NC State Health Plan Doubles Retiree Contributions
Leaders voted to draw $415 million from the retiree health fund to cover a cash shortfall driven by rising medical costs.
By Justin Brooks ·
North Carolina’s State Health Plan cash balance fell to $298 million by the end of September, a figure far below the $420 million target set by officials to stabilize the system.
To bridge the gap, the Health Plan Board of Trustees voted unanimously on Tuesday to double the monthly contribution from the Retiree Health Benefit Fund for six months. The contribution will rise from $300 to $600 per retiree for the period between July and December.
Health Plan staff warned that without this immediate injection of funds, the plan risks running out of cash entirely later this year or in early 2027. The cash crunch stems largely from escalating healthcare costs that have outpaced financial projections.
Tom Friedman, the Health Plan’s executive administrator, told reporters on Monday that costs continue to climb at a rate much higher than predicted. He noted that the plan has already reduced benefit generosity, yet expenses remain high. Friedman stated that if spending trends continue on their current track, the plan will be limping into 2027.
Financial data shows the State Health Plan spent $3.22 billion through August 2026. This total exceeds the amount projected by financial analysts by approximately $148 million. Of that unexpected increase, $131 million came from medical expenses. These costs were driven in part by a rise in members requiring expensive care for cancer, cardiac, and neurological conditions.
Board leaders believe they cannot solve the financial issues solely by raising premiums for active members or further reducing benefits. Friedman said during Tuesday’s meeting that resetting prices for 2027 provides the necessary runway to implement other changes. The plan will launch a preferred provider program next year, allowing members to save money by choosing providers within Novant and UNC Health networks.
The board agreed to pay back the $415 million drawn from the Retiree Health Benefit Fund, plus interest. Mark Collins, the Health Plan’s director of finance, noted that the fund held about $4.5 billion in assets as of June 30, 2025. He described the draw as roughly a tenth of the assets in the Retiree Health Benefit Trust.
Kristin Walker, director of North Carolina’s Office of State Budget and Management and a non-voting board member, expressed skepticism about the repayment plan. She said she wanted to see the math behind the decision because the $400 million figure is not insignificant. Walker warned that the statute establishing the fund states it should only pay for healthcare for retired or disabled state employees, not active employees. She suggested the plan track how the money is used to ensure compliance.
Sam Watts, a board member who oversees the state’s retirement systems, acknowledged that dipping into the retiree health fund poses a threat to retirement security. He noted there have been at least three prior instances where the state used the fund with a mixed track record of repayment. Watts voted to increase the premiums, stating that while he is not happy about the solution, it is a viable way to get over the current bump.
The Retired Government Employees Association released a statement saying it plans to continue monitoring the fiscal health of the State Health Plan. The association noted that using assets dedicated to retiree healthcare to address other funding needs does not eliminate costs. Instead, it shifts those costs into the future while weakening the prefunded resources available to meet retiree healthcare obligations.
Source: WUNC
