Chrysler execs bear brunt of health care cost increase
As Chrysler spends nearly $2.3bil on health
care costs per year, about $8K per worker, it was evident at the top level that changes to the system would have to be
made. Those changes were announced yesterday and involve a sliding scale of out-of-pocket premium increases
that’s based on each salaried employees pay level.“The more you make, the more you will be asked to contribute,” says CEO Tom LaSorda. This means that premiums paid by a “professional-administrative employee” (read: garden variety white collar worker) will on average not go up, while the top brass, presumably LaSorda himself, will now be responsible for up to 100 percent of their health care premiums. Mid-managers will see a premium increase of around $450 and the average exec’s out-of-pocket will inch up by $1,500.
The overall effect of these changes will be a rise in the average amount of health care costs paid by employees per year from 27 to 31 percent. Kudos to Chrysler for not having the least compensated among its ranks bear the brunt of this increase.
Follow the jump for Chrysler's official press release.
[Source: Chrysler]
Chrysler Group Announces Innovative Changes to Employee Health Care Plans
Future employee health premium-sharing scaled to salary
Equitable approach — "the more you make ... "
LaSorda: a competitive, long-term solution
Similar solutions offered to retirees
Auburn Hills, Mich., Mar 15, 2006 -
Chrysler Group today announced changes to the health care programs it offers to active and retired professional-administrative, management and executive employees, effective Jan. 1, 2007.
Most notably, the new plan will introduce a health care premium-sharing structure for non-bargaining salaried employees that is based on salary levels.
"We all have to do our part going forward," said Chrysler Group President and Chief Executive Officer Tom LaSorda. "And we have to do it in a way that is innovative, competitive, equitable and provides a long-term solution. Our solution addresses the need to be competitive and recognizes that, while employees need to pay more for their health care, cost increases should be borne equitably, based on an employee’s ability to pay."
Under the new health care program, each active salaried employee’s health care pre-tax premium increases will be based on their rank and base salary level. For 2007, that means professional-administrative employee premiums on average will not be affected, while the top of the executive ranks will be responsible for up to 100 percent of their health care premium. Mid-managers will see an average premium increase of about $450 in 2007, while the average executive will additionally contribute around $1,500.
Future incremental pre-tax premium increases will follow this pattern of “the more you make, the more you will be asked to contribute,” and any future percentage increases will be reviewed on an annual basis to reflect health care and wage economics.
Health care is one of the company’s largest fixed costs — expected to be $2.3 billion in 2006 — and continues to rise each year well beyond inflation. Since 2000, Chrysler Group's health care costs have risen 100 percent.
"Chrysler Group must continue to drive down health care costs in order to sustain our profitable growth in a market that is intensely competitive," added LaSorda. "The market will not allow car makers to raise vehicle prices to absorb these additional expenses. Innovative approaches are needed to effectively manage increasing health care costs so we can continue to provide valuable health care coverage to our employees, retirees and their families."
Today, the average annual total health care cost for each salaried Chrysler Group employee, regardless of job or income level, is about $11,000. Of that total, the average salaried employee, again regardless of rank or income, pays about 27 percent of that cost, or roughly $3,000 per year in pre-tax premiums, co-pays and deductibles to their service provider. On average, that means Chrysler Group is spending about $8,000 per salaried employee for health care.
The net effect of the changes will increase on average by four percent the amount of health care costs borne by the salaried employees — rising from 27 percent to 31.
Chrysler Group today also announced changes to health care benefits for pre- and post-age 65 retirees.
Pre-65 Retirees
Currently, the company and the “early” retirees equally share annual health care premium increases.
In keeping with an approach that is equitable across groups, beginning Jan. 1, 2007, current and future pre-Medicare retirees (pre-65) will now share a percentage of health care premium increases based on the exit base salary of the retiree. Those retirees who exited at an income below $50,000 will share 50 percent of the inflationary premium in subsequent years, while employees who exited at an income of $171,000 or higher will pay 100 percent of the inflationary premium. For 2007, that means an incremental annual premium of $0 for the former and approximately $375 for the latter.
Those pre-65 retirees exiting between those salary amounts will pay more than 50 and less than 100 percent on an increasing scale based on exit salary.
Post-65 Retirees
For Medicare-eligible post-age 65 retirees, the Company is establishing a Health Care Retirement Account (HRA) of $1,750 annually for a retiree and an additional $1,750 for a spouse or domestic partner, assuming retirement with 100 percent of the necessary service-year credits. In 2008, the reimbursement will increase by 3 percent for the retiree or surviving spouse. Under the new plan, the retiree will be in the driver’s seat to choose what coverage they require and may use the HRA funds toward any or all of the following reimbursable health care expenses:
Medicare Part B or primary medical insurance (currently $1,050 per person)
Medicare Part D (cost depends on prescription plan based on individual need)
Medigap Policy
Out-of-pocket expenses
Dental/vision coverage at competitive rates
Salaried employees hired after Jan. 1, 2004, will continue to receive an annual Retiree Health Care Account deposit. No changes are currently planned.
Reader Comments (Page 1 of 1)
Leo 9:03AM (3/16/2006)
Leave it to a German Company (buy American doesn't apply to DCX, folks) to introduce Socialism to mainstream America.
Thanks to another once great American company selling out and being a chicken $hit shill for the UAW.
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Vig 9:22AM (3/16/2006)
$8,000/person!! My god, it'd be cheaper if they paid for everything themselves. Avg. healthcare in any industialized nation is in the 6 grand range. Save for Leo's gloriously privatized America where competition drove down prices (except on the things that cost more.)
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Paul Murray 9:47AM (3/16/2006)
Leo, that's one of the most idiotic comments I've read here lately (and that's saying something). Go renew your membership in the John Birch Society.
$1500/year is a pittance to a high-level exec compared to a lower-level white-collar worker. I agree with the original post, it's nice to see some recognition of that fact.
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Richard Warren 9:55AM (3/16/2006)
This is nothing new, many companies have been doing this for a long time, our town has the same basic formula. It makes sense, if you're the CEO making millions, you can well afford the cost of your medical and deduct it from your taxes.
Everyone should be slef employeed for a while and have to see how high health premiums have gone.
Example, my wife worked at a business that had health insurance, her plan was much like the one above, her share was 105 per month, my share 456 per month. When they closed, I took on the health insurance for her and myself, the total out of pocket now, 897 and that's for a "reasonable" plan (the older ya get the more it costs)
You know, it's not so much what the employers give or have offered in the past, it's how the whole landscape on health insurance has changed and for folks who retire, here is a real rub, we are living much longer, if you were offered continuing insurance and retirement benefits and you used to kick off at the average age of 67 and now you live well into your 80's, well do the math. Instead of paying benefits for a couple to maybe 5 years now the company may have to pay for 30 years. It's just not doable the way it was.
I think this is a good step in the right direction that Chrysler has taken.
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Leo 11:25AM (3/16/2006)
John Birch Society? You're giving away your age & I voted for Kerry. I'm just a realist who knows that executives aren't just paid more because they have a fancy degree. They get paid more because they have the stress and responsibility of managing hundred - sometimes thousands of people. Anyone who has done that understands why so many execs burn out.
There ought to be some advantage to taking on all the long hours and stress. This Robin Hood-style egalitarian cave in is a step towards running off all your managerial talent.
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t.ogurek 8:10PM (5/21/2009)
give me the job, i'm sure i could handle it better and a lot more fairly. with compassion and concern for all people and a lot more trustworthy. tammy
Richard Warren 1:22PM (3/16/2006)
#4 "They get paid more because they have the stress and responsibility of managing hundred - sometimes thousands of people."
Or---mismanaged and still get rewarded, or haven't you been watching?
And yes at one time I managed over 600 people. Burnout? If you love it you don't get burned out.
Long hours and stress? That's part of the management job, can't take the heat? Get out of the kitchen.
Where the great managers show their stuff? When it all turns to crap and your skill and knowledge turn it around without wholesaling off the company.
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AML 1:59PM (3/16/2006)
'I'm just a realist who knows that executives aren't just paid more because they have a fancy degree. They get paid more because they have the stress and responsibility of managing hundred - sometimes thousands of people. Anyone who has done that understands why so many execs burn out.'
This is the biggest load of crap ever fostered on the American public. The simple fact is, the higher up in the corporation, the less stress you have for one simple reason - PAYCHECK! A CEO averages about $5 million a year and is responsible for thousands of employees. The typical worker averages $40,000 a year and manages very few, if any, workers. But here is the real stress deal; if the CEO loses his job, he doesn't need to find another job since he can easily retire at any time based on the money (and benefits) he has already been paid. If the typcial worker loses his job, he MUST find another job. Otherwise he risks losing his house, his possessions and his family. NOW THAT IS REAL STRESS! I'm tired of all this bull#$%^ about all the stress on corporate executives and how they deserve their pay. Try raising a family, paying bills and sending kids to college on the average household income ($50,000/year) all while trying not to lose your job.
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Brian 2:25PM (3/16/2006)
It's good to finally see the executives of a company finally taking one for the team.
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Kevin 2:39PM (3/16/2006)
OK, here's the first problem: health care premiums of $8k per year per employee? I haven't consumed $8000 worth of health care my entire life, how on earth do they manage to get themselves into that situation?
Our small company pays $285 a month per head for perfectly decent coverage, maybe Chrysler should call our agent.
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t.ogurek 11:38AM (5/18/2009)
my husband retired after 43 years at chrysler. we are trying to find out what health insurance plans chrysler offers. we now live in KY, and have the blue cross ppo. it does not cover much of anything. we have to pay the full cost of office cal 120.00. even after we meet a 3,000 dollar deductable, still does not cover office calls.does anyone know all the health insurance plans that are availableplease let us know. can't even afford to go to the doctor any more. sick of being sick. can anyone help us. we would be very thankful, tammy and don ogurek
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t.ogurek 12:15PM (3/26/2009)
does anyone know what health insurance plans that chrysler offers. we had HAP in michigan and loved it. now my husband retired after 43 years, and we moved to kentucky, and were told the only insurance plan here is blue cross ppo. it does not cover anything. can't even afford to go to dr. when i am sick , because we have to pay office call , which can be any where from 55 to 120. and even test are not covered till ya meet a deductable of 5,000 dollars. so can some one send me a list of health insurance plans chrysler offers, so i can check around, and see if kentucky offers anything else oter than blue cross ppo. thank you tammy
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t.ogurek 7:36PM (5/21/2009)
very sick over this goverment, doing things behind our back. exspeailly the way they came in and told the chrysler employees to sign the contactbecause oboma demanded it. the goverment is trying to own us and everything else in the usa. we the people need to unite and put a stop to this, if it isn't already to late.
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t.ogurek 7:35PM (5/21/2009)
I WOULD LOVE TO KNOW WHAT INSURANCE OPTIONS WE HAVE IN KENTUKY. CURRENTLY WE HAVE BLUE CROSS BLUE SHIELD PPO. WE MOVED FROM MI. TO KY. TWO AND A HALF YEARS AGO, WHEN MY HUSBAND RETIRED AFTER 43 YEAR. AS FAR AS I CAN TELL IT COVERS NOTHING UNTILL WE MEET A 3,000 DEDUCTIABLE. MY HUSBAND IS OK BECAUSE HE HAS MEDICARE TOO, BECAUSE HE IS 66 YEARS OLD. NOT MUCH IS COVERED FOR ME. AN OFFICE CALL RANGES FROM 100.00 TO 120.00 , SO THAT MAKES IT ALMOST IMPOSSIBLE FOR ME TO SEEK MEDICAL, WHICH I REALLY NEED. IT SHOULD BE AN EMBARRASMENT TO CHRYSLER AND THE UAW WHO HE SUPPORYED FOR THE 43 YEARS HE WORKED THERE. IN MI. WE WERE COVERED BY HAP INSURANCE, WHICH I LOVED. WHY IS THERE NOT BETTER INSURANCE PLANS IN KY. A STATE IN WHICH A LOT OF RETIRED PEOPLE FROM MI. LIVE . MY HEATH CONDITION IS PRETTY POOR RIGHT NOW, AND IT IS A PITTY THAT I CAN NOT AFFORD TO SEE A DR. I'M SURE THE EXCUTIVES OF CHRYSLER AND THE HEADS OF THE UAW HAVE THE BEST COVERAGE AVAILABLE, THANKS TO THE PEOPLE YOU EMPLOY AND PAY UNION DUES TO A UNION WHO IS IN BED WITH CHRYSLER,GOVERMENT AND THE UAW. I PRAY THAT GOD HAS PITY ON ALL OF YOU THAT HAVE SOLD US OUT. BUT IF THIS LETTER REACHES ANYONE WHO CAN GIVE ME SOME ANSWERSAND HAS A HEART PLEASE WRITE ME BACK. I HAVE ALREADY WROTE MANY LETTERS TO THE GOV.,THE CONGRESS, THE UAW AND CRYSLER, NONE OF WHICH GAVE ME ANY SOLUTIONS, OR ANYCONSIDERATION AT ALL. MY HUSBAND WORKED FOR THE DETROIT AXEL PLANT,LOCALUNION 961. PLEASE CAN YOU TRY TO BE AS LOYAL TO HIM AS HE WAS TO YOU. WHEN HE RETIRED, HE WAS UNDER THE IMPRESSION THAT WE HAD GOOD BENIFITS THAT WOULD TAKE CARE OF HIM AS WELL AS ME HIS WIFE. REMEMEMBER WHAT GOES AROUND ALSO COMES AROUND, AND I AM CERTAIN THAT YOU AND YOUR FAMILY, WILL FACE AS MANY PROBLEMS AS THE EMPLOYEES THAT YOU SCREWED OVER. PLEASE TAKE THE TIME TO CONSIDER MY LETTER AND OUR PROBLEMS, I BELIEVE YOU OWE US THAT. TAMARA M OGUREK AND DONALD M OGUREK
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