State Health Plan Shortfalls and NC Blue Cross Profits

The North Carolina State Health Plan “only” has a $50 million shortfall so far in 2008 (numbers are through October) – this is far lower than the $122 million shortfall expected just a few months ago as recounted in an optimistic letter posted Dec. 23 on the State Health Plan’s website. However, according to an earlier report from the NC State Auditor, projections are for a shortfall in excess of $250 million through 2009. Other rumors have the shortfall for 2009 exceeding $800 million.

Meanwhile, as Adam Linker recently noted, profits at health insurer NC Blue Cross are up 5% over the same time last year. NC Blue also happens to administer the State Health Plan – although they don’t decide premiums, policy coverage, or other major questions that can affect health costs in the state health plan (state legislators and the state health plan administrator do that). However, nonprofit NC Blue does get paid a substantial amount for their SHP administrative duties and certainly could be profiting more than they should from this contract.

This brings up two questions:

1. Does the State Health Plan have any idea what is going on with its finances? This shouldn’t be that hard. Sophisticated software is routinely used by health insurers to project health claims and costs over multiyear periods with remarkable accuracy. We have had months of hearing different projections of shortfalls from SHP. Why?

2. Many state employees reject paying the required $489/mo premiums for standard plan family coverage. They find coverage for younger and healthier family members is cheaper by buying directly on the individual market through NC Blue Cross who dominates the sale of non-group coverage in NC. Does anyone other than me find it strange that while the state health plan is struggling with sharply increasing costs for members who are generally older and sicker, NC Blue Cross is turning a handsome profit with individual coverage aimed at children and younger and healthier adults? Are the policies of the state health plan serving to inadvertently enrich NC Blue Cross who is – ironically enough – administering both pools?