FedEx Shifts Gears On Health Insurance

Aug. 04--FedEx employees will shoulder a larger share of health care costs as the Memphis-based delivery giant moves everyone to high-deductible, consumer-driven plans for 2014.

The changes, coming in January, will affect some 400,000 U.S. employees and family members. The change is designed to slow down one of the company's fastest-growing expenses, expected to top $1.5 billion next year, and to protect against Obamacare's penalties on overly generous plans in the future.

Premiums will hold steady or rise slightly, but employees will no longer have an option with relatively low deductibles. FedEx is easing into the change by providing Health Reimbursement Accounts, but the cash won't come close to covering 80-140 percent increases in deductibles.

The company began rolling out information about the changes in July, well in advance of re-enrollment Oct. 15-Nov. 5, to give employees time to adjust.

FedEx currently has one plan that's considered high-deductible and one that isn't.

"This new plan offers the best combination of benefits and incentives to address the rapid increase in health care costs," FedEx spokesman Patrick Fitzgerald said. "Currently, more than 70 percent of large U.S. companies offer consumer-type health care plans, and many have slowed the growth in health care costs while still offering quality coverage and affordable premiums."

Officials don't think the change harms FedEx's reputation for taking good care of employees. The company will continue to offer a $5 a month plan for individual employees and coverage to part-timers, who form the backbone of the FedEx Express world hub at Memphis International Airport.

FedEx is Greater Memphis' largest employer with about 30,000 workers and reported $44.3 billion in revenues in the fiscal year ending May 31.

"There's this tsunami of change that's going on, that's affecting everybody," said Tim Finnell, a certified health care reform specialist and president of Group Benefits LLC in Memphis. "I would view this by FedEx as being on the leading edge of change and adopting it early. They don't want to turn people over to the government and the (health care) exchanges."

FedEx's costs for self-insured health care coverage have been rising at two to three times the rate of overall inflation, or by $90 million to $100 million a year, officials said.

"Health care inflation was already unsustainable before the (Affordable Care) Act passed, but the legislation has added costs and complexity on top of that for large employers including FedEx," Fitzgerald said.

The company will pay about $56 million in fees under the act over the next three years. That's a fee the health reform bill charges self-insured employers and insurance companies.

Another cost faced by FedEx is an excise tax in 2018 levied for superior insurance coverage. The new plan being rolled out in 2014 is in part an effort to avoid that excise tax.

"Like virtually every large employer in America, we do not intend to have a plan that is subject to Cadillac excise tax penalties," Fitzgerald said.

FedEx contracts with Cigna and Anthem to administer the plan, and Cigna will continue to be administrator for the Memphis area.

Deductibles will go up as little as $700 and as much as $2,100, depending on the plan and level of coverage. But prescriptions, preventive care and visits to in-network primary care physicians will be excluded from the deductible, meaning employees will pay coinsurance of 20 to 30 percent for those services. The company will offset higher deductibles with HRAs of $400 for individual employees, $650 for employee and children and $800 for families.

FedEx workers contacted by The Commercial Appeal wouldn't comment on the record, but said privately that nobody likes the idea of paying more, and that employees with chronic health conditions or unanticipated medical events would wind up paying much more.

High-deductible plans, also called consumer-driven or account-based plans, are becoming more common among U.S. businesses. They shift the cost of health care more onto the people who are using it, as opposed to spreading costs across all employees whether they use it or not. The plans force employees to be more actively involved in health and wellness and practice better consumer habits in shopping for medical services and goods.

PricewaterhouseCoopers' Health Research Institute's 2013 survey of employers reported 17 percent offer high-deductible insurance as the only option, and more than 44 percent are considering going that route.

Finnell said FedEx appears to be making the right moves to communicate the changes to employees, through meetings, online, mailings, newsletters and a telephone hotline.

"I think where FedEx has a great advantage, communication is the key with any consumer-driven health care plan, people understanding what it is, how it works and why," Finnell said. "The typical large company has a difficult time communicating that. It looks like from the materials FedEx is doing a good job."

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