At a meeting on Friday, the North Carolina State Health Plan Board of Trustees discussed potential solutions to address the plan’s projected deficit—$507 million in 2026 and between $800 million and $900 million in 2027. One proposal included raising monthly premiums for state employees by an average of $30. However, not everyone supported the idea.

The board discussed how the Plan reached this financial situation and explored various strategies to close the funding gap faced by the State Health Plan (SHP). It was emphasized that a vote on premium increases would not take place until August.

Employee premiums and benefits have not been adjusted for seven years despite rising healthcare costs, SHP officials noted, explaining how the Plan reached the point of an impending shortfall. Contributions from the North Carolina General Assembly average about 3.3%. Medical costs and pharmacy costs have been going up significantly and funding from reserves have been used to plug the gap instead of an increase in employee contribution or change in plan design.

Problems pointed out with the Clear Pricing Project include:

  • Increased reimbursement rates for specific services (ex. primary care, behavioral health, therapy) combined with reduced copays led to significant Plan costs.
  • The cost was originally estimated to be $100 million for the initial two years, with no ongoing cost. However, the actual cost has significantly increased above zero.

Officials noted that while reviewing the Clear Pricing Project and emphasizing pricing transparency and unit costs, not enough attention has been given to improving plan members’ health. They want to refocus on this aspect, as better health outcomes could help reduce costs.

They concluded that if a 2% annual premium increase had been implemented in 2017, it could have prevented the projected 2026 budget shortfall. Aligning premium adjustments with state employee salary growth, they say, could have resulted in $165 million in reserves above the required minimum cash balance, softening future premium increases.

An average increase of $30 per month in premiums would generate about $100 million. However, they did stress they would like to keep the increase to $20 per month for the lowest paid employees to as much as $50 per month for those making over $100,000.

An unidentified woman who spoke during the public comment period asked why SHP officials couldn’t negotiate new pricing with their vendors instead of asking employees to foot the bill. She said the members are hurting right now with rising prices for everything else and a rise in premiums cannot be justified.

“North Carolina is number one in the country for the cost of healthcare,” she said. “We all know that that means we’re number one in the world because our nation is the costliest place for healthcare in this world. You have a responsibility not just to state employees but to every taxpayer in this state and in this nation that we are the worst around.”

Tamika Walker Kelly, President of the North Carolina Association of Educators and the State Public School Employees Union, also opposed any proposed premium increase.

“I know that if teachers and school employees are asked to pay more for health care and taking more out of their already meager compensation then we will lose more teachers and more staff out of our classrooms,” she said.  “The percentage of how much they pay cannot be independent of this flat salary that our educators have been experiencing for more than a decade. We won’t be able to reach more students.”

Walker Kelly said it would exacerbate what she called a crisis in the state’s public schools.

“Our crisis was created by state lawmakers who have failed to provide salaries that meet the rising cost that we are all dealing with, and therefore I say it is the state lawmakers who should pay to close the healthcare gap, not our school employees, and it’s not just about saving teachers some money, but it’s really about the students who come into our school buildings every single day,” she stated. “Today I would like to give you an invitation. We call on all of you who are present here today to join us in advocating for increased pay rather than making it harder and more challenging for educators to access quality healthcare for themselves and for their families.”

The State Health Plan Board will meet again next much for a more in-depth discussion on possible premium increases.