Ever wondered where those big ticket deductibles are coming from? How much does healthcare actually cost? This is the transparency issue being battled by North Carolina Treasurer, Dale Folwell, who is confident that price transparency could save state employers and employees close to $300 million.  

Folwell has overseen the state’s employee health plan (SHPNC) since 2017 and has taken responsibility for auditing the $3.2 billion annual healthcare spending budget. The SHPNC represents 727,000 state employees and is one of the largest employers to go to bat with health costs.

Where is the money going?

The standard pricing model in the US sets healthcare costs based on networks, where hospitals and insurers privately negotiate fee schedules. This relationship is the biggest point of contention in the North Carolina pricing war.

In 2011 the NC Office of State Auditor recognized the risk of the relationship with their insurer stating that “…the Plan’s auditors do not have access to BCBSNC (Blue Cross Blue Shield of NC) contracts and cannot independently verify that the Plan receives the proper contractual discounts from BCBSNC’s provider network.”

Folwell also noted that, “For years, the Plan has paid medical claims after the fact without knowing the contracted fee. It is unacceptable, unsustainable and indefensible. We aim to change that.”

New Health Plan in Effect for 2020

According to the SHPNC, Folwell’s Health Plan is set to launch on January 1, 2020 which will include a major transition in pricing. This roll-out will require hospitals to have full price transparency and ditch the commercial-based payment model for a reference-based model pegged to the Medicare program. Folwell’s office is estimating price-matching with Medicare to save upwards of $366 million in healthcare expenditures between the state and the state employees.

Interviews published in the Winston-Salem Journal quoted Folwell: “Reference-based pricing is intended to provide transparency in provider rates by indexing fees to a published schedule.” The Medicare reimbursement measurement “is transparent and adjusts for provider differences”.

Though the solution in theory seems straight forward there has been significant push-back from both healthcare professionals and hospital systems, accusing the plan of being “drastic”. Conversations and appeals are likely over the course of 2019.