An Untapped Loan Market for Credit Unions: Healthcare Expenses

by: Marvin M. Garland, Chief Operating Officer, LEVERAGE

The U.S. government predicts that consumer out-of-pocket healthcare expenses will reach an average of $3,301 a year for each household by 2014, up from $2,500 in 2009. In 2011, this market was estimated to be slightly more than $300 billion, with forecasts predicting growth of more than 20 percent over the next four years. As more consumers find themselves struggling to pay for growing levels of healthcare-related debt, an increasing rate of individuals is turning to high-interest bank loans or credit cards to pay for healthcare costs.

In a landscape dominated by major players and big banks such as General Electric (GE) and Chase, credit unions have a real opportunity to join a market that could benefit greatly from a credit union presence, presenting an untapped potential for credit unions to do what they do best – make consumer loans. Credit unions can offer great rates on loans, many times better than consumers would find at a bank, as well as low-interest rates on credit cards.

Will credit unions be able to step up and compete in this market? It turns out that it really isn’t a question of competing as much as it is about offering alternatives. In a growing market, filling the gap that consumers face with the rising costs of out-of-pocket healthcare expenses is a matter of creating the right products and having the right delivery channels in place. Here are some things to consider for success:

• Connect with health care providers and offer easy-to-use solutions.
• Establish that your credit union is a local source, and how a partnership with your credit union benefits the local community as a whole.
• When creating solutions, find a way to take the work away from the healthcare office staff. Most are eager to offer financial solutions for patients/customers, but they want limited involvement in the process.
• Create products that appeal to the consumer such as low-interest or no-interest plans. Remember the space you are competing in and how it is typically served.
• Where successful funding of consumer loans dictates, leverage this lending solution by encouraging practitioners to open an account with your credit union to more easily fund the loans.

Credit unions represent a fundamental choice for consumers by offering a significant alternative in this market. Maintaining a holistic approach is essential for credit unions. The key is making consumers aware that credit unions are a viable option for covering these costs and that a credit union is a local, community-focused financial institution that operates to serve its members rather than maximize its profits. This type of financing is as much business account relationships as it is consumer lending. Ultimate success will rely on the coordination between those two departments in your credit union.

Marvin Garland is the Chief Operating Officer for LEVERAGE, the LSCU Service Corporation. LEVERAGE is a business services provider that has a revolutionary ePurchasing platform and a contract management system in Ventelligence, automated compliance execution through ComplyTrac, as well as with many other solutions. Visit myleverage.com to learn more about how credit unions have leverage in the marketplace. You can follow LEVERAGE on Twitter or LinkedIn.