Fiat Chrysler-UAW deal includes health care co-op

Michael Wayland, Melissa Burden and Michael Martinez
The Detroit News

United Auto Workers members at Fiat Chrysler Automobiles NV are expected to benefit from across-the-board wage raises and a health care co-op pool under a “transformational” four-year deal that was reached by the two sides Tuesday night.

In a letter on Wednesday morning to employees, Fiat Chrysler Automobiles NV CEO Sergio Marchionne confirmed the company “will partner” with a United Auto Workers Health Care Development Co-op and workers will receive “significant economic benefits,” while keeping the company competitive.

“If the final plan targets are met, and I am confident they will be, workers will receive significant economic benefits tied directly to their commitment,” read the letter.

Marchionne and UAW President Dennis Williams on Tuesday declined to discuss specific details of the agreement until after the union’s roughly 40,000 Fiat Chrysler workers were briefed on the tentative contract.

Late Wednesday, however, Bloomberg News cited unnamed sources saying senior, or tier-one, workers now making about $28 an hour would get raises in two steps that could bring their hourly wage to almost $30; newer or second-tier workers could earn as much as $25 an hour after eight years of service. Second-tier workers currently top out at $19.28 an hour.

Several officials with Fiat Chrysler and the union, when contacted by The Detroit News, declined to comment on the tentative agreement or Bloomberg report, which also cited $3,000 signing bonuses for members.

The rewards are consistent with comments made by Williams and Marchionne about rewarding the membership for sacrifices made in recent years and creating a “path” for higher wages for entry-level workers and ending the tiered-system “over time.”

Beyond economics, the health care co-op is expected to be one of the most radical changes in the tentative agreement.

Marchionne, in the letter, described the co-op as a “comprehensive approach” that will “explore innovative ways of improving the delivery of health-care benefits in a manner that increases quality, lowers costs and provides better patient care.”

A health care co-op pool was first brought up by Williams earlier this year to include all employees — salaried and hourly — at Fiat Chrysler, General Motors Co. and Ford Motor Co. as a way to ease rising health care costs, increase buying power and maintain benefits for its members in the future.

“They can really impose favorable terms on providers,” said Andrew Stumpff, an employee benefits lawyer who teaches at the University of Michigan. “What strikes one as surprising, any one of the automakers individually were already so big to negotiate significant discounts. If you can scale that even more from that … you’re really in a good position to negotiate.”

It’s unclear if salaried and hourly employees are expected to be included in the co-op — or what happens if GM or Ford don’t agree to it. If salaried employees at all three automakers were included, the co-op would have about 226,000 people, including 145,300 union members.

Officials with the union and automaker declined to comment on the co-op under the tentative deal, which must be ratified by the union’s members at Fiat Chrysler.

Williams’ initial co-op concept was a product of the union’s experience managing the Voluntary Employee Beneficiary Association, or VEBA, that controls costs for 750,000 UAW eligible retirees and dependents. Since its creation in 2007, fund managers have reinstated vision and dental coverage for retirees and are preparing to reinstate hearing coverage, as they have learned to better manage their resources and coverage.

A health care co-op for all three companies would be groundbreaking for the automotive industry, which annually spends billions on employee health care.

But for it to reach its full potential, it has to include GM and Ford as well as all the automakers’ 81,000 salaried employees, officials say. The union will work on reaching tentative agreements with GM and Ford in the coming weeks.

“It’s an interesting concept,” said Steve Rosser, vice president of Johnston Lewis Associates, a Troy-based employee benefits and insurance company. “While they’re not completely replacing the insurance company, they’re trying reduce their role and negotiate better fees and discounts with the hospitals and providers.”

Rosser said the companies would still need an insurance company like Blue Cross to function as an administrator.

“In my opinion I would see it as short-term savings only,” he said. “You’re not going to change the cost curve just because you’re negotiating directly.”

Kristin Dziczek, director of the Labor and Industry Group at the Center for Automotive Research, said Wednesday that it’s unclear how the pool could be set up or if the pool requires a buy-in from the other two automakers: “To increase the buying power, you can’t have just one company in it,” she said.

Williams on Tuesday said all three companies “are all very interested in the concept and the idea about the co-op.”

“It is ultimately the right thing to do, to redesign and use purchasing power as well as other means,” he said.

A pooled system also could help automakers avoid the Affordable Care Act’s so-called “Cadillac Tax,” which starting in 2018 imposes a 40 percent excise tax on the portion of group health insurance premiums that exceed $10,200 for single coverage and $27,500 for family coverage.