Rising dental costs build case for 'buy-now-pay-later' companies

The pandemic is driving investor interest in healthcare, with some lenders anticipating rising out-of-pocket dental care costs will create a lucrative financing market, The Wall Street Journal reported Nov. 6.

In 2020, 17.5 percent of Americans reported skipping dental care within the previous 12 months because of the cost, according to the American Dental Association's Health Policy Institute. Additionally, 7.9 percent of respondents skipped medical care because of cost, followed by 6.3 percent for prescriptions and 5.2 percent for mental healthcare.

In general, dental insurance covers far less than traditional medical insurance, with many plans only paying $1,000 or $2,000 of dental work per year, according to the Journal.

"Dental insurance is not true insurance in the sense that it protects you from catastrophic costs," said Marko Vujicic, PhD, chief economist of the ADA's Health Policy Institute. "It's more of a prepaid benefit."

Some organizations are tapping into the market by letting people pay for specific items in installment loans, often approving borrowers who may not qualify for credit cards.

Buy-now-pay-later lender Sunbit said its dental-finance offering added this year is its fastest-growing segment.

Patients often first hear about the financing options at the dentist's office and apply on the spot.

People are less likely to default on healthcare purchases compared to travel or consumer goods, partially because they tend to have established relationships with dentists and physicians, said Brian Shniderman, CEO of buy-now-pay-later lender Opy USA.

Citizens Financial Group partnered with PrimaHealth Credit in July to offer buy-now-pay-later financing for dental work.

Consumer lender Synchrony offers CareCredit, a credit card for healthcare and pet expenses, at nearly 116,000 dental offices. Some dentists prefer patients using CareCredit instead of a monthly payment plan set up directly with the office. Then, if a patient doesn't complete payment, Synchrony is on the hook, though Synchrony said nearly 80 percent of customers pay off balances in full before its interest-free period ends.

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