The state treasurer, on Monday announced that he is directing Blue Cross and Blue Shield of North Carolina (BCBSNC) to cut the State Health Plans’s medical provider rates by 15 percent, leveraging the size of the plan as BCBCNC’s largest customer to get the decreased rate.
State Treasurer Dale Folwell told BSBSNC to cut the plan’s medical provider rates on major contracts being negotiated this year by at least the targeted 15 percent.
BCBSNC is the state’s third party administrator and processes the state’s claims, provides a network of providers and establishes medical provider rates for the plan.
The claims, once approved by BCBSNC, are paid out of state funds.
“We’re going to be asking a little from a lot of people, and a lot from a few,” Folwell said. “Many believe that medical providers can achieve at least 10 percent in savings. I believe it’s more. I’m asking medical providers in the state to help us sustain this plan for the future. We’re in a medical arms race that is driving up costs, and we need partners to work with us to reduce costs for all.”
BCBSNC negotiates rates with the health care providers and Folwell projects that the potential for costs savings from the reduction could be $1 billion over a three-year period.
Last year the plan spent $2.5 billion and a 15 percent reduction would be expected to generate approximately $300 million a year in savings for North Carolina taxpayers.
Folwell said that those savings would be used to lower family premiums and address the state’s $34 billion long-term health care liabilities for retirees.
“I believe we can make a generational difference by allowing those who teach our children, protect us from crime, and pave our roads to have more affordable health care for their families,” Folwell said. “At the same time, we can pay down our long-term health care liabilities so that we can keep the promises made to hard-working public employees.”
Folwell’s announcement is part of a broader strategy to reduce health care costs for the plan to better prepare the state financially to meet its obligations moving forward.
Treasurer Folwell has launched a number of initiatives designed to increase transparency in the cost of medical services as part of a larger effort to turn members into watchdogs who, as better educated health care consumers, can help make the plan more sustainable.
The State Health Plan is a division of the NC Department of State Treasurer and provides health care coverage to more than 720,000 teachers, state employees, current and former lawmakers, state university and community college personnel and their dependents, including non-Medicare and Medicare retirees.
Last year the plan provided medical services to more than 550,000 teachers, state employees, non-Medicare retirees, and their dependents on the State Health Plan.