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Obamacare Hits a Durbin Speed Bump for the Unbanked/Underserved

Mercator Advisory Group by Mercator Advisory Group
May 23, 2013
in Analysts Coverage
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According to a Washington Post article, the unbanked and underserved will find it hard to pay for Obamacare insurance since few insurance companies accept cards:

Americans shopping for health insurance under the Affordable Care Act next year might hit an unexpected obstacle: the lack of a bank account.

Millions of Americans are expected to qualify for tax subsidies under the health overhaul, which they can use to purchase coverage on new marketplaces. One quarter of those people are effectively “unbanked” and without a checking account, according to a new report from tax firm Jackson Hewitt.

With few regulations around what types of payment health insurers must accept – whether they will could require direct debit from a bank account or also allow credit cards – these Americans may run into trouble paying their monthly premiums.

Regulators want to address this problem, but a path to that outcome appears thorny:

A letter from the Department of Health and Human Services sent to health insurers on April 5, addressed the[sic] this issue. It said that insurance carriers must be “able to accept payment in ways that are non-discriminatory.”

Aetna, one of the country’s largest health plans, already accepts debit and credit card payments. It will continue to do so on the new health insurance exchanges.

“We accept credit and debit cards for Individual policies today and will have the same payment options for Individual exchange products,” spokesman Matt Wiggin wrote in an e-mail.

Still, not all health insurers read that language as requiring them to accept every form of payment that a subscriber might come up with. One possible deterrent to accepting credit cards could be the administrative fee that comes along with a credit card transaction, which could slightly increase premium costs.”

Not mentioned in the story is that regulations imposed to enforce the Durbin Amendment may further disenfranchise the unbanked and underserved. The regulation imposed by the Federal Reserve Board states that prepaid accounts offered through banks with more than $10B in assets can only be accessed by the card. This excludes ACH debits, which are the preferred mechanism for insurance companies.

Click here to read more from the Washington Post.

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