At Ford, GeneralMotors Co. and Fiat Chrysler Automobiles NV, the tab for healthinsurance topped $2 billion in 2015 and has only grown since.(Photo: Shutterstock)

Ford Motor Co. expects the cost of health insurance for its 56,000 hourlyworkers in the U.S. to top $1 billion for the first time next year,according to a person familiar with the situation, highlighting agrowing expense for automakers even as car sales slow.

Those mounting health-care costs represent a potential stickingpoint in this year's contract talks between the United Auto Workersand the three U.S. automakers that tried and failed four years agoto address an expanding outlay that threatens profits and jobs. AtFord, General Motors Co. and Fiat Chrysler Automobiles NV, the tabfor health insurance topped $2 billion in 2015 and has only grownsince.

Bargaining negotiations get underway this summer on contractsthat expire in September with each of the three automakers. Someexperts say divisive issues including cost-sharing for health care benefits may leadto striking.

The UAW must balance its protection of benefits with the need tokeep workers on the job at a time when GM is shuttering five NorthAmerican factories and Ford is slashing shifts and cutting jobs aspart of an $11 billion restructuring. Although the three automakersremain profitable, they are bracing for a slowdown that couldbecome a recession while spending billions to prepare for a futuredominated by electric and self-driving cars.

Ford shares rose 0.7 percent to $8.67 at 9:44 a.m. in New York.The automaker's stock is up more than 13 percent this year fallingalmost 39 percent last year.

Hard-won benefit

Nationwide, health expenditures are projected to grow by 5.5percent annually from 2018 to 2027, more than twice the rate ofinflation, according to a new study by the Centers for Medicare andMedicaid Services. But unionized auto workers enjoy some of themost generous medical coverage plans in the country and have beenspared premium increases.

The UAW sees that as a hard-won benefit that helps make up forconcessions to automakers in other areas. But automakers view thesegold-plated worker plans as a growing burden that puts them at adisadvantage against rivals with non-unionized factories.

“We're returning to major concession negotiations in the autoindustry,” said Gary Chaison, professor emeritus of industrialrelations at Clark University in Worcester, Massachusetts. “Themajor manufacturers are saying: Give us a reason for why we shouldexpand in the U.S. as opposed to China or India or somewhereelse.”

Thin contributions

With little or no co-pays or deductibles, UAW members contributejust 3 percent to their health-care coverage, compared with 30percent by Ford's salaried workers, said the person familiar withthe matter, who asked not to be identified revealing internal data.Without changes, the growth in health-care costs over the life ofthe next contract would be the equivalent of a $3 hourly wageincrease, the person said.

In the U.S., workers with health insurance contribute an averageof 18 percent of the premium for single coverage and 29 percent ofthe premium for family coverage, according to a study last year bythe Kaiser Family Foundation.

Health-care coverage has been sacrosanct at the UAW, which gaveup wages and jobs in 2009 to help keep the automakers afloat butdidn't give back medical benefits. “The union has fought hard inthe darkest of economic times to ensure its members remainprotected,” said Harley Shaiken, labor relations professor at theUniversity of California at Berkeley. “It's not a rhetoricalcommitment. It is a substantive commitment at the bargainingtable.”

In 2015, when then-UAW President Dennis Williams proposedcreating a health care co-op that leveraged the buying power ofalmost 140,000 UAW members working for Detroit automakers, workerssoundly rejected it, fearing it would erode their benefits. That'swhy labor analysts expect health care to be a flashpoint innegotiations for the contracts.

'Cadillac' tax

As the union gathers in Detroit this week to map out itsbargaining strategy for this summer's contract talks, it has maderetaining and expanding health-care benefits a top priority. Theunion said it will seek to eliminate disparities in coverage, whichhave left newer workers with less-generous coverage than veterans.It also is looking to reduce co-pays on prescription drugs andavoid any “cost shifting” from companies, according to thebargaining resolutions prepared for the convention.

Looming over the talks is a provision in the Affordable Care Act— also known as Obamacare — that will tax so-called “Cadillac”health care plans like the UAW's at 40 percent starting in 2022.That cost would be crippling for the automakers and its workers,both sides say. But finding a way around that will be tricky.

Labor experts say neither side is eager to make concessions,which could bode ill for the negotiations.

“I don't think any of the Big Three can absorb that cost, sothey're going to want more cost sharing,” Wheaton said. “But I cansee the UAW saying, we've given up so much money on other thingsand we've tried to claw back some of that, and now you're saying weneed to make up for a 40 percent hit on health care. I think you'retalking strike.”

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