State health plan needs bailout, premium increase

Raleigh, N.C. — A $300 million taxpayer bailout is needed to rescue the financially troubled state employee health insurance plan, and the plan's director said Tuesday that state workers will need to absorb higher premiums to keep the plan solvent in the coming years.

Projections of a $50 million surplus in the plan last summer quickly morphed into a $65 million deficit that has continued to balloon in recent months.

"I think we're reaching a very critical point," said Jack Walker, a former health plan director who was rehired to oversee the plan last summer after the financial crisis prompted the firing of director George Stokes.

The State Health Plan provides medical insurance for almost 650,000 state workers, public school teachers and retirees. It also administers N.C. Health Choice, which covers 122,000 uninsured children statewide.

Alarming actuarial data about underestimated patient care surfaced in the first two months of 2008, but lawmakers weren't informed of the growing shortfall until June.

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Financial troubles grow at state health plan

WRAL obtained e-mails between Stokes and a consultant that said "the numbers are not good" and that they "kept going south." It was unclear when the e-mails were sent.

"I don't want to get into questioning personalities, but there were forecasting errors made," Walker said. "I would have been very concerned, and I would have raised the flag."

A state audit issued in October called for more oversight of the health plan by an executive branch agency instead of the current combination of a legislative committee and a board of trustees. Walker said more legislative oversight of the plan is needed.

The plan needs an immediate $300 million bailout in this year's state budget, he said. Dependent coverage could go up 30 percent, or higher costs could spread to all co-payments and deductibles to keep the plan on firm financial footing in the coming years, he said.

Overall, the plan will need an extra $1.2 billion by 2011, he said.

Lawmakers last summer suggested raising co-pays to cover part of the health plan's deficit, but they quickly backed off the idea under intense lobbying from state workers and teachers.

"Everyone should give something up, not just (state) employees," Dana Cope, executive director of the State Employees Association of North Carolina, said Tuesday.

Walker said he believes premiums paid by state workers should have increased two years ago.

Cope said the profitable Blue Cross Blue Shield of North Carolina, the state's largest insurer, and the state need to share in the pain of rescuing the health plan.

Correctional officer Wendell Powell, who earns less than $30,000 a year, said paying more for health insurance will crimp his wallet this year, especially since it's unlikely he and other state workers will get a raise in a tight budget.

"It would really hurt. It would be devastating to my family's economy," Powell said. "You're telling me you're going to raise my premiums? You're going to raise my health care (costs)? It's like you can't win."