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The State Health Plan must do a better job negotiating lower prices with
doctors, hospitals and pharmaceutical companies to avoid shifting a bigger
share of the rising costs to employees, said Jack Walker, who took over as
executive director of the plan last year.
Walker spoke before staff and faculty at the Hanes Art Center on July 14 at a
community meeting. Organized by Human Resources, the meeting gave employees the
chance to voice their concerns about the changes in the health care insurance
options they have available to them this year.
"Essentially, I work for the government, and I'm here to help you," said
Walker, who has himself and his wife on the state's family plan. "I know what
the out-of-pocket expenses are and I feel it like you do and I don't want them
to go up."
Employees' out-of-pocket costs go unchanged for the State Health Plan in
2000-01, but increases range from 28 percent to 136 percent for employees
choosing state-offered HMOs.
While answering questions, Walker touched on the many challenges facing the
system in the years ahead while reviewing changes that the N.C. General
Assembly approved for 2000-01.
The state commissioner of insurance offered the executive director's post to
Walker last year, and Walker left a similar job with the state of Louisiana to
take it.
"I thought I was going to have an easy time when I came here," Walker said.
"After several months of looking at financials, I said, `You guys have got a
problem here.'''
Consider:
* The State Health Plan pays out about $20 million worth of benefits each
week. At that rate, the plan is expected to run a deficit between $140 million
and $150 million. If that should happen, the plan's current cash reserve of
$188 million would be reduced to $47,000 by Sept. 30, 2001.
* The State Health Plan currently pays a $6 dispensing fee for each covered
prescription. In Louisiana, the fee is $2.
* In North Carolina, the State Health Plan receives a 10 percent discount on
generic drugs. In contrast, the state of Louisiana receives a 50 percent
discount on generic drugs.
* Women between 18 and 55 have higher health costs than men, and women
represent two-thirds of the employees enrolled in the State Health Plan.
* The state plan pays between 160 percent and 180 percent of the rate Medicare
pays to doctors (Walker said he would like to get that amount down to 120
percent through negotiations).
Walker said several bills passed in the General Assembly this session will
help.
For instance, the budget provides $48 million in case the state plan needs the
additional funds to meet health-care expenses.
Other legislation will reduce the dispensing fee from $6 to $4. After the
2000-01 fiscal year, the legislation gives authority to the executive
administrator (Walker) to negotiate with pharmaceutical companies to get the
best prices. The legislation also allows Walker to hire a "pharmacy benefit
manager" to assist with negotiations and to implement systems that will control
fraud and abuse.
The changes are expected to produce savings of about $600,000 per week this
year and more than $1 million weekly during the 2001-02 fiscal year.
At the same time, the following changes were made to enhance coverage:
* Improved retirement coverage that provided for fully paid (employee-only)
health coverage for employees who retire with five or more years of service.
The legislation overturns a measure passed in 1996 that would have created a
tiered premium, with the retiree paying part or all of the premium.
* An expanded wellness benefit that authorizes payment for annual Pap tests
for women regardless of age. This benefit became effective Aug. 1.
Walker said he had little flexibility in adjusting benefits up or down in
accordance with available revenues and changing costs. Benefits are set by
statute, and codes must be followed, he said.
Health maintenance organizations must operate under the same set of
state-imposed rules, which is one of the reasons why so many of them are in so
much financial trouble that they are dropping out of the list of state-offered
HMOs.
This past year, Walker said, the HMOs offered benefits that were 10 percent to
15 percent richer than the State Health Plan. At the same time, the HMOs have
administrative overhead that represents about 15 percent of total costs.
The one way HMOs have to reduce losses is to raise premiums, Walker said. But
the effect of raising premiums is to chase away the clients they can least
afford to lose -- the healthiest clients who use their services the least.
In July, the Doctors Health Plan and the Generations Family Health Plan
announced they would not be among the HMO options for state employees for the
coming enrollment year, which begins Oct. 1.
Other HMOs that had dropped out earlier are Blue Cross/Blue Shield Personal
Care Plan, Partners of Optimum Choice, Wellness Plan of North Carolina,
QualChoice and United Health Care.
The only HMO plans that will be offered are WellPath Select and Prudential
Health Care. The only other option is the State Health Plan.
Change plans by Sept. 1
Any University employee currently enrolled in a plan that will be
discontinued must enroll in an available plan by Sept. 1 to keep insurance.
Employees whose current plan will be offered next year and who do not want to
change plans do not need to do anything.
All employees were scheduled to receive this month at their home address an
"It's Your Choice Booklet" that explains in detail their health insurance
options. For more information, call the Benefits Office at 2-3071.
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