New Program Gives General Motors Retirees More Control

Published January 1, 2009

General Motors has announced it will stop funding health insurance for its Medicare-eligible retired employees, opting instead to pay 100,000 retirees and their dependents $300 more each month in pension funds beginning January 1, 2009.

This measure is part of an overall $1.5 billion structural reduction, said GM spokeswoman Michelle Bunker.

The company also is offering the services of contractor Extend Health, whose representatives will meet with retirees to help them figure out the best ways to use the $300 in a personalized health care plan to supplement their Medicare coverage.

Silver Lining

The auto industry faces a financial crisis, and GM is desperately trying to scale back expenditures, noted Bruce Belzowski, an automotive analyst and researcher at the University of Michigan. The most pessimistic estimates predict GM could run out of cash entirely next year.

The industry has been hit hard by the credit crunch plaguing the United States. GM has been unable to borrow funds to run operations and is struggling to loan consumers money to purchase vehicles, Belzowski said. Also, drivers have been facing higher fuel prices, and many of the vehicles manufactured by the “Big Three”—Chrysler, Ford, and GM—are not optimally fuel-efficient, he said.

“Those two things combined are really hurting the Big Three,” Belzowski said.

Changes Becoming Common

GM is not the first big company to alter the health benefits in its retirees’ pension plans to lower expenses and increase choice, Bunker said. Ford and Chrysler are doing the same, as is appliance manufacturer Whirlpool.

Extend Health has already met with 40,000 GM retirees at 110 meetings across the country, Bunker said. They have distributed educational material about the switch.

“GM is trying to walk the fairness line,” Belzowski said. The change “only applies to people who are on Medicare. That $300 goes a lot farther with people who are on Medicare than people who are not. They could just say, once you’re on Medicare, you’re on your own.”

Personalizing Coverage

While retirees are losing health care coverage in a form they’ve grown used to, the transition is likely to lead to more-personalized plans and a more consumer-driven health care market, experts say.

Extend Health Senior Vice President Brian Tenner said the next step will be to connect enrollment benefit advisors with each of the retirees to help them evaluate what’s available in the health care market and figure out what plan best fits their individual needs and budget.

“The idea here is that people get to personalize their coverage,” Tenner said. “It’s no longer a one-size-fits-all plan. So if people want coverage that is similar, they can find it. But if they want to personalize it, they are able to do that as well.”

He said most retirees can find equal or better coverage at less cost.

“They might be somewhat skeptical coming in, but they’re pleased and delighted to find there’s hope for them, they’re not alone, and they’re surprised at the plans they have and the options they can invoke,” Tenner said.

Jillian Melchior ([email protected]) writes from Michigan.