Charlotte, N.C.-area hospitals have started offering multiyear interest-free payment plans to help reduce the number of outstanding bills as consumers pay more out-of-pocket medical costs.

The changes come with a push from federal lawmakers and consumers to make hospital systems less aggressive when collecting debts.

Novant Health, which operates four hospitals in Mecklenburg County, N.C., began offering interest-free payment plans for patients with outstanding bills in 2013. Carolinas HealthCare, which had offered some interest-free plans for at least 10 years, has expanded those options. At Carolinas HealthCare, charity care for uninsured patients rose from $224 million in 2012 to $324 million in 2013.

Insured workers with deductibles have jumped from 55% to 80% since 2006, according to the Kaiser Family Foundation. The average annual deductible today is $1,135, compared with $826 in 2009, Kaiser data show.
While health care reform has increased the number of people with insurance, even those with insurance are spending more for their own care because of a rise in high-deductible plans. These plans have lower premiums but require consumers to pay more before getting reimbursed.

The Consumer Financial Protection Bureau reported last monththat 52% of all debt on credit reports is from medical expenses. An estimated 43 million Americans carry delinquent medical debt on their credit reports.

For 15 million people, medical debt is the only debt they have in collections in their credit report, according to the CFPB.

Charlotte hospital officials report they have not seen a drop in the number of uninsured patients despite the federal requirement that most Americans buy insurance. Part of the reason could be that North Carolina and South Carolina did not accept federal money to expand Medicaid.

Hospital officials said the first year of the Affordable Care Act showed that a subsidized policy with high out-of-pocket costs isn’t always much better than no insurance – for patients or hospitals. Low-income people often chose the high-deductible plans with the lowest premium, then avoided or delayed care because they couldn't cover the deductible.

Stephen Burr, senior vice president of patient financial services for Carolinas HealthCare, said the system's financial counselors in the past year have noticed that more people are having trouble paying their bills. Bad debt – the amount left unpaid by patients who don't qualify for charity care – rose for Carolinas HealthCare from $243 million in 2012 to $290 million for 2013.

All of Novant's patient payment plans have been converted to interest-free accounts, said Melanie Wilson, a vice president in charge of billing and collections for Winston-Salem, N.C.-based Novant. In December, Novant expanded access to interest-free plans from hospital bills to physician practices.

Novant began offering multiyear zero-interest payment plans to patients through ClearBalance, a San Diego-based company, in 2013. Wilson told the Charlotte Observer that Novant's previous vendor "acted like a collections agency" and "wasn’t always as friendly to our patients as we would like for them to be."

ClearBalance doesn't use "strong-arm-type tactics" and is "more an extension of us," she said. "This really wasn't about increasing revenue or increasing money to our bottom line. It was more about 'How do we do the right thing for our patients?' "

Novant charged 12% interest on payment plans and patients had a 31% default rate under its previous collection practice. Since moving to zero-interest loans, the default rate has dropped to 9.6% and Novant collected 6% more from patients on payment plans in 2014 than the year before, Wilson said.

Fair Isaac Corporation (FICO) recently started using a new scoring model that changes the way medical debt is weighted and no longer factors in overdue payments that have since been made. The CFPB expects to propose new rules for collection agencies this year, focusing on accuracy and how consumers are treated.

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