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Wednesday, July 17, 2024

Treasurer candidates Briner, Harris discuss State Health Plan woes

An administrative law judge’s ruling that Aetna can take over management of the N.C. State Health Plan got lots of publicity this week. But it’s a minor matter compared with the financial pressures facing the plan, which insures more than 740,000 state employees and retirees.

In April, state officials shared their projections that the plan would lose astounding amounts of money over the next three years: $323 million in fiscal 2025, $452 million in 2026 and $1 billion in 2027. They concluded that the plan’s cash balance would be a negative $829 million in mid-2027.

No free lunch here. Either more money has to be invested to pay the medical bills, or services for members have to be trimmed. It’s a public plan, so the money comes from North Carolina taxpayers.

The person with the main assignment to address this problem is the State Treasurer, which starting in January is likely to be either Republican Brad Briner, an investment manager, or Democratic candidate Wesley Harris, a Mecklenburg County state representative.

Brad Briner

Dale Folwell, who has had the job since 2017, is stepping down after his failed gubernatorial bid. He has pressed, mostly unsuccessfully, for state lawmakers to invest a few hundred million dollars to strengthen the plan. He’s also spent years criticizing hospital systems and drug companies for their pricing policies.

Harris and Briner need to get elected before they share really tough news on what must happen at the State Health Plan. But they offered some ideas this week.

Harris cited “legislative assistance,” namely more state funding and offering better pay and benefits to attract younger, healthier state employees. ”The problems are in no way unsolvable, but we have to have a commitment to investing in our state employees to make that happen,” he says.

State government job vacancies have exceeded 20% for several years because of inadequate compensation, notes Ardis Watkins, executive director of the State Employees Association of North Carolina, or SEANC. Many of the vacancies involve workers in the corrections and health care sectors, but Watkins says there are openings throughout state government.

Harris adds, “The only way to really lower total healthcare costs is to either create a more healthy society in general, or lower the risk profile of the plan.” He adds that the treasurer’s office can best influence that by focusing on “preventative care and making sure that those with insurance are utilizing their insurance for yearly check-ups.”

Wes Harris

Briner agrees on the latter point, noting that many private-sector insurance plans charge  higher premiums for people who don’t attend an annual physical. In 2019, Folwell introduced a program that provides premium incentives for plan members who stop smoking. In 2021, the state changed its policy that formerly awarded healthcare benefits for life for state employees after five years of service,

Briner says revising the state’s pharmacy-benefit manager contract with CVS could produce savings of more than $50 million a year starting in 2026. He’s also encouraged by the plan’s pilot program with Wilmington Health that could cap the state’s obligation at a set level per employee. “It’s going well and we’ve got to do more things like that,” he says. Meetings with stakeholders are also sparking ideas to improve the plan, he says.

SEANC has endorsed Harris in the general election, but it remains to be seen if they will invest as much this year as they did for Folwell. He received more than $500,000 in SEANC support in 2020.

Financial problems at the plan are mounting because of higher healthcare costs and the aging of state employees. Most healthcare spending involves older adults. Between 2008 and 2020, the plan reported only two unprofitable years, while the cash balance topped $1 billion from 2014 to 2020. But losses in the three of the past four years have shrunk the cash balance, with much bigger problems ahead unless changes are made.

Don’t discount this as just other example of ineffective government, Watkins says. She calls the state plan’s problems a “canary in the coal mine” situation that are also affecting many private-sector healthcare plans.

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at dmildenberg@businessnc.com.

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