DEARBORN, Michigan (Reuters) - Ford Motor Co (F.N) is launching a two-year pilot program with the United Auto Workers and a UAW-affiliated retiree healthcare trust aimed at lowering medical costs for the second-largest U.S. automaker’s active and retired hourly workers.
Between 1,200 and 1,500 unionized workers and retirees in southeastern Michigan with chronic but manageable diseases are expected to join the pilot program, the automaker, the union and the UAW Retiree Medical Benefits Trust said on Monday.
Under this program, Ford, the UAW and the trust hope to cut healthcare costs - rather than shift the burden to others - by encouraging workers to treat and address health issues earlier rather than wait until conditions grow more severe and therefore more expensive. It is an effort to “bend the cost curve,” according to Marty Mulloy, Ford’s vice president of labor affairs.
In recent years, Detroit’s automakers have struggled to cope with runaway healthcare costs for their hourly and salaried workers. Ford spends $7 an hour on healthcare for its 44,500 active hourly workers in the United States. About 61 percent of annual healthcare costs for Ford and the UAW trust stem from five chronic diseases, including diabetes, asthma, coronary artery disease, congestive heart failure and chronic obstructive pulmonary disease.
By tackling problems earlier, Ford can lower its healthcare costs, Mulloy told reporters during a media briefing at the company’s headquarters. That could help the UAW trust, which assumes the burden of healthcare for Ford’s unionized workers once they retire.
The UAW trust spends $4.5 billion a year on healthcare for 800,000 retirees from General Motors Co (GM.N), Ford and Chrysler Group LLC FIA.MI.
The pilot is modeled after a program at Boeing Co (BA.N), where Alan Mulally was a top executive before joining Ford as its CEO in 2006. In the Boeing program, medical costs for the participating workers fell 17 percent after two years.
Participation in the pilot is voluntary and workers will be recommended to the program by their doctors. Only non-Medicare eligible retirees can join the pilot program.
Participants will have access to one of 12 personal care nurses who will help patients navigate the healthcare system and track their progress. Each nurse will handle a maximum of 125 cases a year.
Both GM and Chrysler are in talks with the UAW about a similar program for active hourly workers, said Susanne Mitchell, director of the UAW’s Social Security department.
Ford and the UAW began to broach the subject of lowering healthcare costs before the 2011 labor talks. Officials from the company, union and the trust visited Boeing and discussed nurses and doctors involved in the plan.
The participation of retirees differentiates the Ford program from Boeing’s example. The trust was created in 2007 during labor 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 $2,000 to the cost of a vehicle.
But rising healthcare costs have widened the trust’s funding shortfall. In 2010, the first year of the trust’s operations, the trust was underfunded by $20 billion. In 2011, the most recently available data, the shortfall grew to $33 billion.
“A lot of what you hear in healthcare today is cost-shifting,” said UAW’s Mitchell. “This is not cost-shifting.”
Ford and the 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.
Additional reporting by Ben Klayman in Detroit; editing by Matthew Lewis