Ford Motor is launching a two-year pilot program with the United Auto Workers and a UAW-affiliated retiree trust fund aimed at lowering the cost of providing medical care for the company’s active and retired hourly workers.
The program, open to workers and retirees in southeastern Michigan, is designed to help “bend the cost curve” of healthcare by treating chronic diseases early on, rather than risk having workers and retirees wait until those issues grow more severe and expensive, Ford, the UAW and the UAW Retiree Medical Benefits Trust said on Monday.
It is the latest attempt by Ford and the UAW trust to cope with healthcare costs, which are rising faster than the value of the assets used to pay for them. The UAW trust was short US0 billion during its first year in 2010. By 2011, the most recent period for which data is available, that shortfall grew to US3 billion.
If successful, the program could be expanded to other areas such as Kansas City, Missouri, and Louisville, Kentucky, where Ford has a concentration of retirees and workers.
“We’ve never done anything like this before,” said Rick Popp, Ford’s director of employee benefits. “If the process and this kind of arrangement works for this program, that could be leveraged for a broader solution.”
The pilot is modelled on a program at Boeing, where Alan Mulally was a top executive before he joined Ford as chief executive in 2006. Ford officials declined to estimate the potential savings of their pilot program, but said medical costs for the participating Boeing workers fell by about one-fifth.
Ford spends US$7 an hour to pay for healthcare for its 44,500 UAW-represented workers in the United States. This amounts to between US$600 million and US$700 million a year, the bulk of the US$1 billion that Ford spends annually on healthcare for its entire workforce.
The UAW trust spends US$4.5 billion a year on healthcare for 800,000 unionized retirees from General Motors, Ford and Chrysler Group.
About 61 per cent of annual healthcare costs paid by Ford and the UAW trust stem from five chronic diseases: diabetes, asthma, coronary artery disease, congestive heart failure and chronic obstructive pulmonary disease.
Between 1,200 and 1,500 unionized workers and retirees are expected to join Ford’s voluntary program on the recommendation of their doctors. Only retirees who are not eligible for Medicare are allowed to join.
Participants will be assigned one of 12 personal care nurses who will them help navigate the healthcare system and treat their chronic conditions.
“I would think that most reasonable people would look at this as a really great opportunity,” said Marty Mulloy, Ford’s vice president of labour affairs. “You get healthcare provided to them at a level that isn’t normally available.”
Each nurse will handle a maximum of 125 cases.
The UAW is in talks with GM and Chrysler about a similar program for their hourly workforce, said Susanne Mitchell, director of the UAW’s Social Security department.
The participation of retirees differentiates the Ford program from Boeing’s. The trust was created in 2007 during labour talks with the UAW to take on the retiree healthcare burden from GM, Ford and Chrysler.
The landmark deal was designed to protect UAW retiree benefits if the companies’ finances deteriorated and to remove an ever-increasing liability that the automakers said added as much as US$2,000 to the cost of a vehicle.
Ford and the UAW trust will pay for the salaries of 12 personal care nurses and consultants who are part of the pilot program, which kicks off on July 1.