The Strong Link Between Financial Literacy and Having Health Coverage
By Right About Money Staff Report
December 15, 2016
Policymakers, employers and individuals pretty much agree that everyone should have health coverage. How to make that happen is where we have tensions, which are likely to intensify in coming months. The incoming Trump administration has promised to overhaul the nation’s healthcare system, rescinding much of the Affordable Care Act also known as Obamacare.
Whatever the outcome, new research suggests that part of any comprehensive solution is raising the level of general financial literacy among individuals. Buying health coverage is fundamentally a financial decision. What will it cost to be covered? What will it cost if I get sick and have no insurance? What are the financial penalties for ignoring laws that mandate coverage?
Those who can work through the math are more likely to have health insurance regardless of income, employment status or political affiliation, according to a Rand study published in the Medical Care journal last month. As a nation, we must improve general understanding of personal financial issues and design health plans and supporting materials that can be easily understood, researchers concluded.
“Limited health insurance and financial literacy may make it difficult for consumers to assess whether insurance premiums are ‘worth it'”, said Rand economist Katherine Carmen, senior author of the study. “Efforts to decrease the number of uninsured adults should consider that these individuals may have a hard time deciphering health insurance information.”
The study of 18-to 64-year-olds on the Rand American Life Panel found that an individual uninsured in 2013 had a 9.2% greater chance of being insured two years later if exposed to financial education including a healthcare component. The study occurred as health insurance exchanges opened under the federal Affordable Care Act. “It is remarkable that the association between financial literacy and people’s insurance decisions is similar in size to things we normally associate as being a key to someone having health insurance, such as education levels and whether someone is employed,” Carman said.
Some 60% of study participants who were initially uninsured gained health insurance over a two-year period. Among people with high health insurance knowledge who were uninsured, 64% obtained coverage. That compared to 48% of those with low health insurance knowledge. Among those with high financial literacy scores who were uninsured, 70% obtained coverage. That compared to 56% among those with low financial literacy skills.