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Court Permits GM To Charge Retirees For Some Health

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JULY 20, 1998 VOLUME 6, NUMBER 3

When General Motors Corporation first began offering health insurance to its retired employees in 1961, it required them to pay a portion of their medical care. By 1968, however, GM was not only paying all the costs of medical insurance for retirees, but was also covering their spouses, even after the death of the retiree.

In 1987, however, GM changed its approach. Concerned about the rising cost of health care for employees and retirees, the automaker adopted a new plan: retirees and current employees alike would continue to have a “fee-for-service” insurance option available to them, but they would have to pay an annual deductible of $200 ($250 for family coverage). They would also be responsible for a 20% copayment up to a maximum of $500. In other words, retirees who had previously received free insurance coverage would now have to pay as much as $750 per year for their policies.

As before, GM also made available a self-administered health program. Even participants in that program saw significant changes in 1987, however. They also were required to make payments for previously free services, and both kinds of plan participants suddenly lost vision and hearing aid coverage.

GM’s retirees had come to rely on the free medical coverage. In fact, over most of the two decades the plan operated as a full benefit, GM itself had consistently encouraged early retirements as a way of reducing its workforce; many of the early retirees had made their decisions at least partly on the basis of a belief that the health benefits would continue for the rest of their lives.

In 1989 retiree Robert Sprague and 113 other former GM employees brought suit against the corporate giant. They alleged that they had been induced to retire partly by representations that the health plan would continue for their lives, and that federal law required GM to continue the benefit at the same level. They pointed, among other things, to a series of brochures published by GM to describe its retirement benefits. A 1977 booklet was typical: it advised prospective GM retirees that “your basic health coverages will be provided at GM’s expense for your lifetime.”

In a series of rulings in the early 1990s, the Federal District Court held that the 114 listed plaintiffs could represent the claims of the 50,000 GM retirees who had been induced to leave the company early. The 34,000 “regular” retirees, however, were dismissed from the litigation, on the basis that they had not entered into separate agreements regarding retirement. Both GM and the plaintiffs appealed.

This January, the Sixth Circuit Court of Appeals dismissed all the claims of the GM retirees. Although the appellate judges recognized GM’s representations to the retirees, they also noted that the company consistently reserved the right to change the health benefit. Besides, the judges observed, the individual facts of each case would be incalculably difficult to identify: each retiree would have read different company literature, talked to different company representatives and had different information regarding the retirement options. Nothing in federal law, said the judges, required GM to continue the plan intact for the rest of the retirees’ lives. Sprague v. General Motors, January 7, 1998.

Three judges (out of thirteen) disagreed. Writing for the dissenters, Chief Judge Boyce Martin observed that “this is a classic case of corporate shortsightedness. When General Motors was flush with cash and health care costs were low, it was easy to promise employees and retirees lifetime health care…. Rather than pay off those ill-considered promises, it is easier for the current regime to say those promises never were made.” The Court of Appeals decision permits GM to change benefits for its retirees.

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Robert B. Fleming


Robert Fleming is a Fellow of both the American College of Trust and Estate Counsel and the National Academy of Elder Law Attorneys. He has been certified as a Specialist in Estate and Trust Law by the State Bar of Arizona‘s Board of Legal Specialization, and he is also a Certified Elder Law Attorney by the National Elder Law Foundation. Robert has a long history of involvement in local, state and national organizations. He is most proud of his instrumental involvement in the Special Needs Alliance, the premier national organization for lawyers dealing with special needs trusts and planning.

Robert has two adult children, two young grandchildren and a wife of over fifty years. He is devoted to all of them. He is also very fond of Rosalind Franklin (his office companion corgi), and his homebound cat Muninn. He just likes people, their pets and their stories.

Elizabeth N.R. Friman


Elizabeth Noble Rollings Friman is a principal and licensed fiduciary at Fleming & Curti, PLC. Elizabeth enjoys estate planning and helping families navigate trust and probate administrations. She is passionate about the fiduciary work that she performs as a trustee, personal representative, guardian, and conservator. Elizabeth works with CPAs, financial professionals, case managers, and medical providers to tailor solutions to complex family challenges. Elizabeth is often called upon to serve as a neutral party so that families can avoid protracted legal conflict. Elizabeth relies on the expertise of her team at Fleming & Curti, and as the Firm approaches its third decade, she is proud of the culture of care and consideration that the Firm embodies. Finding workable solutions to sensitive and complex family challenges is something that Elizabeth and the Fleming & Curti team do well.

Amy F. Matheson


Amy Farrell Matheson has worked as an attorney at Fleming & Curti since 2006. A member of the Southern Arizona Estate Planning Council, she is primarily responsible for estate planning and probate matters.

Amy graduated from Wellesley College with a double major in political science and English. She is an honors graduate of Suffolk University Law School and has been admitted to practice in Arizona, Massachusetts, New York, and the District of Columbia.

Prior to joining Fleming & Curti, Amy worked for American Public Television in Boston, and with the international trade group at White & Case, LLP, in Washington, D.C.

Amy’s husband, Tom, is an astronomer at NOIRLab and the Head of Time Domain Services, whose main project is ANTARES. Sadly, this does not involve actual time travel. Amy’s twin daughters are high school students; Finn, her Irish Red and White Setter, remains a puppy at heart.

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Matthew M. Mansour


Matthew is a law clerk who recently earned his law degree from the University of Arizona James E. Rogers College of Law. His undergraduate degree is in psychology from the University of California, Santa Barbara. Matthew has had a passion for advocacy in the Tucson community since his time as a law student representative in the Workers’ Rights Clinic. He also has worked in both the Pima County Attorney’s Office and the Pima County Public Defender’s Office. He enjoys playing basketball, caring for his cat, and listening to audiobooks narrated by the authors.