NC’s State Health Plan switching who administers its members’ benefits, again

Once more, North Carolina state employees, retirees and their dependents will see a change to who administers their health plan.

North Carolina State Health Plan officials announced on Friday they had awarded the contract to administer health benefits for teachers, state employees, retirees and their dependents to Blue Cross Blue Shield of North Carolina. The plan also awarded the contract to administer pharmacy benefits to Blue Cross NC.

The State Health Plan covers about 750,000 people total — state employees, teachers, retirees and their families. Of those, about 570,000 are self-funded members, meaning the state pays their medical claims and prescription costs directly.

Both the third-party administrator and pharmacy benefit manager contracts cover this same group, comprised of active and retiree members who are not on Medicare Advantage plans, and who are currently served by Aetna and CVS Caremark.

Both contracts have an implementation period that runs from July through December 2027. The chosen insurers will begin administering the plan’s health and pharmacy benefits on Jan. 1, 2028. The contracts run through Dec. 31, 2030, with two one-year renewal periods.

The decisions, announced Friday, come after the State Health Plan opened both contracts for competitive bids earlier this year.

The plan had been in a silent period since the bids opened, which ended with the announcement.

The plan issued a request for proposals — an invitation for insurers to submit bids — on March 20, 2026, for the health administration contract, but cancelled it in mid-April after no bidders met the contract’s minimum requirements. A new RFP was issued before the end of that month.

Aetna, which replaced Blue Cross NC as the plan’s third-party administrator in 2025 following a competitive bidding process led by then-Treasurer Dale Folwell, is the plan’s current TPA. Blue Cross NC sued over the loss, but a judge ruled the process was fair. Aetna’s contract included an option to extend for two additional years, but the state opted instead to open a new bidding process.

At the time, when asked why the State Health Plan was seeking bids instead of extending the Aetna contract — as it had done numerous times with Blue Cross NC during its more than 40 years as the plan’s third-party administrator — Briner’s office provided a statement attributed to plan staff.

“This administration has different priorities and would prefer a contract that is more in line with those priorities,” the statement said.

The TPA role for the SHP contract includes issuing cards, processing claims, setting up technological systems and more. The TPA also establishes contracts with a network of providers and negotiates the prices paid to them for health care services. The administrator then sends claims to the state, which is on the hook for covering healthcare costs.

The bidding process ran in two stages: First, insurers had to attest they met 100% of the contract’s minimum requirements, including patient privacy and security compliance standards. The more detailed technical and cost proposals were not due until June. The contract also includes financial penalties for contractors that miss performance targets, a corrective action plan process and a possible $2,500-a-day penalty violations not listed in other sections of the contract.

The RFP document says in its mission statement that the plan is seeking a partner with technology and resources that will focus on core operations such as claims adjudication and network development, noting that some services, such as population health, will be handled by other contractors. Population health looks at the health outcomes of a group of people and the environmental, behavioral and social factors they share.

It says that the plan may elect to carve out other services over time and that the plan “does not seek a partner who agrees with the Plan’s requirements now but intends to convince the Plan to do things its way or adhere to existing infrastructures.” The RFP gives the State Health Plan more flexibility in designing benefits and more control in negotiations with providers, instead of giving that control to insurers.

Success by 2032, the RFP document says, would look like all members having access to primary care, mental health care, OB-GYN care, pediatric care and emergency support services in every county, as well as annual physicals, screenings and lab work. It also says, among other highlights, that there is a focus on access to quality care and cost containment, with members leveraging the plan’s preferred provider network.

The scoring approach differed from the plan’s prior TPA solicitation. The new RFP used a “best value” method, in which price was weighted significantly less than other criteria, such as network development, member experience and claims processing. An evaluation committee made up of plan employees, independent contractors and other reviewers ranked each bid.

A request for proposals for pharmacy benefits opened in mid-February.

CVS Caremark — which, like Aetna, is owned by CVS Health — is the plan’s current pharmacy benefit manager, which processes pharmacy claims and negotiates discounts with drug manufacturers on the plan’s behalf. The PBM pays the pharmacy, and the plan reimburses the PBM.

CVS Caremark has been the plan’s PBM since Jan. 1, 2017, and the current contract’s term is set to expire on Dec. 31, 2027.

In June 2025, the SHP said in a news release that it had reached an “untenable impasse” with CVS Caremark, accusing the company of refusing to honor its current contract. The plan alleged that CVS Caremark had not paid tens of millions of dollars in rebates — post-sale discounts negotiated with drug manufacturers — since 2023 and was attempting to rewrite the contract to boost its profits. Caremark, through spokesperson Shelly Bendit, said at the time that the company “has, and is committed to delivering on its contractual promises” to the plan, The N&O reported. In October 2025, the SHP announced that it had reached an agreement with CVS Caremark.

The plan divided the RFP for pharmacy benefits into three modules, allowing but not requiring the plan to choose multiple partners.

The three modules are:

In its mission statement in the RFP, the plan said it was “not chasing the biggest rebate guarantee” but instead prioritizing flexibility, control and transparency.

The new contracts come at a time when the State Health Plan leadership is implementing and has already implemented numerous changes.

The board of trustees recently approved a new four-tier provider network structure, under which some providers will be designated as preferred. Members who use preferred providers will pay less out of pocket, and the plan will also pay less for the care those providers deliver. On Friday, the board voted on what hospital systems would be classified as preferred.

Tom Friedman, the plan’s executive administrator, told The News & Observer in April that the rates negotiated in the preferred provider system “are specific rates between the entity and the State Health Plan,” meaning that whoever is the next administrator would load those into their system, giving the SHP “better transparency and kind of control over the rates.”

That would also mean providers would not have to renegotiate rates every time there is a shift of administrators.

The new rates laid out by the SHP via its contracts would supersede contracts laid out by the administrator. Any rates the SHP has not already set on their end would then go by default to the rates the insurer has established, said Friedman in April.

The transition to new contracts also come as State Health Plan members saw premium increases last year via a tiered system based on salary and higher deductibles. And on Friday, the board approved further premium increases.

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