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Dale Folwell's gutsy move on healthcare spending
What swapping Blue Cross for Aetna truly means for North Carolina
Health benefit contracts don't typically make for the most interesting stories. But it's worth taking a closer look at the decision last week to shake up the management of North Carolina's State Health Plan.
For more than 40 years, BlueCross BlueShield of North Carolina has been responsible for administering the benefits for some 740,000 state employees, teachers and retirees covered by the plan. Beginning in 2025, Aetna will be taking over the contract.
But this decision is more than just swapping out one big company for another. In reality, it is perhaps State Treasurer Dale Folwell's most significant move yet in his mission to reduce the cost of health care in our state.
A quick primer on the State Health Plan
The State Health Plan is the primary health care benefits system for state agency employees and their families across North Carolina. The plan has its own board of trustees and lives within the Department of State Treasurer.
The plan is self-funded, meaning the state of North Carolina pays all of the medical bills. But it’s administered by a private company.
This means that a private company handles all of the billing, claims processing and paperwork. But, crucially, it’s also responsible for negotiating the prices it pays for different procedures with healthcare providers across the state. (Yes, in our nation’s convoluted healthcare system, there’s no set price for a medical procedure. The amount something costs is entirely dictated by closed-door negotiations between hospital groups and insurers.)
For 40 years, this private company has been Blue Cross NC. The company’s contract with the state typically runs for three to five years, and it’s been renewed time after time over that period. That changed last week.
Why North Carolina is changing course
The announcement Wednesday stated that Aetna has been awarded a three-year contract running from 2025 through 2027, with two one-year options to extend it.
It’s a big contract. In the past year, the state paid roughly $79 million in administrative fees to Blue Cross NC, according to data the State Treasurer's office provided to Longleaf Politics. This fee is per member, per month, and thus can fluctuate.
The state treasurer’s office noted that the new contract is projected to save about $140 million over its term.
But this decision wasn’t likely just about the cost benefits. In previous cycles, Blue Cross NC has offered to reduce its administrative charges — and likely was willing to do so again to keep this contract. The company worked hard to win its bid.
Instead, the key element is almost certainly “transparency.”
In the Department of State Treasurer’s announcement, Folwell said he looks forward to working with Aetna on price transparency, a major emphasis of his since taking office in 2017.
Remember that point about the State Health Plan administrator being responsible for negotiating prices with healthcare providers? Under current state law, that data is completely private, and the state treasurer’s office has no access to it.
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.
Switching to Aetna is a signal that State Treasurer Dale Folwell is willing to act for the good of North Carolinians when the General Assembly won’t. That’s one reason why it’s so gutsy. It’s also a blow to Blue Cross NC, one of the most politically powerful companies in the state chaired by Ned Curran, a prominent Charlotte real estate developer with deep political connections.
Why this is important
Getting pricing data will allow North Carolina to audit a huge piece of its budget — some $3.5 billion per year in healthcare spending.
But prying loose this data is a key component of making healthcare spending more transparent as a whole.
Despite making up nearly 20% of the U.S. economy, healthcare is one of the only industries in which people receive a service and have no idea how much it costs. In fact, it’s all so convoluted that there’s really no way for them to figure out what it costs.
When pricing is opaque, pricing steadily increases. Healthcare providers have no competitive pressure to reduce costs while improving quality, meaning we all end up paying way more for healthcare than we should.
3 things of note
Who is the N.C. House Democrat most likely to switch parties?
We discussed last week whether the General Assembly will be able to find a "working supermajority" in the House, where Republicans are just one vote short of being able to override a gubernatorial veto. There have been some rumblings that these efforts could go even further -- with a Democrat member or two actually switching parties and joining the GOP caucus.
This wouldn't be without precedent. As recently as 2017, six-term representative Bill Brisson of Bladen County switched parties from Democrat to Republican. He continues to hold his seat, which at the time of the switch was in the reddest Democrat-held district in the state.
However, there aren't any seats like that left. Other than a shrinking handful of sheriffs and local officials, there simply aren't any more conservative Democrats in state office. The shift of the rural conservatives from Democrat to Republican is all but complete. And over the last three cycles, Republicans have been successful in picking off every single Republican-leaning seat in both the state House and the Senate — and even some left-leaning ones.
I took a look at the House roster anyway to try to figure out who would be the Democrat most likely to switch parties. I came up with two names. I don't think either will actually switch parties, but both will likely be willing to vote with Republicans to override a veto — in certain circumstances.
The first is Rep. Michael Wray, who has represented Halifax, Northampton and Warren counties in northeastern North Carolina for nearly two decades.
He's by far the most conservative Democrat currently in the state House, consistently earning the highest rating in his party in the American Conservative Union's index.
Still, even Wray isn't super conservative. His vote record displays a willingness to cross party lines and vote with Republicans, but not even half of the time. And he's not barely holding onto his seat, either. His is a D+13 district, and Wray just won his 10th term by defeating former Halifax County Sheriff Wes Tripp, taking more than 61% of the vote.
Wray has been willing to vote to override Gov. Roy Cooper's vetoes in the past. The House did not take a single override vote in the most recent biennium, but did so six times in the 2019-20 session. Only two were successful. Wray voted in favor of overriding vetoes on bills to protect the Second Amendment and open gyms during COVID.
The second name is Rep. Garland Pierce, a minister who has represented Hoke and Scotland counties since 2005. His district is D+5, so definitely winnable by the right Republican, but far from an easy get. Pierce has proven to be socially conservative overall, including voting to override Gov. Cooper’s veto of the Born Alive Abortion Survivors Protection Act in 2019 and voting in favor of House Bill 2 in 2016.
Again, he may well be willing to override a veto once more — but I wouldn’t count on him switching parties.
Most other conservative-leaning Democrats have already lost re-election or retired from the General Assembly. Former Rep. James Gailliard of Rocky Mount lost to Republican Allen Chesser in 2022. Former Rep. Scott Brewer of Rockingham lost to current Rep. Ben Moss in 2020.
U.S. Rep. Dan Bishop votes against Kevin McCarthy to end "uniparty lock on Washington" — but ultimately supports him
If you followed the U.S. House speakership drama, you likely noticed a familiar name in the small group of lawmakers consistently voting against U.S. Kevin McCarthy: U.S. Rep. Dan Bishop. Bishop was the only member of North Carolina's delegation part of the 20 Republicans voting for other candidates.
In a brief interview with Pete Kaliner on WBT (starts at the 21:15 mark) on Wednesday, Bishop explained why. He said he was intending to break the "uniparty lock on Washington," which he described as a lobbyist-led movement that handpicks legislation to move on the floor and chooses "squish" candidates to run in Republican primaries.
"We are pushing to change leadership in the house so that we have a leader who wants to make change for the American people," Bishop said.
By Friday afternoon, Bishop had flipped and voted in favor of McCarthy — and McCarthy finally took the gavel in the early morning hours of Saturday. In a statement posted to Twitter, Bishop said it was because he was happy with the slate of concessions McCarthy made to woo defectors over to his side.
The big one that's gotten a lot of national attention is reverting back to a pre-Pelosi rule that allowed any member to call for an immediate vote to "vacate the chair" -essentially a vote to keep the current Speaker or elect a new one. When House Speaker Nancy Pelosi took over, she changed the rule to require a party leader or majority vote of the party in control of the House to trigger a vote to vacate.
Before this week, McCarthy had said he'd be willing to reduce that number to just five members of the party. Finally, he agreed to going back to a single member.
Other concessions Bishop mentioned are much more meaningful to the American people. One is a response to the $1.7 trillion omnibus budget bill rammed through last month.
Bishop said he pushed for rules that require bills to be on a single subject, preventing gigantic thousand-page bills that cover a host of topics. He also said he wanted a concession that requires amendments offered on a bill to be germane to the topic of the bill.
It looks like those concessions are definite. If Bishop succeeded in getting them, I think his hold-out was well worth it.
More post-Dobbs fallout: Planned Parenthood drops lawsuit challenging N.C. abortion laws
When the U.S. Supreme Court overturned Roe v. Wade in last year's Dobbs decision, the first major impact on North Carolina was the reinstatement of the 20-week abortion cutoff that had been in state law for decades. But now it appears that the Dobbs decision is having a more far-reaching impact.
Planned Parenthood has dropped a lawsuit it filed in 2020 challenging five pro-life laws passed by the General Assembly between 2011 and 2015, according to an email from the N.C. Family Policy Council. These laws require "informed consent" before an abortion, a 72-hour waiting period before an abortion, ban telemedicine abortions, require annual inspections of abortion facilities, and require doctors to perform abortions.
For now, these laws are not being challenged. However, depending on what the General Assembly does in this long session, it is possible that Planned Parenthood will seek a different way to challenge state abortion laws again in the future and try to establish a right to abortion in the state Constitution.
That's exactly what just happened in South Carolina, where the S.C. Supreme Court just overruled the state's six-week abortion limit based on a right to privacy found in their state constitution.
1 good idea from another state
This is the first in a new weekly section of Longleaf Politics, where we highlight innovative legislation that’s worth considering in North Carolina. If you see any good ones, send them my way.
Louisiana requires age verification on porn sites. A new law that went into effect Jan. 1 helps to protect children from hard-core pornography by requiring porn sites to verify that their visitors are age 18 or older. If they don’t, they’ll be legally liable. The bill passed nearly unanimously in the state legislature and was signed into law by Louisiana’s Democratic governor.
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