Delta Air Lines says it has dropped more than 7,000 people from its medical plans through a screening process that asked employees to prove they aren’t claiming ineligible dependents.
Delta expects to save more than $13 million this year on lower health-care costs as a result. The screening process started last spring and required employees to turn in tax returns, birth certificates and other records. The audit also affected dependents’ eligibility for free flight benefits, Delta said.
The Atlanta airline told employees Friday about the outcome of its dependent review. Delta joins a growing number of big employers that conduct such reviews looking for ex-spouses, adult children or other dependents who are mistakenly or fraudulently getting coverage and other benefits.
Procter & Gamble, General Motors, DaimlerChrysler and Ford Motor Co. are among other companies using the tactic.
Delta didn’t say how many health plan enrollees it had before the review.
The airline last spring told employees it would cancel medical coverage and flight privileges for any dependents they fail to document. Delta also said it may fire employees and charge for back premiums and medical claims if it discovers ineligible dependents after employees were warned.
Delta told workers Friday that it is winding down the audit and will give employees until the end of the year to appeal the status of dependents who were removed from its benefit plans.
The cost-cutting move winds down as Delta has launched a broader-ranging effort to lop $5 billion from its annual operating budget by 2006. The company is struggling to stop a financial nose dive that began in early 2001 and has produced $5.6 billion in net losses.
Delta has said it will file for Chapter 11 bankruptcy protection “in the near term” if it can’t win cost cuts from pilots and creditors outside court.
The early retirement issue recently emerged as another potential Chapter 11 trigger, although Delta Chief Executive Gerald Grinstein says he expects a deal will be reached on that.
The Air Line Pilots Association said this weekend’s talks may include an offer to allow Delta to temporarily use retired pilots to avert staffing problems. The union wants assurances, however, that Delta will not endanger retiring pilots’ ability to take up to half of their pension benefits as a lump sum. This year, hundreds of Delta pilots have retired ahead of the mandatory retirement age of 60.
If negotiators reach a tentative agreement this weekend, ALPA said, it will require the approval of the union’s leaders and a ratification vote by members. The union said such a vote could be done quickly.
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That would still leave Delta seeking a broader package of pay and other concessions from the pilots union, and trying to renegotiate some of its debts. Analysts say it has to do both in the next few weeks to avoid a Chapter 11 case.