When movie stars become unbankable, they're no longer a slam dunk at the box office. When investments become unbankable, they're relegated to the Wall Street's junk pile. For ordinary Americans deemed unbankable — those who don't have a traditional checking or savings account — it can be hard to simply pay bills.
And that absence of a bank account is about to become a big problem for those who also lack health coverage — and for the health insurance companies trying to sell them coverage. After all, how do you sell a product to a customer who has no easy way to pay you?
One in five households in the U.S. have only a tenuous relationship with a traditional bank. Many of 51 million adults in these households rely on check-cashing stores and money lenders, according to the Federal Deposit Insurance Corporation.
The federal health law requires most Americans to carry health insurance starting next January. The presents a particular problem for those households. Most health plans accept a credit card for the first month's premium payment and then require customers to pay monthly with a check or an electronic funds transfer from a checking account.
Those options won't work for the so-called unbankables looking to purchase health coverage with federal subsidies through online insurance marketplaces, says Dan Schuyler, a director at Leavitt Partners, a firm that is advising private insurers and states on how to comply with the law. "You don't want to take these millions of unbankable people through the entire enrollment process and then at the end of line say, 'OK, the only way you can pay for your share of the premium is with a bank account number,' " he says.
The consequences could be severe. When your cable gets turned off, you miss The Walking Dead or Pawn Stars. But starting next year, if your insurance is canceled, you'll be breaking federal law and liable for any medical bills.
Researchers who study consumer financial behavior say people have their reasons for spurning banks. New immigrants, for example, may have distrusted the banks in their home country and brought that skepticism with them to the U.S. And for many people of modest means, overdrafts and fees charged by traditional banks can upend the financial balance in their household.
"The bank account is extremely stressful when you don't have a job that's reliable," says Tran, a 25 year-old community organizer and Ivy League graduate who lives south of San Francisco.
Her current employer doesn't offer her health benefits, and she was turned down, she says, when she applied for health coverage on her own. Tran hopes to get hired to a full-time position and asked that we use just her last name so it didn't give her bosses a bad impression.
Tran says when she took her new job and no longer had direct deposit, Bank of America began charging her, up to $12 a month. "I was not happy with the charges," she says.
Consumers who will be required to purchase health coverage will need payment options that are simple, easy and affordable, say consumer advocates and health care experts.
"I think there is a dawning awareness that this is a large problem," says Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service. Until last year, Haile was wrestling with this problem on behalf of the state of Tennessee, where he served as director of the Insurance Exchange Planning Initiative. "We raised these issues with the federal government well over a year ago and in a series of about four or five letters." Haile said he didn't get much of a response then.
Indeed, neither the Affordable Care Act, nor any other federal health laws, require health insurers to accept all forms of payment, such as credit cards or the cash-loaded, prepaid debit cards that many people without bank accounts often rely on.
Federal officials are wary of doing anything to discourage insurance companies from selling plans on the exchanges, say current and former state health officers who have pressed the federal Department of Health and Human Services for a ruling.
One of the largest players on the new exchanges is likely to be WellPoint, a Blue Cross and Blue Shield licensee. In an email, a WellPoint spokesperson says the company is "evaluating expanded payment options to members." Other insurers, including Cigna and UnitedHealthcare, are urging state officials in planning documents to allow companies to set their own payment policies.
Federal health officials issued a letter in April stating that all health plans selling coverage in the federally run insurance marketplaces in 28 states will have to accept payments in ways that don't discriminate against their customers, but didn't prescribe what those payments should be.
Varney is a reporter with our partner Kaiser Health News, a nonprofit news service.
MELISSA BLOCK, HOST:
As the Obama administration rolls out the federal health law, it's grappling with a long list of questions that could slow or derail the effort. Among them: Will the online insurance marketplaces be up and running, and will customers actually use them.
Well, reporter Sarah Varney is about to add another question to the list. How are people who don't have bank accounts going to pay?
SARAH VARNEY, BYLINE: According to federal statistics, 1-in-5 households in the U.S. - that's some 51 million adults - have only a tenuous relationship with a traditional bank, relying instead on check-cashing stores and money lenders. The new federal health law, which requires everyone to carry health insurance, presents a particular problem for those households.
Health plans accept payments by check or an electronic transfer from a bank account. And those options won't work for the so-called un-bankables, says Dan Schuyler, a consultant at the firm Leavitt Partners.
DAN SCHUYLER: You don't want to take these millions of un-bankable people through the entire enrollment process and then at the end of line say, OK, the only way you can pay for your share of the premium is with a bank account number.
VARNEY: The consequences could be severe. After all, when your cable gets turned off, you miss "The Walking Dead" or "Pawn Stars." When your insurance is canceled, starting next year, you'll be breaking federal law and you'll be liable for any medical bills.
I met Tran, a 25-year-old community organizer and Ivy League graduate, at a coffee shop in Daly City, California.
TRAN: I closed my bank account a few months ago because Bank of America was charging me around 10 or $12 a month and I felt like I was not happy with the charges ever since, like, I wasn't working a job that had direct deposit.
VARNEY: Tran doesn't get benefits at her job and was turned down when she applied for health coverage on her own. She's hoping to get hired to a full-time position and asked that we use just her last name so it didn't give her bosses a bad impression. Researchers who study consumer financial behavior say people have good reasons to spurn banks.
New immigrants may have distrusted the banks in their home country and moderate-income earners on tight budgets have been stung by bounced checks and overdraft fees.
TRAN: A bank account is extremely stressful when you don't have a job that's reliable.
VARNEY: Consumers like Tran will need health insurance payment options that are simple, easy and affordable, says Brian Haile. Last year, Haile was wrestling with this problem on behalf of the state of Tennessee. Now he oversees health services for Jackson Hewitt.
BRIAN HAILE: I think there is just a dawning awareness that this is a large problem. When I worked for the state in Tennessee, we raised these issues with the federal government well over a year ago and in a series of about four or five letters. Didn't get much of a response.
VARNEY: There are no laws mandating that insurers accept all forms of payment, including credit cards or the cash-loaded prepaid debit cards that people with bank accounts often rely on. And the federal government doesn't appear eager to push the issue out of fear it will scare off insurance companies from selling plans on the exchanges, say current and former state health officials.
As for the health plans, they say they'd rather decide the issue themselves. Last month, federal health officials clarified that health plans selling coverage on the federally run insurance marketplaces will have to accept payments in ways that don't discriminate against their customers.
But just what that means, no one seems to know. Insurance carriers are in a pickle since the transaction fees for credit cards and prepaid debit cards can run as high as 4 percent. If only one company takes the plunge, its costs are likely to be higher, scaring away customers. And the prepaid cards popular with low-wage workers come with their own hazards, says Brian Haile.
HAILE: If you accept reloadable debit cards, are you, in fact, getting folks with lower health status? That's a real risk when you're in the insurance business so you can't be the only one in the insurance business who's picking up folks with those health risks. I guess, ideally, what we would see is a uniform national standard where all issuers or all insurers had to accept these forms of payment.
VARNEY: For now, it's a problem with no elegant solution. Prepaid debit cards and credit cards could be options, consumer advocates say, if the federal government stepped in to negotiate lower rates with the card companies as it did for tax payments to the Internal Revenue Service. As for Tran, she pays her student loans with a money order and figures she might do the same when she's required to buy health insurance starting in January, unless she snags that full time job before then.
For NPR News, I'm Sarah Varney.
BLOCK: This story is from our partner Kaiser Health News, a nonprofit news service. Transcript provided by NPR, Copyright NPR.