Lack of Checking Accounts May Block Millions From New Health Coverage

Millions of Americans eligible for programs under the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) will be unable to enroll in health coverage due to their lack of a checking account, according to a report by Jackson Hewitt. The 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.

Unbanked Americans

According to the report, more than one in four uninsured Americans eligible for the new premium assistance tax credits under PPACA are considered “unbanked” because they do not have a checking account. It is through a checking account that most insurance companies plan to require their customers to pay healthcare premiums. Further, the impact on the unbanked is most significant in states that will have federal health insurance marketplaces in 2014.While these restrictions may help insurers reduce their administrative costs, unbanked customers will not have the ability to pay their required share of insurance premiums. Without some sort of an accessible payment channel, unbanked Americans may be denied health care coverage, and would then be subject to a fine for not being covered.

Prepaid Debit Cards

Currently, the federal government has not created any policies regarding whether insurance companies will be required to accept alternative forms of payment, such as debit cards. According to the report, prepaid debit cards are one of the few avenues for the unbanked to access the mainstream financial system and make electronic payments. The use of these cards is increasing dramatically among the unbanked, as the cards provide a lower-cost alternative to traditional checking accounts. Even the federal government currently issues these prepaid debit cards to unbanked individuals such as veterans and social security recipients.

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, who, Jackson Hewitt noted, are more than 40 percent more likely to be unbanked relative to uninsured white residents in the tax credit eligible income category. 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.”