The financial industry and health insurers have found a new way to exploit US residents who are uninsured or under-insured. They are offering "interest free" loans to allow people to pay for medical and dental procedures not covered by health insurance.
Seeing major profit opportunities, such players as Capital One, CitiBank, a unit of General Electric; health insurers such as United Health and numerous "upstarts" are entering the field.
The room for expansion looks ample, as rising deductibles, co-payments and other costs may force more of the nation’s 250 million people with health insurance to finance out-of-pocket expenses for even basic medical care.
"As more and more of the costs of care are shifted to consumers, people are going to need more credit," said Red Gillen, a senior analyst at Celent, an insurance and banking research firm. "They are still going to need health care."
At present the credit is offered for dental and medical procedures not covered by insurance.
Some insurers, including UnitedHealthcare, also have special credit plans available for insured members whose policies are linked to health savings accounts. Such policies combine high-deductible insurance with tax-sheltered savings accounts where money can roll over year to year until needed for medical expenses. But typically, the amounts of money being set aside do not go very far toward meeting even routine health expenses.
So far, among the 1.76 million health savings accounts in this country, the average balance is $1,327, according to a recent survey by Inside Consumer-Directed Care, a trade publication. To help people with health savings accounts meet the shortfall, the Exante Bank unit of UnitedHealth Group is trying out a card that extends credit at rates currently averaging about 10 percent to 13 percent, depending on the applicant’s credit history.
The companies providing such "free" financing profit in two primary ways: They charge the provider making the "opportunity" available around 10% (the exact cost to the provider varies with the credit rating of the patient using the credit) of the cost financed; and if the loan is not paid in full within the allotted 12 or so months, the interest rate on the loan defaults to 20% or more.
So, let me get this straight: Financial "service" providers gave the American population as a whole the ability to accumulate debts that exceed their savings. It created and sold mortgage products that many of their purchasers could not possibly afford to pay. It packaged these mortgages into "securities" so complex that nobody could possibly understand their worth and sold them to investors throughout the world. Defaults and the fear of defaults on the original mortgages have contributed to a worldwide financial crisis of unknown and unknowable proportions.
These same providers are now in the process of creating yet another way for Americans to accumulate debt they probably cannot afford. Even worse, they are creating even more costs for people who cannot afford needed health care to begin with.