What a Repeal of the Affordable Care Act Would Mean for Financial Inclusion in the U.S.

The Affordable Care Act (Obamacare) has been at the center of the U.S. political discourse, and perhaps divide, since it was passed in 2010. Some measures show that Republican lawmakers in the House of Representatives and Senate have voted over 50 times in the past few years to try to repeal the sweeping legislation. As the country prepares for a changing of the guard, Republican lawmakers are already taking steps to put an end to the program.

‘Repeal and Replace’ was the slogan hailed by Republican politicians, including the incoming president, during election season. However, on January 13th, the House of Representatives approved a budget plan which would revoke key elements of the Affordable Care Act (ACA). Meanwhile, they have not yet presented a replacement for the law. The nonpartisan Congressional Budget Office reports that the plan to repeal certain provisions of the law without a replacement would leave at least 18 million people without health insurance in the first year, a number which could balloon up to 32 million within 10 years if a replacement is not enacted. In addition, as a result of the proposed provisions, premiums for individual policies under ACA would increase by 20 to 25 percent in the next year, and would likely double by 2026.

At the Center for Financial Inclusion, we define financial inclusion as a state in which every person has access to a full suite of financial services, provided with quality to everyone who can use them. We view insurance as an important element of financial inclusion, allowing clients to secure their assets, homes, and health. This is perhaps most important for lower-income people, who do not have the savings or disposable income to deal with a large, unexpected medical expense.

For many in the United States, healthcare is a significant source of financial stress and one that is amplified without insurance coverage. Healthcare expenses are the number one cause of personal bankruptcy and the leading cause of debt collections in the U.S. A NerdWallet study estimated that in 2014, 56 million American under the age of 65 will have trouble paying medical bills. It should be noted that even those with health insurance can face medical bills that surpass their abilities to pay. However, a poll conducted by The New York Times and the Kaiser Family Foundation in 2016 found that those without insurance (under the age of 65) were nearly three times as likely to have problems paying their medical bills. This same poll reported that as many as 15 percent of people said they borrowed money from a payday lender to pay for medical bills and 63 percent had at one point used up all or most of their savings to do so.

Aiming to tackle both health insurance access and costs, the ACA could be seen as an important financial inclusion effort, and one that has succeeded on certain fronts. The ACA expanded access to health insurance for an estimated 20 million Americans who would have been otherwise uninsured. While premiums have increased for many (20 percent for the average family) since the rollout of the ACA several years ago, research from The Kaiser Family Foundation shows that this rate of increase is in fact lower than the industry’s cost increase rate prior to the ACA. Rising deductibles and higher prescription drug spending following the ACA may also stand out as negative impacts of the bill’s provisions and display a need for more regulatory efforts to curb cost; however, it’s difficult to draw a causal connection between these and the effects of the ACA.

The president-elect has recently promised that “[His administration is] going to have insurance for everybody” and that it will be “much less expensive and much better”. I, for one, hope that is the case but have reason to question the real planning behind such promises. A repeal of the ACA without a replacement would strip millions of Americans of health insurance, something that would lead to great financial burden, and perhaps even greater health issues. And speaking from our financial inclusion perspective, it could be the single biggest setback to financial inclusion in the U.S. since the 2008 financial crisis.

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