Studies suggest Affordable Care Act helped reduce bankruptcy filings

Patricia Hafermann • Benefit Specialist

Between 2010 and 2016, the years during which several provisions of the Affordable Care Act (ACA) went into effect, personal bankruptcy filings decreased from 1,536,799 to 770,846–a drop of around 50 percent. Although other factors likely contributed to this decline, many bankruptcy attorneys and experts agree that medical bills were s significant cause of bankruptcy filings before access to healthcare coverage was expanded under the ACA. Bankruptcy attorneys say they are seeing fewer clients with large medical bills that resulted from reaching lifetime limits or denials due to pre-existing conditions.

The ACA introduced some important financial protections for consumers, including an end to lifetime limits on coverage and required coverage of preexisting conditions. In addition, the ACA allows young people to remain on a family insurance policy until age 26. These provisions began to go into effect in 2010, and the full rollout of the ACA is currently planned to continue until 2020.

Bankruptcy attorneys say that there are two other reasons for the decline in bankruptcy filings. First, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for consumers to file for bankruptcy. Moreover, the economic recovery that has taken place since the 2008 recession means that consumers now have better employment prospects, fewer problems with their mortgages, and greater access to credit.

Although it is not easy to pinpoint the reason someone files for bankruptcy, studies have nevertheless found that medical debt is a large factor in personal bankruptcy. A 2014 study from Daniel Austin, then a professor at Northeastern University School of Law, surveyed a nationwide group of 100 bankruptcy filers. Twentyfive percent of participants said that medical bills were a factor in their decision to file for bankruptcy. Austin also evaluated bankruptcy filings from a group of 100 people in Massachusetts, where residents have been covered by a statewide healthcare program similar to the ACA since 2006. The difference between the Massachusetts group and the nationwide group was noteworthy–in 2013; the average medical debt was $3,041 in Massachusetts and $8,594. According to Austin, only about 9 percent of Massachusetts filers felt that their bankruptcy was the result of medical bills.

If you have any additional questions, you may call Pat Hafermann, Elderly Benefits Specialist with the Aging and Disability Resource Center at (920) 467-4076.

Sources: Published with permission from the Legal Services Team at the Greater Wisconsin

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