Consumers with unpaid medical bills will get new leeway before those bills appear as black marks on their credit history under a new set of credit-reporting standards released this week.
The three major credit-reporting agencies—Equifax, Experian and TransUnion—Monday announced a settlement agreement with New York Attorney General Eric Schneiderman that will provide additional consumer protections around credit reporting.
Although the agreement is wide-reaching and not specific to healthcare, it does address the issue of medical debt. The rules under the newly-launched National Consumer Assistance Plan state that medical debt will not be reported until after a 180-day waiting period so that insurance payments can be applied.
Moreover, the credit-reporting agencies will remove any information about medical debts that have been paid, or will be paid, by insurers.
The Consumer Financial Protection Bureau last year released a study that found that current models of calculating consumer credit scores overstate the effect of medical debt—even when overdue bills are paid in full.
The scrutiny on medical debt is only likely to grow as a study this week from the Kaiser Family Foundation found that only 51% of non-poor, non-elderly households have sufficient liquid financial assets to cover a high deductible. Only 63% could meet a mid-range deductible.
Meanwhile, these plans continue to proliferate, both from employers as well as through state and federal insurance marketplaces.
Schneiderman has been interested in the issue of medical debt for some time. In 2013, for instance, he issued a consumer alert about medical credit cards and loans, which are often used for elective procedures but can carry steep interest rates and hidden fees.
The agreement was reached in New York but is likely to have national implications.
Still, it's unclear how the latest settlement will affect hospital bill collectors, though they are closely watching the issue, said Cindy Sebrell, vice president of public affairs at the Association of Credit and Collection Professionals.
“It's not a big surprise, but the same time there aren't a lot of answers,” she said.
With the proliferation of high-deductible plans, a growing number of hospitals have been offering financial counseling to patients from the time they schedule treatment. They've also been screening patients for their ability to pay and setting them up with financial counselors, when necessary.
The new rules would remove some of the information about an individual's medical debt from his or her credit report, but that step alone wouldn't affect hospital counseling, which incorporates a number of different variables, said Chad Mulvany, director of healthcare finance policy, strategy and development at the Healthcare Financial Management Association.
Moreover, the new rules are in line with the guidelines that the HFMA set two years ago, which do not recommend reporting disputed medical debt to a collection agency as an initial step. “If someone has a dispute about the bill … we believe the health system needs to work that out with the patients before reporting to collection agencies,” Mulvany said.
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