Millions of Americans Are Skipping the Dentist. Lenders See a Financing Niche.

Wall Street Journal

Americans often have to take out personal loans or dig into savings to pay for dental care

Linda Stultz learned last fall that she needed a $1,100 dental crown, but she didn’t have the money.

So Ms. Stultz instead financed the treatment with CareCredit, a credit card offered by Synchrony Financial for healthcare and pet expenses. She first learned about the card from her veterinarian’s office during a visit for her cat, Tinky.

Ms. Stultz, a 72-year-old retired social worker, has dental insurance through Medicare Advantage, but she can’t find a local dentist who accepts it. She has paid off the cost of the crown but used the card again this year for about $700 of fillings. She still has a balance of about $580; if she doesn’t pay it off by February, the bank will start charging about 27% interest.

Millions of Americans, including many who have dental insurance, have to take out personal loans or dig into slim savings to pay for dental care. Many forgo treatment altogether. A previous version of President Biden’s proposed economic package would have given dental benefits to people on Medicare, but that measure has since been dropped from the pared-back version of the legislation.

Covid-19 has turbocharged investors’ interest in medicine broadly, and some lenders are betting that rising out-of-pocket costs for dental work will create a niche but lucrative financing market. CareCredit is a major player in the fractured field, but it still accounts for only about 2% of an estimated $500 billion U.S. market for personal-health and pet-industry expenditures, according to Wolfe Research.

Some companies are tapping into the market with buy-now-pay-later offerings. Those plans let people pay for specific items in installment loans; lenders are often willing to approve borrowers who wouldn’t qualify for credit cards.

One buy-now-pay-later lender, Sunbit, began by partnering with auto-repair shops, giving customers the option to pay for brake repairs or new batteries in
installments. The company says the dental-finance offering it added this year is its fastest-growing segment.

“There is a big difference between if you go to the dentist and need a loan or you go to the jewelry store in the mall and need a loan,” Sunbit Chief Executive Officer Arad Levertov said in an interview. “One is nice to have, and one is something that you need.”

That is another draw for lenders: People are less likely to default on healthcare purchases compared with travel or consumer goods, in part because they tend to have established relationships with their dentists or doctors, said Brian Shniderman, CEO of buy-now-pay-later lender Opy USA Inc. Opy started offering financing at healthcare providers and veterinary offices this year.

In July, Citizens Financial Group Inc. partnered with patient-financing platform PrimaHealth Credit to offer buy-now-pay-later financing for dental work. The bank said it plans to
expand into other healthcare offerings, including eye care.

Many patients first hear about the financing options through their doctor’s or dentist’s office and can apply on the spot.

Synchrony, a regional bank based in Stamford, Conn., says CareCredit enables people to get treatment they might have otherwise skipped. CareCredit is offered at more than
250,000 locations, including nearly 116,000 dental offices.

Some dentists, vets and doctors prefer steering patients to CareCredit over setting up a monthly payment plan directly with the office. That way, if a person stops paying, Synchrony is on the hook.

Most purchases are eligible for six to 24 months of interest-free payments. Synchrony says that nearly 80% of customers pay off their balances in full before the interest-free period ends.

Ms. Stultz, who lives outside Chico, Calif., considered using CareCredit again when her dentist told her this summer that she needed another $1,100 crown. But her card has a credit limit of $1,500, and she had already used it to pay for the $700 in fillings.

She considered selling some household items, but instead opted for a cheaper filling that her dentist says is only a temporary fix. To make it last, she avoids sticky foods and chewing on her left side. Ms. Stultz said she thought CareCredit was a miracle when she first heard about it, but now she is just worried about the bills coming due. She doesn’t believe she will be able to pay off the card by February, when interest from the previous six months will be added to her unpaid balance.

Dental insurance typically covers far less than traditional medical insurance. Many plans will pay for only $1,000 or $2,000 of dental work in a year.

“Dental insurance is not true insurance in the sense that it protects you from catastrophic costs,” said Marko Vujicic, chief economist of the American Dental Association’s Health Policy Institute. “It’s more of a prepaid benefit.”

Rob Carlisle pays a monthly premium of about $15 for dental insurance. But Mr. Carlisle, 28, can’t afford the extensive work he needs: four root canals and three extractions. His insurance covers 60% after a $3,500 deductible, already more than he can afford.

Sometimes the pain in his mouth is so bad that he calls out from his tech-support job.

Last month nearly 1,000 people filed through Pittsburgh’s convention center for Mission of Mercy Pittsburgh, a free, two-day dental clinic. Organizers said that in past years, about a third of attendees had dental insurance.

When Jerry Stephens needed major dental work last year, he and his wife, Carolyn Stephens, pulled $6,000 from their IRA to pay for it.

The couple, who live outside Las Vegas, have dental insurance, but it covered only a small portion. This year, the dentist told Ms. Stephens, 77, that she needed $3,000 of work. For now, it isn’t in the couple’s budget.

“At my age,” she said, “I have to get a good return on investment on this money.”