Checking Account Requirement Disproportionately Affects Minorities

As we wrote recently, millions of Americans eligible for subsidized insurance under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) may be unable to enroll due to their lack of a checking account, according to a report by Jackson Hewitt. With insurance companies facing strong incentives to minimize administrative expenses, prohibiting the use of debit cards to limit their transaction costs may be too tempting to pass up. Jackson Hewitt’s report examines the critical role that access to banking may play in providing tax credits and health insurance under PPACA, while calling on the federal government to clarify policy soon to ensure that PPACA coverage programs do not exclude nearly one in four eligible Americans.

Discriminatory Impact

Jackson Hewitt took this research another step and used its data to generate estimates for specific demographic subpopulations. What it found is that there is a distinctly larger, discriminatory impact among African Americans and Hispanic Americans.  Jackson Hewitt noted, that these groups are more than 40 percent more likely to be unbanked than uninsured white residents with similar incomes. This means that almost 5 million out of 8.5 million unbanked fall into these two minority categories. According to the report, “the fact that more than half of those excluded individuals will be African American or Hispanic American is particularly alarming in light of HHS Secretary Sebelius’ recent affirmation that the new insurance affordability programs under the ACA should play a significant role in improving minority access to insurance coverage and health care.”

Learning from Past Experience

A recent article by Kaiser Health News shows that problems like this are already taking place. The story points to a program developed in Palm Beach County, Florida. In 2006, the county launched a program offering subsidized health care coverage to residents who couldn’t afford private insurance, but made too much to qualify for Medicaid. By enrolling in this program, individuals would be able to buy significantly less expensive policies for about $52 a month. However, a year after the program began, fewer than 500 people had signed up, less than a third of the number expected.

Another example cited by the article in Kaiser was JaxCare, which also suffered from low enrollment. At its inception in 2004, JaxCare, was marketed as low-cost coverage for small employers. Employers could get low-income workers covered for $50 a month. But two years after it began, enrollment was far below expectations. Jaxcare closed in 2008 when city funding ran out.

Individuals involved with these programs in Florida put forth several reasons as to why the programs failed. Many people didn’t sign up because they weren’t sick, and this population is used to using the emergency room as a doctor’s office. Outreach was a huge key to program success; however it took significantly more time to reach the target populations. Typical forms of advertising didn’t work. And if they don’t know about the program or don’t understand it, people may not sign up.

Although various factors contributed to the failure of these programs, one thing they demonstrate is that just because the opportunity for less expensive health coverage is there, doesn’t mean people will use it. And getting sufficient enrollment, especially from the young and healthy, is vital to holding down premium costs, as pointed out in the Kaiser article. According to the article, “the concern is that if all the sick people flood the exchanges and younger, healthier ones hang back, health care costs will spike, along with premiums.”

The Federal government has already set a policy to deal with a similar situation for TRICARE. As of May 31, electronic payments will be required by TRICARE beneficiaries enrolled in TRICARE Reserve Select (TRS) or TRICARE Retired Reserve (TRR) to avoid losing coverage. After May 31, TRICARE will accept monthly premium payments using recurring automatic payments by credit or debit card, as well as by recurring electronic funds transfer from a linked bank account.

What the government cannot afford to do is wait and see whether this potential road block, the lack of a checking account, may really keep people from obtaining coverage. They must act now, just as they have with TRICARE and put policies into place to protect this population and ensure their ability to obtain coverage.