More changes and higher rates could be coming to the health insurance plan for teachers and other North Carolina state employees. Last week, the board of the State Health Plan approved the option of moving to a system where premium amounts are based on how much employees make. The state plan, which covers about 8% of North Carolina’s insured population, is working to close a projected shortfall of about $500 million. Reporter Michelle Crouch wrote about the challenges the plan faces for the Charlotte Ledger Business Newsletter and NC Health News. She joins WFAE's Marshall Terry to discuss.
Marshall Terry: OK. So, you write that the projected $500 million shortfall could actually grow to almost $1.5 billion in the two next two years. Forbes recently ranked North Carolina as the most expensive state for health care. What’s driving all of this?
Michelle Crouch: Health care costs are skyrocketing. A lot of experts believe that a big reason for that is health care consolidation. Our hospitals are getting bigger and bigger by merging and buying up independent practices. And the bigger they are, the easier it is for them to raise prices because there's less competition, and they also have more leverage when they're negotiating with health insurance companies.
When it comes to the State Health Plan, the legislature is responsible for funding it, but that funding just hasn't kept pace with those rising costs. Former state treasurer Dale Folwell was able to keep premiums flat for eight years straight. So that helped state employees — but it also meant that the plan wasn't bringing in more money, even though its expenses were growing. Folwell liked to say that the hospital prices were the problem and that it was the legislature's responsibility to fund the plan. Now there's a new state treasurer, Brad Briner, and he's looking for other ways to close the gap.
Terry: The State Health Plan recently switched from Blue Cross Blue Shield to Aetna, and that move has not gone over well with everyone. Why not?
Crouch: Well, the switch was announced as a way to save money, but state employees and teachers were also assured that their coverage mostly would not change. But now that the new plan is in place, many of them are finding out that's not the case. The biggest complaint I've heard is that they're being asked to pay more out of pocket. One teacher told me her co-pay for her regular visits to her ENT doctor doubled from $40 a visit to $80 a visit. Others say they're getting hit with higher co-pays for mental health, for their physical therapy appointments and other types of care.
Terry: The State Employees Association is calling for more transparency. How could that possibly lower costs?
Crouch: Ardis Watkins, the executive director, says that some hospitals are charging the State Health Plan exorbitant rates — nine times what Medicare pays for the same procedures. But here's the thing — no one knows which hospitals are doing that because those prices are secret under an exception to the state's public records law. So what Watkins says is, that if the public could actually see what those hospitals are charging and which hospitals are charging those rates, there'd be more pressure to bring those costs down. She says that other states that have made prices public have seen those prices drop.
Terry: How has the idea of different premiums for people with different salaries going over?
Crouch: As you can imagine, teachers and state employees are not happy. They say their salaries already haven't kept up with inflation. You know, for years, good health insurance is one of the key benefits used to attract people to public service — but they say they feel like that benefit is gradually eroding away.
Terry: Well, what power, if any, do lawmakers in Raleigh have in lowering costs?
Crouch: That's the big question, Marshall. It's so complex and it has so many players that fixing it — or even making an incremental improvement — is a huge challenge. Patient advocates like the North Carolina Justice Center say the state should increase its oversight of health care mergers and acquisitions, and maybe set limits on how much health care systems can raise their prices each year.
Another solution that the State Health Plan board seems interested in is called value-based pricing. That's when instead of paying doctors for each procedure or visit, you pay them for improving patient health overall and delivering better care. I imagine we're going to hear a lot more about that in the next couple of months.
