As Americans pay more out-of-pocket medical costs, Charlotte-area hospitals have begun offering multiyear no-interest payment plans to help patients with their bills.
The changes come at a time when health care reform has increased the number of Americans with insurance. But even those with insurance are spending more for their own care thanks to the rise in high-deductible plans. These plans have lower premiums but require consumers to pay more before reimbursement kicks in.
The number of insured workers with deductibles has jumped from 55 percent to 80 percent since 2006, according to the Kaiser Family Foundation. The average annual deductible today is $1,135, compared with $826 in 2009, Kaiser data show.
In reaction to the trend, Novant Health, which operates four hospitals in Mecklenburg County, started offering interest-free payment plans for patients with outstanding bills in 2013. Carolinas HealthCare, which had offered some interest-free plans for at least 10 years, has expanded those options.
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The changes coincide with a nationwide push, from lawmakers and consumers, to make hospital systems less aggressive in debt collection.
Practices such as filing lawsuits and placing liens on real estate have lightened in response to federal and state laws intended to discourage hospitals from engaging in “extraordinary” debt collection steps before making reasonable efforts to determine whether patients are eligible for financial aid, said Melissa Jacoby, a bankruptcy and consumer law professor at UNC Chapel Hill.
The federal Consumer Financial Protection Bureau recently reported that 52 percent of all debt on credit reports is from medical expenses.
While the Affordable Care Act sets a limit on how much anyone buying insurance through the marketplace must pay in deductibles, co-pays and coinsurance, even that amount would strain many budgets. For 2015, it’s $6,600 for an individual plan and $13,200 for a family plan.
“It’s a very common circumstance for people to owe money to their provider whether they’re covered by insurance or not,” Jacoby said.
Despite the federal requirement that most Americans buy insurance, Charlotte hospital officials report they have not seen a drop in the number of uninsured patients they treat. Part of the reason is that North Carolina and South Carolina did not accept federal money to expand Medicaid, the government health program for low-income and disabled residents.
Hospital officials said the first year of the Affordable Care Act showed that a subsidized policy with high out-of-pocket costs isn’t always much better than no insurance – for patients or hospitals. Low-income people often chose the high-deductible plans with the lowest premium, then avoided or delayed care because they couldn’t cover the deductible.
In the past year, Stephen Burr, senior vice president of patient financial services for Carolinas HealthCare, said the system’s financial counselors noticed that more people are “really having trouble paying their bills.”
Charity care for uninsured patients rose from $224 million in 2012 to $324 million in 2013 at Carolinas HealthCare, Burr said. Bad debt – the amount left unpaid by patients who don’t qualify for charity care – rose from $243 million in 2012 to $290 million for 2013.
“Affordable coverage usually comes with high deductibles, and patients are now responsible for more of the costs,” Burr said. “The ones that have that insurance (may not have been) fully aware of just how much they’re on the hook to pay for.”
Default rate drops
In April 2013, Novant began offering multiyear zero-interest payment plans to patients through ClearBalance, a San Diego-based company.
Novant’s previous vendor “acted like a collections agency” and “wasn’t always as friendly to our patients as we would like for them to be,” said Melanie Wilson, a vice president in charge of billing and collections for Winston-Salem-based Novant.
ClearBalance doesn’t use “strong-arm-type tactics” and is “more an extension of us,” Wilson said. “This really wasn’t about increasing revenue or increasing money to our bottom line. It was more about ‘How do we do the right thing for our patients?’ ”
Under its previous debt-collection practice, Novant charged 12 percent interest on payment plans, and patients had a 31 percent default rate, Wilson said.
Since the switch to zero-interest loans, the default rate has dropped to 9.6 percent, and Novant collected 6 percent more from patients on payment plans in 2014 than the year before.
All of Novant’s patient payment plans have been converted to interest-free accounts, Wilson said. If a patient with a new payment plan has old accounts, they can be rolled into one so there is just one payment per month. In December, Novant expanded access to interest-free plans from hospital bills to physician practices.
ClearBalance offers zero-interest plans for all patients, regardless of income or insurance status. Five years is the typical payment schedule, according to Wilson. Payments can be as low as $25 per month, and the terms can extend to 60 months for large balances. The minimum payment for a $1,200 bill is 16 installments of $75.
Novant’s charity care policy is one of the most liberal in the state, offering free care for uninsured patients with annual incomes up to 300 percent of the federal poverty level. That translates to about $35,000 for an individual or $71,500 for a family of four.
One monthly bill
Carolinas HealthCare has been among the most aggressive North Carolina hospital systems when it comes to filing lawsuits and liens against patients with outstanding bills.
But the number of lawsuits decreased by about 50 percent since 2010. The system has also expanded its financial assistance program for low-income and uninsured patients.
Under the current charity care policy, uninsured patients with annual incomes under 200 percent of the federal poverty level – about $23,000 for an individual or $47,700 for a family of four – can qualify for free care. Those with incomes from 200 to 400 percent of the poverty level qualify for discounts.
In addition, hardship settlements are available for patients with balances of more than $5,000 after all insurance payments if that amount is greater than 20 percent of household financial resources.
“We didn’t think anyone should have to exhaust all their resources to pay their health care bill,” Burr said.
Carolinas HealthCare refers any patient who asks for a payment plan to AccessOne MedCard, a Fort Mill, S.C., company founded by Dr. Russell Salton III, a family physician.
Salton said AccessOne enables patients to consolidate bills onto a single medical credit card. They receive one monthly bill, instead of multiple bills from different providers, and future medical bills can be added to the card balance.
Cardholders can choose interest-free plans or interest-bearing plans with lower payments. For example, a $1,200 bill could be paid in 12 installments of $100 interest-free. Or patients could choose to pay as little as $39 per month including interest. A $50,000 bill could be paid in 100 installments of $500 interest-free or as low as $250 per month with interest. Current interest for accounts of less than $10,000 is 9.25 percent. For those greater than $10,000, it’s 5 percent.
Anyone is eligible for an AccessOne card, no matter their income, insurance or credit status, Salton said. The company doesn’t report patients to credit agencies if they stop paying. Such accounts are returned to the hospitals.
With deductibles rising to thousands of dollars, Salton said more patients will likely need payment plans.
“What we’re trying to do is to make that financing socially acceptable and patient-friendly,” he said. “How many families can write a $2,500 or $5,000 check? Very few.”
Staff writer Ann Doss Helms contributed