Fired Officials Keep Some Health Care

By THEO FRANCIS

April 5, 2007; Page D2

Wall Street Journal

 

This year's crop of proxy filings show that losing a job doesn't mean losing

health-care for many corporate executives: Their former employers are on the

hook for the coverage, sometimes for years to follow.

 

All workers get some protection thanks to a 1986 federal law that allows

them to stay in the company plan when let go -- if they pay the full,

unsubsidized cost. The law, the Consolidated Omnibus Budget Reconciliation

Act, or Cobra, lets companies charge 2% for administration. That is

unaffordable for most people, say most advocates.

 

Four out of five Cobra-eligible workers don't take the benefit, said Ron

Pollack, executive director of Families USA, a Washington, D.C., advocacy

group pushing to expand coverage of the uninsured. "The problem is that

people eligible for Cobra have to pay the full freight -- and they have to

do so at a time when they're unemployed and don't have the resources," Mr.

Pollack said.

 

Companies have historically disclosed little about the cost of free

health-care to fired executives. But the Securities and Exchange

Commission's beefed-up disclosure requirements are shedding some light on

the price tag.

 

Video-rental chain Blockbuster Inc. said this week that it could be on the

hook for more than $27,202 in Cobra payments for medical and dental coverage

for three years if it terminates Frank G. Paci, executive vice-president for

strategic planning and business development.

 

Discount broker Charles Schwab Corp. would have to pay out $32,561 for 36

months of health-care for founder, pitchman and Chief Executive Charles R.

Schwab should he be fired without cause.

 

Seattle-based insurer Safeco agreed to pay $15,000 in Cobra coverage to

former president and Chief Operating Officer Michael LaRocco, who resigned

in July.

 

A Blockbuster spokeswoman said that all company executives "would have it in

their contract that the company would pay their medical coverage for the

remainder of their contract." A Safeco spokesman declined to comment. A

Schwab spokesman couldn't be reached to comment.

 

Write to Theo Francis at theo.francis@wsj.com