The leaders of the State Health Plan met Tuesday to debate whether to raise costs on North Carolina state employees who use certain health care providers.

No final decision is expected until this summer, but Tuesday’s meeting laid the groundwork for how the new model will work. The idea, in general, is that it will soon become much more expensive for people on the State Health Plan to go to certain specialists or surgeons, while at the same time becoming much cheaper — possibly free — to go to others.

“We’re not saying you have to change providers,” said Tom Friedman, the State Health Plan administrator. “We’re saying, if you want to save significant money, you can.”

The State Health Plan provides health insurance for more than 750,000 state workers, retirees and their family members. It’s facing a shortfall of hundreds of millions of dollars, however, driven by rising health care costs, limited financial support from the state legislature and years of frozen premiums for its members.

State Treasurer Brad Briner and other leaders of the plan voted last year to raise premiums for the first time in nearly a decade, instituting a new payment scheme based on people’s salaries. While costs went up for nearly everyone on the plan, they went up only slightly for the most lowly paid state workers. Premium increases for more highly paid state employees were larger.

At the same time, however, the state instituted new benefits including a new plan for certain types of surgeries. Hundreds of doctors and other providers partnered with the state, promising to do surgeries for far less than they’d normally charge, in exchange for having patients funneled into their practices by the State Health Plan.

State workers were then told they could have free surgeries at those providers — not owing a copay or coinsurance. At the same time, prices went up to use other providers not on the preferred list.

Now the state wants to expand that same model to all types of health care, other than primary care doctors. If the idea is approved, all specialists would be subject to the same rules: For certain providers, state employees would have to pay extra to keep their doctors. But for others, state employees could go get care for free, or at least a very low copay.

“We fundamentally have two short-term options,” Friedman said. “We can make everyone’s benefits worse and charge people a bunch more money for everything. Just uniformly flat. The other option there is to get physicians, doctors, hospitals to lower their prices.”

The state has taken that second option, promising to funnel its hundreds of thousands of members to a smaller group of providers who agree to charge the state less in exchange for a guaranteed stream of patients.

The strategy has angered some hospitals and providers around the state who aren’t among the state’s list of preferred providers for surgeries. Expanding that same strategy to all types of medical specialists is likely to invite similar reactions. But state leaders say they’re OK with taking the heat from health care executives, since in the end they believe this plan will lower costs for state workers and taxpayers alike.

“There are going to be losers in this transaction,” Friedman said Tuesday. “But it’s not going to be the members of the State Health Plan.”

How it works

The idea is that if, for example, the state would normally pay $30,000 for a procedure but can find someone willing to do it for $15,000, it can afford to erase the thousands of dollars in copays the member might otherwise have to pay — making the procedure free for patients — while still coming out ahead financially.

“The right thing to do is reward the member first, because it is the member who has to make the decision on where to get surgery,” Friedman said. “It’s really complicated and really hard to shop for surgeries when you’re in pain, when you need care. It is a scary, complicated thing. So we need to incentive, reward and support the member when they need health care.”

Briner said that in addition to helping funnel patients through the doors in those doctors’ offices, the state is also offering automatic preapproval in many circumstances to its preferred providers — an attempt to cut down the amount of time patients and doctors alike spend fighting with insurance to ensure a procedure or medication will be covered.

“We are allowing our providers to actually practice medicine, instead of practicing paperwork,” Briner said. “And in a lot of cases, that allows more access.”

The State Employee Association of North Carolina, which lobbies for state workers, hasn’t embraced the plans to raise costs on state workers but has also acknowledged the financial difficulties the health plan faces, and hasn’t opposed the new strategies being proposed to cut costs.

Suzanne Beasley, a lobbyist for the group, said at Tuesday’s meeting that they’ll keep pushing to see the contracts of providers who work with the health plan — believing that bringing public scrutiny on those costs would help drive down prices.

“SEANC is still holding the position that provider contracts be made public information,” Beasley said. Neither Briner nor any other board members responded.

Many new changes being made

Briner, a Republican who won election in 2024 and has been the state treasurer for slightly more than a year now, has taken drastic steps to reverse policies of former State Treasurer Dale Folwell, another Republican, who had been in office since 2017.

Among those choices was a decision, announced last week, to reopen bidding for North Carolina’s multibillion-dollar State Health Plan contract. Blue Cross NC had run the plan for decades but increasingly feuded with Folwell, who oversaw a switch to Aetna starting in 2025. Another switch could now potentially happen as early as 2028.

A spokesman for CVS, which owns Aetna, told WRAL last week that “we remain committed to improving the overall health and well-being of State Health Plan members.”

Aetna charged the state more than Blue Cross but also offered more in-network providers in urban areas where most state workers live, WRAL reported during the last contract battle. Friedman said Tuesday that providers in just 10 of the state’s 100 counties handled 70% of all State Health Plan visits last year. And in those big urban areas, he said, there’s so much competition that the state has options to pit providers against each other and find savings.

Regardless of which insurance company is in charge of administering the State Health Plan going forward, however, the state should be able to continue pushing forward with this new strategy to align itself with certain providers who promise lower costs.