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November 10, 2020

How CarePayment Differs From a Deferred Interest Program

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We are often asked, “At what point does interest begin to accrue with a CarePayment plan?”

Patients are relieved when we tell them CarePayment is truly a zero interest program. Meaning, we offer patient financing plans with no interest, EVER. Patients only pay the amount of their medical bill, nothing more.

Zero interest and deferred interest programs are vastly different. In the deferred interest model, there may be a short promotional period of 0.00% APR, but interest kicks in either after the promotional period ends or a consumer is late on a payment. When either of these conditions occurs, an interest rate, typically well above 20 percent, is applied retroactively to the original balance. This means consumers who owe a few dollars after the introductory offer expires or who are one day late on a payment could be charged a high interest rate backdated to the original loan amount. Deferred interest can add hundreds of dollars to a balance, leading to increased loan defaults.

Deferred interest finance products have long been part of other consumer sectors, from electronics and furniture purchases to credit card promotions. In recent years, they have made their way into healthcare. While on paper it may seem like a perfect fit – patients have increasingly high out-of-pocket expenses they need to pay and historically few payment options. Unfortunately, deferred interest programs are generally structured in favor of the businesses, not consumers, and that is particularly concerning in healthcare. A healthcare event, even in the best circumstances, is anxiety producing and the financial experience is anything but transparent and simple. Most patients do not know what their true out of pocket will be until the service is over and their insurance has paid their portion. By that time, the patient may have already agreed to a deferred interest solution with a balance that they are highly unlikely to be able to pay within the 0.00% APR promotional period. And, unlike other industries, they cannot return or sell the product. Deferred interest solutions in healthcare lead to increased defaults, decreased patient satisfaction and can significantly contribute to increased medical debt – the leading cause of bankruptcy, according to recent studies.

But, there is a better idea.

 

Our plan is completely interest-free.

Patient healthcare costs have increased by almost 30 percent since 2015, causing many to delay or forgo critical care.  Those who can’t delay care often struggle to pay their medical bills. In 2016, 68 percent of patients failed to pay their medical balance in full.

A deferred interest plan can appear to be a lifeline for patients who are desperate to pay for surgery or see their physician. However, one in five consumers misses the deadline for promotional interest. Patients, who were already struggling with out-of-pocket medical costs end up paying interest rates as high as 30 percent. Additionally, 82 percent of people do not understand how deferred interest works, according to WalletHub’s recent deferred interest study, and terms can be intentionally confusing to mislead consumers into defaulting so that companies can collect on the higher interest rate.

When providers partner with CarePayment to offer 0.00% APR financing over the lifetime of the loan, they are able to remove a primary obstacle to timely access to care – and do so in a transparent, straightforward, compassionate manner. Additionally, patients who use the CarePayment program become members for life, meaning additional charges may be added at any time at 0.00% APR. No strings attached.

 

Everyone qualifies.

Deferred interest programs often require credit checks which can automatically exclude patients with lower credit scores. Among subprime borrowers who do qualify, roughly 43 percent miss the deadline and are stuck paying deferred interest. Those most in need do not benefit from the promotional zero interest. In fact, they subsidize the program for the companies that offer them.

To fulfill our promise of making medical bills affordable for everyone, our program does not have any barriers. Patients are automatically enrolled when they make their first payment. There are no maximum balances, no application required, and no impact to credit score. Everyone qualifies.

 

Patient satisfaction is much higher.

Deferred interest companies depend on patients to default and pay an excessive interest rate to fund the program. This model grossly affects patient satisfaction.

In fact, 54 percent of people surveyed by WalletHub said they would view a company negatively that offers deferred interest, and 65 percent even think it should be illegal!

With CarePayment as a partner, patient satisfaction and loyalty significantly increases:

  • 89% were more satisfied with their providers after they began offering CarePayment
  • 91% are more likely to recommend medical providers that offer CarePayment
  • 76% say the availability of CarePayment would influence their decision in choosing one provider over another

 

CarePayment is dedicated to making affordable financial options available to patients in a straightforward and trustworthy manner. We help patients get the care they need, when they need it, while protecting the financial health and reputations of provider organizations.

Brian Brown is the Vice President of Sales at CarePayment.