| Ford hasn’t always had the best relationship | | | | case, the company accepted responsibility for its |
| with the United Autoworkers Union (UAW). Back | | | | retiree’s healthcare in a long-term buy-out |
| in 2007, the company’s employee healthcare | | | | agreement so management could reduce its |
| costs were eating up the carmaker’s meager | | | | workforce quickly and stave off continued losses. |
| profits. After posting quarter after quarter of | | | | Traditionally, only public / government businesses |
| disappointing earnings, stockholders were putting | | | | had the financial pull and employee base to justify |
| the big squeeze on America’s pioneer of the | | | | funding its own health insurance plan. But as |
| modern automobile. That was before economists | | | | planned federal healthcare reforms become law, |
| noticed (or perhaps, acknowledged) that | | | | self-insurance may be more common among |
| sub-prime mortgages were a bad thing. | | | | smaller corporations and those not typically |
| To dig out from under its messy employee | | | | self-insured today. That’s because one of the |
| obligation to provide ongoing, long-term healthcare | | | | most controversial provisions in the Senate’s |
| to its retirees, Ford reluctantly agreed to begin | | | | health reform plan provides for broad new taxes |
| depositing cash into a trust fund that would be | | | | on commercial insurance companies. |
| administered and operated by UAW once $6.5 | | | | The nation’s biggest insurance companies |
| billion piles up. By New Years’ Day, Ford had | | | | unabashedly admit that such surcharges, fees and |
| not only met the monetary benchmark, but | | | | other new costs bourne out of the reform bill will |
| exceeded it by another half-mil. | | | | be passed on to their customers. Some analysts |
| “The transfer of these health care liabilities to | | | | say small and mid-sized businesses, already heavily |
| the VEBA trust is the culmination of several years | | | | stung by the economic meltdown and slow |
| of work and will significantly improve our | | | | recovery, may take a look at alternative ways of |
| competitiveness in the United States,” Ford | | | | offering insurance as a way of cutting costs, |
| CFO Lewis Booth said in a statement. “We | | | | without eliminating the benefit altogether. |
| also have shown confidence in our liquidity …by | | | | The self-insured movement is already taking hold, |
| pre-paying $500 million of debt.” | | | | especially in sales-driven companies that have |
| At the time the arrangement was made, | | | | seen their profits plummet like Ford’s: |
| Ford’s public tone was far less positive when | | | | “In the last several years, our health |
| it came to its future outlook. Its cars were | | | | maintenance organization (HMO) costs have |
| considered tired, quality suffered and continuous | | | | increased rapidly even as our sales plateaued and |
| public spats between Henry Ford’s great | | | | we let some employees go,” writes one |
| grandchildren (who held controlling public interest | | | | Indianapolis manufacturing CFO recently on his |
| and managed the company) and the stockholders | | | | personal blog. “We switched to self- insurance |
| were routinely covered in national headlines. Now | | | | with an associated stop-loss policy. We calculate |
| the company has not only rebounded, refusing to | | | | that savings will be around $80,000 to $100,000 |
| accept any part of a public government bailout | | | | yearly. We also added wellness benefits and |
| that its peers would later have to extend | | | | incentives to keep our 1,600 employees and their |
| payment on, but Ford has become a trend-setter | | | | spouses healthy.” |
| in automotive design. Can industry analysts | | | | With top lawmakers advocating that any |
| expect the automaker to extend its leadership | | | | healthcare reform that passes must include the |
| into the boardrooms of health insurers as well? | | | | ability for individuals and businesses to purchase |
| When a company or large organization becomes a | | | | insurance from across state lines and voluntarily |
| self-insured entity, the company is assumed to | | | | pool together to get preferred rates on insurance |
| have amassed enough financial liquidity to assume | | | | plans, your next open enrollment period could |
| its own risk and the financial risk associated with | | | | very well include the option to keep your health |
| its employees’ health insurance. In Ford’s | | | | insurance inside the confines of your cubicle walls. |