The growth in high-deductible insurance plans, accepted by consumers either by choice or employer requirement, is contributing to more Americans absorbing more out-of-pocket medical costs, according to several national studies, according to the Winston-Salem Journal.
More people without health insurance are seeking medical help in emergency departments, which also is increasing the amounts that hospitals eventually write off as bad debt.
According to the American Hospital Association, bad debt is defined as services for which hospitals anticipate payment from patients who have the financial means, but do not receive it.
Novant’s provision for bad debt was $182.9 million in fiscal 2013, which ended Dec. 31, 2013, compared with $179.5 million in fiscal 2012.
Some health-care systems, such as Novant Health Inc., have responded to the trend by turning to third-party collection vendors that offer interest-free payment plans to qualified healthcare consumers. The systems’ goal is to bolster revenue by lowering the payment default rate rather than by applying a high interest rate.
Most hospitals offer monthly payment plans to consumers, but some last only six months to a year before the bill is turned over to collections.
Novant patients had been charged up to 12 percent on certain payment plans, said Melanie Wilson, a vice president in charge of billing and collections for Novant. The default rate on payments was 31 percent.
In April 2013, following an internal evaluation of its debt collection and payment plan policies, Novant contracted with ClearBalance, a debt-collection agency based in San Diego. ClearBalance’s interest-free payment plans, which last up to five years, initially were offered only for hospital bills.
Wilson said Novant’s previous payment plan vendor “acted like a collections agency rather than exploring options for patients who wanted to pay their bill, but were faced with an initial amount that could be very daunting.”
“We thought that it you can buy a mattress interest free for multiple years, there must be a way to do it for medical billing,” Wilson said. “Our goal was to come up with a more affordable way for patients to make their payment while reducing the default rate.”
Wilson said the policy shift is recognition of the growth in high-deductible insurance plans, in which “consumers gamble that they won’t get sick in exchange for gaining a lower premium cost.”
Wilson said the ClearBalance plans have contributed to the default rate dropping to 9.4 percent, as well as a 6 percent increase in revenue collected compared with 2013.
Payments can be as low as $25 per month. Wilson said the payment amount and plan length depends on the patients’ ability to pay, their expenses and other financial considerations.
“We realize that offering a limited time period for making payments may not help some consumers,” Wilson said. “A $330 a month payment for some people is equal to their rent.”
In December, Novant extended the ClearBalance plans to ambulatory facilities and physician practices, said Kelly Baker, vice president of Novant’s revenue cycle division for ambulatory and physician sectors. At that time, Novant began offering the flexibility of rolling several medical bills into one payment plan.
Baker said Novant patients are notified of the interest-free payment plan options through their bills, through ClearBalance if they fall behind on their payments, and through advocates in physician practices and clinics who act similarly to financial counselors.
Baker and Wilson said that for patients whose medical bills leave them unable to make full payment, they typically are shifted to charitable care. Novant’s policy includes offering free care for uninsured patients with annual incomes up to 300 percent of the federal poverty level – $35,000 for an individual and $71,500 for a family of four.
Baker said the payment plans can be extended beyond five years if the consumer is making a good-faith effort with payments.
A Mercer study released in November found employees in North Carolina are bearing a higher amount of their health-care costs in 2015. The average premium increase of 4.3 percent on health insurance is slightly lower than in 2013 and 2014.
Mercer, a human-resource consulting company in Charlotte, annually tracks health-insurance charges nationwide.
Steve Graybill, a principal in Mercer’s Charlotte office, said employers “have begun to position plans for the future” by offering lower cost consumer-directed health plans, such as a health savings account, that typically carry high deductibles.
Mercer’s N.C. survey found 43 percent of employers said they would offer a consumer-directed health plan as a cost-reduction strategy in 2015. Nationally, employer offering is at 27 percent.
Mercer found 83 percent of employees are enrolled in preferred-provider plans, 15 percent in consumer-directed health plans and 2 percent in HMOs.
Another likely spur for the interest-free loans came in August 2013 when Gov. Pat McCrory signed a bipartisan bill that gave patients more clarity on their medical bills and on hospitals’ debt-collection efforts. House Bill 834 was championed by Roy Cooper, the state’s attorney general.
Hospitals are not allowed to refer patients to collections while their application for charity care is pending. Patients are required to be given 30 days’ notice before their account is sent to collections.
Hospitals no longer are able to force patients or their parents to sell their home to pay medical bills. Hospitals also are required to approve if their third-party collection agency wants to file a lawsuit to collect payment.
In terms of charity care, the law requires hospitals to improve the placement of information criteria on their website and on their campus.
