A Wake County Superior Court judge has denied the State Health Plan's request for a restraining order against Atrium Health's proposed pricing plan for state employees, leading to a stark warning from State Treasurer Brad Briner.
Atrium announced the pricing plan last week, just days before open enrollment was set to begin. The health system is planning to waive deductibles and coinsurance payments and offer state employees the lowest co-pays available to them.
The Charlotte-based health system has said it is trying to protect healthcare affordability for state employees, but Briner and state employee advocates say the pricing scheme will undercut the Health Plan's precarious financial situation because it isn't actually charging the health plan less for services.
In response to Tuesday's ruling, Steve Smoot, the president of Atrium parent company Advocate Health's North Carolina and Georgia divisions, wrote, "Thousands of State Health Plan members have told us they didn't want to choose between paying more and leaving the physicians and care teams who have walked with them through some of life's most serious health challenges."
If Atrium's pricing plan becomes effective, Briner said in a statement, every member of the State Health Plan could see premiums increase by as much as $50 a month in 2028. That includes people who receive care from Atrium, as well as everyone across the state who does not.
"The State Health Plan is funded by member and taxpayer dollars and those resources are finite. When a single provider can manipulate the Plan’s cost structure, dictate how benefits are designed or undermine our tiered network, it won’t just be disruptive, it could be catastrophic for the Plan, its members and taxpayers," Briner wrote in a statement.
Briner and his lawyers had been arguing that Atrium's pricing plan was effectively an illegal effort to set copays and cost sharing rates for the State Health Plan, a power they said should reside with its Board of Trustees.
"Ultimately, at this early stage of the case, Plaintiffs have not demonstrated both a reasonable likelihood of success on the merits of their causes of action and a likelihood of irreparable harm resulting from Defendant's conduct," wrote Judge Matthew Houston, a special Superior Court judge for complex business cases.
The State Health Plan was, Houston wrote in his opinion, already facing financial challenges before Atrium announced its pricing plan, meaning an injunction wasn't necessary to preserve the status quo.
Atrium serves about 80,000 health plan members across North Carolina, with the largest presence around Charlotte and Winston-Salem. The health system is also in the process of adding Wake County's WakeMed to its system, a merger Briner has publicly opposed due to the likelihood it will increase healthcare costs.
Tiered pricing plan
The argument between Atrium and the State Health Plan revolves around the tiered pricing structure that Health Plan trustees approved in July to take effect in 2027.
Under that system, the health plan sought bids for competitive rates from hospital systems, allowing it to issue lower copays and out-of-pocket maximums for members seeking care there. In turn, the thinking went, those health systems would be preferred by health plan members.
Health Plan trustees chose Novant and UNC Health as their preferred providers.
"We talked to every hospital in the state and some of them, obviously, in hindsight, took us much more seriously than others. Some of them wanted to be our partners in a serious way and others, I guess, thought we were kidding," Briner said.
Both Briner and predecessor Dale Folwell have tried to address what the plan pays for healthcare, albeit in different ways, said Ardis Watkins, the executive director of the State Employees Association of North Carolina.
"The reason both of those gentlemen had to go down that kind of path is, there is no way you can throw enough money into this thing if you're going to be held hostage by these big hospitals," Watkins said.
Atrium officials have said in recent press releases that they offered to match the preferred provider packages put forth by Novant and UNC Health.
That wouldn't work, health plan officials said, because the concept behind the plan is that the health systems offering competitive prices will make it up with volume by being the most affordable option for patients.
"By definition if we did that, it would be a problem for our agreements with Novant and UNC. They entered into this conversation expressly because we said we would have preferred providers in these urban areas that would enjoy higher member utilization because of the savings we were passing on to those members. And if that fundamental contract is not true, then their bids would have been very different, and Atrium knows that," Briner said.
Atrium and the State Health Plan have shown some ability to reach compromise in recent weeks, announcing an agreement that adds a dozen Atrium hospitals and clinics to the plan's mid-level Access tier. That would have effectively preserved 2026 expenses for members at those children's facilities and rural hospitals.
State Health Plan Executive Administrator Tom Friedman said both sides entered that negotiation with some degree of mistrust and ultimately reached a point where it seemed like there was at least some agreement.
But even in the midst of those negotiations, Health Plan officials say, Atrium didn't discuss its plans to introduce a larger pricing plan weeks later.
"It's very hard to trust someone who you enter a partnership with and then does something like this after the fact and then doesn't have the courtesy to tell you about it," Friedman said.
Impact of Atrium's plan
In the press release announcing Atrium's new plan, Smoot wrote, "The most important message we want State Health Plan members to hear is simple: we've got your back. When you select a primary care provider during open enrollment, you can feel confident choosing or keeping an Atrium Health provider."
But that's not quite true, said Ardis Watkins, the executive director of the State Employees Association of North Carolina. Instead, a plan that looks cheap on the day a state employee seeks care will end up costing them significantly down the line.
"The employee could save money on the day they go get that service, but the employee will lose shortly thereafter when their premiums go up, when the General Assembly has no money for raises, that kind of thing," Watkins said.
Watkins pointed to the $4 billion the General Assembly has spent on the State Health Plan over the past two years, money that, she noted, could have been spent on offering state employees raises that outpace inflation or higher cost-of-living adjustments for retirees.
Roughly, Briner said, the State Health Plan pays 80% of the cost of healthcare and passes 20% on to its members.
At preferred providers, that comes out to $80 coming from the Health Plan and $20 from the member.
But Atrium is more expensive, Briner said, averaging about $125 for a service that would be $100 at a preferred provider. That means the Health Plan pays $100 for the service, with the member paying $15 under Atrium's plan and the health system absorbing $10.
At scale, Briner said, that is a pricey scenario that could steer the Health Plan toward bankruptcy.
"The only people who pay the State Health Plan's bills are our members and the taxpayers. There's no profit sitting around. There's no insurance company," Briner said.
He continued, "And in the end, the short-term savings that they get is going to be more than offset by the long-term expense that they will bear."
The State Health Plan's open enrollment period is ongoing. It will remain open until Nov. 6.
