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--on guard 179 years--

$10B aimed at union retirees

Provision called welfare by some, not enough by others

BY JUSTIN HYDE and TODD SPANGLER
FREE PRESS WASHINGTON STAFF

WASHINGTON -- Antilabor forces say it's welfare for the UAW and Democrats'
union allies. Labor supporters say it falls short of what's needed as tens of
thousands of union members are pushed into early retirement as employers cut
back health care coverage.

They're both talking about a $10-billion provision tucked deep inside thousands of
pages of health care overhaul bills that could help the UAW's retiree health-care
plan and other union-backed plans.

It would see the government -- at least temporarily -- pay 80 cents on the dollar to
corporate and union insurance plans for claims between $15,000 and $90,000 for
retirees age 55 to 64.

Big businesses with union workers are twice as likely to offer retiree benefits as
nonunion ones.

Greg Mourad of the National Right to Work Committee called it "a shameless case
of political payback," saying Democrats and President Barack Obama are trying
"to force the rest of us to pay billions to cover those unions' health care."

Labor advocates say even more funding may be needed.

"It is not enough money," said former U.S. Rep. David Bonior, a Mt. Clemens
Democrat who chairs the board at Washington, D.C.-based American Rights at
Work, a labor advocacy group. "That will have to be supplemented to fill the gap."

Without U.S. aid, union health plans could fail.

The health care debate roiling the nation promises an even greater impact in
Michigan: It could determine whether the UAW's gamble that it can insure
850,000 retirees from Detroit's automakers pays off or goes bust.

Thanks to Detroit's twin auto bankruptcies and other concessions, the UAW's
voluntary employee benefit association, or VEBA, had to take stock of unknown
value for $24 billion in claims, while adding thousands of early retirees to its rolls.

Outside experts estimate the funds have about 30 cents in cash for every dollar of
future claims, with no guarantee of what its stock assets will be worth. Lance
Wallach, a New York-based VEBA expert, says if the funds "don't get something,
they're out of business in 12 years."

That something may be national health care reform.

Key provisions in House and Senate proposals set aside $10 billion to pay some
claims for early retirees covered by employers and VEBAs, before other
cost-saving measures kick in. Critics call it a union giveaway, but the union says
the money would keep companies from further slashing coverage.

"We want to see the whole reform package succeed," said Alan Reuther, the
UAW's chief lobbyist. "There's substantial overall benefits to the American people
and our members that includes benefits to retirees and VEBA."

Bridging a care gap

The $10 billion is aimed at a growing gap between the skyrocketing cost of care
for early retirees -- ages 55 to 64, too young for Medicare -- and what President
Barack Obama and congressional Democrats promise will be less-expensive
coverage once, and if, the much-debated reform measures kick in several years
from now.

Layoffs, buyouts and company cutbacks have contributed to force more people
into early retirement at a time when only about one-third of U.S. firms with 200
or more workers even offer retiree benefits, compared with more than twice that
percentage two decades ago. Of those that remain, companies with union
employees are far more likely to offer benefits for early retirees.

That's enough to get the blogosphere ramped up with references to a so-called
payoff for collective bargaining groups and whether, once turned on, the spigot of
funding for claims can be turned off by Congress.

Money's running out

John Sheils, vice president of the Lewin Group, a health care research firm
owned by a United Healthcare subsidiary, said the money likely will run out in less
than two years. Then, like with the recent cash-for-clunkers clamor, Congress
could feel obligated to add money to the program.

"From a political perspective, I think it's very, very difficult for the Congress to
actually close down programs," Sheils said. "This is something people could get
used to very quickly."

Labor unions, including the UAW -- which has taken on about $90 billion in health
care liabilities for its retirees from the three metro Detroit automakers -- have
fought hard for the so-called reinsurance provision that would cover 80% of early
retirement claims between $15,000 and $90,000.

According to outside experts, the UAW's VEBAs have only about 30% of the cash
needed to cover retirement health benefits for about 850,000 people -- making it
the second biggest retiree insurance pool in the nation, with only California's
pension plan larger. Shares in Chrysler Group, Ford Motor Co. and General
Motors Co. will add to the bottom line -- but it's impossible to say how much.

Were VEBAs a gamble?

The VEBAs will have the power to cut coverage and raise costs to make their
money last, and have already warned retirees that cuts are likely next year.
Wallach said the UAW VEBAs resemble the plans the UAW set up for workers at
Detroit Diesel and Caterpillar in the 1990s -- both of which later ran short of
money.

"I really think" the UAW "were gambling there would be some health care
nationalization," he said.

Although she doesn't agree with Wallach that the UAW took such a risk, Kristin
Dziczek, head of the Ann Arbor-based Center for Automotive Research's Labor
and Industry Group, said getting help now with the expensive coverage required
for pre-Medicare claims could help greatly in the short term. In the long term, any
success in lowering health care costs could be a windfall for the VEBAs and help
ensure their survival.

Stephen Diamond, a professor at Santa Clara (Calif.) University and a VEBA
expert, said the UAW helped get Obama elected; now the union owes its
membership to make sure that whatever reform is crafted "protects the interests
of their members and their retirees."

It's not just the UAW fighting for the funding. The provision has the backing of
the United Steelworkers of America and the Communications Workers of
America. The AFL-CIO also pushed for the program in congressional hearings.

Pre-Medicare vulnerability

Reuther said retirees too young for Medicare often face problems in getting or
maintaining health insurance, since they're typically far more expensive to insure
than younger workers. The reinsurance provision, he said, is needed to maintain
coverage.

"We think it's important so that we keep the employer- and VEBA-sponsored
coverage for these retirees," he said.

That's especially true of the number of retirees age 55 to 64 without employer or
union-based insurance coverage. People in that group are among the most
expensive to cover with health insurance, face high premiums if forced to seek
their own policies and often have preexisting conditions that can make finding
coverage difficult.

Whatever happens, GM retiree Phil Cimino of Clarkston said he hopes health care
reform can help a system that he says costs too much. Cimino, 61, is diabetic,
and where he once paid nothing for health care, his premiums and prescriptions
now run about $4,000 a year.

He worries it could be more.

"The retirees are getting hit big-time," he said. "I don't think there's enough money
in the kitty. I think there's going to be a big problem down the road."