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Auditor: State Health Plan needs more oversight

Posted October 15, 2008

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— State Auditor Les Merritt on Wednesday called for oversight of the state employee health insurance plan to be moved from a legislative committee to an executive branch agency.

The State Health plan experienced a financial meltdown in recent months, going from projections of a $50 million surplus to a $65 million shortfall. Analysts have projected a $250 million deficit within a year.

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

“In a majority of states, the legislative branch creates the health plan, and the executive branch provides the day-to-day oversight," Merritt said in a statement. "Their system avoids the pitfalls of separation of powers issues and potential conflicts of interest between health care providers and legislators."

Thirty-five states operate their state health plan under an executive branch agency, while 13 operate their health plan under boards of trustees, according to an audit Merritt's office conducted after the financial problems surfaced with the North Carolina plan. A second audit being done on the plan focuses on the financial causes of its growing deficit.

The primary authority over North Carolina’s health plan is a legislative body – the legislative Committee on Employee Hospital and Medical Benefits. The plan’s Board of Trustees provides some oversight but operates in an advisory role.

The committee’s influence over the plan’s management could violate the state constitution’s separation of powers clause, and it creates the potential for undue political influence in the plan’s administrative decisions and contract negotiations and the opportunity for conflicts of interest, according to the audit.

The audit noted the same shortcomings were identified in a 1994 audit, but that no changes were made.

“There is clearly a problem when the health plan is running a deficit and facing tough economic times ahead," Merritt said. "North Carolina’s teachers and state employees need to know that the health plan that they’re paying for is being properly managed and will be there when they need it."

Jack Walker, executive director of the State Health Plan, declined to comment about the audit's findings in his formal response. In a two-sentence response, he wrote that neither he nor his staff had any questions or comments.

9 Comments

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  • wdkanesfan Oct 15, 2008

    The real problem is that for many years, some State Employees could work as little as 4 years and have health insurance until death. Many former state employees (Legislators etc.) took advantage in that, and are still on the health plan today. Many people don't realize that is where the expense of the plan is the greatest....state employees continue with full coverage when they retire with full benefits. Surely there is cheaper or more affordable insurance available, but how many will give benefits until death? The former Health plan director (Mr. Stokes) was doing a great job of enhancing the Health Plan, and the wellness benefit would have reduced costs. Now, Mr. Walker is back in control of the plan. State employees will see reduced benefits, increased costs, and the pharmacuetical companies will be smiling all the way to the bank.

  • SS67 Oct 15, 2008

    So who's fault is this? And why would the State Employees (Teachers also) have to bare the burden because they didn't listen to recomendations in 1994? There needs to be an investigation of the legislators involved.

  • hallmark Oct 15, 2008

    One of the problems with the State Health Plan is that they do not have a separate rating structure for the retirees. The State Health Plan lumps current employees and retirees in the same bucket which can cause rates to soar. If the State really wanted to be cost efficient, it would have chosen an HMO plan instead of the PPO. Folks are getting costly and unnecessary procedures and medicines because there is no oversight and too many benefits that most private employers would not cover. I agree that the Legislature should be removed from overseeing the health plan.

  • cem2523 Oct 15, 2008

    To understand where the financial shortage is on the State Health Plan, all you have to do is look at the financial projections / budget and actual figures on their website. LOTS of useful info on their website.......

  • TheBullCity Oct 15, 2008

    It baffles me b/c the new state health plan both better than the old one and cheaper. Does not compute. Why am I not surprised that they are now in the hole.

  • 4family Oct 15, 2008

    Bev Purdue will not get our vote just as our Governor now didn't get our vote.

  • Beachnut Oct 15, 2008

    More evidence that the State of NC is incapable of running anything efficiently. DOT, State mental health hosptitals, now this... Of course, I'm sure state employees are expected to support Bev Purdue for Govenor, so they should expect more of the same inept leadership.

  • G-man Oct 15, 2008

    It is pretty bad when an individual can purchase better healthcare coverage at cheaper rates than the state can.

  • 4family Oct 15, 2008

    Our health insurance didn't go up this year but I bet next year it will go up alot. We already pay $500 a month for health and $100 a month for dental. I see some state employees having to soon drop their family coverage. Whoever said the State had good benefits must have been talking about 50 years ago. I guess if you are single they are ok but they suck if you have a family (insurance wise).