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There is a question now whether GM's move may spark consideration of a more radical break with the present reliance on job-based insurance. Cutting off health benefits completely is still unfathomable to nearly all large employers that require competing for talent. In its place, more are embracing the middle ground of offering a fixed contribution in the direction of individual coverage.
The new trust for UAW retiree health benefits is likely to hear pitches from consultants about such ideas. By disbursing fixed amounts, and limiting increases, administrators of health-care trusts can keep away from running out of money.
Extend Health Inc., partly owned by America Online founder Steve Case's Revolution Health Group, has built a team of 180 insurance agents and a sophisticated Web site to serve retirees at Fortune 500 companies with individual health accounts. Extend has signed six large clients, as well as Ford and Chrysler, that will be offering retiree health accounts next year. It plans to triple that number by 2009.
The chief executive at Extend Health, Bryce Williams, disagrees that the paternalistic group model is broken and that companies cannot sustain a health-care safety net. "This is about making corporate America competitive again," says Mr. Williams.
Ford estimates its change for salaried retirees will save the automaker about $80 million yearly, and still more in future accounting liabilities on its balance sheet. In 2006, Ford spent $1.8 billion on retiree health care for hourly and salaried workers, more than half its total $3.1 billion health-care tab. Ford has estimated its U.S. health-care costs will increase 6% this year and could level off to 5% growth by 2011 with some of the changes it is making now.
Marcey Evans, a Ford representative, said the new health-reimbursement accounts for salaried retirees maintain high-quality benefits in line with the company's competitors, while providing a way to manage costs.