Per today’s News & Observer, North Carolina’s State Health Plan “expects to save $22.4 million a year after awarding new contracts to administer the plan, which is currently handled solely by Blue Cross and Blue Shield of North Carolina, to three different providers. Blue Cross, the state’s largest insurer, retained the biggest piece of the state’s business. The State Health Plan covers 663,000 state employees, teachers and retirees and their dependents.”
Assuming these savings materialize, that’s good news. However, I wouldn’t breathe too big a sigh of relief over the news, because the $22 million in savings is barely a drop in the ocean of SHP expenses. Total payment requirements – to cover medical claims and administrative expenses – in the SHP are projected to be roughly $3 billion this year. Covering almost all of those expenses are the premiums paid for the plan. Premiums for state employee and retirees are almost completely covered by taxpayers (there is a small contribution for enrollees in one of the coverage options), while premiums for their dependents are paid for by the enrollee.
The total cost to taxpayers to cover SHP premiums for state workers and retirees has risen to about $1.8 billion annually. With the rising cost of health insurance, along with a rising number of retirees still enrolled in the plan, this cost is sure to continue to rise steadily. For instance, the calculated unfunded liabilities for retiree SHP benefits (the present value of promised benefit for the next 30 years) is up to $33 billion – a figure that has ballooned by 38 percent ($9 billion) in just five years. The pay-as-you-go cost to taxpayers to finance SHP premiums for retirees has exploded six-fold in just the last dozen years.
In short, chipping away at administrative costs is always a good thing, but North Carolina’s State Health Plan is in desperate need of significant reforms.