FedEx is shaking up its employee health benefits plan for 2020, as Memphis’ largest employer moves to pare down costs in a turbulent time for its business.

In 2020, FedEx will require a surcharge for working spouses of employees, end out-of-network coverage and phase out domestic and civil union partner benefits, the company said in a recent newsletter.

FedEx said in a FAQ document for employees that it expects to pay more for health care in 2020 than in 2019, even with these changes. Health care costs at FedEx will exceed $2.1 billion in 2019, according to the company newsletter.

FedEx employs around 30,000 people in the Memphis area, out of around 450,000 globally. According to the newsletter, 441,596 employees and dependents are covered by the FedEx Corporation Group Health Plan this year.

The logistics giant's salaries and employee benefits totaled about $6.09 billion in its most recently reported quarter. That’s down from $6.26 billion in the year-before quarter and after a wave of employee buyouts focused on FedEx Express.

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FedEx’s performance has disappointed amid a global economic slowdown and mounting costs integrating European courier TNT Express into its network, leading to cost-cutting measures such as the buyouts.

The company likely saw a “constant increase” in its health care costs and looked for ways to cut some expenses while still providing suitable benefits, said Julie Stich, vice president of content at the International Foundation of Employee Benefit Plans.

“It can be for a number of reasons,” Stich said of why companies pare back benefits. “It could be because they’re struggling, but every so often companies take a strategic look at the benefits they’re offering.”

In a statement, a FedEx spokesperson said the company is “committed to delivering competitive and meaningful health benefits” to employees and reviews its health care benefits every year.

“In order to continue to provide competitive health care benefits to our team members, we pursue health care innovations, high quality care and options to keep our contributions, deductibles and out-of-pocket maximums from rising any more than necessary,” the spokesperson said.

Surcharge for spouses added

If an employee’s spouse declines medical insurance offered through his or her own job in favor of FedEx’s health plan, the employee will pay a $150 surcharge every month, according to a document summarizing the benefits changes.

According to a 2019 survey from professional services network PricewaterhouseCoopers, the median surcharge for spouses with coverage access through another employer is $100 a month.

FedEx said in the document that the average cost to cover an employee’s spouse is 76% higher than the employee.

Stich said working spouse surcharges are becoming more common among employers, who have seen spouses of employees sign onto their more generous plans.

Per a 2018 IFEBP survey of its members, 25% of employers had a working spouse surcharge or no coverage for spouses offered a plan at another job. That’s up from 17% of members in 2014, she said.

“Certainly, the reason employers do implement this is because of cost savings,” Stich said of working spouse surcharges.

Another change in FedEx’s benefits plan is that no new domestic and civil union partners can be added for health coverage (medical, dental and vision) in 2020 except where contractually mandated, the document said. Current partners may stay covered, and new dependents of currently covered partners may be added.

No more out-of-network coverage

At the start of 2020, FedEx will end out-of-network coverage for all of its medical plans.

Those covered under its plan will be responsible for the entire balance of care received from an out-of-network provider or facility. There is an exception for emergency services, as the plan allows that to be covered at the in-network benefits level, according to an employee benefits enrollment FAQ.

FedEx said in the FAQ document that it tries to keep cost increases to its plan below the rate of U.S. health care cost hikes.

“As our strategy evolves to promote use of high performing doctors and facilities, allowing out-of-network (OON) use undermines that strategy as there are no quality or cost control levers and there are emerging fraudulent billing practices, particularly in behavioral health,” the company said.

Even when using an in-network facility, patients can still be hit with an out-of-network claim. But FedEx said in the FAQ services from ancillary providers are processed according to the facility’s network status. That means out-of-network services done at an in-network facility will be processed as if it was in-network, according to the FAQ document.

“A member should always ensure that the facility and primary treating physician or surgeon are in-network in order for services to be covered,” FedEx said.

Employees may prefer an out-of-network provider “due to reputation, familiarity, or convenience,” an analysis from the Kaiser Family Foundation said. It also said some provider networks may have limited options for certain services.

Stich said typically there’s at least some sort of coverage for out-of-network providers among employee health plans, but that FedEx isn't alone.

Deductible hike among other changes

Annual deductibles for all FedEx Medical Plan options are increasing in 2020, the first time since 2014. The individual in-network deductibles are increasing by $100, while the family in-network deductibles are increasing by $300, per the summary document.

FedEx 2019 in-network deductibles varied by plan. For most plan options, individual deductibles ranged from $1,200 to $2,250, while family deductibles ranged from $3,600 to $4,500.

FedEx is also requiring those covered to complete a “surgery decision support” program through ConsumerMedical before certain surgeries.

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“The SDS program offers in-depth and personalized information and support to help you and your covered dependents 18 and older make wise decisions about surgery treatment options,” FedEx said in its summary document.

FedEx said there will also be an added responsibility of $1,000 if the program isn’t completed before having a lower back surgery, hip replacement, knee replacement, weight-loss surgery or a hysterectomy. Those covered can earn a $400 credit to their health reimbursement accounts if the program is completed prior to certain surgeries.

Other changes to FedEx’s health plan noted in the summary document include free telemedicine for non-urgent medical issues and base credits for health reimbursement accounts, which help pay for eligible medical, mental health and substance abuse expenses.

Enrollment for FedEx’s 2020 benefits plan runs through Oct. 29.

Max Garland covers FedEx, logistics and health care for The Commercial Appeal. Reach him at max.garland@commercialappeal.com or 901-529-2651 and on Twitter @MaxGarlandTypes.