Thousands of former North Carolina state employees and their dependents who are on the Medicare Advantage base plan will see an increase in their healthcare premiums in 2025.

The North Carolina State Health Plan Board of Trustees voted on Thursday to increase monthly premiums for 4,200 not fully vested retirees and 22,000 dependents from $0 to $33 starting on January 1. Another 160,000 retired members will not see any increase, nor will active employees.

They also agreed to increase the retirement system contribution.

The SHP staff recommended the changes to premiums and contribution rates in order to maintain adequate reserves. The board stressed that this does not increase funding beyond 2025. The SHP has a total membership of 750,000.

The move was not unexpected.

Last week, North Carolina State Treasurer Dale Folwell said the zero monthly premium for health plan members for the Medicare Advantage plan, along with the $4 a month premium for dependents with no cost to the taxpayers, would be going away.  

Several years ago, Folwell said, the State Health Plan was able to negotiate those costs and was hoping to get two more years of extensions on the Medicare Advantage product, but they have been unable to successfully renegotiate that based on a small change in federal law.

In 2022, the Inflation Reduction Act instituted a benefit redesign for Medicare Part D (Rx) coverage effective in 2025. It allows DHHS (Federal) to negotiate prices directly with Rx manufacturers, set a member Out-of-Pocket (OOP) Maximum for Rx of $2,000, and increased insurer payments for claims above OOP Max. Increased costs to insurers are being passed through as premiums for coverage.

According to Folwell, the change gave Humana, the company holding the Medicare Advantage contract, a loophole, allowing them to truncate the fifth year of the contract, which featured $0 premiums and $0 cost to the taxpayers.

Along with the increase in Medicare Advantage premiums, the board listed the following reasons that necessitated the increase:

  • FY 2023-25 State Budget funded the SHP by $240 million less than requested.
  • The Plan’s funding request did not anticipate the full impact of the explosive growth in spending related to GLP-1 weight-loss medications (Wegovy, Ozempic)
  • The board’s recent actions to exclude coverage for these medications significantly improved projections but did not fully resolve the funding shortfall.
  • The Plan incurred $313 million in unreimbursed COVID costs.

Ending coverage for the weight loss drugs on April 1 reduced the shortfall for the SHP to $89 million. But, the Medicare Advantage premium increase contributed an additional $66 million that was needed, bringing the total deficit to $155 million.

The board voted to withdraw $155 million from the Retiree Health Benefit Trust Fund.

The changes will bring the projected cash balance at the end of calendar year 2025 to just above the target stabilization reserve, which is the amount needed in reserve.

Folwell told reporters on a call last Tuesday that during his tenure as “the keeper of the public purse,” the SHP has worked to lower healthcare costs, which would reduce the trend of unfunded healthcare liabilities and try to build up its reserve funding for its unfunded healthcare liability, which was 2% funded when he took over, and now is about 10% funded.

Editor’s Note: This story has been updated to reflect a correction in the headline.