President &
CEO, Lance
Wallach
CEO, Lance
Wallach
- Member of the
AICPA faculty of
teaching
professionals. - AICPA author,
instructor &
national speaker. - National Society of
Accountants
Speaker of the
Year. - Writes financial
articles for over 50
national
publications.
Our other Veba
web sites:
VebaPlan.com
FinanceExperts.org
web sites:
VebaPlan.com
FinanceExperts.org
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Veba Health Care .com
A Veba Plan LLC site
A Veba Plan LLC site
Veba Health Care.com
68 Keswick Lane
Plainview, NY 11803
ph: 516-938-5007
fax: 516-938-6330
Email:
LaWallach@aol.com
68 Keswick Lane
Plainview, NY 11803
ph: 516-938-5007
fax: 516-938-6330
Email:
LaWallach@aol.com
| Copyright (C) 2009 Veba Plan LLC All rights reserved. |
Workforce Management October 8, 2007
Health Care Obligations to Workers and
Retirees?
For its proposed health care trust to work, the union
will have to change retiree behavior or reduce what it
pays medical providers.
October 8, 2007
Can UAW Take the Wheel and Steer Its Health Care
Obligations to Workers and Retirees? The deal
between the United Auto Workers and General
Motors means the union, long a critic of the American
system of employer-sponsored health care, will have
to put its newfound money where its mouth is.
The contract proposal, which was agreed upon
September 26 and remains subject to court
approval, will transfer from GM around $35 billion in
cash and stock to the union to pay for retiree health
care costs.
Should the United Auto Workers get a similar offer
from Ford and Chrysler regarding retiree health care
benefits, the union could have upwards of $70 billion
to spend on more than 500,000 beneficiaries,
making it among the largest health care purchasers
in the United States. But in health care, where costs
have risen more than 70 percent in the past five
years, even $70 billion can last only so long.
In the equation that produced health care costs that
nearly sent GM into bankruptcy, costs must drop for
the union, or the health care trust—known as a
voluntary employees beneficiary association, or
VEBA—will find itself bankrupt.
To avoid insolvency, the union will have to adjust the
behavior of retirees. It would most likely have to
change the benefits incentives that drive over-
utilization of health care or reduce the amount the
union pays health care providers.
UAW president Ron Gettelfinger promised workers
the fund would remain solvent for 80 years without
any reduction in benefits.
“The funding level we have negotiated is expected to
allow the VEBA to continue to provide benefits
without change for the lifetime of current and future
retirees,” he wrote in a letter to members.
Those familiar with the union’s thinking say the UAW
will address costs by utilizing the full force of its
purchasing power, which will grow if Ford and
Chrysler offload their liabilities into the VEBA.
The union could create networks of efficient lower-
cost doctors, negotiate lower rates with hospitals,
abandon brand-name drugs in favor of generics and
make changes that General Motors never had the
freedom to make.
“The trustees of this VEBA are going to aggressively
manage this fund to protect and maintain health care
for retirees similar or equal to what they currently
have for as long as they possibly can,” says Kristin
Dziczek, senior project manager at the Center for
Automotive Research in Detroit.
Lance Wallach, a consultant on VEBAs, believes the
union must change its benefit structure to encourage
more responsible spending and healthier living,
including among retirees responsible for the bulk of
health care spending.
“The only way for this VEBA to work is for whoever is
going to administer it to change the behavior of the
workers,” Wallach says. “If they don’t do that, this
absolutely won’t work.”
One escape valve for the union is to change the
relationship between health insurance and
employment. Toward that end, the union, with $15
million from GM, will establish the National Institute
for Health Care Reform “to expand access to high-
quality, affordable and accountable health care
coverage for all Americans,” the union wrote.
“I don’t know where it ends up, but [the union-run
VEBA] is certainly part of the transition away from
employer-based health in the United States, says
Dave Andrea, vice president of industry analysis and
economics for the Original Equipment Suppliers
Association, the trade group for auto parts
manufacturers.
--------------------------------------------------
Lance Wallach, CLU, ChFC, CIMC, speaks and
writes about benefit plans, tax reductions strategies,
and financial plans. He has authored numerous
books for the AICPA, Bisk Total tape, and others. He
can be reached at (516) 938-5007 or lawallach@aol.
com. For more articles on this or other subjects, feel
free to visit his website at www.vebaplan.com.
Lance Wallach, the National Society of Accountants
Speaker of the Year, speaks and writes extensively
about retirement plans, Circular 230 problems and
tax reduction strategies. He speaks at more than 40
conventions annually, writes for over 50 publications,
is quoted regularly in the press, and has written
numerous best-selling AICPA books, including
Avoiding Circular 230 Malpractice Traps and
Common Abusive Business Hot Spots. He does
extensive expert witness work and has never lost a
case. Contact him at 516.938.5007 or visit www.
vebaplan.com.
The information provided herein is not intended as
legal, accounting, financial or any other type of
advice for any specific individual or other entity. You
should contact an appropriate professional for any
such advice.
Health Care Obligations to Workers and
Retirees?
For its proposed health care trust to work, the union
will have to change retiree behavior or reduce what it
pays medical providers.
October 8, 2007
Can UAW Take the Wheel and Steer Its Health Care
Obligations to Workers and Retirees? The deal
between the United Auto Workers and General
Motors means the union, long a critic of the American
system of employer-sponsored health care, will have
to put its newfound money where its mouth is.
The contract proposal, which was agreed upon
September 26 and remains subject to court
approval, will transfer from GM around $35 billion in
cash and stock to the union to pay for retiree health
care costs.
Should the United Auto Workers get a similar offer
from Ford and Chrysler regarding retiree health care
benefits, the union could have upwards of $70 billion
to spend on more than 500,000 beneficiaries,
making it among the largest health care purchasers
in the United States. But in health care, where costs
have risen more than 70 percent in the past five
years, even $70 billion can last only so long.
In the equation that produced health care costs that
nearly sent GM into bankruptcy, costs must drop for
the union, or the health care trust—known as a
voluntary employees beneficiary association, or
VEBA—will find itself bankrupt.
To avoid insolvency, the union will have to adjust the
behavior of retirees. It would most likely have to
change the benefits incentives that drive over-
utilization of health care or reduce the amount the
union pays health care providers.
UAW president Ron Gettelfinger promised workers
the fund would remain solvent for 80 years without
any reduction in benefits.
“The funding level we have negotiated is expected to
allow the VEBA to continue to provide benefits
without change for the lifetime of current and future
retirees,” he wrote in a letter to members.
Those familiar with the union’s thinking say the UAW
will address costs by utilizing the full force of its
purchasing power, which will grow if Ford and
Chrysler offload their liabilities into the VEBA.
The union could create networks of efficient lower-
cost doctors, negotiate lower rates with hospitals,
abandon brand-name drugs in favor of generics and
make changes that General Motors never had the
freedom to make.
“The trustees of this VEBA are going to aggressively
manage this fund to protect and maintain health care
for retirees similar or equal to what they currently
have for as long as they possibly can,” says Kristin
Dziczek, senior project manager at the Center for
Automotive Research in Detroit.
Lance Wallach, a consultant on VEBAs, believes the
union must change its benefit structure to encourage
more responsible spending and healthier living,
including among retirees responsible for the bulk of
health care spending.
“The only way for this VEBA to work is for whoever is
going to administer it to change the behavior of the
workers,” Wallach says. “If they don’t do that, this
absolutely won’t work.”
One escape valve for the union is to change the
relationship between health insurance and
employment. Toward that end, the union, with $15
million from GM, will establish the National Institute
for Health Care Reform “to expand access to high-
quality, affordable and accountable health care
coverage for all Americans,” the union wrote.
“I don’t know where it ends up, but [the union-run
VEBA] is certainly part of the transition away from
employer-based health in the United States, says
Dave Andrea, vice president of industry analysis and
economics for the Original Equipment Suppliers
Association, the trade group for auto parts
manufacturers.
--------------------------------------------------
Lance Wallach, CLU, ChFC, CIMC, speaks and
writes about benefit plans, tax reductions strategies,
and financial plans. He has authored numerous
books for the AICPA, Bisk Total tape, and others. He
can be reached at (516) 938-5007 or lawallach@aol.
com. For more articles on this or other subjects, feel
free to visit his website at www.vebaplan.com.
Lance Wallach, the National Society of Accountants
Speaker of the Year, speaks and writes extensively
about retirement plans, Circular 230 problems and
tax reduction strategies. He speaks at more than 40
conventions annually, writes for over 50 publications,
is quoted regularly in the press, and has written
numerous best-selling AICPA books, including
Avoiding Circular 230 Malpractice Traps and
Common Abusive Business Hot Spots. He does
extensive expert witness work and has never lost a
case. Contact him at 516.938.5007 or visit www.
vebaplan.com.
The information provided herein is not intended as
legal, accounting, financial or any other type of
advice for any specific individual or other entity. You
should contact an appropriate professional for any
such advice.