State Health Plan hikes prices for older state workers, retirees

Healthcare costs are going up for older state workers and retirees — by potentially hundreds of dollars per year — part of an effort by State Health Plan officials to address a steep deficit.

The plan’s board voted Friday to approve price hikes that would go into effect next year for nearly 180,000 people on the Medicare Advantage version of the State Health Plan.

The State Health Plan serves about 750,000 people. Most of them are on non-Medicare ‘Standard’ or ‘Plus’ plans and could also see changes to their benefits voted on in July, the next time the board meets. The board also raised premiums on them last summer, for the first time in years.

The proposal up for debate Friday would increase Medicare Advantage plan members’ out-of-pocket maximums for medical care from $4,000 to $4,500 per year on the base plan and from $3,300 to $3,700 on the enhanced plan. Everyone on either plan would also have a new, $50 copay for drugs covered through Medicare Part B.

Additionally, copays for inpatient hospital stays would increase by an additional $25 to $40 per day. Copays for other visits — for specialists, radiologists, advanced imaging, therapies and more — would go up an extra $10 to $75 each, depending on the type of visit and which plan someone is on.

Officials said this is the first time in several years they've approved major hikes to the Medicare Advantage plan, even though its costs have been rising 7% to 8% per year.

Representatives for state workers and retirees spoke out against the changes ahead of the vote but weren’t able to stop it; the higher costs were approved unanimously.

Retirees typically live on a fixed income, and, since the state legislature hasn’t approved cost-of-living raises to pensions for years, inflation has tightened their budgets. The advocates questioned the fairness of now also requiring each state government retiree to pay hundreds of dollars per year more for health care.

“We are deeply concerned that substantial cost increases for Medicare Advantage participants would place a disproportionate burden on a population that has very limited ability to absorb all these additional costs,” Jackson Cozort of the N.C. Retired Government Employees Association said.

“These increases are going to turn our folks on their head,” added Suzanne Beasley of the State Employees Association of North Carolina. “They do live on a fixed income. There's been no increase [in pension payouts]. Their buying power is down, I believe, about 30%. So this is going to be pretty unbearable.”

The increases come as the State Health Plan faces a deficit of more than $1 billion, driven in part by years of no premium hikes, lagging support from the state legislature and rising inflation in the healthcare field that has often outpaced inflation as a whole. The plan is led by Republican State Treasurer Brad Briner, who was elected in 2024 and quickly began implementing significant changes to the State Health Plan. He defended the strategy Friday,

“We cannot solve the problems of the entire American healthcare system on our own,” Briner said, calling it “highly dysfunctional” and “a system where prices go up only and no one actually cares that they do. A system that defies transparency because we, as a country, allow healthcare providers to hide that information.”

One change state workers and retirees on the Medicare Advantage plan won’t need to navigate is a tier system of providers that the State Health Plan is planning to implement for its other 500,000-plus members on the regular plan.

Under that tier system, some hospitals, doctors’ offices, specialists and others will be designated as ‘Preferred’ while others will be labeled ‘Access’ or ‘Non-Preferred’ for members of the State Health Plan. A similar program for surgeries has, since last year, allowed some people to have surgery for free at preferred providers.

The ‘Preferred’ providers in the new tier system will agree to charge less money than normal from the State Health Plan for treating its members, in exchange for the state funnelling patients to their practice.

The idea, first broached last year by State Treasurer Brad Briner, could save money for all parties involved: The doctors get more patients, but the state pays less, and passes those saving onto its members in the form of lower deductibles.

The new designations will determine how much money people pay out-of-pocket for their healthcare. Going to a ‘Preferred’ provider could save state workers money, while going to a ‘Non-Preferred’ provider could cost people thousands of dollars more than they’re used to paying.

“We’re asking our members to become shoppers in health care, and we never asked them to do that really before,” Briner said. “We've all just taken what we've been given and assumed that that was best for us. We can't assume that anymore. We have to look around for a better price.”

People who go to ‘Access’ providers would face essentially the same deductibles and out-of-pocket costs they do now, under the new plan up for consideration. Those will largely be providers in rural areas where there’s not as much healthcare competition, said Thomas Friedman, the State Health Plan director. But in big urban areas with more competition, he said, the goal is absolutely to rely on that competition to discourage State Health Plan members from seeing any doctors who haven’t agreed to take the lower rates the state is offering.

It comes as the State Health Plan faces a large deficit. Changes instituted last year, including higher monthly premiums, helped chip away at a deficit of more than $1 billion, but officials are still trying to find other ways to improve the plan’s solvency.

While more premium hikes are likely to be debated for the majority of State Health Plan members at the July meeting, Friedman said, he’s hoping this new tier system can also create hundreds of millions of dollars in savings for the plan — allowing the state to rely less heavily on premium hikes in the future — as long as people comply and go to the doctors the state would like them to see.

That means it’s likely that many people will be faced with the prospect of either leaving their doctor, or paying more to keep their doctor. Briner said he knows people will be frustrated by that, but he noted that he and other State Health Plan officials gave every single provider in the state the option to join the preferred list. Some are expected to sign on; others aren’t.

“If your current provider is ultimately not in the preferred tier, it will be because your provider does not sufficiently value your business,” Briner said. “They chose not to compete for it.”

And while there’s a chance some doctors move into or out of favor with the new tiers, Friedman said he doesn’t want it to turn into a system that changes up regularly.

“These should be longer-term contracts, so that we're not moving patients around and members around,” he said. “... If you switch the providers up all the time, you lose a lot of trust. You lose the provider-patient relationship.”

People should still expect premium increases to be on the table — perhaps based on their salaries, similar to the hikes last year, but they should still pay less in the long run as long as they use the new list of ‘Preferred’ providers, Friedman said.

“You might pay $120 more in premiums, with $4,000 less in out-of-pocket [costs],” he said.

Some of the health plan’s board members also said it should be seen as an overall win, as long as people use the providers the state wants them to.

“You’re going to have the opportunity to save a boatload of money — not just for the plan, but for yourself,” said Dr. Brian Miller, a UNC and Johns Hopkins University professor and doctor.