Nebraska Department of Insurance

EXPLAINATION OF HOSPITAL-MEDICAL LIABILITY SURCHARGE INCREASE

The Nebraska Hospital-Medical Liability Act
Cost of Coverage with the Excess Fund

For health care providers with insurance policies beginning on January 1, 2003 and after, the cost of coverage under the Excess Fund has been increased to 50%. During 2002, the surcharge rate was 35%, up from 20% in 2001 and from 5% in 1999.

The reason for these increases is relatively simple. The 5%, 20% and 35% surcharge rates were artificially low rates. They had been intentionally depressed from the amount necessary to support ongoing operations. In the mid-1990's, hindsight determined that the 40% surcharges in place for a number of years were higher than necessary. As such, a decision was made to charge surcharge rates that would lose money (thus saving money for participating health care providers) until the assets of the Excess Fund were more in line with its liabilities.

At this point, that large surplus is gone, in part because of the artificially low surcharges and in part because of an unexpected surge in claims costs during the past 4 years. In fact, the surcharge is not higher than 50% because the law does not allow a surcharge higher than 50%.