Slapped in North Carolina

“Delay and Confuse” is one of the oldest tactics used by incumbents under attack. The North Carolina flirtation with Reference Based Pricing for their state employees is a classic example.

This is exactly why employers considering Reference Based Pricing should do so without first asking the medical community for permission to pay them less.

Take the case of Corpus Christi Independent School District for example. This Texas school district was set to move to Reference Based Pricing (Slapped In Texas). That is, until Gloria Hicks sent her famous email:

“I am on the Board of Directors for Corpus Christi Medical Center, which includes Bay Area Hospital, Doctors Regional, ER in Portland, ER in Calallen. The message that I would like to convey is that……”

That email worked as intended. Instead of moving away from the world of managed care the district awarded their health insurance contract to Blue Cross.

Lawmakers derail State Treasurer’s plan to change State Health Plan reimbursement

March 27, 2019

An overwhelming vote stopped Dale Folwell from pegging payment for state employees’ insurance coverage to Medicare, instead creates a study committee with tight deadline, mandate.

By Rose Hoban

After months of bitter back and forth between state Treasurer Dale Folwell and legislators, a bill that would slow down Folwell’s proposal to trim what the state employees health plan pays hospitals and other providers passed a key vote today at the General Assembly.

House Bill 184 creates a new multidisciplinary study committee to look at ways to manage and control costs in the state health plan, which covers some 726,000 state employees, retirees and their family members.

The bill passed by a wide margin despite a monthslong fight by Folwell to push through a plan to peg the prices paid by the SHP to hospitals and doctors to the prices set by the federal Medicare program.

Folwell proposed paying providers about 177 percent of what they get from Medicare. Struggling rural hospitals, primary care doctors and mental health providers would get an additional bump. He painted the proposal as a way for state employees to have a better understanding of what they’d pay for health care, in addition to being a control on ever-increasing health care costs.

But the proposal met with stiff opposition from hospitals and doctors’ groups, which argued that they’re being buffeted by multiple changes in the health care system as the state prepares to move Medicaid from a fee-for-service system to one controlled by large managed care organizations.

Hospitals have also maintained that they’d cover much of the state share of a purported plan to extend Medicaid coverage to hundreds of thousands of low- income North Carolinians, something hospitals have dearly wanted in order to reduce the amount of uncompensated care they’ve had to swallow. But they’ve argued that the hit they’d take under Folwell’s plan would make that arrangement untenable.

Taking sides

Folwell found an ally in the State Employees Association of North Carolina, which was supportive of Folwell’s plan, which he argues would save state employees about millions out of pocket while saving taxpayers as much as $300 million per year. SEANC rallied its members to contact legislators to support the treasurer.

Click here to read about mental health parity issues in NC.

“I’ve been inundated with all kinds of paperwork, whether it would be all true or not, I’ve heard from both sides and I quite frankly don’t know what to believe,” said Rep. Phil Shepard (R-Jacksonville) during Tuesday’s meeting of the House Health Committee.

Shepard said phone calls to his office were running 2-to-1 against the bill.

“I wish we could have another meeting and open up all that and let’s evaluate it and see what is and what isn’t, because this is a very important issue,” he said, expressing his support for the state employees who had contacted him. “At the same time we have a small local hospital that I’ve worked diligently with UNC to incorporate them as part of our hospital and I’m glad of it, and I’ll continue to work on behalf of our hospitals and I’ll do what I can to support them.”

SEANC also ran radio and social media ads targeting legislators, that many during the hearing complained had gotten too personal. Legislators complained that if they attempted to sign onto the bill, they were buried by phone calls and emails sent by SEANC members.

Lead sponsor Rep. Josh Dobson (R-Nebo) said he felt the need to protect rural hospitals, but at times had trouble getting people to sign onto the bill.

“There are people on both sides of the aisle that know how catastrophic the consequences could be for providers across this state, and I admire their courage and look forward to working with whoever decides to sign onto the bill to make it happen,” he told NC Health News in February.

During Tuesday’s meeting, he decried the at times personal nature of the opposition.

“The personal attacks have not been pleasant to say the least and for that, I’m sorry,” Dobson told his colleagues. “I myself have been attacked and my integrity questioned. I do hope that in the future our politics can be conducted with more collaboration and professionalism from all sides.”

Competing visions of the future

What the argument came down to was competing versions of how to rein in health care costs. Folwell’s idea to peg the SHP to Medicare starting next January has been done in one other state, Montana, which has a much smaller state employee pool.

It’s an approach to reducing costs which trims reimbursement to providers. He also argued that the SHP currently acts as a commercial plan, which pays what the administrator, BCBS of NC can negotiate with hospitals. Hospitals usually try to get a higher reimbursement from insurers to offset the low payments the hospitals receive from government payors, such as Medicare and Medicaid.

But Folwell said that the SHP should use its large size to act more like Medicare and Medicaid, setting the rates, rather than being told what to pay.

Meanwhile, hospitals and, in many ways, larger forces are pushing the health care system to more so-called risk-based reimbursement, where insurers and government payors set one fee schedule and then tell doctors and hospitals to be more efficient and manage the costs to their patients. If the doctors’ actions keep patients from using expensive care, then the providers get to keep some of the payment as profit. But if patients bounce back into the hospital, or need expensive care, the physicians have to eat the costs.

Rep. Donny Lambeth (R-Winston-Salem), who was a hospital executive in his professional career, is a supporter of pushing more providers to risk-based reimbursement, he said on Tuesday. He said that going along with Folwell’s plan would only prolong that transition to a different payment model.

“We’ll be back here in two years, and we’ll have another crisis, because all we’ll see in this plan is a short term fix to reduce rates and that we have to fundamentally change the model,” he said.

Lambeth also said he wanted to see the state rein in the costs of the SHP, something he said he warned former House Speaker Thom Tillis of when he was first elected.


“Trend line on unfunded liabilities and the trend line on utilization and aging of the population and the number of retirees taking advantage of the plan all were aligning up to be a perfect storm,” Lambeth said he told Tillis at the time. “And that’s actually where we are today, seven years later.”

Study group

The bill passed on Tuesday, though, does have some significant changes to what Dobson had originally planned.

Instead of the study continuing through April 2020, an amendment introduced by Rep. Cynthia Ball (D-Raleigh) moves the deadline for the study committee up to December of this year. Ball’s amendment also moves up the timeline through which the status quo from the end of 2021 to the end of 2020. Implementation of any new reimbursement scheme could not start before that time.

In the end, the amendment passed unanimously, and a show of hands on the final bill displayed overwhelming support.

The committee to study the reimbursement plan will consist of:

  • Four members of the House of Representatives
  • Four members of the Senate
  • The executive administrator of the State Health Plan
  • One person appointed by the NC Medical Society
  • One person appointed by the NC Healthcare Association (formerly the Hospital Association)
  • One person appointed by the NC Nurses Association
  • Two people appointed by SEANC
  • Someone appointed by the Retired Governmental Employees Association of NC
  • A person appointed by the North Carolina Association of Educators
  • One person appointed by the NC Psychiatric Association

In addition, Folwell will be a nonvoting member of the committee.

The bill next goes to the House Rules Committee, before being sent for a vote by the entire chamber.

Clarification and a correction: SEANC did not run television ads around HB 184 and Rep. Ball’s amendment moves up the status quo until the end of 2020, but no date was set for implementation of any change to the State Health Plan.