Different approaches to comp addressed in airline merger

Months before the 2013 merger of two of the largest U.S. airlines — American Airlines and US Airways Group — Jennifer Saddy was already deep in the paperwork that comes with combining a workforce of 115,000 employees and a mountain of old workers compensation claims.

“There is certain information you can share premerger,” said Ms. Saddy, Fort Worth, Texas-based director of workers compensation, corporate insurance and risk management for what is now American Airlines Group Inc. “We spent nine months mapping out and doing a gap analysis” of the two workers compensation and workplace safety programs.

“There were different cultures that existed and different approaches for handling claims (that) when we got to the point of merging it was so clear that there was a discrepancy (between the two companies) with what we were doing to handle workers compensation claims,” said Ms. Saddy, who hailed from US Airways before becoming the head workers compensation executive for the combined airline.

The differences included long-held attitudes and rules for handling claims for both companies, she said.

There were 7,127 open workers compensation claims when the companies merged, but the company expects to close 4,000 of those claims by the end of the year, according to Ms. Saddy. The giant airline sees 12,000 comp claims annually, she said.

The best strategy has been to comb through each claim — a task that for a variety of reasons was not done before the merger but had become critical during and after the transaction, she said.

That meant numerous conference calls with adjusters and creating plans to resolve problems, she said. “It was digging into the claims and understanding the obstacles,” she said.

Why the claims were still open was the first question, Ms. Saddy said. Pharmacy turned out to be a problem as legacy claims often included prescriptions complicated by polypharmacy and drug dependence issues.

“But sometimes it was so simple as nobody asked them if they wanted to settle their claim. I said, ‘let’s just make an offer’.” Another challenge was each company’s rules for claims closure — rules that dictated when and why a claim was eligible for closure, which the new business entity tossed aside in favor of moving forward, Ms. Saddy said. That philosophy helped craft a new program for American Airlines, and helped lead to success in managing new claims and ensuring they do not linger.

“Any rules that you would live by before (the merger) do not exist. We said, ‘Think with a clean slate,’” she said.