How BNPL is Improving Access to Healthcare

Updated on May 17, 2023

At a Glance: Previously, healthcare financing relied on in-house payment plans or healthcare loans. In-house payment plans allowed patients to pay for medical expenses in smaller installments without interest, but posed financial risks for medical practices. Healthcare loans had lower interest rates but added to the cost of medical debt and affected credit scores. However, with the emergence of Buy Now, Pay Later (BNPL) financing, healthcare financing is being revolutionized. BNPL offers consumers the ability to make significant purchases and pay later with minimal or no interest. It benefits both patients and medical practices by increasing access to care and eliminating financial risks.

It’s no secret that healthcare in the United States is very expensive. In fact, it’s the most expensive healthcare in the world and, for many, it’s too expensive. A 2021 study found that 18% of Americans haven’t been to a doctor in 5 or more years. The same study also found that 34% of Americans don’t go to the doctor because health insurance coverage and co-pays are too high. 

This is obviously bad for patients. It’s bad for medical practices, too. If patients can’t or won’t go to their doctors, medical practices suffer, too. It’s a lose-lose situation. 

There have been, of course, financing options created to help patients and doctors overcome the burdens created by overly expensive healthcare. Options like in-house payment plans and medical loans have been around for a long time. Each has pros and cons, but neither really addresses the needs of both parties. 

Recent advances in financial technology have, however, bridged a lot of the gap. In this post, we’ll discuss how old medical financing options fall short and how embedded finance options, Buy Now, Pay Later, in particular, are helping patients get treatment and doctors grow their practices!

The Old Ways of Financing Healthcare

Let’s examine how healthcare financing used to operate. Previously, the two primary methods of healthcare financing were through in-house payment plans provided by medical practitioners and hospitals or through obtaining a healthcare loan. We will delve further into these choices, their mechanics, and the types of expenses they typically covered.

Below, we’ll take a closer look at each of these options, how they worked, and what they were typically used to cover. 

In-House Payment Plans

In-house payment plans, also known as internal financing plans, enable patients to break down larger healthcare expenses into smaller installments and are provided by doctors and hospitals.

While in-house plans simplify the payment process for medical practices, they also come with significant financial risks. However, for patients, in-house plans are an advantageous option because they do not involve intermediaries and do not accumulate interest.

In-House Payment Plans Best Use Cases

In-house payment plans are best suited for smaller medical expenses, particularly those under $3,000, which include routine and preventive care as well as minor procedures. This sweet spot reduces the financial burden for patients while keeping risks for medical practices at a minimum.

Healthcare Loans

Another popular medical financing option is third-party medical loans, which, like in-house payment plans, cater to both patient and medical practice needs.

Healthcare loans offer lower interest rates compared to personal loans, which lessens the overall medical debt patients incur in seeking treatment. They also expedite payment for doctors and hospitals, while alleviating the responsibility of managing loans from medical practices, allowing medical professionals to concentrate on providing treatment.

However, healthcare loans do have downsides for patients, as they do accumulate interest, adding to the cost of medical debt. They also impact a patient’s credit score, just like other loan options.

Healthcare Loans Use Cases

Healthcare loans have major advantages, including keeping patients from being sent to collections and ensuring healthcare providers remain financially stable. Nevertheless, due to interest, they are more suitable for specific types of expenses.

Healthcare loans are most appropriate for substantial medical costs, such as expensive procedures. They are also a viable option for unexpected medical debt, particularly in emergency care situations. Patients can also refinance existing medical debt using healthcare loans, potentially at a lower interest rate, thus avoiding collections and protecting their credit scores.

How BNPL is Changing Healthcare Financing

Traditionally, patients’ options for financing their healthcare were restricted to in-house payment plans (if available), medical loans, and several other less consumer-friendly alternatives. However, fintech innovations have brought about a significant change through embedded finance, revolutionizing payment methods and enhancing consumer options.

One of the notable products that emerged from fintech, BaaS, and embedded finance is Buy Now, Pay Later (BNPL), which has made it simpler and more cost-effective for consumers to make significant purchases. In the medical sector, BNPL is likewise aiding patients in accessing healthcare by providing the same benefits.

Buy Now, Pay Later Explained

Before delving into how BNPL is transforming healthcare financing, let’s briefly revisit what Buy Now, Pay Later entails and its mechanics. BNPL is essentially a brief financing alternative that permits consumers to make sizeable purchases today and pay for them at a later date, often with minimal or no interest. Over the last few years, BNPL, also called “point of sale loans” or “point of sale installment loans,” has grown in popularity as it provides both businesses and consumers with greater flexibility. 

How BNPL Works for the Customer

BNPL is a third-party payment plan similar to medical loans or personal loans that has gained immense popularity in retail sales. However, unlike conventional loans, BNPL does not affect patients’ credit scores. Traditional loans typically necessitate a hard credit check, which reduces a borrower’s credit score, regardless of loan approval. Moreover, loan payments and loans are usually reported to credit bureaus, lowering borrowers’ credit scores. BNPL financing, on the other hand, does not require a credit check or reporting to credit bureaus, except in the case of a missed payment.

In addition to not impacting credit scores, BNPL financing usually involves little to no interest. BNPL plans usually last between 4 and 36 months, with shorter-term plans having no interest. Longer-term plans accrue some interest, but generally less than conventional loan options.

How this Helps Medical Practices

In general, any financial product that improves consumers’ (and in this scenario, patients’) purchasing power benefits businesses as well. Unfortunately, healthcare costs in this country are exorbitant to the point that some people opt out of medical care altogether. Emergency and preventative care may be unaffordable for some. However, since BNPL offers almost risk-free flexibility, more patients can access medical care, resulting in more payments collected by medical practitioners.

BNPL removes almost all of the risks for medical practices. In-house payments, in particular, expose medical practices to a lot of risk since the business itself is responsible for financing. If the patient fails to make a payment, the business loses money. With BNPL, payment plans are supported by a third party, which eliminates the medical practice’s risk entirely. The medical practitioner is paid upfront, and the third party handles repayment collection.

To put it simply, BNPL combines the advantages of in-house payments and medical loans while avoiding most of the drawbacks. 

Final Thoughts

The emergence of Buy Now, Pay Later has revolutionized the healthcare financing industry, offering patients an affordable and accessible way to receive medical care. With BNPL, patients can make larger purchases without impacting their credit scores, and medical practices can provide care without taking on significant financial risks. BNPL’s flexibility and low-interest rates make it a viable option for patients who might not have been able to afford medical care otherwise. As the healthcare industry continues to evolve, BNPL is poised to play a crucial role in expanding access to healthcare for all.

Frank Gogol

A seasoned SEO expert, Frank has a long history of working with and for startups. Starting in mid-2018, Frank served as the SEO Strategist for Stilt, a fintech startup that provided fair loans for immigrants in the US and other underserved markets. While with the company, he scaled site traffic from zero to more than 1.5 million unique visits per month, driving the bulk of the company’s lead generation until it was acquired by J.G. Wentworth in December 2022. As employee #5 at Stilt, Frank was witness to, and part of, the successful building and sale of a fintech company, uniquely positioning him to create content for founders about all things startups.