1. The Pennsylvania Community Health Reinvestment Act: Establishing Nonprofit Insurers’ Community Benefits Obligations State Innovations in Health Coverage State Coverage Initiatives Meeting Chicago, Illinois August 3, 2006 Catherine M. Dunham, President, The Access Project 89 South Street, Suite 404, Boston, MA 02111 (617) 654-9911; www.accessproject.org

2. Definition of Community Benefits 1)Unreimbursed goods, services and resources provided by health institutions. 2) Health institutions include all health care institutions including providers and insurers. 3)Community benefits should address community- identified health needs and concerns rather than solely attending to institution enhancing activities. 4)Community benefits should particularly relate to the needs of people who are traditionally un- or under- insured and underserved. Taken from: Community Benefits: The Need for Action, an Opportunity for Healthcare Change, Natalie Seto, Bess Karger Weiskopf, The Access Project, 2000 [free on website: www.accessproject.org]

3. Pennsylvania Community Health Reinvestment Agreement Entered into in February 2005. Agreement between state (Governor’s Office of Health Reform, the Pennsylvania Insurance Department) and the state’s four non- profit Blue Cross and Blue Shield Plans. The 10 plans committed to contributing annually 1.6 percent of their health care premiums plus 1 percent of their Medicare and Medicaid premiums, less certain state taxes to support community health programs for 6 years. Sixty percent of the six-year total of approximately $950 million would be allocated to provide health insurance to low-income people through state-approved programs like Pennsylvania’s Adult Basic program. Remaining 4 percent would go towards other publicly-sanctioned coverage programs or other community health initiatives.

4. Important Precedents Set by the Pennsylvania CHRA Gained significant funding for state health programs through a voluntary agreement and without a plan conversion. State Insurance Commissioner established clearly-defined levels of surpluses that could be found likely to be excessive. Reaffirmed and further defined the social missions of the four Blues Plans. Reminds us that executive leadership matters. The respectful and skilled negotiations with the insurers honored the complexity of the issues of solvency, social mission and shared responsibility.

5. Background and Timeline November 1996Pennsylvania Insurance Department (PID) approves a merger of two Blue Plans requiring the new entity direct 1.25% of direct written premiums to social mission programs. May/June 2001Class action suits filed against all four Blue Plans claiming excessive reserves by small businesses and their employees concerned about high cost of premiums. September 2002PID holds hearings to gather information about reserve and surplus levels of the Blues Plans. January 2003Edward G. Rendell was inaugurated as Pennsylvania’s 45 th Governor. December 2003PID denied about two dozen rate hikes requested by Blues Plans saying it needs to determine if more of their surpluses should be used to mitigate the increases.

6. Background and Timeline (continued) April 2004Insurance Commission requests application from Blue Plans justifying their surpluses and reserves. August 2004PID solicits public comments on applications. September 2004Discussions began between leadership of Blues Plan and Governor’s Office and PID. October 2004Legislature directs the Budget & Finance Committee to “examine options and alternatives.” Committee retains The Lewin Group to perform the study. February 2005Governor Rendell announced signing of the Agreement on Community Health Reinvestment. Two days later, Insurance Commissioner issues determination setting maximum surplus levels, but finding Plans’ surpluses are not excessive.

7. Background and Timeline (continued) June 2005PID approves several rate hikes for Blue Plans at slightly lower increases than requested. Lewin Group publishes its report that the surpluses are not excessive and the funds committed under the Agreement are “at least as generous” as Plans in other states. July 2005Legislature creates a restricted account for funds from the Agreement and appropriates them for support of the Adult Basic program. June 2006Adult Basic has over 50,700 enrollees, more than at any previous point. Waiting list reduced from 127,000 prior the Agreement to 48,680.

8. How the Banking Community Reinvestment Act Works Passed in 1977 as part of the Housing and Community Development Act, CRA makes redlining or discrimination against neighborhoods illegal. CRA imposes an affirmative and continual obligation on banks and thrifts to service credit needs of low- and moderate-income communities. CRA empowers community groups and citizens by establishing formal mechanisms for the public to articulate if banks are meeting credit needs—CRA Exams and merger applications. CRA is a win-win proposition: more safe and sound loans in underserved communities, building wealth through homeownership and small business ownership, and more profitable business opportunities for banks. Source: National Community Reinvestment Coalition/www.ncrc.org

9. Conclusions Pennsylvania contributed to the national discussion on shared responsibility in health care financing and equity: Concept of community health reinvestment expands beyond the limits of “in lieu of taxes” discussions. Community health reinvestment agreement established the responsibility of not-for-profit insurers to share in addressing the needs of people who remain underserved in an imperfect market system. There are always trade-offs that must be weighed by thoughtful policymakers that balance the interests of rate payers with those of the larger community