RALEIGH, N.C. (AP) - North Carolina's state employee health plan
got out of a deep hole last spring thanks to a $250 million cash
injection from the state's rainy-day reserves, followed by higher
dependent premiums and more out-of-pocket expenses for everyone.
So even though the State Health Plan is on better footing since
the Legislature's bailout bill passed in April, the plan's
challenges aren't over.
Plan officials told lawmakers last week they already paid out 8
percent more for claims than they had budgeted in July and August -
although it could be a one-time blip caused as more of the 650,000
employees, retirees and their dependents covered went to the doctor
before higher payment schedules took effect July 1.
An outside actuary now predicts the plan will lose $54 million
this year, instead of making a small profit as predicted a few
months ago.
With the rainy-day fund about out of money and tax revenues
still dwindling, North Carolina is joining insurance plans for
state employees nationwide looking for ways to cut expenses. North
Carolina is readying a plan for members to quit smoking and lose
weight, and trying to narrow administrative costs.
"Many state employee health plans are very concerned. Their
available revenue is at least partly tied to state revenues," said
Richard Cauchi, health program director for the National Conference
of State Legislatures in Denver.
The belt tightening for North Carolina's health plan is largely
about meeting expectations for a change after it missed projections
by a whopping $138 million for the year ending in June 2008.
State Auditor Beth Wood's office said last April the mistake
occurred because health plan leaders underestimated the popularity
of a preferred provider plan that offered more benefits and a
cheaper premium than the traditional indemnity plan.
Lawmakers said the mistake, and failure by plan leaders to alert
them to problems, led to the firing of plan administrator George
Stokes last year and the rehiring of predecessor Jack Walker.
But Wood's audit also found expenses by Blue Cross and Blue
Shield of North Carolina, which processes claims and administers
the program, were $36 million more than expected. While the state's
contract allowed Blue Cross to pass along any costs, plus profit,
to the plan, Blue Cross didn't have to explain how those costs were
calculated, according to the report.
The $675 million bailout law has taken the plan on a
cost-cutting spree. It got rid of the most generous tier of
insurance because it lost more than $100 million. It eliminated
coverage for routine eye exams starting this coming January.
But $32 million in higher-than-expected claims in July and
August threaten to eat into those savings. Lawmakers are hopeful
the higher claims were temporary.
"I think we're pretty well on track. The jump in June is
certainly understandable. People knew that copays and deductibles
were going up," said Sen. Tony Rand, D-Cumberland, co-chairman of
the legislative oversight for the State Health Plan. "We'll see
over time."
State Health Plan leaders have reworked their contract with Blue
Cross and Blue Shield to have more control and participation in
audits of the company's administrative expenses, said Mona Moon,
the plan's chief financial officer. Plan leaders hope audits under
way or about to begin will find cost savings.
Blue Cross said it earned only $480,000 on the contract in 2008,
or a profit margin of less than 1 percent. But the State Employees
Association of North Carolina, a frequent critic of Blue Cross,
accuses the company of hiding revenues in the form of undisclosed
costs.
A mailer sent to plan members explains how a new "Comprehensive
Wellness Initiative" will shift smokers and excessively overweight
employees and dependents to the less generous of two remaining
coverage tiers.
The tobacco program, which will begin next July, will require
smokers to quit or get into a cessation program if they want to
keep the "standard plan" that requires patients to pay for 20
percent of a doctor bill after copayments and deductibles.
Otherwise, the portion rises to 30 percent.
At least nine other states charge or soon will charge higher
premiums for state employees who smoke, according to the National
Conference of State Legislatures.
Starting in July 2011, enrollees with a body mass index - a
weight-height ratio that determines whether a person is considered
overweight - below 40 can stay in the more generous plan. The
standard becomes 35 in July 2012.
The plan believes it can save $13 million from the wellness
initiative in the 2010-11 fiscal year.
The State Employees Association doesn't care much for the
wellness initiatives, which also would include random employee and
dependent testing for nicotine or body mass index at work. Those
who fail would be forced to the lower-tiered insurance, along with
their entire family, for at least a year.
"We want employees to get healthier, but we want that done with
incentives, not punishments," said spokeswoman Erica Baldwin.
"They're discriminating against those employees, it's an invasion
of privacy."