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Ford's Salaried Retirees

When asked about the health-care changes at an August meeting with Ford salaried retirees, Ford Chief Executive Alan Mulally noted that health costs averaged about $1,200 for every vehicle the company manufactured last year. "We simply cannot add that amount to a vehicle and remain competitive," Mr. Mulally told the retirees, as per internal company documents.

Jay Savan, a principal at Towers Perrin in St. Louis, says that he is working with a foreign-owned company with 17,000 U.S. employees that is adopting an account-based plan. He says there will be winners and losers based on workers' annual health-care bill but over the time most people should be better off for the reason that they can save up health-care dollars when they are healthy. "There is a lot of activity going on with large employers in this area," says Mr. Savan.

Tricia Neuman, director of the Medicare Policy Project at the Kaiser Family Foundation, says this represents a "big change in structure" for retiree health care. "While companies limit their own financial liability, they may end up shifting costs to retirees who may not be able to discover analogous coverage on their own," she says. That is mostly true when retirees receive a one-time lump sum that they must stretch out over many years, rather than an annual contribution from the company.

Advocates of this individual-market approach argue that many employers overspend on one-size-fits-all health plans featuring bells and whistles most workers do not require or desire. They contend workers then indulge in pointless medical care since they are paying for only a fraction of the total cost.

However, turning individuals loose in the market carries risks. Older consumers will pay considerably more for coverage and many will not even meet the requirements for a policy because of their medical history. The individual market is also still plagued by deceptive marketing of coverage limits, steep rate increases after low introductory prices, insurers' efforts to deny expensive claims and lax regulation in some states.

That is why retiree health care is the chief testing ground for individual accounts, as Medicare shields most retirees from crippling medical bills.

Ford estimates the average salaried retiree and spouse spend about $2,900 in premiums now for Medicare and Ford's group medical and dental plan. The automaker says the average couple must save about $500 on average under the new plan that gives them $3,600 - $1,800 per person, in a health-reimbursement account.

Some retirees are not so sure. Nunzio Curcuru, a 77 years old retired personnel supervisor at Ford's Dearborn, Mich., framing plant, starts radiation treatment for prostate cancer next week and worries about keeping his present doctors when he has to switch Jan. 1 from the Ford group plan to a private Medicare supplement.

"Having $1,800 doesn't seem like much. A few hospital visits can wipe that out," says Mr. Curcuru. "It is a very anxious moment at my age."



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