The North Carolina State Health Plan Board of Trustees took a step toward a salary-based employee health insurance premium contribution system, as a way to avoid a looming $1.3 billion deficit in the government's health plan budget.
The board Friday unanimously approved to pay for technological changes that would allow the state to introduce a graduated salary-based system of premium payments. Currently government employees contributions are not salary-based.
The change in contribution rates would be only for active employees, not retirees receiving benefits.
State Health Plan Chief Economist Emma Turner said without changes to the state's health system, it faced a $500 million shortfall in calendar year 2026 and an additional $800 million shortfall in calendar year 2027.
Underfunded other post-employment benefits, which includes health insurance for retirees,
State Health Plan Executive Administrator Tom Friedman said the board would probably have to institute multiple measures to reduce costs and increase revenues to be able to cover the $500 million shortfall. The board is working with its insurer (Aetna) to address the $800 million gap in 2027, he said.
Turner said administrators are requesting an increase in employer and retirement system contributions as well as the salary-related contribution rates.
The plan has seen an increase in the frequency of years with operating losses in the last few years, and she said the plan lost $12.1 million in calendar 2024.
Turner said the state's health costs for residents and the health costs for the health insurers were among the highest in the country.
Friedman presented a timeline for solutions to the deficits that would reach a final decision stage to set 2026 premiums in August.
S&P Global Ratings in its October report on the state's AAA general obligation bond rating noted then-Gov. Roy Cooper's April additions to spending to address health issues in the state.
The health plan must reduce costs through reducing unit price, volume, service mix, and member acuity, Friedman said.
Friedman and Board Member Brian Miller said health plan members need to be directed to get imaging, blood and other tests at dedicated imaging and lab facilities, because they charge far less than hospitals.
Miller said $500 million was a huge deficit and the board would have to make several choices it didn't like.
