Later On

A blog written for those whose interests more or less match mine.

How the Affordable Care Act Drove Down Personal Bankruptcy

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Allan St. John writes in Consumer Reports:

As legislators and the executive branch renew their efforts to repeal and replace the Affordable Care Act this week, they might want to keep in mind a little-known financial consequence of the ACA: Since its adoption, far fewer Americans have taken the extreme step of filing for personal bankruptcy.

Filings have dropped about 50 percent, from 1,536,799 in 2010 to 770,846 in 2016 (see chart, below). Those years also represent the time frame when the ACA took effect. Although courts never ask people to declare why they’re filing, many bankruptcy and legal experts agree that medical bills had been a leading cause of personal bankruptcy before public healthcare coverage expanded under the ACA. Unlike other causes of debt, medical bills are often unexpected, involuntary, and large.

“If you’re uninsured or underinsured, you can run up a huge debt in a short period of time,” says Lois Lupica, a bankruptcy expert and Maine Law Foundation Professor of Law at the University of Maine School of Law.

So did the rise of the ACA—which helped some 20 million more Americans get health insurance—cause the decline in bankruptcies?

The many experts we interviewed also pointed to two other contributing factors: an improving economy and changes to bankruptcy laws in 2005 that made it more difficult and costly to file. However, they almost all agreed that expanded health coverage played a major role in the marked, recent decline.

Some of the most important financial protections of the ACA apply to all consumers, whether they get their coverage through ACA exchanges or the private insurance marketplace. These provisions include mandated coverage for pre-existing conditions and, on most covered benefits, an end to annual and lifetime coverage caps. Aspects of the law, including provisions for young people to be covered by a family policy until age 26, went into effect in 2010 and 2011, before the full rollout of the ACA in 2014.

“It’s absolutely remarkable,” says Jim Molleur, a Maine-based bankruptcy attorney with 20 years of experience. “We’re not getting people with big medical bills, chronically sick people who would hit those lifetime caps or be denied because of pre-existing conditions. They seemed to disappear almost overnight once ACA kicked in.” . . .

Continue reading.

Chart (and more) at the link. And this one is really worth reading in full since you get to read about actual people who will be hurt by the GOP AHCA plan.

Later in the article:

Grossberg adds that her bankruptcy business has slowed so much that she has been forced to take on other kinds of legal work—landlord-tenant and housing discrimination cases—to cover her own bills.

The American Bankruptcy Institute suggested that veteran Chicago bankruptcy attorney and trustee David Leibowitz could also help parse the reasons for the decadelong decline.

First, he says, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 made it more difficult for consumers to file for bankruptcy. The law required credit counseling and income verification and forced many consumers to seek protection under Chapter 13, which restructures, but does not eliminate, most debt. The piles of paperwork also meant most filers needed a lawyer, which made bankruptcy more costly and therefore not an option for many poor consumers.

Written by LeisureGuy

6 May 2017 at 3:05 pm

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