Is Health Insurance Good For Your Financial Health?

When people become sick, they seek health care so they can get better. But health insurance has a somewhat different function: Its main purpose is not to safeguard our health per se, but instead, to protect our finances. It is for this reason that millions of Americans requested health insurance quotes for 2017.

There are people with very high health costs due to major health problems and this is where health insurance comes in. Having a good health plan will protect you against large health expenditures.

The 2010 Patient Protection and Affordable Care Act was enacted and made into law with the goal of protecting American citizens and residents against financial hardships. Prior to the passage of the ACA, in 2009, uninsured rates in the US reached 16.7 percent. The ACA meant to lower this number using a few strategies such as expanding Medicaid to include any adult earning 133 percent of the poverty line. But in 2012 it was determined by the U.S. Supreme Court that the federal government does not have the power to mandate the states to expand Medicaid. As a result, nineteen states declined to expand it in 2016.

According to the U.S. Census Bureau, between 2013 and 2014, states, which decided to expand Medicaid had a bigger decrease in uninsured rates than those that did not expand the program.

The Effects of the ACA’s Medicaid Expansion on Financial Indicators

There’s evidence to prove that after the implementation of the ACA, counties with a high rate of uninsured prior to the health law reform in states that expanded Medicaid had lower average debt that were sent to collections agencies compared to those counties in states that opted not to expand Medicaid.

Indeed, health insurance is healthy for personal finances particularly for low-income individuals. It is important to note however that many of the findings focused on the benefits of the ACA expansion alone.

What Happens When You Don’t Have Health Insurance?

Some people may opt to forego health insurance because they don’t have sufficient means to pay for it. But if a major illness occurs when a person is uninsured, it can lead to a host of financial problems and even bankruptcy. A 2009 study published by the American Journal of Medicine reported that more than 60 percent of U.S. bankruptcies that were filed in 2007 were because of inability to pay medical expenses. Most of these debtors had medical debts exceeding $5,000.

While the Affordable Care Act’s full effects on financial health are yet to be seen, there is suggestive evidence that the Medicaid expansion is realizing the goal of health insurance: to give consumers “peace of mind” by protecting them against financial difficulties. The decision of the states to expand or restrict Medicaid coverage will provide us with additional evidence on the financial effects of health insurance to the general population. In the coming years, as more data become available, we can further evaluate the dynamics and compare the benefits of health insurance with its associated costs.

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