The Affordable Care Act & the Unbanked: Part 1

This is the first in a two part blog series on the Unbanked and the Uninsured

When the Affordable Care Act (ACA) goes into effect this October, Illinois residents who don’t have a bank account could find themselves without access to new healthcare opportunities.

Under the Affordable Care Act, 957,440 Illinois residents are expected to qualify for tax subsidies that can be used to purchase insurance through new health care exchanges. However, an estimated 36% of uninsured households in our state have no checking or savings accounts and are effectively “unbanked”. The problem is that the vast majority of insurance companies require individuals to pay their monthly premiums via automatic withdrawal from a checking account. This means if you don’t have a checking account, you can’t get insurance.

As Illinois works to set up health exchanges, the question of how unbanked households will purchase insurance has largely been overlooked. In an effort to address this challenge, the Department of Health and Human Services released proposed rules that would require insurers to accept a menu of payment options, including:

• Paper Checks
• Cashier’s Checks
• Money Orders
• Prepaid debit cards
• Electronic funds transfer from a bank account
• Automatic deduction from a credit or debit card

IABG believes insurance companies should be required to accept alternative payment options in order to ensure that thousands of our residents are not denied health insurance as the ACA is implemented in Illinois. However, we also believe that we need to go further.

1 in 4 Illinois households are either unbanked (with no checking or savings account) or underbanked (they may have a bank account, but still use alternative financial services like check cashers and payday loans). With individuals signing up for health insurance in communities across the state, this is a great opportunity to connect them with programs and services that help families become financially secure. These include community Volunteer Income Tax Assistance (VITA) programs, Bank ON initiatives, and financial counseling services.

While existing programs are helping a percentage of households that need their services, with support from government leaders, they can leverage the implementation of the ACA to help even more residents safely connect to the financial mainstream.

IABG is working with other advocacy leaders engaged with CFED’s Assets & Opportunity Network to develop recommendations on how the Department of Health & Human Services and other state and federal agencies can insure that a pathway to safe banking opportunities is a part of ACA implementation.

In part 2 of this blog series, we will share these recommendations and ask for your support in moving them forward. If you have feedback please contact Lucy Mullany.