Members of the N.C. State Health Plan will be able to get a knee replacement or other surgeries at no cost under a new program that marks a shift for the group that helps insure 740,000 teachers, state employees, retirees and dependents
The plan signed a partnership with Dallas-based Lantern, which has a network of surgeons and specialists who have agreed to treat health plan members. Lantern is expanding its current network of surgeons with physicians working for the OrthoCarolina and Raleigh Orthopedics practices, aiming to build a statewide network.
The Lantern partnership is distinct from existing preferred provider organization, or PPO, agreements between providers and the health plan’s third-party administrator, Aetna. Members typically pay a small portion of the cost of surgeries under those agreements.
“It’s a market-based approach, which is one of the things that [State Treasurer Brad Briner] has emphasized,” says Tom Friedman, executive administrator of the health plan.
The State Health Plan is expected to lose $507 million in 2026 and as much as $900 million in 2027, prompting Briner to boost members’ annual deductibles and raise monthly premiums by $20 starting in 2026. It makes up more than 7% of the medical claims volume in North Carolina, Friedman says.
Orthopedic surgeries that can be scheduled seemed like a smart first step to introduce the Lantern plan as it starts offering the no-cost option to members, Friedman says. “It’s a thing that you can shop for, if you have time to look at provider options.”
Later, he expects the plan to offer a similar benefit for infusions of high-cost drugs, cancer care, and heart care.
While Friedman expects a slow initial start to the program, it can eventually save the state and its members hundreds of millions of dollars. “We’re going to communicate the heck out of it,” he adds, noting that the state plans to spur interest through programs that share savings with providers.
Providers are attracted to the program because it pays a higher reimbursement rate than the federal Medicare and Medicais plans, and at a faster payment pace, Friedman says.
Lantern CEO John Zutter joined the company in 2016 when it became majority owned by Dundon Capital Partners. He had been a co-founding partner of the investment firm with Tom Dundon, the Dallas billionaire who owns the Carolina Hurricanes hockey team.
“We focus on building a network of the highest quality surgeons and connecting people to the right one, at an affordable price, so they get the best outcomes,” Zutter said in a release.
Under Zutter’s leadership, Lantern has grown from 100,000 members to more than 5 million, now serving hundreds of self-funded plan sponsors across 1000-employers, according to its website.
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.