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No checking account, no health insurance coverage?
There's a little-noticed weak link in the federal government's plan to extend health care insurance to millions of Americans who now lack it: The uninsured may have to stay uninsured if they're also unbanked.
So says a report issued by Jackson Hewitt Tax Service, titled "Uninsured + Unbanked = Unenrolled."
It points out that one in four uninsured Americans eligible for coverage under the Affordable Care Act (aka "Obamacare") do not have bank accounts. In the parlance of the financial industry, they're "unbanked." Unless insurance companies allow customers to pay their premiums using prepaid debit cards -- which they're not required to do now -- it could put a chill on who actually enrolls.
If it's not clarified, the act, whose major provisions are set to take effect next year, could give the cold shoulder to more than 8 million people it's supposed to assist, says the study, co-written by experts from Jackson Hewitt and Vanderbilt University. On top of that, up to 5 million veterans and others who receive their federal benefits on prepaid debit cards also could be at risk if they can't use those cards to pay their premiums.
Insurers typically require that premiums be paid automatically from checking accounts.
Prepaid cards are fast becoming the favored alternative payment system for those without checking accounts. A survey released in September 2012 by the Federal Deposit Insurance Corp. found nearly 18 percent of those without bank accounts use prepaid debit cards, up from 12 percent in two years.
Under the health care act, those who earn up to 400 percent of the federal poverty level will be eligible for tax credits to offset premium costs if they purchase their insurance through state health exchanges. But what good does it do if they can't pay their premiums?
It wouldn't even take an act of the contentious Congress to make that change.
The Department of Health and Human Services sent a letter to insurers in April, saying they must accept payment in ways that are "nondiscriminatory," but the letter doesn't explain what's considered discriminatory.
If it had stated directly that insurance companies must take prepaid debit cards, that would solve the issue, says Brian Haile, senior vice president for health care policy at Jackson Hewitt, and an author of the report.
While they're called state exchanges, the majority of states will have exchanges run by the federal government, or through state-federal partnerships.
Carla Saporta, health policy director at the Greenlining Institute, a California organization that works for economic and racial justice, says California has avoided the issue by setting up a state-run exchange. The state will collect premiums and pass them on to insurers. Having a checking account isn't required. "The system needs to adapt to the needs of the consumer," she says.
While insurance companies say they don't want to accept the cards because of transaction fees, if all insurers were required to take them, the playing field would be level, Haile says.
HHS must act soon, he says, so insurance companies would be prepared to accept prepaid debit cards when open enrollment starts Oct. 1.
So far several insurance companies have requested copies of the report, Haile says, but from the federal government there's been only silence.
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