UAW's takeover of retiree health care is succeeding
Brent Snavely, Detroit Free Press
2:52 p.m. EDT September 9, 2015 - USA TODAY
DETROIT -- A grand experiment that began eight years ago for the United Auto
Workers union to take over management of retiree health care for the Detroit Big
Three automakers is now viewed as a major success.
Retirees, analysts and executives involved in the contract of 2007 that
created the UAW Retiree Medical Benefits Trust say it's working even better than
originally expected.
With healthcare costs rising nationally, UAW President Dennis Williams wants
to use the trust as a model for a new benefits pool that would oversee
healthcare for the 141,000 hourly workers at General Motors, Ford and Fiat
Chrysler Automobiles, and maybe even the automaker's salaried workforce.
Reducing healthcare expenses without increasing costs for UAW workers is one
of Williams' top priorities in Detroit Three contract talks this year.
"I think if the companies fail on the healthcare, it's a missed opportunity,
and I think the medical community will agree with me on that," Williams said
Monday.
The original trust concept was viewed as a major win for automakers, which
off-loaded future risk and expense, and a huge risk for the UAW, which bet it
could leverage lower because of its membership size.
The agreement freed the Detroit Three from about $88 billion of future health
care liabilities for a one-time payment of $56.5 billion to cover about 750,000
retired autoworkers and their dependents.
Retirees and analysts at the time doubted the money would ever be enough and
feared benefits would erode as the years wore on.
"I was really concerned about that," said Al Churchill, a Ford retiree and
president of a chapter of UAW retirees. "So far, it seems to be working out
pretty well. c I get good service and the medical care I get from the VEBA is
pretty good. I think it's been a positive thing overall."
When the trust was launched in January 2010, it was the largest
non-governmental purchaser of retiree health care in the United States. Many of
the retirees it serves are also covered by Medicare, which reduces the trust's
financial burden, and members pay monthly contributions.
With odds stacked against it, the trust has emerged from a period of
uncertainty and has earned praise and respect from the retirees it serves,
health care experts and the investment community.
Today the trust actually has increased it balance, ending 2013 with more
$60.8 billion in net assets, according to a report filed with the IRS, the most
recent year available.
The trust's future outlook is better now than it was several years ago
because healthcare costs are not rising as fast as a decade ago. The Trust also
has found ways to better manage health care of chronically ill members, and it
has made smart investment decisions, said Kristin Dziczek, director of the labor
and industry group for the Center for Automotive Research in Ann Arbor.
"It's much healthier now," Dziczek said.
One advantage the trust has that the automakers lacked is an ability to
review and change the benefits it offers on an annual basis, instead of every
four years during contract negotiations.
Joel Clark, president of Southfield-based J.S. Clark Agency, said the Trust
also has found ways to reduce health care expenditures by designing benefits
that encourage retirees to make cost-saving choices.
For example, instead of having a single prescription drug co-pay, the Trust
introduced a tiered prescription drug co-pay system that creates an incentive
for retirees to opt for less expensive generic drugs. The Trust's prescription
drug co-pays are $12 for generic drugs, $40 for "preferred brands" and $100 for
non-preferred brands, according to the Trust's Web site.
"They understood that they had limited resourcescand the goal and objective
was to stretch those resources," Clark said.