Big Auto Manufactures Site Rise in Health Insurance Costs as Reason Posted Losses

Many have said in recent months that we are at the tipping point where the current system of employer based medical insurance must change. Perhaps there is no clearer bell tolling the demise of employer-based healthcare then the fact that two of the largest auto manufactures are blaming the inability of their last quarter earnings to show a profit on the costs of medical insurance.

Both Ford and GM two of the largest auto manufactures in the nation blame their lackluster performance last quarter and their lack of profitability on the high cost of employee healthcare and medical insurance benefits. John Devine GM's CFO has been quoted as saying, "We're spending more on healthcare then we are on the auto business, and quite frankly that does not work. A system that has relied solely on the backs of U.S. business I don't think is going to be sustainable much longer." The auto industry is not alone; several other big employers in the retail sector, even companies with predominantly union employees have had to begin cost sharing programs with their employees to continue to provide affordable medical plans to employees and to defray costs. Those who have company benefits have suddenly had to begin paying for them, those who have been paying, are now paying more.

According to the most recent Health Confidence survey conducted by the employee Benefit Research Group, the vast majority of respondents who had health benefits, 77% still had them through their place of employment. And yet that number is down from 81% in 2001. More than 30% expressed dissatisfaction with our current healthcare system, and although more than 60% reported that their healthcare cost have gone up, more than 75% said they would turn down a pay raise if it meant parting with company benefits. Which indicates that many American's are still "stuck" in their faith in a healthcare model that is obviously broken, preferring even to pay more for it, rather then change it.

But many experts agree that employer-based healthcare is literally a thing of the past. Our current reliance on work related health benefits started during WWII where as part of the New Deal and the War Effort, wage and price restraints were placed on companies. Instead companies began offering group health insurance coverage in lieu of higher wages.  Yet today the US is one of the only industrialized nations that still rely on such a system. Our neighbors to the north in Canada where employers can rely on a tax-sponsored single payer system, private employers pay only about 2.8% of their gross domestic product on healthcare, US companies spend almost 8%.

With statistics like that some say it is impossible for US firms to stay competitive, especially with emerging economies like China.