Collection on Medical Bills

Incurring and paying your medical bills is a major consumer issue, whether you have insurance or not. A 2003 study by the Federal Reserve Board found that unpaid medical bills accounted for almost half of the collections efforts appearing on credit reports. Even if you have health and vehicle insurance, you might be surprised to learn that the aggregate coverage may not cover the entire bill for treatment. That means you're obligated to pay the remainder The really bad news is that once a medical bill is turned over to a private collection agency, it is reported on your credit report and stays there for seven years, even if you pay it the outstanding amount.

Unpaid Bills

• Sometimes your insurance limits don't cover the full amount of the bill. If you have a $10,000 personal injury insurance limit on your automobile insurance and also carry health insurance with a $10,000 limit and the bill for treating you after an auto accident is $25,000 expect to be hit with the $5,000 difference. It can get much more byzantine. Assume your hospital bill was only $8,000--under your policy limit--and you submit the claim to both insurance companies. They may spend considerable time squabbling over who should pay. Beyond a certain time, the hospital may turn the bill over to a collection agency, which then reports it to the credit agencies. So while the insurance companies were quarreling, you now have an entirely different struggle on your hands to get the claim removed from your credit history.

HIPAA

• The Health Insurance Portability and Accountability Act (HIPAA) that took effect in 2003 was designed primarily to protect patient health information, but it also gave health care providers the right to report overdue bills to collection agencies. It's the collection agencies that report the unpaid bill to the credit agencies. The health-care provider by law may provide only your name and address, birth date, Social Security number, payment history, account number, and the name and address of the claimant.

Laws Covering Collections

• The federal Fair Debt Collection Practices Act (FDCPA) prohibits abusive collection tactics that harass you or invade your privacy. More specifically, debt collectors cannot call before 8 a.m. and after 9 p.m., call you repeatedly, or use the phone to harass you, trick you into accepting collect calls or paying for telegrams, or use obscene language or make negative comments about your character. If you have an attorney, refer the collector to the attorney. A debt collector can sue to collect a debt but can't threaten to sue unless the collector plans to do so.

Advice

• Don't let bills get to collection. If you receive a medical bill, expected or otherwise, contact the health provider immediately. Sometimes, the notices look like bills but are simply statements confirming what has been paid, what has not and what is a discounted amount you don't have to pay. Make sure it's an invoice for payment. Mistakes are made and you may be doubled-billed after insurance has covered the claim. If there is an amount owed, pay it if you can. If you can't pay the full amount, work out a reasonable payment plan and make your payments. The worst case is that it goes to collections and against your credit record.

Private Nonprofit Hospitals

• If you received your care and bills from a private nonprofit hospital there is an obligation on the part of the hospital to provide care to those who are underinsured or not insured. It's part of what allows them to maintain a nonprofit status. It's murky waters, however. A 2008 report by the Government Accountability Office on Nonprofit Hospitals found that the standards allowing nonprofit hospitals to claim nonprofit status were widely variable, ill-defined and inconsistent. According to the GAO report, "Since 1969, IRS has not specified that these hospitals have to provide charity care to meet these requirements, so long as they engage in activities that benefit the community." The IRS doesn't specify standards or reporting requirements, among other things, to maintain their tax-exempt status, so there is a lot of latitude for negotiating your bill.