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Chrysler's Health Care Linked to Pay: Program to Start With Management

Posted on: Thursday, 16 March 2006, 06:00 CST

By Kim Norris, Detroit Free Press

Mar. 16--Chrysler Group is taking the unusual step of tying 2007 health care premiums to pay levels for senior management and executives as part of changes to its coverage for all active and retired salaried workers.

The Auburn Hills-based automaker plans to extend its the-more-you-make-the-more-you-pay formula to all salaried employees after 2007, the company announced Thursday.

Retired salaried employees who are younger than 65, 3,200, will see increases in their premiums, while Medicare-eligible retirees 65 and older, 14,400, will be covered by a company-created health care retirement account that Chrysler officials say ultimately will lower their overall health costs.

In a letter Wednesday to Chrysler's 14,900 salaried workers, CEO Tom LaSorda said to stay competitive, Chrysler, like Ford Motor Co. and General Motors Corp., would have to reduce health care costs.

Chrysler's total health care bill has nearly doubled since 2000 to $2.3 billion in 2006.

"That is why we all have to do our part going forward. And we have to do it in a way that is innovative, competitive, equitable and provides a long-term solution," LaSorda said.

Like Ford and GM, the remedy of choice is to ask workers and retirees to share more of the ever-increasing health care costs. Unlike the other two Michigan automakers, Chrysler plans to index its increases to rank and salaries of both active and retired workers.

The average annual total health care cost for active salaried employees is about $11,000, of which each worker, regardless of rank or pay level, pays about 27%, or $3,000, in premium contributions, co-payments and deductibles. Every employee pays $1,000 toward his or her premium, with Chrysler picking up the rest of the $9,000 premium cost.

Starting in 2007, management and executives will be asked to pay more of the annual premium, up to 100% for the top dogs. Beyond 2007, all employees will be asked to share more of the cost increases, based on how much they make.

For executives who fall into what Chrysler defines as Bank 94 and above, average premium increases will be about $1,000 and up to 100% for top executives like LaSorda. Conceivably, LaSorda could be picking up the whole tab -- about $9,000 -- for the health care premium for him and his family. All employees pay co-payments for doctors, prescriptions and deductibles, which average about $2,000 a year.

Highlights of the new health care plan:

* On average, 4,100 professional administration employees will see no increase in premium costs in 2007.

* 9,400 management employees will be asked to pay between 50% and 100% of premium increases in 2007, an estimated $450 on average.

* 1,400 executive employees -- senior managers and up -- will contribute an additional $1,500 on average.

* Current and future retirees younger than 65 will be asked to pay an incremental share of their premium increases.

*For retirees 65 and older who qualify for Medicare, Chrysler is establishing a health care retirement account into which the company will contribute $1,750 annually for the retiree and $1,750 a year for a spouse or partner. The retiree decides how to delegate the health care dollars. Currently, these retirees pay $3,700 toward their premium and another $1,400 in out-of-pocket expenses on average.

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Copyright (c) 2006, Detroit Free Press

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Source: Detroit Free Press

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