The North Carolina State Health Plan may be unable to stay afloat by fall 2026, according to State Treasurer Dale Folwell. Why the state legislature is withholding the funds needed to keep the plan solvent remains a mystery.
COVID-related expenses and skyrocketing prescription drug and health care costs are wreaking havoc on the State Health Plan’s budget: the plan is facing a projected loss of $106.3 million in the upcoming fiscal year, according to a July report. Price increases are vastly outpacing the budget, which was rocked by the pandemic.
The plan provides health insurance for 750,000 state employees, teachers, retirees, and dependents — that’s more than 15% of all North Carolinians with employer-sponsored insurance. Those covered by the plan — public school teachers, police officers, and park rangers, for example — face higher premiums and limitations on prescription drug offerings. The plan stopped covering blockbuster drugs for weight-loss like Ozempic back in March.
“We are scrubbing our prescription drug offerings,” Folwell told Carolina Public Press.
“We are doing everything we can to encourage people to take generics. We are writing letters to the federal government asking them to expedite the process for GLP-1 drugs so that the price of that product could come down. We have more people in the Medicare Advantage program than ever in the state's history. We've cut hundreds of millions of dollars of expenses. We're doing everything humanly possible to keep the plan going.”
The state is also switching from Blue Cross Blue Shield to Aetna for coverage on Jan. 1, 2025, a move that Folwell estimates will save tens of millions of dollars.
The plan has spent $538.8 million on COVID-related expenses through July 2024. Only $215 million of that has been reimbursed by the state budget, which is currently operating on a surplus. The state received $110 billion in pandemic relief funds from the federal government. Nearly 60% of that money remains unspent.
State Treasurer Folwell, a Republican and former second-in-command in the state House, is asking the Republican-controlled state General Assembly for $250 million to keep the plan solvent in the short-term.
For now, legislators seem to be ignoring his call.
“We have one person to go to to get our funding, and that's the General Assembly," Folwell told CPP.
"They have the keys to the car. They ... are going to determine whether this car continues to roll down the road .... While we’re watching pennies and paper clips, they could snap their fingers and make this situation go away.
“All we really want is to solve a problem, and the problem is solved by the General Assembly taking the money that the federal government borrowed and sent down here for these types of expenses, and put it toward the expenses that we incurred.”
Senate leader Phil Berger did not respond to a request for comment on the legislature’s motivations for withholding the money from the State Health Plan. He is not responding to Folwell’s calls or emails either, according to the state treasurer.
“Why is the General Assembly not fully funding the state’s healthcare plan?” wonders Joseph Harris, fiscal policy analyst at the John Locke Foundation, a North Carolina-based conservative think tank.
“They make sure to fund the state retirement plan each fiscal year, but they have not been doing that with the state health plan. As far as understanding that politically, we don’t know yet.”
Looking at how they have spent the federal pandemic relief money so far can offer a clue: it appears the General Assembly’s biggest concern is reviving business in the state. The legislature has spent more than $17 million on business aid, and less than $3 million on assisting health providers.
“I feel so bad for people who are operating businesses, who saw their businesses just get shut down to a standstill,” executive director of the state employees' independent association Ardis Watkins told CPP.
“But what we did with the CARES Act did not seem to not make a lot of sense: there's nothing more directly related to what the state incurred in terms of expenses due to COVID than what we incurred for our own employees, testing, vaccinating and treating COVID.”
Another partial explanation is that legislator may be just as fed up with rising costs as the State Health Plan board. The state legislature has been spending more and more money on state employee benefits over the years.
Between 2009 and 2024, the number of state employees rose 0.7%, while the price of benefits for those employees increased 102.9%, according to the General Assembly’s fiscal research division.
“You can't run any business where the cost of things are going up at twice the pace of the amount of money coming in,” Folwell said.
The cost of a blood test faced a median commercial markup from Medicare of 759% in North Carolina as of June 2023, according to a report from the state treasurer. A CT scan has markups of 976%, an automated urinalysis test 1120%.
“We're one pandemic away from not being able to pay our bills,” Folwell said in an Aug. 6 press conference.
Part of the problem here is a lack of transparency in the costs of health care services.
“By North Carolina law, contracts between third-party administrators, in this case Blue Cross (or Aetna), and providers — hospitals or doctors — are considered exempt from the Public Records Act,” Watkins said.
“Contracts worth hundreds of millions of dollars of public money are protected from view with the argument that it's a trade secret. North Carolina law interprets ‘trade secret’ very broadly. This is just a way to get people to overpay and not be held accountable for it.”
Harris, of the John Locke Foundation, says a potential solution is reference-based pricing.
“There’s no way around it: the General Assembly is just going to have to put up money,” Harris said. “But at the same time, the state needs to be better about trying to figure out a way to get these costs down.”
“The way hospitals in North Carolina work now is that they totally decide the price of the procedure or service, and you just show up and they give you a bill. There’s no negotiation.”
“Reference-based pricing would give a patient a reasonable and customary price for a procedure, saying ‘Hey, this is about what it should cost to get an MRI on your leg,’” Harris said. “It would create more of a negotiation process between the health care provider, the insurance provider and the actual patient.”
For now, whether the general assembly will eventually provide the State Health Plan with much-needed funds is unclear, and the reason behind their radio silence remains even more opaque.
This article first appeared on Carolina Public Press and is republished here under a Creative Commons license.