Higher premiums coming: NC State Health Plan to undergo major overhaul in 2026

North Carolina’s state health plan is poised for a major overhaul Friday, leading to higher premiums and out-of-pocket costs for most of the plan’s 750,000 members.

The State Health Plan covers teachers, state employees and retirees, and many local government employees and retirees. Advocates that represent those groups say they’re disappointed in the increases.

It’s been in dire financial straits for some time. It was projected to run out of money in 2026 unless changes are made, with a $500 million shortfall next year and a $1.4 billion deficit in 2027.

Big changes will be made Friday, however, when the health plan’s board of trustees is planning to vote on raising premiums as well as making other tweaks to what people on the plan pay. Premium increases will depend on people’s salaries but in general could range from as little as $10 extra a month, to as high as $110 extra per month.

The State Health Plan is overseen by the state treasurer’s office. Former Treasurer Dale Folwell had policies for years not to raise premiums on most members.

But rising health care costs driven in large part by an aging population and spiking prescription drug prices have made that untenable. New Treasurer Brad Briner has backed the changes to raise premiums, which will also be accompanied by efforts to bring new benefits to state workers as well — such as a proposal that could result in many surgeries done at no cost.

Executive director Tom Friedman says the changes will keep the plan solvent through 2028. He said they've been discussing most of these changes for months now, so he doesn't expect board members will find any surprises.

“In the past eight years, the state health plan has been spending more money than it was taking in,” Friedman said. “The previous treasurer came in with significant reserves. Those reserves are gone. So, as health care costs continue to increase, without reserves, we had to make pretty significant changes to make sure that we were solvent.”

For the first time, plan premiums will be on a sliding scale, so workers who make the least will have the smallest increases. The changes will also reduce the cost of enrolling children for workers at the lower end of the income bracket.

The median salary for a worker on the plan is a little less than $65,000. That’s at the center of the four newly created brackets: Under $50,000; $50,001 to $65,000; $65,001 to $90,000; and $90,001 and over.

For those in the bottom bracket, their monthly premium increase will be either $10 or $16 for a single subscriber, depending on whether they’re in the base or enhanced plan. But a single subscriber in the top income tier will see their premium rise by $30 or $110 per month.

Retirees in the enhanced plan will also see their premiums rise by $16 per month. Those in the base plan will continue to have a $0 premium.

While the premium increases are salary-based, the increases in deductibles and out-of-pocket costs will be across the board.

The annual deductible will double for those on the base plan, from $1,500 to $3,000. The co-pays for emergency room visits or in-hospital stays will nearly double. And co-pays for the most commonly used prescription drugs will rise substantially.

Friedman told reporters Thursday that there are some bright spots in the changes. For example, the cost to add children to insurance will actually decrease, for some lower-paid state workers.. Complex imaging for breast cancer screening will now be fully covered.

There will also no longer be a required attestation and higher rates for tobacco users. He said the surcharge made the plan less competitive for those members.

“I think the utility of the tobacco attestation has run its course,” Friedman said. “With premiums going up so much, we wanted to eliminate that barrier and remove that additional cost.”

Friedman said the increases would have been even worse if state lawmakers hadn’t set aside $150 million in their stopgap spending plan to subsidize employee and retiree health care.

“Had we not gotten that funding, premiums would have been about $100 higher per member per month, and that’s on top of what we're already talking about now. So we are exceedingly grateful,” Friedman said. “I think it's a reflection of the value they put on teachers and state employees that they made sure this came through.”

However, the NC Association of Educators and State Employees’ Association of NC say they don’t feel valued.

"The legislature still hasn’t passed a budget,” said NCAE president Tamika Walker-Kelly. That means no raises. No cost-of-living adjustment. Nothing. If the State Health Plan raises premiums, it will result in a pay cut for public school educators.”

“They're not necessary. Everyone keeps saying they're necessary,” said SEANC executive director Ardis Watkins. “They're only necessary and the only thing to do, because the other things they could have done, which is to stop overpaying hospital systems – that's been neglected and kicked down the road and it's just too politically volatile for people to address.

“So state employees and retirees are the easy path to take money from rather than negotiating fair contracts,” Watkins said.