Bid to cut State Health Plan costs fails

Treasurer Dale Folwell said Thursday that the 727,000 participants in the state employee insurance health plan will still receive in-network hospital coverage next year through the current provider network offered through Blue Cross Blue Shield of North Carolina.

But they'll also have similar preferred benefits with providers who agreed to the new pricing model Folwell pushed for the past year for the State Health Plan, which his office oversees. Folwell said that model, which pegs payments to Medicare rates, would help create more transparency in expenses and could lead to significant cost savings.

Without retaining the current Blue Options network, plan members would have faced higher out-of-pocket costs at out-of-network hospitals. Folwell focused instead on what he called the five "courageous" hospitals and 28,000 other non-hospital medical providers that signed on for the "Clear Pricing Project."

"I could not be more proud of what the staff at the State Health Plan has accomplished," plan Executive Administrator Dee Jones said in a release. "We created a brand-new network of 28,000 providers from the ground up."

Hospital leaders and other critics had argued the pricing model reimbursements weren't enough and could lead to some medical service reductions, and that the model was a poor method to address increasing plan expenses.

The North Carolina Healthcare Association, which lobbies for hospitals and fought hard against Folwell's proposal, called Thursday's announcement a "positive step forward." In a news release, the association said it looked forward to working with Folwell and the General Assembly "to develop a stronger, sustainable, transparent future for the State Health Plan."

An outside group also ran a campaign against Folwell's pricing effort. In the current pricing process, Blue Cross negotiates what are considered confidential rate agreements with individual hospitals on behalf of the health plan. He said it leaves the state and taxpayers who help pay for the plan in the dark about the true costs of medical care.

"Transparent pricing would end decades of secret contracts and high costs causing (hospitals) to have to actually have to compete for customers like any other business does in a free-market society," said Folwell, a Republican elected in 2016.

The State Employees Association of North Carolina backed Folwell's pricing project. "We always recognized that this was going to be a long-term effort," Executive Director Robert Broome said in an interview.

Mark Jewell, president of the North Carolina Association of Educators, expressed relief Friday that the standoff was over.

"We are relieved that all State Health Plan participants will have access to quality, affordable health care next year and that our members will not have the prospect of their local hospital or doctor being out-of-network hanging over their heads as they prepare for the start of the upcoming school year," Jewell said in a statement. "It appears the combination of the Blue Options Network and the new North Carolina State Health Plan Network will give members sufficient choice and access for their health care needs."

Providers who agreed to the new model will ultimately be able to participate in alternate payment arrangements, Folwell's office said. That inducement could attract additional hospitals to the model in the future.