In-office financing options for patients change July 1: What dentists need to know

June 30, 2020
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Medical and dental providers in California will soon need to adjust how and when they offer financing products, including credit cards with deferred-interest provisions, to in-office patients to cover treatment costs.

As CDA reported in February, Senate Bill 639 (Mitchell, D-Los Angeles), signed into law last October by Gov. Gavin Newsom, is intended to protect consumers from high-interest medical credit cards and the potential debt accumulation that can result when patients sign up for these cards — occasionally while in physical discomfort or under emotional stress.

Lack of consumer understanding of deferred interest

The bill especially takes aim at deferred-interest credit cards, with Sen. Holly Mitchell and the bill’s sponsors citing a lack of consumer understanding of deferred interest and how it can impact the consumer’s finances.

Deferred interest, which is common for most medical credit cards, is often advertised as “zero percent interest,” but it only applies if the consumer pays off the entire charged amount within a specified time period. Any remaining unpaid balance means the consumer is responsible for all interest that would have accrued during the promotional period, often at a high interest rate.

Beginning July 1, providers and employees of providers are prohibited from establishing on behalf of a consumer an open-end credit or loan application that contains a deferred-interest provision. Consumers can continue to access these products; however, they will need to apply directly with the credit company.

Providers can establish credit or loan accounts that do not contain deferred-interest provisions after first providing the patient with a treatment plan that includes all proposed services and the estimated cost of each service.

Patients must be informed of Medi-Cal eligible services

Medi-Cal providers will need to indicate on the patient’s treatment plan if Medi-Cal would cover an alternate, medically necessary service. The treatment plan would also need to indicate that the patient has a right to ask to receive only services covered by Medi-Cal. Supporters of SB 639 hope the new requirements will prevent Medi-Cal-covered patients from signing up unwittingly for high-interest cards to cover Medi-Cal-eligible services.

Additionally, treatment and associated costs cannot be charged to a third-party medical credit card established in the provider’s office more than 30 days before the date of treatment or before the date the provider’s office incurs cost for the treatment — with the exception of orthodontic treatment, such as braces, for which incremental or monthly fees can be charged.

CDA advocated last summer for a number of amendments during the legislative process, including the 30-day grace period, out of concern that proposed restrictions would interrupt the practice of dentistry and prevent patients from receiving services that they couldn’t otherwise pay for.

Dentists must provide patients with updated notice

The bill also makes changes to the notice a dentist must provide before establishing the patient’s credit or loan. The notice can be provided in written or electronic format and contains specific language intended to help the patient understand their financial options and rights — including the right to have their credit card or loan account refunded for the costs of any treatment not received.

(Dentists can use the updated CDA Practice Support resource “Sample Notice: Credit for Dental Services.”)

To further ensure that patients understand what they’re signing up for, the bill prohibits the provider or the provider’s employee from completing any portion of an application for credit or a loan for the patient or establishing an application that is not completely filled out and signed by the patient. That provision also takes effect July 1.

Safeguarding the practice of dentistry and dentist-patient relationship

CDA actively opposed early iterations of the bill due to concerns about limiting the financing options available to patients and restricting where in the office a dentist or their staff could talk to patients about procedure costs. Those types of limitations could interrupt the practice of dentistry and the dentist-patient relationship, especially in light of the number of noncovered but necessary dental care expenses. Most of the amendments that CDA advocated for were ultimately included in the final bill.

CDA resources updated for members

In addition to the “Sample Notice: Credit for Dental Services,” CDA Practice Support also has an updated resource “Offering Commercial Credit to Patients” for dentists’ use. Access the updated resources in the CDA Practice Support resource library.

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