The key date for state employees wondering if State Treasurer Dale Folwell will stick to his “Clear Pricing Project,” resulting in many of their physicians and nearby hospitals leaving the State Health Plan network, is not January 1, 2020, when the new plan begins, it is October 1, 2019 when open enrollment begins.
Like many challenges, people may agree there is a problem (the State Health Plan is insolvent) but disagree on the means by which to address it.
Folwell shared estimates that North Carolina’s State Health Plan (SHP) has $34.4 billion in unfunded liabilities. This number assumes the total cost if all current employees retire at once, plus the cost of current retirees. A lesson must be learned from Congress’ mandate that the U.S. Postal Service prepay its liabilities. We must address the imminent insolvency of the State Health Plan, but focusing on total future liabilities and bringing a machete to the solution is unnecessary.
The more relevant data is the annual SHP funding needed vs. actual funding. For FY 2017, the State Controller’s Annual Financial Report listed the State Health Plan would need $2.65 billion to keep pace with liabilities, but received $2.26 billion in state funding. There are three ways to address such a deficit: increase revenue, cut costs, or both.
Since 2013, the NC General Assembly has turned away $2.8 billion each year by cutting corporate income taxes in half and personal income tax cuts that gave wealthier residents the largest breaks. Also a supporter of these tax cuts, and the income tax cap amendment, Treasurer Folwell has been transparent in his effort to address the SHP’s unfunded liabilities through his “Clear Pricing Project” which offers lower reimbursement rates to health care providers, but has not been as candid with all attempts.
Since he took office in 2017, a fact pattern exists that Treasurer Folwell has himself tried to cut costs to the State Health Plan through policies that would ultimately reduce the number of people using the SHP.
1. End of May 2017 – State Employees received an email stating that they would have to resubmit a copy of the first page of their tax returns, or birth certificate(s) in order to prove they are not fraudulently covering spouses or dependents under the SHP. A letter was also sent to home addresses stating the same, however the letter was sent via “junk mail” rate postage with the urgency of an advertisement, not first class.
Having parents who work for the post office, and serving as a letter carrier for a summer myself, I typically discard mail I receive labeled as “PRSRT STD” without the “First Class” designation, which is how this letter arrived. As someone who teaches personal financial literacy to high schoolers, I advise them to do the same to protect themselves from scams, and this envelope had all the telltale signs. On my way to the garbage can with the letter, something in my gut told me to open the letter against my usual judgement. In addition to having my own health insurance through the SHP, my two children are also covered.
After reading the letter, I was still skeptical that it was a scam since several months before, I had submitted the first page of my tax return to prove that my children are my children, and are eligible to be covered on my health insurance plan. This letter said I had to submit copies of their birth certificates by July 31 through an online portal, or my children would be removed from my health insurance plan on August 1. Having this information solicited through “junk mail” postage and email didn’t sit right, so I didn’t immediately jump to upload sensitive documents to the website suggested in the email and “junk mail.”
Upon further investigation, I learned that the email and “junk mail” solicitations were in fact legitimate. I once again proved to the state that I am not committing insurance fraud by confirming that my children are my children. I wondered what would have happened if I did not heed the warning in the letter sent to my home because I disregarded it as junk mail given the nature of the postage, or if I had moved and this mail was not forwarded to my new address since it was not “first class” postage. What if I overlooked the email buried in my 90 other email messages I received to my work account that week, or disregarded these attempts since they resembled scams seeking sensitive information through a digital platform.
There were 3 other emails I received after the end of the school year but I do not tend to check my work email when I am furloughed over the summer. I wondered how many other people may have overlooked this essential task or thought it was a scam, and would lose coverage for their dependents as a result of not reconfirming information by July 31. Why couldn’t this information request have waited for the open enrollment period that would begin a few months later? At that time in my life, I kept those concerns to myself. Two years later, I know better that sharing these concerns is how we protect each other and work together.
How many dependents were removed from the SHP’s rolls for the rest of 2017? Of that number, how many were actually fraudulent? These are not rhetorical questions.
2. June 2017 – The NC General Assembly passed its biennial budget which included a provision that state employees and teachers hired after January 1, 2021 will no longer be eligible for health care in retirement. The News and Observer reported Folwell’s response to the bill: “Folwell said he did not ask for the provision and was not consulted on it. He wouldn’t say whether he liked the idea – “I will obey the law” – and added that he is concentrating on strengthening the health plan.”
3. December 2018 – Members of the SHP received a letter from Treasurer Folwell with their new insurance ID cards. In the letter, employees are directed to “help sustain this benefit by taking control of your medical costs. Be a smart health care consumer.” The message that taxpayers pay for health care is so significant that it is reiterated 4 times in half of one page of the letter and a reminder “Paid for by YOU and other NC Taxpayers” is printed on each insurance card.
In the letter, employees are encouraged to become SHP “Watchdogs” since “Making more informed decisions about your healthcare spending can help as we try to drive down costs. It’s one way to tackle the debt and help you save money, but we need your help.” One month later, the state surrenders an additional $900 million each year with another corporate income tax cut. NC has the lowest corporate tax rate of states who have one, but ranks second-to-last nationwide in funding its health plan for its employees and retirees.
Why does Treasurer Folwell support tax cuts while continually expressing concern that the sky is falling for the SHP?
4. July 1, 2019 – This is the date by which health care providers had to choose to abide by the provisions of the “Clear Pricing Plan” or risk becoming out-of-network providers for those on the SHP. As of July 22, fewer than half of providers and only 3 hospitals and have signed on. Treasurer Folwell re-opened the window for health care providers to sign up for the plan and extended the deadline to August 5. State employees and retirees notice signs popping up at their doctors’ offices that they will not sign on to the new terms and will therefore no longer be in-network providers as of January 1, 2020. For an employee on the standard 70/30 plan, their deductible obligation would double when using out-of-network providers, and $40 office visit copays would become 50% payment after the deductible is met. On April 3, 2019 the House passed a measure to delay implementation (HB 184).
Will the Senate discuss this bill now that it is clear that so many providers have not signed on?
5. October 1, 2019 – Open enrollment for 2020 health coverage begins on this day. State employees and retirees must have a “Clear Coverage Plan” and know how the “Clear Pricing Plan” brinkmanship will end by this day in order to make informed personal financial decisions. Although the July 1 deadline has passed, now that the results are in that few providers signed on to the plan, it is not too late for Treasurer Folwell to change course.
Given Lt. Governor Dan Forest’s recent victory in the passage of a stand-alone “Economics and Personal Financial Literacy” course required for high school graduation, state employees await his weigh-in to ensure they have access to definitive information on the outlook of the SHP to make informed personal financial decisions regarding their health insurance plan.
Health care providers have started to suggest that people on the SHP look into other insurance programs. Cone Health “encourages (state employees) to take advantage of other insurance options during the fall benefits enrollment period.” Employees need to have all information available to make decisions for their 2020 health coverage plan. Employees with a spouse on their plan need to have this information to weigh options to determine if it is worth paying around $600 monthly for insurance that is unlikely to be in-network at many health care offices and most hospitals.
Failure to conclude a resolution to the “Clear Pricing Plan” by this date will likely lead to shopping around for other insurance programs for themselves and/or dependents in the face of health plan uncertainty or increased out-of-pocket costs.
By making the SHP unattractive to employees and their dependents, is getting people to leave the plan part of the cost-cutting measures? If people stay on the plan, is making out-of-pocket health care more expensive (therefore reducing amount of care sought), also a cost-cutting measure?
If two months is enough time for thousands of employees to prove they are not committing fraud by resending information previously shared to prove their children are still their children, and their spouse is still their spouse, it is enough time for Treasurer Folwell to clearly and definitively communicate what health costs will look like for state employees, and how his plan will save them $65 million annually with so many providers out-of-network, before open enrollment begins on October 1.