North Carolina officials are suing hospital giant Atrium Health over what government leaders claim is an illegal effort to meddle in the State Health Plan’s new pricing program. As a result, plan officials are extending the upcoming deadline for state employees to choose their coverage options.

Open enrollment for the State Health Plan begins Monday. It will now end Nov. 6, the state said Friday. Meanwhile, the state is also asking for a judge to shut down Atrium’s new plan before then.

State Treasurer Brad Briner oversees the health plan, which provides insurance to more than 750,000 state workers, retirees and family members. 

The lawsuit stems from the health plan’s efforts to move to a preferred-provider tier system that is intended to help it become more financially viable. Atrium stands to lose patients to competitors under that system.

Briner’s lawsuit claims that a new effort by Atrium to incentivize state employees to stay with Atrium providers, when the new system goes into place next year, “single-handedly threatened the stability and long-term viability of the Plan.” 

An Atrium spokesperson said Friday they’re still reviewing the lawsuit but that, in general, they stand by their efforts to sidestep the higher prices the state wants to charge teachers and other state workers for using Atrium providers.

“We strongly disagree with the characterization that this program was intended to harm the financial stability of the State Health Plan,” an Atrium spokesperson told WRAL in a written statement. “Our focus has always been, and remains, serving patients and making care more affordable for North Carolina’s public servants and their families.”

The outcome of the legal battle could also affect patients of Raleigh-based WakeMed — which has entered an agreement to merge with Atrium — if that merger goes through. The deal is currently being reviewed by state and federal regulators. 

  Briner has been an outspoken critic of Charlotte-based Atrium’s effort to absorb WakeMed, which operates three hospitals and dozens more doctors’ offices around Wake County, although the lawsuit doesn’t address that merger. WakeMed and Atrium haven’t officially merged yet, but the deal recently cleared a major hurdle when the Wake County Commissioners voted to back it.  

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Atrium is part of one of the biggest hospital chains in the nation. WakeMed is the smallest of three major Triangle-area providers and says it needs Atrium’s financial backing to advance ambitious expansion plans.

Winners and losers in new tier system

The new health-pricing strategy, championed by Briner, seeks to drive State Health Plan members away from WakeMed and Atrium, by charging them higher prices to use those companies’ doctors but offering discounts at competing providers, including state-backed UNC Health.

Earlier this year, the State Health Plan approved that new concept for pricing. It divided healthcare providers including hospitals between new tiers called “preferred,” “access” and “non-preferred.” Members of the health plan who go to doctors at “access” providers will see their bills stay roughly the same as they have been. But going to “preferred” providers will earn members a discount, while members who go to “non-preferred” providers will be charged more.

Atrium and WakeMed were both put into the “non-preferred” tier by the State Health Plan earlier this summer, after Briner and other plan leaders voted to approve the changes. UNC Health and Novant Health are the state’s “preferred” providers. Briner said at the time the decision had nothing to do with his personal criticism of the proposed Atrium-WakeMed merger, and everything to do with other hospitals offering better rates for the state.

The idea is to steer the health plan’s hundreds of thousands of patients into healthcare chains that have agreed to charge the state lower rates, in part by using the threat of higher bills to convince people not to go to providers who didn’t agree to lower their rates.

Cristy Page, CEO of UNC Health, said Friday that her hospitals and other doctors offices are preparing for an influx of new patients next year when the new tier system starts and names UNC as a preferred option. “We are working hard behind the scenes to ensure all patients receive the same excellent care at every UNC Health location and close to home,” she said in a news release.

Members of the health plan could save thousands of dollars a year, or pay thousands of dollars more, depending on which doctors they decide to use.

The changes go into effect next year, after the current open enrollment period ends. But Atrium has recently thrown a wrench into the State Health Plan’s plans, rolling out a new strategy it calls its “Affordability Protection Program.”

Essentially, in an effort to stop its current state employee patients from leaving Atrium for competitors like Novant or UNC to chase the lower prices the State Health Plan is offering, Atrium will pay those patients to counteract the higher deductibles and copays they’ll face from the State Health Plan.

Atrium says on its website that State Health Plan patients who keep going to Atrium providers would actually pay less money than they would at a “preferred” tier provider, even though Atrium is in the “non-preferred” tier.

“The most important message we want State Health Plan members to hear is simple: we’ve got your back,” Steve Smoot, a regional president of the national chain Advocate Health, which owns Atrium, wrote in announcing the new program. “When you select a primary care provider during open enrollment, you can feel confident choosing or keeping an Atrium Health provider.”

However, while the patients themselves would benefit from Atrium’s payments, the hospital chain would still be charging the higher rates to the state.

Tom Friedman, the State Health Plan’s executive director, said Friday that if Atrium’s plan is allowed to happen the plan could be forced to raise premiums higher on all its members.

“We currently pay somewhere between 70% and 80% of the costs for care,” Friedman said in an interview. “And when folks go to Atrium, that is 70 or 80% of a higher number. So while they’re paying the members’ part of the bill, the rest of the bill — that we pay — is still the highest bill for services in the state. And that’s really stuff that drives up premiums.”

Briner said earlier this week at the monthly Council of State meeting of top executive branch officials he believed that Atrium’s plan was illegal, in addition to being bad for the state as a whole.

“We run the plan for our members’ benefit in the long run,” he said. “Their proposal is short-term oriented. Long-term, extremely costly. And so we can’t let it go forward.”

And on Friday he sued, asking a Wake County judge to put a stop to Atrium’s plans.

“State law assigns the treasurer, and the treasurer alone, the duty to set the [State Health Plan] copays, deductibles and coinsurance amounts,” Briner wrote in a news release. “Atrium has never been given this authority, yet it believes it can change these amounts simply by posting new ones on its website. That’s not how it works.”