CLEVELAND, OH – Medical Mutual of Ohio’s several hundred employer groups of 100 or more employees now have access to an interest-free credit card to pay healthcare services within six months through automated payroll deduction.
“This is not a solution to the rising cost of healthcare, but it does allow people another option to spread payments out,” said Aaron Graham, director of product development.
It also helps network providers get paid faster.
E-Duction, which provides the Clear MasterCard, is rolling out its new financial model to Medical Mutual of Ohio. In lieu of the annual membership fee for employees, employers pay a “modest” per-employee per-month fee. “This is a minimum amount versus the benefit to both employers and employees,” said Paul Chicos, CEO and president of E-Duction.
He stressed that the limited credit line is proportional to employees’ salaries, making the ability to pay healthcare costs prorated, manageable and free of debt incurrence. “This is a cost-sharing and budgeting tool,” he said, which is preferable to a traditional credit card that accrues interest after 30 days.
Carl Doty, principal analyst at Forrester Research, said this financial model will not be widely adopted because of health savings accounts (HSAs).
The average HSA balance has been rising with an aggregate number of approximately 600 million accounts in existence, he said. Employees can save money in their HSAs and roll over funds left over from the previous year. With HSAs’ overdraft protection provision, Doty said that the need for a line of credit is dwindling.
“Employment-based lending has merit. There is still a large percentage of people who could benefit from this solution,” Chicos said, referring to a third of the population that is not eligible for a credit card, the 60 percent of people who are unable to save money and/or the subprime population.
“It makes the subprime population lendable,” he said.
The solution can also differentiate health plans from one another, Chicos said. Medical Mutual of Ohio’s card enables employees to pay for healthcare and education costs. It can also be extended to pay for and manage members’ other out-of-pocket expenses, he said.