Cashing In Q&A columns

Cap One pulling out of health care financing

Capital One is pulling out of the health care financing market — closing the door on a financing option for medical services offered at nearly 30,000 health care providers nationwide.

Capital One exits health care financing

The card issuer had built a network of 30,000 health care providers that offered its medical care financing options, but is shutting it down. Click image or here to see a full-size copy of the letter it sent to its network.

Effective April 10, 2009, Cap One will no longer accept new installment loan applications. Nor will it modify existing loans. Spokeswoman Pam Girardo confirmed in an e-mail: “The decision was made based on a variety of factors, including the impact of the current credit and economic environment and the business’s fit with Capital One’s long-term strategic focus.”

Cap One’s primary focus is credit card lending. The company’s withdrawal after eight years in the health care market comes at a time of rising credit card defaults amid record job losses and a recession. Analysts from Moody’s Investors Service warned that Cap One may be among the Big Six credit card issuers facing increased stresses in 2009.

Eight years in health financing
In 2001, Cap One acquired AmeriFee, a company that had been financing orthodontic treatments since 1993. It later expanded to financing dental, vision, cosmetic and fertility treatment. On its website, the Cap One health care finance division billed itself as the “leading provider of financing for elective medical and dental procedures.”

Doctors referred patients to Cap One through brochures, via phone or the Web. After providing information for a credit check, including their incomes, addresses and types of medical procedures, patients could get approval within 10 minutes from the lender. Depending on the borrower’s creditworthiness, loans of $300 up to $40,000 were available at fixed interest rates ranging from 0 percent to 25.99 percent. Repayment terms were three months to 84 months. The fixed rate installment loans were considered a better alternative for patients than credit cards because they didn’t carry some of the “gotcha” fees and interest hikes associated with cards.

Capital One sent letters out last week informing medical providers of the decision, which had some doctors’ offices scrambling to sign up for competing health financing programs offered by Chase and GE Money. (See: Compare health care credit options

According to the letter, medical providers must destroy all brochures and promotional materials and remove website links to the Cap One program by April 10. Existing borrowers will not be affected. “We will continue to work with (and service the loans of) our current customers,” Girardo wrote.

Health care and credit
Financing medical procedures with credit cards and installment loans has been available for nearly 30 years but primarily for elective procedures such as cosmetic surgery. In recent years, however, as health care insurance policies have become more costly and less available,  more people have turned to credit cards and installment loans to cover medical expenses.

Consumer credit counselors have warned borrowers to be leery of putting medical expenses on plastic or making important financial decisions at times when they may be emotionally distraught over medical emergencies. Medical debt is a leading cause of many personal bankruptcies

Heath industry analysts have said the combination of rising health care costs and credit crunch will force more families into bankruptcy and make others forgo much-needed medical care because they can’t afford to pay for it.

See related: Credit squeeze limiting health care financing options, Special report: Do credit cards offer health care Rx?, 15 tips for paying high medical bills, Compare health care credit options, poll results: credit and health care costs, ‘MedFICO’ score: Good medicine or bad?No credit card, no medical service?, Blog: Americans worried about health careBankruptcies near record levels as economy sours, Study: 79 million struggling to pay medical bills and debt   

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