As part of a mature and saturated industry, DIRECTV has less room for top-?line growth so we must focus on driving productivity and managing costs to increase profitability for our shareholders. DIRECTV has recently managed to keep the net increase of health care costs at under approximately 3% per year for both employees and the company. But to renew our medical plans for 2014, the projected cost increase was going to be more than 18%. Budgets would only accommodate an increase of 2.5 to 3%, and the Benefits team did not want to pass on the rest directly to employees.
The greatest cost driver was increased usage of our medical plans, mainly because front-?line employee turnover has steadily decreased. Thats good news, but because employees are now staying with the company longer, they are also using more of their benefits. Inefficient plan use (e.g., using the ER for non-emergency conditions) was also having a significant impact. With greater usage of the plans, the health care choices made by our employees and their families were having a rapid multiplier effect on the overall costs.
With most of our plan design features at or near the high-?end of industry norms, we needed to make more drastic plan changes for 2014. This included phasing out our Exclusive Provider Organization (EPO) Select plan which was the least cost-?effective, but it had more than 40% of employees enrolled. We kept the plan available for only those currently enrolled, but with a 43% cost increase, and it will not be available in 2015. Other cost increases were kept in the single digits. To meet our budget we needed to drive employees into the other two plans, Consumer and Choice, and begin a major shift in health care behavior.
To drive the required change, we had to begin setting the stage for employees before the traditional Open Enrollment communications in October. We needed to engage employees in the change and help them fully understand how their decisions and actions would directly impact their costs over the long-term. A comprehensive change strategy was required, beyond communications about plan options.Download