North Carolina State Treasurer Brad Briner speaks during a State Health Plan Board of Trustees meeting Friday, July 10, 2026, at the Department of State Treasurer in Raleigh.
Travis Long
tlong@newsobserver.com
Raleigh
Due to rising medical costs and other factors, the State Health Plan’s financial reality for the end of the year looks grim, with a cash balance lower than in any quarter since at least 2023.
The board on Tuesday voted in favor of a plan that would address the plan’s projected low cash balance using a retiree reserve fund that would need to be paid back and would carry interest. That vote was unanimous.
The financial diagnosis comes after the plan’s Board of Trustees voted last year to increase 2026 premiums for most state employees, and approved new benefit changes in July while raising 2027 premiums. It also comes as the legislature provided $380 million more than the plan had projected over two years.
Tom Friedman, the executive administrator of the State Health Plan, said the combination of members getting sicker and services like emergency room visits and inpatient care are getting more expensive, contributing to the financial decline.
“If that continues on the same track, we will be very much limping into 2027, where I think had things gone to plan after the benefit changes, we would have been in a pretty strong spot,” he said on Monday. “But I do think it reemphasizes why we need to get the cost of healthcare down and not just purely treat it like a revenue problem like we did in 2026.”
Projected negative cash balance
While unanimous, the vote to use the Retiree Health Benefit Fund to address the low cash balance didn’t come without debate. Board members approved increasing the monthly contribution of the fund to the State Health Plan from $300 to $600 per retiree per month from July 2026 through December 2026.
Kristin Walker, a nonvoting board member appointed by the governor who is also the state budget director, urged caution in relying on the retiree fund and suggested the board consider permanently increasing how much the fund pays the plan for each retiree if retirees cost more than the plan now receives for them.
“I don’t get a vote, but I would suggest caution as we make this maneuver,” Walker said.
“I’m not saying the plan isn’t on a better path and isn’t gonna face a cash crunch. I’m just saying let’s not go too all in on the solution to this,” she said.
The increase would not affect what members pay.
In January, the contribution will drop to $378 per retiree per month, as the board approved in July. The move would bring in about $415 million, according to the State Health Plan.
The plan’s cash balance halfway through 2026 stood at $493 million, according to plan data. For the third quarter of 2026, the data showed a $298 million cash balance.
If current trends continue into 2026’s final quarter, the plan could run out of money by late 2026 or early 2027, according to the State Health Plan.
Data presented on Tuesday showed cash dipping below zero around late December and falling to about negative $150 million by late January 2027.
Deficits have become a recurring problem. Republican former Treasurer Dale Folwell kept premiums flat for active members for years, drawing down the plan’s reserves, and cut coverage of GLP-1 weight-loss drugs such as Wegovy, which he said were straining the plan because of their hefty price tag. But the problems persisted. When Republican Treasurer Brad Briner took office, the plan was projected to run out of cash in 2026, ending that year about $87 million in the red and 2027 about $650 million in the red.
A big question remains whether the plan’s new preferred provider program, which sorts hospitals and doctors into tiers based on the discounts they offer and charges members less to use cheaper ones, will deliver the savings that plan leaders are counting on. Leadership has pitched it as a key piece of improving the plan’s finances.
Impact of AI
Friedman also said that some providers are using artificial intelligence to help with medical coding, which could also be impacting the State Health Plan’s financial state.
Medical coding consists of reviewing treatments and procedures and codifying them for medical billers who convert those codes into insurance claims, according to the American Academy of Professional Coders.
Friedman said some providers have switched to AI for coding “to optimize” billing. He said that there are specific rules governing what patients can be charged for during a visit, but that AI is refining medical coding based on patient data that “is definitely optimized toward (providers’) revenue.”
The State Health Plan covers around 750,000 state employees, as well as retirees, teachers and their families.
This story was originally published October 27, 2026 at 11:54 AM.
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Luciana Perez Uribe Guinassi is a politics reporter for the News & Observer. She reports on health care, including mental health and Medicaid expansion, hurricane recovery efforts and lobbying. Luciana previously worked as a Roy W. Howard Fellow at Searchlight New Mexico, an investigative news organization.