updated 3/20/2005 8:11:14 PM ET 2005-03-21T01:11:14

Chrysler Group has reached an agreement with the United Auto Workers union to help the company ease escalating health costs.

Starting April 1, about 35,000 hourly workers, retirees and their families will be required to pay annual deductibles of $100 to $1,000 for health care that had previously been free, The Detroit News reported Sunday.

The division of DaimlerChrysler AG also will begin charging workers co-payments up to $12.50 for vision care.

The move is expected to save Chrysler tens of millions of dollars.

UAW officials did not return a message Sunday seeking comment.

While deductibles and co-payments are commonplace for most Americans, they are new to many UAW workers. The union’s labor contracts with automakers have long guaranteed close to fully paid health care coverage.

For Detroit’s Big Three automakers alone, the tab for medical expenses was $10 billion last year, and costs continue to rise. Even as Japanese rivals keep grabbing U.S. market share, automakers have said runaway medical costs are a key obstacle for competing with foreign carmakers.

Chrysler began holding discussions with the UAW about six months ago to come up with a solution, said Tom Hadrych, the automaker’s vice president of benefits, compensation and corporate services.

Chrysler will charge deductibles for employees and retirees covered by its preferred provider organization. Annual deductibles within the PPO network will be $100 for individuals and $200 for families.

For workers using doctors and other health care providers outside of the PPO network, deductibles are $500 for individuals and $1,000 for families.

The deductibles apply to office visits, physical exams and all eligible hospital, surgical and medical benefits, but do not apply to prescription drugs or special services such as mental health coverage.

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