Medical Bills and How to Handle Them – Insurance Issues

Medical bills are through the roof.  Even though we’re all supposed to have health insurance, not everyone does.  Even with health insurance, co-pays and deductibles alone often break the bank.

Can health care providers send their bills to collection?

Are there special rules for bill collectors going after people for medical debt?

Will hospitals and other health care provers negotiate?

I was in a car accident why should my car insurance have to pay my medical bills?

Look at Medical Bills Closely

By some estimates as many as three-quarters of all medical bills contain errors.  Money Magazine reports its well worth your while to dispute suspected errors on medical bills.

Medical bills can be disputed in at least two ways.  Medical providers usually have a process for handling questioned items internally.  Health insurance companies by law must have a dispute process.

Let’s not take anything I’ve said here wrong.  Medical billing presents a complex and frequently changing process.  The interplay between numerous federal laws and the policies and procedures of health insurers make medical coding and billing a challenge.

The current medical coding system mandated by federal law covers over 80,000 different medical codes.  If you think it’s simple, check out the federal government’s website, footnoted below, attempting to explain the system.

Don’t Panic When You Receive a Huge Medical Bill

The 3 major credit reporting agencies must wait 180 days before placing unpaid medical bills onto your credit report.  The 180 day rule came out of a 2015 settlement involving the big 3 credit reporting agencies – Equifax, Experian and TransUnion.  The settlement was with the New York Attorney General’s office but its effect is nationwide.

Most medical providers will not report overdue bills right away but instead will hold on to the delinquent account, hoping you’ll pay.  So, after you examine the bill and identify charges that look too high or which may even be erroneous, call the provider and find out if they will negotiate.

Medical Bills & Personal Injury Cases

If you have been injured in a car crash or as a result of a slip and fall or other type of accident the billing process gets tricky.  In car accident cases, despite what medical providers and common sense tell you, your own auto insurance stands first in line.  Whether it’s the “PIP” provision or the “medical payments” provision, these are primary coverage for car accident bills.

If you do not have such coverage, or if you have been injured by the negligence of a property owner then what is called “third party” coverage should be billed before seeking payment from your health insurance company as a last result.  If you have a personal injury case you should send all related bills to your injury attorney who knows or should know how to advise you.  Here’s more on this topic: Auto Insurance & Medical Payments.

“No-Fault” states like Massachusetts require you to carry your own “PIP” coverage which must pay car accident bills.  Other states, like New Hampshire provide the option for you to purchase a “medical payments provision” which is primary coverage for your own car accident medical bills.

Negotiating Medical Bills

One reason medical providers may show flexibility working something out with you is that once they send your account to collection, they lose money.  Collection agencies generally charge 20 per cent.  Some collection lawyers even charge an initial retainer to take on collection accounts.  Once the account is out of the medical provider’s hands they lose control, requiring them to sit back and wait.  Medical people generally dislike not being in control.

Most hospitals offer financial assistance to patients facing hardship.  In fact, federal law requires non-profit hospitals to set up policies offering patients financial assistance with bills they cannot pay.  Such policies provide bill reduction or even cancellation depending on the extent of hardship proven.

Hospital financial assistance policies must be in writing, both in terms of what type of assistance is available and how to apply.  If you’re in the hospital, generally a social service or other department will provide the documents.  If you’re at home try the hospital website.

Even for-profit hospitals not subject to this law usually offer financial assistance programs.  I have seen people work out reductions and payment plans, depending on the amount of the bill and the existing hardship.

Never Ignore Medical Bills

One of the worst things you can do is to simply ignore the bills.  Ignoring medical or any other bills guarantees the other side will ratchet up the collection effort.  You might forget the bills but most health providers have an aging system that updates them periodically, usually every 30 days.  The system notifies them of unpaid balances.

The periodic account updates force medical providers to think about options available to them, whether to send the overdue balance to collections, to call you or to take other action.

So, if a patient is trying to work something out, the provider is more likely to hold off on sending the overdue balance to an outside collection agency.  But if a bill does go to collection bill collectors must follow the rules set forth in federal law.

Debt Collectors and Fair Debt Collection Law

Once any bill goes to collection things can get threatening, but a federal law known as the Fair Debt Collection Practices Act or “FDCPA” mandates what bill collectors can and cannot do.  If they get caught penalties include a $1,000.00 civil penalty for each violation.

Things Debt Collectors Can Not Do Include:

Telephone calls at unreasonable hours.  The law prohibits phone calls after 9 pm or before 8 am.

Threatening arrest. They may not say they’re sending the police to your house or threaten you with criminal charges.  Debt is a civil matter, not handled in the criminal system.

Calling you at work.  One call is permitted but once notified, debt collectors may not call you at your place of employment.

Using abusive or intimidating language.  Insulting you or threatening you with physical violence violates the law.

Repeated continuous phone calls.  Multiple repetitive phone calls with intent to annoy, abuse or harass are outlawed.

You also have the right to demand validation of any debt.  When a debt collector calls, ask for validation and within 30 days they must, in writing, confirm the amount of the debt, the name of the original creditor, and that you have 30 days to dispute the validity of the debt.

When bill collectors violate any fair debt collection practice, consumers may bring civil suits making them eligible for $1,000 for each violation.

Bankruptcy Discharges Medical Bills

Bankruptcy law presents an option to at least consider.   Chapter 7 bankruptcy, if appropriate, discharges medical debt within months.  At the same time Chapter 7 is not for everyone.  The consumer bankruptcy alternative, Chapter 13 bankruptcy, allows for discharge of debt as long as a 3 to 5 year payment plan is followed.

No medical provider may deny you emergency medical care because you’ve done a bankruptcy.  Private medical providers can opt out of treating you in non-emergencies due to non-payment or bankruptcy.  But you always have the right to find a new medical provider.  Also, if you have a long standing relationship with a particular doctor or clinic, most times they’ll be willing to work with you knowing you’ve faced financial hard times.

Bottom Line on Medical Bills

Car accident bills or surprise medical bills incurred by a sudden emergency sometimes present a daunting burden.  The Fair Debt Collection Practices act kicks in when the bills are sent to collection.  Look at the bill, figure out whether there’s hope the bill includes mistakes or may be negotiated.  The matrix of seemingly arbitrary insurance company practices and billing and coding law causes nightmares to medical providers and patients alike.  Bills caused by car accidents or other injuries raise insurance issues best handled by a personal injury attorney.

Model Credit: Alyssa Antoniou

Sources: 

Federal Fair Debt Collection Practices Act, 15 U.S.C. § 1692 .

International Classification for Diseases, (ICD-10-CM/PCS) Transition, Background, Centers for Disease Control and Prevention.

New Rule Just Made it Harder for Medical Bills to Mess up Your Credit, Money Magazine, Sept. 15, 2017.

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