The biggest credit bureaus will soon give some Americans a break from medical debt.
CLEVELAND— Federal law without surprises can go a long way in avoiding unexpected medical bills, and now those who still have medical debt on their credit reports may soon be getting a break.
However, you must ensure that your debt qualifies.
The country’s three largest credit bureaus – Equifax, Experian and TransUnion – have announced they will remove paid medical debt from credit reports starting July 1. black mark on your credit file and impacting your credit score.
Your credit score is what helps you qualify for mortgages and loans, and it’s important to keep it healthy. If you don’t have any other black marks on your credit report, removing medical debt can improve your score by up to 100 points according to financial experts.
For those currently struggling with unpaid medical bills, you now have a 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 medical debt estimated at $88 billion.
In 2023, if your bill is less than $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 company’s explanation of benefits to find out what’s covered and what isn’t.
- If you have a large medical debt and don’t pay, collections and credit damage may be the least of your worries: you risk being sued and having your wages garnished. According to ProPublica, a quarter of the nation’s largest hospitals filed nearly 39,000 medical debt lawsuits between 2018 and 2020.
- The pandemic could have an impact on an increase in these cases.
How to avoid the nightmare? Experts advise informing the supplier that you have received an invoice, but add that there may be potential errors. According to Medical Billing Advocates, up to 80% of medical bills contain errors.
By taking this action, you can put a stop to when the supplier puts the invoice in default. That doesn’t make the deal go away and you still have to pay the bill, but now you have time to negotiate your debt. Maybe the provider will let you start a payment plan or even a lower payment.
You can also file appeals with your insurance company, and if errors are indeed found on the invoice, you can pay less.
Dealing with medical debt is often an overwhelming task. There are organizations that can help you:
If you think you have been the victim of a “surprise medical bill”, you can also file a complaint with the Medicaid and Medicare Service Centers (CMS).
Last month, the Consumer Financial Protection Bureau (CFPB) published a report highlighting the complications of the US medical billing system. Medical bills listed on credit reports can lead to reduced access to credit, increased risk of bankruptcy, avoidance of medical care, and difficulty finding employment, even when the bill itself is inaccurate or wrong. The report outlines how these impacts are higher for people from black and Hispanic communities, as well as low-income people, veterans, and older and younger 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 from the report:
- Medical debt affects tens of millions of households: About 20% of US households report having medical debt. The CFPB found that medical collections business lines appear on 43 million credit reports. In the second quarter of 2021, 58% of the bills that are in collections and on people’s credit files are medical bills.
- COVID-19 has made the situation worse: Uninsured and insured patients incurred substantial costs to cover COVID-related services, including testing and hospitalization. To the extent that people have deferred routine care during the pandemic, costs and medical debt are expected to rise post-pandemic.
- Medical debt affects households unequally: Overdue medical debt is more common among blacks (28%) and Hispanics (22%) than among whites (17%) and Asians (10%).
- Holding credit reporting companies accountable: Federal law requires credit reporting companies to have reasonable procedures in place to ensure medical debt on consumer reports is accurate. These procedures should include, if necessary, actions against suppliers who regularly report inaccurate information. If providers, medical debt or otherwise, contaminate 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 works with the US Department of Health and Human Services to ensure that patients are not forced to pay bills more than the amounts owed. In January, the CFPB published a compliance bulletin which reminded debt collectors, credit reporting companies and others that it is illegal to collect or declare as due a debt that is not legally due and payable, including when the amount charged breaks the law without surprises.
Consumers with a problem resolving a medical debt can file a complaint with the CFPB hereor call (855) 411-2372.