State Health Plan

Financial troubles with a state health insurance program won't likely merit a special session of the General Assembly, legislative leaders said Monday. According to data presented by the head of the North Carolina State Health Plan to a legislative oversight committee, the program for state employees and retirees is projected to lose between $264 million and $281 million during the fiscal year that ends next June - more than $200 million more than previously believed. The plan also could run out of cash to pay the claims of its 650,000 members as early as December, said Jack Walker, the plan's recently hired executive administrator. Walker told the Committee on Employee Hospital and Medical Benefits that an influx of at least $100 million would be needed. But he said the plan should have enough money to sustain itself through the end of March by holding back on payments to vendors. "Then we'll need some money," he said.
The health care plan's problems surfaced late in this year's legislative session that ended in July, leading to the ouster of the most recent administrator, George Stokes. Sen. Tony Rand, D-Cumberland, a co-chairman of the committee, said lawmakers will have to act fast to find additional money once the Legislature's regular session reconvenes Jan. 29. "Now we have a much better understanding of the nature of the problem," Rand said after the meeting. Ultimately, lawmakers may force the plan to raise premiums substantially for spouse and dependent coverage and could consider tightening employee health benefits. Walker, who was brought back to run the plan after leading it for more than five years until 2005, spent much of the meeting trying to explain how the plan's budget veered off course. Walker blamed the problem on an outside actuarial firm using the wrong assumptions to project the financial demands on the plan, which handled $2.6 billion in medical claims last year. The budget underestimated how much outpatient care would be utilized and overestimated the size of discounts for services performed by doctors and hospitals as the plan shifted more to managed care, according to plan documents.
Rep. Hugh Holliman, D-Davidson, the committee's other co-chairman, said plan leaders should have given more information to the actuary, but the actuary also should have asked more questions. Ardis Watkins, a lobbyist with the State Employees Association of North Carolina, a 55,000-member union, said the group still isn't persuaded that there are real problems with the health plan. Stokes has said that any problems were overstated. "I heard nothing from (Walker) to substantiate any of the numbers," said Watkins, adding that the committee should have done a better job overseeing the plan. Holliman said health plan leaders are meeting with lawmakers regularly to keep a close eye on the plan's fiscal picture, but he agrees for now that major changes can wait until early next year. (Gary D. Robertson, THE ASSOCIATED PRESS, 9/15/08).