Lack of bank account could keep 1 in 4 qualified Americans from getting subsidized health insurance

UPDATE, October 2013: The federal government is allowing premiums to be paid with prepaid debit cards.

Federal Deposit Insurance Corp. graphic
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A new study says that if corrective action isn't taken, health-insurance companies could exclude 27 percent of qualifying Americans now eligible for premium-assistance tax credits under the health-reform law because they plan to require customers to pay premiums automatically through a bank account.

Denying coverage to the more than 8 million "unbanked" Americans will undermine efforts to expand health coverage and equalize access to health care, says the report from tax service firm Jackson Hewitt.

Another 20 percent are "underbanked," meaning they have accounts but prefer to use payday loans and other non-bank financial services. One in five households use check-cashing stores and money lenders instead of a traditional bank, says the Federal Deposit Insurance Corp.

Most health plans accept a credit card for the first month’s premium payment and thereafter require monthly payment from a checking account. Federal officials are wary of taking action that might discourage insurance companies from participating in the state insurance exchanges, Varnet heard from current and former state health officers who have pressed the Department of Health and Human Services for a ruling.

“I think there is a dawning awareness that this is a large problem,” Brian Haile told Sarah Varney of Kaiser Health News. Haile is senior vice president for health policy at Jackson Hewitt and has called on federal official to set a uniform standard requiring all insurers to accept all forms of payment. Alternative forms include credit cards or pre-paid debit cards that people without bank accounts often use.

While health insurance companies are evaluating these options, no law requires them to accept all forms of payment, notes Varney. “I’ve not seen any specific guidance that says you have to be able to accept these types of payments,” Ray Smithberger, Cigna’s general manager of individual and family plans, told Sarah Kliff of The Washington Post.

Insurance carriers take a risk by accepting credit cards and pre-paid debit cards because transaction fees can run as high as 4 percent and pre-paid cards are popular among low-wage workers, Haile told Varney. “If you accept re-loadable debit cards, are you in fact getting folks with lower health status?” he said. “That’s a real risk when you’re in the insurance business. So you can’t be the only one picking up those risks.”

The Jackson Hewitt report calls for immediate action by federal policy makers to ensure insurers cannot discriminate against the 'unbanked' through their payment acceptance policies by creating a system-wide rule requiring all forms of payment must be accepted. "Given the dilemma presented to insurance companies by the strong financial incentives to discourage non-bank payment mechanisms, insurers are unlikely to resolve this issue without federal action," the report says.