Some welcome protection for American consumers struggling with health care costs has arrived. New federal regulations call on nonprofit hospitals to establish written financial assistance policies (also known as charity care policies), limit the amount billed to patients who qualify for assistance and screen patients for such assistance prior to pursuing aggressive collection actions.
The final regulations were released Dec. 29 by the Department of Treasury and the Internal Revenue Service after a period of scrutiny for medical debt. In early December, the Consumer Financial Protection Bureau issued a report that found 43 million American consumers have medical collections on their credit reports.
Millions of Americans have only medical collections on their reports and half of them have otherwise clean credit, meaning they have no serious delinquencies and show no other signs of financial distress. The agency also found that most credit scoring systems penalize consumers who have medical collections on their credit reports.
Investigative reporters from ProPublica and NPR issued a report in early December focused on debt collection practices of nonprofit hospitals. These charitable hospitals benefit from generous tax exemptions. But the reporters found that certain nonprofit hospitals use aggressive collection actions such as going to court and getting wage garnishments. Several low-income people featured in the story had wages garnished; they claimed that they were never informed of financial assistance.
Creating a Policy and Being Transparent
Enter the Department of Treasury and the IRS. They were directed to establish rules governing the community benefit to be provided in exchange for the tax subsidies received by charitable hospitals. These new requirements, included in the Affordable Care Act, were intended to promote transparency of nonprofit hospitals’ assistance policies and protect patients from aggressive collection actions if they were eligible for such assistance.
Though it has been nearly five years since passage of the Affordable Care Act, these final regulations only now clarify the requirements. Highlights:
Hospitals must establish financial assistance policies that clearly describe eligibility and the level of assistance provided, for example, whether free or discounted care is available.
Policies must include the information and documentation required to make an eligibility determination, and no one can be denied eligibility based on documentation not clearly referenced in the policy.
Each hospital must make its financial assistance policy, application and a plain language summary available on its websites.
Information on assistance must be conspicuously posted in the emergency room and admitting sites.
Hospitals must proactively inform groups in their service area of this assistance, so as to reach those most likely to benefit from such assistance.
Hospitals are also required to limit the amount charged patients who qualify for assistance to amounts generally billed patients with insurance. This requirement should put an end to the practice of charging the uninsured the highest of rates.
Collecting on Medical Debt
When it comes to collections, the regulations include strong protections. Hospitals are required to get approval from the governing board before the hospital or any third-party collection agency operating on their behalf uses to collect on bills. The regulations include among these actions reporting collections to credit bureaus, selling debt to another party, and taking action that requires legal or a judicial process such as putting a lien on property, seizing a bank account, causing an individual’s arrest or wage garnishments.
Typically, hospitals must wait 120 days following the date of the first billing statement before taking such actions. And, patients must be given a 30-day notice of the actions a hospital intends to take. The notice must also include a plain language summary of the financial assistance offered.
Finally, hospitals are required to accept applications for assistance up to 240 days following the date of the first billing statements. Both the hospital and its collection agencies must accept the application, and if the patient is found eligible, extraordinary collection actions must cease and a refund issued of amounts paid in excess of what the individual would be required to pay under the policy.
Hospitals — and any third party collecting on their behalf — are requited to take action to remove any adverse information that had been reported to a consumer credit bureau if the patient is subsequently found eligible for assistance for the particular account. This should help millions of Americans who’ve had their credit ruined because they were not informed of such assistance.
These new regulations do not go into effect until 2016. However, hospitals are currently required to rely on a reasonably good faith interpretation of the statute, which calls for transparency on policies and collection practices, and requires hospitals to make reasonable efforts to screen people for assistance.
What You Can Do
If you have outstanding bills from a non-profit hospital, regardless of whether or not you have insurance, call the hospital and ask for information on their financial assistance or charity care policy. Apply for assistance, even if the bill has already been sent to collection, or especially if it has been sent to collection. Work with the hospital and the collection agency to make sure it is not reported to the credit bureaus so that it does not drag down your credit score. If it has been reported and you are later granted assistance, make sure it is removed from your report. Remember, it is your right.
If you have medical debts that have gone to collection, it’s important to review your credit reports for accuracy, and to ensure that items that are eligible for removal have been removed. It can also help to monitor your credit scores to get an overview of your standing over time. You can get your free credit reports annually from AnnualCreditReport.com, and you can get a free credit report summary updated monthly on Credit.com.
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