GM Deal Might Start Trend in Health-Care Management

By Stouffer, Rick | Tribune-Review/Pittsburgh Tribune-Review, September 28, 2007 | Go to article overview

GM Deal Might Start Trend in Health-Care Management


Stouffer, Rick, Tribune-Review/Pittsburgh Tribune-Review


General Motors Corp.'s historic labor agreement with the United Auto Workers could have a major impact on how health-care costs are funded and managed in the United States, experts said Thursday.

At the very least -- particularly with a presidential election right around the corner -- the deal could shine a spotlight on the problem of ever-increasing health-care costs, according to industry watchers.

"I think this could be a turning point. This puts health care and its numerous problems in the national spotlight, in the public eye," Duquesne University economics professor Matthew Marlin said.

GM and the United Auto Workers announced their deal Wednesday -- ending a 41-hour strike and pending worker ratification -- which included the establishment of a voluntary employee beneficiary association, or VEBA, that would take over responsibility for health care for workers and retirees and be administered by the union. It promises to move $51 billion in unfunded retiree health-care liabilities off GM's books, potentially raising its stock price and credit ratings.

GM is expected to place as much as $35 billion into the VEBA, but the union will manage how the funds are invested and disbursed.

"I see firms with large numbers of retirees like General Motors forming a VEBA, as it transfers the uncertainty of paying for health care to the workers away from the company," said Mark V. Pauly, professor of health-care systems and economics at the University of Pennsylvania's Wharton School.

Within the last year, Dana Corp. and Goodyear Tire & Rubber Co. have instituted voluntary employee beneficiary associations, but the GM-UAW deal could break the ice in terms of more such groups being formed, Pauly said.

"What's happening is that the structure of health-care coverage provided to retirees is changing as it changes for existing employees," Pauly said. …

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