Human Capital & Careers

New Model Year for GM Health Benefits?

The auto giant's health-care liabilities underscore a problem plaguing most companies, many of which are scaling back coverage for both current and...
Stephen TaubMarch 24, 2005

A top General Motors executive said that the auto giant — which for years has cited soaring health-care costs as a major source of its financial woes — must totally revamp its health plans, reported The Wall Street Journal.

“We need an across the board, competitive health-care plan for salaried and hourly workers that could serve us better,” said Gary Cowger, president of General Motors Corp. North America, during a speech at the New York Auto Show, according to the paper. GM expects to spend $5.6 billion on health care this year, the report added, noting that salaried workers are receiving a less generous package than employees with its largest union, the United Auto Workers.

GM’s health-care liabilities underscore a problem plaguing most companies, many of which are scaling back coverage for both current and retired employees.

“Employers simply can’t afford the benefits they have promised,” Helen Darling, president of the National Business Group on Health, an organization of large employers, told The New York Times. Darling observed that “the auto companies are in the most trouble because they have some of the highest health costs and some of the toughest competition.”

According to the Times, last year only 17 percent of large and medium-size employers paid all health-care premiums for individual coverage, compared with 29 percent in 2000, citing data from benefits consulting firm Hay Group. Just 6 percent of employers paid the full premium for family coverage, down from 11 percent in 2000, the report added.

Retirees are also feeling the pain of eroding health benefits, the Journal reported. The newspaper pointed to estimates by the Employee Benefit Research Institute — drawing on data from the Census Bureau and the Department of Health and Human Services — that 29 percent of early retirees had employer-sponsored health insurance in 2002, down from 39 percent in 1997.

Just 25 percent of retirees older than 65 — those eligible for Medicare — were offered employer-sponsored health benefits, down from 28 percent in 1997.