Federal health officials have proposed that all health plans selling insurance on the new online marketplaces must allow for easy payment options for households without bank accounts or credit cards.
The government’s decision to mandate a menu of payment options including cashier’s checks, money orders and re-loadable pre-paid debit cards comes amid increasing pressure from consumer advocates and business groups that are concerned low-income working families would be required to purchase health coverage under the Affordable Care Act but would have no way to pay their monthly bill.
“What we see here is a real commitment to do what is right,” said Brian Haile, Senior Vice President for Health Policy at Jackson Hewitt Tax Service. “[It’s] a decision that is data driven. It’s not partisan.”
One in five households in the United States, or about 51 million adults, have only a tenuous relationship with a traditional bank, relying instead on check-cashing stores and money lenders, according to the Federal Deposit Insurance Corporation. Kaiser Health News and NPR first reported the concerns over payment options in May. Soon after Jackson Hewitt released its own report that found that more than one in four Americans eligible for the new tax credits under the health law do not have a checking account, and the tax preparation company concluded those households could not enroll for coverage if insurance companies only accepted electronic funds transfers from checking accounts.
“These people should be able to access coverage through an exchange on the same basis as those with a bank account or credit card,” said the proposal by the U.S. Department of Health and Human Services, “and should not be unable to access coverage merely due to the inability to pay their share of the premium.”
Payments options offered to consumers take on more importance because of limits under the health law on how much insurers can mark up the cost of insurance. The Affordable Care Act directs insurance companies to spend at least 80 percent of the premiums they collect on health care-related expenses, and only 20 percent on profit and administration, including payment processing and bill collection. Pre-paid cards and credit cards are expensive for vendors, because Master Card, Visa, American Express and other financial institutions charge fees of up to 4 percent on every transaction.
Companies that sell prepaid debit cards that can be loaded with cash welcomed the proposed rule. Steve Streit, chief executive officer of Green Dot Corporation, one of the largest sellers of prepaid cards in the nation, said, “Since many traditional checking accounts have high fees and or minimum balance requirements, these low income exchange participants may find that a re-loadable Visa or MasterCard prepaid card found at most pharmacies, supermarkets and mass retailers is a good solution for paying recurring health care premiums.”
The online marketplaces where consumers will be able to qualify for government subsidies are scheduled to open October 1.