(The Center Square) – A new assessment shows North Carolina’s Retiree Health Benefits Fund deficit has been reduced by $7.17 billion over the past year, providing the highest funding rate high since 2017.
The valuation, conducted by The Segal Group, assessed the net assets and liabilities of the National Health Scheme for post-employment benefits other than pensions as of June 30 for retirees and permanent full-time employees who will claim benefits upon retirement.
The report showed that OPEB’s unfunded liability decreased significantly from $30.92 billion on June 30, 2021 to $23.75 billion as of June 30, 2022. OPEB’s unfunded liability was expected to increase to $32.44 billion, but went the other way due to higher discount rates which reduced $6.1 billion and $2.57 billion in savings from contract negotiations for the state health plan’s drug benefit management services, according to state treasurer Dale Folwell, who oversees the plan.
The development means the level of funding for the OPEB plan has risen from 7.72% last year to 10.58% as of June 30 this year, marking a fourfold increase since Folwell took office as he pledged to improve the funding ratio by 2.4% in 2016.
“This is a positive report, as we benefit from the tailwinds of high interest rates, but face the headwinds of inflation and skyrocketing healthcare costs. work to be done to achieve even greater fund stability,” Folwell said in a prepared statement.
“There is a long-term solution to shrinking liabilities. Hospitals need to be transparent in displaying their prices,” the statement said. “And they should do the right thing by working with us to reduce health plan costs by eliminating $300 million a year of waste and inefficiency in health care delivery.”
The Retiree Health Benefit Fund enhancement is the latest result of Folwell’s relentless focus on reducing unfunded state liabilities, which has also resulted in savings of nearly $1 billion through renegotiation fully insured Medicare Advantage plan and related services in 2020.
Folwell also championed the Unfunded Liability Solvency Reserve Act, which is funded by General Assembly appropriations, surplus funds from the “Rainy Day Fund” and savings from general bond refinancing or a special debt. The 2018 law created the Employee Benefits Trust Fund to channel the money generated towards unfunded pension and health plan costs.
The Employee Benefits Trust Fund paid $180 million to OPEB for unfunded liabilities over the past year, according to the Segal report.
Folwell warned in August that contracts for the national health plan renegotiated next year will have a significant impact on the plan’s solvency.
The state’s “healthcare cartel” is currently profiting more than 100% from Medicare reimbursement rates, and if they continue to refuse to negotiate, taxpayers will be forced to cover a $5 billion shortfall over the next few years to stay solvent, Folwell said in his August Ask Call Me Anything with Reporters.
“Health care costs run through the system when contracts start to be renegotiated next year,” Folwell said. “I am therefore deeply concerned about the upward renegotiation of these contracts.”