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UAW To Affect Health Care System Through VEBA Deals

Armen Hareyan's picture

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

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

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Detroit Medical Center Chief Operating Officer Ben Cartersaid that he sees the VEBA deals as a catalyst for change in the health careindustry, 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 godown together if it doesn't work. They've got organizational cohesiveness ontheir side where they didn't have it before" (Krisher, AP/PhiladelphiaInquirer, 11/30).

Reprintedwith permission from kaisernetwork.org. You can view the entire Kaiser Daily Health Policy Report, search the archives, and sign upfor email delivery at kaisernetwork.org/email . The Kaiser Daily Health PolicyReport is published for kaisernetwork.org, a free service of The Henry J.Kaiser Family Foundation.