Jan. 12, 2017
Landlords across America should be cheering for Obamacare, and here's why: Families who get health insurance through the Affordable Care Act are significantly more likely to pay their rent or mortgage.
This shows up clearly in our new study of tax and survey data on roughly 5,000 people living near the poverty line. Those who get insurance through the Obamacare marketplaces become delinquent on their housing payments at a rate 15 percent below those who go uninsured.
This research, led by a team at Washington University in St. Louis, strongly indicates that the ACA is lessening financial distress for the working poor by helping to keep a roof over the heads of families who might otherwise be out on the street.
A lot has been said recently about the rising cost of health insurance—both under the ACA’s Marketplace plans and under plans offered by employers. And it’s true, for people with higher incomes, particularly for older adults, the premiums and deductibles on Marketplace plans can be astronomical.
But for people living just north of the poverty line, ACA coverage is relatively cheap. That’s because many low-to-middle income households are eligible for help with premiums and out-of-pocket costs. For example, a 45-year-old single adult earning $15,000 per year (about 25% above the poverty line) pays a monthly premium of $26 and has an annual out-of-pocket maximum of $2,350. At these prices, Obamacare plans cost less than many plans offered by employers.
As our data show, insurance makes a difference in
families where the need for a pricey medicine or an operation can mean skipping
bills or, even worse, skipping the rent.
The decision in some states not to expand Medicaid to
low-income adults has created a laboratory of sorts for researchers interested
in the effects of the ACA. These decisions have set up just the kind of natural
experiment that allows researchers like us to compare groups of otherwise
similar people—some with affordable coverage and others without good options.
Since October 2013, an estimated 15
million people have gotten insured through
Medicaid. However, across all states that didn’t expand Medicaid, there remain
about 2.6 million adults in insurance limbo (commonly called “the
coverage gap”). These adults earn too much to
qualify for Medicaid but too little to be eligible for subsidized private
insurance through Obamacare; subsidies that begin at incomes above 100% of the
poverty line, or $12,000 a year for a single adult in 2016.
Using tax data linked with a survey of household
finances, our study compares households with incomes just below the eligibility
threshold for Marketplace subsidies to households with incomes just above this
threshold, and controls for the small difference in the incomes of these two
groups. Our sample includes people near the poverty line who lived in the 18
states that did not expand Medicaid during the 2015 and 2016 tax seasons. (The
Marketplaces first opened in 2014.)
As expected, we find that the rate of insurance coverage
among those without an employer plan increases by about 10 percentage points at
the income threshold for receiving subsidies. At the same time, the share of people
who fall behind on mortgage or rent payments declines by about 4 percentage
points at the subsidy threshold. This equates to a 15% reduction in the rate of
delinquent housing payments.
Some rigorous statistics (called a “fuzzy regression discontinuity” method) tell us that this relationship is likely causal. First, we use the threshold for subsidies to help predict a household’s likelihood of obtaining private insurance. This keeps the predicted likelihood of coverage independent of any unobserved characteristics, such as the household’s aversion to risk, which might be correlated with its decisions to both get insured and to make on time housing payments. Second, we check whether a household with a higher predicted likelihood of being insured tends to report fewer recent delinquencies on home payments. Results from this technique tell us that more people with insurance through the Marketplaces leads to significantly fewer delinquent housing payments. And that should make landlords smile.
It should also make society smile. A missed rent or mortgage payment is a good signal that a family is facing extreme distress —the kind that big medical bills can cause and that insurance is most likely to measurably affect in the short-term. Even beyond the impact on credit scores and access to credit, the ability of a family to hold onto a home can have serious long-term implications. Housing instability, common among low-income families, has been linked to mental-health problems and poor early-childhood development. When people can pay their rent, we all reap the rewards.
Our study builds on a long line of research suggesting that the benefits of health insurance for low-to-middle income households extend well beyond measures of physical health. Other studies, for example, find that Medicaid access lowers households’ out-of-pocket medical spending, medical debt, unpaid non-medical bills, and the amount of non-medical debt sent to third-party collection agencies. Our results signal that, like Medicaid, the Marketplaces are also generating downstream financial benefits, helping households stay current on their rent or mortgage.
As Congress once again debates the issues surrounding the Affordable Care Act, they should be sure to consider all the benefits afforded to people by expanding health insurance access. Only then can they understand the full costs of repeal.