Last week, State Treasurer Dale Folwell shook up the state’s health care scene with the announcement that Aetna would be taking over as the administrator of the State Health Plan in 2025.
Around 740,000 people in the state are on the plan and Blue Cross Blue Shield has administered it for more than 40 years. Folwell’s office says the change “focuses on transparency and lower costs” and could save $140 million over the three-year contract.
A lot of people are eager to see how this plays out. I count myself as one of them, given that I am one of the many people on the State Health Plan. Blue Cross has a ubiquitous presence across the state, including as an advertiser on everything from higher ed institutions, to the Carolina Hurricanes and local news outlets—including us.
(Our policy on editorial independence is simple: we write bluntly about what we think is newsworthy. While we hope that doesn’t lead an advertiser to leave, we won’t let that get in the way of our reporting.)
Folwell’s efforts are also noteworthy; the treasurer has higher political ambitions, and has made cost and transparency in health care a major focus in his five years in office. (His regular refrain that the industry is a “cartel” appeared in our profile of him last year.)
Andrew Dunn broke down some of what’s at play behind the scenes over at Longleaf Politics:
Folwell had long wanted Blue Cross NC to be more open with its pricing data. He repeatedly pushed for the company to provide his office with the rates it pays for different procedures to ensure that the North Carolina taxpayer is getting a good deal.
“We will reset our relationship, not just renew our vows,” Folwell said in 2017 when Blue Cross renewed its contract soon after Folwell took office.
In 2021, Folwell supported a bill that would require the State Health Plan administrator to make pricing data open to the public. Despite bipartisan support, the bill stalled out in the state House. House Speaker Tim Moore has long been overly sympathetic to the healthcare industry’s desires.
Business North Carolina’s Colin Campbell also reported Monday on the concerns staff and board members had raised about a software system Blue Cross transitioned to in 2022. At a meeting last March, (now former) State Health Plan executive director Dee Jones presented “a laundry list of problems with the new system.” Campbell wrote:
Some claims and vendors weren’t being paid on time. A major physicians’ practice was inexplicably dropped from the plan’s provider directory. State employees had trouble logging into their accounts to view plan information and ID cards.
“This is just a small snapshot of member disruption, provider disruption and State Health Plan disruption,” Jones said, adding that her staff had been on “hours and hours of calls every day” with Blue Cross to address the problems.
In a recent column, The N&O’s Ned Barnett highlighted the risks that come with Folwell’s decision. Hundreds of thousands of state employees will have to switch plans, and potentially switch providers.
How do the two companies’ provider networks match up across North Carolina’s counties? Blue Cross says the contracting process wasn’t designed to answer that question.
“Why didn’t the process of this bid appropriately evaluate the scope and strength of network and access to care?” a BCBS spokesperson told Barnett. “Specifically, this bid process collected less information, with yes/no questions and no additional context or explanation.”
We also asked some smart people following this story what they make of it and how to think about the tradeoffs between cost and transparency, and disruption and ease of access to care.
Barak Richman, a Duke Law professor whose research focuses on health care policy, said via email that the decision “reveals the dual role of the treasurer” as both a fiduciary obligated to negotiate the best possible deal, and as an elected official with other policymaking responsibilities.
“If the Aetna contract enhances price transparency (one of his priorities), then it’s likely to benefit the entire state,” Richman wrote. “Using the state plan as an intelligent shopper of health care services is an important but underutilized policy instrument to make health care more valuable, more affordable, and of higher quality for all North Carolinians.”
Cody Hand, who now runs his own consulting firm after working for more than a decade in private and public health policy, noted that building out Aetna’s network, especially in rural areas, will be a key challenge. “There are many state employees (prisons/schools) in rural areas that will not be in-network,” he wrote.
Hand said the General Assembly should hold hearings immediately to ensure that the transition is on track. “The state cannot wait until January 1, 2025 because the state employees need to plan ahead and, if necessary, find new providers,” he said, noting that the impact on budget projections will also be something to watch.
The transition will be “challenging, not insurmountable,” wrote Bradley Staats, professor of operations and the faculty director of the Center for the Business of Health at UNC’s Kenan-Flager Business School.
“Aetna is one of the largest health insurers in the US. However, health care is a local service. They are much smaller in North Carolina, compared to BlueCross BlueShield of North Carolina,” wrote Staats.
The health care industry in general “is entirely too opaque and so increasing transparency is a worthwhile objective,” he wrote. But a big question will be where Aetna’s proposed savings come from. Options he outlined include finding ways to incentivize healthy behaviors, shifting to care that saves money later, cutting providers’ rates, or adjusting the network toward lower-priced providers.
“It will be helpful to learn more about where actual savings are proposed and how it is structured to know what is locked in for the state vs. what is at risk,” he wrote.