By Beth Lawrence


State Treasurer Dale Folwell (R) and healthcare providers have ended a high-stakes standoff where state employees stood to be the losers.

Folwell and many of the state’s hospital systems were at odds over his proposed changes to the state employee’s health plan.

The plan covers more than 700,000 current and retired state employees, including teachers, and is managed by Blue Cross Blue Shield.

The Treasurer’s Office sent out a press release on Friday announcing an agreement.

“State Treasurer Dale R. Folwell, CPA, the State Health Plan ... and Blue Cross Blue Shield of North Carolina ... announced today that the Plan’s network for 2020 will consist of Blue Options Network and the new North Carolina State Health Plan Network. Combined, this network will consist of more than 68,000 providers,” the release said.

At issue was the amount of money the Treasurer’s Clear Pricing Project proposed to pay hospitals and providers as reimbursement for services.

N.C. State Rep Joe Sam Queen (D-Waynesville) understands what Folwell tried to do, but disagreed with his tactics.

“Folwell’s plan is a bit arbitrary and capricious. It erodes an already fragile safety net for state employees and teachers,” Queen said. “It may be part of a good idea but by itself it appears to be wanting.”

The original proposal called for the state to pay hospitals and providers the amount Medicare reimburses plus a further percentage. Medicare pays out 95 percent, according to Folwell’s first offer allowed providers 182 percent.

Providers were given until July 1 to join the plan. Most balked.

The two sides were at such loggerheads the deadline was extended. Providers were given a new contract period ending Aug. 5, and the compensation amount was increased to 196 percent. Again, providers stood their ground, and the second deadline passed.

By Aug. 9, word had leaked out that the treasurer allowed health care systems and providers that held out to retain agreements already in place with Blue Cross Blue Shield of North Carolina.

Queen sees Folwell’s tactics as gamesmanship.

“He set (reimbursement) at one level a few weeks ago, and then he pitched a second arbitrary reimbursement model,” Queen said. “He’s tapping on his calculator and throwing out a number and not asking anybody about overhead and cost shifting. That’s not what the director of the state health plan should be doing.”

If Folwell had not capitulated, state employees and some retirees would have found themselves going to out of network doctors and hospitals, paying out of pocket and paying higher prices for those out of network providers. Members would have been reimbursed but for an amount much less than an in-network provider.

The Treasurer’s Office said it created the new approach in an attempt to keep the health plan solvent, reduce costs to members and initiate more transparent pricing.

Under the old system, the plan was managed by Blue Cross Blue Shield, which negotiated prices for providers. Those prices were kept private.

According to Folwell, the old plan cost taxpayers and plan members over $3 billion per year. The state healthcare plan is 80 percent taxpayer funded.

“In order for you to consume something, you have to know the value and prices of what you’re getting,” Folwell told the Carolina Journal. “You can’t cut the cost of anything unless you know what it costs.”

He likened the existing system to going grocery shopping and receiving a large and complicated bill at a later date.

Folwell claimed that if reimbursements continued to be paid at rates in the old system, the health plan would run out of funds by 2023.

The Treasurer’s Office claimed that the Clear Pricing Project would save the state $166 million and members $34 million in out-of-pocket costs if all hospitals had signed on.

Cost shifting is the reason hospitals cited for their unwillingness to work with Folwell.

Cost shifting happens when a medical provider covers losses incurred by treating uninsured patients and passes those costs on to others with insurance. Providers charge the insured patient more for the same service than they charge indigent patients.

“Unpaid hospital costs have to be paid for the hospital to be sustainable, so that cost gets shifted to the state health plan and anybody with insurance,” Queen said. “We’re trying to fix that with Medicaid expansion. When we expand Medicaid and close the coverage gap cost shifting will stop.”

The issue became so contentious that some legislators, including some Republicans, introduced a bill to kick the issue down the road until 2022. The bill proposes a study committee that would suggest “a design for the State Health Plan and submit its final report no later than December 15, 2019.”

Reps. Josh Dobson, Julia Howard and William Brisson, all Republicans, along with Democrat Gale Adcock introduced House Bill 184. The bill passed the state House but has not passed in the state Senate.

Queen voted in favor of the bill.

“If this (The Clear Pricing Project) a good idea, it will stand the scrutiny of a study; then, we can roll it out with confidence,” Queen said.

Four hospital systems have agreed to the new reimbursement structure. Caro-Mont Regional Medical Center of Gastonia signed a contract with the state in late July. Other hospitals on the plan are: Randolph Hospital, Asheboro; Martin General Hospital, Williamston and North Carolina Specialty Hospital, Durham.

The treasurer’s office boasts that more than 27,000 providers had signed on to the plan as of July 16.

“We’re pleased that so many medical providers have joined us in opposing secret deals and higher costs for state employees,” said Folwell in a press release. “We’re also honored that so many understand what we are trying to do with the Clear Pricing Project and have decided to join the new network. But we realize that more work needs to be done to complete the network.”