Member Update

September 25, 2008 -- At the State Health Plan, we are continuing the analysis of our financials to better understand the budget shortfall of $137 million for Fiscal Year 2008 (after adjusting for delayed claims payments).  As a result of the analysis, we found that administrative expenses were underestimated and that our forecasting model was incorrect.  

Other key points are:

  • Monthly cash flow projections indicate that the Plan will probably need an infusion of cash after December 2008.  Note:  Through very careful cash management practices, the State Health Plan should have the funds to continue paying claims into the first quarter of 2009.  Based on this strategy, a special legislative session would not be required prior to the January 2009 Long Session.

    • Please keep in mind, as previously reported: For Fiscal Year 2008-2009, the Plan is now projected to lose between $264 and $280 million.  (A loss of $62 million was originally projected.)

  • Our financials for July 2008, the first month of the new fiscal year:  We have revised or “recasted” our 2008-2009 budget to address forecasting concerns and other factors.  For July, our actual loss of income for the Plan was $67.5 million. Our recasted budget projected a Plan income loss of $68.1 million. 

As part of my commitment to provide you with monthly financial information, please review the full reports from the September 15, 2008 meeting of the Committee on Employee Hospital and Medical Benefits and the September 16, 2008 meeting of our Board of Trustees.

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Cost Savings

Steps have been taken to reduce expenses.  We have reviewed a number of programs and services and made changes. Of course, the work continues.  Progress points to date include:
  1. Blue Points exercise incentives program terminated, effective 9/01/08
  2. Improved utilization management of inpatient mental health and substance abuse authorized days, effective 9/01/08
  3. Improved efficiencies in BCBSNC operations and with its subcontractors, ongoing

Implications for the Plan and Members

The State Health Plan for Teachers and State Employees remains focused on restoring cash reserves and strengthening the financial health of the Plan.  Throughout this process, transparency for our members and taxpayers is an important value.

We have a long way to go in this process.  A wide range of options will be considered – and ultimately, solutions will be determined – by the General Assembly during the 2009 Legislative Session as they face the major challenge of funding the State Health Plan.  

Of course, no decisions have yet been made.  Before and during the Legislative Session, the State Health Plan will be asked to present a number of scenarios.  We will do so with the success of the Plan and the wellbeing of all of our members firmly in mind. 

I encourage you to visit our Web site often for monthly Member Updates and new initiatives announced on our Home Page. Thank you for your interest and insight.

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