Most American banks and credit unions are pretty good at advising people about credit ratings, mortgage rates, credit cards and so on. But what about advising them on health costs?
“That's crazy,” you might say. “Banks don't have anything to do with health costs.”
But hear me out: They do.
For many American families, health costs are the tiger lurking in the closet—commonly the second biggest budget item in a family after the mortgage, or in some cases, even surpassing it.
A whopping 83 percent of Americans believe high costs stand in the way good health care, according to a recent Pew Research Center study. And 66 percent named high health costs as their top issue in the recent midterms, according to a CBS News poll.
Beyond that, a recent study by the JPMorgan Chase Institute—based on banking data—said that in any given year, one in six families (17 percent) makes at least one extraordinary health care payment, defined as at least $400 and 1 percent of annual income, and more than two standard deviations from the family’s monthly health care spending.
In the period 2013-2015, these payments averaged $2,089.
Even in the case of good employer-sponsored health care, health costs can be ruinous. Chronic illness can ravage an individual’s or family's finances over time, and emergency bills could land at any moment due to an unlucky accident.
How do I know this? I’m the founder and CEO of ClearHealthCosts, a New York company bringing transparency to health care by telling people what stuff costs. We do this both on our home site and in partnership with other news organizations. Read about our work here, or watch the recent TED talk I gave that collected more than half a million views in less than a week, and just passed 866,000.
Understand the problem, stand by your customers
The stories we hear would make your hair stand on end. Just a few examples:
- A woman and a man both told us of gall bladder surgery that resulted in $6,000-plus worth of bills—this from people who had good employer sponsored healthcare.
- One woman told us of a case of pink eye that cost her family more than $2,600.
- One woman's child had an illness that resulted in hospitalization. She sobbed when telling us about the resulting bill and payment plan. “I can’t talk to anybody about this,” she said.
Many financial institutions are only dimly aware of how this affects people: a missed or late mortgage or credit card payment, or a hit to somebody's credit rating from health provider’s bill collector. But we hear about it all the time, as our goal is to help people understand the murky, mysterious world of healthcare finance (and help them navigate it, as in the case of this woman, who saved $3,786 using our data).
O.K., I hear you saying. You’re right. Health costs are out of control, but how can banks help?
First and foremost, financial institutions must understand that this is a big problem in people’s lives. If you haven't had financial issues over healthcare, you might overlook this as one of the reasons why a responsible person suddenly turns into a person in collections, with her credit rating shot.
The financial health-physical health connection
It’s also important to know health costs can vary by a lot. Most people don’t know this, and the information can be hard to find. A simple procedure like an MRI could be $475 or $6,221; a simple blood test could be $19 or $522 depending on your insurance and the place where you have it. These pricing variations persist over all the procedures and all the cities we’ve studied.
A lot of people don’t know this. And a lot of people could save a lot of money if they did know this.
Rochelle Nawrocki Gorey, the co-founder and CEO of SpringFour, sees a clear connection between health care costs and financial health.
“It's important for banks and loan servicers to understand that there is a reason why a person is behind on their bills,” says Gorey, whose company connects consumers to the financial health resources they need to manage difficult expenses. (Listen to her interview on the BAI Banking Strategies podcast.)
Adds Gorey: “We are all one day away from an unexpected medical expense or a pre-existing condition, and so we ought to design strategies and offer assistance for when that day comes. Nearly half of Americans are living paycheck to paycheck and can't afford a $400 unexpected expense. That means they’re going to fall behind on their payments if they need to seek medical treatment or pay for a prescription.”
In concrete terms, “Providers can offer consumers high-quality, flexible bill payment and financing options to align with their cash flows,” said Shaheen Hasan, senior manager for programs at the Center for Financial Services Innovation.
“Financial service providers and innovators could design innovative savings products to encourage people to set aside money for emergencies such as medical expenses,” Hasan adds.
“And you are probably already aware of better designing HSA accounts. Financial service providers could potentially directly integrate planning and budgeting tools—to help consumers estimate, and plan and shop for healthcare and manage related costs—with innovative savings, credit, and payment tools.” The result: Customers gain more insight into and control over “when and how to cover large-ticket medical expenses.”
In an age where banks agonize over how to win and keep customers, doesn’t this sound like a winner and a keeper?
Three healthy action steps
What can banks and credit unions do? Here are some options.
1. Help deliver knowledge about how prices vary in health care. Tell someone they can pay $500 instead of $5,000, and they’re your friend for life.
2. Concretely, if you’re a financial institution holding Health Savings Account (HSA) or Health Reimbursement Account (HRA) or Flexible Savings Account (FSA) money, let people understand that they can indeed act like a consumer in health care.
That’s not true in every transaction, or every event—but certainly is with items such as a routine test or prescription. That customer of yours can save money, you keep their HSA funds and everybody’s aligned.
3. Use the knowledge you have to find out what your customers need, and design new solutions based on that knowledge.
Putting it all together: Creative solutions to a crisis
The time to stop and think has gone. People in trouble over health costs are choosing not to buy prescriptions, or skip tests and treatments, because they can’t afford them. Little problems become big problems. People die—as is the case with high-priced insulin, for example.
But maybe they can afford it. And maybe your financial institution can tell them more clearly than their hospital or insurer can. Not sure? Read this NPR story and this Philadelphia Inquirer story.
We are in a national crisis on health costs. Banks and credit unions that grasp this can help their account holders and members with crucial health cost information. In the end, it need not cost financial institutions much at all to help customers with something that costs all too much.
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Jeanne Pinder is the founder of ClearHealthCosts.com, an award-winning startup bringing transparency to the health care marketplace. She was an editor, reporter and human resources executive at The New York Times for close to 25 years, and has also worked at the Des Moines Register, Associated Press and Grinnell Herald-Register.