Labor and managed care: an uneasy alliance

Business & Health, June, 1997 by Helen Lippman

Since their founding, America's unions have fought long and hard for higher wages, shorter hours and safer working conditions. What's more, the idea that employers should pay for their workers' health care was conceived by labor and nurtured by the United Auto Workers in the 1940s. As one of the country's most powerful unions, the UAW has been in the forefront of the struggle to secure top-notch health benefits for its members in the half a century since.

Priorities were different in the not-so-distant past, the American Federation of State, County and Municipal Employees (AFSCME) declares in "Managed Health Care: Your Knowledge or your Life." What mattered most at the bargaining table in an indemnity/fee-for-service world was not who the carrier was but which services and out-of-pocket costs the contract called for.

For UAW workers at the Big Three auto makers, top-notch has long meant zero premiums and a guarantee of provider choice as well. Which is why industry observers were surprised by a provision in the union's latest contracts with GM, Ford and Chrysler that eliminates the indemnity option for new hourly workers. UAW spokesman Reg McGee says, "We don't think of it as diminishing choice," but the fact remains: Employees coming on board after January 1 of this year must enroll in an HMO for their first two years on the job-or go without job-based health coverage.

Dramatic as that change may seem, union representatives say it's neither an indication of unequivocal support for managed care nor a serious about-face. "The UAW has been a pioneer in supporting prepaid group practice going back to the 1970s," contends Robert Alpert, executive director of the Center for Community Health Care Initiatives established by the union last year. "We've always supported the concept of managed care as a system that provides high quality, cost-effective--not cheap--care."

Nor was the UAW the first union to embrace alternatives to fee for service. In 1929, teachers in Dallas negotiated a prepaid health benefit program through their employers--the first collective bargaining group to do so, according to University of Connecticut professor and labor consultant Joseph A. Fields. And shipyard workers helped launch the first HMO, Kaiser Permanente, to provide health benefits to them and their families during World War II.

LET'S MAKE A DEAL

Monumental or not, the UAW's contract concession reflects a continuing shift in labor's approach to health benefits. The rank and file and their leaders, like their non-union counterparts, have had to concede that managed care often offers more affordable, and in some cases the only affordable, coverage. While some union leaders argue that with the proper controls in place, managed care may be preferable--"The HMO is a much better deal than the fee for service," Alpert says of the new-hire provision--acceptance is more likely spurred by trade-offs: Switch to an HMO or forgo a raise. Stay within the confines of a restricted provider panel or pay hundreds of extra dollars in deductibles. Enroll in a managed care plan or pay out of pocket for the preventive care office visits the indemnity plan doesn't cover.

The last of those choices is presented to auto workers with some seniority, but employees in low-end jobs often face a harsher reality. For most of the 160,000 people represented by the ILGWU's Rx program (the International Ladies' Garment Workers' Union has merged with another organization, but the benefit plan remains separate), it comes down to this: Use a mail-order-only closed formulary plan or pay full price for all your prescriptions. Plan members who live in the New York metropolitan area have the only out: The 20,000 or so who use the union's sole clinic can get medications there for a minimal copay.

Theodore Bernstein, director of the trust fund-sponsored plan, explains: This is a low-wage manufacturing industry with a large minority and immigrant population and benefits in proportion to the pay. Half the people covered are retired, with pensions averaging $120 to $150 a month. Given these constraints, the plan--members pay $10 for a 60-day supply of drugs for chronic or catastrophic conditions-is "a meaningful benefit.

"We can't afford a retail drug store program," Bernstein continues, "or one that's open with respect to single-source or nonmandatory generics. But we're insuring the greater costs." He credits pharmacy benefits manager Merck-Medco for working closely with the union to transform the Rx benefit, which has existed in some form for nearly three decades, into a tightly managed, cost-effective program. "Cost increases have been well below the national averages, he says, rising no more, and often less, than 1 percent annually.

The Rx plan's success--out of 700,000 scrips filled each year, there are only 1,800 requests for waivers, and most of them are granted--gave managed care a foot in the door. "For a long time, we were in the fee-for-service system. The idea was that these low-wage workers could have a Blue Cross card, same as a CEO of a company," explains Bernstein. But that's no longer feasible. Today, most of the garment workers belong to PPOs, and more change is imminent. "We're evolving into a more managed system," he says.