Health plan flap could spark back-to-the-future moment

Lawmakers unhappy with a recent flap over North Carolina's State Health Plan say the episode may prompt them to take a more active oversight role. It wasn't that long ago that they created an appointed board to handle the plan's governance.

Posted 10:00 p.m. Feb 4, 2016 — Updated 10:00 p.m. Feb 4, 2016

Mark Binker

RALEIGH, N.C. — Five years after creating an appointed board to take the politics out of governing the State Health Plan, North Carolina lawmakers of both parties say they're right back in the fray as they field a deluge of calls and emails from those unhappy with proposed plan changes.

"Somebody I've know for a hundred years called me in tears," Sen. Ralph Hise, R-Mitchell, said Thursday.

State employees, teachers and retirees have been reacting to news that the plan's board has considered eliminating an "80/20" plan that currently serves 280,000 of the plan's 691,000 members and discussed eliminating coverage for spouses, effective 2018. A spokesman for the health plan announced Wednesday that the board would postpone consideration of the more drastic changes but will meet Friday at 3 p.m. to discuss raising premiums and deductibles members will pay starting in 2017.

Worker representatives note those big changes are not off the table, merely shelved for the moment. While the pending changes for 2017 are far less sweeping, they're still of concern to state workers who say that their health costs are going up but their salaries are not.

"The North Carolina General Assembly and the State Health Plan Board of Trustees are planning major changes to the State Health Plan that would preserve the profits of the large health insurance companies while taking money out of the workers' pockets," said Larsene Taylor, a health technician at Cherry Hospital in Goldsboro and a member of U.E. Local 150, which has about 2,000 members throughout state government.

It's possible that the health plan could roll out a different set of cost adjustments when it meets on Friday, but employee groups say they expect that participants in the plan will be asked to bear a greater share of the costs.

"The state budget should not be balanced on the backs of educators and other state employees," said Rodney Ellis, president of the North Carolina Association of Educators.

The plan's staff and trustees have said they are reacting to a demand by lawmakers to find cost savings and to sock money away into a reserve account. Lawmakers, in turn, say they're taking a lot of calls from people who don't understand that an appointed board runs the plan.

"We're getting a lot of people saying the General Assembly is getting ready to vote on Friday," Hise said with a chuckle, noting that lawmakers would not be back in session until April 25.

Changes sought by employee groups

Until 2011, a legislative committee made up of top lawmakers set policy for the health plan, including signing off on what sorts of coverage would be offered.

"Way back in the day, the State Health Plan was almost an ATM for politicians," said Ardis Watkins, the government affairs director for the State Employees Association of North Carolina, the largest state employees organization in the state. "Benefits were eroding, and the costs were rising."

During the 2011 legislative session, shifting the plan to an appointed board was a top priority for SEANC. Since then, Watkins said, that decision has generally worked out. The plan has gone from a entity perennially running budget deficits to one that has stayed within budget.

That said, the plan's Board of Trustees relies on lawmakers to subsidize coverage for workers. According to the health plan, taxpayers put $2.5 billion into the plan for fiscal year that ended last June. While health plan executives say they're are responding to directions contained in legislation, Watkins said lawmakers were far from specific when they asked for cuts.

"We have an issue with that because we now have the (board of trustees) blaming the General Assembly, and the General Assembly saying, 'It's not our fault.' We would like to get to the bottom of that," Watkins said.

Lawmakers acknowledge they told the health plan to save money. But Republicans and Democrats alike said they were taken by surprise by the proposed long-term changes when they started to be deluged by calls and emails from many plan members. In particular, eliminating the 80/20 plan, which many view as the best value among the three current offerings, has drawn scrutiny from lawmakers.

"It's an absolutely ridiculous proposal," said Rep. Jason Saine, R-Lincoln. "Hopefully, we've put it to bed."

Taking a more active role?

Statements from the State Health Plan have said only that the discussion is "delayed until a later date," not shelved entirely.

Asked what would happen if the health plan continues to push toward eliminating the 80/20 plan, Saine said, "I think the legislature would have to act."

Asked about assertions by health plan leaders that it was lawmakers who directed them to save money, he said, "I could cut off the power to my house in order to save money. That's not a solution."

Health plan officials did not comment on the potential for lawmakers to make governance changes. Spokesman Brad Young referred to a prepared statement from earlier in the week which read, in part, "The State Health Plan and its Board of Trustees looks forward to working with the General Assembly on a solution that will maintain the financial stability of the State Health Plan while providing meaningful benefits to teachers and state employees."

Rep. Gary Pendleton, R-Wake, who works with corporate health insurance plans for a living, called the elimination of coverage for spouses "Draconian" and agreed with Saine that the type of sweeping changes recently discussed could cause lawmakers to take a more active role in overseeing the health plan.

Pendleton added that the health plan should keep a bare-bones option that would levy no premium for an individual employee, calling that notion "a compromise" between the drive to cut costs and the need to offer attractive benefits to state workers.

"When you compare state employees' benefits to the private sector, it's not even competitive," he said.

For his part, Hise said lawmakers "could take a strong look at" changing how the health plan is managed if the board moves in a direction they view as problematic. He added that benefit changes wouldn't be the only reason to consider more scrutiny.

Hise said that his office was getting complaints about the health plan before this latest fracas. He pointed to a recent issue that saw many members who had never smoked be listed as smokers for purposes of their coverage, which raised their costs. He said that he also has concerns about the plan's financial stability.

For her part, Watkins said it's not the governance of the plan than needs to change but its willingness to lower the rates paid to hospitals and other providers. The state, she said, is overpaying when compared with either the private insurance market or Medicare. SEANC insists that, at a minimum, the health plan could save $250 million a year, money that Watkins said could be a "game changer."

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