Most State Health Plan participants set to gain 'no-cost surgical benefit'

The majority of State Health Plan participants will become eligible in October for "an innovative no-cost surgical benefit" through a new partnership with a Dallas-based healthcare network.

Treasurer Brad Briner said the plan involves Lantern, a Specialty Care Platform, and a network of surgeons and specialists it is assembling in North Carolina that includes the Triad.

The state Treasurer's Office oversees the SHP, which covers nearly 750,000 members comprised of teachers, state employees, retirees and dependents.

However, for the Lantern plan, Medicare recipients are not eligible, which reduces the number of potential participants to about 550,000.

The "no cost" in this instance signifies the SHP will cover the surgical cost for members that they normally would be responsible for under the typical preferred provider organization (PPO), such as currently with Aetna.

"Our specialty care platform focuses exclusively on complex, high-cost care — surgery, cancer and infusion therapy — which make up 50% of healthcare spending," Lantern said.

The first phase will be focused on about 1,500 orthopedic procedures, ranging from shoulder surgery to knee replacements, that typically are scheduled rather than resulting from an emergency.

"Though most people don't need surgery often, when they do, it's a stressful time and finding the right surgeon is important," Lantern chief executive John Zutter said in a statement.

"We focus on building a network of the highest quality surgeons and connecting people to the right one, at an affordable price, so they get the best outcome."

The state Treasurer's Office touts the benefit as "no-cost, high-quality" healthcare that is a key cog "of the efforts to reduce costs for members and help overcome the (SHP) budget deficit."

The current SHP deficit is $500 million deficit with a potential loss of as much as $900 million in fiscal 2027.

"Our team has talked to a lot of members over the last year, and we are committed to improving our plan design through higher quality choices at better rates," Briner said in a news release.

"Investing in more primary care and waiving the cost of surgery for members through this new partnership is something we're really excited about."

How it works

Lantern is expanding its N.C. network of surgeons and specialists who have agreed to treat SHP members.

Among the providers Lantern is recruiting are physicians working for the OrthoCarolina and Raleigh Orthopedics practices, as well as those in particular in the Triad, Charlotte area and Hickory.

The enticement for healthcare providers to join the Lantern network is in large part because it provides a higher reimbursement rate than federal Medicare and Medicaid plans.

"Like a hospital in Greensboro may have an excellent reputation in hip replacement surgeries," according to the treasurer's office.

"We want people to go there because they will have better outcomes. What that hospital will do is say 'we'll give you a discount on those surgeries because you will direct patients here and we will always have a full surgical schedule.' "

Plan members are incentivized to use the Lantern network "to ensure better outcomes and bigger savings."

In return, SHP provides leverage to the Lantern initiative.

"That means we are getting a much better price for it, and we are giving that better price to our members in the form of no cost," according to the treasurer's office. "The SHP would also likely be spending less per surgery by getting the bulk price from the provider."

Lantern also pairs members with a dedicated care team, including care advocates and nurse navigators, "for the entirety of their care journey."

"I've seen firsthand how access to high-quality, affordable surgical care makes all the difference in someone's recovery," said Dr. Steve Lucey, a Greensboro-based orthopedic surgeon and member of Lantern's medical advisory board.

SHP members will be getting more information about the partnership leading up to the launch.

The biggest challenge that the SHP and Lantern may face is overcoming participants' concerns about another third-party group getting involved in their healthcare, said John Quinterno, principal with South by North Strategies Ltd., a Chapel Hill research company specializing in economic and social policy.

"One of the key sources of frustration and cost in the U.S. healthcare system is the growing involvement of third-party actors that don't actually provide care and insert themselves between patients and health care providers," Quinterno said.

"In many instances, these entities exist to throw up obstacles to care, leading to all sorts of problems for both patients and providers.

"The question I would have is what exactly Lantern is being asked to do under the terms of its contract and how it will be compensated," Quinterno said. "These details will determine the extent to which this change helps or hurts members of the State Health Plan."

Health insurance premium decision pending

Health insurance premium increases for about 300,000 state government employees in 2026 are part of a proposal approved in May by the SHP's Board of Trustees.

A final decision will be made at the board's Aug. 15 meeting.

The board said the planned premium, higher deductible and co-pay increases will play a crucial role in addressing the plan's deficit.

The SHP is North Carolina's largest purchaser of medical and pharmaceutical services.

Briner made the health plan's precarious financial status a major focus of his 2024 campaign.

Particular areas of cost-cutting focus are orthopedic surgery, surgical eye care, maternity care, weight-loss medication and surgery.

State health plan staff recommended in February that all annual premium costs go up in 2026, with the percentage increase based on annual salary.

For example, recommendations were for monthly premium costs to rise $20 for individuals and families for those making $40,000 or less a year. The proposed increase would be $25 for those making $40,000 to $65,000, $35 for those making $65,000 to $100,000, and up $50 for those making more than $100,000.

Some pricing insight

The SHP is recommending a three-prong approach to reducing its deficit: increase employer contributions; ask providers to reduce their reimbursement rates; and raise premiums for state employees, which would be the first increase since 2018.

The N.C. House mini-state budget bill — House Bill 125 — that cleared the legislature Wednesday adjusts, retroactive to July 1, the annual employer contributions by the state to the SHP for each covered employee becmes a maximum of $8,500.

SHP staff recommended in February significant increases in copays, deductibles and out-of-pocket maximums for both the 70/30 and 80/20 plans, as well as cost hikes for prescription drug and formulary costs.

For example, the annual deductible for active and non-Medicare members would double from a range of $1,500 to $4,500 in 2025 to $3,000 to $9,000 in 2026 for the former 70/30 plan now branded as standard. That plan has come with a lower premium fee.

The increase is not nearly as sharp for the former 80/20 plan now known as plus, going from a range of $1,250 to $3,750 to a range of $1,500 to $4,500. That plan comes with a higher premium fee.

For the standard plan, a primary care provider office visit would increase from a range of $0 to $45 to a range of $15 to $50. For the plus plan, the visit cost would rise from a range of $0 to $25 to a range of $10 to $40.

There also would be a significant uptick in members' share of prescription costs.

Under the health plan's Medicare Advantage administered by Humana, members will have a $100 increase in the pharmacy out-of-pocket maximum for 2026.

"To keep benefits stable, the plan will split the medical and prescription drug plan,' according to the news release. "It will continue to be administered by Humana and will save the Plan $70 million in 2026."

Medicare Advantage plan members will receive some duplicate communications and two identification cards.

Plan members will receive more information regarding the changes prior to the 2026 Open Enrollment period that takes place Oct. 13-31.