The real state health plan crisis
By Adam Searing
North Carolina’s health plan for state workers is in trouble. Estimates differ, but shortfalls may be in the tens of millions and health plan administrator Jack Walker recently called for a $300-million taxpayer bailout in addition to sharply higher premiums, co-pays and deductibles for state employees.
In the current economic climate, North Carolinians who aren’t state workers are losing jobs by the tens of thousands, along with their health insurance. Should we then be worried about the millions it looks like we may have to spend on the state health plan along with yet another erosion of benefits for state workers?
The answer is “yes,” but for two reasons that are receiving no attention at all in the current debate.
First, the idea that a suddenly appearing deficit in the state employee health plan inevitably requires state workers to now pay higher premiums, co-pays and deductibles is outrageous. Tough times perhaps require workers to share a higher burden of costs, but this is a serious conversation for our entire state. The state health plan already compares unfavorably with many health options available in private industry, even accounting for current problems in the cost of employer-provided health insurance. And the cost of covering one’s family under the state plan – already around $500 a month – is prohibitively high compared to other states and private industry.
Making the state health plan even more expensive than it already is means a still harder time recruiting quality teachers, road engineers, insurance regulators, school nurses and state highway patrol officers – just to name a few of the critical jobs our state employees do every day.
The effect on the quality of life for all of us – and not just state workers – of the changes that are being proposed must be a part of the conversation on the state health plan. It’s easy to glibly talk about the necessity for “everyone” to sacrifice, but almost everyone in North Carolina knows personally or has contact with someone on the 660,000-member plan. Most North Carolinians want the best teachers, doctors and public health professionals educating our children, keeping us safe and making our state run the way we think it should. Skyrocketing costs and decreasing coverage in our health plan make that goal much harder.
Second, the state health plan crisis really highlights the fact that this is a problem for all health insurance in our state and not just state workers. Why is it that the state health plan is suddenly in trouble? This is no mystery. The fact is, the state health plan doesn’t kick people off after they retire – a substantial number of folks on the plan served years with the state and are now retirees who, like all of us, need more care as they get older. In addition, huge premiums for families have encouraged younger spouses and children of state workers to leave the plan for private insurance, which is often much cheaper, especially for children.
And this uncomfortable fact brings us to the biggest elephant in the room around the state plan crisis: North Carolina Blue Cross – which administers the state health plan for North Carolina – is making tens of millions in profits this year in its similar private insurance business while the state plan it oversees is losing millions. How can this be? After all, the same private nonprofit is running both the state and private individual insurance market.
The answer isn’t so hard – it’s known as “cherry picking” in the health industry. The state health plan must accept all state workers and charge them the same premium. It also charges the same premium to older retired workers – regardless of health status.
In contrast, Blue Cross prices its individual health coverage differently depending on the age and health status of whoever happens to be applying. For a state worker’s spouse in her early 30s with two young children, Blue Cross’ premiums are low. For a state worker’s spouse who is older, near retirement, and has high blood pressure, Blue’s premiums suddenly become unaffordable.
So the two largest groups of insured folks in the state – Blue Cross’s individual pool and the pool of state workers — have a drastically different makeup. Look closely, and it’s a sure bet that Blue has much younger and healthier North Carolinians in its individual plans as compared to the state employee pool. Of course, insuring younger, healthier workers costs much less.
This means that state employees and state taxpayers (think about that $300 million bailout) are, at least in part, financing the huge profits that continue to be made at North Carolina Blue Cross during this economic downturn. Any solution to help the state health plan needs to address these structural inequities in North Carolina’s insurance market and require N.C. Blue Cross to be an active participant in addressing N.C.’s state health plan problems. Otherwise, we are just continuing to feed profits at a private entity when the state needs every dollar it can get.
Adam Searing is the director of the N.C. Health Access Coalition.