If you think you are immune to damage from a collections account on your credit report because you are paying your bills on time, think again. Medical bills you don’t know about could affect your creditworthiness – and the odds are not in your favor.
In fact, the Consumer Financial Protection Bureau reports that approximately 31.6% of adults in the United States have collection accounts on their credit reports. That’s almost every third American! Medical bills make up over half of all recoveries with an identifiable creditor. Chances are you have a medical bill in collections too.
Often times, medical bills are collected because you didn’t even realize you owed something. Here are four common myths about medical bills that can cost you dearly and the truths you need to be more proactive in managing your loan and medical expenses.
In this piece
Media debt and your insurance
Medical bills and collections
Medical Collection Accounts
Tips on handling medical bills
Medical bills and emergencies
Your insurance doesn’t cover everything
It is the consumer’s duty to know what he is responsible for making the payment. Many people feel that their insurance covers all medical expenses, so they don’t owe anything. This is not always the case due to the billing of a visit or procedure with the insurance company. It is always best to be prepared for the worst to prevent anything from being sent to collections.
Insurance companies usually send a declaration of performance (EOB) before you receive an invoice from the provider. Read these important documents carefully to make sure you understand your estimated expenses. If you have any questions about why something was not insured, contact the provider and your insurance company.
Your medical bills can be sent to collection agencies even if you pay
Making payments on a medical bill doesn’t necessarily stop you from collecting. If you’re making small payments or a few days late in making your payment due to a payment arrangement, you may find that the provider has passed the invoice to debt collection agencies.
Protection under the Affordable Care Act gives patients in nonprofit hospitals time to apply for financial assistance before “exceptional collection measures” are taken. But in most cases, any unpaid credit is fair game.
To prevent medical bills from being collected during payments, make a payment agreement with the provider and have them submitted in writing. If you make an agreement to pay off a debt in six months and the provider agrees, they shouldn’t send you for collection as long as you make the payments as agreed.
Medical collections accounts are treated differently
This is good news for you. Medical bills are treated differently than other bills sent to debt collection agencies – at least for your credit report.
- Medical debt is given less weight: Newer scoring models like FICO 9 and VantageScore 4.0 weight medical collections less than other types of collections, so they don’t have as much impact on scoring. However, not all creditors use these new scoring models, so medical collections could still affect your ability to obtain credit in the future.
- Medical debts are given a grace period: The three credit bureaus will now wait 180 days before listing medical debts on your credit reports. This grace period gives you time to determine payment options before the debt affects your creditworthiness.
- Medical debts are removed after payment: While most recoveries will stay on your credit report for seven years, medical debts will be removed as soon as they are paid or are covered by insurance. Unpaid medical debt collection will remain on your credit report for seven years from the original default in payment.
Tips on handling medical bills
Every time a debt collection agency contacts you, you have the right to a written confirmation of the claim and the right to contest it. That is your right under the Federal Law on Fair Collection Practices. Those who know their rights are better able to stand up for them.
Under the Federal Fair Credit Reporting Act, you also have the right to challenge inaccurate information in your credit reports. However, you need to know how to properly challenge an article on your credit report to get results.
Some best practices to consider when dealing with medical debt include:
- Never assume that you won’t owe anything. Check with your provider for details of the cost and contact your insurance company and provider even if you don’t receive an invoice.
- Always ask for proof of what you owe. If a healthcare provider or their clearing house sends you a bill, it is likely not to include a detailed breakdown of all fees. However, you have the right to receive this information. Request it in writing, then review all fees to make sure they reflect the services you have received.
- Compare invoices to insurance EOBs. Your insurance declaration on the benefits breaks down each fee. Typically, an EOB should tell you how much the provider charged, how much the insurance refused, how much the insurance paid, and how much you owe. Make sure that what you are billed does not exceed the debt insurance stated.
- Make payment arrangements as soon as possible. It’s never too early to speak to your provider’s billing department. Even if you’re not sure how much you owe, ask about payment methods. Many providers have processes in place to create payment plans or to discount parts of your bill if you pay in advance.
- Ask to make monthly payments for medical bills. You may be able to make monthly payments, but you will need documented evidence that the vendor or collector has agreed to do so. That way, if they report a negative item on your credit report, you can appeal it to show that they agreed to the payments you made.
Handling medical bills in emergencies
The only certainties in life are death and taxes – and the COVID-19 pandemic has shown us that not even taxes are safe. In an emergency, rules and regulations relating to medical bills can change. Government intervention and hospital policies make it easier for many people to get much-needed medical care during this time if they have COVID-19.
Providing medical bills can seem daunting at a time when your personal finances could also be weighed down by lost income or other factors. But even during a crisis, you shouldn’t overlook this aspect of your healthcare. Instead, discuss the options with your provider as early as possible and let them know if you think you won’t be able to pay. By proactively reporting in, medical providers can step in early to make it easier for you to access any help that may be available.
Anytime you are facing financial pressure due to medical bills, you can consider a personal loan. Personal loans let you spread large expenses out over time, and they can be a great option when you can’t get a medical collector to agree to a payment plan.
Medical Debt and Your Credit Score
If you are concerned about how your medical debt could affect your credit score, you can usually check your three credit reports once a year for free. However, you can currently check the COVID-19 shelters weekly until the end of April 2022.
If you want to check your credit history more regularly, Credit.com’s free credit report card provides an easy-to-understand breakdown of the information on your credit report using letter grades. It also includes a free credit score that is updated every 14 days.
What You Should Know About Medical Bills Sent to Collection Agencies first appeared on Credit.com.