Corporate America Facing Health Care Cost Revolt

A recent strike by two key General Electric Co. unions over mushrooming health costs highlights a near-revolt across corporate America as workers face health insurance cuts and steeper out-of-pocket costs.

Companies and health care experts said wages and working conditions will not be the hot button issue in union negotiations this year. More likely to be the subject of arguments at the bargaining table are relentless double-digit rises in health care costs and cutbacks to medical benefits. And there are signals that major corporations, reeling from employee anger over rising costs, are beginning to push back at the health insurance providers demanding the hikes.

About 17,500 workers at GE's biggest union, the International Union of Electronic Workers, walked off the job for two days to dramatize their opposition to what they said were increases of hundreds of dollars in health insurance premiums per employee.

There is nothing unique about the GE case. In 2002, workers threatened to strike over the issue at New York City's Metropolitan Transit Authority and did walk out at Hershey Foods Corp. Health care costs were a major bone of contention in talks between Navistar International Corp. and its workers last fall. In 2003, big players such as Verizon Communications, Brown & Williamson Tobacco Corp. and Lucent Technologies Inc. have contract talks nearing, according to the U.S. Department of Labor.

The United Auto Workers (UAW), which has some 730,000 active members, has already said that it will not stand for cutbacks to health benefits when it launches new contract negotiations later this year with the Big Three U.S. automakers: General Motors Corp., Ford Motor Co. and DaimlerChrysler. Major corporations are feeling the squeeze between worker demands and escalating health premiums. And a retreat from soaring costs does not appear in sight: health insurance prices soared 12.7 percent in 2002, the biggest increase since 1990, and double-digit growth is forecast for this year as well, according to the Kaiser Family Foundation. GM, for example, told Wall Street analysts its health-care costs will increase to about $4.4 billion before taxes this year from $3.9 billion in 2002. The company has about 175,000 salaried and hourly workers.

As it stands now, HMOs hold the upper hand in negotiations with employers, because individual companies are not large enough to bargain from positions of strength. Employers blame the HMOs, which they say have failed to live up to their promise of controlling costs.