Hourly workers and retirees with General Motors Corp. pay no monthly fee for health care. They can go to any doctor they want with no penalty. They have a very small co-payment for office visits and drugs. Their company covers 93 percent of their health care.
In a nation where 45 million people are not covered by health insurance and where 40 percent of companies do not offer health care coverage to their workers, GM's health care benefits have been the diamond standard. Some have joked that GM is an HMO that makes cars on the side. It provides health insurance for 1.1 million people. Its health care costs in 2004 totaled $5.2 billion, and of that, $4 billion went to retirees.
Now that safety net is about to change. The agreement announced this week by the company and its union to reduce benefits will save the flailing corporation $1 billion in cash annually -- at a cost to current and former workers.
"I'm 60 years old. I got about 5 or 6 medicines a day. . . . If they try to pull that on us, that's going to be kind of hard on me," said John J. Hollis Sr., who retired from GM in May when the company closed the Baltimore plant where he worked for almost 42 years in maintenance. His wife is covered by his insurance and takes a similar number of medications.
Companies across the country have pared health benefits as costs have escalated. The move by GM, one of the nation's most prominent corporations, will likely inspire companies to take another look at their own expenses. "What they've done is really almost jump-start reconsideration of health care benefits," said Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass. "A lot of companies are going to start thinking now, 'If they can do it, let's take a look at ours, as well.' "
Sixty percent of companies offered health care coverage to workers in 2005, down from 69 percent in 2000 and 66 percent in 2003, according to a Henry J. Kaiser Family Foundation survey released last month.
In almost every strike in the past decade, health care benefits were an issue. Since 2000, premiums have increased 73 percent, according to the survey. Premiums increased an average of 9.2 percent in 2005, and 11.2 percent on average in 2004. The 2005 increase followed four consecutive years of double-digit-percentage increases, according to the survey. The rate of growth is still more than three times the 2.7 percent growth in workers' earnings.
Meanwhile, costs for firms that provide health benefits to retirees increased 12.7 percent in 2004, according to another Kaiser Family Foundation survey. And 8 percent of employers said that they had eliminated subsidized health benefits for future retirees in 2004. Other major companies have acted to curb their costs. General Electric Co., for example, planned in 2003 to increase the cost to employees for health care coverage after the company said its costs rose 45 percent, to $1.4 billion, from 1999 to 2002.
Employees staged a two-day strike to protest the changes. The company and union settled the dispute by adding to the employees' burden but keeping the percentage employees paid about the same.
UAL Corp.'s United Airlines, US Airways Group Inc. and Delta Air Lines Inc. all filed for bankruptcy even after they aggressively cut wages and benefits. Northwest Airlines Corp. filed for bankruptcy after announcing it needed to obtain more than $1.1 billion in annual pay and benefits cuts from its workers.
"The large unionized corporations have been the place where health insurance has been most available and comprehensive for workers," said Diane Rowland, executive vice president with the Kaiser Family Foundation. The GM decision "is a signal of growing stress on employers and employees of rising health care costs."
Eldon Renaud, the president of UAW Local 2164 in Bowling Green, Ky., met with about 100 of the 1,000 retirees in his area, who he said were resigned to the benefit reductions. "But there are some people that are in serious medical condition that are really concerned because they can't afford any more increases because of the medications they take," he said. "Those that are in fairly good health can kind of understand it, and they realize it has to be done."
The local presidents will learn details of the GM plan today in Detroit.
Billy Jackson, who retired from GM in 2003, said he expected cuts to his health care. He has a $10 co-payment for his prescriptions and pays $10 for each doctor's visit. "I look for that to change. We got pretty good insurance, and we'll continue to have pretty good insurance," said Jackson, 57, who worked on the assembly line in Bowling Green and retired after serving as a local president. "It's better to have good insurance and not have everything because you can negotiate your members out of jobs if you're not careful."