Health care reform bill includes billions for union fund

The Detroit Free Press reports that the health care reform bills being debated in the nation’s capitol include a provision that would supply up to $10 billion to shore up the UAW’s Voluntary Employee Beneficiary Association (VEBA) fund, which was established in the last round of labor negotiations to allow the union to control and administer the health care benefits of retired autoworkers.

Greg Mourad of the National Right to Work Committee called it “a shameless case of political payback,” saying Democrats and President Barack Obama are trying “to force the rest of us to pay billions to cover those unions’ health care.”

Labor advocates say even more funding may be needed.

“It is not enough money,” said former U.S. Rep. David Bonior, a Mt. Clemens Democrat who chairs the board at Washington, D.C.-based American Rights at Work, a labor advocacy group. “That will have to be supplemented to fill the gap.”…

The health care debate roiling the nation promises an even greater impact in Michigan: It could determine whether the UAW’s gamble that it can insure 850,000 retirees from Detroit’s automakers pays off or goes bust.

Thanks to Detroit’s twin auto bankruptcies and other concessions, the UAW’s voluntary employee benefit association, or VEBA, had to take stock of unknown value for $24 billion in claims, while adding thousands of early retirees to its rolls.

Outside experts estimate the funds have about 30 cents in cash for every dollar of future claims, with no guarantee of what its stock assets will be worth. Lance Wallach, a New York-based VEBA expert, says if the funds “don’t get something, they’re out of business in 12 years.”

These provisions would have the government offering a reinsurance plan to help cover the cost of some claims by retirees between the ages of 55 and 64 — those who retired early, likely because of layoffs or buyouts, and are not yet eligible for medicare.

In the bankruptcies for both GM and Chrysler, the union agreed to swap a large portion of money owed to the VEBA fund by the automakers for stock in the newly restructured companies. Over the next few years, as that stock is sold off, the hope is that the proceeds will replenish the fund so that the union can cover the future costs of health care for all retired autoworkers.

Whether there is enough money generated by the sale of stock to do that completely will depend on how strongly those companies rebound in the eyes of investors, who will set the value of those shares. But in the meantime, the fund is saddled with tens of thousands of additional workers who were forced to retire early due to layoffs and buyouts, on top of the hundreds of thousands of already retired workers whose health care the fund must provide.

For those retirees over 65, medicare reduces the cost of their health care and requires less payout by the fund. But for those early retirees who are not yet eligible for medicare, the cost of their health care is higher and requires more of a payout by the VEBA fund.