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Heavy N.C. workers' insurance costs climb

February 23, 2009|By DAN KANE / Raleigh News & Observer

North Carolina - a state where tobacco and barbecue have long reigned - may soon hit state employees who smoke or are seriously overweight with higher health insurance costs.

Legislative leaders introduced a bill Thursday that seeks to keep the State Health Plan solvent by reducing some benefits and raising premiums less than 8 percent each year over the next two years. Smokers or obese people would be forced into the coverage option that carries the highest deductibles and co-payments.

Jack Walker, the plan's executive administrator, said those employees are the most costly and therefore should shoulder more of the burden. The average additional cost to the plan for each smoker is $2,000 a year, he said, while it takes a $2,360 hit for each employee who weighs 35 percent or more over what is considered fit.

Those costs are a major problem for the plan, which covers roughly 660,000 state employees and their dependents. The plan is free for employees; insuring a family costs $489 a month.

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The plan is relatively expensive, and therefore unattractive, for healthy families, but a bargain for the ill. That, and the relatively old state work force, means that the chronically or catastrophically ill compose half the membership; the plan spends nearly 90 percent of its money serving them. Trends show that population exceeding half the membership in future years.

Smokers would have to quit or join a cessation program by July 1, 2010, to stay on a less expensive plan. The seriously overweight would need to get in better shape by July 1, 2012, to stay on a less expensive plan. There would be no exceptions for smokers, but the overweight, judged by the 35 percent standard, might get a waiver if they could show they don't fit the standard or they cannot drop their weight for medical reasons.

At least two other states, Alabama and South Carolina, charge more for public employees who smoke or are obese, Walker said. The legislation would let Walker suggest to lawmakers possible sanctions for those who lie about smoking.

Walker said the plan also needs to attract younger members and their dependents. The average age of members not on Medicare, the federal insurance for seniors, is 46.

The typical plan has an average member age of about 33, Walker said. "The younger people are not here," Walker said.

The legislation carries pain for nearly all members. It eliminates a popular option that had the lowest deductibles and co-payments, but played a major role in causing the plan to run out of money. The plan needs roughly $250 million in the next few weeks just to keep paying its bills.

The total cost of the legislation to taxpayers would be roughly $580 million over the next two years. A little less than half - $250 million - would come from the state's rainy-day fund to cover the current shortfall.

The legislation would end subsidized basic eye exams, raise co-payments from $5 to $40 and increase deductibles to anywhere from $300 for network providers to $600 for providers outside the network.

Premiums would increase from 7.3 to 7.9 percent each year for the next two years.

Representatives of three major public employee groups said they were encouraged.

"I think this is a reasonable approach from what I've heard so far," said Cecil Banks, the government relations manager for the N.C. Association of Educators, which represents teachers.

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