May 24, 2013

Obamacare will force you to either ante up an expensive insurance premium every month or face a hefty penalty on your tax return.

Gearing up for increased administrative costs when the Affordable Care Act (ACA) kicks in, health insurance companies are refusing to allow customers to make payments with credit or debit cards. Instead, they want you to mail them a check – preferably one that doesn’t bounce – which means if you don’t have a bank account you’re pretty much outta luck.

Once the ACA comes fully into effect, health insurance companies will be required to allocate a set portion of insurance premiums toward actual healthcare costs, not overhead and administrative costs as they’ve previously done. A small portion of their overhead costs go toward paying debit and credit card transaction fees. Rather than relinquish even a few pennies of profit per transaction, the insurance companies are just disallowing the use of debit and credit cards.

The average credit card processing fee when the card is not present to be swiped is approximately 2.30-2.50 percent. Those fees can go even lower if the business accepting the card uses some type of transaction protection service and / or processes a large number of transactions, which both apply when you’re talking about the major insurance companies.

BlueCross BlueShield of Tennessee and Health Net are just two of the major insurance providers who are no longer accepting credit or debit card payments.

“To help control costs associated with credit and debit card payment processing, BlueCross

BlueShield of Tennessee no longer accepts credit or debit cards for premium payments. This

helps BlueCross BlueShield of Tennessee make sure a greater percentage of premium dollars

is spent on care – and not administrative costs.”

What’s the alternative for the average American? Ryan McCostlin, team member at Nashville-based healthcare consulting firm Bernard Health says, “Since I’ve been thinking about how to help individuals and families figure out what to do about health insurance, more than half the carriers, while they may allow you to pay the first month’s premium with a debit or credit card, quite often, the only options after that are to get direct-billed with a paper statement or to set up an electronic funds transfer (EFT).”

Going back to the good old days of paper statements sent via snail mail only proves how greedy these health insurance providers really are. The average monthly per-person premium in the U.S. is $215. At 2.50 percent, the credit or debit card transaction fee would be approximately $51.0. Moving to a paper billing system would incur so many additional expenses for insurance providers it’s hard to know where to start – the cost of the printing a multi-page bill every month, the cost of postage, the additional administrative expense for opening all of those envelopes, logging all those checks, and hiring additional help to handle the accounting nightmare this will create.

And let’s not forget that a paper billing system makes it that much easier for insurance providers to “lose” your payment or credit it to the wrong account. Just when you need it most your insurance is canceled because somebody misplaced your check.

The biggest problem is, according to a 2012 FDIC national survey, roughly 10 million, or 1 out of every 12 American households is unbanked, meaning they have no checking or savings account.

But you see where this is going, don’t you? Not only will Obamacare force you to either ante up an expensive insurance premium every month or face a hefty penalty on your tax return, now you’re also going to have to open a checking account and pay a monthly handling fee to a bank.

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