Wealth and health: NC treasurer talks new pension strategy, weight-loss drug coverage and more

Brad Briner left a career in high finance to pursue one of the highest-pressure roles in North Carolina government: state treasurer.

The treasurer's department is responsible for managing one of the biggest pension plans in the nation, as well as overseeing health benefits for hundreds of thousands of current and retired state employees and their families.

Briner, a former executive at a New York firm that managed investments for Bloomberg LP founder Michael Bloomberg, took office in January. He took over for Republican Dale Folwell, who served for eight years and didn’t seek reelection to the role. Briner is tasked with steering the health plan toward profitability in an era of rising health care costs, and he’ll be focused on getting bigger returns for the $130 billion pension plan as markets face headwinds.

In an extended interview with WRAL News Anchor Dan Haggerty, Briner talked about the health plan’s recent change to a new administrator. Briner also talked about the potential for bringing popular weight-loss drugs back into the coverage plan. And he discussed Bitcoin’s role in boosting returns for pension plan members — and revealed plans for proposed legislation aimed at adding checks-and-balances for the state employees who manage the state pension plan.

Below is a transcript with highlights of the conversation, edited for brevity and clarity.

WRAL: You have a ton of experience in finance. Now you're in politics. Has any part of the job been surprising to you?

BRINER: This job is probably the least political of the Council of State jobs, in my opinion. The surprise has been more on the state and local government side. There's a lot of money that came through the American Rescue Plan Act, and it ended up in a lot of places in this state. It was one-time money. A lot of municipalities and counties either didn't hear that or didn't want to hear that, so that's been a big surprise to deal with.

When we deal with the state health plan, and when we deal with benefits for state employees, this does become political. There's a lot of math that underlies that, though, and we try to show that over and over again about the choices that we have to make and future responsibility we have. Does it become political from time to time? Of course it does. But we're trying to ground it in the data everything we do.

WRAL: You ran on your record as an investor. You said you could find ways to make the state pension plan more money. Now that you take a closer look at the numbers, what's the plan for that? And are you as optimistic?

BRINER: Most investment management challenges boil down to one big fact and one very small fact. And people love to talk about the small fact, and that's: “Which stocks did you pick?” or “Which real estate did you buy?” The big fact is: “How much risk did you take?” So this is essentially North Carolina's problem.

I talk about two of my daughters all the time in this regard. When we were teaching them to drive, the older one would love to go 85 mph on the freeway, and that's a problem. And the younger one would love to go 45 mph on the freeway, and that's a problem, but in a very different way. Going 65 is the right answer. North Carolina's pension is going 45 mph right now.

We sit on a lot of cash. We have a lot of investment-grade fixed income, which doesn't have a whole lot of return or risk associated with it. We have a lot less equity than almost any other pension in the country. Our fundamental problem is our risk problem. But that said, when we talk about risk, that scares people. We want to go 60 mph or 65 mph. We do not want to go 85. We’ve got to be very careful to hit our mark, and not go beyond our mark.

WRAL: How should members of the pension plan feel during this transition? Because not only are you coming out and saying we've been underperforming, but on top of that, we're watching the market move downward.

BRINER: If you are due a pension payment from us, the retirement system isn't the only person on the hook for that. The entire state is, too. You have the full faith and credit of the state of North Carolina behind those pension payments in the future. The retirement system is the first account we tap to pay it, though. The taxpayers are behind that; hopefully we never get there. These promises are as good as gold, if not better, and we should not worry about that.

What we need to do for our state's purposes is make more money on the investment portfolio, so that we're not putting incrementally more into the pension system every year, and we can use those proceeds elsewhere. We now fund almost $4 billion of our state budget into the pension systems. If we get this right, that number drops by half. I can assure you, any legislator you want to talk to of any variety would find a good use for $2 billion.

WRAL: How do you take advantage of the down market? Because when you have the funds that you have at your disposal, there can be benefits to seeing a downturn in the market, in the long run.

The hardest part of investing by far is emotional self control — fear and greed. When it is time to invest and invest heavily, it is obvious. But what stops people is the fear that there's more downside. And so you overcome that through a disciplined and systematic strategy, saying, “OK, the world feels like it's falling apart, but in the end, I think the United States is going to exist. So f I have $100 in cash, I'm comfortable taking $10 this week, $10 next week.” Having a disciplined and methodical approach in the midst of that is [what great investors do].

If you look back to 2009, just read the headlines about Berkshire Hathaway: Every month, Warren Buffett was putting a billion or $2 billion to work in the middle of the calamity. But they were in very high-quality securities, great companies at very low prices. That's what we seek to do, too, over time. Ideally you'd never get to those situations where everything's falling down around you, but in the fullness of time, we will. And we'll be ready with a disciplined investment strategy.

WRAL: A lot of people are preparing for a recession, with some wondering if maybe moves by President Donald Trump are strategic moves to try to enter a controlled recession. How do you view what is happening now? And how do you think people should view it and prepare for it?

BRINER: Trump was handed a mandate around a handful of things, one of them being improving our trading relationships with our allies — or the so-to-speak allies, in certain cases. He's delivering on that. That's what we worry about in the economic world, particularly on the tariff regime. So to me, it's much more about delivering on those promises than trying to engineer a recession. I've heard that theory; this doesn't hold any water for me, in that no recession is a good recession. You might want to slow down, you might want to lower the interest rates. You certainly want to bring down inflation. But I think the goal is delivering a fair trading relationship with our allies. And we look at pharmaceutical pricing as the obvious example of that. We deal with that in the state health plan. We're paying 10 times what they pay in Europe for the same medication. Is that because our lives are worth 10 times what theirs are? I don't think anyone's arguing that. I think it's just a very simple, unfair trading relationship.

WRAL: Do you see us heading in the direction of a recession?

BRINER: There's certainly a slowdown going on. You see it in consumer confidence. You see that in a lot of ways right now. There was an enormous amount of fiscal stimulus put in the system, and that is still working its way through. We're unwinding that. You had very high real GDP growth when that happened. So we're slowing from there. But I don't see a recession in the cards in the immediate future. Today, it's slower, but it's not slow.

Moreover, you're entering a business environment that will be better. The stock markets sold off massively when Trump won in 2016, only for people to wake up sometime in 2017 and realize deregulation is really good for business. I think we'll get back there.

WRAL: Will you consider investing pension plan money in cryptocurrency such as Bitcoin?

BRINER: As a hedge to the dollar, I think Bitcoin makes a lot of sense. But the volatility is extraordinary. There's a suitability question in Bitcoin relative to the pension fund that I still am not at peace with. It moves up and down 5% a day, every day, it seems. It moves up 100% over the last year and down 20% year-to-date. As an investor who's trying to take as low risk as possible to get to 6.5%, it doesn't seem to me that those two things go hand-in-hand. That said, personally, I own Bitcoin, but I'm a very different investor than the pension system.

In the end, I've got a fiduciary duty to the state and to the assets of the pension plan to do what is right by them, and that is going to be measured in hindsight. We're all going to figure out over time the right role for Bitcoin in the portfolio. Right now, it's at zero. Having more options to solve our performance problem is something we are very much in favor of. We are filing a bill to really change the way that we do all of our investing. And Bitcoin is a small piece of that puzzle.

WRAL: Can you tell us more about that bill?

BRINER: We have this sole fiduciary model where, subject to some statutory limitations. If I wanted to go back to the office right now and buy $20 billion of Microsoft stock, I can just do that. I've got a trading desk and everything. I don't need to even sign anything. It's verifiably insane from a checks-and-balances and controls perspective. Now, thankfully, we've had dedicated public servants in this role, so we've never had a problem around that. But you can imagine the problems you could have.

Also, we elect this job every four years. And everybody likes to change investment strategies when they come in. But the enemy of long term investment strategies is changing it every four years. So what we'd like to do is build a staggered board that creates that longevity, it diversifies who can make these decisions, and takes a lot of the risk out of this whole fiduciary model, which is what we've got currently.

WRAL: Let’s talk about the State Health Plan. Your predecessor, former State Treasurer Dale Folwell, frequently argued that the General Assembly underfunded the state health plan for decades — to the tune of $33 billion. Do you agree with that math? Is that what you inherited, more or less, when you took this job?

BRINER: We did inherit a very large deficit in the State Health Plan. The number you mentioned is the unfunded liability. I think it's $36 billion today. So we do have a big liability. But more pressingly, we have a cash shortfall next year of about $500 million. We’re trying to make sure this health plan survives and provides the benefits that it needs to provide for all of our state employees. We're doing that in a couple different ways. We have to get revenue from somewhere, so we've asked the General Assembly for a record appropriation and growth higher than they've grown historically. We're going to ask the state employees to chip in some for the first time in eight years. We're also going to ask the providers for some. So it really is an all-across-the-board solution to the short-term fiscal deficit, with some long-term challenges ahead.

WRAL: You're looking at a sliding scale for premium increases. Isn’t there the potential for upsetting some of the higher earning employees? State employee retention has been difficult. Hiring has been difficult. And now you're asking these people to hold more of the burden when it comes to the premium increase.

BRINER: We're asking everyone across the board for more money, so I suspect we're going to upset everyone at least a little bit. I hope that they will understand the situation we find ourselves in. I hope they will understand that they are not alone. I hope they understand that the General Assembly is taking in a lot of money, that providers are providing some money, too. Medicare already does this. It's a percentage of salary which is much more palatable, I think, for people over time. It also has the effect of setting a rate once and not having to revisit it each and every year. As wages grow, the premiums grow as is appropriate given that costs grow, too.

WRAL: The State Health Plan this year switched from Blue Cross Blue Shield to Aetna. How is the transition going?

BRINER: As with any transition of this magnitude, there are complexities. We process something like 40,000 claims every day. And so when you go through these transitions, 39,500 of them are going to be fine. With 500 of them, though, you're going to have small or big problems. We're in the phase where that 39,500 has become 39,990. So we're down to a small number of claims that aren't getting done exactly the right way, and there are a couple different reasons for why that may be. There are some mistakes that were made in the way that we transitioned. Those are largely fixed at this point. There are some different policies that feel like differences but, in the end, aren't differences. And so we're trying to clean those up.

Aetna has been a great partner. They've been adaptable. I think what drove that decision to switch [from Blue Cross Blue Shield] was technology and access to data. If we're going to solve our health care challenge as a state, access to data is going to be the linchpin of any solution.

WRAL: What about money? Is it saving the state money?

BRINER: Aetna I don't think was designed as a third-party administrator to save money in the short term. It was to allow us to save money with solutions in the future — by knowing who the high quality providers are, by knowing who puts people back in the hospital and who doesn't. If we can steer our patients towards higher quality providers, that's obviously wonderful for them because they get a better procedure and they don't end up back in the hospital. And it’s also better for the finances and the plan, too.

WRAL: If we’re talking about the long-term picture, let’s talk about GLP-1 medications — weight-loss drugs such as Wegovy and Ozempic. The State Health Plan covers them for diabetes management. Is there any chance the plan reinstates coverage for weight loss?

BRINER: We know they work. At the same time we suspended that coverage, though, we had no choice because the structure of our contract at the time did not allow us to distinguish between the person who wanted to lose five pounds for the summer or someone who wanted to lose 150 pounds because of serious medical complications. We had to provide it just the same to everybody. We couldn't afford that. We were headed toward spending $250 million on GLP-1s. And as a deficit matter, we already had a problem. We couldn't make that worse with that.

We seek to get back to coverage of those GLP-1s next year, maybe sooner, when we can figure out the ability to distinguish between those populations, and a better price to pay. The good news is: capitalism works. The retail price of these drugs is coming down. Five years ago, pharmaceutical businesses understood that these drugs work. So guess what they did? They all tried to invent one, and many of them were successful. Prices are already coming down as a result, and we expect them to come down further, which will allow us to cover it, even if we have to cover it for everybody.