Potential Premium Increases for North Carolina’s State Health Plan

Hundreds of thousands of residents insured by North Carolina’s state health plan might face another rise in health insurance premiums next year.

A board meeting is scheduled for Friday where directors will discuss and vote on new premium rates, alterations to benefits like deductibles, and a fresh system that might reduce out-of-pocket expenses at certain hospitals and clinics while increasing them at others, as outlined in the meeting agenda. If the changes are approved, they will take effect in 2027.

This health plan currently covers over 750,000 state employees, retirees, and their families.

At a state executive leadership meeting on Tuesday, State Treasurer Brad Briner suggested that new premium hikes are likely. He pointed to the existing health insurance deficit and the premium increases that took effect earlier this year as measures to mitigate that deficit. Although many state employees have expressed their dissatisfaction with higher premiums, Briner stressed that the increases are necessary.

“A year and a half ago, this program was nearly bankrupt, and we made some unpopular choices to improve its standing for 2026,” he shared with lawmakers. “We must continue to improve for 2027 and beyond. So, Friday’s meeting is critical for that.”

Last month, the board voted to raise deductibles and drug copays for retirees on the Medicare Advantage plan.

This upcoming vote will concentrate on the Standard and Plus plans for active employees.

Aldis Watkins, head of the North Carolina State Employees Association, noted that many state workers did not receive raises in the last fiscal year when insurance premiums increased, and most will see only a 3% raise when the new fiscal year starts on July 1.

“A 3% raise won’t cover the inflation we’ve experienced, let alone the increases from last year,” Watkins explained to the Health Planning Commission before Friday’s vote. “We expect these costs to keep rising this year… It just doesn’t feel right.”

Another part of Friday’s discussion may involve new contracts with healthcare providers in a strategy aimed at cutting costs, already implemented in some surgical contexts. This could soon be expanded statewide, with some companies labeled as “preferred” providers. In return for lower rates, state health plans would direct patients to select hospitals and clinics.

However, for this plan to work effectively, changes in providers might be necessary. The state can categorize some healthcare providers as non-recommended, which would result in additional fees for those who wish to continue receiving services from them.

Briner stated that finalizing these details could significantly reduce out-of-pocket maximums for individuals who use only “preferred” providers, potentially lowering costs to levels not seen in 15 years, even amidst rising inflation.

“If you switch to a preferred provider, you could lower your out-of-pocket expenses by over a third,” Briner noted. “Achieving this would bring healthcare costs back to what they were in 2012, which is progress considering the circumstances we’ve faced.”

While groups like SEANC are against the proposed premium increases, Briner mentioned that any hikes would be largely offset by decreased out-of-pocket costs resembling those from 2012.

“Once members choose a preferred provider, their out-of-pocket costs will drop to those 2012 levels,” he indicated. “This equals substantial savings for average members, which is far more relevant than any monthly premium increase of a few dollars.”

Friday’s agenda may also address a potential change in the insurance company managing the health plan and its pharmacy plan starting in 2028.

This year, the board made the decision to move away from Blue Cross & Blue Shield to Aetna after four decades, a transition that has sparked public disputes from State Treasurer Dale Falwell over cost transparency. The accounting firm supervises the health plan, but Falwell is currently out of office, with fellow Republican Briner set to step in during the 2024 elections.

Though the decision to shift to Aetna was controversial and led to a legal clash, Aetna was ultimately awarded a multi-billion dollar contract. However, indications earlier this year suggested that Briner might not fully endorse the evaluation process from 2023 that had scored Aetna higher than BCBS.

“This administration has different priorities and prefers contracts that reflect those priorities,” a representative for Briner stated. Meanwhile, a spokesperson for Aetna’s parent company, CVS, reassured that Aetna was committed to improving the overall health and well-being of the state health plan despite this significant change after so many years.