Leslie W. Merritt, Jr., CPA, CFP

State Auditor

STATE OF NORTH CAROLINA

Office of the State Auditor 2 S. Salisbury Street

20601 Mail Service CenterRaleigh, NC 27699-0601

Telephone: (919) 807-7500Fax: (919) 807-7647

Internet http://www.ncauditor.net

FOR IMMEDIATE RELEASEFor Additional Information Contact: Chris Mears, Director of Public Affairs

Office: (919) 807-7566Cell: (919) 306-4301

chris_mears@ncauditor.net

Audit Finds State Health Plan’s Oversight Inadequate and Ineffective

RALEIGH, NC – October 15, 2008

Today, State Auditor Leslie Merritt released a performance audit on the oversight of the North Carolina State Health Plan for Teachers and Employees. The audit found that the oversight of the State Health Plan is inadequate and ineffective. The audit recommends that the General Assembly place the Health Plan under the authority of an executive branch agency to ensure proper operational and financial oversight.

“In a majority of states, the legislative branch creates the health plan and the executive branch provides the day to day oversight. Their system avoids the pitfalls of separation of powers issues and potential conflicts of interest between health care providers and legislators,” said State Auditor Leslie Merritt.

Thirty-five states operate their state health plan under an executive branch agency and thirteen states operate their health plan under boards of trustees. But the primary authority over North Carolina’s Health Plans is a legislative body – the legislative Committee on Employee Hospital and Medical Benefits. The Legislative Committee’s influence over the Plan’s management functions may violate the North Carolina State Constitution’s separation of powers clause, creates the potential for undue political influence in the Plan’s administrative decisions and contract negotiations, and creates the opportunity for conflicts of interest. The Health Plan’s Board of Trustees provides some oversight but operates in an advisory role.

“There is clearly a problem when the Health Plan is running a deficit and facing tough economic times ahead. North Carolina’s teachers and State employees need to know that the Health Plan that they’re paying for is being properly managed and will be there when they need it,” said State Auditor Merritt.

This audit is the first of two performance audits on the State Health plan. The second will focus on the financial causes of the State Health Plan’s deficit.

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