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University employees enrolled in the State Health Plan can expect to see some
combination of higher out-of-pocket premiums and reduced benefits this fall.
No one knows for sure what will happen until the N.C. General Assembly approves
its 2001-2003 biennial budget this summer.
But changes are likely to be more severe than employees enrolled in the N.C.
Teachers' and State Employees' Comprehensive Major Medical Plan (State Health
Plan) have seen in a long time.
Jack Walker, the plan's executive director, spent much of the past week
spelling out the plan's fiscal troubles and outlining steps to address them.
Over the current fiscal year, the plan has raked up operating losses at the
rate of millions of dollars every week, Walker has said. Left unchecked, the
deficit could reach $780 million by 2003.
Of more immediate concern is making sure the plan does not run out of money by
this summer, Walker said. Those concerns intensified earlier this month when
N.C. Gov. Mike Easley decided to freeze the $48 million reserve the General
Assembly set aside last year to make up for a possible shortfall of revenues in
the State Health Plan. That money is now being held in escrow in case it is
needed to help make up a state budget shortfall for this fiscal year now
estimated at close to $800 million.
Walker met with his board on Feb. 15 to present the proposals he will recommend
to state legislators for the upcoming fiscal year.
According to media reports, to reduce losses this fiscal year Walker has
proposed cutting fees paid to doctors on April 1 and the fees paid to hospitals
by May 1. Over the next two years, Walker hopes these reduced payments to
doctors and hospitals will net a cumulative savings of $155 million.
Walker says he plans to ask the legislature to consider increasing premiums for
family coverage and doubling deductibles. Currently the deductible is $250 per
each person covered. Walker said premiums could rise 22 percent on Oct. 1 if
cost-cutting measures are approved. Otherwise, employees and their families
could face 50 percent rate hikes.
All of his proposals must be approved by the legislature. His plan to reduce
fees payments is expected to encounter strong resistance from hospital and
doctors before that can happen.
JoAnn Pitz, the University's director of benefits, said it is too early to make
any predictions about how high premiums could be raised or how much benefits
could be affected when the General Assembly makes its decisions.
In the meantime, the University's Human Resources office -- in conjunction with
the Faculty Council and the Employee Forum -- will conduct a survey this spring
to find out what employees here would find least objectionable, Pitz said.
Pitz said Human Resources wants to find out what University employees would
prefer to see in the way of changes in the plan. The hope is that survey
results could be made available for legislators to consider while they are
deciding what to do, Pitz said.
The state's fiscal year begins July 1. Permanent changes in the health plan,
however, may not go into effect until Oct. 1, the start of the new year for the
health plan.
Past premium increases
If a premium increase is approved, which now appears likely, it will be
only the third time employees have been required to increase their
out-of-pocket expenses for the health plan since 1989.
In 1991, monthly premiums for family coverage increased from $152.24 to $216.18
and did not go up again until 1999 when they increased to $281.04, still the
current charge.
Monthly premiums for parent-child coverage increased from $63.50 to $90.12 in
1991 and remained the same until 1999 when they increased to $117.16, Pitz
said.
Employees working 75 percent time or more do not pay any out-of-pocket premiums
for their own coverage.
In the same years dependent premiums rose, the state increased the amount it
set aside for each employee covered under a health insurance plan.
The same contribution is offered to each employee regardless of the level of
coverage or type of plan the employee selected, Pitz said.
In 1991, for instance, the state's monthly contribution for each employee
enrolled in a health plan increased from $107.90 to $144.60 and stayed the same
until 1999 when it increased to $187.98, still the current amount.
The rise and fall of HMOs
All these changes in the State Health Plan have occurred during a period
that has seen the rapid rise and fall of health maintenance organizations
(HMOs) in North Carolina.
In 1989, there were only two health maintenance organizations that state
employees had the option of joining, Pitz said.
By 1993, the number of HMOs had grown to six, then to seven in 1995 before
mushrooming to 12 in 1997.
A year ago, eight HMOs dropped out of the plan and the number of HMOs available
to state employees dwindled to three.
More recently, Wellpath Select -- one of the three remaining HMOs still offered
-- announced it plans to drop 13 counties from its plan in early March. The
State Health Plan is now in court to block the action.
Even if Wellpath prevails, few University employees enrolled with Wellpath
would likely be affected because most of them live or work in Orange County
where the HMO would continue to provide service.
The counties where Wellpath seeks to discontinue services are Franklin,
Guilford, Harnett, Iredell, Johnston, Lincoln, Nash, Person, Randolph,
Rockingham, Rowan, Stanley and Warren.
If Wellpath prevails in court, the inevitable result will be for more employees
to return to the State Health Plan.
In fall of 2000 about 1,000 University employees returned to the State Health
Plan after their HMOs were discontinued.
As of January, about 8,100 University employees were enrolled in the state
plan, compared to 1,041 enrolled in Wellpath and 364 in the Prudential HMO,
Pitz said.
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