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Could the Affordable Care Act lower bankruptcy risk?

As the deadline for enrollment in the Affordable Care Act passes, many across the nation are wondering how the program might affect the financial standing of those who participate. In many cases, individuals and families are already in the middle of financial hardship brought on by job losses or other setbacks. Having health coverage could make a world of difference in their overall financial outlook. Some in Florida and across the nation believe that the ACA could even lower the rate of personal bankruptcy filings.

In making that projection, financial and medical analysts look to data collected from a state in which a similarly expanded health coverage system has been in place for some time. Statistics show that the rate of bankruptcy filings that resulted from medical debt fell from 59.3 percent in 2007 to 52.9 percent in 2009. In addition, overall bankruptcies fell 18 percent between 2006 and 2013.

Some believe that the reason for a decrease in overall bankruptcy filings may be attributed to improvements in the overall health of that state's residents since they obtained greater access to health care services. This is known as the "spillover effect." It is assumed that the same effect would be achieved if individuals have increased access to health care on a national scale.

It is far too early to predict how the Affordable Care Act will affect either health or financial standings. However, for those who are already on the brink of financial disaster, having some form of health insurance could help them to avoid bankruptcy in the years to come. For many in Florida who are already buried under a mountain of medical debt, the fastest path back to financial stability still lies in filing for personal bankruptcy.

Source: The Motley Fool, "Medical Bankruptcies: How the ACA Stands to Reduce Them, How States Are Blocking the Way", James O'Brien, March 22, 2014

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