Pardon me if I’m skeptical of Treasurer Folwell’s motives in the current State Health Plan debate

By: - August 1, 2019 5:00 am

There’s been a great deal of heat but not a lot of light in recent weeks surrounding state Treasurer Dale Folwell’s “Clear Pricing Project” for the State Health Plan (SHP) – an initiative that has led physicians and hospitals to leave the plan in droves.

Here are some important truths about the issue that have not been widely reported – much less understood by many of the state employees whose lives stand to be disrupted.

First, the key date for state employees wondering about the standoff between Folwell and providers is not January 1, 2020, when the new plan begins; it is October 1, 2019 when open enrollment begins. Folwell must clearly and definitively communicate what health costs will look like for state employees, and how his plan will supposedly save them $65 million annually by October 1.

Second, while Folwell says SHP has $34.4 billion in unfunded liabilities, this number assumes the total cost if all current employees retire at once, plus the cost of current retirees. The much more relevant figure is the annual SHP funding needed vs. actual funding. For FY 2017, the State Controller’s Annual Financial Report showed the SHP annual shortfall at around $390 million.

This is a hole that has been made much harder to address by the numerous tax cuts enacted by the General Assembly since 2013 – cuts have cost state coffers at least $2.8 billion each year. Folwell has been a supporter of these tax cuts and the new income tax cap amendment adopted last year.

While Folwell has been up front about his effort to address the SHP’s shortfall through his Clear Pricing Project which offers lower reimbursement rates to health care providers, he has been less transparent about other efforts to slash costs.

Since he took office in 2017, Folwell has repeatedly advanced or acquiesced to policies that would ultimately reduce the number of people on the SHP rolls.

In May of 2017, for example, state employees received an email and letter sent via “junk mail” rate postage instructing them to resubmit a copy of the first page of their tax returns, or children’s birth certificates in order to prove they are not fraudulently covering spouses or dependents under the SHP.

After receiving the letter, I for one thought that it was a scam since it had all the telltale signs, and I had already recently submitted my tax return to prove that my children are my children, and are eligible to be covered on my plan. Folwell’s letter said I had to submit copies of their birth certificates by July 31 through an online portal, or my children would be removed from my health insurance plan on August 1.

Why couldn’t this information request for the audit have waited for the open enrollment period that would begin a few months later? Why wasn’t the letter sent via more legitimate “first class” postage?

Six hundred people were removed from the SHP for the rest of 2017. Of that number, how many were actually fraudulent?

Folwell followed this questionable move up by taking no position in June 2017 when the General Assembly passed a law eliminating health coverage in retirement for state employees and teachers hired after January 1, 2021.

Then, in December 2018, just weeks before another massive corporate income tax cut was to take effect, state employees received a letter from Folwell with their new insurance ID cards urging them “help sustain this benefit” by, in effect, becoming more conservative health care consumers.

This, in a state that has the lowest corporate tax rate of states that have one, but ranks second-to-last nationwide in funding its health plan for its employees and retirees.

But back to Folwell’s current effort.

The Treasurer may claim pure motives, but plan participants have grounds to doubt this.

Health care providers originally had to sign on to the Clear Pricing Project by July 1 or risk becoming out-of-network providers. As of July 22, fewer than half of providers and only three hospitals and had signed on. Instead of digesting his plan’s impact on state employees, Folwell has doubled down on his failed plan and re-opened the window by extending the deadline to August 5.

State employees and retirees have been noticing signs popping up at their doctors’ offices indicating that they will not sign on to the new terms and will therefore no longer be in-network providers as of January 1, 2020.  For an employee on the standard 70/30 plan, their deductible obligation would double when using out-of-network providers, and $40 office visit copays would become 50% payment after the deductible is met.

In April, the House passed a measure to delay implementation (HB 184), but thus far Senator Phil Berger has refused to allow the Senate to discuss this bill on the floor, and it remains stuck in a committee, regardless of the negative impact this plan will have on state employee health care.

Failure to conclude a resolution to the Clear Pricing Project by October will clearly leave state employees in a lurch – a situation in which they may be forced to shop around for other insurance programs for themselves, spouses, or dependents in the face of health plan uncertainty or increased out-of-pocket costs.

But given past experience, one can’t help but wonder whether Folwell might actually welcome such a development. After all, making the SHP unattractive to employees and their dependents, and forcing people to leave the plan would clearly be an effective cost-cutting measure. The same is true for making out-of-pocket health care more expensive (and thereby reducing the amount of care sought).

Open enrollment for 2020 health coverage begins on October 1.  State employees and retirees must have a “Clear Coverage Plan” and know how the Clear Pricing Project brinkmanship will end by this day in order to make informed personal financial decisions. As the August 5 deadline approaches, and most providers have not signed on to the plan, it is not too late for state employees, retirees and their dependents to: a) encourage Folwell to change course, and b) urge senators to advance HB 184 – especially if Folwell remains more committed to his “Project” than to state employees’ health care.

Kim Mackey is a veteran Wake County public school teacher and the author of the blog educatED Policy.

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Kim Mackey
Kim Mackey

Kim Mackey is a veteran Wake County public school teacher who comments on public policy at the website educatED Policy, where this commentary was first published.