Gerri Detweiler, October 12, 2020
Can a hospital, doctor or other medical provider send a medical bill to collections if you are making payments? Generally the answer is “yes,” but there are some protections under the Affordable Care Act that apply in specific situations. There may be state laws that offer protection as well.
Here we’ll discuss common questions about what happens when medical bills are sent to collections without notice, as well as what you can do to protect yourself.
At DebtCollectionAnswers.com, we’ve received numerous complaints about medical bills being sent to collections while patients are making monthly payments under a payment plan:
I live in Dallas, Texas and I had a radiology bill sent to collections while I was making monthly payments. I told the representative I had other medical bills I was paying on, in the process of moving to another state b/c I was getting married and my fiance (who is in the military) was just relocated- In essence all costing money out of our pockets. The rep stated I had to make a payment plan of 25 dollars or more, and that 10 dollars would not be enough. I told her I could only afford that and would pay more and quicker when other expenses were paid off. She stated they couldn't wait, and would send it to collections. Is that legal?
I have been paying them since May 2014 steadily from my HSA and they turned me over to collections. Can they by law do this?
Another person wrote:
Same thing here, paying $170 a month on time each month. No phone call or warning, just tiny print on the back of the bill that I could not even read: "May not stop further collection if making payments." I called, they said there is nothing they could do. Apparently I was supposed to make a $245 a month payment. I’m not psychic.
I am so upset, my credit was finally good. Very deceptive and unfair, unreal!! They didn't even warn me -- a fat envelope just arrived one day.
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The first question many people have is whether they can make small payments on medical bills to keep them out of collections. Yes, you can if the provider agrees but they are generally not required to agree. (Again, see the information about protections under the ACA below.)
Here’s the good news: If your provider does accept payments they probably won’t charge interest. That means it may be better to work out a payment plan than to put a medical bill on a credit card.
Here’s the bad news:
Small payments won’t make a dent in a large debt. But they will extend the statute of limitations (the time period the provider may have to sue you for the debt). So you may find yourself years later still owing a lot of money you can’t pay back.
In the meantime, and most likely at any time, the provider may decide to send the debt to collections. We’ve heard these complaints time and time again.
This isn’t to say you should never agree to make small payments, but do not assume that doing so is in your best interest. You really need to think through whether that makes sense. Don't do it just because you want to buy some time for dealing with your debt. Keep reading for tips on how to deal with medical bills you cannot afford.
Fact: According to a Consumer Financial Protection Bureau study, the average amount of an unpaid collection account on credit reports is $579. The median amount is $207. This is small compared to other collection accounts on credit reports.
In most cases, a medical provider may send a medical bill to collections at any time. However, many will wait until 90 days or more before sending the account to collections. As we mention below, there are some limited protections if you receive care at a nonprofit hospital covered by the ACA and some state laws prevent some medical bills from quickly going to collections. But generally, if you owe money to a medical provider on a bill that is past due, that balance can be sent to collections.
The Consumer Financial Protection Bureau report points out that state laws or regulations may impact how quickly medical bills may be turned over to collections, stating, “assignment of unpaid medical bills to third-party debt collectors can even occur when the bills are only 60 or even just 30 days past due.”
Collection accounts can harm your credit scores. However, when it comes to your credit reports, the major consumer credit bureaus (Equifax, Experian and TransUnion) will not report a medical bill unless it is at least 180 days old. That generally means you have six months to work out a payment arrangement or try to straighten out problems with insurance before this debt shows up on your credit reports.
If you have been paying on a medical bill for a while and the provider suddenly sends it to a debt collection agency, the debt collector may report it to your credit reports right away-- as long as it’s more than six months since the date of service.
Collection accounts may be reported on consumer credit reports for 7 years plus 180 days from the date of the original delinquency (when you first fell behind). However if the bill is later paid by insurance, you can get that medical debt removed from your credit report.
Collection accounts generally drop credit scores by anywhere from 20-70 points or more. However, newer credit scoring models ignore collections where the balance is zero (which can help if you later settle or pay off the debt) and some scoring models will give less weight to medical bills. But be careful: it is a misconception that medical collections automatically won’t impact your credit scores.
The Affordable Care Act (ACA or “Obamacare,”) includes some protections designed to help protect patients who get help at non-profit hospitals. These protections do not protect consumers who are treated at for-profit hospitals or by private medical providers.
Generally these hospitals must make a written Financial Assistance Policy (FAP) available to patients that specifies the criteria for getting discounted, free care, or other level of assistance available.
Section 501(r)(6) requires a hospital organization to make reasonable efforts to determine whether an individual is eligible for assistance under the hospital organization’s financial assistance policy (FAP) before engaging in extraordinary collection actions (ECAs) against that individual. You can read about actions that may be prohibited here. Debt collectors who purchase debts from covered hospitals must agree to certain protections as well.
Again, this applies to nonprofit hospitals but not to all providers. But it will provide some patients with some protections against unfair collection practices.
Keep in mind that at the time of this writing the Trump Administration has filed a legal challenge to the ACA. If successful, these protections against certain unfair medical billing practices are likely to end.
Some state legislatures have passed laws that help protect consumers against unfair medical billing practices. For example:
These are just a few examples. We suggest you contact your state attorney general’s office, state insurance department and/or your state consumer protection office to find out what laws apply in your state. A consumer attorney may also be able to help you understand which laws may help in your situation.
When you are first contacted by a third party collection agency you have certain rights. (This is true whether it’s for a medical bill or another type of bill.) If the first contact from a debt collector is by letter, the Fair Debt Collection Practices Act (FDCPA) requires that debt collection notice include the following information:
If the debt collector contacts you by phone initially it should send you written notice within 5 days of that call. You still have the right to dispute the debt as listed above.
Keep good records of any conversation or correspondence with debt collectors. Take notes and keep copies! You can download our debt collection contact worksheet here.
However, with medical debt there may be some additional approaches to consider. (Note we say additional - if you are contacted by a collection agency you can still exercise your right to dispute the debt as mentioned above. Take advantage of that opportunity to protect your rights if you have any reason to dispute that debt.)
You may also want to take additional steps:
If your insurance pays the medical bill after it was turned over to collections, you can get it removed from your credit reports.
It varies. As a general rule, the older a debt is when it is placed for collection, the less the debt collector (or debt buyer) paid for it. Some old delinquent debts are bought for pennies on the dollar, and a debt collector may be willing to accept a small payment to resolve the debt. (Read the warning below before you settle an old debt!)
When a debt is first placed for collection it may be assigned to a collection agency that hasn’t purchased the debt; it has just been hired to collect. This is often referred to as a “contingency collection agency.” According to the CFPB, commissions for collecting these debts usually range from 10 - 40% of the amount collected, depending on the type and age of the debt. The collector may be limited by the policies of the medical provider in terms of how low it can go in these negotiations. (In other words, it may not be able to settle the debt for less than a specific amount.)
As the debt becomes older and remains unpaid, it may be sold to another collector and the price likely goes down significantly at that point. That’s also when you may be able to settle the debt for much less than the full balance.
Warning! It is very important that you investigate the statute of limitations before you make a payment or agree to make a payment on an old debt. If you make any payment (or in some states, just agree to make a payment), you may “revive” the statutes of limitations, or basically start the clock all over again. (Debt past the statute of limitations is known as “time-barred” debt.) This gives the collector more time to sue you for the debt. Read more about the statutes of limitations here.
If you don’t have the money you pay a medical bill, the provider or debt collector may encourage you to put the bill on a credit card. Think carefully before you do this:
On the other hand, using a credit card may help you avoid having the debt turned over to collections, or worse, being sued for the debt.
Before you put medical debt on a credit card or take out a personal loan, it’s not a bad idea to get a free consultation with a reputable credit counseling agency.
If you are served with a complaint or summons for a lawsuit over a medical bill do not ignore it! You will likely lose the lawsuit, the creditor or collector will get a judgment against you, and then may be able to garnish your wages, place a lien against property, or seize your bank account to pay off the debt (depending on state law).
There are also disturbing reports of people being jailed in conjunction with medical debt. And parents have been jailed over their children’s medical debt.
A free consultation with a bankruptcy attorney can help you understand what can happen to you if you don’t pay the debt.