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The State Health Plan currently covers over 720,000 members. The State Health Plan currently covers over 720,000 members.

The State Health Plan currently covers over 720,000 members.

By Elizabeth Thompson July 20, 2019

Do State Health Plan changes deny state employees access to care?

Hospitals have rallied against Republican State Treasurer Dale Folwell’s new health care program, saying it will hurt state employees.

In a recent paid advertisement in The News & Observer, the North Carolina Healthcare Association, which lobbies for hospitals and other health-care providers, said the changes coming Jan. 1 "will DENY North Carolina state employees, retirees, and their families of in-network access to critical healthcare services."

The program, called the Clear Pricing Project, was designed by Folwell to increase transparency and cut spending on the North Carolina State Health Plan. The deadline for health care providers to register for the program was July 1.

The State Health Plan covers state employees, teachers and retirees and spends about $3.3 billion a year on its 720,000 members. Most of that money, 80%, comes from taxpayers.

A third-party insurance company, Blue Cross Blue Shield of North Carolina, currently administers the State Health Program by paying providers based on negotiated rates that are kept confidential. Folwell’s project would take the power to negotiate rates away from hospitals and set rates based on what Medicare pays providers, plus a 77% markup. Because of this, many hospitals have refused to sign on to the new health-care network created by the project.

"The decision to provide health care to teachers and state employees rests with hospitals and doctors… the State Health Plan is not going to pay bills when it doesn’t know what it’s paying for," Folwell said in a statement to The News and Observer. "If a doctor or hospital goes out of network, it will be that medical provider’s decision not to provide care to state workers at almost twice the reimbursement rate of Medicare."

Proponents of the project say it could save state employees $57 million a year in out-of-pocket costs and premiums and the program $258 million a year in reduced fees.

But opposition to the plan made news when the Greensboro News & Record reported that in an email to state leaders dated July 1, Frank Kauder, the assistant director of finance for Moses Cone Hospital in Greensboro, told state officials to "burn in hell." He even went on to attack the Republican Party, saying "...poor people generally don’t vote for your party, so you want them to die."

Why we’re checking this

We check claims that are widely shared or published; are about a topic of concern to many of our readers; can be proven or disproven through facts; and could cause people to act or vote in a certain way. This topic met all the criteria.

The health care proposition is so controversial that even members of Folwell’s own party have proposed a bill in the state legislature that would delay its implementation until 2022. House Bill 184 is sponsored by Republican Reps. Josh Dobson, Julia Howard and William Brisson and Democratic Rep. Gale Adcock. It was passed in the state House, but has yet to be passed in the more conservative state Senate.

The newspaper ad aims to convince people to lobby their legislators to pass the bill.

What it means for hospitals

Many state hospitals are not happy with the project since the fixed rates set by Folwell do not provide enough money for them to pay extra expenses, such as 24/7 emergency rooms and people who cannot afford to pay for their hospital visits.

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"What you’re effectively asking hospitals to do is sign a contract with them performing the same services for the same number of people for less," Aaron McKethan, a professor of population health sciences at the Duke University School of Medicine and the former chief data and analytics officer for the North Carolina Department of Health and Human Services.

Signing this contract could also put hospitals on a "slippery slope," McKethan said. Once hospitals have compromised for one state-set rate, they fear that could give the state the power to change the rates whenever it wants. For this reason, many hospitals and doctors across the state have refused to agree to join the State Health Plan’s new network.

"The new State Health Insurance Plan will not pay what it costs to provide patients’ care," Doug Allred, communications manager for Cone Health, which encompasses Moses Cone Hospital, said in a statement to The News & Observer. "Instead, beginning on Jan. 1, 2020, patients would be left with the rest of the expense, or hospitals would have to reduce or cut services that patients rely on. We don’t think that is right. Neither do most other hospitals in the state."

How would this affect state employees?

If these health care providers do not sign on to the new network, they will be out-of-network providers which are not covered the same as in-network providers.

Unlike in-network providers, out-of-network providers do not sign contracts with a specific insurer. In-network providers are less expensive than out-of-network providers. People who use out-of-network providers can either choose to apply for out-of-network benefits, in which their insurer assists them in paying for extra out-of-network costs, or pay for their visits directly.

"My biggest concern is the number of consumer/employees who are going to find themselves in and out of network situations with a very high cost responsibility," Dan Gitterman, professor of public policy at UNC-Chapel Hill, said in an email interview.

McKethan said he was worried about state employees going to an institution that is in-network only to find out after the fact that the physician they saw is out-of-network, which would be an unexpected cost.

However, if patients avoid out-of-network providers, they could be depriving themselves of necessary medical attention, Cynthia Charles, a spokeswoman for the North Carolina Healthcare Association, said in an email interview. This could especially hurt people in rural counties who may only have a single hospital in their vicinity, McKethan said.

"It is not unreasonable to assume that those out-of-network penalties represent significant financial obligations that may force plan members to forego much needed care and effectively cut off their access to critical, affordable health services," Charles said.

However, the State Employees Association of North Carolina supports the treasurer’s plan because of its transparency and more affordable costs. SEANC even called on the North Carolina Association of Educators to more publicly support the plan.

Our ruling

The health association’s claim says Folwell’s plan would "DENY North Carolina state employees, retirees, and their families of in-network access to critical healthcare services.

Because Folwell’s health-care design is unattractive to health-care providers, many doctors and hospitals have not signed on to his insurance program.

Because of this, Folwell’s changes would cause some State Health Plan members to lose in-network access to providers, which would most affect people in rural areas who don’t have an in-network provider in their vicinity. However, the statement leaves out the fact that members would only lose access because providers — including members of the very interest group making the claim — will not sign on to the plan. Additionally, many State Health Plan members would actually save money in out-of-pocket costs that they pay toward their insurance.

We rate this statement Half True.

This story was produced by the North Carolina Fact-Checking Project, a partnership of McClatchy Carolinas, the Duke University Reporters’ Lab and PolitiFact. The NC Local News Lab Fund and the International Center for Journalists provide support for the project, which shares fact-checks with newsrooms statewide. To offer ideas for fact checks, email [email protected].

Our Sources

Cone Exec roils State Health Plan controversy with blunt email by Taft Wireback, July 10, 2019.

Email interview with State Treasurer Dale Folwell, July 15, 2019.

Email interview with Doug Allred, external communications manager at Cone Health, July 15, 2019.

Email interview with Cynthia Charles, vice president of communications and public relations of the North Carolina Healthcare Association, July 11, 2019.

Phone interview with Aaron McKethan, professor of Population Health Sciences in the Duke University School of Medicine, July 12, 2019.

Proposal might save NC $300M in health care costs. Hospitals say it’s a bad idea by Travis Fain, October 26, 2018.

SEANC calls on NCAE to support Clear Pricing Project, June 21, 2019.

Do State Health Plan changes deny state employees access to care?

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