A bill clarifying medical debt collection practices while still upholding significant patient rights has been signed into law by California Gov. Arnold Schwarzenegger.
The legislation tweaks a law that went into effect in January that provides Californians with sweeping protections on how hospitals and collection agencies could recoup unpaid hospital bills and that created clear rules on overcharges and charity care.
The new law, sponsored by the California Association of Collectors, specifies that hospitals extended payment plans may be declared no longer valid if the patient fails to make all consecutive payments due during a 90-day period. Making even one payment during that period would keep the plan valid.
Defaults on payment plans can be reported to consumer credit reporting agencies and civil court action can be taken, after consumers are reached by phone and in writing and given a chance to pay, according to the new law. Under the big consumer protection law enacted last year, collectors cannot garnish wages or place liens on property to recoup costs from patients eligible for charity care or discounts.
The law clarifies that these extended payment plans are interest-free. If a patient overpays a bill, then the hospital must reimburse the patient fully with 10% interest. The law doesnt set an interest rate that can be charged to patients who fail to make payments. It prohibits insurers and health plans from reducing their claim reimbursements for hospital services because the hospital has waived all or a portion of a patients bill under its charity-care policy.
The bill passed unanimously in both houses of the California Legislature, and was supported by consumer groups and the California Hospital Association.