E&Y Outlines Problems, Solutions to Auto Industry Health Woes

March 18, 2005 (PLANSPONSOR.com) - A new white paper from Ernst & Young (E&Y) is asserting that the auto industry is being hit harder than most others with regards to health care costs, and also offers up some solutions to the problem.

The E&Y report suggests that the size of the industry and foreign advantages in health care, employee consumption, and retiree to current employee ratios make the auto industry especially prone to health-care cost problems.

Ford, DaimlerChrysler, and General Motors – the auto industry’s “Big Three” – spent over $10 billion on health care in 2003, a direct result of their sheer size, according to the report. American companies also have a competitive disadvantage because many of their competitors are based in countries, such as Japan and Germany, which offer universal health coverage. Also, because of the strenuous labor involved in the auto industry, auto workers tend to use more health care services. In addition, retirees tend to make up a greater portion of those covered by health plans provided by auto companies than those in other industries, according to the report.

E&Y, in its report, suggests possible means of fixing the problem. At the corporate level, E&Y suggests that there be greater cost and utilization analyses done in the industry, as well as an increased focus on wellness and lifestyle programs that promote healthy workers.

Also suggested is increased vendor management; E&Y suggests that auto companies demand the same quality and cost improvements in their health care system as they do in other aspects of the business. E&Y suggests finding the most effective vendor, renewing contracts to keep up with which vendor provides the most efficient service, and negotiating financial incentives into health contracts.

The company also suggests that auto companies move toward a more consumer-directed approach, in which workers take charge of their health program. E&Y asserts that productive “consumerism” requires information for employees on costs and quality, education of responsible health spending, and components that offer benefits to employees.

For a copy of the white paper, please see here.