Premiums rise, but overall costs could fall for NC State Health Plan members under a new system

State health plan members will pay less for their care beginning next year if they use UNC Hospitals, Novant Health, and Iredell Health System under a new plan adopted to help lower costs for state employees and the State Health Plan.

State Health Plan trustees on Friday agreed to contracts with three health systems designated as “preferred providers.” These are hospital systems that have agreed to lower prices for the Health Plan with the expectation that they will treat more of its members.

The new strategy sorts providers into three groups. “Preferred” providers would offer patients the lowest out-of-pocket costs. “Access” providers would stay at current out-of-pocket costs, and “non-preferred” providers would cost plan members the most to use.

Atrium Health, the state’s largest healthcare system, is a “non-preferred” provider network,  so members who go there for care will pay some of the highest out-of-pocket costs. Some Duke/LifePoint hospitals and Granville Medical Center are also “non-preferred” providers where care will cost members more. 

The picture for the Triangle remains unfinished. Health Plan administrators are continuing to negotiate with Duke Health and WakeMed about becoming “access” providers, locations where out-of-pocket costs will remain unchanged.

Tom Friedman, executive director of the State Health Plan, said the system has to change.  

“The status quo is bankrupting the State Health Plan and not getting members healthier,” he said.

Big changes ahead for State Health Plan as trustees work to lower costs 

The Health Plan is using preferred provider contracts to help close its own deficit and reduce costs for members. The State Health Plan insures about 750,000 employees, dependents, and retirees. 

At the same time, the trustees adopted insurance premium increases of 5%.  That would mean a monthly increase in premiums anywhere from $1.76 per month to $8.04 per month for individual coverage for members who are still working. Monthly premium increases for family coverage will range from $28.76 per month to $42.04 per month.  Members’ premiums are based on salary bands the Health Plan began using this year. The size of the premium increases are based on  members’ salaries and whether they’re enrolled in the standard or the plus plan. 

Ardis Watkins, executive director of the State Employees Association of North Carolina, said workers shouldn’t have to pay higher premiums when their raises haven’t kept up with inflation. 

State employees received no raises last year and most of them received a 3% raise this year. 

“We don’t want premium increases,” she said. “We think that’s absolutely wrong-headed.”

She challenged the trustees to speak out against the Atrium Health merger with WakeMed, which is projected to increase healthcare costs. 

State Health Plan members will be able to save money even with premiums increasing if they use preferred providers because their out-of-pocket costs will be lower, Friedman said.

“The premiums are going up with inflation,” he said. “There’s an opportunity for your costs to go down.”

For example, the yearly deductible for an individual enrolled in the standard plan using preferred providers will be cut in half, dropping from $3,000 to $1,500. For the same person using a non-preferred provider, the yearly deductible will increase to $5,000. 

Some healthcare services, including trips to the emergency room, transplant services, cancer treatments, maternity care, and neonatal intensive care, will not cost more for members who use non-preferred hospitals. 

State Treasurer Brad Briner said the health plan is using its bargaining power as the largest commercial payer in the state to lower costs. 

Using preferred providers, members will pay 2012 prices for their health care, Briner said. “This is monumental. It’s thousands of dollars for the average member of the State Health Plan if they participate in the preferred provider program. Our members know that those thousands of dollars are much more important than the $2 to $4 premium increases.”

Choosing preferred providers will likely be easier for some plan members than others. For example, in the Charlotte-Mecklenburg area, 54% of members use Atrium, a non-preferred provider. Taking advantage of the cost cuts will require some of them to seek treatment at different hospitals. 

“We have to communicate to a lot of different people in a lot of different places,” Friedman said.