As a teenager, Sarah was told she needed her wisdom teeth extracted, but she put it off for over a decade because of the out-of-pocket cost. “It was expensive, but it got to the point where I couldn’t avoid it anymore,” she says. “There was always pain there because they grew in sideways. And since they would never fully come up, they were pushing all my teeth together. It got to the point where I started not being able to eat without excruciating pain.” Finally, she went to the dentist, where she learned that the impacted teeth had led to a cyst in her jaw. The teeth were removed, but the resulting $3,800 bill wiped out Sarah’s emergency fund.
To manage her diabetes, Elaine typically sees her doctor every three to four months, but she’s stopped tracking her blood sugar between medical visits. “The test strips are quite expensive, even with the insurance,” she explains. “I’m lucky that I work for a hospital and pharmacy: if you get the medicines at the hospital, they don’t even require a copay... But that does not work for diabetic test strips.” Even with employer-sponsored health insurance, Elaine has to make difficult decisions about what kinds of health care she can afford, with high and personal stakes.
Income Volatility and Health Care Needs
There are plenty of Americans who, like Sarah and Elaine, can’t afford the health care they need. Many of them have health insurance and one or more sources of income, which might fluctuate throughout the year. They make rational but difficult choices about what kinds of care they can access and what kinds they cannot, how they will pay for health care and which members of their household will receive timely medical treatment. According to a recent survey conducted by the Kaiser Family Foundation and the Los Angeles Times, 40% of nonelderly adults with employer-based health insurance had difficulty paying medical bills, and nearly half indicated that they or a family member skipped or postponed health care in the past year because of cost. We can’t assume that health insurance offers security.
There is a strong correlation between our physical, mental, and financial well-being. The recent report from Filene’s Center for Consumer Lives in Transition, Income Volatility and Health Care Needs, underscores this connection – and it couldn’t have come at a better time. While we hope to be turning the page to a new chapter beyond the pandemic, living through a global health and economic crisis has left an indelible mark.
It’s going to take “out of the box” thinking for us to move the needle on financial well-being for all.
This research is immensely important for my credit union peers who are committed to identifying non-traditional ways to provide value to their members and aspire to compel more consumers to consider credit union membership. Financial well-being is already a key element of the credit union value proposition – which means that we also need to pay attention to the obstacles inhibiting members’ physical and mental well-being.
Credit unions should start by ensuring we are all paying a living wage. We should also be at the forefront of supporting members in establishing and sustaining emergency funds, starting with our own employees.
We need to ask ourselves if we’re doing enough to support gig workers, independent contractors, and anyone else who may not be receiving a weekly or bi-weekly paycheck. I would challenge underwriters to find ways to say “yes” to borrowers based on membership tenure and past payment history with the credit union rather than a traditional credit score. As many credit unions already do, we should be designing repayment options for borrowers that accommodate their financial inflow, rather than an arbitrarily chosen “due date.” Think about gig workers, for example: a daily payment option that chips away at debt might be more beneficial to them than one monthly payment that doesn’t align with their income pattern.Rather than struggling to compete with fintech providers, credit unions should find more ways to partner with them. They should leverage fintech expertise with UX design, utility, and nimble frameworks to complement our service mindset and deep understanding of the member population.
Steps for Credit Union Leaders to Support Members
As we consider how to support members who are facing volatile incomes and barriers to health care, I recommend that credit union leaders take the following steps:
- Start with data! Seek to understand your member population at the deepest possible level. Analyze transactional data to understand what members may be financially fragile – especially with regard to health care. Next, analyze money movement and transactional data to better understand the income volatility trends within your member population. What patterns do you see? Identify strategies to support members through income volatility rather than exacerbate it with late fees, overdraft, etc.
- Upskill your staff. Establish a coaching model to support vulnerable members in meaningful ways. Offer the opportunity for members to work with someone who is empathic and knowledgeable about their situation, but even better, who can propose actionable steps the member can take to build and sustain financial well-being.
- Grow your reach. Partner directly with community and health care service providers to support those who are most in need by offering membership at the time of service. This will be most effective when you can offer health care financing or income-smoothing products that support immediate needs.