North Carolina state health plan to penalize smokers, obese

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The state health plan in North Carolina, home of cigarette makers Reynolds American Inc. and Lorillard Inc., will shift more expenses to smokers and those who are overweight to try to curb medical costs.

Those who use tobacco or have a body mass index above a specified level and don't quit or lose weight will be placed in an insurance plan that pays 70 percent of claims, the health system said on its Web site. Members who can prove through tests that they don't smoke and that they meet the body-mass threshold can choose an option paying 80 percent, officials said.

"We think we'll have $13 million of cost savings in the next fiscal year," Lacey Barnes, deputy executive administrator of the plan, said in an interview today from Raleigh, the state capital. "As smokers quit, there will likely be savings in medical costs."

Savings sought in move

The plan, which required an emergency cash infusion last fiscal year and covers more than 660,000 state employees, retirees and teachers, joins nine other states where smokers face added costs, according to the National Conference of State Legislatures. In Alabama, obese state workers will be penalized in 2011 if they don't lose weight, the first such charge in any state, the center said.

Public health-benefit programs across the United States seek savings as more than 45 states face diminished revenue because of the economic recession, the center said.

"Rapidly rising commercial premiums are impacting state budgets, state fiscal pressures are leading to more proposals to increase employee share of costs, and co-payments and deductibles are on the rise," the center said on its Web site in a study of state health benefits updated Oct. 5.

Smoking and obesity contribute to 50 percent of North Carolina plan members who suffer from chronic diseases that raise health-care costs, Barnes said. The plan spends $2,000 more each year on smokers, she said.

"Our objective is to improve the health of our members and save some money in the process," Barnes said of the new requirements, which call for an outside vendor to weigh members and test saliva and blood for the presence of tobacco.

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North Carolina's health plan got $250 million from the legislature in April to meet claims in the fiscal year that ended June 30 because costs of medical care exceeded its forecast, Barnes said.

"Our annual medical cost exceeds $2 billion, so even a small miss resulted in almost a $250- million shortfall," she said. "It certainly increased the sense of urgency" to encourage members to healthier lifestyles.

Critics push for alternatives

There are less harmful solutions to combat smoking than to impose additional costs on health-care recipients, said the North Carolina Justice Center, a legal advocate for low- and moderate- income residents.

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"Shifting an employee into a new insurance product will affect the likelihood of the worker to seek needed care," the center's Web site says. "The program will also cost the state money, and savings are not guaranteed."

The health plan's stance is part of changing values in North Carolina, said Barnes, such as restrictions on smoking in public places in a state that, with Kentucky, accounts for 65 percent of U.S. tobacco output, according to the Appalachian Regional Commission.

The legislature also raised taxes this year on cigarettes to balance the budget, which Greensboro, N.C.-based Lorillard, the third-biggest U.S. cigarette maker, called "an economic penalty."

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