updated 3/15/2006 6:19:57 PM ET 2006-03-15T23:19:57

DaimlerChrysler AG’s Chrysler Group said Wednesday it will change its health care plan for active and retired salaried employees to require those who earn more to pay more in premiums, hoping to address the rising cost of the benefit.

Chrysler said that beginning in 2007, the increase in every active salaried employee’s health care pretax premium would be based on their rank and base salary level. Top executives would be responsible for up to 100 percent of their premiums.

“We all have to do our part going forward. And we have to do it in a way that is innovative, competitive, equitable and provides a long-term solution,” Chrysler President and Chief Executive Tom LaSorda said in a letter to employees.

The changes will affect about 17,600 retirees and 14,900 active white-collar workers.

Auburn Hills, Mich.-based Chrysler reported a profit of $1.8 billion in 2005 in the U.S., up 6 percent from the year before. But the company’s leadership had said the division faced increasing costs and competition and it would seek benefit cuts from workers.

Chrysler spent $2.2 billion on health care last year and expects that number to grow to $2.3 billion in 2006. The automaker’s health care costs have nearly doubled since 2000.

Chrysler said the average total health care cost for each salaried employee is about $11,000, with the employee paying about $3,000 — or about 27 percent — in pretax premiums, co-pays and deductibles.

The company said the changes will increase the average cost for the employees to about 31 percent.

In 2007, administrative workers are not likely to see an increase in their premiums, while midlevel managers will see premiums grow by about $450, Chrysler said. The average executive will contribute about $1,500 more a year to the plan.

Retirees younger than age 65 will pay between 50 percent and 100 percent of health care premium increases based on their salaries when they retired. For retirees 65 and older, the company will create health care retirement accounts of $1,750 a year for each retiree and a same amount for their spouse. Retirees will be able to use the money for programs such as Medicare costs, dental and vision coverage and out-of-pocket expenses.

Chrysler said the average post-65 retiree will pay about $5,100 in premiums and out-of-pocket expenses in 2006, but the amount should drop to about $3,150 in 2007 through the plan.

DaimlerChrysler said in January that it would cut 6,000 administrative jobs by 2008 in order to make the company leaner and more profitable. LaSorda said in the letter that he believes “we can hit the year-end 2008 targets in the Chrysler Group with limited voluntary programs and a no-layoff strategy.”

U.S. automakers have sought to reduce the burden of growing health care costs at a time when they face intense competition from foreign carmakers. The United Auto Workers union has agreed to pay more for health care for active workers and retirees at Ford Motor Co. and General Motors Corp. Chrysler is seeking a similar agreement.

Ford plans to charge an additional fee for salaried employees who want to have their spouses included on the company’s health care plan. The fee would only apply to spouses who can access health benefits elsewhere.

Salaried employees who decide to have their spouses covered at Ford, even though the spouses might be eligible for medical and dental coverage elsewhere, will pay $110 a month for medical coverage and $11 a month for dental care, Ford spokeswoman Marcey Evans said Wednesday.

The charges take effect June 1, when Ford’s new benefit year begins, and will be based on an honor system of employees providing accurate information about their spouses’ coverage. Open enrollment for the program begins March 28. The automaker first announced the changes in December.

Evans said Ford is committed to providing quality health care for its employees but it “has to balance the cost of health care that it faces, the increase of costs that it faces every year.”

Ford spent $3.5 billion on health care expenses in 2005, compared with $3.1 billion in costs the previous year. The automaker has not projected how much it expects to spend on health care this year.

GM has said it will cap its annual spending on health care costs for salaried retirees and their dependents at 2006 levels beginning in January 2007, a move that could save about $200 million in cash a year within five years, the company said. The automaker has about 100,000 salaried retirees.

GM spent $5.4 billion on health care in 2005 for its 1.1 million employees, retirees and their dependents. The tab was up from $5.2 billion in 2004.

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