Point-of-sale lenders aim to fill Obamacare's coverage gaps

The recent Supreme Court decision to uphold the Affordable Care Act allowed payment companies and financial institutions to avoid the chaos that some processors feared — but the status quo still leaves consumers increasingly responsible for health care costs and presents an opportunity for financial firms to offer point-of-care financing.

"The government insurance programs don't cover much," said Ryan Heroy, chief operating officer for BDG Dental Services in Las Vegas. "Health insurance in general doesn't cover as much for dental as it does other health care categories. If anything, dental expenses may be a bit better because there's more of an understanding of the procedure and how much it costs than there is for other medical care."

The recent U.S. Supreme Court ruling on the ACA was quickly accompanied by a push from the Biden administration to expand ACA tax credits, lower Medicare age requirements and offer an option for public health insurance. Any change to the ACA, also known as Obamacare, would alter the relationship between patients, providers and insurance companies, and would require payment systems to make changes to adjust to changing economic conditions and compliance requirements.

It's unlikely that any change to expand the ACA, even if it did pass a divided Congress, would eliminate out-of-pocket expenses entirely. For that reason, the point-of-care financing options that were introduced during the pandemic will likely maintain demand as an alternative to credit cards, cash, checks or a payment plan that the provider negotiates directly with the patient.

In specific health care categories, such as dental services, the ACA provides some coverage but does not cover a large portion of expenses, creating a need for financing even with the ACA intact, Heroy said.

BDG uses point-of-care financing from Sunbit, a Los Angeles-based lender that last week launched a product tailored for the dental industry. Sunbit uses its internally developed analytic engine to power a 30-second application process that approves about 90% of applications.

"In health care in general, there's an out-of-pocket expense issue that continues to be a problem," said Arad Levertov, CEO and founder of Sunbit.

BDG serves a demographic that includes a large portion of people with lower incomes, many of whom did not visit the dentist during the pandemic for economic reasons or out of fear of being in a medical office.

Any treatment that costs beyond $2,000 after the insurance contribution typically requires financing, Heroy said, adding other options to finance payments would not have the same approval rate as the buy now/pay later model.

"We're now getting a lot of people coming in that weren't taking care of their teeth over the past year," Heroy said. "Having a financing option will hopefully help us serve more of them."

The Supreme Court's ruling in Huntington v. Texas followed a Republican-led challenge to a part of the ACA's individual mandate. At the time of the case, several payment executives said striking down the ACA would create vast uncertainty for transaction processing since millions of people would lose health coverage and the source of much of the funds for medical transactions. Much of the health care payments technology developed during the past decade is designed to accommodate the ACA, with a focus on helping providers manage the increase in consumer responsibility for health care expenses.

"The ACA is a big impetus for our business," said Hans Zandhuis, head of Ally Lending. "Consumers are taking on more responsibility for health care payments, and that trend isn't going away."

The pandemic, and the economic downturn that followed, put added stress on how health care providers administer care, bill patients and collect fees. This can create additional confusion and a state of flux for consumers, according to Zandhuis.

Ally offers financing for health care expenses, a product similar to the buy now/pay later options that are proliferating across general retail, but more tailored for health care bills that are larger than the consumer may be expecting.

Consumers are presented with terms and options at the point of care, with installments spread up to 60 months for some procedures. Ally's underwriting produced the options and terms for the patients. There's also a mix of terms in some cases, such as no interest if paid within a shorter period of time.

"If you look at our system, or if you look at the health care payment systems in Europe, or even in socialist countries, you can have higher out of pocket or major consumer needs, whether that's for an elective or nonelective procedure," Zandhuis said, adding consumes are often told braces or a surgery is going to cost $5,000 after insurance, leaving options such as checks or credit cards. "But not everyone is able to do that, so an installment is an option."

Ideal Image, for example, teams with Ally to use a lending portal that helps consumers find financing options starting with 0% interest plans over 12 to 48 months. "Our consultants work with the client to find the best solution so they don't have to figure anything out on their own," said David Prokupek, CEO of Ideal Image, a wellness company that offers medical treatments for skin and hair that most public and private insurance plans don't cover.

Despite the insurance coverage gaps, the U.S. spends a considerable amount on health care, which takes up about 17% of GDP, according to the Brookings Institution. That's more than most developed nations, it noted.

About a third of Americans have medical debt and 28% have more than $10,000, according to a Salary Finance survey of 2,700 adults working at companies with more than 500 employees. Salary Finance also found 54% had defaulted on those bills. Out-of-pocket health care costs "dwarf" the liquid resources of many U.S. households, resulting in "negative health shock" leading to loss of income, Brookings says.

Americans are also paying higher deductibles for traditional plans. 85% of employer health plans have a deductible, up from 59% in 2008, according to the Kaiser Family Foundation. The average deductible for a single person increased from $533 in 2009 to $1,350 in 2018, it said.

"There is no clear regulatory or legislative path that solves the larger issues," said Lil Roberts, CEO and Founder of Xendoo, a Fort Lauderdale, Florida, small-business technology company that advises businesses on how to manage documents for government lending programs, among other services.