With a trio of votes on Friday, the N.C. State Health Plan Board of Trustees raised premiums for a second consecutive year while also giving active members the option to essentially turn the clock back 15 years on their healthcare spending.
Trustees voted Friday to raise premiums by 5% for about 550,000 state employees and their families, marking the second consecutive year that they will increase after years of remaining stagnant.
But moments later, they also voted for a tiered benefits plan that could bring out-of-pocket maximums and deductibles down to 2011-12 levels if those members seek care from certain groups of providers.
"They save money at the point of care. That money is then funneled in to keep premium costs down," State Health Plan Executive Administrator Tom Friedman told reporters Thursday.
The changes are the Health Plan’s latest efforts to address long-standing financial challenges, while also acknowledging that healthcare costs are a major concern for members. They affect 575,000 state employees and their families who are active subscribers in the plan, but not the 175,000 people who are covered by the plan's Medicare Advantage plan.
Under the new four-tier benefit structure, the “preferred providers” tier offers significant discounts from this year's benefits for both the member and the plan, while the “access tier” offers care at levels identical to this year’s. The “non-preferred” tier is still in-network albeit at higher prices, while out-of-network services will see steep price increases.
All emergency services will be available at the access tier level, which is typically a $600 co-pay before services and then 30% of costs after meeting deductibles. And the State Health Plan has committed to not moving cancer care, transplant care, neonatal intensive care or maternity care to a tier that is more expensive than the access tier until at least Jan. 1, 2028.
"We are going to be as flexible and as member-supportive as we possibly can," Friedman said of those cases.
Choosing preferred providers
The State Health Plan’s Board of Trustees also voted Friday to name Iredell Health, Novant Health and UNC Health as its preferred providers. Other major providers like Cone and ECU Health will remain in the Access Tier, while Atrium Health will move to the non-preferred tier.
Novant and UNC were willing to accept lower rates from the State Health Plan in exchange for the likelihood that they will receive a significantly higher amount of its members' business, Friedman said.
"If folks are giving us a discount, they've got to get more volume to be successful and to retain their revenue. So there are going to be losers — there are going to be places you pay more for healthcare," Friedman said during Friday's meeting.
Negotiations are still continuing to determine whether Duke Health or WakeMed will be an access tier provider, an important target for plan officials who want to have an option at that price level in Wake County.
The contracts with preferred providers will all last for multiple-year terms to give State Health Plan members time to make the changes officials are trying to encourage and, ideally, to grow comfortable with their new providers.
"Asking people to change preferred providers every year is treating them like either cattle or pawns ... and they're not. They are people with healthcare needs, but we need to be fair and flexible," Friedman said Thursday.
The cost of healthcare for state employees
While members whose providers are in the Access tier will pay the same deductibles and out-of-pocket maximums as they do this year, those who are able to move their care to one of the preferred providers will spend less for healthcare.
For members in the standard plan who are able to use preferred providers, the out-of-pocket maximum will decrease by $2,500 for individuals and $4,300 for families. Members in the plus plan who switch to preferred providers will see their out-of-pocket maximums fall by $2,000 if they cover themselves and $6,000 if they cover their families.
Another feature of the preferred provider plan is flat fees for services like high-cost imaging, inpatient hospital treatment or outpatient surgery instead of requiring members to pay co-pays and then meet their deductibles before further coverage kicks in.
"You are welcome to go with our Access or whomever our non-preferred providers are. You are going to pay more because it's going to cost more, and we're not going to take that option away from you. But we hope you see the value that they're putting into you the same way we see the value that they're trying to put into you," Friedman said.
By comparison, the State Health Plan's benefits in 2011-12 featured out-of-pocket maximums of $3,973 for individuals and $11,973 for families covered under what was then called the Basic (70/30) Plan. For what was called the Standard (80/20) Plan in 2012, out-of-pocket maximums were $3,210 for individuals and $9,630 for families.
"This is monumental. It's thousands of dollars to the average member of the State Health Plan if they participate in the preferred provider," Briner said, adding that those savings are more significant to members than the premium increases.
Briner also said that the preferred provider plan is meant to help keep premiums from eating up ever-larger chunks of employees' pay by keeping the Health Plan's spending in check.
For individuals, the new premiums are increasing by as little as $1.76 a month or as much as $8.04 a month, while someone who is covering their family on the State Health Plan is seeing their premium increase by as little as $28.76 a month and as much as $42.04 a month.
"There's no other plan I'm aware of that can keep them flat as a percentage of compensation," Briner said.
Health Plan's financial history
When Briner was sworn in to office in January 2025, the State Health Plan, which he oversees, was facing a $500 million deficit that was expected to balloon to $1.4 billion by 2027.
"In 2024, we learned that years of financial mismanagement had put the plan on a path to bankruptcy unless we acted decisively," Friedman said.
Briner and his team quickly homed in on premiums increases as a first, necessary step, arguing that his predecessor Dale Folwell had been spending down the plan's reserves instead of raising premiums.
As late as 2025, those premiums had been $25 or $50 per month depending on which plan a member elected. The changes raised premium based on a member's income, with people in the lowest tier with an individual plan seeing an increase of as little as $10 and as much as $110 based on their income and plan.
Friedman gave trustees two alternative scenarios to the paired 5% premium increase and tiered benefit plan.
Under one, all premiums would increase 21%. And under the other, members would see increases of $800 for individuals and $2,400 for family deductibles; $500 for individuals and $1,500 for family out-of-pocket maximums; and $100 to copays for outpatient surgeries and inpatient hospital stays.
The recently signed state budget includes about $4 billion for the State Health Plan, including a 5% increase in the employer contribution that sees the state contribute $8,925 for each member's coverage.
