Health Benefits Vanish in Bankruptcy Court

Wally Cooper never missed a day in the coalmines, breathing in gritty black dust, straining to carry 150-pound oak timbers through cramped tunnels until his aching body was drenched in sweat down to his socks.

It was part of the bargain he made each day he descended into the darkness. Hard work for now, security for later -- with good benefits spelled out in black and white in his union contract. Or so he thought.

Seven months after Cooper suffered a massive heart attack, the mine was closed, the bankrupt company that owned it was sold and, as part of the deal, his health insurance was terminated. Now, at age 53, he’s wondering how he’ll pay doctor bills or buy the drugs -- an astounding 62 pills a day -- that keep him alive.

“If I have to quit taking something, I will,” said Cooper, a burly man whose ruddy face is framed by thick silver sideburns. “I have to pay bills and put food on the table. I’m not going to take anything away from my family.... Maybe my time is going to be a bit shorter.”

Cooper says he is not worried, but many miners who worked for Horizon Natural Resources Co., which was sold this fall, are scared and angry. The health insurance they thought was a sure thing vanished when a bankruptcy judge recently released the company from having to pay the benefits for 3,800 active miners and retirees along with their families.

“I feel let down and cheated,” said Kenny Kondoudis, president of the United Mine Workers of America local at the Zeigler No. 11 mine here, which recently closed. “We were productive for these people. We lived with what we signed. They should have to. But these lawyers, these corporations, they see the loopholes and they can take our benefits.”

The Horizon miners are not alone. Hundreds of thousands of steel, airline and technology workers -- many of them retirees -- have seen long-promised benefits disappear or be slashed or threatened in recent years.

In the steel industry, 244,000 retirees have lost healthcare benefits in the last three years, according to union officials. Many also have seen drastic cuts in pensions. Much of that is related to 44 bankruptcies of domestic steel companies since 1998.

The Horizon workers, although relatively few, have generated sympathy far beyond the coal fields and union halls, with calls for reform (a New York Times editorial urged “humane revision” of bankruptcy law) and pledges of help from Capitol Hill.

Legislation was recently introduced in Congress to provide Horizon workers with medical coverage -- it would be financed from two abandoned mine land funds -- and prevent the courts from changing or ending any coal company’s healthcare obligations.

What happened to the Horizon miners is a “true injustice,” but isn’t the judge’s fault, said Christopher Frost, a law professor at the University of Kentucky. In bankruptcy cases, he says, most workers’ claims fall near the bottom of the list.

“Union members are not getting what they were promised,” he said. “They probably should come first. That’s a problem -- not with what the judge did ... but with the way the law was structured.”

Horizon had been one of the largest coal companies in the United States, with mines in Illinois, Kentucky, Indiana and West Virginia. But its debts mounted, and it filed for Chapter 11 protection from its creditors in 2002.

The company argued in bankruptcy court this year that it should be allowed to shed its union contracts because the burden of paying retiree health coverage would make it unappealing to prospective buyers.

The costs were estimated at $576 million, according to union officials.

Hundreds of miners protested during federal bankruptcy court hearings in Kentucky, and several were arrested. In the end, Judge William Howard agreed with Horizon, saying there was “unrefuted evidence” that the company wouldn’t be able to sell with its union obligations.

“The court is aware of the hardships worked on the employees of these companies ...,” the judge wrote in his opinion. But Howard also said he had to weigh the rights of creditors -- some of them small businesses -- and the reality that nonunion jobs could be preserved if the mines stayed open with new owners.

Under bankruptcy law, a judge has the authority to void a contract, Frost said.

Horizon, which had about two dozen union and nonunion mines, was sold for $786 million to International Coal Group, led by financier Wilbur Ross, also known for buying bankrupt steel companies and turning them around.

Ross’ group immediately sold two former Horizon union mines to Massey Energy Co. (There are plans to reopen both as nonunion operations next year, according to a Massey spokesman.)

The union is appealing the judge’s decision, saying the 1992 Coal Act, which requires coal companies to fund medical care for retirees, supersedes bankruptcy law.

The act covers about 1,000 Horizon retirees but doesn’t help about 2,800 active miners and retirees who will have to seek benefits from smaller union funds that will probably be out of money by next year, said Mike Buckner, the union’s research director.

“They’re already spending more than they’re taking in,” he said. “At some point, even without the Horizon people, we’ve got a financial crunch coming.”

One problem that the miners face is there is no federal protection for healthcare benefits as there is for private pensions that are insured by a government agency.

“The simple fact is companies are not required by law to put aside money today to cover retiree healthcare promises that won’t kick in until later,” said Daniel Keating, a law professor and bankruptcy and labor expert at Washington University in St. Louis.

When the coal and steel industries were at their peak, he says, the companies had a lot more younger than older workers but weren’t always flush with cash, so they sweetened their contract offers by including the retiree benefits.

“When those promises were made a long time ago, I don’t think anybody could have predicted the rate at which healthcare costs would increase,” Keating said. “The workers didn’t realize the promise was only as good as the strength of the party making it.”

That’s just more bleak news in this stretch of southern Illinois that echoes with mining history: This was once a land where coal was king, the union was feared and a fire-breathing organizer known as Mary Harris “Mother” Jones chose to be laid to rest. Her grave is about an hour away.

This also was the land where miners grew up listening to tales from their fathers and grandfathers of bloody union struggles, and deadly explosions and cave-ins that forever scarred the soil.

Even so, the younger generations continued the family tradition, lured by wages and benefits that offered the promise of a middle-class life.

The fate of the Zeigler No. 11 mine is unclear. Company officials didn’t return repeated calls for comment.

Buckner, the union official, expects that it will reopen at some point, although that doesn’t mean that the former workers, whose average age is 52, will return.

“They have no employment rights at that mine,” he said. “It’s one thing to extinguish a contract, another thing to extinguish 20 or 30 years of service. But that’s the state of the law.”

That’s especially galling for miners who point to a provision in their contract that says: “Any pensioner ... with at least 20 years of credited service ... is entitled to receive health benefits until death.”

Many miners say they put up with decades of the dangers of coal dust, diesel fumes and falling rock, believing that was an ironclad guarantee.

“I’ve done my job. I’ve put in my years. Then they turn around and tell me no insurance,” said Cecil Eubanks, a Horizon retiree who spent 25 of his 63 years in the mines.

Eubanks, who says he’d rather give up his pension than his health insurance, is among many retirees scrambling to deal with a family crisis. His wife, Patsy, is battling hip cancer, and her treatment costs more than $4,500 a month.

For now, they are leaning on six months of insurance that the miners union provided as a stopgap. But Eubanks, who is too young for Medicare, is thinking beyond that. “We’re going to use my savings, my 401K, then after that, I don’t know,” he said, his voice trailing off.

Gary Franklin, a fourth-generation miner, has his own worries.

He decided to call it quits last year at age 55 when he started coughing up specks of coal dust every morning and was diagnosed with the early signs of black lung disease.

“I’ve seen people hurt badly ... their heads gashed, broken hands, broken feet,” he said. “After 33 years, you think sooner or later your number is going to come up.

“I worry about my health,” he said. “Sometimes I have a hard time sleeping. I wonder what’s going to happen.”

His first priority now is his wife, Marjorie, who was diagnosed with breast cancer in 2002 and had surgery last year. They had medical coverage then. Soon they won’t.

Marjorie Franklin, a small red-haired woman wearing a T-shirt emblazoned with an American flag shaped like a heart, tells her story with a single piece of wrinkled paper that she plucks out of her purse.

Flattening it on the table at the smoky VFW hall, she recites her monthly drug costs: There’s $206 for a pill to treat cancer, $140 for arthritis medicine, $90 for sleeping pills.

Her husband knows that tough times are ahead. “I can’t afford $700 or $800 to pay for these pills,” he said. “It makes me so mad. I’d like to hit somebody. But who do you hit?”

Many miners have focused their fury on the judge, but Frost says the bankruptcy code says a court can modify retiree benefits if it finds that all parties are treated equitably and that there is no other way for the company to reorganize.

“We don’t have any choice today in the Horizon case because the money is not there,” he said. “All the bankruptcy process does is realize that.”

If the judge hadn’t approved the sale, Frost says, the miners would have still lost out because the company would have been liquidated and there wouldn’t be money for them.

The answer, he says, is reforming the healthcare benefits and pensions system.

But that will be too late for David Heard, 49, a Horizon miner who has an immediate quandary: He has lymphoma and needs costly treatment.

“My doctor told me he wasn’t going to just abandon me,” he said. “But this is the kind of thing that no one can pay for out of their pocket. It’s hundreds of thousands of dollars.”

Had he known that this was going to happen, Heard says, he would have saved for health insurance during his 26 years in the mines.

Now, he says, he worries about what’s next.

“I don’t know what to do,” he said. “Really, I don’t.”