OMAHA, NE – With health care costs spiraling and the number of uninsured expanding, Nebraska’s Senator Ben Nelson today unveiled a plan to reduce health care premiums so that more Americans can purchase and retain health insurance.

“We have an excellent health care system. But it needs to be more accessible,” said Nelson in a speech before the Downtown Omaha Rotary. “This proposal will open doors, bringing more Americans under the umbrella of health care coverage while lowering rates for employers and employees alike.”

Recent studies have shown that monthly premiums for employer-sponsored health insurance on average rose 11 percent from 2000 to 2001, and then 12.7 percent from 2001 to 2002 – the second straight year of double digit increases. As a result, 22 percent of all firms increased employee deductibles in 2002. The average cost of adding employer-sponsored coverage, according to a recent report by the National Employer Health Insurance Survey, is $2000 annually. And that number excludes coverage for family members.

The rising costs of health care coverage hamper businesses’ ability to continue to provide this coverage and it is hampering their ability to create jobs.

The Nelson plan would create a federal “backstop” to provide coverage in the event of a catastrophic illness or injury. These claims require insurance companies to maintain a financial pool large enough to cover the costs associated with these very rare, but very expensive, occurrences. By creating a federal “backstop”, insurance companies will not have to maintain as large a pool, lowering risk premiums for businesses and workers.

The Nelson plan would:

Create a federal “backstop” to provide coverage for catastrophic claims, with the insurer paying noncatastrophic claims up to a certain cost. This is known as “stop-loss coverage” and provides a dollar limit to the insurer’s exposure to either an individual claim or aggregate multiple claims.

Require the insurer to reduce premiums if they want to participate in the program. Since they can be assured that they would not pay for catastrophic illnesses or injuries over a certain dollar amount, their risks would be smaller and premiums would go down.

Create a certification process by which insurance companies could be reimbursed for these catastrophic costs. Insurers would continue to be the point of contact with patients and doctors on the costs of treatment. As they already negotiate costs now, there is no need to create a huge federal bureaucracy to micromanage the health care process. The proposal allows for flexibility as insurees would continue to work through their insurance companies, but also requires accountability from the insurance companies.

The benefit of only having to pay premiums for noncatastrophic coverage is that it is predictable—the insurer knows in advance what the maximum claim amount per person will be.

“A catastrophic injury or illness can have a devastating effect on the finances of a family. But affects are not limited to one person or one family; all of our rates are affected by these rare but expensive cases,” said Nelson. “By creating a federal ‘backstop’, we can provide some certainty in a time of uncertainty while lowering health care costs for all Americans. I’m looking forward to working with my colleagues here in the Senate to lower health insurance costs and insure more Americans.”


Health Care Costs By-the-Numbers
Uninsured
-43 million Americans are without health insurance (source: Urban Institute)
-25% of these are children (source: Urban Institute)
-Over 150,000 Nebraskans are without health insurance (source: Urban Institute)
-The number of nonelderly Americans without health insurance increased by 2.4 million in 2002 – the largest increase in more than a decade (source: U.S. Census Bureau 9/30/2003)

Insurance Availability
-Only 61% of all small businesses offer health care coverage (source: Kaiser 2002 Employer Health Benefits Survey)
-The average cost of providing coverage for an employee - excluding family benefits - is $2000 (source: National Employer Health Insurance Survey)