Pretty much nothing has been uncontroversial about President Barack Obama’s health care reform law. From screams about so-called “death panels” to complaints that the new law, known officially as the Affordable Care Act, doesn’t cover enough people, reasoned debate and compromise has been basically non-existent since well before the bill was even introduced to Congress.
And even though Republicans in the House of Representatives have voted dozens of times to repeal the law and efforts are still continuing to de-fund it, the Obama administration is feverishly working to get the health exchanges it creates up and running. As part of that effort, according to reports in Businessweek Magazine and The Wall Street Journal, the White House issued rules in late Aug. that declare that prepaid debit cards can be used by citizens to pay for their new health care plans.
According to the Businessweek story by John Tozzi, the state exchanges that will begin opening in Oct. will be required to accept payment via not only prepaid debit cards but also checks, money orders and bank wire transfers. In a way, this shouldn’t be at all surprising. After all, the Affordable Care Act is aimed largely at helping low-income families to purchase health care. Even though these new entrants to the health care market will be aided with government subsidies to help afford their new plans, they will still need a way to pay for it. For an estimated 10 million U.S. households lacking a bank account, a regular check is not an option. And according to a Vanderbilt University study cited in the Businessweek article, nearly 30% of those eligible for health care subsidies do not have bank accounts.
Enter prepaid debit cards, a product that the federal government is already quite familiar and comfortable with. Indeed, tax refunds and a host of different government benefits can already be deposited to a prepaid debit card account. Still, there is likely to be criticism of the use of prepaid debit cards in this instance, since so many of them come with high fees. Then again, would anybody really expect this aspect of Obamacare to be less controversial than all the rest?
According to information provided by the Federal Deposit Insurance Corporation (FDIC), more than 17 million adults in the United States are unbanked. Additionally, 43 million are considered underbanked, still relying on payday loans check cashing services to handle regular banking needs. This could be a huge obstacle for those shopping for health insurance under the Affordable Care Act.
Millions of Americans are expected to be eligible for tax subsidies under the health care overhaul that they can use to purchase coverage on new marketplaces. With few regulations about what types of payment health insurers must accept, the unbanked could run into trouble paying the monthly premiums.
According to the Washington Post, the unbanked rate tends to be higher among minority groups. The Department of Health and Human Services addressed this issue in a letter to health insurers on April 5, saying that insurance carriers must be “able to accept payment in ways that are non-discriminatory.”
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. “The reason this is such an issue is that insurers are increasingly saying that they will not accept debit or credit cards as an acceptable form of payment,” study author Brian Haile said. “If insurers refuse to accept premium payments made by debit cards, you’re going to exclude many uninsured Americans.”
The Benefits and Pitfalls of Paying for Health Insurance with a Prepaid Debit Card
By Lucy Lazarony
2019 Update! According to Ihealthplans.com, at least within the individual health insurance Marketplace, insurance providers are required to accept money orders and pre-paid debit cards, which is good news for prepaid card owners. Providers do not have to accept credit card or debit card payments unless states make that a requirement (so varies by state), although many insurers currently accept all of these forms of plastic payment.
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Original article from 2013
(kept for archival purposes):
Accepting payment by prepaid card may vary from state to state and between insurers. Insurance companies prefer automatic bank drafts through a checking account, since this costs the least amount of money.
You’ll be able to pay for new health insurance exchanges with a prepaid debit card. A new rule released by the Department of Health and Human Services last month requires insurers participating in new health-insurance exchanges to accept payments from consumers by prepaid debit cards, cashier’s checks, money orders, paper checks and bank-account transfers.
“The HHS rule just means that people without checking accounts can pay for exchange health insurance plans by getting a prepaid card,” says Linda Sherry, director of National Priorities for Consumer Action. “Several different forms of payment will be accepted by the exchanges, including prepaid cards, cashier’s checks, money orders, paper checks and bank-account transfers.” The exchanges are part of a new health insurance marketplace under the Affordable Care Act, also known as Obamacare. The marketplace is set to open on Oct. 1, when plan and pricing information will be made available to consumers and open enrollment begins, according to HealthCare.gov.
Insurance coverage is set to begin on Jan. 1, 2014 and the open enrollment period extends all the way to March 31, 2014, according to HealthCare.gov.
The addition of prepaid cards as a payment option make these new health plans more “convenient” to consumers without bank accounts, Sherry says. “Otherwise, an unbanked person would have to stand in line for a money order or cashier’s checks each month or quarter to pay for them,” Sherry says.
Another advantage of paying for health care with a prepaid debit card is having an online record of payments and insurance for tax credits on insurance premiums, says Jeanne Hogarth, vice president of policy at the Center for Financial Services Innovation. “You might want to be careful of the card you choose so you can view it online,” Hogarth says.
A study from Jackson Hewitt estimates that more than one in four uninsured Americans — about 8.5 million people — who would be eligible for Affordable Care Act tax credits on insurance premiums, do not have a checking account.
When shopping for a prepaid debit card to pay for health care, take a close look at the fee structure of each card, advises Judith Rinearson, chair of the government relations working group of the Network Branded Prepaid Card Association.
“Keep in mind that general use or general purpose prepaid cards often come in two different models. Some come with a monthly fee – similar to a monthly fee that might be charged by a bank for a bank account. Those fees are often less if the cardholder signs up for direct deposit of their wages or salary. If you anticipate using the card a lot, going for a card with a flat monthly fee model may save the most money,” Rinearson says.
“The other model, often called “pay as you go,” does not have a monthly fee, but instead charge fees every time the card is used – such as a fee when the card is used to make a purchase or to make an ATM withdrawal. For those who intend to use the card only occasionally – perhaps for their monthly health insurance premium payment – this may be a better option.” Rinearson also recommends choosing a prepaid debit card with free balance inquiries and text messaging. “Personally, I like cards that provide free balance inquiries and access to online transaction data and text messaging,” Rinearson says. “And fortunately, I have found the majority of cards out there routinely do provide such services for free.”
Here’s a short checklist from Rinearson for choosing a prepaid debit card: • Reasonable fees • Easy to access balance and transaction information • Access to cash not just at ATMs (where a fee is often charged) but also at the point of sale (where “cash-back” is often free of charge) • Protection against lost or stolen cards or unauthorized transactions
