Health Insurance Impacts Timely Rent, Mortgage Payments, Report Says

mortgageIt’s not unusual to see GoFundMe or other crowdfunding efforts for someone who, facing a catastrophic health crisis, can’t afford to pay their rent or mortgage. But until now, those incidents remained anecdotal.

But a study released this year by Emily A. Gallagher, Radhakrishnan Gopalan, and Michal Grinstein-Weis, professors and researchers at the University of Colorado-Boulder’s Leeds School of Business, Washington University’s Olin Business School and Washington University’s George Warren Brown School of Social Work (Grinstein-Wise is also the Associate Dean for Policy Initiatives at Washington University), respectively, reveals that data clearly indicates a relationship between having health insurance and being able to make your rent or mortgage payment.

But the data doesn’t just tell the story of people with catastrophic illnesses, but also the cascading issues that can occur from just being sick and missing work a few days, when an insured person might be able to see a doctor for more immediate relief.

“When people think of health insurance, they often think of its effect on health. They may even they go a step further and think about its effects on a person’s medical expenses and their medical debt,” the three explained in a synopsis of the study. “Our study says that health insurance has significant downstream benefits to a person’s finances that show up in their home payments.”

“These indirect benefits may not be so salient to health policymakers, but they are extremely important to the overall financial stability of the person,” they continued. “On top of this, they carry broader economic implications.”

The trio compared households that were similar except for one thing — one household just barely qualified for generous health insurance assistance under the Affordable Care Act, and the other household just barely didn’t qualify, meaning it likely went uninsured.

“These are all low-income households living in states that did not expand Medicaid,” the report explained. “In these states, if you have an income above 100 percent of the poverty line, you get access to the Obamacare subsidies. But, if you have an income below 100 percent of the poverty line, you are out of luck.”

They estimate that about a quarter of rent or mortgage delinquencies of people near the poverty line are not happening because of the ACA marketplace subsidy.

“We show in the paper that this isn’t merely correlation but that it is causal,” they write. “Going from being uninsured to having heavily-subsidized Marketplace insurance substantially lowers your probability of being delinquent on your home payments.”

The study found that instead of having about a one in three chance of being late for your rent or mortgage payment, chances change to about one in five. This impact is felt especially in households with a higher likelihood of health problems — they were identified because they had a history of medical debt or they indicated on their survey that they have medical problems throughout the year.

“None of these same effects show up in states that expanded Medicaid, where this disparity in insurance access around the poverty line doesn’t exist,” they write.

The report also compares the implied social savings from fewer late rent and mortgage payments to the dollar amount given out in the form of subsidies. That’s not the easiest thing to do, they say, because while there are studies that show there are costs to evictions — vacant and damaged apartments, adverse childhood experiences that result in child development delays, etc. — there are no real studies that quantify the costs to society when it comes to evictions. There are, however, a few regarding foreclosures.

“Nonetheless, if we assume (for sake of argument) that an eviction costs society around $10,000, then our estimates would imply that about 32 percent of the subsidy would be offset by the social savings associated with fewer home delinquencies,” the three wrote. “This analysis is simplistic as it does not take into account any of the social costs associated with raising revenue to provide these subsidies, such as through higher taxes and interest on government debt.”

“Nonetheless, the calculations indicate that lower home payment delinquency carries large incidental benefits that should be considered when evaluating the overall cost of expanding access to affordable health insurance.”

And all of this has implications for the real estate market, the three said.

“On the one hand Obamacare raises revenue by imposing tax penalties that disproportionately hit high-income people,” they explained. “High-income must pay a tax on their wages (over $200,000) and a surtax on various forms of investment income.”

“On the other hand, high-income people tend to be investors in a bond mutual funds. And for this reason, they should like the ACA, since bond funds are often chock full of mortgage-backed securities,” they continued.  “An implication of our study is that people with health insurance are better able to meet their rent and mortgage payments, which, in turn, should improve the risk-return ratio on MBS.”

“Landlord’s also benefit financially when their cash flows are more secure. This is particularly important in today’s market, given the high cost of rent and the lack of supply on the low-income side.”

We spoke with one of the study’s authors, Emily Gallagher, about the work she and her colleagues did.

“So when the ACA went into effect in 2014, there were kind of two prongs to the ACA,” she explained. “The first was this expansion of Medicaid. States were supposed to expand Medicaid to people not earning up to 138 percent of the poverty line.”

“And then once you earn more than 138 percent you roll on to these exchanges where you get subsidies up until you make 400 percent of the poverty line,” Gallagher continued. “And the subsidies are super progressive so you get huge subsidies if you are in a lower income and still eligible and very little once you’re close to 300 percent.”

“You really almost get nothing, which is what a lot of the complaints about the ACA marketplaces are about, because for some people it’s fantastic,” she explained.”You get great health insurance for, you know, a $20 premium a month and you get something like a 94 percent actuarial value health insurance plan, meaning that the plan is going to kind of cover on average 94 percent of your costs, which is just a fantastic health insurance plan.”

Once you get to the higher income bracket, the subsidies fall off quite a bit, though, and the plans become much more expensive.

“That that’s basically what was supposed to happen and that’s how it is in states that expanded Medicaid,” Gallagher said. “But then in states like Texas that did not expand, what happened is you have people put the line for insurance now becomes 100 percent the poverty line.”

“So if you earn under 100 percent of poverty line you’re pretty much out of luck,” she said. “The only thing you might be able to afford is a super catastrophic plan with gigantic deductible that you’ll never be able to pay and if you have an income above 100 percent of the poverty line you get this incredibly generous health insurance.”

Gallagher and her colleagues examine the states like Texas, where Medicaid expansion did not happen.

“We use these states that did not expand Medicaid where there’s just this incredibly clear line where if you’re on one side you’re out of luck, and if you’re on the other side of it you get a better plan than I get through the University Colorado.”

Thanks to the data that is available because of this clear line, it became easier to identify groups of people.

“We can compare people just below that line and just above that line in terms of their financial outcomes, and in particular what we were most interested in was their ability to make their home payments on time,” she said. “It’s just a really interesting variable first because your rent or your mortgage bill is not the bill you want to skip.”

“You might juggle your gas bill with your electric bill due date, and you might put off paying your cell phone bill one month, but you’re really going to try and make your rent on time.”

And measuring those evictions is hard to do. Gallagher pointed to Matthew Desmond’s book “Evicted,” as a prime example of how hard it can be.

“You know a big chunk of the point he’s making at the beginning which is that we just aren’t measuring evictions properly,” she said. “We know very little about them because a lot of these evictions, they have sort of on the down low — you just come home and your landlord has a sign on your door saying,’Get out.’”

“And you know that’s never reported anywhere it doesn’t show up with the credit bureaus, and it doesn’t show up in any sort of formal municipal data sets.”

Gallagher said that eviction rates are probably much higher than most studies reveal, because of the difficulty in quantifying all of them.

“Now I must say that in my paper I can’t actually say we’re measuring eviction as an outcome,” she said. “What we’re looking at is home payment delinquency but obviously home payment delinquency is the antecedent of foreclosure and evictions.”

In their paper, the three expressed surprise that nobody has taken a look at the relationship of having healthcare coverage and mortgage and rent delinquencies. What has taken so long for someone to look at the potential connection?

In a word, the data became easier to find post-ACA passage. Some groups have done studies linking insurance expansion and financial well-being, and for certain, housing would fall under that. But nobody had really looked at the potential connection between being late paying your rent or mortgage and whether or not you had health insurance.

“A couple of groups of people have been making connections between these health extra insurance expansions and financial well-being,” Gallagher said. “So there’s been a couple of papers that have looked good like Medicaid and its effect on people’s credit scores and their loan offers, that kind of thing.”

“People have shown that you know if you have health insurance, of course, you have lower medical expenses or medical debt.”

“But it’s been really difficult for most people with standard datasets to look at home payment delinquency because rent delinquencies are not reported anywhere — that’s the first thing,” she said. “The only way you can take it up is when the survey data  indicates it, and a lot of the survey data doesn’t have detailed information on people’s incomes that you would need to really determine whether or not they are eligible for these expansion programs these insurance programs or not.”

“So you kind of need you need the convergence of that detailed income information, which we were able to do because we have tax data,” Gallagher added. They were able to link that tax data with survey data.

“We just got sort of lucky with this data set,” she continued.

The survey also drives home the point that it’s not always a catastrophic health event — like cancer, or an accident — that can impact whether someone is short on their rent or mortgage.

“I think that those are the things that people don’t realize probably most lower income people do not get access to paid sick leave for themselves,” Gallagher said. “So if they can’t come into work because they had an ear infection that they can’t get treated because they can’t afford the office visit and medication, they’re not bringing in income and therefore they’re more likely at the end of the month to have trouble making their rent.”

How does this play out in Dallas? Late last year, we reported on a study that found that Dallas was in the top five cities in the country when it came to eviction rates.

“We estimate an eviction rate of 5.6 percent for the Dallas metro, which is the No. 5 highest rate of the nation’s 50 largest metros,” said Chris Salviati, a housing economist with ApartmentList.com.

Drilling down further, Salviati and his team found that of that 5.6 percent, low-income renters accounted for 8.1 percent. Middle-income and high-income renters accounted for 6.3 percent and 2.8 percent of evictions respectively.

According to the Dallas Economic Opportunity Assessment conducted by the Communities Foundation of Texas and the Center for Public Policy Priorities, uninsured rates have dropped for all racial and ethnic groups in Dallas County since the Affordable Care Act was signed in 2009, translating to an increase of almost 322,000 insured people in Dallas County.

Courtesy the Communities Foundation of Texas and the Center for Public Policy Priorities.

Courtesy the Communities Foundation of Texas and the Center for Public Policy Priorities.

“Texas legislators did not elect to expand Medicaid under the Affordable Care Act, allowing nearly 100,000 low-income Dallas residents to fall into a coverage gap who otherwise would have access to this public health insurance program,” the assessment said. “In 2015, the vast majority of uninsured Dallas County residents were low-income, working-age Texans who are unable to afford private coverage or access public coverage options.”

But that insurance rate gap is also linked to opportunity and race. The uninsured rate for Hispanic residents is three and a half times higher than white residents, and nearly two times higher for black residents. More than a quarter of Dallas County residents did not purchase private insurance or enroll in public insurance in 2015, and 12 percent of children and two percent of the elderly.

“The implication is that health costs play a determinant role in the financial lives of low-income households as they have a profound effect on their ability to make one of their most important financial obligations — paying for shelter,” the three professors concluded.

It seems data in Dallas agrees.

(Note: The deadline for open enrollment for insurance on the Affordable Care Act exchanges is Dec. 15. Details can be found here.)