UAW-GM deal would improve newer workers’ health plan – Detroit Free Press
UAW negotiators bargained significantly better health care coverage for about 11,000 General Motors workers hired since October 2007 and the automaker will pay for most of it.
But if a majority of 52,700 workers ratify the tentative agreement reached last weekend, they could face more out-of-pocket expenses, if the company gets hit by a new tax, dubbed the “Cadillac Tax,” that looms in 2018 if lobbyists lose their efforts to have it repealed.
Combined with an $8,000 signing bonus for each worker and a faster wage progression for Tier 2 hires, many of whom will reach the traditional top wage in the next four years, the deal will add to GM’s costs. The company won’t disclose a figure until the contract is ratified.
“We aren’t commenting on the contract while the UAW encourages members to vote, so there isn’t an appearance that we’re trying to sway the outcome in any way,” said GM spokesman Tom Henderson.
Setting aside the sweetened health care coverage, the $8,000 signing bonus will cost the company about $421 million. And the first installment of the $500 quality performance bonus payable Nov. 15 will cost about $26 million.
But in exchange, GM has no limit on the percentage of the U.S. hourly workforce that start at significantly less than the $28 to $28.50 hourly wage of those with eight or more years of seniority. A cap is not needed because “in progression” workers now have a clear path to the top base wage rate. A new hire would start at $17 a hour and hit the top wage in seven years. Those with seniority would catch up much faster.
GM shares fell about 1.3% to $34.75 Thursday as investors and workers studied details of the agreement on which workers will vote over the next week.
Nearly 80% of GM hourly workers who already are at the traditional pay scale will receive 3% raises in their base wage in the contract’s first and third years, their first increases in a decade. They also will receive lump sums equal to 4% of their pay in the second and fourth year.
UAW President Dennis Williams and GM executives talked throughout the summer about the urgency of controlling health care costs. In 2018, under the Affordable Care Act, employers who provide generous health care coverage could face a 40% “Cadillac tax” on the amount by which an individual plan costs more than $10,200 a year, or a family plan costs more than $27,500.
While the company does not disclose the cost of its current plans, Williams has said the union’s active workers pay out of pocket for about 6% of the health care they use. The average American pays about 15.2%, according to data compiled by the Health Care Cost Institute.
Today GM’s newer workers (those hired after October 2007) pay $300 deductibles for individual coverage and families pay a $600 deductible. In addition, Tier 2 individual plans carry a 10% co-insurance contribution up to $700 a year, with family plans incurring co-insurance of up to $1,400 a year.
This new contract would give them the same coverage as those hired before October 2007: no deductibles or co-insurance contributions, with one exception — choosing a doctor outside the preferred provider network will mean the member pays 20% above the first $100 of service.
There are unlimited doctor’s office visits with a $25 co-pay. Visits to urgent care centers or emergency rooms carry co-pays of $50 and $100, respectively.
Prescription drug co-pays are $6 for generics, $12 for brand names and $17 for erectile dysfunction drugs. Mail-order co-pays are higher, but one gets larger quantities by mail.
It’s a huge improvement from the coverage Williams negotiated for Tier 2 or “in progression” workers at Fiat Chrysler.
“GM’s health care will be more expensive than it was before, but might not be as bad as first appears,” said Art Schwartz, a former top GM labor relations executive. “Most of the newer employees are relatively young and many don’t have dependents. They are in better health and the cost would not be as high as for an older employee with many dependents.”
It’s impossible to know whether the so-called Cadillac Tax will ever take effect. Large and influential political forces, including major corporations and labor unions, are allied in seeking its repeal.
If the tax survives, however, GM and the UAW agreed to revisit the issue.
At the end of more than 350 pages in the proposed contract devoted exclusively to health care is a letter from Cathy Clegg, GM vice president of North American manufacturing and labor relations, to Cindy Estrada, vice president of the union’s GM department.
The letter says that if the cost of these UAW plans trigger the Cadillac Tax, “the parties will employ a process … to find areas of opportunity to reduce cost.
“The parties further agree that a member who voluntarily remains in such plan will be subject to a maximum deductible of $400 for single coverage and $800 for family coverage.”
In the near term, about 11,000 workers will have much better coverage than what they would find on healthcare.gov.
Contact Greg Gardner: 313-222-8762 or email@example.com. Follow him on Twitter @GregGardner12