The ACA Helped Drive Down Personal Bankruptcies

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Filings have dropped about 50 percent, from 1,536,799 in 2010 to 770,846 in 2016 (see chart, below). Those years also represent the time frame when the ACA took effect. Although courts never ask people to declare why they’re filing, many bankruptcy and legal experts agree that medical bills had been a leading cause of personal bankruptcy before public healthcare coverage expanded under the ACA. Unlike other causes of debt, medical bills are often unexpected, involuntary, and large.

“If you’re uninsured or underinsured, you can run up a huge debt in a short period of time,” says Lois Lupica, a bankruptcy expert and Maine Law Foundation Professor of Law at the University of Maine School of Law.

So did the rise of the ACA—which helped some 20 million more Americans get health insurance—cause the decline in bankruptcies?

The many experts we interviewed also pointed to two other contributing factors: an improving economy and changes to bankruptcy laws in 2005 that made it more difficult and costly to file. However, they almost all agreed that expanded health coverage played a major role in the marked, recent decline.

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At its most basic level, health insurance allows consumers to pay for the medical care they need. Each year, the Centers for Disease Control and Prevention determines how well the system is working by surveying Americans and asking a simple but powerful question: Did you have problems paying medical bills in the last 12 months?

The percentage of those reporting problems has dropped from 21.3 percent of households when they first asked the question in 2011 to 16.2 percent in 2016. That’s almost 13 million fewer Americans no longer facing collection notices from a doctor or hospital.

“It’s been happening across the board, by race, by age, by insurance status, by gender,” says Robin Cohen, the study’s lead author.

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