With the Affordable Care Act in limbo, and the details of the Republican repeal-and-replace plans still not fully known, a growing number of Americans are turning to crowdfunding platforms like GoFundMe or YouCaring to raise money to cover their medical bills.
From extraordinary and extremely rare medical cases to more routine fundraisers, Bloomberg reports that crowdfunded campaigns will likely become more popular, reaping significant profits for these online platforms.
We suggest you read the full Bloomberg story, but here are three important takeaways:
1. Growing Rapidly
At GoFundMe, medical bills account for one of the biggest fundraising categories, Bloomberg reports. In fact, campaigns to help with medical cost helped put the service “on the map,” according to CEO Rob Solomon, who calls his service a “digital safety net” for people facing steep medical bills.
While Solomon has noted in LinkedIn posts that the company has helped raise more than $2 billion for campaigns as of Feb 2016, an analysis by NerdWallet found that of those funds, $930 million were for medical-related campaigns.
YouCaring’s recent acquisition of GiveForward has provided the company with a boost in medical campaign support. Prior to joining YouCaring, Bloomberg reports, 70% of GiveForward’s campaigns were related to medical costs.
Other sites like Facebook and Indiegogo have jumped on the medical crowdfunding bandwagon too. Indiegogo’s Generosity platform delves into medical expenses, while Facebook recently began allowing users to raise donations for many personal causes, including medical expenses.
“The growth rate of the industry is showing that this can absolutely be an impactful safety net for a lot of individuals and communities to help each other,” Dan Saper, chief executive officer of YouCaring, tells Bloomberg.
2. Does It Really Work?
Although crowdfunding for medical expenses may help ease the burden of costly care, these campaigns aren’t always successful.
A Nov. 2016 study from NerdWallet found that only 11% of medical campaigns on the GiveForward, Plumfund, FundRazr, and Red Basket platforms were fully funded in 2015.
Another study, from researchers at the University of Washington Bothell found that just 10% of 200 GoFundMe campaigns analyzed failed to reach goal. The study found that the remaining campings received on average 40% of their goal.
The rate of successfulness, analysts tell Bloomberg, often has to do with the types of campaigns being produced.
For instance, a campaign to help a family offset the costs of treatment for a rare type of cancer might draw in more contributions, than one that aims to cover the deductible related to a broken bone.
“The more dramatic the need, the more successful,” Adrienne Gonzalez, creator of GoFraudMe.com, a site that exposes fraudulent campaigns on GoFundMe, tells Bloomberg.
Additionally, Bloomberg notes that many donors tend to have a bias toward campaigns with a clear goal. For example, the Bothell study found that people were more likely to donate to a family with a solvable problem, such as a set number of treatments, rather than one looking for assistance with unspecified bills.
3. Profit Potential
While these campaigns contribute million of dollars to help consumers pay down their medical expenses, the crowdingfunding platforms aren’t leaving empty-handed.
Each company derives some sort of revenue from the campaigns they facilitate, Bloomberg reports.
For instance, GoFundMe takes a 5% just of each donation. Of those funds 2.9% goes to payment processing and $0.30 to a transaction fee.
Likewise, YouCaring charges a 2.9% processing fee and a $0.30 transaction fee, while Indiegogo’s Generosity charges users a 3% payment processing fee, along with the same $0.30 transaction fee, according to Bloomberg.
Facebook seems to take a bigger cut, Bloomberg notes, as personal cause campaigns are subject to a 6.9% fee and $0.30 transaction fee.
While that might not seem like a significant amount, with thousands of campaigns live each day, and more being added, the funds add up.