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Health-care financing comparison chart

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Several big lenders have retreated from health-care financing in recent years. Since the recession, for example, Chase, Capital One and Humana have all dropped their health-care lending programs. (Humana still offers a health-care debit card, but discontinued its medical credit card.)

"Before the recession, there were lots of players," says Mark Rukavina, founder of the health care consulting group Community Health Advisors. "They were aggressively marketing the product and extending it to people who were having a difficult time paying for care."

Today, some smaller lenders have popped up in place of the larger providers. But a number of them are focusing on lower rate installment loans, rather than open-ended cards with hefty APRs.

In the chart below, compare the features and costs of the major providers of health-care financing:

 

Safer loans, for some
For example, American Healthcare Lending, based in Salt Lake City, now markets itself as a simpler, more cost-effective alternative to high-interest medical cards. The company briefly experimented with a revolving line of credit that was similar to other deferred interest medical cards, says Graham Anderson, vice president of business development and marketing. But they quickly discontinued it -- in part because of the controversial financial burden it placed on some of the card's borrowers. "We just felt like it wasn't a healthy option for the patients," says Anderson. Now, the company only offers installment loans with interest rates starting at 5.99 percent and no longer offers interest-free financing.  

Similarly, the South Carolina-based lender East Bridge Funding launched a health-care financing program in early 2014 called SimpleSelect Patient Finance. The company exclusively offers closed-end installment loans and, like American Healthcare Lending, markets itself as a safer alternative to costly medical cards. "The patient finance industry has needed a facelift," said East Bridge Funding's Daniel O'Connor in a January 2014 press release. "Medical credit card programs have dominated the patient financing space for a long time. They are useful for financing smaller, repeat transactions, but are not the right loan product to finance a large-ticket elective medical procedure." Interest rates for the loan start at 14.99 percent, which is higher than other installment loans available. But the company also offers interest-free financing for up to 18 months.

Meanwhile, some of the companies that still offer a revolving line of credit are also lowering their card APRs and offering safer products to new cardholders. For example, Wells Fargo cut the standard APR on the Wells Fargo Health Advantage card by more than half in late 2013, lowering it from a 27.99 percent interest rate to 9.99 percent.

Cardholders still have the option of deferring their payments for up to 18 months. But they will no longer be hit with a nearly 30 percent interest rate if they're unable to repay their balance by the time the promotional period expires.

In addition, the North Carolina-based financing company AccessOne has also begun offering a lower rate card to most applicants. For example, depending on your health-care provider, you may be offered an APR as low as 8 percent on the AccessOne MedCard -- down from 9.25 percent. However, the card is only available to applicants who live in the Deep South.

High-interest medical cards still dominate
Despite the lower rate options available to some health-care borrowers, many of the medical cards that patients see advertised in doctor's offices are for higher rate cards.

That's because the medical financing company CareCredit -- which charges a 26.99 percent APR on revolving balances -- still dominates the patient financing landscape.

According to the company's promotional materials, the CareCredit card is currently accepted at 175,000 locations across the country -- up from 125,000 locations in 2010. 

Meanwhile, one of CareCredit's leading competitors, Citibank, charges cardholders up to 28.99 percent on purchases and is also widely accepted at healthcare offices nationwide.

The cards' high-interest business models aren't popular with everyone, however.

CareCredit, in particular, has received critical attention from regulators and consumer advocates for its hefty APRs and promotional practices. And according to American Healthcare Lending's Graham Anderson, healthcare financing executives are watching CareCredit closely to see what happens next with the company.

"The CareCredit situation is a big topic behind closed doors of healthcare financing companies right now," says Anderson.

CareCredit's parent company GE Capital tried unsuccessfully to sell CareCredit in the summer of 2013. Around the same time, the company reached a settlement with the New York Attorney General's Office, which was investigating CareCredit for deceptive practices, and agreed to revamp some of its enrollment practices.

Soon after, the Consumer Financial Protection Bureau (CFPB) ordered CareCredit to refund cardholders more than $34 million after the consumer watchdog discovered numerous consumers were being enrolled in CareCredit's deferred interest financing program without fully understanding how it worked.

In prepared remarks to reporters, CFPB director Richard Cordray chided CareCredit for its enrollment practices and warned that the CFPB will be keeping a close watch on deferred interest credit cards. "We will continue to monitor these products carefully, and most especially we will not tolerate financial companies that take advantage of patients and their loved ones," said Cordray.  

What's next
The increased scrutiny from federal regulators could make some companies reluctant to introduce more high-interest medical cards to the market.

But American Healthcare Lending's Graham Anderson says the demand for affordable healthcare loans remains high, thanks in part to growing healthcare costs. So you could see more alternatives in the future.

Before the Affordable Care Act went into effect, some experts speculated that the market for health care loans would shrink because the law caps how much consumers have to pay out-of-pocket for any service or procedure covered by their insurance.  

Anderson disagrees. "Yes, more people have insurance. But in the end, patient financing wasn't just going to people who didn't have insurance," he says. In many cases, people use healthcare loans to finance elective procedures that aren't covered by their insurance company, such as cosmetic surgery or in-vitro fertilization.

In addition, he says, some people will continue to pay a substantial amount out-of-pocket before they hit the ceiling on their deductible and will need extra help filling in the gaps.

"There are people out there that need help paying for some of those bills, for sure, and we very much think that the industry is going to continue to grow," says Anderson.

See related: 5 tips when considering health-care credit cards, and Medical credit cards: Treatment today, payment headaches tomorrow

"Before the recession, there were lots of players," says Mark Rukavina, founder of the healthcare consulting group Community Health Advisors. "They were aggressively marketing the product and extending it to people who were having a difficult time paying for health care."

(See "5 tips when considering health-care credit cards" and "Medical credit cards: Good, bad or ugly?")

Today, some smaller lenders have popped up in larger providers' place. For example, American Healthcare Lending, based in Salt Lake City, markets itself as a direct competitor to CareCredit, with significantly lower rates for consumers with solid credit scores.

The company only offers installment loans for now rather than a medical credit card. However, Graham Anderson, vice president of business development and marketing at American Healthcare Lending, says they are thinking about introducing a revolving credit line in the future.

Meanwhile, AccessOne, based in Charlotte, N.C., also offers a health-care credit card that has a significantly lower standard APR than most -- 11.25 percent - and, unlike other cards, can be used for general medicine and hospital expenses. However, the card, which has been around for over a decade but appears to be growing slowly, is only accepted by a limited number of health-care providers in a handful of states in the Deep South.

Experts are unsure whether more lenders will be eager to get into the health-care financing market going forward, particularly now that key sections of the Affordable Care Act are about to be implemented.

"I would expect that there would be less of a need for these credit cards if more people have insurance," says Gina Calabrese, a professor of law at St. John University.

Beginning next year, Americans who currently can't afford private health insurance will be able to shop around for a less costly, government-subsidized plan using state-run marketplaces known as health insurance exchanges. Many consumers will also spend significantly less on out-of-pocket medical expenses, thanks to an annual cap on the health-care costs that insurers can pass on to individuals and families.

The changes, which don't go into effect until 2014, are expected to dramatically increase the number of people who are insured in the US and cut down on the number of people who are pushed into bankruptcy by out-of-pocket medical expenses.

However, people who are financing elective procedures that typically aren't covered by insurance -- such as cosmetic surgery or in-vitro fertilization -- may still be eager to turn to alternative forms of financing to help bridge the gap. Here are some of the lending options that are currently available.

Credit Issuer: CareCredit from GE Money

Type of loan: Credit card

Treatment covered: Dental, hearing, vision, cosmetic, chiropractic care, hair restoration, weight loss and veterinary care

Interest rate: 26.99 percent for a revolving line of credit; 14.9 percent for extended payment plans.

Terms: There are two types of promotional financing plans available. If you choose a deferred-interest plan, you can defer paying interest for 6, 12, 18 or 24 months, depending on the plan offered by your health-care provider. If you pay the full balance charged to the card by the end of the promotional period, interest charges will be waived on your account. However, if you don't repay the full amount by the time the promotion expires, a 26.99 percent interest rate will be charged to your card's full balance, beginning with the first purchase.  

If you opt for an extended payment plan instead, you will be responsible for fixed monthly payments lasting 24, 36, 48 or 60 months and will be charged a 14.9 percent interest rate on the loan.

Restrictions: CareCredit can only be used at participating health-care or veterinary clinics. The availability of specific payment and promotional options varies by provider.

**

Credit Issuer: Citi Health card

Type of loan: Credit card

Treatment covered:  Dental, hearing, vision, veterinary care, mobility care and hair restoration

Interest rate: 29.98 percent for a revolving line of credit; 15.9 percent for budget payment plans.

Terms: There are two types of promotional plans available. If you choose a deferred interest plan, you can defer paying interest for up to 6, 12, 18 or 24 months, depending on the treatment amount and plan offered by your health-care provider. If you pay the full balance charged to the card by the end of the promotional period, interest charges will be waived on your account. However, if you don't repay the full amount by the time the promotion expires, a 29.98 percent interest rate will be charged to your card's full balance, beginning with the first purchase.  

If you opt for a budget payment plan instead, you will be responsible for equal monthly payments lasting 24, 36 or 48 months and will be charged a 15.9 percent interest rate on the loan.

Restrictions: The Citi Health card can only be used at participating health-care or veterinary clinics. The availability of specific payment and promotional options varies by provider.

**

Credit Issuer: Wells Fargo Health Advantage card

Type of loan: Credit card

Treatment covered: Dental, hearing, vision and veterinary care

Interest rate: 9.99 percent for a revolving line of credit; 9.99 percent for reduced APR plans.

Terms: There are three types of promotional financing plans available. If you choose a deferred-interest plan, you can defer paying interest for an extended period, depending on the plan offered by your health-care provider. If you pay the full balance charged to the card by the end of the promotional period, interest charges will be waived on your account. However, if you don't repay the full amount by the time the promotion expires, a 9.99 percent interest rate will be charged to your card's full balance, beginning with the first purchase.  

If you opt for a reduced APR plan instead, you will be charged a 9.99 percent APR on any balance that you carry over from month to month.

Some health-care providers may also offer a fixed payment plan with a 0 percent APR that lasts between two and three years. If you opt for this plan, you will be expected to repay your balance in equal monthly installments. As long as you pay your bills on time, you won't pay any interest.

Restrictions: The Wells Fargo Health Advantage card can only be used at participating health-care or veterinary clinics. The availability of specific payment and promotional options varies by provider.

**

Credit Issuer: Access One MedCard

Type of loan: Credit card

Treatment covered: Hospital services, primary care and some specialty services, including women's health care, rehabilitative care and psychiatric services

Interest rate: 9.25 percent

Terms: A 12-month, interest-free option is available for cardholders who agree to repay the loan in 12 equal installments.

Restrictions: The MedCard Access One card can only be used at participating hospitals and health-care clinics in North Carolina, Tennessee, South Carolina, Georgia and Florida

**

Credit Issuer: American Healthcare Lending

Type of loan: Installment loan

Treatment covered: Hearing, dentistry, mental health care, cosmetic procedures, weight loss and hair restoration, fertility treatments and veterinary care.

Interest rate: 8.99 percent for excellent credit; 17.99 percent and up for those with less-than-perfect credit

Terms: There are two types of promotional financing plans available. There is an interest-free option for 6, 12, 18 or 24 months. If you fail to repay the full balance by the time the promotional period expires, interest will be applied to the remaining balance on the loan. There is also a no-interest option that lasts 3, 6 or 12 months and is approved using information from your checking account history in addition to your traditional credit history.

The installment term on the loan offered by American Healthcare Lending may last between 12 and 72 months, depending on the plan offered by your provider.

Restrictions: A loan from American Healthcare Lending can only be used at participating health-care or veterinary clinics. The availability of specific payment and promotional options varies by provider.

***

Credit Issuer (type): Springstone Patient Financing

Type of loan: Personal loan

Treatment covered: Dentistry, Fertility (IVF only)

Interest rate: 22.98 percent for deferred interest loans; 3.99 percent to 17.99 percent for extended payment plans.

Terms: There are two types of promotional plans available. If you choose a deferred-interest plan, you can defer paying interest for 6, 12, 18 or 24 months, depending on the plan offered by your healthcare provider.

If you pay off the loan completely by the end of the promotional period, interest charges will be waived on your account. However, if you don't repay the full amount by the time the promotion expires, a 22.98 percent interest rate will be charged to the total amount borrowed for the procedure.

If you opt for an extended payment plan instead, you will be responsible for fixed monthly payments lasting between 24 and 84 months and will be charged interest on the loan. Interest rates for extended payment plans vary, depending on your credit history. Currently, Springstone offers a wide range of possible APRs, starting at 3.99 percent and topping out at 17.99 percent.

Restrictions: A loan from Springstone Patient Financing can only be used at participating healthcare clinics. The availability of specific payment and promotional options varies by provider. 

Updated: May 19, 2013


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