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Feds Seek Broad Payment Options for Health Insurance Customers

Proposed menu includes cashier’s checks and prepaid debit cards (June 18)

According to a report from the Kaiser Family Foundation, federal health officials have proposed that all health plans selling insurance on the new online marketplaces must allow easy payment options for households without bank accounts or credit cards.

The government’s decision to mandate a menu of payment options, including cashier’s checks, money orders, and reloadable prepaid debit cards, comes amid increasing pressure from consumer advocates and business groups that are concerned low-income working families would be required to purchase health coverage under the Patient Protection and Affordable Care Act (PPACA) but would have no way to pay their monthly bill.

Recently, Jackson Hewitt released a report that found that more than one in four Americans eligible for the new tax credits under the PPACA do not have a checking account, and the tax preparation company concluded that those households could not enroll for coverage if insurance companies accepted only electronic funds transfers from checking accounts.

According to the Kaiser report, payments options offered to consumers take on more importance because of limits under the health law on how much insurers can mark up the cost of insurance. The PPACA directs insurance companies to spend at least 80% of the premiums they collect on health care-related expenses, and only 20% on profit and administration, including payment processing and bill collection. Prepaid cards and credit cards are expensive for vendors because Master Card, Visa, American Express, and other financial institutions charge fees of up to 4% on every transaction.

The online marketplaces where consumers will be able to qualify for government subsidies are scheduled to open October 1.

Source: Kaiser Family Foundation; June 18, 2013.

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