Big changes are coming to the State Health Plan, which provides health insurance for nearly 750,000 teachers, state employees, retirees and their dependents. Starting in 2027, plan members will be incentivized by lower deductibles and out-of-pocket costs to seek out “preferred providers” for their care.

“We are asking our members to become shoppers in healthcare, and we’ve never asked them to do that, really, before,” State Treasurer Brad Briner said.

The board, at its upcoming July 10 meeting — which Briner said in June will be “the most consequential meeting this board has ever had” — will vote on contracts that will classify providers in one of three categories: preferred, access or non-preferred. Deductibles, out-of-pocket costs, and other expenses will decrease for members who choose to use providers in the preferred category.

Meanwhile, providers deemed non-preferred, which charge the State Health Plan more for care, will cost more for members. Plan officials have said they aim for the non-preferred category to include no more than 10% of all providers, and that geography will be considered so that no areas only have non-preferred providers available.

Most providers will remain in the access tier, where prices for members will be unchanged. Most providers in rural, less competitive markets such as the southwest, northeast and southeast, will probably be in the access tier, officials have said. Ahead of the July board meeting, here is what you need to know about the new tiered-provider structure.

The State Health Plan faced a financial cliff when Briner, who chairs the plan’s board, entered office. Since then, it has come back from a $507 million deficit through across-the-board cost increases for members, including a recent increase in out-of-pocket costs and copays for retirees on Medicare Advantage plans.

But the plan is still battling rising health care costs and inflation, said Thomas Friedman, executive administrator of the plan. A slide presented during a June meeting reads “the status quo of healthcare is unsustainable” and “member health is getting worse because health care is unaffordable.”

Friedman presented cash projections showing that the plan will end 2026 above its target stabilization reserve, but is currently $58 million short of the target number for 2027 — assuming the legislature funds a 5% employment contribution in fiscal year 2026-27, then 4% annually in following years.

So far, the brunt of the cost increases required to balance the State Health Plan’s budget have been borne by members and by taxpayers. The tiered-provider structure could change that by lowering the amount paid to healthcare providers.

A secondary savings effect may come from lower healthcare costs for members, since members paying less will be able to seek more preventative care and be treated early  before sicknesses progress and more expensive services are needed later.

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