Another front in the battle for health insurance reform opened up in Minnesota as Attorney General Lori Swanson filed suit against a chiropractic clinic. The suit alleges the clinic fraudulently enrolled patients for health care credit cards, and then charged them thousands of dollars for care they neither received nor consented to.
The Emergence of Health Care Credit Cards
According to the Office of the Attorney General, health care credit cards are a new device used and aggressively marketed to patients already struggling with the high costs of health care and gaps in existing insurance coverage. Banks often work in concert with these providers, encouraging them to offer these health care credit cards to their patients as a way to make additional revenue for the clinic.
Like many similar practices by traditional credit card companies, these health care cards often strap unknowing and unsophisticated consumers with interest rates of up to 29.99% on their health care bills and late fees of $30 or more for missed payments. In a statement released in connection with the suit Swanson compared these practices to many that caused the current financial crisis. "This is the health care version of subprime predatory mortgage lending," Swanson said.
Oftentimes a lender may try to entice patients into signing up by offering credit cards that have a zero percent interest rate only so long as the balance of the card is paid off during a promotional period, and so long as, during that promotional period, the debtor makes all monthly payments on time. Promotional periods vary, but often run from 12 to 18 months. If the debtor fails to pay the entire balance within the promotional period, or if the debtor misses a monthly payment during that time, then the interest rate will jump to the 29.99% retroactively. That means that even if a debtor has paid $5000 of a $6000 bill they are charged interest on the entire $6000 charge.
According to Swanson, some clinics marketed these cards to patients as a way to pay for future health care services. Some patients complained of being charged for services they had yet to complete, only to have the clinic go out of business. When this happened the consumer remained liable for the charge, despite the fact that no services were ever delivered.
Who Issues These Cards?
Dental clinics, chiropractors, medical clinics, weight loss clinics, and cosmetic and eye surgeons all offer these kinds of cards. Many partner with some of the largest national lenders, including JP Morgan Chase, CitiGroup, and Capital One. Health care companies such as UnitedHealth Group and Humana have also started issuing cards to consumers.
How Can Consumers Protect Themselves?
Zero interest credit card offers are almost always too good to be true, regardless if the offer relates to health care services, or run-of-the-mill retail purchases. The first guiding principle for consumers is to trust their instincts. If the offer is too good to be true, it probably is. However, if a consumer is still considering enrolling in such a program they should make absolutely sure they can pay the entire balance in full during the promotional period. If they cannot, then do not sign up for the card.
This is an area where consumers need to pay particularly close attention. Lenders often rely on clinics to promote health care credit cards for them. That means that the consumer often has little to no direct contact with the lender. Many consumers may not even be aware that their health care credit card is issued by Citigroup, for example. That means that patients are relying on clinics and clinic staff to explain the details of what amounts to a consumer loan.
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