WASHINGTON, DC -- As the Senate Health, Education, Labor and Pensions (HELP) Committee continues to draft legislation and seek bipartisan consensus to reform our nation's health care system, U.S. Senator Jack Reed (D-RI) is championing a proposal to establish networks of federally qualified community health centers nationwide that will offer non-profit Community Health Plans that would compete with private insurers.

The building blocks of these networks - community health centers - already exist across the country, with 1,200 community health centers serving over 18 million Americans and providing quality, affordable health care to patients in need, saving communities and taxpayers billions of dollars in health care costs.

"This proposal is a good way to bridge the divide on the public option, which so far has been a stumbling block in achieving a bipartisan bill," said Reed, a member of the HELP Committee. "Existing Community Health Plans have a proven record of serving uninsured populations and keeping costs down. For example, in my home state, the Neighborhood Health Plan of Rhode Island has successfully reduced hospitalization rates. And a Community Health Plan will have lower administrative costs than private insurance."

The administrative costs of Neighborhood Health Plan of Rhode Island have averaged 8.7% over the past 5 years, compared to 11.6% and 14.2% for the state's private insurers.

"Because the plan will be formed by community health centers with deep roots in the community, it will remain responsive to the needs of the community it serves," noted Reed. "By their very nature community health centers provide an integrated system with a preventive approach that has clear incentives to keep patients healthy and avoid more costly health problems."

Under Reed's plan, the Secretary of Health and Human Services (HHS) will provide federal grants or loans as seed money to community health centers that partner to form a Community Health Plan. To receive the grants, all community health centers in a state must agree to form a plan, but they may offer more than one plan serving geographically distinct regions. The Secretary may also provide loans to help Community Health Plans establish initial reserves.

In states where Community Health Plans already exist, the Secretary may provide loans to help them expand their reserves to prepare for an expansion in membership.

A Community Health Plan will be self-sustaining and finance itself through premiums. Beyond seed money, it cannot receive tax revenue or appropriations.

The same rules that apply to other qualified health plans offered through a Gateway will apply to a Community Health Plan, including the same essential benefits package. The network may contract with other providers, including hospitals, on a voluntary basis. And state solvency laws would apply to a Community Health Plan under Reed's proposal.

The states where the model already exists are: Colorado, Connecticut, Maryland, Massachusetts, Oregon, New York, Rhode Island, Washington, as well as the District of Columbia.

Reed outlined the need and benefits for this plan today in a letter to President Barack Obama:

June 12, 2009

The President
The White House
Washington, DC 20500

Dear Mr. President,

Among the many great challenges in health reform is to provide cost discipline in an environment of private markets where it is very difficult to internalize the social costs of prevention and universal coverage.

Currently, the private market too often reacts by underinvesting in prevention and screening their customers to avoid costs. This has resulted in escalating health care costs in general and a growing share of public budgets dedicated to providing care for the uninsured.

Like a significant number of my colleagues, I favor a public option. But this public option may be accomplished by building on existing not-for-profit arrangements involving Federally qualified community health centers. In Rhode Island, these health centers have come together to form a not-for-profit insurer under Rhode Island insurance law which manages care throughout the system ("Neighborhood Health Plan of Rhode Island"). Its major funding source is Medicaid funding, but it is capable of offering insurance to non-Medicaid customers. It consistently receives "excellent" ratings for quality from the National Committee for Quality Assurance.

This not-for-profit approach affords several potential advantages. It already has a customer base, a provider network stressing integrated care, and positive recognition in the state as a source of medical coverage - particularly in communities that lack insurance coverage and will likely form the bulk of new entrants into the Gateways.

There may be additional governance, financial, and operational requirements that would be necessary for a national approach. In any case, I believe that we should fully explore this model.

Although this model is not present in every state, the constituent building blocks - Federally qualified health centers - are. Incentives could be provided to these centers to form these organizations. Indeed, this approach resembles the concept of cooperatives that several colleagues have suggested.

I look forward to working with you on this issue and the other challenges that we face.

Sincerely,

Jack Reed