UAW Gains Clout To Affect Health Care System Through VEBA Deals

Main Category: Health Insurance / Medical Insurance
Article Date: 03 Dec 2007 - 11:00 PDT

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When the United Auto Workers in 2010 assumes responsibility for the health care benefits of 540,000 Big Three automaker retirees and spouses through a voluntary employees' beneficiary association, experts say the union will have enough clout and bulk purchasing power to affect health care costs, the AP/Philadelphia Inquirer reports. UAW in its contract negotiations with General Motors, Ford Motor and Chrysler Group agreed to take responsibility for health care liabilities through the establishment of a VEBA in exchange for funding levels of between 56% and 62% of liabilities. Other funding sources include wage contributions from active employees and increased payments from retirees.

The contracts turn UAW "into one of the largest health care consumers in the nation," according to the AP/Inquirer. Experts say that UAW must make smart choices when investing the funding provided by the Big Three to see returns higher than the average annual health care inflation, which rises 6% to 8% each year. In addition, UAW "must control costs with bulk buying, perhaps negotiating directly with health care providers," the AP/Inquirer reports. The union also can use its influence with retirees to encourage them to limit their health care usage. Experts say UAW can encourage retirees to lead more active lifestyles, adhere to disease-management drug regimens and avoid unnecessary visits to hospitals and physician offices. Some observers say the deal might push UAW to strengthen its lobbying effort for a universal health care system.

Detroit Medical Center Chief Operating Officer Ben Carter said that he sees the VEBA deals as a catalyst for change in the health care industry, especially with how health care is priced and delivered.

J.B. Silvers, a professor of health systems management at Case Western Reserve University, said of UAW and retirees, "They all go down together if it doesn't work. They've got organizational cohesiveness on their side where they didn't have it before" (Krisher, AP/Philadelphia Inquirer, 11/30).

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