North Carolina Treasurer Warns of Health Plan Insolvency, Has Plans for Reform

A December 2018 report by S&P Global suggests that the North Carolina state health plan will be in real jeopardy of insolvency by 2023 due to unfunded liabilities and rising medical and pharmaceutical costs.

“North Carolina’s other post-employment benefit (OPEB) liabilities as a combined funded ratio, are less than five percent funded. The November 28, 2018 report confirms previous research by the Pew Charitable Trusts which explains that the state’s unfunded retirement/health care costs as a share of personal income are one of the worst in the country, right behind Illinois,” State Treasurer Dale R. Folwell, CPA, announced in a press statement about S&P Global’s findings.

“Every man, woman, and child in the state would have to pay almost $3,200 each to cover our current promises of health care for state and local government retirees. We’re having to act because others haven’t,” Folwell said in the press statement.

Folwell has a plan to save the health plan and taxpayer money.

“We are approaching this like anything else and that’s ‘we attack problems, not people’, Folwell recently told Battleground State News. “Solving this is going to make a huge difference in the lives of the people who educate our kids, who protect us from criminals and pave our roads.”

“We are looking for more transparency, less cost, pushing the power away from us and into the hands of the state employees,” Folwell said.

Part of Folwell’s strategy will be to take advantage of the fact that North Carolina’s state employee health plan the largest single purchaser of healthcare in the state.

Treasurer Folwell also indicated they are looking at reference-based pricing. With reference-based pricing, an insurance provider network doesn’t negotiate covered services for a plan. Instead, an employer sets a fixed amount they want a plan to pay for health care services.

“It typically represents a cost of delivery,” Folwell said. “And we’re going to pay on average a 77% profit on top of that cost. You may say, ‘Gosh, that seems high’, but we have some providers who are charging us 800%.”

Folwell’s reference to 800% refers to some Medicare reimbursement rates for certain procedures. The proposed health plan changes could reduce the rates to care providers by an average of by 14%

The potential savings for taxpayers could be in the $300 million range and plan members could end up saving around $65 million a year.

“We spend over three billion dollars a year,” said Folwell. “We spend more money on the state health plan every year than gets appropriated to the entire university system or the entire justice and public safety system.”

Costs of many services and healthcare premiums in most states have increased since the introduction of the Affordable Healthcare Act also known as the ACA or Obamacare.

In mid-December 2018, Fort Worth U.S. District Judge Reed O’Connor ruled that the individual mandate of Obamacare was unconstitutional. The law, however, remains in place pending an appeals process.

North Carolina’s Attorney General Josh Stein isn’t waiting around. Stein joined around 16 other state attornies general in filing a notice of appeal in the Texas v. United States case.

During the first four years of Obamacare, Blue Cross and Blue Shield in North Carolina wanted rate increases of between 13.5% and 32.5%. Blue Cross claimed a loss of more than $450 million dollars on those plans in the first three years, yet in 2017 reported a $118 million profit on ACA/Obamacare policies.

Obamacare-tied premium hikes have had a ripple effect in other care areas. North Carolina’s health plan prescription and procedure costs under have annually increased five to nine percent.

Blue Cross Blue Shield is the provider for the North Carolina State employees health plan.

Folwell said that there are approximately 727,000 state employees enrolled in the plan.

“That’s about the same size as the domestic employment base of J.P. Morgan, Berkshire Hathaway and Amazon combined,” said Folwell.

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A.P. Dillon is the North Carolina Bureau Chief for The Tennesee Star and a reporter at Battleground State News. Follow A.P. Dillon on Twitter. Email Tips to [email protected].
Photo “Dale Folwell” by Dale Folwell. Background Photo “North Carolina Capital” by Chanilim714. CC BY-SA 3.0.








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