Retiree Health Care Shifts to Unions

Some manufacturers are shifting health-care responsibility for retirees to unions. Goodyear Tire and Rubber, for example, is giving the United Steelworkers about $1 billion to take over retiree health care. Others ponder similar plans.

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On Wednesdays we focus on the workplace. Today we look at companies shifting healthcare costs to employees. Companies have been doing that for years but Goodyear Tire and Rubber recently went a step further - it gave a billion dollars to its union, which then took over responsibility for its retirees' healthcare. Other manufacturers are also pondering the move. NPR's Frank Langfitt reports.

FRANK LANGFITT: The steel workers were trying to make the best of a bad situation. They were in the midst of a strike at Goodyear, and they were worried - if the company went bankrupt, retirees could lose their healthcare, just as they did when Bethlehem Steel went under. So as Steel Workers' President Leo Gerard explains, they decided to take the money and take their chances.

Mr. LEO GERARD (President, Steel Workers Union): We were concerned that if Goodyear was to go into insolvency at some point, then we'd end up retiree healthcare being wiped out in total - the way it's been in so many other places. So that we've viewed this as quite frankly a bird in the hand.

LANGFITT: The money goes into a trust. A committee chosen by the union and, to a lesser extent, the company, will manage the assets and health benefits. For Goodyear, this was a way to get rid of a rising expense that has dogged U.S. firms for more than two decades.

Mr. HARLEY SHAKEN (Labor Specialist, University of California at Berkeley): Goodyear is essentially giving a billion dollars to avoid an unknown rise in those costs for the future.

LANGFITT: That's Harley Shaken. He's a labor specialist at the University of California at Berkeley. He says the Goodyear deal is the latest in a long trend towards pushing the responsibility of healthcare onto workers. And for Goodyear, the pressure to shed that risk is even greater, because of foreign competition.

Mr. SHAKEN: Goodyear competes with companies that are producing in low-wage areas of the world, who do not have healthcare costs - either because they're not paying them or because governments in other countries are doing this on a federal level.

LANGFITT: Other U.S. businesses quickly took note of Goodyear's novel approach. Derrick Giden(ph) is a senior healthcare consultant with Mercer, the human resources giant. Companies began contacting him a day after the deal with announced.

Mr. DERRICK GIDEN (Senior Healthcare Consultant, Mercer): It certainly sparked a lot of interest. I've probably had, you know, at least a dozen inquiries about this. And obviously these are large companies with large union populations.

LANGFITT: Manufactures like, say, Ford, General Motors or Chrysler. All three face crippling healthcare costs, and all three have expressed interest in a deal like Goodyear's. In a conference call, Chrysler CEO Tom LaSorda said his company had analyzed the deal. But he said at the time it was too complicated to discuss with reporters.

Mr. TOM LASORDA (CEO, Chrysler): I mean this would take a day of debate with experts from all walks of life, including the union. But all I can say is we've studied it, I know others have studied it in town, and it's just something -it's an option that we would not discount at this stage.

LANGFITT: But just because some companies are interested doesn't mean that this is the start of a trend. Derrick Giden of Mercer says the move could make sense for Detroit's Big Three, but can they afford to pay the United Auto Workers to take over retiree healthcare.

Mr. GIDEN: You wonder if even they have enough cash. I mean the Goodyear liability was a little bit over a billion dollars. But the car companies' liabilities are tens of billions of dollars.

LANGFITT: As for the steelworkers, they say they should have enough money from Goodyear to look after an estimated 30,000 retired employees and family members. But healthcare remains unpredictable. What if costs rise faster than anticipated? Or a new expensive drug for Alzheimer's comes on the market? Derrick Giden says a number of factors could drain the retirees' fund faster than the union expects.

Frank Langfitt, NPR News.

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