Paying for insurance under health care reform
By Allie Johnson
September 5, 2013
With the new health insurance exchanges slated to open in October, you might be wondering how those premium payments will be accepted: in cash, check or plastic?
The short answer: It will depend on where you live and which insurance company you use. And you probably won't be able to use a credit card, although prepaid cards are a possibility.
Here's what you need to know about the cost of coverage — and how you'll be able to make premium payments if you opt for new coverage in your state's insurance exchange.
The cost of coverage
The Affordable Care Act (ACA), the federal health care reform law passed in 2010, requires most uninsured Americans to buy health insurance starting in 2014. Many of those who aren't already covered by an employer or another group plan will be able to shop for policies on the health insurance exchanges — health insurance marketplaces that will operate in each state..
On the exchanges, health insurance plans will be offered in four tiers. The most expensive (“platinum”) level, pays an average of 90 percent of a policyholder's health care costs. The least expensive (“bronze”) pays an average of 60 percent. The average premium for the cheapest mid-tier (“silver”) plan in the 11 states that have released prices is $321, according to a July 2013 brief from the Department of Health and Human Services (HHS).
Consumers with household incomes under 400 percent of the federal poverty level (currently $11,490)– up to $45,960 for a single person in 2013 — can get tax credits to lower the cost of their monthly premiums. For example, according to HHS, a 25-year-old California man with an income of $17,235 — 150 percent of the federal poverty level — could buy a silver plan for $34 a month or a bronze plan for $7.
It's still not completely clear which payment methods consumers will be able to use. The ACA doesn't dictate how consumers will be able to pay for policies on the exchanges.
“It's an important question,” says Dan Schuyler, a director at Leavitt Partners, which offers consulting on all aspects of the ACA.
One thing is certain: Consumers will be able to use prepaid cards to buy health insurance on all exchanges, according a new final rule from HHS. Insurers also must accept several other forms of payment: paper checks, bank transfers, money orders and cashier's checks, which are checks banks issue on their own accounts after receiving the funds from a consumer.
The requirement to accept general purpose prepaid cards “is a really positive thing,” says Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service.
However, Haile says, the federal government fell short by not requiring insurers to accept recurring monthly payments, including debits from bank accounts, which would make getting and keeping coverage even easier for consumers.
“That's very short-sighted,” Haile says.
As of Sept. 5, 35 states are either opting to allow the federal government to run their exchanges (or are partnering with the feds), while 15 states and the District of Columbia are going to operate their own exchanges. States that run their own exchanges can choose to make their own rules about methods of payment insurers must accept — or even to administer payments for the insurers.
But, Haile says, “The federal government sets the tone.”
So, he says, it's likely some states will follow the federal lead when making decisions about other payment methods — such as credit cards and direct debits. No matter where you live, though, individual insurers might choose to accept more methods of payment than they're required to.
“In some cases, carrier A might offer five different payment options and carrier B might offer six,” Schuyler says.
Still, don't count on being able to whip out your rewards card and rack up points for paying your premium. Most insurance companies don't take credit cards — and they're unlikely to start doing so on their own, Schuyler says, because of the transaction fees merchants pay when customers use credit. For example, if a family paid $1,000 over several months in premiums by credit card, the insurer might pay more than $10 in fees to the credit card issuer.
“Those transaction fees add up quickly,” Schuyler says.
Unbanked could be uninsured
Experts say an even bigger concern is how consumers without bank accounts will pay for health insurance.
A report, “Uninsured + Unbanked = Unenrolled,” by Jackson Hewitt Tax Service, found that one in four uninsured consumers eligible for health insurance premium subsidies does not have a checking account. About 50 million Americans are “unbanked,” according to the report.
That's a major problem because making it easy for consumers to pay their premiums is crucial to the goal of getting and keeping everyone insured, Haile says.
Consumers who miss a payment can quickly get behind financially, lose their coverage and then owe the amount of their subsidy plus tax penalties, Haile says.
The requirement that insurers take general purpose prepaid cards helps, Schuyler says, but it isn't enough.
“There are still a lot of folks out there who don't want to use a prepaid card — they just deal strictly in cash,” Schuyler says.
Experts say innovation and new methods of payment are necessary to make it easier for unbanked consumers to pay their premiums. For example, one option would be for a customer to obtain a transaction number they could then use to pay with cash at a Western Union or similar type of business, Schuyler says.
“It's important that carriers and exchanges provide as many payment options as possible,” Schuyler says.