Byline: Diane Levick
May 1--Aetna's turnaround motto is 'under-promise and over-deliver' on financial performance.
But Aetna has simply broken promises by cutting retiree health and dental benefits, retirees alleged at the company's annual meeting in Hartford Friday.
Although a reinvigorated Aetna is making millions again, it is phasing out medical insurance subsidies for employees who retire in 2004 or later. Many other U.S. employers have been cutting back retiree benefits, too.
Just this year, Aetna stopped paying for dental coverage for employees who retired Jan. 1, 2003, or later. As of Jan. 1, 2005, Aetna will end the dental subsidies for its other retirees.
John J. Dwyer of WestSimsbury, a retired Aetna senior vice president and shareholder, said nothing in his company documents warned that his benefits could be cut or reduced 10 years after his retirement.
'It is nothing less than a breach of promise, and that is unacceptable,' Dwyer told the annual meeting.
He said he was responsible for 2,500 early retirements at the company, but that 'it never occurred to me that the benefits they would rely on would be eroded or eliminated in subsequent years.'
Aetna retiree Alyce Rawlins said, 'So many people are so disappointed and disgusted, and really feel that Aetna has not kept its word' on retiree benefits.
However, Aetna chief executive Dr. John W. Rowe said the company has to keep expenses, including employee and retiree benefit costs, under control because Aetna's overhead as a percentage of revenue is still higher than that of its peers'.
'This expense gap makes it much harder for us to price our products competitively, increase revenues and achieve and sustain profitable growth,' Rowe said.
Rowe also said he had to strike a balance in the changes of benefits between the active employees and the retirees, and did not believe it was justified to put the burden only on active employees.
Rawlins also noted that employees are worried about Aetna shipping jobs overseas, including information technology positions -- a hotly contested trend at many U.S. companies.
Rowe said Aetna has about 1,000 people serving the company overseas, mostly in India and Ireland, either in outsourced positions or as employees.
Outsourcing, Rowe said, is a 'very effective means for us to have the flexibility to ramp up for individual projects' quickly.
Rawlins, however, urged management at Aetna, which has slashed thousands of jobs across the company, to think carefully before cutting more staff.
'Just remember people that are not like you, not so privileged, and think how you would feel in their place,' Rawlins said.
'I don't think we have plans for major [job] reductions anywhere in the country and not in Connecticut, to my knowledge,' Rowe said after Friday's meeting. 'My hope would be that if we continue growing along the way we were growing the first quarter, we may be able to start growing the workforce back.'
Aetna stockholders Friday rejected shareholder proposals on limiting executive compensation and changing the voting methodology for directors to make it easier to elect dissidents to the board.
About 5.5 percent of the shares being voted were cast in favor of the executive pay proposal, which was offered by a mutual fund of the United Association of the Plumbers, Pipefitters and Sprinklerfitters Union. Nearly 94.5 percent of the shares voted were cast against the proposal.
The perennial proposal by shareholder Evelyn Y. Davis on 'cumulative' voting for directors won 39 percent of the shares voted, while nearly 61 percent were voted against the measure.
In other Aetna news Friday, the company said its board authorized the repurchase of as much as $750 million of Aetna common stock.
The authorization is in addition to the $326 million remaining under Aetna's prior authorization.
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(c) 2004, The Hartford Courant, Conn. Distributed by Knight Ridder/Tribune Business News.
TICKER SYMBOL(S): AET
