Never Simply Pay A Collection Agency For A Medical Bill
If you notice a medical bill has been reported to your credit reports by a collection agency then simply paying the debt is going to do little to improve your credit rating.
Unless you’ve already disputed with the credit bureaus and collection agency, paying the debt is going to do nothing more than turn it into a “paid collection”. We cannot stress this enough. A “paid collection account” is the last resort. Ultimately, you want to negotiate complete deletion in exchange for paying it. Collection agencies, unlike original creditors, often remove accounts in exchange for payment.
Knowing The Facts Can Help You Manage Your Credit And Medical Expenses More Proactively
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If you think youre immune to damage from a collection account on your credit report because you pay your bills on time, think again. Medical bills that you dont know about could be hurting your creditand the odds are not in your favor.
In fact, the Consumer Financial Protection Bureau reports that around 31.6% of adults in the U.S. have collections accounts on their credit reports. Thats almost one in three Americans. Medical bills account for over half of all collections with an identifiable creditor. Chances are good that you, too, have a medical bill in collections.
Many times, medical bills hit collections because you didnt even realize you owed anything. Here are four common medical bill myths that can cost you dearly and the truth you need to manage your credit and medical expenses more proactively.
Your insurance wont cover everything
Its a consumers obligation to know what theyre responsible for paying. A lot of people are under the impression that their insurance will cover all medical costs, so they dont owe anything. Due to how a visit or procedure is billed with insurance, this isnt always the case. Its always best to be prepared for the worst to prevent anything from being sent to collections.
Your medical bills can be sent to collections, even if youre paying
Tips for dealing with medical bills
How Long Does A Late Payment Stay On Your Credit Report
Unfortunately, there is no single set rule for all creditors when it comes to how long a late payment will stay on your credit report. Each lender has their own threshold for what counts as a late payment, as well as at what point they decide to report these late payments to the credit bureaus. While this can be frustrating, its important to know that there are some tried and true industry averages that can be applied.
In most cases, once your payment gets to be 30 days past due, lenders will consider your payment late and will report it to the credit bureaus. Once this happens, the late payment will almost likely show up on your credit report. But why is this important? Simple even a single late payment can have a big impact on your credit score.
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Many Unprepared For An Emergency Expense
38% of American adults prefer using credit cards to pay off medical debt.
Many people cant afford to pay a small-scale financial disruption in their lives, let alone larger medical debts.
A survey by the Kaiser Family Foundation and the New York Times found that among the insured and uninsured with problems paying for health care, 31% said the total amount of the bills they had problems paying was at least $5,000. Thirteen percent said their medical bills totaled at least $10,000, and 24% said it was less than $1,000.
According to a 2015 Federal Reserve report, many people dont even have $400 in their bank account to cover an unexpected expense. The report found that 46% said that an unexpected $400 expense would leave them unable to pay it, or theyd have to borrow or sell something to do so. Among people who wouldnt pay the bill in full with cash, 38% would use a credit card and pay it off over time, and 31% had no way to cover the expense.
Debt Collection Advanced Disputes
For these advanced disputes to work, you need to send them simultaneously. The Fair Credit Reporting Act states that creditors and debt collectors have 30 days to respond to your disputes. If they do not verify the information within the 30 day time period, they must delete the information from your Credit Report. If you send both disputes at the same time, the Creditor is mandated to respond to you before responding to the Credit Bureaus further lengthening the timeframe and workload for both the Credit Bureaus and Debt Collectors. *We dont recommend doing this without the help of a professional.
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Bills Can Be Sent To Collections Even If Youre Paying
Making payments on a large medical bill does not guarantee you will avoid collections. Those who decide on their own to pay only a portion of the bill could have the bill sent to collections. Same with those who are not paying on time
Its important to talk with the provider or hospital when you cant pay all of what is due. Providers typically will set up a payment play, but be sure to get it in writing. Some hospitals the Cleveland Clinic among them have agreements with certain banks that will spread payments over two or three years at no interest, provided payments are made on time.
Communicating with the provider is key to making payments affordable and avoiding collections.
Research The Medical Bill
As with all things financial, the first thing to do is sit down and do your research.
If you notice a medical debt on your credit report, do your best to match it up with an actual bill.
Determine if you do owe the bill in the first place. If you do not, or simply cant find documentation, you should prepare to file a dispute with the credit bureaus.
If the bill is owed, you may want to consider backtracking and working with the provider. They will often be able to offer a payment plan that is preferential to working with a collection agency.
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Ask Your Health Insurance Company To Review The Bill
When insurance companies pay a medical bill, you should receive an explanation of benefits that outlines what the insurance company did and did not pay for. If you notice that your insurance provider didnt pay for certain things, reach out to ask why. You might be able to correct some mistakes, saving you money.
Similarly, if you find mistakes on the bill and the health care provider corrects them, ask the billing office to send an updated bill to your insurance company.
If you can get your insurance provider to cover more of the bill, that can help you avoid missing payments and having a debt collector come after you.
Medical Bills With Health Insurance
Carefully re-read your policy contact your insurance agent if you think charges on a bill should be covered. If you are certain you should be reimbursed, or that your doctor or hospital should be paid by your healthcare provider, file an appeal in a timely manner, as most insurers limit the time you have to question a benefit. It often is just 30 or 60 days.
Be prepared for denials and delays and be careful to keep records of all phone calls and correspondence. That way, if you eventually must file a formal complaint with your states insurance commission or contact a consumer law attorney, you have accurate records.
Be aware that in the end, you may still have to pay the bill.
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When You Receive A Medical Bill In Error
You can occasionally wind up with a medical bill that you aren’t responsible for because of:
- A medical coding error: If the services arent coded properly, your insurance company may not pay for them, even if they were supposed to be covered.
- Duplicate quantities: If a service is accidentally entered into your bill twice, your insurance may only cover the first instance, leaving you on the hook for a second procedure or appointment that you never received.
- Incorrect personal information: If your account number or contact information is listed incorrectly, you may receive someone else’s bills by accident.
- Incorrect insurance information: If your medical provider doesn’t have the correct insurance information for you, they may send bills to the wrong company, who will refuse coverage.
If you receive a bill thats not correct or you believe your insurance company should have covered it, you can take immediate steps to have the bill corrected.
Contact the hospital or provider as soon as you can after receiving the bill. If you can point out errors or correct out of date information, they may be able to resolve the issue within a few days and cancel the incorrect bill.
If your provider can’t help, contact your insurance company directly. They may be able to contact the hospital on your behalf to resolve any errors or give you the information you need to provide the hospital to have them fixed.
Stay On Top Of The Debt
You want to make sure you are staying on top of your insurance company about the debt. Continue to follow up with them to ensure they pay their part of the medical bills. Get an estimate of how much you will be on the hook for. Stay in communications with the hospital and surgeon about the medical bills. Let them know you intend to pay your bills, so they do not prematurity send you to a debt collection agency. Being in constant communications with the doctor and hospital make it much less likely they will send the debt to a collection agency.
Ignoring the debt is the worst thing you can do even though it can make you anxious, ignoring medical debt will only make it worse. Before you know it, the bills will be in collections, fees and interest may be added that substantially increase the amount you owe.
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Do Different Types Of Debt Get Treated Differently
For the most part, debts that get turned over to collections are usually treated in the same way, and therefore the same rules apply. Typically, this means that these types of debts will remain on your credit report for 7 years before falling off.
However, that doesnt mean that all debt is treated the same when it comes to your credit. Medical collection debt does have a few differences when it comes to how it is reported.
In accordance with the National Consumer Assistance Plan, medical debt cant be reported on your credit report until after a 180 day waiting period, in order to give substantial time for any insurance payments to be applied to the debt. Additionally, credit reporting agencies are also required to remove any previously reported medical collections that either have been or are being paid by insurance.
Whats more, even if you have medical collection debt on your credit report, it may not impact your credit score to the same degree other collection debt would. Different credit scoring models vary in their factors, but there are some models that give less weight to medical-specific debt. For more information on how to keep medical debt from hurting your credit standing, jump to our section on how to remove medical debt from your credit report.
With this in mind, lets take a look at the scoring model calculation factors for the FICO credit score and the VantageScore credit score.
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Send A Debt Validation Letter To The Collection Agency
Do this within 30 days of the original letter you received from the agency or else you will lose your chance to dispute the debt. Use the sample debt validation letter for medical bills provided below.
This debt validation letter outlines the following:
- Your request for proof of the debt.
- Your request for proof that the collection agency does in fact hold the debt now
- Your request for a statement regarding how much principal you owe plus any fees and interest that have been added
- Your request for a copy of the contract you originally signed saying you will be responsible for payment of the debt
- Your request for contact information of the original creditor in case you need to call or write them if necessary.
Send the debt validation letter to the debt collectors address listed on the debt noticed you received. If you didnt receive a notice but account is listed on your credit report, send it to the address listed in your credit reports Contact Information section.
Send the debt validation letter via certified mail, return receipt requested, so that you have document that the collection agency received your correspondence. Keep a copy to yourself.
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What If The Collection Agency Sues Me
If the collection agency sues you, stick to your guns: you can win. This flowchart shows you the path to victory in a debt collection lawsuit. Pre-lawsuit, make sure to send the collector a Debt Validation Letter telling them you dispute the debt and requesting validation of the debt.
If they sue you, be sure to file an Answer in court. This will make it more likely they give up and the case gets dismissed. If not, you can angle for a settlement with a Debt Lawsuit Settlement Offer Letter.
Can’t I Just Pay Off My Medical Bills With A Credit Card
Before choosing to use a credit card to pay your medical bill, make sure you have a plan for repaying the debt after it’s charged. The last thing you want to do is add to the pain of medical debt by racking up interest on a credit card.
And if you are struggling with how to pay off your medical debt, consider moving it to a 0% balance transfer credit card. The Chase Slate® Credit Card offers a low introductory balance transfer offer: $0 fee during the first 60 days of account opening and 0% intro APR for the first 15 months from account opening .
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How Long Does A Collection Stay On My Credit Report
If you find a collection account on your credit report, you may be wondering what happened. Most often, this happens when your original creditor owed, such as your credit card company, writes off your debt as bad debt and then sells the debt to a debt collection agency. Typically, creditors will only sell your debts after you have become seriously delinquent in your payments, usually after 3 to 6 months of nonpayment.
If you find a collection account on your credit report, it is important that you act quickly and not ignore it. Why? Because collections can have a huge negative impact on your credit and your credit score, it is crucial that you understand how to handle them.
Pay Your Bills Monthly
When you first receive a bill and cant pay it off right away, contact the medical provider to determine if you can sign up for a monthly payment plan.
Payment plans with hospitals and doctors offices typically dont charge interest. And they usually wont send the medical debt to a collection agency if you make regular payments.
You can also consider applying for a low interest personal loan if your provider doesnt offer monthly payments. Of course, its never ideal to have to pay interest on top of the principal balance, but it could prevent you from having the collection account go into delinquency and showing up on your credit report.
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With Hipaa Patients Will Have More Privacy With 3rd Party Debt Collectors
Medical collections may have become a little more difficult to collect because of privacy rules with medical laws. The HIPAA privacy rule requires a “business associate” to reasonably limit the amount of information disclosed for such purposes to the minimum necessary as well as to abide by reasonable requests for confidential communications.
This could be a loophole for debtors against collection agencies because collection employees often know less about their industry restrictions than does the debtor. This could lead to privacy and HIPAA violations – and eventually, case law to support such violations.
If collection agency employees are not careful, they could lose out on collecting medical debts by inadvertently knowing too much about the debtor’s medical condition. This will no doubt lead to many consumers seeking that the debts be pulled back by the medical provider to avoid potential suits against the provider.
Debtor’s who know how to protect themselves will use this provision to threaten collectors and gain the upper hand in settling the medical debt without it hitting their credit reports. Basically, debtors who discover that the collector knows their diagnosis and treatment will threaten the agency that their privacy has been violated.
How To Deal With Late Payments On Your Credit Report
If you already have late payments on your credit report, you may or may not be able to have them removed. If your bills are past due, its important to understand that the sooner you can pay them off, the better off you will be.
However, if you want to take this a step further and remove a late payment that is already on your credit report, you have a few options:
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