DETROIT -- UAW President Dennis Williams floated the idea this summer that the union wanted to work with Detroit 3 negotiators to create a health care pool for workers. But what does that mean?
Williams hasn't said. But the best guess is a purchasing consortium to drive down the fees that hospitals, doctors and insurers charge, rather than something akin to the 2007 retiree trusts that shifted the risk of rising costs from the carmakers to union-designed independent plans.
"Don't confuse this with a VEBA," said Art Schwartz, a former top labor negotiator at General Motors who now heads Labor and Economics Associates in Ann Arbor, Mich.
In a pool, the Detroit 3 might get better rates from providers and insurers for their hourly employees and dependents -- about 300,000 individuals in all -- than if each negotiates separately, said Kristin Dziczek, director of the Industry & Labor Group at the Center for Automotive Research in Ann Arbor.
Labor and health care experts say that radical changes to health care are a very long shot in this year's Detroit 3-UAW contract talks. The current four-year labor contracts expire Sept. 14, but can be extended by mutual agreement.
The 138,000 hourly employees at the Detroit 3 have among the richest health care benefits in America and aren't interested in risking higher personal cost sharing by moving to a new plan, Dziczek said.
Given the solid profitability of the Detroit 3 and labor concessions made in prior contracts, workers expect the current talks to bring wage increases and other compensation improvements, not to go backward on health care, Dziczek said. "There's a feeling that 'this is our time,'" she said. "Ratification would be difficult if cost sharing were to increase significantly."
Today, active UAW employees pay about 6 percent of their annual health care costs. In contrast, UAW retirees in the Voluntary Employees' Beneficiary Associations pay about 11 percent of their costs, while salaried employees at Ford Motor Co. and Fiat Chrysler Automobiles pay between 30 and 35 percent.
The union, worried that the distressed carmakers might not be financially strong enough in the future to continue to pay retiree health care, created the VEBAs in 2005 and 2007. The union used the VEBAs to get the automakers to contribute tens of millions of dollars in cash and stock upfront so that the independent trusts could manage care and invest the principal to generate additional income.
Today, the solvency of the carmakers isn't a concern. Even so, pooling active workers in some form to improve their purchasing power for health care makes sense, Dziczek said.