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Fundamental changes in health care and employee benefit programs are needed to solve the problems of soaring costs, low care quality and access to health care services, a panel of experts said Friday, July 24.

Speaking at a Chicago forum on national health care reform and its effect on Illinois, the panelists outlined major problems in the health care system and suggested ways to address those issues.

“Employers’ house of benefits needs an extreme makeover,” said Larry Boress, president and CEO of the Midwest Business Group on Health, a Chicago-based coalition that hosted the forum with the National Coalition on Health Care.

He noted that increases in health care premiums are outpacing wages and consuming retirement savings. While employers spend billions of dollars on benefits, quality of care often remains low, Boress said.

“Why are employers involved in health care? Why do we offer benefits? It’s because we have to recruit and retain employees and keep them productive,” Boress said. Employers bear part of the responsibility for deterioration of quality because they “treat health care as an expense, not an investment” in their employees, he said.

In an ideal health care system, “patients can choose their doctors and hospitals, they are sensitive to cost and quality, and they are engaged in their own health,” he said. Similarly, “purchasers would encourage employees to make cost-effective decisions and pay for quality care.”

Joel Miller, senior vice president at the National Coalition on Health Care, cited a Kaiser Family Foundation survey showing that health insurance premiums increased 119 percent while workers’ earnings rose only 34 percent, slightly ahead of inflation, during the period of 1999-2008.

“By 2019, total health care coverage costs for employers could reach $900 billion a year,” Miller said. “Experts estimate that small businesses will pay $2.4 trillion for health insurance over the next 10 years. By 2018, 1.7 million workers will have job-lock; that means they won’t leave” employer-based health plans “for fear of losing their coverage.”

Dr. James Galloway, assistant U.S. surgeon general and acting regional director for the Department of Health and Human Services in the Midwest, said the only way he sees to reduce health care costs is “by reducing the chronic-disease burden” on families and businesses. “We must build and ignite a social movement” to address chronic diseases such as obesity, heart disease and diabetes, he said.

Dr. Mark Rosenberg, a member of the American Academy of Pediatrics’ committee on federal affairs, said a priority for national health care reform should be a program that covers all children. He said a key to health benefit packages for children should be early and periodic diagnostic screening.

Filed by Regis Coccia of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Senate Majority Leader Harry Reid pulled the plug Thursday, July 23, on the full Senate taking up sweeping health care reform legislation before the August recess.

“It is better to get a product that’s based on quality and thoughtfulness than on trying to just get something through,” Reid, D-Nevada, said at a news briefing.

While a blow to President Barack Obama, who pressed Congress to take up reform bills before the recess, the delay is not a surprise, Reid acknowledged.

While the Senate Health, Education, Labor and Pensions Committee passed a reform bill last week, Senate Finance Committee Chairman Max Baucus, D-Montana, has been working for weeks to develop a reform bill that would have support from at least a few Republican members on that panel.

The Senate committees share jurisdiction on health care reform legislation.

Even if there were a sudden agreement on a Finance Committee bill, there would not have been enough time for Senate leaders to come up with one bill that merged proposals from the two Senate committees and complete action before the recess, now scheduled for August 7.

Action on reform legislation also has been bogged down in the House.

While two panels—the Education and Labor and Ways and Means committees—have completed action, a third panel, the Energy and Commerce Committee, has not. Opposition from both Republicans and conservative Democrats—part of the so-called Blue Dog coalition—has forced Commerce Committee Chairman Henry Waxman, D-California, to delay scheduled votes on the bill several times this week.

While the Senate and House bills differ, both would move the nation close to universal health care coverage. More than 15 percent of the U.S. population now lacks health insurance coverage. Included in the bills are requirements that employers offer coverage or be assessed a fine, that individuals enroll in a health care plan and that the federal government provide premium subsidies to the low-income uninsured.

In addition, the measures call for establishing state insurance exchanges in which individuals and, later, employers could select plans offered by commercial insurers as well as some type of public plan.

The House bill also would impose a surtax on higher-income individuals to help fund the expansion of coverage.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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About 1,000 members of the United Auto Workers accepted Ford Motor Co. buyouts last quarter, and Ford says it doesn’t plan more.

The workers’ departure, scheduled to be completed “in the next few weeks,” will cut the number of active UAW employees to 47,000, Ford spokesman Mark Truby said in an e-mail. That’s down from 95,000 in 2003.

Participation in the recent buyout offer was in line with Ford’s expectations, CEO Alan Mulally said during a conference call Thursday, July 23. No more UAW buyouts are coming, he said.

“We’re about right,” Mulally said.

The deadline to sign up for that buyout had been June 26, which was an extension from the previous deadline of May 22.

Ford, which has not taken federal funding, on Thursday posted a second-quarter pretax operating loss of $424 million and a net profit of $2.3 billion. The profit stemmed from a gain related to recent debt reduction. The automaker also said it burned through $1 billion in operating cash, down from $3.7 billion in the first quarter and $7.2 billion in the final quarter of 2008.

Ford discussions with the UAW “continue like they always have,” Mulally said, referring to the automaker’s attempts to cut labor costs. GM and Chrysler received cost concessions from the union ahead of their recently ended bankruptcies.

Mulally was asked whether Ford would seek an agreement with the UAW to align the Ford terms with those of the new GM contract.

Mulally said, without offering explanation: “We will not be disadvantaged going forward.”

GM’s agreement with the UAW includes a suspension of bonuses and cost-of-living adjustments. It also gives GM greater flexibility for hiring lower-cost entry-level workers and permits the company to use equity instead of cash to fund most of a $20 billion health trust for retirees.

Ford also announced Thursday that it has modified its agreement with the UAW on funding its payment obligations to a trust fund for retiree health care.

An agreement earlier this year gave Ford the option to fund up to half the payments using Ford common stock at prices that were tied to Ford’s stock price at the time. The fixed prices were $2 per share in 2009, $2.10 in 2010 and $2.20 in 2011. However, Ford’s stock price has rebounded, closing Wednesday at $6.38.

The modified agreement will allow the automaker to fund up to half of its VEBA obligation with stock at market prices instead of the fixed prices. Ford must make payments of $610 million to the VEBA in each of the next three years, Truby said.

Filed by Amy Wilson and Chrissie Thompson of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Michigan CEOs are pessimistic about the state’s economy in the coming months but believe the national economy will hit bottom and begin to improve, according to a survey released Wednesday, July 22, by Detroit Renaissance Inc. and the Michigan Business Leadership Council.

The survey of 60 Michigan chief executives found approximately 90 percent forecasting the same or lower employment and Michigan capital investment during the next six months.

Sixty-eight percent said they expect the Michigan economy will worsen during the next six months, and 80 percent believe the U.S. economy will be the same or improve.

Looking ahead 18 months, 80 percent of those surveyed believe Michigan’s economy will stay the same or worsen, with 49 percent saying the economy will be the same and 31 percent expecting further decline.

However, 78 percent of CEOs believe the U.S. economy will be in recovery.

In a news release, Doug Rothwell, president of Detroit Renaissance and the leadership council, said the survey results should be informative to state policymakers.

The leadership council is a statewide group of corporate executives that meets throughout the year to discuss ways to improve the economy and make Michigan a more competitive place to do business.

“The results show two things: First, Michigan cannot expect to grow out of its fiscal crisis anytime soon so it must make structural budget reforms, and second, major changes are needed to stimulate economic growth in this state,” Rothwell said.

Filed by Amy Lane of Crain’s Detroit Business, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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Concerns that a new consumer watchdog agency proposed by the Obama administration could play a role in overseeing retirement plan products are unfounded, Rep. Barney Frank, D-Massachusetts, said Wednesday, July 22, at a press conference on Capitol Hill.

Frank, chairman of the House Financial Services Committee, said legislation pending before his committee to create the Consumer Financial Protection Agency would not affect products—such as mutual funds—already regulated by the Securities and Exchange Commission.

“This [the CFPA legislation] does not affect Securities and Exchange Commission jurisdiction,” Frank said.

He also said the CFPA would not play a role in regulating 401(k) plans or annuities.

In July 17 testimony before Frank’s committee, Paul Schott Stevens, president and CEO of the mutual fund industry’s Investment Company Institute, asked that lawmakers ensure the new agency have no regulatory authority over mutual funds or retirement plans. 

Filed by Doug Halonen of Pensions & Investments, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

The Pension Benefit Guaranty Corp. is taking over the massively underfunded pension plans of financially troubled auto parts manufacturer Delphi Corp., a takeover that will cost the PBGC about $6.25 billion—its second-biggest loss ever.

The PBGC will take over six plans sponsored by Troy, Michigan-based Delphi, which is in bankruptcy.

The biggest plan, which is offered to Delphi hourly employees and has about 47,000 participants, has about $3.7 billion in assets and more than $8 billion in liabilities. The PBGC expects to assume about $4 billion of the plan’s nearly $4.4 billion shortfall.

The second-biggest plan, covering about 20,000 salaried employees and retirees, has $2.4 billion in assets and liabilities of about $5 billion. The PBGC estimates it will be liable for about $2.2 billion of the $2.6 billion shortfall.

In addition, the PBGC will be responsible for about $50 million in unfunded benefits in four small Delphi plans with about 2,000 participants.

The $6.25 billion loss to the PBGC is surpassed only by the agency’s 2005 takeover of four United Airlines pension plans, which cost the agency about $7.5 billion.

The PBGC estimates its takeover of Delphi’s plans will increase its deficit by about $3.5 billion. The agency had included the claim in its 2008 financial statements but at a much lower estimated amount.

Delphi said in a statement that it does not believe a termination by the PBGC of the hourly plan would violate Delphi’s existing collective bargaining agreements or prior bankruptcy court orders.

However, Delphi said it hasn’t yet agreed to a termination of the plan and “will not enter into an agreement with the PBGC to take over the plan unless the bankruptcy court finds that doing so is not a violation of Delphi’s collective bargaining agreements or a federal district court issues an order terminating the U.S. hourly plan.”

The PBGC earlier disclosed that its deficit hit a record $33.5 billion at the end of its fiscal 2009 first half on March 31, compared with $11.2 billion at the close of fiscal 2008.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

Companies are leveraging control over the home marketing process with greater use of cost-control strategies, a recent survey of 210 employers finds.

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Responding to dramatic shifts in the housing market, companies were swift to change policies in 2008. Not surprisingly, many companies added or increased their loss-on-sale allotments.

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