Grants by SCAN Group and CareOregon to a charity that buys and forgives medical debt will erase $110 million in medical bills for almost 70,000 lower-income people across five states.
The companies' $345,000 in grants are the first funds RIP Medical Debt has received directly from health insurance companies, a spokesperson for RIP Medical Debt wrote in an email.
SCAN Group gave $285,000 to RIP Medical Debt, and CareOregon contributed $60,000, SCAN Group CEO Sachin Jain said. RIP Medical Debt will use the funds purchase and eliminate medical debt owed by 67,000 people across Arizona, California, Nevada, Oregon and Texas, states where SCAN and CareOregon sell insurance.
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The grants come as inflation and interest rates rise and medical debt strains more households, especially those who can least afford it. Nearly 10% of adults carry medical debt worth a collective $195 million, and people of color, those with disabilities and the uninsured are most likely to hold outstanding healthcare bills, according to a report last year from the Kaiser Family Foundation.
"What we are hoping to do is inspire the industry," Jain said. "We're modest-sized companies in a landscape of for-profit giants. We think that there are a number of other entities in healthcare that have the ability to do what we did, which is to purchase medical debt for pennies on the dollar and lower the burden that medical debt is imposing on people in communities all over America."
RIP Medical Debt, based in Long Island City, New York, previously received grants from local governments, hospitals and debt collectors. Employees from Alera Group, a property, casualty and life insurer, also donated $450,000, according to a spokesperson from the charity.
The charity uses the funds to negotiate and buy medical debt for a fraction of its value from health systems and debt collectors. After purchasing the debt, it forgives patients' outstanding bills free of charge. It has forgiven more than $8.5 billion in medical debt for 5.4 million people since its founding in 2014 by former debt collectors.
The charity will notify people whose medical debt it will eliminate in the coming weeks. To qualify, a person must have household income at or below 400% of the federal poverty guideline, which translates to an annual salary of $14,580 for individuals and $30,000 for families. The charity will also erase debt for people whose outstanding medical bills represent at least 5% of their annual household income.
President Joe Biden's administration has looked for ways to relieve the medical debt burden. The administration last year directed the Department of Health and Human Services to look at providers’ billing practices and help veterans get their medical debt forgiven. The three largest credit rating agencies—Experian, Equifax and TransUnion—in April announced they would no longer include medical collections worth $500 or less on consumer credit reports after the Consumer Financial Bureau published a report arguing that because people generally do not voluntarily take on medical debt, it is not a good indicator of whether they will pay other bills.
"One of the biggest challenges that we face from a health equity perspective is economic inequality," Jain said. "Part of the reason we are the first managed-care organizations to do this is because we want the industry to pause and reflect and ask, 'Is this really the healthcare system we want? What is our role in having created this medical debt? How do we help people get out from underneath it?'"
CareOregon and RIP Medical Debt did not immediately respond to interview requests.
In December, SCAN Group and CareOregon announced a plan to combine into a $6.8 billion carrier focused on government-sponsored insurance, named HealthRight Group. Regulators are reviewing the deal, Jain said. The companies' grants to RIP Medical Debt are not related to the pending merger, Jain said.
