Health Reform May Reduce Personal Bankruptcies

Credit union members are likely to face fewer medical-related financial disasters under upheld healthcare reform.

With the recent ruling on the constitutionality of President Obama’s Patient Protection and Affordable Care Act, it seems as though health care reform is here to stay. Keeping this in mind, many are asking how these reforms will affect their personal and business lives. Because most credit unions have health care programs in place for their employees, some might think this new development will not significantly affect the credit union industry; however, this law could benefit credit unions greatly.

For the past few decades, the No. 1 reason people cited when filing for bankruptcy has been health care expenses. Even in the recent economic climate, the inability to pay medical-related bills has remained the leading cause to declare bankruptcy. As credit unions are well aware, when a member files for Chapter 7 bankruptcy, all of their outstanding loans must be forgiven by the lender. This leaves the lender with the duty of making up for that lost money on their own.

Some of the new measures Obamacare introduces, and which the Supreme Court has upheld, include requiring every citizen to have health insurance, removing lifetime caps on coverage, and making it illegal for insurance companies to refuse patients because of pre-existing conditions.

Although many who have filed for bankruptcy had some form of insurance, these new mandates will work to combat the loopholes in many Americans insurance policies that make it possible to be insured and still go into the red. The ACT is expected to decrease the number of people who cannot afford to pay for their expenses should something happen to their health. Many of those who end up filing for bankruptcy have medical issues to blame for pushing them beyond their already tightly strapped financial situations.

Students paying back loans, patients with conditions that require robust treatment, people whose current premiums are steadily rising due to pre-existing conditions, and others will be able to focus their money on loans and expenses and stay out of debt.

As more members avoid personal bankruptcies, credit unions should begin to log fewer non accrual loans. With less worry about members filing for bankruptcy because of medical bills, credit unions can lend with more peace of mind.

May 10, 2022

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