NC’s State Health Plan sues Atrium, saying it can’t set plan members’ copays

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The State Health Plan and the state treasurer are suing Atrium Health after the health system launched its own program to give state employees lower out-of-pocket costs at Atrium than they would pay even at the hospitals the plan favors under its new tiered network.

Atrium doesn’t have the authority to set what members pay for their care, the lawsuit says — only the treasurer does.

The lawsuit was filed Friday in Wake County Superior Court by the plan, the Office of the State Treasurer and Treasurer Brad Briner, a Republican. It asks the court for a temporary restraining order to stop Atrium’s new program, set to launch in January 2027, while the case is sorted out.

The lawsuit also asks the court to declare Atrium’s program “void and against North Carolina public policy” and to rule that it “unlawfully interferes with and usurps the Treasurer’s statutory authority.” It seeks damages and a jury trial.

Atrium on Tuesday announced an “Affordability Protection Program,” stating in a news release that the program was aimed at addressing “the higher healthcare costs created for patients seeking care at Atrium Health by the NC State Health Plan’s new tiered provider structure.”

The program, which starts Jan. 1, 2027, waives deductibles and coinsurance entirely at all Atrium locations for State Health Plan members and replaces them with a copay. Retirees 65 and older on the plan’s Medicare Advantage plans are excluded. Atrium said in its release that members’ cost-share at Atrium would be lower than at the plan’s preferred providers, and lower than at any other health system in North Carolina.

The plan says those savings come at a cost to members.

“Under the guise of ‘affordability’ and ‘patient choice,’ Atrium has, on the eve of Open Enrollment, single-handedly threatened the stability and long-term viability of the Plan — and the health care coverage of 750,000 North Carolinians—by attempting to usurp and circumvent the express statutory authority delegated to the Treasurer to determine the Plan’s coverage and benefits,” the lawsuit says.

The plan said in a news release Friday that Atrium “has never been given this authority, yet it believes it can change these amounts simply by posting new ones on its website. That’s not how it works.”

But Atrium, which said it’s reviewing the lawsuit, disputed “the characterization that this program was intended to harm the financial stability of the State Health Plan.”

The program’s purpose “is simple: to make healthcare more affordable and help patients maintain access to the providers they know and trust,” Chris Berger, an Atrium spokesperson, said in a statement.

“Our focus has always been, and remains, serving patients and making care more affordable for North Carolina’s public servants and their families,” Berger said.

When Briner took office in 2025, he began a series of changes. They include raising premiums for state employees, requesting more funding from the General Assembly (which funds the employer portion of premium costs) and implementing a new preferred provider system.

That system has had several pieces kick in already, but its hospital provider portion takes effect in January 2027. It designates some providers as preferred, others as access (or middle-tier) providers and others as non-preferred. At non-preferred providers are where members would see the highest out-of-pocket costs. Plan officials have said the system is meant to encourage competition and lower costs by pushing members toward high-quality providers that charge the plan less, thereby improving its finances. Meanwhile, preferred providers are expected to receive more patients, and therefore, more business.

Atrium was initially designated as non-preferred. Under a Sept. 14 agreement with the plan, some Atrium locations and services, including rural hospitals, were moved to the access tier, and some Atrium providers, known as OneHealth, were designated preferred. But many Atrium locations, including its urban hospitals, remain non-preferred, according to the lawsuit and Atrium.

Open enrollment begins Monday and had been set to end later this month. The plan announced in its news release that it is extending it through Nov. 6, to give “members more time to review information about the recently announced program and understand what it could mean for their 2027 coverage and costs.”

The lawsuit says the plan’s cash reserves plummeted from about $1.4 billion to about $420 million between January 2020 and June 2025 as healthcare providers charged more.

In 2025, the treasurer projected the plan would run a $500 million deficit in 2026, completely eliminating its then-existing cash reserves, followed by a $1 billion deficit in 2027, according to the lawsuit.

The plan now projects a “strong likelihood of a negative operating balance” as of January 2027, meaning it might not have enough money to pay its bills, the lawsuit says. The new tiered system is estimated to save the plan more than $135 million in 2027.

“Savings from the tiered provider system are the lynchpin for the Plan’s overall strategy to correct the short and long term financial problems of the Plan. These savings would evaporate if Atrium’s Protection Program is allowed to stand,” says the lawsuit.

The plan said in its release that Atrium will keep charging the plan its current rates, which it called “among the highest charged by major hospital systems,” and that all members — including ones who go to Atrium — would ultimately pay through “significantly increased premiums and decreased benefits.”

The lawsuit also says Atrium’s plan was “designed and implemented in bad faith,” because Atrium “strategically waited until six days before the start of the Plan’s Open Enrollment period” to announce it, after months of negotiations and a September agreement.

Atrium told The N&O on Tuesday in an email it that it submitted multiple proposals “starting in July” to give the health plan the same discounts as preferred providers had, and that the plan rejected them each time. It said the offer remained on the table, according to Berger, the Atrium spokesperson.

Berger also pointed to the plan’s September announcement of its agreement with Atrium, which said that before the new tiers took effect, Atrium “was no more expensive than other leading health systems in North Carolina.”

“However, the 2027 NC State Health Plan design — not Atrium Health’s pricing — will charge members more to use Atrium Health providers and facilities,” Berger said.

Meanwhile, the plan says that proposal came in July — after it had already announced the preferred providers.

“When you make an offer that is no better than the winning bid after the contest is over, that doesn’t help, and that’s what they’re talking about. They made an offer in August that’s not better than what we already had after the competition concluded late June,” Briner told The N&O on Tuesday.

This story was originally published October 9, 2026 at 1:20 PM with the headline “NC’s State Health Plan sues Atrium, saying it can’t set plan members’ copays.”