Will the Affordable Care Act Affect Bankruptcy Filings?

You may wonder what recent developments in health care law, such as the Affordable Care Act, have to do with bankruptcy law. CNBC reports that unpaid medical bills are now the most common cause of bankruptcy, outnumbering credit card debt and home mortgages. In 2013, an estimated 650,000 Americans filed for bankruptcy because of their medical bills, equaling about three out of every five individual bankruptcy filings.

Persons who are uninsured or who have high insurance deductibles may spend thousands or tens of thousands of dollars on a medical emergency. Even with health insurance, an estimated 10 million adults will accumulate medical bills they cannot pay off this year. In order to pay, many borrow money at high interest rates, making the bills even more expensive.

For those who have unpaid medical bills, Chapter 7 or Chapter 13 bankruptcy may be a viable option. Filing for bankruptcy may allow you to reduce or eliminate payments on your medical-related debt and allow you to get a fresh start. To find out if bankruptcy can help you, contact an Oakland Bankruptcy Attorney.

Affordable Care Act and Medical-Related Bankruptcies

The implementation of the Affordable Care Act will dramatically reshape health care in the United States. However, there is disagreement over how, exactly, this will affect bankruptcy filings. Some argue that the Affordable Care Act will largely eliminate bankruptcies that result from unpaid medical bills. By requiring that Americans without health care purchase it unless they fall into one of the Act’s exceptions, the Act will drastically reduce the number of Americans who do not have health care. Prior to the Act, this population would have had to pay for medical emergencies out of pocket. With the Act, the insurance company will pay for a medical emergency, reducing an individual’s medical bills and thus reducing the likelihood that they would need to file for bankruptcy.

However, experts caution that the Affordable Care Act will not entirely solve the medical bankruptcy problem. Many (about 75 percent) of the persons who file for bankruptcy as a result of unpaid medical bills already have insurance. Because of high deductibles and/or limited insurance coverage, persons may still accumulate overwhelming medical debt. The Affordable Care Act grandfathers in plans that existed prior to March 23, 2010, so many of these insurance plans may be around for years to come.

In a recent article entitled Sick and Still Broke: Why the Affordable Care Act Won’t End Medical Bankruptcy, Washington University Law Professor Ryan Sugden argues that although the Affordable Care Act will reduce catastrophic medical expenses among the uninsured, it will also accelerate the use of deductibles and out of pocket expenditures, penalizing customers for poor financial and health decisions. As a result, a limited number of medical bankruptcies will still take place.

The Law Offices of Melanie Tavare is a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code