A Response to Larry Cook
GE Attacks Our Medical
Benefits — Again!

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There can be no doubt that GE is sharpening its sword in preparation for what they hope will be yet another round of medical insurance cost shifting onto the backs of GE workers and even GE retirees in the upcoming National Contract negotiations. As part of the softening up process, GE is actively spreading its line on our medical plan in company newsletters and other communications. We can expect this to continue right through June and beyond.

If you haven’t seen it already, the company at your location will be distributing a lengthy "interview" of GE Health Benefits "Program Leader" Larry Cook. Cook has been a fixture at the last several sets of negotiations. He can be counted on every three years to come up with a large list of cost shifting items which he invariably presents to the union as part of "GE’s effort to find new solutions." This process has been ongoing since 1985. During that time GE workers have absorbed literally dozens of cost shifting items while managing to beat back scores more that GE wanted to impose. While our co-pays, deductibles and contributions (including 9.5 cents in COLA raises withheld from our paychecks for the rest of our lives as GE workers) have skyrocketed, GE continues to search for new ways to get away with dumping even more on us. But GE workers are not fools. We know that the company has an embarrassment of riches, and we’re fed up with eating more and more of the insurance bill. That is the real problem for which GE is trying to "find new solutions."

What specifically is GE after? We don’t even have to guess about it. In a presentation made last fall to UE leaders, GE laid out its intentions very clearly. The following is taken from that presentation:

This pretty much speaks for itself, although we would note that GE is zeroing in particularly on prescription drugs. This despite the fact that the 1997 negotiations saw sharp increases in costs to employees combined with reductions in coverage for drugs. Normal prescription dosages were reduced from 30 to 21 days and GE has essentially ceased paying for non-generic drugs. But like the proverbial dragon GE is back for more – lots more – this time around.

You have to give GE credit for one thing. They have an ingenious ability to make the outrageous sound eminently reasonable. Let’s take a closer look at GE’s arguments.

You have to give GE credit for one thing. They have an ingenious ability to make the outrageous sound eminently reasonable

GE’s constant refrain is that their medical costs are increasing. In order for them to make this claim they always express medical costs on a per person basis. Thus Cook states that GE spends almost $7,000 "per employee" on health benefits for employees and dependents. But of course as we all know, GE has dumped about a quarter million employees during the Welch era! By expressing medical on a per person basis, GE obscures the fact that in aggregate terms, much of their medical costs have been flat or even declined in recent years since so many fewer people are employed!

To illustrate, let’s look at GE’s costs for the basic medical plan including both the regular Comprehensive Medical Benefits Plan (CMB) and Health Care Preferred (HCP), as well as its various HMO arrangements. Using GE’s own figures, aggregate costs for this insurance peaked in 1992 at $916 million. Last year, 1999, it cost them just $719 million - nearly $200 million less, which comes to a 21.5% decrease. Why? There are three reasons: cost shifting to employees; more employees opting for or in many cases being driven into HCP which costs less; and the biggest reason — fewer people covered. In 1992, GE covered 247,000 family units. Last year they were down to 182,000 family units, including pre-65 retirees. In other words, GE lays us off by the thousands thereby saving a bundle on insurance among other things, and then complains that their per employee costs are up justifying another round of cost shifting! GE’s statistical sleight of hand with insurance costs would make Harry Houdini envious.

THE HEALTHY AND THE WEALTHY

Another way to view GE’s insurance costs is to ask how significant they are in the overall health of the company. GE claims to have spent more than $1 billion for medical, dental, prescription, and vision care expenses last year which Cook claims is paid directly by each GE business. (He conveniently forgets to mention that everything GE pays for medical benefits is completely tax deductible). But no matter – $1 billion is a big number to contemplate. But is it a big number for GE? Not really.

... as a percentage of profits, GE's medical costs have declined by over 50% in the last decade ...

Even accepting GE’s $1 billion figure as correct, this comes to only about 6.4% of GE’s gross profits (before taxes) of $15.5 billion for 1999. Let’s compare this with a decade earlier in 1989. In 1989 GE had gross profits, of $5.7 billion or about a third of what they grossed last year. According to GE figures, their medical and dental costs for that year came to about $778 million, which in 1989 amounted to about 13.6% of gross profits. Thus as a percentage of profits, GE’s medical costs have declined by over 50% from 13.6% to 6.4% in the last decade! Moreover GE’s insurance bill comes to less than 1% of its gross revenues.

So it turns out that GE’s complaints about rising medical costs are not even half truths. In terms of actual dollars spent and expressed as a percentage of profits and revenues, GE’s medical costs have sharply declined. Even if they hadn’t, who is in a better position to pay the medical bill? Is it hard pressed GE workers, or is it a company that has spent over $50 billion acquiring other companies in the last three years alone?

The average GE hourly paid worker with dependents, in the $37,500 to $50,000 wage bracket, is paying about $700 per year in contributions alone for HCP. This does not count various co-pays. For those in CMB it’s even worse. There the average is over $900 a year. Add in deductibles and it’s over $1,300! We know GE is famous for squeezing ever more juice out of the lemon, but we’re bone dry now. We need lower, not higher contributions, deductibles and co-pays, GE’s complaints to the contrary notwithstanding.

The Cook interview piece contains a number of other inaccuracies and outright distortions. Not the least of these is the statement that "on average, employees of our competitors pay medical contributions that are nearly twice those paid by our employees."

We have no idea what alleged "competitors" GE is talking about. In fact we have asked them to supply the list, and as yet they have been unable or unwilling to do so.

One thing is for sure — GE can’t be talking about foreign competitors. The U.S. is nearly alone in the world in having a primarily private health care delivery system. Most of the rest of the world enjoys medical care as part of their country’s "social contract." In Western Europe for example, comprehensive cradle to grave medical care generally is the rule for all citizens. Thus the employees of GE European competitors Siemens (power generation), Rolls Royce (aircraft engine) and Philips (lighting) to cite just three examples have superior medical care without even having to worry about it when they negotiate their labor contracts.

... we don't know who GE is talking about — and we suspect they don't either.

Closer to home, the employees of GE’s chief competitor in locomotives, the EMD division of General Motors in Canada do not contribute to pay for their medical insurance either. And costs to U.S. aerospace industry workers are also way below those of GE employees. So we don’t know who GE is talking about, and we suspect they don’t know either. What we do know is that in scores of UE contracts with much smaller firms, workers are not contributing anywhere near what GE workers do. We should be correcting this miserable state of affairs, not making it worse.

The last point we will deal with concerns the myth that GE insurance coverage is primarily for "catastrophic" medical expenses. Cook notes that up to $1.5 million of coverage is available per individual and states as follows: "We can budget for the small stuff, but the catastrophic coverage is really important."

Coverage for expensive medical catastrophes is important. But across the large GE population, those who run up huge medical bills constitute a small percentage. Typically, every three years, the number of people who use the maximum amount of lifetime benefits can be counted on the fingers of one hand.

The place where GE has concentrated its cost shifting efforts is not surprisingly where the real costs are — that is the initial or early dollar payments for medical expenses. That’s why GE wants an in-hospital deductible, deductibles for HCP, and bigger co-pays for prescriptions and doctor visits, among other items on their wish list. This is what Cook is referring to when he says "We [meaning employees] can budget the small stuff." This "small stuff" isn’t small at all. If GE gets their way, it means several hundred more dollars per year out of our pockets and many millions back into theirs.

Our insurance was neither designed nor intended to be merely a catastrophic plan.

Our insurance is neither designed nor intended to be merely a catastrophic plan. The basic plan, negotiated in 1969-70 provided for first dollar coverage of in-hospital expenses with no deductible, as well as first dollar coverage for surgeons and diagnostic procedures. Up through 1985, the total contribution for GE workers was $100 per year for dependents, nothing for individual insurance. Deductibles were $50 individual and $125 family. The fifteen years since that time have been by far the most profitable in GE history. They have also been years of enormous cost shifting to employees. Moreover while there have been very few improvements in the Plan, we have also seen the erosion of many of our benefits. Our dental, vision and Short Term Disability benefits are lagging badly behind inflation. Close to 80% of GE employees are enrolled in a medical option (HCP) which is not even fully negotiable by the Union! Our insurance is not a "catastrophic" Plan, but it is in fact GE’s intention to impose what amounts to a catastrophe on us come June.

We have between now and June 25 to raise our voices and let GE know that we have no intention of letting them Cook our goose on medical insurance yet again. If you’re not involved in this struggle yet — it’s time!