DaimlerChrysler’s Chrysler Group last night confirmed earlier media rumours and announced more expensive health care programmes for both current and retired ‘white collar’ employees – professional-administrative, management and executive staff.
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The new plan, effective from 1 January, increases premiums based on salary levels and actually reduces the automaker’s subsidy to zero in the case of the most highly-paid executives.
Under the revised programme, each current salaried employee’s health care pre-tax premium increases will be based on their rank and base salary level.
Next year, Chrysler said, professional-administrative employee premiums on average will not be affected, while top executives will pay up to 100% of their health care premiums.
Mid-managers will have to pay an average premium increase of about US$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 annually to reflect health care and wage costs, Chrysler said in a statement.
Echoing similar comments from Ford and GM, who have both already thinned their white collar ranks and reduced their benefits, Chrysler said health care is one of its largest fixed costs – expected to be $2.3 billion in 2006 – and continues to rise each year well beyond inflation – since 2000, its health care costs have risen 100%.
“We all have to do our part going forward,” said Chrysler group president and chief executive officer Tom LaSorda in the statement.
“Our solution addresses the need to be competitive and recognises 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.”
“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.”
Chrysler said the average annual total health care cost for each salaried employee is about $11,000. However, the average employee already pays about 27%, or roughly $3,000 a year in pre-tax premiums, co-pays and deductibles to their healthcare provider, leaving Chrysler to come up with about $8,000 per salaried employee.
The changes will increase employee contributions by an average 4% to 31%.
Again following Ford and GM, Chrysler also announced changes to health care benefits for pre- and post-age 65 retirees.
Currently, the company and the ‘early’ retirees equally share annual health care premium increases but, from 1 January, current and future pre-Medicare retirees (pre-65) will now share a percentage of health care premium increases based on the final base salary of the retiree.
Those who retired at an income below $50,000 will share 50% of the inflationary premium in subsequent years (no increase for 2007) while employees who earned $171,000 or higher when they left will pay 100% of the inflationary premium (up $375 next year).
Others will face hikes of between 50 and 100% on an increasing scale based on final salary.
For Medicare-eligible post-age 65 retirees, Chrysler 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% of the necessary service-year credits.
In 2008, the reimbursement will increase by 3% for the retiree or surviving spouse. Under the new plan, the retiree will be able to choose the amount of coverage and can use the HRA funds towards a variety of health care expenses.
Chrysler said employees who joined the company after 1 January 2004, will continue to receive an annual retiree health care account deposit and no changes are currently planned for that scheme.
Graeme Roberts
