General Motors Will Replace Retiree Health Benefits for Non-Union Workers With Monthly Pension Supplement
General Motors on Tuesday, as part of a plan to increase its liquidity by $15 billion, announced that it will eliminate health care benefits for non-union retirees older than age 65, the New York Times reports (Vlasic, New York Times, 7/16). Morgan Stanley analyst David Veal estimated that few than 100,000 retirees will lose health benefits (Wisenberg Brin, Dow Jones, 7/16). To offset the loss of coverage, which many retirees use to "supplement gaps in traditional Medicare coverage," GM will increase monthly pension payments by $300 to affected retirees, the Wall Street Journal reports. The company also will hire an independent firm to advise retirees on choosing Medicare prescription drug plans, supplemental insurance or private Medicare Advantage plans.GM spent $4.75 billion last year on health benefits for U.S. retirees, including hourly workers and those younger than age 65 (Fuhrmans/Francis, Wall Street Journal, 7/16). Retirees who are eligible for Medicare currently receive $76.20 per month to help pay for supplemental coverage and also can enroll in secondary coverage provided by GM. The amount contributed by the company usually depends on which plan a retiree chooses, according to the Baltimore Sun. This coverage helps pay for additional medical, dental, vision, prescription drug and extended care coverage (Walker, Baltimore Sun, 7/16).
Veal said analysts "see the move as a watershed event for the retiree benefits marketplace that is likely to lead other employers to do the same, which will, in turn, cause the issue to grow as an overhang for the stock" (Dow Jones, 7/15). Rick McGill, head of retiree medical consulting for Hewitt Associates, said retiree health benefits are a "dying breed" and employees and retirees "have to feel lucky if they still have retiree (health care) benefits, and have to start planning for when they won't" (Wall Street Journal, 7/16). This is part of the Morning Briefing, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
