A.M. Best Special Report: Massachusetts Health Regulatory Market Review - Will Massachusetts Universal Plan See Its Reflection in Future of U.S. Health Care?

OLDWICK, N.J. -- The Massachusetts universal health care mandate, enacted a year ago this past April, may have energized the movement for state level reform, but will the plan be a template for the future of health care in the United States? Certainly the direct way in which the state's Legislature, governor and voters made their historic decision to implement universal coverage suggests, at least at the state level, that there is the will to solve the problem and that the time is right to do so. Unfortunately, there is little uniformity among the states that have enacted or taken steps toward universal health care legislation. Nor is there likely to be uniformity in the future, as each state, so far, has crafted reform legislation to fit its population and economic circumstances.

In this special report, A.M. Best Co. addresses the challenges for insurers in dealing with a future of disparate state health care reform plans and in designing profitable lower priced coverage to fulfill the mandates under these plans. A number of issues potentially can affect ratings, including an already challenging regulatory environment and limited new business opportunities. As such, A.M. Best's is taking a cautious view of this market.

As health care costs have gone beyond the level of affordability, states have taken ownership of the universal health care agenda. Many state legislatures and governors are now working with the guidance teams of state and nationally focused health insurance plans to craft their own market specific solutions. This is likely to remain true, in spite of the fact that there are a number of bills in Congress addressing health care benefits and health care reform has been taken up as a campaign issue by the various presidential candidates, including former Massachusetts Governor Mitt Romney, who initiated that state's universal health care plan. Even President Bush has added the subject to his talking points.

An important milestone in the Massachusetts plan was passed the first week in May when health insurers kicked off their advertising campaigns in an attempt to enroll thousands of uninsured residents in what the state calls "affordable" heath plans by July 1, 2007. It will be interesting to see if enrollment goes any better in Massachusetts than it reportedly has in Maine. The New York Times reported on May 2, that enrollments in Maine's voluntary universal health plan have fallen far short of the state's goal.

Massachusetts' mandate that all residents buy health insurance is significantly more feasible than in some other states, however, as the median annual household income is well above the national average.

The supply of health insurance in Massachusetts also is concentrated in a few companies. In 2005, more than 280 individual insurance companies provided accident and health insurance in the state. The top 10 companies were responsible for more than 87% of annual premiums, with Blue Cross and Blue Shield of Massachusetts and its subsidiary, HMO Blue, accounting for more than 42% of the premiums.

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Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.