No qualifying bids, so State Health Plan will restart search for new insurer
AI-generated summary reviewed by our newsroom.
- The State Health Plan canceled its initial insurer search after no bids met requirements.
- A new RFP will be issued in the coming weeks and the plan remains in a silent period.
- The services under the TPA contract would start January 1, 2028 with optional renewals.
The North Carolina State Health Plan has scrapped its initial search for a new health insurer to serve as its administrator after no bidders met minimum requirements, resetting the search process for a program covering over 500,000 state employees, retirees and dependents.
The plan issued the request for proposals — an invitation for vendors to submit bids — on March 20, 2026, and will issue a new RFP in the coming weeks, according to a news release from the state treasurer’s office.
The March RFP came in year two of a three-year contract with Aetna and less than a year and a half after the state switched to Aetna from Blue Cross Blue Shield of North Carolina, which had served as the plan’s third-party administrator for 40 years. That’s despite the contract with Aetna having an optional two-year extension.
That decision under former Treasurer Dale Folwell led to prolonged legal challenges, after Blue Cross filed protests and lawsuits alleging the bidding process was flawed and unfair. An administrative law judge ultimately upheld the state’s decision to select Aetna. That cost the state over $2 million in legal expenses, Beth Horner, director of communications with the SHP, said in an email response to questions from The N&O.
The plan will remain in a “silent period” while staff work to develop the revised solicitation, according to a news release from Treasurer Brad Briner’s office, which houses the State Health Plan.
The aim is still for the plan’s Board of Trustees to approve the contract award later this summer, the news release said.
The initial RFP released in March would have given the State Health Plan more flexibility in designing benefits and more control in negotiations with providers, instead of insurers.
Asked about any pushback on this new strategy during an interview earlier this week with The News & Observer, Tom Friedman, the plan’s executive administrator, said they were “absolutely not” getting pressure from doctors and health systems.
“North Carolina providers really want to serve teachers and state employees. I think they hit some abrasion points with insurance companies that if their relationship is more directly with the State Health Plan, one, it feels a little bit less combative, and two, they are willing to provide deeper discounts and do things a little bit differently,“ he said.
“I don’t think it’s probably insurance companies’ favorite approach to be kind of pushed back from some things. But we’re not a 50- or 500-person group; the contract is over 550,000 people,” he said.
“I think we know our members” and “we want to make sure their unique values and what we’ve learned from them over time are really articulated throughout the contract,” he said.
“So I’m very happy if they don’t bid, if they don’t want to adhere to that,” he said.
The RFP concerns third-party administrator services that would begin Jan. 1, 2028.
The original RFP outlined two additional optional, one-year term renewals.
Submission of proposals on minimum requirements were due from bidders by April 8. Full proposals, which include more detailed information on contract costs, provider networks and more, were to be due May 18.
State Health Plan changes
The State Health Plan has undergone significant changes under the leadership of Briner, who took office in 2025, and Friedman. These include premium increases via a tiered system based on salary and higher deductibles.
Last year, the plan also launched a surgical benefit with Lantern, a specialty care platform, offering certain surgeries at no cost to members. The plan pays less when these providers are used. Novant Health and EmergeOrtho joined that partnership. Earlier this year, the plan’s board of trustees approved contracts with three clinically integrated networks, or groups of health care providers: Aledade, Community Care Physician Network and UNC Health Alliance.
In March, the plan’s board of trustees approved the implementation of a three-tier network structure in which members and the plan would pay less when preferred providers are used and more when non-preferred providers are used. The vote was not on specific cost-sharing amounts, but rather to approve the structure. No final decision on costs will come until June.
The third-party administrator contract launched in March would have given the SHP further latitude to try new strategies.
Friedman said Monday that the plan wanted to “give ourselves the flexibility to correct as the market conditions change, or success kind of wanes and goes.”
Friedman said that the plan is negotiating contract rates with other doctors and health systems to amplify that preferred provider network.
Those rates “are specific rates between the entity and the State Health Plan,” meaning that whoever is the next administrator would load those into their system, giving the SHP “better transparency and kind of control over the rates.”
That would also mean providers would not have to renegotiate rates every time there is a shift of administrators.
A third-party administrator handles all of the administrative tasks associated with health insurance, which include issuing cards, processing claims, setting up technological systems and more. For this, the state pays a fixed per-member cost.
In the case of North Carolina’s State Health Plan, the administrator also lays out contracts with a network of providers and negotiates the prices paid to them for health care services. It does not pay claims as a typical insurer would. The administrator sends claims to the state, which is on the hook for covering health care costs.
The new rates laid out by the SHP via its contracts would supersede contracts laid out by the administrator. Any rates the SHP has not already set on their end would then go by default to the rates the insurer has established, said Friedman.
Friedman said by June, the plan should have a sense of who will be a preferred provider. That will be across practice types, and the plan is focused on negotiating with health systems and doctors in different regions of North Carolina to pick the preferred ones.
Penny wise, dollar foolish?
Full bid proposals require bidders to lay out their contract value.
For the 2025 contract with the State Health Plan, Aetna priced its total contract value at approximately $9.9 billion for three years. That included $293.6 million in administrative costs and the rest in claims costs.
That RFP occurred under the prior treasurer, Folwell, who like Briner is a Republican.
But Aetna’s estimates for the three-year period were off as claims and administrative costs came out higher, according to an SHP projection shared with The N&O.
The N&O has contacted Aetna for comment but has not yet heard back.
Friedman said they estimated costs would continue increasing by about 6% to 7% annually.
As for what they were looking for in terms of costs under the new contract, Friedman said Monday that “the previous administration initially wanted the lowest possible administrative fee and then, the next year had to buy a few more services to make sure the plan could run smoothly.”
He said, “I am not trying to pay materially more for administrative fees unless I am getting materially more,” adding that the plan wants to focus on population health and patient navigation.
“I don’t want to be penny wise, to be dollar foolish,” he said.
He also said he wants more flexibility to pay doctors directly instead of paying insurers: “How can we carve out services where we want to where we think we would rather pay doctors in North Carolina to deliver care than pay an insurance company to deliver some services?”
He added, “I want the flexibility to be able to kind of attack problems. And I think that’s a very different way to think about administrative fees.”
On potential issues should the State Health Plan shift to a third-party administrator that is not Aetna, Friedman said, “transitions are, by nature, a little bit rocky, and we’re going to try to learn the lessons we learned last time, continue to get feedback from members and try to address the issues.”
He said that out of millions of claims, there were less than 1% with issues, but “that’s still unacceptable, and it’s still our job to solve them.”
This story was originally published April 15, 2026 at 1:37 PM.
