RALEIGH—The state’s treasurer is intervening to relieve a supposed $35 billion in unfunded liabilities for the state.
As the insurer’s largest customer, State Treasurer Dale Folwell has directed Blue Cross and Blue Shield North Carolina to negotiate a 15 percent decrease in all of the insurer’s major contracts with medical providers this year.
“$35 billion, that’s almost two times the size of one year’s state budget,” Folwell said. “The State Health Plan, including pharmaceuticals, is going to spend more money this year than is appropriated to the entire university system.”
The State Health Plan provides medical benefits to North Carolina’s teachers, state employees, non-Medicare retirees, and their dependents. Last year, the plan covered over 550,000 people and cost the Department $2.5 billion.
Since 1997, per-person health care expenditures in North Carolina have increased by 2.6 percent annually, above general inflation
This “unsustainable situation” has been created by a promise to state retirees, matched with inflating health care costs.
“We are unsustainable because promises made to state retirees that they would be eligible for their entire life,” Folwell said. “No money has ever been put aside for that purpose.”
The Department of State Treasurer, through the State Health Plan, is Blue Cross and Blue Shield North Carolina’s largest customer. Both Folwell and Frank Lester, spokesman for the department, could not recall the last time the department had actively intervened to battle inflated health care costs.
Since 1997, per-person health care expenditures in North Carolina have increased by 2.6 percent annually, above general inflation according to a 2018 NC Medical Journal report.
“Healthcare, even after you consume it, you don’t know the value of what you’ve got,” Folwell said. “The largest purchaser of something should be able to do it better and more efficiently on behalf of the people on this plan and taxpayers like them.”
In a statement provided by Blue Cross and Blue Shield spokesperson Austin Vevurka, the medical insurance provider is in agreeance with the treasurer’s concerns of rising health care costs.
“We share Treasurer Folwell’s concern about the cost issue and hope that health care providers will partner with us to make health care affordable for all consumers, not just the State Health Plan,” Vevurka wrote. “As we do so, we should not increase costs on others to offset any potential savings within the State Health Plan.”
As Blue Cross and Blue Shield renegotiates its contracts with hospital groups and medical providers this year at a 15 percent discount, there is no guarantee that private providers will compromise.
“The negative is that that particular provider could become an out-of-network medical provider,” Folwell said.
Savings generated from the decreased rate will be designated for lowering family premiums to attract a younger generation of medically insured, and to set aside funding for eligible retirees.
Johanna Ferebee can be reached at firstname.lastname@example.org or @j__ferebee on Twitter