Despite the unflattering attention the Affordable Care Act’s rollout has received in recent months, the legislation’s goal still remains unchanged – to offer the 47 million non-elderly Americans who were without insurance in 2012 an opportunity to purchase affordable health care. With the ACA’s enrollment website still in disarray and the cost of health care continuing to climb, a growing number of Americans have started using medical credit cards to help pay for treatment or procedures not covered by their insurance.
Just like a Visa or Master Card, medical credit cards allow patients to charge the cost of treatment so they can make manageable payments on the care they receive. On the surface, medical credit cards seem like a wonderful solution for patients needing to pay for dental care or a doctor’s appointment they could otherwise not afford. However, as many unsuspecting users have discovered, medical credit cards can cause serious financial aches and pains.
In December, the Consumer Financial Protection Bureau ordered GE Capital Retail Bank and the company’s CareCredit medical credit card division to refund over $34 million to customers claiming the financial company defrauded them of thousands of dollars with the use of deceptive credit card enrollment techniques that hid long-term interest rates. As a result, over one million customers may have been wrongly charged due to GE Capital’s duplicitous policies.
While GE Capital’s actions don’t represent the entire medical credit card industry, they do highlight a few key questions concerning the use of this type of heath care payment plan.
So you can gain a better understanding of whether a medical credit card is right for you, here are five questions you need to ask before applying for a card.
What is a card’s true cost?
As customers of GE Capital discovered firsthand, medical credit cards can carry hidden fees that can cost consumers thousands of dollars if they don’t know what’s coming. While most medical credits cards offer an interest free period where patients can repay what they owe – a period that can last a few months to one or two years – failing to pay off a balance in full before the introductory period expires can trigger a massive interest payment.
In the case of Care Credit, patients had two years to pay off the full amount they owed during the card’s interest free period. However, if a patient still had a balance remaining after 24 months, they were required to pay back the full interest of the loan at an annual rate of 26.99 percent, a much higher APR than most traditional credit cards carry.
Before you enroll in any medical credit card, you need to understand what interest rate the card carries and how long you have to repay your debt before this rate begins. Keep in mind that even if it’s only used for medical bills, a credit card is not an interest free loan, and you will eventually need to make interest payments should you not pay off your balance in time.
What does your insurance cover?
Knowing what you’re insurance will and won’t cover can make a significant difference when deciding if you need to apply for a medical credit card. For example, unless you carry a separate policy, most general health insurance policies don’t cover the cost of dental care, which means you may want to use a card to pay for scheduling routine cleanings and checkups or for expensive treatments you cannot afford out of pocket. However, you may be surprised to find that your insurance will cover some other procedures if you take the time to look.
While most health plans won’t cover the cost of cosmetic surgery procedures, many polices will cover the cost of reconstructive breast surgery following a mastectomy. Other elective procedures such as gastric bypass band and adjustable silicone “lap bands” have started to appear on many major health insurance plans due to the costs insurers can save long-term by helping patients lose weight now before the develop the health problems associated with obesity. Some health plans will even help pay for a monthly membership at a gym or the cost of a personal trainer, as healthy customers cost far less than one’s out of shape in and need of frequent medical care.
So before you take out a medical credit card to pay for something you believe not covered by your insurance, take the time to do a little research first just to make sure.
Do you really need that procedure?
While there are many necessary medical procedures your insurance may not cover, you need to think long and hard about applying for a medical credit card to undergo unnecessary cosmetic procedures. Your desire to have breast augmentation, the size of your nose reduced, varicose veins covered, hair plugs installed, or whiter teeth should be balanced by whether or not you actually need a procedure and whether you can afford it long-term.
It’s not uncommon for people to lose their better judgment when making decisions that relate to their appearance, so take the time to view the cost of any elective procedure like you would the purchase of a new car or other expensive item prior to extending yourself further into debt with a medical credit card.
Does your physician accept medical credit cards?
While the use of medical credit cards has grown in recent years, many physicians and medical offices still don’t accept them as a valid form of payment. Before you apply for a card, talk with your physician’s office to determine which – if any – types of medical credit cards they accept. Otherwise you may find yourself forced to go to a doctor you don’t know or trust for treatment.
Can you pay off your debt every month?
While some patients have had horrific experiences, many others have had a good experience with their health care card because they able to afford the monthly payment and pay off their balance before any interest was due. If using a medical credit card allows you to pay for a procedure you could otherwise afford if able to save up for it, then applying for a card probably won’t place you into financial uncertainty.
However, if you’re already struggling financially, you should take into consideration what further financial strain could do to your already tight budget.