Jeff Bingaman United States Senator from New Mexico

SANTA FE – U.S. Senator Jeff Bingaman today praised the health insurance coverage proposal unveiled by the Senate Health Education Labor and Pensions (HELP) Committee aimed at helping containing health care costs and expanding coverage to uninsured Americans.

The HELP Committee is in the process of writing health care reform legislation. Next week, it will consider the full coverage proposal including the "public plan” health insurance option. The public plan would be established and overseen by the federal government, and made available to all Americans.

The primary purpose of a public plan is to ensure that there is at least one health insurance option for Americans that is affordable and that would provide meaningful care. By leveraging competition, the public plan would also serve as another safeguard against unscrupulous insurance practices.

"This strong public option proposal will ensure that there is real competition between public and private insurance plans. It is an important safeguard, the goal of which is controlling escalating health care costs and extending coverage to millions of Americans for whom health insurance has been out of reach," Bingaman said.

Details of the plan and explanation of why it is an importing cost savings tool follow:

Summary:

• HHS-based plan: The Community Health Insurance Option would be run by the Department of Health and Human Services.  The government would provide funding for the first three months of claims as a way to capitalize it; this would be a loan to be repaid over time.  This would make the public health insurance option quickly available in all areas of the country.

• Plays by the same rules: The public option would be one of the Gateway choices.  It would follow the same rules as private plans for defining benefits, protecting consumers, and setting premiums that are fair and based on local costs.

• Provider payments and participation:

o Negotiated rates within limits: The payment rates paid by the public option would be no more than the local average private rates – but could be less.  The Secretary would negotiate these rates.

o Input from Advisory Councils: Each State would create a Council of provider and consumers to recommend strategies for quality improvement and affordability.  States would share in the savings that result.

o Purely voluntary: Health care providers and the American public would have the choice of participating in the public option; there would be no obligation to do so.

Why It Will Make Health Care Affordable

• Pooled purchasing power: This public option can pool the purchasing power of its enrollees nationwide to leverage lower prices to compete with private plans. Similar negotiation power has been used by states to get drug rebates in Medicaid beyond the statutory minimum.  It has been used by large businesses to drive delivery system change.  This negotiation would be backed by a ceiling of paying no more than average local rates.

• Flexibility and incentives to innovate: Unlike administered pricing, the negotiation for payment rates gives the Secretary the ability to quickly and aggressively promote payment policies that promote quality and best practices.  In addition, the State Advisory Councils would tailor delivery system reform for the public option, with a financial bonus for success.

• Lower administrative overhead: The public option would not need to raise premiums to support shareholder profits and extensive marketing.