Auto Workers’ Push for Pooling

The United Auto Workers is pushing for greater industry consolidation. No, I’m not referring to something along the lines of Fiat Chrysler’s CEO Sergio Marchionne’s on-again, off-again pursuit of merging with General Motors. I’m talking about employee healthcare.

ThinkstockPhotos-101922589A story in today’s Wall Street Journal titled “UAW Pitches Health-Care Co-op to Car Makers”  (subscription site) reports that the “United Auto Workers union is pushing Detroit car makers to put all their employees under one health-care umbrella, creating a powerful purchasing group that could upend traditional health-care markets.” It continues:

“The union’s idea would create a joint purchasing group for the three largest U.S. auto makers that would cover factory and white-collar workers and union-affiliated retirees. The group could total nearly 1 million members, a scale it believes would have unprecedented leverage in negotiating directly with hospitals, drug companies and others.

Assuming the idea even gets off the ground, it could take one to two years to set up and longer to generate significant savings, health-care experts said.”

As the WSJ story reports, “UAW President Dennis Williams previously has described the plan as a way for auto makers to gain more control over health-care expenses and win cost savings. He wants the purchasing group overseen by a board [consisting] of union and auto-industry executives. A prior effort to pull together employees of the three stalled in 2011 because auto makers weren’t interested in pursuing it.”

The UAW is currently negotiating a new four-year deal to replace the current contract, which is set to expire on Sept. 14.

I spoke to Steve Wojcik, vice president of public policy for the National Business Group on Health in Washington, and asked him for his take on the UAW move.

Wojcik says he can’t comment on the union’s plans, since he doesn’t know the specifics, but adds that he certainly understands where the motivation is coming from. Plans, he says, are under a lot of pressure to reduce costs, especially with the ACA excise tax kicking in in 2018.

Still, Wojcik says he isn’t convinced the UAW pooling strategy would be the most effective way to address the cost issue.

“The problem with these efforts,” he says, “is [they involve] voluntary participation—so employers with success at controlling costs or lowering healthcare expenses end up not participating and those having trouble [on these fronts do participate]. Because of this, I don’t think the track record has been that successful.”

Pooling, he adds, has typically found greater success among smaller organizations.

The WSJ story also touches on the practice of direct contracting. “One option for the purchasing pool, say people familiar with the matter, would be for it to establish ‘centers of excellence … ,” the article says. It cites Lowe’s Cos., which has a deal with the Cleveland Clinic and flies employees to Ohio for heart surgeries at no cost to the worker.

Commenting on this, Wojcik notes NBGH’s just-released Large Employer Plan Design Survey reveals that respondents put direct contracting close to the bottom of initiatives having an impact on controlling costs.

Wojcik points out that there’s probably good reason for this. A number of factors need to be in place for direct contracting to work, including the employer needs to have a “significant market power, opportunities need to exist for improving care delivery and there needs to be a decent amount of provider competition.”

“It’s not just about negotiating a discount,” he says.