State employees are no longer in immediate danger of paying out-of-network costs for their health care, but they may confront higher premiums and higher taxes later.
State Treasurer Dale Folwell’s Clear Pricing Project has folded, and its proposed reforms won’t touch hospitals. But the fiscal future of the State Health Plan is unclear.
Without the CPP, the plan remains at significant risk of overpaying providers, according to the state auditor. The system is so opaque that Folwell once said he “didn’t have a clue … what the hell we were spending this money on.”
The State Health Plan faces some $35 billion in unfunded liabilities. Without changes, it’s due to go broke within four years.
Hospitals fought the CPP, warning the plan’s reimbursement levels would cost them millions and hurt their quality of care.
Before the State Health Plan allowed hospitals to maintain the status quo, state employees wondered what their health insurance would actually cover, and at what out-of-pocket cost, when the new year rolled around. As the major hospital systems remained out of network, patients worried about getting their medications and paying for hospital visits.
“They just about have a monopoly in Goldsboro,” state employee at Cherry Hospital Kathy Merritt said the day before the new plan was announced. “I don’t know what I would do if they go out of network. It would be terrible for me. I have health issues, and I really don’t know what I would do or where I would go. … I’m worried I won’t be able to afford to go to the doctor.”
Folwell allowed the hospitals to operate under their previous Blue Cross Blue Shield contracts rather than under the CPP, so these immediate concerns evaporated.
The treasurer’s office says it has three “levers” to keep the plan solvent. The first was the CPP, which aimed to cut costs by requiring health providers to show patients what they charged for services. But with the CPP scuttled, it can either raise premiums or raise taxes.
“In the short term, premiums might have to increase because of the yearly shortfall, and in the long term, this just adds to the massive unfunded liability that they have,” says Jordan Roberts, John Locke Foundation health care policy analyst. “It’s never good to operate a plan of this size with that type of insolvency.”
Both Latina Shelley and her husband are state employees. Working at the Walter B. Jones Alcohol and Drug Abuse Treatment Center in Greenville, Latina makes $42,000. She estimates she and her husband together make $70,000.
She already buys her 10-year-old daughter’s health insurance directly from Blue Cross Blue Shield, as it was cheaper than adding her to the State Health Plan.
“If premiums rise, that will be a problem for us. We don’t make that much. We’re blessed, but that’s a big jump,” Shelley said. “When I started working for the state, almost 16 years ago, there was no premium.”
The State Employees Association of N.C. has expressed disappointment with the latest development, but not surprise.
“I think it’s a mixed bag. With 28,000 providers signed onto the CPP, that is good news for taxpayers and state employees,” SEANC Executive Director Robert Broome said. “Those providers have embraced transparency, and we hope that more providers will continue to sign on.”
These latest developments could hamper the State Health Plan’s ability to control spending. Under the CPP, Folwell agreed to pay providers almost twice the rate of Medicare payments, but he will be unable to balance those increased rates by cutting the plan’s spending to hospital systems, Roberts said.
“Basically they are projecting that the plan won’t be able to cover all of its commitments,” Roberts said. “If you’re a state employee, your benefits may eventually be in jeopardy if they can’t pay for everything. If they have these liabilities and yearly deficits, there’s a chance benefits will have to be scaled back.”
Folwell and SEANC are looking to alternatives in tackling the exploding cost of health care. Folwell said he would use bundles to lock down some clearer prices, while cutting the cost of pharmaceuticals.
SEANC looks to other reforms, namely ones that weaken the power of hospitals. It has spent the past year blasting nonprofit hospitals as “tax-exempt corporations,” and it highlights Certificate of Need reform as a way to dissolve a chokehold on new health care facilities.
“SEANC is not giving up this fight, and we recognize that some laws governing hospitals need to change,” Broome said. “I don’t believe that there is a silver bullet, but we need wholesale reform of the system, that could include CON reform, prohibitions on balanced billing, and changes that would bring more transparency to health care costs so that consumers can make more informed decisions.”
Hospitals say they are relieved that the CPP’s proposed cuts won’t take hold, for now.
“Atrium Health is pleased that North Carolina state employees can rest easier, knowing they will be able to maintain the relationships with the doctors and care providers they trust, while also having the access to high-quality care close to home they deserve,” Atrium Health said in a statement. “We will continue to look for ways to collaborate and find reasonable and cost-conscious solutions that benefit all residents of North Carolina and beyond.”