The State Health Plan and state Treasurer Dale Folwell have ended — at least for the 2020 coverage year — their controversial attempt to compel the state’s 126 hospitals to sign a contract requiring reduced reimbursement rates in order to stay in-network.

The SHP, Folwell and Blue Cross Blue Shield of N.C. said Thursday that SHP’s coverage network will feature a combination of the insurer’s Blue Options plan, as well as the Clear Pricing Project (CPP) contract.

The combined hybrid network will have more than 68,000 in-network providers. Blue Cross is the third-party administrator of the SHP.

By comparison, the CPP had about 28,000 providers as of Monday.

The combined CPP-Blue Options network is effective Jan. 1 and will be available for sign up when open enrollment begins Oct. 1 for SHP participants.

The N.C. Healthcare Association conducted a statewide public-relations campaign against the reimbursement contract, targeting Folwell’s role in the initiative. That included lobbying Gov. Roy Cooper and legislative leaders of both parties.

The legislature has given the state treasurer the authority to negotiate SHP contracts.

“While the specific benefit design for this plan has yet to be seen, this move will help maintain access to in-network care for them (SHP participants),” the NCHA said in a statement.

“NCHA and our members look forward to working with the treasurer and the General Assembly to develop a stronger, sustainable, transparent future for the State Health Plan.”

The SHP has more than 727,000 participants that include current and retired state employees, teachers and legislators. It is North Carolina’s largest purchaser of medical and pharmaceutical services at $3.2 billion in 2017.

Blue Options is a preferred provider organization that covers 92% of physicians practicing in North Carolina.

According to a Blue Cross flier, it offers co-pays ranging from $10 to $35 for a primary physician visit and annual deductible ranging from $0 to $5,000 — both depending on how much a participant pays in monthly premium fees.

Spokesman Austin Vevurka said the SHP offers two Blue Options plans and a qualified high deductible plan that is for employees working between 30-40 hours a week.

"The 80/20 PPO has a $1,250 in network deductible, and the 70/30 PPO has a $1,080 deductible in network," Vevurka said.

“We are relieved that all State Health Plan participants will have access to quality, affordable healthcare next year, and that our members will not have the prospect of their local hospital or doctor being out-of-network hanging over their heads as they prepare for the start of the upcoming school year," said Mark Jewell, president of the N.C. Association of Educators.

"It appears the combination of the Blue Options network and the new N.C. State Health Plan network will give members sufficient choice and access for their healthcare needs.”

Zagros Madjd-Sadjadi, an economics professor at Winston-Salem State University, said he’s not confident the hybrid network will fix the overall issue.

“This will not change the dynamics at all,” Madjd-Sadjadi said.

“If anything, it will only end up angering state employees who will have to decide between a likely very expensive, but almost useless, health insurance plan, and going without.

“In some ways, especially for poorer state employees, it would be better for the state to simply offer them the state (funding) portion to go on the health exchange for their coverage than accept this.”

The fight

A financial reimbursement game of chicken with the state’s hospitals commenced in October when Folwell launched his attempt to move the SHP to a government pricing model tied to Medicare rates via the CPP contract.

Hospitals and medical providers that did not sign the contract could have become out-of-network for SHP participants on Jan. 1.

However, as of Monday’s second deadline for signing up, Folwell and SHP were only able to get five hospitals to sign the contract, as well as 28,000 providers.

The SHP said the combined network “is designed to comply with access to care requirements for hospital coverage.”

“For members, this means they will continue to have access to the provider network they utilize today, along with some new providers that were not previously part of the Blue Options network” through adding the CPP contract.

Dr. Patrick Conway, Blue Cross NC’s president and chief executive, said in a statement that the combined network will “ensure that teachers and state employees have uninterrupted access to quality care.”

Folwell could not be immediately reached for comment Thursday on why he and the SHP agreed to the Blue Options proposal.

He stressed in the statement that “the Clear Pricing Project is just the beginning” of his efforts to reduce health-care costs.

Folwell said that by the NCHA “spending millions of dollars to oppose us and by using cartel-like tactics, these organizations were able to convince most hospitals to boycott the State Health Plan.”

“If big hospitals could do this to their largest customer, just think what they can do to the individual average citizen or business.

“We’re in a medical arms race in North Carolina,” Folwell said. “Every dollar unnecessarily or inefficiently spent on health care is a dollar that can never be spent on education and other core functions of government.”


Employers and health insurers negotiate rates that provide in-network discounts to individuals covered by an employer-based plan.

Without the negotiated discount, out-of-network costs can be significantly higher for most medical procedures.

On Monday, the second sign-up deadline for the CPP contract came and went with just one hospital agreeing to join during the 10-day period. The initial sign-up period ended July 1.

CaroMont Health of Gastonia signed July 22 and Catawba Valley Medical Center in Hickory during the second sign-up period. The others are N.C. Specialty Hospital in Durham, Martin General Hospital in Williamston and Randolph Health in Asheboro.

Cone Health said July 1 it was rejecting the contract. Some hospitals, including Cone, have encouraged SHP participants to consider signing up for their spouse’s or partner’s health insurance if it keeps them in-network.

On Thursday, Cone said in a statement that it "applauds Treasurer Folwell for finding another option for our indispensable teachers, troopers and other state employees to access the advanced health care they deserve from the state’s hospitals and health systems."

"We look forward to the opportunity to collaborate in the creation of a more sustainable approach for the state.”

The SHP’s final proposal increased payments to medical providers, on average, from 182% to 196% of Medicare. Urban hospitals saw their combined inpatient/outpatient ratios go from 178% to 200% of Medicare on average.

The SHP said providers that signed on to the CPP “will eventually be offered the opportunity to participate in alternative payment arrangements.”

“These arrangements, or models, include medical-procedure bundling, accountable care organizations, as well as other outcome and evidence-based programs designed to deliver quality care at affordable prices.”


UNC Health Care took a lead hospital lobbying role with legislative leaders from both parties and Cooper to get Folwell and the SHP to delay, if not halt, the contract rollout. Cooper’s office said it is reviewing a UNC Health Care proposal.

House Bill 184, which passed the House but stalled in the Senate, would have delayed implementing the CPP for a yearlong legislative study of how to reduce SHP costs.

Folwell and UNC Health Care held negotiations as recently as Monday.

When asked about another deadline extension, Folwell said Monday that “deadline or no deadline, our responsibility is to figure out what we are spending $3 billion of taxpayer and employee money on.”

Charles Owen III, UNC Health Care’s board chairman, said in a letter to Folwell that he suggests getting a mediator involved “as soon as possible.”

On Thursday, UNC Health Care said in a statement that it is “pleased” that state employees “will be guaranteed the access to primary, specialty and hospital care they’ve become accustomed to through the State Health Plan.”

Dee Jones, the SHP’s executive administrator, said she intends to rely on the plan’s staff, board of trustees and a proposed advisory subcommittee of experts “to provide guidance on steps forward to reduce costs and increase medical pricing transparency.”

“We have three levers we can pull to keep the plan solvent with the existing benefit offerings,” Jones said.

“First, we can cut costs by increasing transparency and giving the buying power to the consumer, which is what we’re trying to do with the Clear Pricing Project.

“Second, the governor and General Assembly can appropriate more taxpayer dollars to the plan.

“Third, we can increase member premiums, co-pays or deductibles,” Jones said. “”With hospitals boycotting the Clear Pricing Project, it will make it difficult to lower family premiums in 2020, which was a goal of the plan.”

Robert Broome, executive director of the State Employees Association of N.C., told The Charlotte Observer that “it’s a mixed bag” that while the CPP got 28,000 providers to sign on, 121 hospitals declined to do so.

SEANC recently launched a Facebook public-relations campaign and placed statements on its website aimed at persuading the boards of the state’s major health care systems to sign the contract. The Facebook messages tell the health care systems’ boards to “do the right thing ... sign the State Health Plan contract.”

Broome said that “for us, the fight continues, and we will not rest until we make health care affordable for the members of our plan.”

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