A controversial bill that calls for a study of the financial sustainability of the State Health Plan cleared the state House by a 75-36 vote Wednesday.

House Bill 184, filed Feb. 26, would create a joint legislative committee. The bill now goes to the Senate, where its future is less certain.

The committee initially was supposed to submit a report by April 1, 2020. That date has now been moved up to Dec. 15.

Implementation of study recommendations would be by Jan. 1, 2021, a year earlier than the original proposal.

The State Health Plan is the largest buyer of medical and pharmaceutical services in North Carolina, spending $3.2 billion in 2017. It represents more than 720,000 teachers, state employees, the governor, current and former legislators, state university and community college personnel and their dependents, and non-Medicare retirees and their dependents.

The SHP Clear Pricing Project proposal from state Treasurer Dale Folwell, disclosed in October, would change how the plan handles reimbursements to medical-care providers.

It would move it away from a commercial-based payment model to a reference-based government pricing model tied to Medicare rates.

The treasurer has the authority to decide on the reimbursement cuts, but legislation could take that away from Folwell.

Folwell’s proposal would allow the State Health Plan to begin, on Jan. 1, paying about 61,000 providers based on a percentage above current Medicare rates, along with an additional and adjustable profit margin.

Folwell’s goal has been to have providers sign up for the new payment system by June 30.

Folwell said his proposed changes could save State Health Plan members up to $57 million initially and $258 million overall. In October, the plan’s board of trustees unanimously passed a resolution supporting the strategy.

HB184 would bar Folwell from implementing his proposal during the study period. An amendment to allow the payment plan to go forward failed 88-23.

“Those that are against price transparency and lowering the costs of health care won the day, and the teachers, troopers, state employees and taxpayers like them lost,” Folwell said in a statement.

Folwell said HB184 “locks in a failed and bankrupt system resulting in less transparency, higher costs and more control to many who have been using the State Health Plan to increase their profits for decades.”

“Citizens are no longer going to accept nearly 20 percent of their income going toward something where the price and value cannot be determined.”

‘Best possible solution’

The committee would be made up of four members of both the House and Senate, the State Health Plan’s executive administrator, and one member each from the N.C. Healthcare Association, N.C. Medical Society, N.C. Nurses Association, State Employees Association of North Carolina, N.C. Association of Educators and N.C. Psychiatry Association.

The initial version allowed the state treasurer to serve only in a non-voting role. An amendment to the bill, passed 106-5, gives the treasurer a voting role. The House and Senate would each name an appointee to serve as co-chairs.

The bill cleared two House committees with significant debate. Republicans and Democrats were both divided among themselves in their positions on the bill.

Bill supporters said they hope the study could bring civility to the intense debate that was ignited in October when Folwell introduced his proposal.

Bill co-sponsor Rep. Julia Howard, R-Davie, said in February that legislators “have kicked this can for a long time, and now, with a major breakdown of communication between working groups, I believe this is our best possible solution.”

Legislators have said they, as well as Folwell and supporters and opponents of the study, have been personally targeted for their stances, including through radio and television political ads from advocacy groups.

Some legislators said the bill is a direct affront to Folwell and potentially a step toward targeting Folwell in a 2020 Republican primary.

Lambeth’s view

Rep. Donny Lambeth, R-Forsyth, said legislators should not have been surprised that the debate became so heated so quickly.

Lambeth said that when he joined the legislature in 2013, he cautioned then-House speaker Thom Tillis that the SHP was dealing with an unsustainable unfunded liability “that would come to bite” the legislature at some point.

“There was a perfect storm forming that has arrived now,” Lambeth said in February.

Lambeth said on the House floor that “this bill is not, nor should it be, a referendum on Dale Folwell.”

Lambeth said that although he has campaigned for Folwell, he supports the bill because it would take the time to study the SHP’s financial sustainability “so we can get it right.”

Other legislators warned that passing the bill and stalling Folwell’s initiative will end up costing taxpayer money and threaten the financial solvency of the SHP.

Rural health care at issue

Steve Lawler, president of the N.C. Healthcare Association, said in a statement that “healthcare providers stand ready to work together with legislative leaders, State Health Plan administrators and plan beneficiaries to develop a modern plan model that focuses on supporting members in managing and improving their health, providing the state and members with cost transparency, and lowering overall costs to the state and taxpayers.”

Health-care system executives in North Carolina have warned that Folwell’s proposal could lead to providers closing their practices, particularly in rural parts of the state, and providers choosing not to accept patients with State Health Plan coverage.

The SHP board countered by saying Folwell’s proposal “further supports the delivery of and access to health care in rural communities.”

Rep. Michael Speciale, R-Craven, said health-care systems have positioned themselves as “a third rail” in the legislature by claiming that cuts in state payments are a threat to hospital stability, particularly with rural community hospitals.

“The State Health Plan is not designed to subsidize everyone else’s health plans,” Speciale said.

Folwell has said that “our approach has always been to help rural hospitals be in a position to provide vital health services in outlying communities.”

“However, the problems with rural hospitals’ finances existed long before I became state treasurer.”

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