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Tuesday, April 23, 2024

Folwell says critics underestimate pension, health plan challenges

State Treasurer Dale Folwell struck back Tuesday at critics of his office’s conservative investing strategies for public-employee pension funds.

Folwell said the state’s investment strategy for its $100-plus billion in pension fund assets shields its money from the ravages of downturns and against things such as declining numbers of active state employee members.

“A lot of the comparison have to do with people wanting us to take more risk,” Folwell said. “Well, they weren’t saying that during COVID when our plan lost half as much as other plans did.

“What they want to do is find a benchmark in time that fits their narrative,” he added. “We don’t pay our retirees with benchmarks; we pay them with cash.”

Folwell was answering criticism from Republican treasurer candidate Brad Briner and Democratic candidates Wesley Harris and Gabe Esparza, all of whom argued that plan administrators’ conservatism is leaving money on the table. Briner and Harris won their primaries Tuesday and will face off in November to succeed Folwelll, who made an unsuccessful bid for governor.

Esparza had pointed to a Yale School of Management study that found that showed North Carolina’s retirement system had earned 4.9% a year during the three years ending June 30, 2022.

That was rock-bottom of the 46 states that had published their returns data.

The top performer, Washington state, achieved a 12.04% annual return.

The S&P 500 gained 8.77% annualized from the last trading day of June 2019 to the last trading day of June 2022.

The Yale study was written as a critique of Connecticut’s pension-plan investment performance, which is slightly better than North Carolina’s. It pointed out that Washington’s strategy puts a lot more money into private equity and real estate than does North Carolina’s. Folwell has criticized the fees collected by PE groups as excessive.

Separately, Folwell and others are waiting on the outcome of the insurer’s court challenge of the State Health Plan’s decision to select Aetna to administer claims. Blue Cross has had the account for 43 years.

Aetna and Blue Cross took part in a two-week trial that concluded last week following Blue Cross’ appeal of the plan’s decision. A Wake County administrative law judge is expected to rule in the next month or so on whether to allow Aetna to proceed with the changeover taking effect in 2025. More than 700,000 active and retired state employees and their dependents belong to the State Health Plan.

“We remain confident in our position … that every single bidder in this process [was] informed at the same time about what the rules were and the rules were followed,” Folwell said.

In an emailed statement, Blue Cross says it appealed because “the State Health Plan failed to compare the networks of providers offered by each bidder in any detail and used an untested and convoluted scoring process with no logical basis.”

Blue Cross leaders now want to “create as much chaos as they can” for the health plan, he said. He cited as UNC Health’s decision to have a Blue Cross subsidiary administer health benefits for new employees. That effort followed authority granted by legislators as part of the fiscal 2023-25 state budget.

The subsidiary, Brighton Health Plan Solutions, specializes in working with “self funded clients, health systems and” third-party administrators. It bills itself able to capitalize on “an opportunity to deliver integrated care” that can promote “better health outcomes at lower cost.”

Blue Cross bought Brighton in early 2022, financing the deal with a $500 million loan from Wells Fargo, according to a state-of-the-company filing with the N.C. Department of Insurance.

Legislators loosened regulatory controls over Blue Cross last year, in a move opposed by Folwell and Insurance Commissioner Mike Causey.

Supporters of the bill, including Gov. Roy Cooper, wanted to reinforce the nonprofit’s ability to compete with private rivals Aetna and United Healthcare. Blue Cross remains the only insurer widely available in big chunks of rural North Carolina.

Analysts with Moody’s Investors Services, however, have signaled in at least some of their reports that they see Blue Cross as a monopolist.

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