CLEVELAND — The federal No Surprises Act may help many avoid unexpected medical bills, and now those who still have medical debt on their credit reports may soon get a break.
However, you need to make sure your debt qualifies.
The nation's three largest credit bureaus — Equifax, Experian, and TransUnion — announced they will remove paid medical debts from credit reports beginning July 1. If you had an unpaid medical bill and went to collections but then paid it off, chances are it's still a black mark on your credit report and impacting your credit score.
Your credit score is what helps you qualify for mortgages and loans, and keeping it healthy is important. If you don't have any other black marks on your credit report, removing the medical debt may improve your score up to 100 points according to financial experts.
For those who are currently dealing with unpaid medical bills, you now have one year to negotiate with your insurance company and provider before that medical debt shows up on your credit report. According to the Consumer Financial Protection Bureau, Americans are drowning in an estimated $88 billion in medical debts.
In 2023, if your bill is under $500, Equifax, Experian, and TransUnion will no longer include medical debt in collections on credit reports. It's important to understand that your health insurance may not cover everything, so here are some tips:
- Read the explanation of benefits provided by the company to know what is and isn't covered.
- If you have a large amount of medical debt and don't pay, collections and credit damage may be the least of your worries: You risk getting sued and having your wages garnished. According to ProPublica, a quarter of the nation's largest hospitals filed nearly 39,000 consumer medical debt lawsuits between 2018 and 2020.
- The pandemic could have an impact on a rise in these cases.
How do you avoid the nightmare? Experts advise notifying the provider that you have received a bill, but add that there may be potential mistakes. According to Medical Billing Advocates, up to 80% of medical bills contain errors.
By taking this action, you can put a halt on when the provider will put the bill into default. It doesn't make the matter go away and you still need to pay the bill, but now you have time to negotiate your debt. Perhaps the provider will allow you to start a payment plan or even a lower payment.
You may also file appeals with your insurance company, and if errors are actually found on the bill, you may pay less.
Dealing with medical debt is often an overwhelming task. There are organizations that may be able to help:
- RIP Medical Debt
- HealthWell Foundation
- Patient Advocate Foundation
- Debt consolidation loans (contact your bank)
If you think you're a victim of a "Surprise Medical Bill," you can also file complaint with the Centers for Medicaid and Medicare Services (CMS).
Last month, the Consumer Financial Protection Bureau (CFPB) released a report highlighting the complications of the U.S. medical billing system. Medical bills placed on credit reports can result in reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty securing employment, even when the bill itself is inaccurate or erroneous. The report outlines how these repercussions are higher for people from Black and Hispanic communities, as well as people with low incomes, veterans, and older and young adults of all races and ethnicities.
Bills may be sent to collectors by doctors, hospitals, parent companies, or groups representing a service provider, so there may be multiple charges for the same visit. Other key findings of the report:
- Medical debt affects tens of millions of households: Roughly 20% of U.S. households report that they have medical debt. The CFPB found that medical collections tradelines appear on 43 million credit reports. As of the second quarter of 2021, 58% of bills that are in collections and on people’s credit records are medical bills.
- COVID-19 has made the situation worse: Both uninsured and insured patients incurred substantial costs to cover COVID-related services, including testing and hospitalization. To the extent people deferred routine care during the pandemic, costs and medical debt are expected to increase post-pandemic.
- Medical debt affects households unevenly: Past-due medical debt is more prevalent among Black (28%) and Hispanic (22%) individuals than white (17%) and Asian (10%) individuals.
- Hold credit reporting companies accountable: Federal law requires credit reporting companies to have reasonable procedures in place to assure that medical debt on consumer reports is accurate. Those procedures must include, if necessary, taking action against furnishers who routinely report inaccurate information. If furnishers, of medical debt or otherwise, are contaminating the credit reporting system with inaccurate reports, the CFPB expects the Big Three agencies to cut off their access to the system.
- Work with federal partners to reduce coercive credit reporting: The CFPB is working with the U.S. Department of Health and Human Services to ensure that patients are not coerced into paying bills more than the amounts due. In January, the CFPB issued a compliance bulletin that reminded debt collectors, credit reporting companies, and others that it is illegal to collect or report as owing a debt that is not legally due and owing, including where the billed amount violates the No Surprises Act.
Consumers having an issue resolving a medical debt can file a complaint with CFPB here, or call (855) 411-2372.