Fitch Views Massachusetts Health Insurance Reform Bill Favorably
Massachusetts Health Insurance Reform
Fitch Ratings recently reviewed the landmark legislation passed in Massachusetts aimed at providing a means for the state's 550,000 uninsured residents to obtain health insurance. While Fitch views the legislation positively, the impact on Massachusetts' hospital ratings is likely to be neutral.
The Health Reform bill, signed by Gov. Romney, will provide substantial additional financial support for hospitals and a shared responsibility among businesses and individuals with the goal of having 95% of state residents covered in three years. While many details regarding the implementation of the bill remain unclear at this time, there are several provisions that should result in additional funds for Massachusetts hospitals over the near term.
Fitch views the additional Medicaid funding ($100 million in 2006, $90 million in 2007, $180 million in 2008, and $270 million in 2009) as being favorable to hospitals, as reimbursement should increase. Under the bill, approximately 90,000 residents will be newly enrolled in MassHealth (the state's Medicaid program), including 40,000 residents that are currently eligible but not enrolled. While a portion of the improved funding is due to increased eligibility, reimbursement rates are also likely to improve. This should have positive effects on both revenue and bad debt expense.
The Commonwealth Care Health Insurance Program, a program designed to offer private, affordable, no-deductible health plans to approximately 215,000 state residents over the next three years, could also have a significant impact on reducing the levels of uninsured in the state. Slated to begin on Oct. 1, 2006, the program will provide those residents below 300% of the federal poverty level with state-assisted or -subsidized premiums.
In addition to the expanded Medicaid eligibility and the Commonwealth Care Health Insurance Program, there will be employer and individual mandates. The employer mandate requires those with 11 or more workers, who do not provide health insurance, to pay an annual assessment of $295 per employee. The individual mandate requires all individuals to have health insurance. However, while the details of the penalties on individuals failing to have health insurance are concrete, the definition of an 'affordable plan' has not been determined. The implementation of the penalties on individuals could be delayed until the 'affordability' issue is resolved. The successful implementation of the individual mandate and employer mandate should significantly increase the number of insured.
The Massachusetts Health Reform Bill is groundbreaking and should be favorable to hospitals in the state if fully implemented and properly funded. However, the total number of uninsured in the state, reportedly about 550,000, is relatively small. Although the uncompensated care pool is scheduled to remain in effect through 2008, it is expected to be replaced by a safety net program administered by the Office of Medicaid that will provide a minimum level of reimbursement for uncompensated care (reportedly $287 million, which is a reduction from the 2006 and 2007 funding levels of approximately $606 million and $620 million, respectively). Fitch believes that if fully implemented, the Health Reform Bill will be more favorable to Massachusetts hospitals than the uncompensated care pool.
Many details remain to be worked out, but an early read on the bill points to encouraging signs for Massachusetts hospitals. Non-profit providers in Massachusetts were heavily involved in the drafting of this legislation. While Fitch views the legislation positively, it is not likely to be the platform for national health care reform.