This November, North Carolinians will elect an official to oversee the state’s $108 billion pension fund and health care system, which serve nearly a million state employees, their dependents and retirees.
Republican Treasurer Dale Folwell, 61, is running for re-election. Challenging him is Aaron “Ronnie” Chatterji, 41, a first-time Democratic candidate with a very different background.
Folwell, a certified public accountant, is the first Republican to be elected N.C. treasurer in 140 years. He was a state representative for eight years before running for treasurer. A native of Winston-Salem and alumnus of the University of North Carolina at Greensboro, Folwell touts his familial and political ties to the state.
The son of Indian immigrants, Chatterji would be the first Asian American elected to statewide office in North Carolina if elected. He is a tenured Duke University business and public policy professor. He argues that his lack of political experience is a good thing, and points to his academic background in economics. In the past, Chatterji served on an economic advisory board to President Barack Obama, taught at Harvard University and graduated from the University of California at Berkeley.
He told The N&O before the primary elections that “the great thing about this race is that the differences between me and Treasurer Folwell are not the typical partisan differences. They’re really issues of economic policy and substance.”
Folwell has focused on conservative cost-cutting measures in both the State Health Plan and the N.C. Retirement Systems, the pension fund, to protect taxpayers from self-serving interests and decisions that he says cost them too much money.
Although Chatterji seeks to save state employees money as well, he proposes less conservative fiscal strategies and new policy approaches, basing his campaign’s direction around his academic background.
Folwell said his time in office includes fulfilling original campaign promises: amending the State Health Plan to cut insulin costs for diabetic state employees starting in 2021; an effort to cut co-pay costs for all plan users under a new payment model; running a well-funded pension plan that weathered the COVID-19 stock market crash; and renegotiating to cut premiums for Medicare users.
In interviews with The News & Observer, the candidates explained their stances on key issues:
On health care
If elected to a second term, Folwell said he would continue the effort to expand the embattled “Clear Pricing Project” in the State Health Plan: his office’s new state-set medical pricing model that ties reimbursement rates for providers to Medicare rates to increase the price transparency and cut an estimated $300 million in costs.
Losing the election would likely mean the end of the program, since Chatterji said he would move in the direction suggested by the pricing model’s critics.
In an interview, Folwell said he’s continuing to fight “secret contracts” from providers for high health care prices. “Anyone who’s not in favor of that,” he said, “is going to be on the wrong side of history.”
With providers that signed on to this plan, users save up to $94 on co-pays while having co-pays waived on primary care.
But the plan has met opposition since Folwell proposed it in 2018 with major hospitals and groups like the N.C. Health Care Association saying it would reduce revenue for hospitals and force them to cut services. Folwell’s own party sponsored a House bill that passed by wide margins last year that opposed the proposal and sought to modify it.
The NCHA said hospitals need the revenue to cover uncompensated care for the uninsured, Medicaid users and bad debt for people unable to pay.
As a result, the plan didn’t proceed as intended and major hospital systems like UNC Health (which hires the largest number of state employees as a provider), Duke Health, Atrium and Novant refused to sign on.
“I appreciate that 28,000 providers — independent primary care providers, behavioral health providers, independent provider networks and the five courageous hospitals — have chosen to provide care to those who serve in state government,” Folwell told The Charlotte Observer last year.
Folwell yielded to the pushback last year, and now state employees have a hybrid system of providers in the Blue Cross and Blue Shield of North Carolina’s network that didn’t sign on as well as those within the Clear Pricing Project, The N&O reported.
Chatterji says the Clear Pricing Project failed and said that being adopted by only five hospitals demonstrated it wasn’t nearly effective enough as a cost-cutting measure.
“The different approach there is [expanding] Medicaid, then we need to align what we pay out of the State Health Plan with health outcomes,” Chatterji said. “If you look at the hospital systems that are out there, they want to be held accountable for the quality of the outcomes, not just the price. Essentially, when you go to the doctor, you’re not just thinking about the price, you’re thinking, ‘Will I get better?’”
Like Folwell’s critics, Chatterji advocates instead for “value-based care,” where providers are reimbursed in part on their ability to keep patients healthy to begin with, and which focuses on holistic efforts to make health care more effective in the long term. This kind of care is consistent with what is envisioned with the state’s recently approved Medicaid transformation.
The state treasurer is pivotal to supporting Medicaid expansion, which Chatterji said he would be a strong proponent of.
“I think that if Medicaid is expanded with the support of the treasurer, then it will make it a lot of easier to make positive changes to the State Health Plan,” Chatterji said.
As treasurer and investor
The state treasurer also oversees the state pension system, one of the biggest public pools of money in the nation, which pays out about $6 billion annually to retirees.
During his watch, Folwell has fought fervently to prevent unnecessary spending within the $108 billion fund.
Last year, the fund was rated as well-equipped to weather economic strain by the Pew Charitable Trusts and as nationally having the lowest burden to pay in liabilities by Moody’s Investor Services.
“Any dollar that’s inefficiently spent at the treasurer’s office for anything is a dollar that can never ever, ever be spent on public education, public safety, public work, public roads,” Folwell told The N&O.
Echoing his Democratic challengers in the 2020 primary race for treasurer, Chatterji criticized Folwell’s conservative management of the pension fund. He compares it to saving money on not changing a car’s oil for years, then having to pay for repairs.
He said that he would advocate in the General Assembly for cost of living adjustments for retirees and alter the management of the pension, including filling vacant positions within the department’s investment management department.
Folwell moved to save millions on the fees charged by Wall Street managers of the pension’s billions in invested stocks by terminating the managers. Well over $240 million has been saved to date by this strategy, according to the treasurer’s recent pension performance report.
But this move also included liquidating roughly $14 billion in stocks into cash over his tenure, missing out on record market growth over the last year. Folwell expressed concerns over unstable market conditions for the move, saying he “wasn’t hired for his crystal ball.”
This different strategy by Folwell and ensuing controversy was initially reported by The Wall Street Journal in 2018. The reporting included the fact that the position of chief investment officer hasn’t been filled for the majority of Folwell’s tenure. The position has been overseen by two interim officers.
“The investment strategy we have now is kind of like bending over to pick up a nickel and then $20 falling out of your pocket every day,” Chatterji said.
He contends that Folwell’s move cost the pension roughly $4 billion in return on investment before the pandemic-induced market crash.
“It’s not theoretical money, it’s real money that could have been used to shore up our state pension fund for future state employees’ retirements,” he said.
Pension performance reports show that the fund is heavy in cash and low in invested stocks, according to investment policies set by the treasurer’s department.
In spite of this, the pension handled the market crash well because of its sitting cash, although market conditions have improved and the pension is roughly back at the same value as before the pandemic.
Folwell said the details of investment management may be interesting to state employees, but what matters most is the state of the pension fund.
“At the end of the day, what state employees are most interested in is not having to worry about the safety and security of their pension system, like many other public service workers in most of the world are having to worry about right now,” Folwell said.
Subscribers to The News & Observer can access a voter questionnaire between the two candidates.