New York Times Examines General Motors' Decision To Eliminate Salaried Retirees' Health Benefits

Main Category: Health Insurance / Medical Insurance
Also Included In: Public Health
Article Date: 11 Nov 2008 - 7:00 PST

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The New York Times on Monday examined how for about 100,000 General Motors "white-collar retirees, time is about to run out" on their "gold-plated medical benefits" as the company looks to "make deep cuts wherever it can" (Bunkley, New York Times, 11/10). GM in July, as part of a plan to increase its liquidity by $15 billion, announced plans to eliminate health care benefits for non-union retirees older than age 65.

Under the plan to offset the loss of coverage, which many retirees use to supplement gaps in traditional Medicare coverage, GM said it would increase monthly pension payments by $300 to affected retirees (Kaiser Daily Health Policy Report, 7/16). GM estimates that eliminating the medical program for salaried retirees -- a move already adopted by Ford and Chrysler -- as well as reductions to employee wages and the work force will generate about $1.5 billion in annual savings for the company.

According to the Times, "paying the cost of hospital stays, surgeries and expensive drugs for retirees, a group now larger than GM's active work force, is a major reason the company's financial woes are so great." The automaker in 2007 spent $4.6 billion on health care for one million employees and retirees and their dependents.

Effect on Workers
GM's decision to eliminate the retirees' health care benefits program "means that nationwide, former engineers, plant managers and executives are anxiously trying to decipher various combinations of Medicare and other insurance plans" because "few studied up on Medicare and other coverage options as they approached retirement," the Times reports. Jack Dickinson, a retired GM worker who runs the Web site OverTheHillCarPeople.com that provides GM retirees with health insurance assistance, said, "Some of these people have been on GM's plan for 40 or 50 years, and now all of this is thrown at them," adding, "People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle."

According to the Times, "Eliminating that confusion has been a major undertaking." As part of the effort, GM scheduled 150 informational meetings in cities with large numbers of retirees and has contracted with Extend Health to answer retirees' questions and help them enroll in Medicare. Many retirees also have "turned to one another for help, by getting together with former co-workers who live down the street, sharing information on Internet message boards or discussing the issue at meetings of the numerous GM retiree clubs," the Times reports (New York Times, 11/10).

Democratic Leaders Request Federal Assistance For Big Three
In related news, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) on Saturday sent a formal letter to Treasury Secretary Henry Paulson requesting "temporary assistance to the auto industry" using a portion of the recent $700 billion bailout for Wall Street firms, the Wall Street Journal reports (Hitt/Stoll, Wall Street Journal, 11/10). On Thursday, executives from United Auto Workers, GM, Chrysler and Ford met with Pelosi, Reid and other congressional leaders to ask for $25 billion in additional federal loans for health care payments for retirees. The money from the loans would help cover the companies' contributions to a health benefit trust, or a voluntary employees' beneficiary association, for union retirees (Kaiser Daily Health Policy Report, 11/7).

UAW President Ron Gettelfinger said the union would not make additional concessions to automakers. Alan Reuther, legislative director for UAW, on Friday said that the union "already stepped up" in 2007 by making concessions on workers' pay and benefits and retiree health care. He said UAW wants assurances that federal funding would help members maintain retirement and health care benefits (Wall Street Journal, 11/10).

Reprinted with kind permission from http://www.kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, or sign up for email delivery at http://www.kaisernetwork.org/dailyreports/healthpolicy. The Kaiser Daily Health Policy Report is published for kaisernetwork.org, a free service of The Henry J. Kaiser Family Foundation.

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