The Bottom Line About Healthcare
The Bottom Line About Healthcare
When considering the benefits of one healthcare plan over another, keep in mind that a health event often involves much more than just payment of medical bills (healthcare includes premium costs and other charges to you, and income replacement benefits includes payments made to you should a medical event cause you to miss work). It is simply not realistic to look at only one aspect of what happens when you have a health issue, because the impact on you and your family involves a multitude of factors. The net financial result is what really matters.
Union organizers imply that healthcare benefits applicable to some ATDA-represented dispatchers also would be applicable to Union Pacific dispatchers if they elected union representation. If UP dispatchers elected union representation, healthcare benefits would be subject to negotiations, and even if it’s assumed that the National Health and Welfare Benefits were negotiated, UP’s management benefits still are not given the correct context by the organizers. To appropriately see all dimensions of what management benefits offer (and what the National Health and Welfare Benefits don’t), take a look at some realistic comparisons between your management benefits and benefits applicable to some union employees. Decide for yourself - which of these “bottom lines” looks better?
*Union Pacific will not violate you or your co-workers’ privacy rights, so the following examples do not involve actual employees. They do, however, involve actual dollars – and sense.
Scenario 1: Expecting a Baby
Management benefits – Consider a dispatcher with 3 years of service making an annual base salary of $98,000 who elected HDHP1 family coverage and was off work for maternity leave. She worked until pregnancy-related complications required bed rest beginning 4 weeks before the birth of her daughter. Following delivery, the employee was off for 6 weeks of short-term disability (STD) leave per UP’s policy. After STD, she continued to receive 100% of her normal salary while on Maternity Leave for an additional 6 weeks. Complications involving her newborn also resulted in an extended hospital stay for the child – total medical bills for mother and baby exceeded $50,000. Under the HDHP1 plan, the medical costs for mother and baby were capped at $10,000, but Union Pacific had contributed $2,100 to her HSA, as well as providing $600 in cash wellness incentives. When her $795 in premiums (3 months) for the time period of these medical claims was included, out-of-pocket expenses for this dispatcher and her family were $8,095.
However, she received short-term disability benefits of about $18,375, which was 9 weeks of her salary at 100% and 1 week of her salary at 75% for the time she was off work. In addition, she received Maternity Leave pay of about $11,307, which was 6 weeks of her salary at 100%. Thus, even when her medical out-of-pocket expenses were included, she netted about $21,587 during her 16-week absence. Including the paid maternity leave period, her total approved leave is 6 weeks longer than agreement benefits would allow.
Additionally, the employee received the 10 weeks of short-term disability payments even though she already had received 1 week of short-term disability payments earlier in the year for an unrelated condition. Also, when her husband broke his arm later that year, his medical bills were paid at 100% because the family’s out-of-pocket cap already had been met.
Union benefits – Union benefit packages differ from railroad to railroad, and there is no guarantee what package might be applicable under a new collective bargaining agreement.
If the dispatcher described in the above scenario was covered by union benefits, the medical costs for mother and baby would be capped at $4,700. Monthly premiums are not owed while on leave, so out-of-pocket expenses for this dispatcher and her family were $4,700.
Some agreements provide for accumulation of sick days based on years of service. For example, if this dispatcher accumulated 10 days of sick leave based on her 3 years of service, that 10 days would be worth $3,769 (10 times a daily rate of $376.92) in sick pay during her maternity absence, followed by only $850 every 2 weeks in Railroad Retirement benefits (RRB). However, since she had already used 5 of her 10 sick days earlier in the year, the remaining value of her sick pay is only $1,885 (5 times a daily rate of $376.92). Her sick pay combined with Railroad Retirement benefits of $3,995 results in $5,880 of benefit income during her leave.*
After factoring in medical costs being capped at $4,700 for mother and baby and union dues of $351 owed during the leave,** which the management dispatcher does not pay, she nets only $829 for her leave of absence, or over $20,750 less than the management dispatcher.
Bottom Line:
Management plan = +$21,588
Union plan = +$829
*Amount is based on the dispatcher taking 5 days of sick leave on the first 5 days of her absence, as she would not have received RRB benefits during that time. After 7 days of absence, she would receive 7 days of RRB benefits payment ($85.00/day effective July 2022), then she would go on the benefit cycle of 4 days with no payment followed by 10 days of payment.
**The dues amount is calculated based on the monthly dues at a Class 1 carrier for the period on leave.
Scenario 2: Serious Accidental Injury
Management benefits - No one can predict when a catastrophe will turn life upside down. A 35-year-old dispatcher with 11 years of service and an annual salary of $107,500 who elected HDHP1 family coverage was in a serious automobile accident. He was hospitalized for 3 weeks and had several surgeries resulting in 9 months off work and $450,000 in medical bills. His individual out-of-pocket medical expenses were capped at $5,000, but UP already had contributed $2,100 to his HSA, as well as providing $600 in cash wellness incentives. After including his $2,385 of premium during the 9 months, his out-of-pocket expense was $4,685.
Despite his injury, this dispatcher maintained his financial security. He received short-term disability payments of $46,384, which were 100% of his salary for 18 weeks, and 75% of his salary for 8 weeks. After 26 weeks on short-term disability, he received 13 more weeks of long-term disability payments at 62% of his total compensation. Thus, for the 9 months he was off duty, after deducting his long-term disability (LTD) premiums,* this dispatcher netted about $57,984.
Union benefits – The maximum amount of sick leave that can be accumulated at one railroad often used for comparison by organizers is 60 days. Even if the employee had not used any of those days due to other illnesses or injuries, the union dispatcher would only receive $23,192 in sick pay (60 times the daily rate for a salary of $107,500). After his sick pay ran out, he would receive RRB payments of $850 for every 14 days off. His total pay for 9 months would be only $35,687. After factoring in medical costs being capped at $2,350 and union dues of $1,053 owed during the leave, which the management dispatcher does not pay, he nets only $32,284 for a similar leave of absence, or $25,700 less than the management dispatcher. Do you think this would have an impact on his ability to meet financial obligations?
Bottom Line:
Management plan = +$57,984
Union plan = +$32,284
*This LTD premium was paid based on total compensation, so it was assumed that the dispatcher received a bonus of $7,000. The company-paid LTD benefit is 50% of total compensation, with no premium cost to the employee. In this example, the dispatcher chose to pay the premium to increase his LTD benefits from 50% to 62%. He paid those premiums for 9 months, at a cost of $377.37. The LTD premium is waived during the 3 months he received LTD benefits. This example assumes the RRB Sickness Benefit daily amount of $85 effective July 2022.
Scenario 3: Extended Illness - Disability Pay
Management benefits – We have looked at two scenarios comparing medical costs and disability pay received within the same year. In addition, let’s compare the disability pay benefits received over a longer period of time. A 50-year-old dispatcher with 25 years of service was diagnosed with a serious illness that prevented her from working for an indefinite period. She received short-term disability payments of 100% of her salary for 18 weeks, and 75% of her salary for 8 weeks. After 26 weeks on short-term disability, she began receiving long-term disability at 62% of her total compensation. That level of payment will continue until she is no longer medically disabled, chooses to retire, or reaches age 65. In addition, she will be allowed to continue her Union Pacific medical coverage the entire time she is receiving disability pay.
Union benefits – Most union agreements don’t provide for long-term disability benefits at all. A union dispatcher at those railroads would quickly use up any accumulated sick leave and then would have to rely on Railroad Retirement disability benefits, if she qualified. Those benefits are not nearly as generous as those available through UP’s management long-term disability plan which could last for years. In addition, medical coverage under the union plan would only continue for 2 years following the end of the year in which the union dispatcher became disabled (and one year for the employee’s dependents).
Bottom Line – Disability Pay*:
Management plan if employee disabled to age 65 = +$1,306,361
Union plan if employee disabled to age 65 = +$842,337
*This example assumed a base salary plus bonus of $122,500 in 2022 and that Railroad Retirement Benefits would have a cost of living adjustment of 3% each year and does not reflect medical costs or premiums.
Conclusions
It’s clear that healthcare concerns are different for everyone. There may be some employees who, in certain circumstances, might pay less for healthcare costs under some union agreements than they would under the current management plan. But as you can see, there are many other circumstances in which the opposite is true. Management benefits are far superior when significant expenses result from an employee's extended absence from work due to a serious accident or long-term illness.
It’s important to remember that healthcare is just one part of your overall benefit package and one aspect of your overall work environment. Healthcare is not the only issue when looking at whether to sign an A Card or vote for union representation – but as the examples demonstrate, those who claim that an unknown future healthcare alternative is better than your current benefits aren’t looking at the entire picture – or they aren’t telling you all the facts.
If, like many of us, you do not have any medical claims this year, the cost of a typical ATDA plan is more than the cost of the most popular management plans. See the article titled Hard Numbers on Healthcare for more information.