Nine months of studies, audits, frantic lobbying efforts, and closed-door negotiations came to a head when the House and Senate quickly approved in April a temporary fix to the ailing state employees’ health plan. The compromise between House and Senate leaders dashed the hopes of reformers who wanted more sweeping changes, and state employees who wanted to hold down costs for plan members.
In addition, the plan will continue to be run by a special legislative committee rather than an agency of the executive branch, as some had wanted.
The compromise will raise employee co-pays, deductibles, and dependent premiums enough to keep it solvent for a while, but leaves big questions about the future financial health of the plan. Reformers wanted to change the fiscal year of the plan to match the calendar year; lower dependent premiums to attract younger, healthier people into the plan; and enact other measures to make the plan more financially stable. What they had to settle for was a provision calling for an independent audit and a Blue Ribbon Task Force to study the issues raised by the plan’s near failure.
Proposals to put the health plan under the executive branch were tabled or voted down as a bill to reform the plan (S.B. 287) moved through both chambers in March. Of the states that have government-run health plans for state employees, more than two dozen are administered by the executive branch, while most of the rest opt for control by an independent board of trustees. North Carolina’s plan is administered entirely by a joint House and Senate committee run by each chamber’s majority leader, currently Sen. Tony Rand, D-Cumberland, and Rep. Hugh Holliman, D-Davidson.
Critics say that arrangement has worked poorly. A report last year by former state auditor Les Merritt noted that the Select Committee on Employee Hospital and Medical Benefits, the committee charged with administering the plan, rarely met and that its members did not have access to important details about the plan’s finances. The report concluded that lax oversight by the committee contributed to the plan’s financial meltdown last year, and suggested that the executive branch was the proper place for the plan.
Rep. John Blust, R-Guilford, agrees. He’s filed a bill (H.B. 1302) that would put the plan under the governor’s Office of Management and Budget. “It’s an executive function to carry out the rules,” he said.
Blust notes that the state constitution grants the legislature the power to write laws and appropriate money, but it calls on the executive branch to carry out those laws and spend that money.
He points out that under our system of separation of powers, the legislature does not try to run programs in other fields such as corrections, transportation, and schools. “We don’t have a committee to run prisons,” he said as an example.
Rand has argued that he does not think the plan’s current form of governance raises any constitutional concerns. He had previously deflected attempts to move the plan out of his committee’s control and into the executive branch, but has recently signaled more openness to the idea.
The plan’s financial difficulties go back to the end of last year’s legislative session. Legislative leaders found out in July that the plan was going broke, but chose to adjourn for the year without implementing any changes other than to replace the executive director.
The new executive director, Dr. Jack Walker, spent the rest of the summer and fall figuring out what went wrong and devising a plan to fix it. By the time the General Assembly convened anew in late January, legislative leaders had a bill to overhaul the plan drafted, but it took nearly three months to get it through both chambers, in part due to fierce lobbying efforts by pharmacists, state employees, teachers, and others.
While the bill was being debated on the House floor, Blust proposed an amendment that would move the plan into the executive branch. His proposal was immediately attacked by House Majority Leader Holliman, calling the amendment a “knee-jerk reaction” to the plan’s fiscal woes.
Other House Democrats followed suit. Rep. Dan Blue, D-Wake, pointed out that the bill already had a provision calling for a study of the plan’s management and urged the House to wait “for an ultimate decision from the experts.”
Although several Republican legislators spoke in favor of Blust’s amendment, it was defeated, and the House passed the bill without it. However, the House passed several other amendments that did not sit well with the Senate, necessitating its referral to a conference committee of both chambers to work out a compromise. Both chambers agreed to the compromise version April 21, mere hours after the conference committee had finished its work.
Giving up control of the plan to the executive branch might have been a hard pill for legislative leaders to swallow. The health care and insurance industries have a huge stake in the management of the state’s health plan, and those industries have been a consistently reliable source of campaign contributions for key legislators of both parties, Rand in particular.
It’s neither illegal nor unusual for companies in industries that are heavily regulated by state government to donate through political action committees to politicians who write the regulations. Blue Cross and Blue Shield of North Carolina, the company which currently administers the state health plan, has been a particularly generous donor.
An analysis by Democracy North Carolina, a nonpartisan group which advocates for public financing of political campaigns, shows that PACs associated with Blue Cross and Blue Shield donated $643,000 during election cycles from 2000 to 2008. Executives of Blue Cross and Blue Shield made personal donations totaling $117,000 during that same time frame.
The top recipient of these donations was Rand, who pulled down $36,000 from the Blue Cross and Blue Shield PAC, and another $7,850 from Blue Cross executives. For the 2008 election cycle, Rand raised just over a half-million dollars, with $106,000 of that — about 20 percent — coming from the health and insurance sectors.
Even so, during the conference committee negotiations Rand offered to move the plan to the executive branch. House conferees declined the offer. On their recommendation the conferees opted to wait for the report of the Blue Ribbon Task Force before deciding the plan’s ultimate fate.
Jim Stegall is a contributor to Carolina Journal.