This story originally published online in The Assembly.
Thirty-four days remain until the contract expires between the insurer for the state’s public employees and the state’s largest hospital. But the health care titans don’t appear to be anywhere near the finish line.
If Aetna and Duke Health can’t agree on a new contract by October 20, the health system will no longer be considered in-network for the 743,000 retirees, teachers, and other state employees, as well as their families, on the North Carolina State Health Plan. These members make up the bulk of Aetna’s business in North Carolina, but the Duke negotiations affect other employers’ plans too.
Reimbursement contracts determine what insurance companies will pay for various health services from in-network providers. Naturally, providers want insurers to pay as much as possible, while insurers jockey to pay as little as providers will accept.
Usually, these negotiations take place behind the scenes, with the insured catching wind only when their premiums or out-of-pocket costs increase. But this summer, the Duke-Aetna showdown spilled into public view as Duke launched a heated public campaign.
The campaign includes a webpage, a strongly worded public letter, and radio ads imploring patients to voice their concerns with Aetna. “We urge Aetna to reconcile their commitment to profitability and increasing revenue, with their commitment to enabling patient access to affordable, high quality health care to their customers,” the webpage states.
In a September 10 letter notifying the state plan’s Medicare-eligible retirees and their dependents of the potential changes, Aetna was similarly blunt: “Your provider is leaving our network,” it said in large font. Aetna listed Duke Health by name and phone number, but stopped short of telling members to call the health system.
Duke says its current reimbursement rates don’t reflect the actual cost of providing patient care and leaving them unchanged would restrict its ability to invest in technology, staff, and services. Earlier this month, Duke Health sent a letter urging its patients to contact Aetna to avoid being forced out of the network: “We are asking Aetna to pay fair rates.”
“They’re trying to scare our members,” State Treasurer Brad Briner, who oversees the State Health Plan, told The Assembly. He said Duke has been “incredibly tone deaf in this situation.”
As the state’s third-party insurer, Aetna has led the negotiations on behalf of plan leaders. While negotiations are ongoing daily, “I’m not sure that we’re any closer to a deal today than we were yesterday,” Briner said.
A Duke Health spokesperson said it is “actively engaged in good faith negotiations with Aetna.”
“These negotiations are not with the State Treasurer,” said the spokesperson. “While Aetna administers the State Health Plan, Duke Health serves fewer than 10% of its participants. This is a direct negotiation with Aetna.”
The spokesperson cited Duke’s $1 billion in community investments made last year and said the academic health system is “driven not by margin but by mission.”
A Test of Patients
Duke Health, a nonprofit controlled by Duke University, reported $9.7 billion in total assets as of its latest quarterly financial report in March, with income from patients generating $6 billion in revenue last fiscal year.
Duke’s network includes three hospitals in the Triangle, as well as 31 primary care practices, 23 behavioral health providers, and nine urgent cares across the state. In fiscal year 2023, it saw 67,000 inpatient and 5 million outpatient visits.
After UNC Hospitals, Duke University Hospital is the second-most-frequented hospital for State Health Plan members, according to the plan’s latest annual report. The system is also expanding, with the recent purchase of Mooresville-based Lake Norman Regional.
But Trump administration cuts to research funding have kneecapped Duke, both the university and the health system; funding from the National Institute of Health for this fiscal year shrank by $82 million as of this summer, according to federal data. The “One Big Beautiful Bill Act” will soon cut Medicaid and reduce how many patients are eligible; those patients accounted for about 17 percent of Duke’s patient revenues last fiscal year.
The feds also froze $108 million in previously approved research funding for Duke Health in late July as the DOJ launched investigations into alleged systemic racial discrimination. Both Duke and the feds have been mum on the status of the investigations and which programs the freeze is impacting.
The cuts have affected staffing: Nearly 600 university-wide employees have resigned through a voluntary separation program, and the school is now undertaking layoffs. Last month Duke Health announced it would reduce paid time off for employees hired after January 1, 2026.
Duke officials say those federal funding challenges are unrelated to the reason it needs to charge Aetna higher rates, and instead points to escalating pharmaceutical, labor, and other costs. Duke contends that failing to increase reimbursement rates puts the community’s access to high quality care at risk.
Briner isn’t convinced. “I find it really beyond belief that they think that we owe them some more money to make them even more profitable,” he said.
Critical Condition
Briner inherited a nearly insolvent State Health Plan when he took office earlier this year, with evaporating cash reserves and a $507 million deficit.
But recent interventions are closing that gap.
Last month, the legislature increased its annual contributions for state employees from $8,095 to $8,500, which will provide a $150 million annual boost. The following week, the State Health Plan Board of Trustees voted to increase premiums for the first time in seven years. Negotiations are underway to create a preferred network of surgeons who will perform procedures at no cost to State Health Plan members through a program with Aetna’s subcontractor, Lantern.
Combined, Briner said the efforts will allow the State Health Plan to break even in 2026.
Briner said that Duke has been an outlier in a field of health care providers who are largely willing to help the plan avoid insolvency and that bowing to Duke could set off a cascade of cost increases.
“We have a single hospital system who’s saying, ‘Not only will I not take the same, I want more,’” he said. “Whatever the merits of Duke’s argument are, if we are to give them a big raise, the next day, I will have a line around the block of providers asking for more.”
After more than 40 years with Blue Cross Blue Shield, Aetna took over as the State Health Plan’s third-party administrator in January.
The plan oversees $3.5 billion in annual claims and, like Duke, has significant negotiating leverage given the volume of patients it can steer toward preferred provider networks.
A spokesperson for CVS Health, Aetna’s parent company, said in a statement that North Carolina has among the highest health care costs in the country: “Our discussions are ongoing and our intent is to reach a mutually agreeable outcome.”
Last year, negotiations similarly frayed between Duke Health and United Healthcare, which covers 172,000 of its patients. The insurer called Duke the most expensive health care system in the Southeast, which Duke denied.
The two finally announced a deal on the day their contract expired.
If Aetna concedes to Duke’s demands, State Health Plan premiums may have to rise again, but Duke officials says any required increase would be modest. If Aetna doesn’t agree to an increase, it could drop Duke Health as a provider and plan members would have to find new doctors. (For certain health conditions, like pregnancy or ongoing cancer treatments, Aetna is obligated to provide continuity of care under state law.)
“Duke is a great hospital in certain ways, but it is just another hospital in other ways,” said Briner. “We have alternatives here in the Triangle, and if we have to ask people to use those alternatives, we will do so.”
Update: This article has been updated with additional information from Duke Health.
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