CFPB investigating predatory medical credit cards; products yet to get attention from NV regulators

"Financial firms are partnering with health care players to push products that can drive patients deep into debt," said a CFPB official when the investigation was announced last month. (Photo by Joe Raedle/Getty Images)

Medical credit cards position themselves as alternatives to spread out the cost of out-of-pocket expenses for dental, optometry, and other services that aren’t covered by insurance for patients, but their practices are under investigation by the federal government as predatory, and their use expanded to covering health care that should be billed to insurance.

And as of now, there aren’t specific regulations to protect the Nevadans from medical credit card practices and no way for consumers to file complaints.

“I have found no statutes that reference medical credit cards in the NRS [Nevada Revised Statutes] codes,” and “no mention of this was made in the most recent Legislative Session,” said Mark Garratt, the Nevada Department of Insurance (DOI) chief of product compliance in an email to the Current.

The Consumer Finance Protection Bureau (CFPB), the U.S. Department of Health and Human Services, and the U.S. Department of Treasury announced the investigation in July.

“Financial firms are partnering with health care players to push products that can drive patients deep into debt,” said CFPB Director Rohit Chopra in a statement announcing the investigation. “We are opening a public inquiry to better understand how these practices are affecting patients in our country.”

Medical credit cards are marketed to patients through their medical providers, but are serviced through banks and financial service companies that rely on medical providers to promote the cards to their patients. Providers emphasize that the credit cards reduce the administrative burdens for collecting bills and negotiating with insurance companies, and minimize financial risk, according to a CFPB report.

Health care providers are given sales and marketing training, promotional materials, and in-housing financing software to help expedite the approval process in their offices.

Finance companies also boast to medical providers that they can enable more expensive treatments, as well as additional services that aren’t in the patient’s best interest, according to the report.

Before the popularization of the credit cards, medical providers offered zero-interest installments for people to pay off their bills in chunks for medical services and devices that were typically not covered or only partially covered by insurance, including fertility treatment, auditory devices, and dental care.

Three financial institutions – CareCredit, Wells Fargo and Comenity – dominate the medical credit card industry, and over the last decade their presence in health care offices and the use of medical credit cards have soared. CareCredit grew from 4.4 million cardholders in 2013 to 11.7 million in 2023 and from 177,000 health care providers accepting the cards in 2012 to 250,000 providers in 2023, according to the CFPB report.

The report by CFPB found that CareCredit and Wells Fargo’s Health Advantage Care were pushed on patients to pay for primary and emergency services covered by insurance.

Wells Fargo mostly partners with vision, dental, and hearing in Nevada, according to their website.

But in addition to dental and vision, CareCredit partners with hundreds of providers in Nevada, from private practices in obstetrics and gynecology and behavioral health services to entire health care systems, including UNLV Health, North Vista Hospital in North Las Vegas, and Saint Mary’s Regional Medical Center in Reno.

The medical credit cards are targeted to those who have insurance but have higher deductibles. One report notes that 50% of people with health insurance in the U.S. are enrolled in high deductible plans.

Even as more Americans are getting health insurance, those with employer-sponsored health care have seen their deductibles grow 336% in the last two decades, from $650 in 2002 to $1,945 in 2020, according to the report.

The report notes that as a result, more people will finance their health care through alternatives, including medical credit cards to cover unexpected and routine health care procedures.

Even if the medical care is covered by insurance or there are financial assistance programs that many nonprofit hospitals may have to help with the cost of health care (UNLV Health is a non-profit that uses CareCredit), providers still pitch these medical credit cards to patients.

Providers are disincentivized to explain legally mandated financial assistance programs or zero-interest repayment plans before offering the credit card products to patients, and the result is patients saddled with deferred interest or creditor lawsuits, according to the CFPB research.

Unlike typical credit cards that accrue interest on the unpaid portion of the debt, many medical credit cards retroactively charge interest on the entirety of the debt if it is not paid off at the end of the promotional period, according to the CFPB report.

“I have found no statutes that reference medical credit cards in the NRS codes ... no mention of this was made in the most recent Legislative Session.”

– Mark Garratt, Nevada Department of Insurance

Multiple state agencies including the DOI, Department of Health and Human Services, and the Attorney General’s office said they did not have oversight of predatory medical credit card practices. The Nevada Financial Institutions Division did not respond at the time of publication.

None of the above state agencies could confirm if there were any regulator oversight or efforts to track the promotion of medical credit cards in doctors officers, which health care providers promote them, or how many Nevadans have applied.

U.S. Sens. Elizabeth Warren (D–MA), Edward Markey (D–MA), Christopher Murphy (D–CT), Bernie Sanders (I-VT), and Sherrod Brown (D–OH) signed a letter earlier this year calling for the Biden Administration to start investigating the use of the medical credit cards.

“We are concerned that given the circumstances in which these cards are used, medical credit cards could be predatory to patients seeking medical care and leave patients stuck paying higher costs with “hefty, high-interest debt.” Banks have identified medical credit cards as a lucrative opportunity to profit off of the worsening crisis of patients who are unable to afford their medical care.”

For example, CareCredit’s current interest rate is 29.9%. The finance institution was fined $34.1 million for deceptive practices for credit card enrollment in 2013.

While Nevada’s senators did not sign the letter, Lauren Wodarski, spokesperson for Sen. Catherine Cortez Masto (D-NV), said in an email to the Current that the senator “has led efforts to protect consumers throughout her career, and will continue to support the CFPB’s work to protect patients from predatory practices and inaccurate medical debt credit reporting.”

While the medical credit cards have yet to land on Nevada regulatory radar screens, Nevadans who wish to lodge a complaint or ask for help with predatory cards are encouraged to do so on CFPB’s website or by calling (855) 411-CFPB (2372).

by Camalot Todd, Nevada Current August 21, 2023

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An award-winning, investigative and enterprise reporter, Camalot Todd has over seven years experience in print, digital, radio and TV journalism.