Moody's: Health exchanges a credit risk for most U.S. hospitals
Hospital bad debt also likely to rise, particularly among not-for-profits
According to a new report by Moody’s Investors Service, the health insurance exchanges mandated by the Affordable Care Act (ACA) may increase risks to credit quality that will pressure not-for-profit hospital revenues in 2014.
The risks to not-for-profit hospitals include the migration of commercially insured patients to exchange-insured patients, where reimbursement rates are likely to be lower, and the uncertain terms and contracts between exchange plans and hospitals, as well as a growth in bad debt.
“The exchange-related risks center on two primary issues that will largely negate the benefits of a declining uninsured population in 2014. These issues are the level and composition of enrollment, and how insurance exchanges exacerbate revenue pressures on hospitals,” said Moody’s Associate Managing Director Lisa Goldstein in the report.
[See also: Moody's reports weaker hospital finances.]
The Congressional Budget Office is estimating that 7 million individuals will participate in the exchanges in 2014, and some of those enrolling on the public exchanges will previously have had commercial insurance, says Moody’s. The exchange-based insurance could reimburse hospitals at a lower amount than a patient’s previous insurance carrier did, and the lower reimbursement rates will contribute to lower revenue growth for hospitals in 2014, said the report.
The report also mentioned that there would likely be a timing mismatch between when hospitals should experience savings from fewer uninsured patients, reductions in Medicare rates, and Medicare and Medicaid disproportionate share (DSH) reimbursements that also began on October 1, 2013. If fewer patients end up purchasing insurance on the exchanges, hospitals will end up absorbing the rate reductions without the corresponding reductions in uncompensated care.
Additionally, Moody’s expects hospital bad debt to rise because new enrollees previously insured by a commercial payer are likely to sign on to plans with high co-pays and deductibles, which they may ultimately be unable to pay. Moody’s also expects some delays in receiving payments and processing claims among insurers offering products on the public exchanges, because they will tend to be smaller and less experienced, and will take time to come up to speed.
[See also: HIX plan premiums won’t firm until 2016.]
