The Obama administration said Wednesday it would require insurers to let uninsured Americans pay for health coverage this fall with prepaid debit cards rather than limit them to bank-account transfers, though it won't require insurers to accept automatic monthly payments from credit or debit cards.
Allowing prepaid cards is aimed at ensuring millions of lower-income Americans can sign up for coverage even if they don't have checking accounts.
Rules released by the Department of Health and Human Services said insurers participating in new health-insurance exchanges set to open in October would be required to accept payment from consumers in several different forms, including prepaid debit cards, cashier's checks and money orders, as well as paper checks and bank-account transfers. Insurers won't be required to accept cash.
A move to allow payment by prepaid card had been backed by consumer advocates, who said they wanted to ensure access to coverage for "unbanked" Americans, and by card giants such as MasterCard Inc. and Visa Inc.
But consumer advocates said Wednesday the administration had fallen short of that goal by not requiring insurers to accept automatic deductions.
"If you require someone to take a monthly step they're just less likely to do it," said Brian Haile, senior vice president for health policy at Jackson Hewitt Tax Service Inc. "This is very disappointing."
HHS didn't immediately respond to the complaint.
The card-payment issue had caused concern among insurers, which said earlier this year they didn't want to be required to handle specific payment methods and were worried in particular about vendor fees on cards.
On Wednesday, a spokesman for America's Health Insurance Plans said the administration's decision on prepaid cards was acceptable to the trade group.
Jackson Hewitt Tax Service told the administration earlier this year that on the basis of census data, as many as one in four of the low-income people eligible for tax subsidies toward the cost of insurance coverage didn't have bank accounts. Their participation in the exchanges is seen as crucial to the law's success in extending coverage.
MasterCard and Visa also wrote letters to the administration in which they pushed officials to require insurers to accept prepaid debit cards.
With just over a month to go before the new health-insurance marketplaces open, the administration is rushing to confirm details of how they will work. On Tuesday, it released final rules on the requirement that most people carry insurance next year or pay a tax penalty. Those rules were largely unchanged from previous drafts, but confirmed consumers can avoid a penalty for not having coverage on Jan. 1, 2014, as long as they sign up before March 31 and remain enrolled for the rest of the calendar year.
Write to Louise Radnofsky at louise.radnofsky@wsj.com
A version of this article appeared August 28, 2013, on page A3 in the U.S. edition of The Wall Street Journal, with the headline: Prepaid Cards Allowed as Health-Insurance Payment.
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