RALEIGH — The North Carolina State Health Plan’s Board of Trustees voted to approve a three-tiered provider network beginning in 2027 to reduce plan costs by steering members toward lower-cost, high-value care doctors and hospitals while protecting rural access to health care.
“We have to keep our eye on the ball this year,” State Treasurer Brad Briner said in a press release following the meeting. “We are all in this fight together to keep the Plan sustainable. Our focus in 2026 is ensuring members receive high-quality care at the best possible value. This is how we protect affordable premiums and stable benefits for the teachers, state employees, and retirees.”
The move to a three-tiered network for the State Health Plan (SHP) seeks to address the SHP’s solvency and deficits, which were $507 million in 2025.
The SHP projects ending 2026 with approximately $491 million in reserves, but the outlook for 2027 depends directly on state funding. The state still has not passed a budget, however, “mini-budget” House Bill 125 was signed into law last year. That measure provided an additional $100 million in nonrecurring funds to the SHP for 2026 to help address its deficit.
With a budget including the proposed 5% appropriation, SHP reserves would hit its target stabilization rate by the end of 2027. Without the funding, reserves would fall below the statutory target stabilization rate, likely leading to stringent cost-cutting measures.
Consensus among the board was that the new structure is needed to keep premiums affordable, benefits stable and improve member health for the plan’s 750,000 members. The SHP has not seen premium increases for the past seven years, and it has been implied the lack of adjustments contributed to the current financial situation.
The rationale for the move also involves medical and pharmacy costs hovering near 6% and 70% of care concentrated in 10 of the state’s 100 counties. Additionally, financial projections presented to the board showed rising claims for past years now in decline, but the plan is still in a tight cash position.
Under the approved framework, providers will fall into three categories:
- Preferred — Lower out-of-pocket costs for members, more patient volume and shared savings for the plan.
- Access — Designed to preserve current benefits, especially in rural counties or areas with limited options.
- Non-preferred — Higher copays and deductibles for members who choose higher-cost providers.
The Preferred category is being rolled out in phases, with the Specialty Clinically Integrated Network phase already completed. The next targeted phases will include maternity, dermatology and independent pharmacies.
The SHP moved to a salary-banded premium model this past year and will build on that by linking salary increases to premium increases.
The example given in SHP Executive Administrator Thomas Friedman’s presentation was for a member making $55,000 who currently pays $94, or 2% of their salary, a month for Enhanced coverage or $50 (1%) of their salary for Standard coverage. If that member were to receive a 1% raise, the premium for Enhanced coverage would rise the same percentage, going to $94.94 a month or $50.50 a month for Standard coverage.
Specific dollar amounts for deductibles, copays and out-of-pocket maximums will be finalized at the board’s June 5 meeting.
Friedman emphasized that the tiers reward providers willing to negotiate on price and quality while giving members clear incentives to shop around for the best cost and value. During the meeting, he said the changes could bring up to $600 million in annual savings.
Friedman said the changes are not about cutting benefits but changing behavior through smarter purchasing.
“Our strategies are only successful if the member saves first,” Friedman told reporters in a Q&A ahead of the meeting.
The three-tier model will be rolled out with extensive member education during open enrollment, officials said, and providers will receive “badges” to help families identify preferred options.
Trustees also heard about requests for proposals for the SHP’s third-party administrator contract (TPA), which are being issued this month for a contract “effective Jan. 1, 2028,” according to Briner’s office. A spokesperson said Briner’s administration “has different priorities and would prefer a contract that is more in line with those priorities.”
The long-running choice of Blue Cross Blue Shield as TPA was changed to Aetna under former Treasurer Dale Folwell in 2023. The change to Aetna was effective as of 2025, and that three-year contract has a two-year extension option. Blue Cross and United Healthcare, the two other bidders for the 2023 TPA contract, challenged the selection but were rejected by the SHP. Blue Cross continued to fight the decision, but United dropped its challenge. An administrative law judge ultimately upheld the contract to move to Aetna.
Other cost-saving initiatives were also discussed by the board, such as partnerships to bring down the cost of care with Novant, Lantern and EmergeOrtho, and a deal with CVS Caremark on pharmacy pricing that included the SHP being able to “negotiate directly” with GLP-1 weight loss drug manufacturers.
The Lantern benefit routes members to prescreened, high-quality providers for procedures such as joint replacements, bariatric surgery and spine care at a $0 out-of-pocket cost. Friedman’s presentation showed more than 400 procedures have been completed through that benefit, with 1,848 cases pending as of early March.
Consistency with auto-enrollments into the Medicare Advantage Plans in terms of cost savings was also underscored. Friedman’s presentation noted the SHP sees “significant savings” of $4,700 per member a year for those enrolling in Medicare Advantage plans.
