Tech startup meets huge demand for mental health care with BNPL model

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  • Walnut is a buy-it-now, pay-later platform for medical bills.
  • Co-founder and CEO Roshan Patel spoke to Insider about Walnut’s plan to improve medical accessibility.
  • Mental health services proved extremely popular, accounting for more than half of all requests.

The American healthcare system tends to make it difficult for the average American to access anything beyond essential services. The “buy now, pay later” (BNPL) model that has swept the


distribution sector

be an option for a system filled with uneven coverage?

Walnut, co-founded in 2020 by venture capitalist Roshan Patel after a loved one was in debt after being hit by a car, is a company that offers a BNPL option to split payments for procedures and other medical bills over a extended period.

The appeal for customers, Patel told Insider, is that the company charges customers no interest on loans. Instead, Walnut charges medical providers a transaction fee equal to a percentage of the total bill. The company has more than 50 partners using its services.

Behavioral health demand surges after COVID-19

Medical debt is often a way of life for Americans with limited coverage or a desire to receive psychological treatment.

Given the uneven insurance coverage, with Obamacare covers those under 26 under their parents’ plans and Health insurance for retireesas well as low-income Americans, Walnut targets 25- to 60-year-olds, especially those who want to take advantage of “elective” procedures — those not typically covered by basic insurance plans.

“Behavioral health” is by far the most requested of these services for which Walnut lends, with more than half of their requests coming from services aligned with mental health, a fallout from the pandemic which has seen mental illness soar in the face of enormous uncertainty and widespread lockdowns.

“A lot of people, especially during COVID, have suffered from anxiety and


depression

. And a couple hundred dollar therapy session every month is quite expensive for most Americans,” Patel said.

He said the company uses a sophisticated underwriting process to identify creditworthy customers, assess income, cash flow, banking transaction history and


health data

. Patel said people accepted through Walnut would typically be rejected for other loans like credit cards based on traditional credit scores.

Most of Walnut’s 16 employees, Patel said, are engineers working on a machine learning model building these algorithms.

Loan sizes average $1,300 and Patel estimates the company receives thousands of applications a year. Orthodontics, dermatology and fertility are other services typically requested by applicants, with some patients funding $25,000 for a fertility IVF cycle, Patel said.

Can BNPL Healthcare help address the $195 billion medical debt market?

BNPL models have struggled with growth in the past, and experts have argued that while it offers consumers a flexible way to repay, it may also incentivize shoppers to spend more globally, putting pressure on their customers. finance.

Patel said that in addition to interest-free loans, customers who miss a payment are not charged and that Walnut would work with customers who had missed payments by offering restructured plans and temporary breaks.

However, the company will soon begin reporting to credit bureaus, which means customers could see their credit rating affected by defaulting on repayments. But so far, Patel said the company has had good reimbursement rates.

It is also unclear to what extent Walnut will help the most vulnerable people improve access to care.

A study of Kaiser Family Foundation (KFF) found that about 9% of adults, or 23 million Americans, had medical debt over $250, with half of them having debt over $2,000 in a market valued at $195 billion. The services offered by Walnut, however, are mostly voluntary costs than those accrued by disbursements.

While Walnut has yet to find partners in the essential care market, where healthcare demand is more often based on necessity, the company hopes to launch pilot projects in emergency care, where lines may fade for insurance coverage. Patel said Walnut was in negotiations with “a large health system“, which he could not name.

Currently, Walnut operates in a handful of states, primarily Texas and Illinois, with plans to expand nationwide by the end of the year. Patel said he expected to reach profitability within a year or two. He hoped the company wouldn’t need another round of venture capital, having raised $110 million in a Series A funding round last week, almost all of it in the form of debt.

But he accepted the headwinds, including the impending


recession

fears, where the probability of default increasescould force the company to tighten lending standards in the future.

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