Health insurance premiums would rise for many of the N.C. State Health Plan's 750,000 subscribers under a proposal its Board of Trustees is poised to consider Friday.
The premium changes would take effect in 2026. They are the final step in months of efforts by N.C. State Treasurer Brad Briner and State Health Plan administrators to bring it back onto even financial footing.
Under former State Treasurer Dale Folwell, the State Health Plan had avoided increasing premiums for years by spending down reserves. Now, Health Plan administrators say, those reserves are depleted and major changes are necessary.
"At its simplest level, the past eight years the State Health Plan has been spending more money than it was taking in. 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 we were solvent," Tom Friedman, the State Health Plan's executive administrator, told reporters Thursday.
Adjusting premiums is the final step in a series of measures that already included a May vote tweaking available benefits to increase deductibles and out-of-pocket maximums under the Health Plan's two offerings, as well as requesting additional funding from the General Assembly.
With all of those changes on the verge of being complete, Friedman said, the Health Plan has gone from facing a $500 million deficit in 2026 and $1.4 billion deficit in 2027 to solid financial footing through 2028.
The State Health Plan offers insurance to state employees, teachers and retirees, as well as their dependents.
Different premiums for different pay
A key change in the proposed premiums is different monthly payments for employees depending on their wages, with people who earn less paying lower premiums. Under the existing plan, everyone pays the same premium for the same coverage.
The least significant increases are proposed for employees who earn less than $50,000, people who will see lower monthly payments in some cases. Employees earning more than $90,000 will see the most significant increases, particularly if they are only seeking coverage for themselves.
The median income for a State Health Plan member is just less than $65,000, Friedman said, which factored into the four brackets of premium payments administrators are proposing.
When State Health Plan officials were adjusting the premiums, they tried to change them to make it more affordable for members to cover children, who are typically a fairly healthy population.
So under the Standard PPO offering, anyone earning under $90,000 would pay less to cover their children than this year's $218 monthly premium. And an employee earning less than $50,000 would see the most savings, paying $185 each month to cover themselves and their children under the proposed premiums.
And for the Plus PPO offering, anyone earning less than $65,000 would pay less than this year's $305 monthly premium to cover themselves and their children.
"As a policy decision, the plan has decided we need to increase our risk pool, get more children on the plan, be more competitive with the private sector in terms of costs for covering your children," Friedman said.
In a stopgap budget passed last month, the N.C. General Assembly raised the state's annual contribution for State Health Plan covered employees to $8,500 annually, up from $7,557 per employee.
That amounts to more than $150 million in funds annually. Without the funding, premiums would have risen an additional $100 across the board, Friedman said Thursday.
"We are exceedingly grateful, and I think it's a reflection of the value they put on teachers and state employees," Friedman said.
Free surgeries, no tobacco statements to cut prices
The proposed premiums also do away with the tobacco attestation, where someone could pay significantly lower premium for saying they do not use tobacco products.
"A lot of the members that were paying the tobacco attestation penalty were just not signing up during open enrollment. It wasn't they were saying they were smokers, they just took no action. With premiums going up so much, we wanted to eliminate that barrier and remove that additional cost for folks that are not enrolling," Friedman said.
As part of another effort to keep costs down for State Health Plan members, the state is partnering with Lantern, an Aetna subcontractor, to try to drive down how much the state will pay for a given surgical procedure by encouraging all of its members in certain regions to go to one health system for that procedure.
The idea behind the plan, Friedman said, is to use economies of scale to offer health systems revenue certainty in exchange for deeper discounts for a given service. Health plan members would trade off being able to choose their own doctors for any procedure to instead receive that procedure at no cost.
"Historically, the State Health Plan has been: Any member can have access to any provider with the same cost sharing across the board. We're going in a different direction of trying to align member incentives with provider incentives with the plan incentives and really using market forces to drive better prices for our members for higher quality care," Friedman said.
He continued, "(We're) really focusing on economies of scale, not economies of scope."
The Health Plan's partnership with Lantern will start with elective surgeries like knee and hip replacements, but administrators are considering adding other services like cancer care, maternity care and transplant care.
