7.22.03 – (LAA) – APFA Meets with AA to Discuss Options for Changes to the Medical Plan Design

This is Jeff Bott with a special APFA Hotline update for July 22, 2003.

As you know, Attachment K of the Restructuring Participation Agreement not only doubled our monthly contributions to the medical insurance plan but required APFA to meet with the Company to discuss options for changes to the medical plan design. If we could not agree on what those changes would be any remaining differences were to be submitted to expedited binding interest arbitration. During the negotiations of the Restructuring Agreement, both sides agreed that the doubling of the employee contributions (premiums) produced a savings of $8mm and that future negotiations under the provisions of Attachment K would be required to produce savings of at least $8mm. Because of the very real possibility that we could wind up in an interest arbitration, these negotiations were conducted by the APFA’s System Board department.

I am pleased to report that arbitration has been avoided and that we have reached agreement with the company over the 2004 medical benefit plans as required by Appendix K. This agreement produces $8mm, no more no less. Instead of bigger and bigger give-backs, these savings were achieved in a way that produces real and substantial improvements for Flight Attendants and their families.

First, the medical plans will stay the same as they are today with some important improvements.

These improvements include:

• the standard medical plan, also called the PPO, has been incorporated into the contract which means the benefits are “locked in” for the duration of the contract.
• the lifetime maximum increases from one million to five million dollars. This provides substantial relief to any of our members faced with catastrophic medical expenses.
• the current higher co-pay at retail pharmacies for psychotherapeutic drugs such as Prozac and Zoloft, has been eliminated, and these drugs will be treated like any other drugs.
• the network of doctors participating in the Point of Service plan, called the POS, has been expanded, and the definition of “local” refined to measure from your five digit zip code.
• a joint APFA/AA network review board has been established to review problems associated with the network of Doctors participating in the PPO and POS plan.

Second, the formula that calculates and limits how much inflation increases the premiums we pay monthly for our medical plans has not only been reinstated, but for the first time, it has been added into our contract, and fixed for the duration.

Third, as you know, our monthly contribution premiums were doubled as part of the RPA. That doubling produced a savings of $8mm and that $8mm, no more, no less, was our target amount under Attachment K. In these negotiations we were able to split that doubled contribution premium and treat it as two separate and distinct parts. Only one part is subject to inflation increases. The first portion consists of our original contribution premium amount (the monthly rate in effect prior to May 1, 2003) The second portion consists of a flat rate equal to the original contribution premium, now called the supplemental employee contribution. Under this agreement, only the original contribution premium is subject to inflation increases each year. The supplemental employee contribution is fixed for the duration of the contract. An example of how that works is, if you had a $20 premium and premium inflation was 10%, you would pay $2 a month more. If you doubled that premium to $40 and had a 10% premium inflation, you would pay $4 a month more. By splitting the premium back into two parts, we prevent the premium inflation from ratcheting our additional contribution up year after year. We agreed to an eight million dollar savings in medical contributions, and that is what they will get, not an amount that gets increased each year by inflation.

Fourth, our dental plan remains the same, including the monthly premiums for the High Option Dental Plan of 3 Tiers: EE – $2.75, EE+1 $5.50; EE+2 $8.00. Low Option Dental Plan continues to have no employee contributions required. Employee contributions to dental plans are NOT subject to annual inflations, and are fixed for the duration of the contract.

Fifth, we are please to announce that beginning January 1, 2004 you will now be able to obtain additional employee life insurance and, for the first time dependent life insurance through AA. The benefit level for spouse has the same options as for the employee, one, two or three times the employee’s salary level. Benefit level for children is $15,000. There will be a one time open enrollment for all family members prior to the effective date. Open enrollment means you can secure coverage of eligible family members without having to provide proof of good health. Premiums for this coverage will be announced with the annual benefits election package.

Sixth, we will also be offered a new vision coverage plan effective January 1, 2004. This plan offered through Spectera Vision offers both in and out of network benefits. In-Network there is annual coverage for routine eye examination, one pair of single vision, bifocal or trifocal lenses and frames, including 100% coverage for scratch resistant coatings, or contact lenses. Out-of-Network there is a scheduled, fixed reimbursement towards the annual cost of a routine annual eye examination, frames and lenses, or contact lenses. Premiums for this coverage will be announced with the annual benefits election package.

We hope that this marks the beginning of a new trend of better improvements in our work life and benefits.