Transcripts

The GM/UAW Agreement Could Drive Healthcare Changes Everywhere

SUZANNE PRATT: The United Auto Workers says its new contract with General Motors guarantees many cars and trucks will be built in the U.S. The deal won tentative approval today from local union leaders. The contract also sets up what's known as a voluntary employee beneficiary association, or VEBA. GM will pump nearly $30 billion into the VEBA to fund retiree health care. As Darren Gersh reports, that could impact health care policy across the country.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: You could think of the GM/United Auto Worker's VEBA as a kind of huge IRA dedicated to pay for doctors and drugs. GM is expected to fund the VEBA pot with nearly $30 billion. In return, the financial risk for retiree health care will move off the company's balance sheet and onto the workers. Health policy analyst Joe Antos says that means the health care benefit for GM retirees is no longer open-ended.

JOSEPH ANTOS, HEALTH POLICY ANALYST, AEI: What it says is, employees and union, you have to decide what you really want and you have to go for it. And if you want to spend more money, that is up to you. That is a huge change.

GERSH: Because GM union retirees will be responsible for their own health care bills, Antos hopes that will make them more careful consumers. As more employers consider adopting VEBAs, that could help slow the national increase in health care costs. But the impact will be limited because VEBAs appeal most to companies with large numbers of unionized workers. Health policy expert Gail Wilensky serves as a trustee of the United Mine Workers VEBA-like plan. Wilensky says VEBAs are an important incremental change, because they give employers more flexibility.

GAIL WILENSKY, ECONOMIST, PROJECT HOPE: The options that have existed are stay where you are, or try to diminish benefits or walk away from benefits if you can't afford where you are now with regard to retirees. This is a way to maybe get better use out of the money you are setting aside.

GERSH: Now that the auto workers have put down their pickets and more companies like GM are trying to offload their health care liabilities, some worry there will be less pressure on Congress to reform health care. But labor lawyer Douglas Greenfield says if VEBAs catch on, workers will be even more sensitive to rising health care costs.

DOUGLAS GREENFIELD, LABOR LAWYER, BREDHOFF & KAISER: The more significant thing here is that they know that there is a limited pot of money that is available to pay for health care, and they are going to want to see the system in the aggregate, in the whole, get normalized in a sense, are more predictable so they can tell what the cost will be.

GERSH: The GM VEBA deal may also make it clear to policy-makers that more workers are being forced to choose between keeping their benefits and keeping their jobs. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.