Mass. insurance expansion helped those with weak credit most

Uninsured Massachusetts households with weak credit before the state's 2006 health insurance expansion benefited most financially because the coverage granted them relief from medical bills, new research shows. These findings suggest similar results may be possible nationwide as the number of uninsured declines.

Notably, benefits were not limited to households with weak credit, said researchers Bhash Mazumder of the Chicago Federal Reserve Bank and Sarah Miller of Notre Dame University, in a recently released working paper. Credit scores improved and bankruptcies declined even among those whose creditworthiness ranked above the Massachusetts median.

Indeed, the analysisanalysis, which drew on financial and insurance data for roughly 380,000 Massachusetts residents before and after the 2006 reform, found that credit scores climbed while overdue bills and bankruptcy declined as health insurance coverage expanded.

“Our results indicate that public policies that expand health insurance coverage do have pronounced effects on financial stability and well-being,” the authors wrote. “We find that the reform in Massachusetts had an impact across a broad set of financial measures, even affecting households' future access to credit markets through improved credit scores.”

The financial strain that can accompany illness is evident in bankruptcy filings and credit scores, but also apparent in household budgets, and can affect immediate family members who may provide informal loans, the authors said. The uninsured were more likely than the insured to wipe out their savings or use cash needed for rent, heat and food to pay off medical debt, according to a 2008 Commonwealth Fund survey, they noted.

The Massachusetts analysis follows other recent examinations of the financial benefits of health insurance, the authors said. Studies of increased coverage under the Children's Health Insurance Program and Oregon Medicaid found households that gained insurance boosted their retirement savings; were less likely to put off non-medical bills; and were less likely to end up in collections. Those that did go to collections owed less.

“Our analysis shows that healthcare legislation has implications that reach beyond healthcare providers and the uninsured and extends to the credit markets, benefiting not only the uninsured households who gained coverage, but also creditors who served these households,” the researchers wrote.

Those with the lowest credit scores saw the most pronounced results. The likelihood of bankruptcy and the amount of overdue debt dropped among those with poor credit to a degree that was twice that of statewide declines, Mazumder and Miller wrote.

Follow Melanie Evans on Twitter: @MHmevans