Consumer banks help patients meet out-of-pocket medical expenses

Out of pocket medical expenses are on the rise for American consumers, putting many at financial risk. In 2018, average per person health care spending rang in at over $7,000 for individuals between the ages of 18 and 65, according to the Centers for Medicare and Medicaid Services. Even worse, spending is anticipated to grow at a rate of 5.5% per year through 2027.ⁱ 

Complicating the issue of rising costs, more employers and consumers are adopting high deductible health plans (HDHPs) in an effort to offset the expense of increasing annual premiums. However, these attempts to bring down health plan costs quickly turn into a trade-off as consumers pay more out of pocket when medical care is necessary.

While health savings plans were designed to help consumers offset the out-of-pocket costs associated with HDHPs, the money set aside does not always cover the bill on medical expenses, resulting in financial risks for Americans at all income levels:

• Research conducted by the Kaiser Family Foundation reveals that 38% of respondents are very worried about being able to afford a surprise medical bill. An additional 29% were somewhat worried.ⁱⁱ
• Additionally, 26% of respondents to the Kaiser survey had trouble paying for medical bills within the last year, with half indicating that these expenses had a major impact on their financial well being.ⁱⁱⁱ
• The Consumer Financial Protection Bureau reports that unpaid medical bills make up 58% of debts sent to third-party collection.^iv
• Medical debt is the leading cause of early 401K withdrawals, according to TD Ameritrade^v  and the oft unspoken cause behind 66.5% of all personal bankruptcies.^vi 

Forty-six percent of Americans responding to a recent survey indicated that they had incurred out-of-pocket charges for medical services in the past year.^vii  Fortunately, 90% of individuals say they want to pay off their outstanding medical bills, and for nearly half responding to a recent survey, payment plans made it possible for them to make good on the money owed.^viii 

As competition heats up in the consumer lending space, healthcare financing also offers a significant opportunity for community banks and credit unions to fill their lending pipelines. Borrowers are also great candidates for future services and can often become a core client for the financial institution.

Patient Financing Offers a Competitive Edge for Consumer Banks

As the banking industry rose from the ashes of the financial crisis, several smaller financial institutions failed, leaving room for alternative lenders to fill the void. The rise of these new competitors has put the squeeze on lending for community banks and credit unions, making it increasingly difficult to garner consumer loans.

However, Americans borrowed $88 billion to cover healthcare costs in 2018,^ix  creating a new opportunity for consumer banks and credit unions to realize a steady source of consumer loans while helping customers and members to pay off medical expenses. When entering the healthcare space, however, there are some important guidelines to consider:

• Consumers require flexibility when it comes to paying down medical expenses, so financial institutions need to offer payment plans that are customized to the needs of the individual.
• Providers are looking to decrease accounts receivable days and accelerate cash flow, so they are looking for a partner who can offer up-front payments and then take over billing activities with the patient.
• The average monthly household income for medical bankruptcy filers is under $3,000 a month, meaning that many of the consumers who need the option of making payments the most often are ineligible for financing.^x  Financial institutions that can offer 100% patient approval and no credit check will help both providers and patients while filling the lending pipeline faster.
• Thirty-nine percent of consumer respondents to a recent survey were unwilling to take out a payment plan that incurred additional charges,^xi  so consider the impact of any fees or interest on your ability to attract consumers when setting up your payment structure.  

While patient financing could prove lucrative to community financial institutions, delivering on provider requirements for low-fee, no-interest payments may sound like a tricky proposition for many community banks and credit unions. Fortunately, there are Fintech partners that make it possible to enter the market by offering third-party financing solutions.

It is a win for all, providing a quality source of consumer lending opportunities for banks and credit unions, while also supporting the community by helping consumers to better manage their out-of-pocket medical expenses.

_{i  “NHE Fact Sheet.” Centers for Medicare & Medicaid Services.” CMS.gov, 2018. Web.
ii  Ashley Kirzinger, Cailey Munana, Bryan Wu and Mollyann Brodie. “Data Note: Americans’ Challenges with Health Care Costs.” Kaiser Family Foundation, Jun. 11, 2019. Web.
iii  Ibid.
iv  “Market Snapshot: Third-party Debt Collections Tradeline Reporting.” Consumer Financial Protection Bureau, Jul. 2019. Web.
v  Lorie Konish. “137 Million Americans Are Struggling with Medical Debt. Here’s What to Know if You Need Some Relief.” CNBC, Nov. 10, 2019. Web.
vi  Lorie Konish. “This Is the Real Reason Most Americans File for Bankruptcy.” CNBC, Feb. 11, 2019. Web.
vii  “The Changing Landscape of Healthcare Payment Plans.” PYMNTS.com, 2019. Web.
viii  Ibid.
ix  “Epic River Banks & Credit Unions. Epic River, 2019. Retrieved from: https://www.epicriver.com/banks-credit-unions
x  David U. Himmelstein, MD, et al. “Medical Bankruptcy in the United States, 2007: Results of a National Study.” The American Journal of Medicine, Vol 122, No 8, August 2009. Web.
xi  “The Changing Landscape of Healthcare Payment Plans.” PYMNTS.com, 2019. Web.}