FINANCING: Patients With High Deductibles Often Use the Service
Monday, September 9, 2013
The number of patient loans made by San Diego-based lender ClearBalance Inc. has grown 76 percent from last year as the number high-deductible health insurance plans increases.
With high deductibles come high costs to patients, who can’t always afford to pay $2,000 or even $10,000 to the hospital up front. Patient financing as offered by ClearBalance helps hospitals recoup costs from patients who can’t afford these large hospital bills, preventing default rates which are rampant among high-deductible and self-pay patients.
ClearBalance works with about 450 hospitals around the country, including Sharp HealthCare and Palomar Health locally, and the number is growing.
The number of patients with high-deductible plans is expected to continue rising as state-run health insurance exchanges come online later this year, ClearBalance CEO Mitch Patridge said
“Hospitals aren’t geared toward creating a new payment architecture that will fit this influx of new, high-deductible-carrying patients,” he said.
ClearBalance has serviced more than 3.3 million patient accounts since it was founded in 1992 and has funded more than $850 million in patient loans, about $350 million of which were in the past three years, Patridge said.
Part of a ‘Quiet Revolution’
High-deductible plans — also known as catastrophe plans — are rising in popularity, particularly among employers who want to adhere to new Affordable Care Act guidelines while maintaining their bottom lines. About two-thirds of employers offer such plans, and about a quarter of employees use them, according to a 2013 annual health benefits survey from New York-based consultancy Towers Watson & Co.
Although they offer lower monthly premiums, patients wind up paying thousands of dollars out of pocket. The average high deductible is about $2,000 and can be $10,000 or more. Nevertheless, an August report from the Kaiser Family Foundation indicated that this has helped employers slow the rise in health care premium costs.
“It’s part of what I see as a quiet revolution in health insurance, from more comprehensive to less comprehensive, with higher deductibles,” Drew Altman, CEO of the Kaiser Family Foundation, said in a teleconference.
Hospital Bill Defaults Cut Sharply
The ClearBalance loan program enables patients to instantly qualify for bank financing for hospital bills, helping health care providers improve their net recovery of patient bills.
“Payment plans set up by hospitals typically default out at 45 percent or greater,” Patridge said. “We guarantee results to hospitals of default rates less than 18 percent.”
The company makes the payment process much simpler, said Cynthia Burns, registration manager for Palomar Health. For a $5,000 deductible, for example, ClearBalance can slice that payment immediately into up to 72 months, which breaks down to a more palatable — and interest-free — $70 per month. The hospital pays an undisclosed “servicing fee” to ClearBalance in return for receiving the bulk of the patient’s bill paid immediately.
The general absence of interest and late fees keeps Palomar patients on board with paying back their loans, Burns said.
Burns said that, upon using ClearBalance, patient bill defaults at Palomar dropped from 41 percent to 11 percent among those who used the financing program. Still, only a small slice of patients use the ClearBalance option; in three years Palomar has registered about 6,000 patients with ClearBalance, generating about $11 million in payments. By comparison, Palomar, which recently built a hospital in Escondido that cost nearly $1 billion, sees about 22,000 inpatients per year.
Sharp HealthCare has also been offering ClearBalance to patients since 2010.
“The economy was taking a downturn, and we saw our patients struggling to make ends meet,” said Gerilynn Sevenikar, vice president of patient financial services at Sharp. The system has a 14.9 percent recourse rate among patients using the ClearBalance system, funding about 3,000 patients with about $5.2 million.
“We’re now seeing patients with deductibles up to $10,000, who have no way to pay their Sharp bills without help in financing,” Sevenikar said. “But with ClearBalance, we’re able to make it a win-win — offering a low-cost loan to the patients — and recoup more costs than we might have otherwise.”