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BY MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

Dalton, Ga., is a community of 30,000-plus people set in the foothills of north Georgia, an exit sign on I-75 between Chattanooga, Tenn, and the Atlantan sprawl. It had been the "Carpet Capital of the World," but now about one in six adult residents are unemployed.

According to Mark T. Hopkins, senior director of compensation and benefits at the self-funding company, Mohawk has seen the number of services ordered by local healthcare providers shoot up. Utilization of outpatient testing, for example, has increased by as much as 17 percent.

Hopkins realized, his employer was supporting the providers in Dalton during the down market.

Here, like with all the healthcare providers who cater to the 20,000 lives under Mohawk's $150 million benefits plan, Hopkins has tried to fight the trend with data and "quality care networks." The latter are plans that identify high-quality providers in a given area and try to educate employees about them.

"Tracking quality is a big deal," said Hopkins. "The best healthcare occurs when people get it done right the first time."

Beyond education, Mohawk also gives employees a $200 bonus to use these high-quality providers. When they do, employees then pay half the usual copay, reported Hopkins, who presented at the annual meeting of the Self-Insurance Institute of America Inc. in Orlando, Fla.

He also had to take on other providers in another area in northwest Georgia, where doctors had formed their own network and were the only game in town. When the network wouldn't talk discounts with Hopkins, the benefits manager traveled down I-75 to "Hotlanta" to talk to Cigna, brought other local employers on board and convinced Cigna to come to them. The result? Now those providers have a little competition and are willing to talk.

Sometimes you have to play "hard ball," Hopkins said.

THE PARACHUTE

Especially when you've reached the "tipping point." When your chief financial officer and CEO call you into their offices and say, "No more" to healthcare costs. At that point, employers have to focus on building a parachute to slow the fall off the cliff, as Hopkins put it.

A cliff that now, given the recession, seems bottomless.

"We cannot tell where the economy's heading," Hopkins said. "I haven't seen anything like this in my lifetime."

Yet despite the uncertainty, despite Mohawk having to lay off about 4,000 employees and close a handful of carpet mills, the company must continue to provide a level of benefits while maintaining its cash position, financial performance, productivity, and employee and management retention.

While Mohawk is not alone in being hit by the recession, it has set itself apart with how it's responded with changes to its benefits plan. In particular, the quality care networks mentioned above are progressive, if not pioneering.

Paul Harris, senior vice president at Aon Consulting, who works typically with larger employers in the 5,000- to 20,000-lives-covered range, explained that such strategies are emerging.

"The more proactive employers are embracing this pretty wholeheartedly," he said.

Collecting the data necessary to measure provider success has only been possible in the last three to five years, according to the broker, as providers have only recently agreed to being measured. Now that measurable data is reaching employers, they are tasked with communicating it to their employees.

"Next we have to educate people how to use it, and then they finally have to trust it," said Harris.

Hopkins expressed similar concerns about how to teach employees when they need care and where to go for it. "I don't want employees thinking they have hurdles to jump through," he said.

Yet he also has to confront a situation where 10 percent of his after-hours emergency room visits are for colds and sniffles.

It's not just care for his current employees that he's got on his plate. Harris is facing an economy where more and more spouses are getting laid off, and more than ever they are coming onto Mohawk's plan.

Other employers are not keen to let just any spouse or dependent on their plans. As Roxann Kerr-Lindsey, vice president at CBIZ Employee Services, explained, employers are more frequently using dependent eligibility audits. Through special enrollment vendors or their TPA if necessary, employers can check birth and marriage certificates to ensure a spouse is really a spouse, a dependent a dependent.

Hopkins didn't mention audits, but perhaps in part as a reaction to the uncertainty of all the coming and going with plan members, Mohawk has changed the way it adds new employees to its plan. For starters, Hopkins has seen a new trend among employers to give lesser limits to first-year employees.

"That is definitely something that we've looked at," said Kerr-Lindsey of new-employee policies. She added that employers are also reconsidering how they do benefits for retirees and part timers.

Another strategy Hopkins is considering for new employees: making plans based on health savings accounts mandatory for them. Currently, HSA plans are just one of the choices all employees can pick from, and Mohawk shoots for a 5 percent participation rate.

HSAs of course are nothing new, and they're only getting more popular, as are incentives to drive employees to them, reported Kerr-Lindsey.

But in terms of mandating that new employees join separate benefits programs than ones offered to veteran workers, that isn't something Harris is seeing too much of.

On the other hand, Mohawk is also giving the folks under its plan as much ease and access to care as possible. Mohawk is in the process of opening its five full-service clinics and its 16 "mini-clinics" to spouses, and perhaps eventually kids as well.

Hopkins also revealed a new plan to put a doctor on a "pony express" to travel between the clinics, assisting the nurse practitioners who man the clinics and providing very hands-on disease management.

PREVENTION & MGMT.

Even in today's tough times, Hopkins sees such disease management strategies, which might appear as added costs to outside eyes, as the more inexpensive option. His view on preventive care is the same. Mohawk has actually allocated more money for preventive care: $400 per person.

"If you're going to talk it, you have to walk it," Hopkins said.

Mohawk has rolled out a health risk assessment (which has an 80 percent participation rate). The company rewards employees for weight loss, smoking cessation, exercise and better nutrition. At one facility in Dallas, the company converted an old warehouse into a walking track.

A June survey of the membership of the National Business Group on Health showed that employers still see wellness as a top-three strategy for cutting healthcare costs, according to Karen O. Marlo, director of benchmarking and analysis with the Washington, D.C.-based nonprofit.

"Overwhelmingly, no, they're not cutting back," she said, adding that the average employer invests up to 2 percent of its healthcare spending on wellness.

Perhaps the shift on wellness in the down economy is one toward the stick, rather than the carrot. Stephen Wall, regional sales manager for Accordant, a health management service provider, said some programs have even become "mandatory"--with quotes because technically they aren't mandatory but employees are nudged in their direction with disincentives. Employers are now worried less about "member disruption."

"We need to upset the apple cart, but that's OK," as Wall put employers' thinking.

Employers are sending a message to employees: "We care about you and your well-being, but we also care about us falling off that cliff."

Employers are also sending another message directly to workers: Our healthcare benefits are expensive. Hopkins stressed the importance of telling employees that, as their employer, you're spending $150 million (in his case) on their health.

"Employees really don't understand the true value of those plans," said Kerr-Lindsey.

RISK APPETITE

More fundamental change is going on with employers. Their ability to tolerate risk is shaken. For Mohawk's plan, for instance, it used to not be feasible to carry stop-loss insurance, or healthcare reinsurance, according to Hopkins. But now, the company is looking to carve most of its excess coverage into stop-loss.

And Hopkins gave the impression that it wasn't just his CFO's views on risk that have changed. Risk appetites have shifted for many CFOs.

In Mohawk's case, the company's accrual and reserves had been based on the old payroll, not on the new one after 4,000 layoffs. As the number of covered lives decreases, the appetite for risk decreases too.

"That is a big, big issue today," Hopkins said.

In fact, it's perhaps an even bigger issue considering how expensive stop-loss insurance is. Some employers have seen rate increases of 25 percent to 30 percent, according to Kerr-Lindsey.

That has led some in the other direction, perhaps more so than in Mohawk's direction, according to what Aon's Harris has seen. Employers are trying to get the same stop-loss limits for less money by shopping around to new carriers.

Or they gamble with less coverage, taking on more risk simply because they cannot afford to transfer it. Kerr-Lindsey has seen employers increasing their limits on individual stop-loss (reinsurance on the costs on an individual employee) to lower premiums.

It's not just reinsurance that self-funding employers are adjusting though. Hopkins has vendors in his sights too. And in usual fashion, he's taken a hard line with them too. He's looking for partners, experts, not yes-men.

"You're either on our team or you're off," he said.

Kerr-Lindsey has also seen other employers asking more questions, visiting with more consultants.

"Everybody's looking out at the horizon trying to figure out what they're missing internally ... trying to find any avenue they haven't thought of on their own," she said.

And the biggest change a self-insured employer could make? It would be to get out of the self-funding business. This would be drastic, and for a large employer, it might be unprecedented for one to go back to a fully insured program for healthcare benefits.

But with employers in "survival mode" or at least "maintenance mode," Hopkins could understand if they consider stopping self-funding for certain benefits.

In fact, Mohawk recently went fully insured for its dental benefits and might go that route with vision.

Will the economic recovery turn out to be a "V" or a "W"? Will drastic healthcare reform reach President Obama's desk? Who knows? And that's the problem.

If anything is certain in today's topsy-turvy world, it's that there are no easy fixes, especially for healthcare.

"It seems like everybody wants to have a silver bullet, but truth is there is not one," Hopkins said.

November 1, 2009

Copyright 2009© LRP Publications