Reform Update: Rule allows 'unbanked' consumers to pay premiums with prepaid cards

In a victory for health insurance exchange customers with lower incomes, HHS issued a final rule (PDF) Wednesday that will allow individuals to pay their premiums with a prepaid debit card. The move allows individuals who do not have a bank account, called the “unbanked,” to pay premiums with a card they add money to that's issued by a credit card company.

The rule responds to widespread concerns that insurers would only take payment by check and credit card, while millions of lower-income Americans who will be buying coverage on the state insurance exchanges are unbanked because they can't afford the costs associated with checking accounts and credit cards. Some insurers had said they wanted to be able to set their own payment policies. They don't necessarily like credit or prepaid debit cards because the fees they have to pay are high.

“At a minimum, for all patients in the individual market, (a qualified health plan) must accept paper checks, cashier's checks, money orders, (electronic fund transfers) and all general-purpose prepaid debit cards as methods of payment and present all payment options methods equally for a consumer to select their preferred payment method,” the 300-page rule states.

Brian Haile, a senior vice president for healthcare policy at tax preparer Jackson Hewitt who lobbied HHS to require insurers to accept prepaid cards, said the final rule will benefit as many as 8.5 million “unbanked” Americans. A May report from Jackson Hewitt found that 27% of uninsured Americans eligible for federal subsidies to buy exchange coverage under the Patient Protection and Affordable Care Act do not have bank accounts.

Although Haile praised the final rule, he expressed disappointment that HHS did not allow automatic deductions from credit or debit cards. “We were surprised by this policy choice, and we fail to see how limiting consumer options for automated recurring premium payments is consistent with the goal of ensuring continuous enrollment and minimizing attrition in the insurance affordability programs. We urge federal policymakers to reconsider this tentative choice. Consumers will face tax penalties for being uninsured under the recently released IRS rules about the individual mandate—and we should be making every effort to help consumers avoid those penalties and maintain coverage.”

Overall, the final rule was relatively unchanged from a proposed rule released in June.

An analysis released today by the RAND Corp. found that there is little evidence that premiums for 2014 are coming in higher compared with current rates.

“Our analysis shows that rates for policies in the individual market are likely to vary from state to state, with some experiencing increases and some experiencing decreases in cost,” RAND senior economist and study lead author Christine Eibner said. “But our analysis found no widespread trend toward sharply higher prices in the individual market.”

In addition, the report found that under the ACA, employees at businesses with less than 100 workers can expect to pay 6% less in premiums in 2016 than if the law was not in effect. RAND based its research on modeling looking at how the ACA is likely to change cost and coverage in the individual and small group markets in 10 states—Florida, Kansas, Louisiana, Minnesota, New Mexico, North Dakota, Ohio, Pennsylvania, South Carolina and Texas.

Aetna today said it has pulled out of New York's individual health insurance exchange, citing competitive reasons. “Our goal for 2014 is to participate in a limited number of state exchanges where we can be competitive and add the most value to the market," Aetna spokeswoman Cynthia Michener said in a prepared statement. New York is the fifth state exchange Aetna has changed its mind about participating in, after doing an about-face in Connecticut, Georgia, Ohio and Maryland.

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