The ACA May Be Keeping You Out of Bankruptcy

Dear Utah Legislature (and some aspiring Sociologist at Weber State University),

I am writing this letter as a concerned legal practitioner of bankruptcy law. I have watched over the past five years how the number of bankruptcy filings have gone into freefall. We have experienced a 35% drop in bankruptcy filings from 2011 to 2015, from 18,414 bankruptcy cases to a mere 12,133 in 2015.

As a business owner, I've been trying to figure out why there has been such a precipitous drop in potential clientele. Unemployment rates in Utah are currently about half of what they were in 2011, which is great for everyone because lost income accounts for a lot of bankruptcies . I had initially thought this might account for the drop.

However, even though more people are working, the median household income has only increased by 9% over the past four years. Since income levels have remained fairly static, I decided to explore other possible reasons for the decline in bankruptcies.

My thoughts led me to consider divorce rates, another big reason for bankruptcies. Divorce really messes up people’s finances. Although divorce statistics proved to be difficult to cobble together, I checked out Weber, Cache and Box Elder counties. In 2011, there were 3440 divorces and in 2015, there were 3409-- a statistical dead heat. Obviously there hasn't been a significant change in our divorce habits, so that can't be the culprit for the decline in bankruptcies.

This brings me to the last reason people come into my office -- medical expenses. Historically, medical expenses have accounted for over 50% of bankruptcy cases. I’ve even mentioned as sort of a tongue-in-cheek observation that what I do for a living is that I am the national health care plan.

Remember the government shutdown in 2013? I do. When I wrote about it in the Standard, I said, “I suppose I should be cheering for the repeal of the Affordable Care Act (ACA), because up until now, I have been an important part of the only reliable National Health Care Plan. If the ACA works at all, I’m going to be losing work.” My prediction was that the ACA would result in fewer bankruptcies as more people became insured.

The uninsured rate has dropped about 25% across the United States since 2011, eerily close to the decline in bankruptcy filings. If you look at filings across the entire United States, the number of bankruptcy cases has dropped at about the same rate as Utah.

This leads me to conclude that the culprit is probably something national, like the Affordable Care Act.

Does this mean that one law, despised and hated by many, has helped reduce bankruptcies across the country by almost 35%? I’m just a boots-on-the-ground consumer bankruptcy attorney, not a sociologist, but it sure looks like that is the case.

If you eliminate pre-existing conditions, extend health insurance for adult children, and put a cap on the percentage of income any one family has to pay for medical costs, all things that the ACA does, the logical conclusion is the ACA has played a part in significantly reducing bankruptcy filings across the country as it has been implemented.

Fortunately for my practice, the Utah Legislature saw fit to not pass Governor Herbert’s Healthy Utah Plan which would have provided health insurance for the most financially vulnerable citizens of our State. Unfortunately for those Utahns, this failure leaves a large pool of people who simply cannot get insurance and will still need to rely on me and the bankruptcy laws to deal with the financial problems resulting from health problems and being uninsured. Representative Hughes and those opposing the Medicaid expansion are doing their best to keep me in business, it seems.

Improving the affordability of healthcare hurts my business, but I am also a citizen, a father, a husband, and grandfather with a family that needs affordable healthcare. No one should be thrown under the financial bus because of health problems. People never want to come into my office and they only arrive when financial stress has forced them. I enjoy helping people get a fresh start, but what if we could support laws that allow people to simply keep going? I look forward to seeing what you can figure out for us.

Sincerely,

A Concerned Consumer Bankruptcy Attorney