Medicare rates will rise for some in State Health Plan

(Carolina Journal) – For North Carolina's older workers and retirees in the State Health Plan, rates on the Medicare Advantage plans will increase, the Board of Trustees says.

The panel also on Friday discussed a new tier system for providers in the state.

The Humana Medicare Advantage Plans have nearly 177,000 enrolled members.

Changes in the Medicare Advantage Plan will save the Plan $54 million, close to closing the projected $58 million gap for 2027.

"I appreciate that this is not going to be wildly popular, but as we work to close that gap, this is something we need to do to make sure that we are financially sustainable," said Tom Friedman, executive administrator of the State Health Plan.

It was noted that there haven't been significant changes in the plan for at least five years or longer. The board indicated it has heard and respects the feedback from members about affordability across many areas. First-term Republican state Treasurer Brad Briner, charged with oversight of the plan, said the biggest challenge is that medical expenses continue to rise.

"So, in the spirit of we're all in this together, which I think we sincerely have to be, we think this proposal is prudent from that perspective," Briner said. "But I understand that it's not pleasant."

Out of pocket maximums for the Base Plan will rise from $4,000 to $4,500 and from $3,300 to $3,700 on the Enhanced Plan. All other copays will rise as well, including Part B Drug Co-pay, which Friedman said is a "tremendous cost driver of the program" costing thousands of dollars. The copay will go from $0 to $50 on both plans.

Jackson Cozort, director of government relations at the North Carolina Retired Governmental Employees Association, told Briner, Friedman, State Health Plan staff, and board members that while he acknowledges that they inherited a "very large ship that had a very large hole," they have grave concerns regarding the substantial increase being proposed for retirees and other members.

"For many retirees, healthcare costs are not simply another line item in their household budget," he said. "They're among the most significant expenses that they face. They live on fixed incomes. Their pensions have remained fixed while cost continues to rise for not just healthcare but literally everything else."

Suzanne Beasley, director of government relations for the State Employees Association of North Carolina, agreed with Cozort, adding that it has been a long time since retirees have received a cost-of-living adjustment, and that their buying power is down 30%.

"This is going to be probably pretty unbearable," she said.

Medicare Advantage Plan premiums for 2027 will be voted on in July. Changes to Medicare Advantage Plans will become effective on Jan. 1.

Proposed tier system

Proposed 2027 benefit changes for active non-Medicare members were discussed, including the implementation of a new provider tier system that is broken down into Preferred, Access, Non-Preferred, and Out of Network providers.

"We are asking our members to become shoppers in health care, and we've never asked them to do that really before," Briner said. "We've all just kind of taken what we've been given and assumed that that was the best for us. And we can't assume that anymore. We have to look around for a better price, we have to respond when providers give us a better deal, and we need to educate all of our members as much as we humanly can to all those choices."

Friedman said out of pocket costs for members have risen up to $400 since 2022, with almost 140,000 members spending $2,000 or more out of pocket, which he said is not sustainable.

If these difficult choices aren't made now, he said things will become more expensive.

A $1.3 billion deficit was projected in 2027, but changes implemented by the State Health Plan board and the General Assembly were able to reverse this trend and bring the plan about $30 million above its reserve rate, according to Friedman earlier this year.

The plan's original projected deficit was $507 million in 2026 and between $800 million and $900 million in 2027.

The goal of the tier structure is to have as many members as possible to use preferred providers, which will save the State Health Plan and the member the most money, with an estimated savings of one-third of out-of-pocket costs. Members who use access providers, which are mainly in rural areas, will basically have the same copays and deductible as they do now.

Friedman stressed that the preferred provider grouping is not an attempt to reduce rural providers and that the program itself is evolving and using Lantern, which has 194 providers.

He added that they met with every major health system provider in December and repeatedly stressed that there will be "winners and losers" as far as providers are concerned. Those who become a preferred provider will see the most members and those who are not will see less.

Briner said they are ready to hear comments from providers about how the system isn't fair but asked members to ask their provider one question if they are in a nonpreferred or out-of-network category.

"If your provider tells you that they're not in the non-preferred tier and they are not happy about it, ask them one question: why didn't you value my business?" he said.

Friedman noted that emergency room coverage will be the same cost across all tiers and there will be a very robust transition-of-care plan in place for those using maternity/NICU services, cancer, and transplant treatments.

Contract negotiations are still ongoing and will be voted on at the board's July 10 meeting. Briner said it isn't too late for a provider to be added to the preferred tier. In addition, 2027 premium rates, a third-party administrator and pharmacy benefit manager will be voted on as well.

Also at Friday's meeting, the board approved its 2026-32 strategic plan focusing on three priorities: protecting affordable premiums and stable benefits, helping members achieve better health, and ensuring members have access to care.

The initiatives are designed to improve member health outcomes while strengthening the plan's long-term financial sustainability.