Bankruptcy Rates and the Affordable Care Act

Does healthcare reform have an impact on the rate of personal bankruptcy filings? According to a recent article in the Wall Street Journal, mandatory health insurance could reduce the number of consumer bankruptcy filings across the country. And with the recent U.S. Supreme Court decision upholding the tenets of the Affordable Care Act (ACA), Illinois and the rest of the country may, perhaps, see a decline in the number of consumers filing for Chapter 7 or Chapter 13 bankruptcy.
Recent History of Mandatory Insurance and Bankruptcy Filings
How do we know that mandatory health insurance could have a noticeable effect on personal bankruptcy in our country? A study conducted last year by Northeastern University law professor Daniel Austin determined that Massachusetts saw a decline in consumer bankruptcy filings after health insurance became mandatory for all residents of the state back in 2005.
Austin determined, in short, that Massachusetts residents who filed for bankruptcy in the last ten years had significantly less medical debt than the average American. For instance, the typical Massachusetts person who filed in 2013 had $3,041 in medical debt, while people everywhere else had an average of $8.594 in medical debt. Medical debt only accounts for between 3 to 9 percent of personal bankruptcy filings in Massachusetts, while that number remains much higher in other U.S. states.
Lower medical debt in Massachusetts is having a meaningful impact on the economic well-being of Massachusetts residents. According to Austin, “Massachusetts is the only state where medical debt isn’t the leading cause of personal bankruptcy.” In Massachusetts, unlike in Illinois and other states, the leading cause of consumer bankruptcy is loss of income.
Predicting Bankruptcy Outcomes with the Affordable Care Act
Given that the U.S. Supreme Court’s recent decision makes clear that health insurance is now mandatory in all fifty states—and likely will continue to be for the foreseeable future—we may see an effect on bankruptcy filings across the country. Austin contends that the Affordable Care Act ultimately could do more than simply ensure that families have access to healthcare and insurance coverage. He emphasizes that the recent high court decision “absolutely should show a reduction in bankruptcies filed due to medical debt.”
Austin’s argument is important and it underscores information lawmakers used to enact the ACA in the first place. Senator Elizabeth Warren co-authored a study more than five years ago that identified more than 62 percent of consumer bankruptcies as “medical bankruptcies.” And “in rallying for healthcare reform in his 2009 State of the Union address, President Barack Obama” cited that information as one of the major reasons our country desperately needed mandatory healthcare.
While Austin’s own research suggests that medical bankruptcies aren’t actually that high—somewhere between 18 percent to 25 percent of consumer bankruptcies filed in America—that figure remains a compelling one. If even one out of every five personal bankruptcies results from medical debt, then the ACA could stand to have a drastic impact on consumer debt.
Do you have questions about filing for bankruptcy? It is important to discuss your situation with an experienced Oak Park consumer protection attorney. An advocate at the Emerson Law Firm, LLC can answer your questions today.
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