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MONDAY REPORT

Coverage Reductions Begin and Will Directly Affect Safety Net

The Massachusetts Health Connector last week began announcing that various insured populations in the state will begin to lose that subsidized coverage due to new federal policies.

For example, those currently enrolled in the ConnectorCare “Type 1” plan – that is, those who make less than the Federal Poverty Level (FPL) of $15,560 annually and whose immigration status makes them ineligible for MassHealth – will lose coverage effective January 1, 2026. There are 34,248 such people currently enrolled in ConnectorCare Plan Type 1. The only way they could get coverage after January 1 is if their income rises above $15,560, which would allow them to qualify for higher income plan types. (Changes to their immigration status and household size could also factor into them receiving coverage.)

If they lose coverage and can’t enroll in other coverage, the 34,000-plus individuals will be covered only for emergency care under MassHealth Limited or care provided by hospitals and health centers through the Health Safety Net. As has been extensively reported, the Health Safety Net, currently funded by hospitals, insurers, and state government is operating with a significant shortfall and is projected to do so in future years. That is, the fund in 2025 has been depleted and will experience an estimated $290 million shortfall by the close of the hospital fiscal year on September 30 if no further funding relief is provided. While others pay into the safety net fund, only hospitals are responsible for absorbing its shortfalls. Adding 34,000 new potential patients to the Health Safety Net after January 1, 2026, will present an insurmountable problem for the safety net, and specifically for hospitals.

MHA’s Senior Vice President for Healthcare Finance & Policy Dan McHale said, “These coverage losses will push the fragile Health Safety Net program into a precarious state that will lead to undesirable consequences to patient access and providers who care for low-income uninsured. Hospitals remain committed to working with state leaders to identify solutions to ensure the commonwealth’s safety net remains viable as we enter this period of significant healthcare coverage losses due to federal cuts.”

Others affected by the federal healthcare coverage cutbacks, according to the Connector, are Deferred Action for Childhood Arrivals (DACA) individuals, who as of today, August 25, 2025, are no longer considered lawfully present by the federal government for the purpose of enrolling in marketplace coverage.

Also effective today, a low-income person (making less than $22,590 annually) no longer will have the opportunity to enroll in a health program throughout the year. Even if they have a “qualifying life event” such as a marriage or birth of child, the special enrollment periods they once had are being eliminated, meaning people can experience longer periods of times between enrollments and will therefore be uninsured during that period.

Enhanced Premium Tax Credits, which have helped lower monthly health insurance costs for many people since 2021, are set to expire on December 31, 2025, unless Congress takes action to extend them. This means for those earning under 400% FPL, their subsidies will be reduced, making their health insurance less affordable. If a person’s household income is above 400% FPL, they will no longer qualify for financial help. For 2026, this is about $62,600 for a single person, $84,240 for a couple, or $128,400 for a family of four.

Removing coverage and increasing premiums for certain populations will reverberate through the entire system. The Connector says if premium tax credits end for one income level, then “health insurance premiums for people who enroll in coverage through the Health Connector at all income levels may increase.”

CMS Sends States Names of Individuals to States

The Centers for Medicare & Medicaid Services (CMS) announced last Tuesday that it will provide states with monthly enrollment reports identifying individuals whose citizenship or immigration status could not be confirmed through federal databases. States are expected to see if the individuals are legally enrolled in Medicaid or the Children’s Health Insurance Program (CHIP), and, if not, to remove them. “We expect states to take quick action and will monitor progress on a monthly basis,” CMS wrote.

Health Plans Now Experiencing Financial Pain Common to Hospitals

The upcoming MHA Annual Health Plan Performance Report, which analyzes the financial position and membership of health plans in Massachusetts, reveals that, like hospitals, nearly all health insurance companies experienced financial losses in 2024. The report is expected to be sent to membership in the coming weeks.

Nearly all the plans examined in the report posted negative operating margins in 2024. Margins ranged from ‐1.6% (Mass General Brigham Health Plan and WellSense) to ‐10.3% (Harvard Pilgrim Health Care). HMO Blue dropped from +2.3% (2023) to ‐6.1% (2024).

Unlike prior years where health plan surpluses grew, aggregate health plan surplus fell from $6.2 billion to $5.6 billion in 2024. Blue Cross Blue Shield of Massachusetts (BCBSMA) and HMO Blue hold 59% of total surplus; with the exception of HNE and BCBSMA, most plans saw reduced surplus levels. BCBSMA and HMO Blue continue to dominate the Massachusetts commercial market with just over 40% of enrollment.

The new trend among payers reflects the strained financial reality that hospitals and health systems have been navigating for more than five years. Hospitals continue to report extremely low operating margins; the statewide hospital median operating margin worsened in 2024, dipping into the negative (‐2%) yet again as of June 30 of last year. Fifty‐seven percent of hospitals reported negative operating margins and 67% of reporting hospital health systems – which include affiliated physician practices – experienced negative operating margins through June 30, 2024.

Rising pharmaceutical costs, labor shortages, hospital capacity issues, the uncertainty of tariffs, and inflation affect both payers and providers. In addition, federal policy changes are affecting Medicaid eligibility, coverage, premiums, and subsidies through the Affordable Care Act (see above story). As a result, healthier individuals may drop coverage due to cost, leaving a sicker risk pool. Higher premiums, patients who are sicker when they finally seek care, and even more crowded emergency rooms will have significant impacts on payers and providers in the coming years.

In response, hospitals and physician practices are reporting that insurers are implementing very aggressive policies, such as “downcoding” emergency department visits. (That occurs when an insurer reduces the submitted CPT [Current Procedural Terminology] code for an emergency visit to a lower-cost service, arguing against the patient’s caregiver that the patient’s diagnosis does not warrant the billed level of care.) Insurers are also downcoding short stay admissions to observation status, often without even consulting a patient’s medical record; dictating where patients can receive care (site of service policies); and homing in on high-level evaluation and management claims from physicians. The financial cost and administrative burden of these unilateral contractual policy changes are substantial and take time away from patient care.

“Obviously, the need for a collaborative, coordinated response between insurers and providers, as well as state policymakers, employers, and the patient advocate community, among others remains more important than ever ever to stabilize our healthcare system,” said Karen Granoff, MHA’s senior director of managed care. “We can all agree that the impending Medicaid cuts, the likely loss of premium tax credits, rising pharmaceutical costs, and the loss of an immigrant workforce that will make it harder to transfer patients from acute to post-acute care are all having a negative effect on care and healthcare finances. We can agree on those items now while we seek longer-term solutions to address the affordability issue.”

Apply for the 2026 Dick Davidson NOVA Award by Oct. 14

The American Hospital Association (AHA) is now accepting applications through October 14 for the 2026 AHA Dick Davidson NOVA Award, which recognizes hospitals and health systems that demonstrate outstanding collaboration with community partners to improve health outcomes and community wellbeing. Eligible programs must be at least two years old, show clear evidence of impact and sustainability, and be replicable in other communities. Up to five winners will be honored at the AHA Healthier Together Conference, May 12-14, 2026, in Dallas.

Mass General Brigham was among the five 2025 recipients of the award announced in July. MGB was recognized for its Community Behavioral Health Workforce Development Program in which the health system partnered with 13 community-based agencies and schools of higher education to develop programs to address mental health needs. Since 2000, the prestigious national award has been presented to eight Massachusetts hospitals.

John LoDico, Editor