3/25/2019
Contact: Frank Lester (919) 814-3811
FOR IMMEDIATE RELEASE

Fiscal Research Division:  HB 184 to Cost Taxpayers $400-$600 million
Teachers and State Employees Could See State Health Plan Premiums rise by at least 266 percent 
 

(RALEIGH, N.C.) – The Fiscal Research Division (FRD) of the North Carolina General Assembly issued a “Legislative Actuarial Note" on the impact HB 184 would have on taxpayers and members of the State Health Plan (Plan). Its analysis of the actuarial impact of HB 184 estimates that the bill could cost taxpayers between $429–$591 million over the next three years based on projections from the actuarial-analysis firms Segal Company and Hartman and Associates.

Additionally, the analysis also notes that the bill adds $1.1 billion to the state's unfunded liability for “other post-employment benefits" (OPEB) currently at $33 billion. This additional liability will negatively impact the state's ability to maintain its triple, “AAA" bond rating further restricting the state's borrowing capacity.  In fact, investor Warren Buffett recently warned that companies wanting to relocate should avoid states with high OPEB liabilities.

Widely respected, FRD provides non-partisan fiscal and policy analysis of budgetary and taxation issues that come before the elected members of the North Carolina General Assembly. FRD is a central staff agency of the General Assembly that serves all elected members.

The fiscal analysis was conducted after the introduction of HB 184 in the House Committee on Health. If passed, the bill would prohibit the Plan from implementing or utilizing “… any reference-based pricing model to reimburse providers …" The legislation would create a joint study committee that would be required to issue a report by April 1, 2020. Furthermore, during that period the Plan would be forced by law to use Blue Cross Blue Shield of North Carolina Blue Options provider network and to pay participating network providers at 100 percent of secretly negotiated fees through the end of 2021.

HB 184 was filed and is supported by legislators who oppose the Plan's Clear Pricing Project (CPP) which was announced last year. Under CPP the Plan will move away from a commercial-based payment model to a reference-based, transparent government-pricing model tied to Medicare rates. Health care providers will be reimbursed for their services at Medicare rates plus an average of 82 percent, which represents a substantial profit.

CPP will provide increased reimbursement payments to independent primary care physicians, behavioral health specialists and many rural, critical access hospitals thereby financial supporting these providers and saving taxpayers almost $258 million and Plan members almost $57 million. The strategy will also result in clear pricing for medical services allowing members of the Plan to make more informed decisions when purchasing health care.

The increased costs associated with HB 184 will have to be addressed by additional appropriations from the legislature or paid by members through increased premiums. The Plan estimates that members could see their premiums increase by at least 266 percent.

“We're not surprised that this legislation comes with such an unreasonable price tag," said State Treasurer Dale R. Folwell, CPA. “Right now, a starting teacher or trooper has to work five days out of every work month just to afford the family premium for health care. This actuarial analysis shows that they will be the ones that will suffer under this legislation."

HB 184 would be a de-facto return to the pre-2011 configuration of the management of the Plan where health care industry groups could use their substantial lobbying power, and virtually unlimited funding, to coordinate lobbying efforts at the General Assembly setting State Health Plan policies and prices that are favorable to their interests.

“The State Health Plan was moved to the Treasurer's Department for a reason," said Folwell. “This bill will cost taxpayer hundreds of millions of dollars taking us back to where providers of health care and drug companies control the Plan. When you have administrative responsibility without operational control, you have nothing but chaos."

The House Committee on Health will consider HB 184 on Tuesday, March 26 at 10:00 AM in 643 Legislative Office Building.

The State Health Plan, a division of the N.C. Department of State Treasurer, provides health care coverage to more than 720,000 teachers, state employees, current and former lawmakers, state university and community college personnel and their dependents, including non-Medicare and Medicare retirees.

 

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