Minn. AG sues Allina over interest on medical debt

Allina Hospitals and Clinics, based in Minneapolis.
MPR Photo/Greta Cunningham

(AP) - The Minnesota attorney general sued Allina Health System on Thursday, alleging that it charged illegally high interest rates of up to 18 percent on medical debts.

Attorney General Lori Swanson said in a prepared statement that state usury laws cap interest rates on such debts at 8 percent.

David Kanihan, a spokesman for Minneapolis-based Allina, said he was not aware of the filing and couldn't immediately comment. The lawsuit was filed Thursday in Hennepin County District Court.

Swanson alleged that Allina typically presented patients with medical debts three options, including paying quickly or spreading payments over time through Allina's MedCredit subsidiary.

She claims MedCredit charged interest of 18 percent on debts up to $4,999 and 12 percent on debts from $5,000 up to $9,999.

The lawsuit also alleges that, in some cases, Allina didn't fully disclose the terms of MedCredit financing to patients.

"The high cost of health care is one of the biggest financial obstacles faced by many Minnesota families," Swanson said. "Allina has dug a deeper financial hole for patients facing tough economic times by charging usurious interest rates."

The lawsuit seeks to stop Allina from violating the usury laws and to obtain refunds for patients who were charged the illegally high interest rates.

Swanson's spokesman, Ben Wogsland, said the state law permits higher interest rates to be charged on credits cards, mortgages and other debts.

(Copyright 2009 by The Associated Press. All Rights Reserved.)