Medical Bill Collections Laws

When an unexpected trip to the emergency room or extended hospital stay transpires, it is not uncommon for medical bills totaling in the thousands of dollars to result quickly thereafter, even for those individuals with some form of health insurance. In fact, it has become increasingly common for many Americans to simply delay or avoid hospital visits altogether out of fear of the medical debt that may result.

Compounding matters further, it often becomes the case that affordable medical debt ends up in medical collections and causes significant harm to a credit score and profile. A 2014 study found that 52% of all debt found on credit reports related to medical expenses and that over 43 million Americans show unpaid medical debt on a credit report. Meantime, Experian data from 2017 indicated over $127 billion in medical bills were in collections stages. With affordable medical debt remaining a problem and much of that debt reaching collections, it is important to be aware of medical bill collections laws. Let’s take a closer look.

When negotiating directly with a representative of a hospital billing office, make certain to get any payment plans expressed in writing. This way, if you do successfully negotiate an interest-free, low monthly payment arrangement over a period of up to two years, making your required monthly payments will keep your medical debt out of collections.

When a negotiated payment plan is not made explicit in writing, or when a medical debtor is even just a few days late on an agreed upon scheduled payment, it is possible for the debt to be quickly sent to collections.

While the Affordable Care Act does make allowances for patients of non-profit hospitals to apply for financial assistance prior to accounts being sent to collections, most medical providers consider delinquent unpaid balances eligible to be sent to outside collection agencies.

Medical providers won’t typically report delinquent accounts to the three major credit bureaus (Experian, Equifax and TransUnion), but they will often send them to outside collection agencies who will then often report them. Collection accounts harm credit scores whether they are unpaid or paid, though the newer FICO 9 scoring model does treat paid medical collections more favorably than unpaid medical collections.

However, many creditors still use older models when determining creditworthiness, so once medical debt reaches collections, it often creates a stain that remains under federal law for seven years and 180 days from the date the consumer first went delinquent on the original debt, regardless of whether the account has been eventually settled or paid in full.

However, there are some collection agencies that are more flexible and open to deleting negative information from credit reports after a debt has been satisfied. Be certain to get written confirmation of any such eventual deletion prior to making payment to the collection agency.

In 2016, Congress passed the Medical Debt Relief Act as an amendment to the Fair Credit Reporting Act (FCRA) and Fair Debt Collections Practices Act (FDCPA). The Medical Debt Relief Act stipulates that when an unpaid medical bill goes into collections, the collection agency must notify the debtor, who then has 180 days to pay the debt before the collection agency can notify any of the credit bureaus.

Additionally, if the medical collection gets paid in full, any mention of the medical debt must be removed from all credit reports within 45 days of payment. Meantime, under the FDCPA, an individual maintains the right to request written confirmation of a medical debt following any contact from a collection agency. Finally, as always, under the FCRA, consumers retain the right to dispute inaccurate information on credit reports, including medical debt that should have been erased under the Medical Debt Relief Act.

Related:

• Medical Debt
• Help With Medical Bills
• Negotiating Medical Bills