The health plan that covers hundreds of thousands of state employees, retirees and their family members faces a drastic shortfall — and possible insolvency — in the coming years. Now the plan’s staff is trying to figure out how to close the gap. The solution could include raising premiums for some members.
The State Health Plan is facing a $106.3 million loss in income for the 2023-24 fiscal year, according to State Treasurer Dale Folwell, the chairman of the health plan’s board. And the plan has spent reserves to cover annual costs. The minimum amount the plan needs to pay for services is projected to fall below the plan’s required threshold by 2026, according to Folwell.
“We're one pandemic away from not being able to pay our bills,” Folwell said Tuesday during a regular monthly video call with reporters.
The board that oversees the North Carolina State Health Plan requires the insurance plan to maintain savings reserves of a year-end cash balance that exceeds the estimated cost of services already provided to its members.
But anticipated increases in drug and healthcare services costs threaten to eat through its reserves if the plan doesn’t cut costs or find ways to boost revenue, according to a health plan presentation released late last month.
The plan’s staff forecasts a net loss of $439 million in calendar year 2026 and another net loss of $824 million in Calendar year 2027. Without action, the presentation said, the plan is “likely to be unable to pay bills in fall 2026.”
Covid-19-related expenses have cost the plan $528 million — almost 60% of which hasn’t been reimbursed by the General Assembly, according Folwell. He says the most recent state budget funded the plan by $240 million less than needed.
In addition to claiming that state lawmakers shortchanged the State Health Plan on Covid-era reimbursem*nts, Folwell has also spent years calling on the legislature to inject other funding into the health plan. Those pleas have largely fallen on deaf ears at the Republican-controlled General Assembly — even though Folwell, a longtime Republican politician, served as the No. 2 state House leader before becoming treasurer after the 2016 elections.
Facing fiscal pressures, the health plan has worked to cut administrative costs. But Folwell said legislative help is needed on top of that. Despite sitting on a $1 billion surplus, the Republican-controlled state legislature hasn’t been willing to spend more on the health plan.
“We need them to fully fund the state health plan based on the cost. Period,” Folwell said Tuesday. “And that is the long term solution.”
A spokesperson for Senate leader Phil Berger didn’t immediately respond to a request for comment.
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“This is not a crisis that's going away,” Folwell said. “And ultimately it's going to impact those that teach, protect and serve. And that's why we look forward to a real, honest, open, mathematical conversation about where the state health plan is going forward.”
For now, the plan continues to eye potential cost savings and considers ways to boost prices without losing too many of the 740,000 state employees and family members who get their health care through the state plan.
The health plan’s trustees this year dropped coverage of expensive GLP-1 drugs such as Wegovy and Saxenda for the purpose of weight loss. Plan spending on the two medications was projected to exceed $170 million in 2024, jumping to more than $1 billion over the next six years. Continued coverage would have forced the plan to double its monthly premiums on many members, Folwell has said.
Folwell has sought to negotiate lower prices with drugmakers while trying to press lawmakers to intervene. Last week, he sent a letter to the Biden administration’s top health policy official, Xavier Becerra, accusing drug companies of engaging in price gouging.
In June, health plan trustees voted to increase premiums for 26,000 people on its Medicare Advantage plan — a move that will affect 4,200 retirees who weren’t fully vested in the health plan and, separately, 22,000 employee dependents for the 2025 benefit year. The move was needed, plan officials said, to offset increases in costs that followed new federal laws and regulations.
Members signed up for the Medicare Advantage Base Plan are expected to see their premiums increase by $33 per month starting Jan. 1. Without the increase, the health plan faced a $1.5 billion budget gap over the next three years, according Folwell. Some Medicare Advantage subscribers could see premiums jump to $159 by 2027, according to the state health plan.
At some point, though, rising prices can have diminishing effects. If prices are too high, some eligible state employees or their family members might opt out, hurting the overall pool.
“There's a high degree of state employees whose very own dependents are uninsured because they can't afford the family coverage,” Folwell said. “They cannot make the choice — especially in this inflationary time — between health care and food, health care and heat, health care and mortgage or health care and living their life.”
