Health insurance is one of the fastest growing costs for employers. For American, this is especially true, as our benefit plans are considerably richer than the rest of the industry. We will continue to offer valuable medical benefit programs, but it’s critical that we better align our costs and the employee cost share in this area with what other large companies pay.
AA pilots currently pay less than pilots at any other legacy airline. Other large network carriers require pilots to pay 20 percent or more of their active medical benefits costs. The company proposal asks AA pilots to contribute more toward the cost of the plan – amount differing by Option A and Option B – which is at or well below that of our main competitors.
When it comes to retiree benefits, American is one of only very few airlines providing retiree medical coverage – and today our pilots don’t pay anything for that benefit. Our retiree medical obligation for 2011 is $171 million – $40 million more than United and more than $100 million greater than Delta. We’re continuing to guarantee coverage to retiree medical, regardless of age, but employees hired after 1983 will need to begin sharing in that cost. For pilots retiring before age 65, American will continue to cover a large percentage of the benefit cost. At age 65, when Medicare is available, AA will offer guaranteed access to Medicare supplement coverage and pilots will pay the full cost for the coverage they select.
Lastly, the company proposes a few changes to Long Term Disability (LTD) coverage which will provide a richer benefit to pilots who need LTD while ensuring the benefit only applies to pilots who truly need the coverage. Additional changes will update the plan provisions to more closely match typical LTD plans. Overall, the changes included within this proposal continue to provide industry-leading benefits to our pilots while better aligning the company’s costs in this area with competitors.
Distribution of Costs
All legacy carriers except for American offer a four-tiered structure and therefore not surprisingly, the company proposes converting its current three-tier employee contribution structure to a more standard four-tier. The three-tier structure is out-dated within the industry and other large employers, and generally more cost share is necessary when covering a spouse.
Proposed Restructure of AA Health Care for Employee Contributions |
|||
|---|---|---|---|
Current Contributions Structure Standard Plans |
Multiplier |
Company Proposal Standard Plans |
Multiplier |
Employee Only |
1 |
Employee Only |
1 |
Employee + 1 |
2 |
Employee + Spouse |
2.3 |
Employee + 2 or more |
2.65 |
Employee + Child(ren) Employee + Family |
1.9 3.0 |
