Medical debt is common in the US. In fact, the Kaiser Family Foundation (KFF) published an analysis in 2022 showing that nearly 1 in 10 adults (around 23 million people) have medical debt. 1
Trying to get rid of medical bills in collections is never a walk in the park, and having your bill sent to a debt collection agency without any warning can be especially concerning. Fortunately, there are ways to deal with this scenario—as long as you know your rights.
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Is it legal for a medical debt to be sent to collections without notice?
Yes, surprisingly, it’s perfectly legal for a healthcare provider to charge off a debt and transfer it to a debt collector without telling you. Doing so isn’t a violation of the Fair Credit Reporting Act (FCRA) or Health Insurance Portability and Accountability Act (HIPAA). 2
In fact, this is true for any debt, medical or otherwise. If you have an unpaid credit card bill, for instance, that can also be sent to collections without warning.
That said, most of the time, if you have an unpaid debt, the company you owe it to (such as a hospital or clinic, in the case of medical debt) won’t send it to collections without trying to contact you about it. When surprise medical collections show up on your credit report, it’s often the result of a clerical error or a failure to reach you, which can happen if your contact info recently changed.
When are medical bills usually sent to collections?
In fact, the Affordable Care Act requires nonprofit hospitals to give patients sufficient time to apply for financial assistance before taking any “extraordinary collection measures.” 4
However, even if you’re trying to pay your medical debt off, it can be sent to a debt collection agency if you’ve made several late payments or you’re only making partial payments.
The upshot is that if several months have gone by and your healthcare provider has lost confidence that you’ll pay off your debt in full, they might send it to a debt collector.
What to do about surprise medical bills in collections
Surprise medical bills are incredibly common. Oftentimes, they’re due to mix-ups between you and your healthcare provider or insurance company, although other times they’re outright mistakes or even the result of fraud.
To protect your credit and finances, it’s important that you know what steps to take to deal with surprise medical bills in collections. Follow these four steps to protect yourself:
1. Research the debt
If you’re contacted about surprise medical bills, don’t pay (or even offer to pay) until you’ve done your research. You need to verify the validity of the debt, make sure the debt collector is legit, and investigate the charges. To do so, follow these steps:
- Contact your healthcare provider: Start by asking your healthcare provider if they sent your debt to collections. If they did, ask them to explain the charges and provide you with an itemized bill. Carefully check for mistakes, such as duplicate charges or charges for services that should’ve been covered by insurance.
- Cross-check the charges with your insurer: If your health insurance company sent you a statement of the charges they covered for your medical expenses, carefully compare it with your itemized bill. Ask your insurer for an explanation of benefits (EOB), and make sure that your insurance covered all relevant charges.
- Request proof of your debt: If you don’t recognize the bill at all, it’s very old, or your healthcare provider claims they never sent your bill to collections, send the debt collection agency a debt verification letter asking for proof that you owe the debt. They won’t be allowed to ask for payment until they provide proof. 6
What to do if the debt is fraudulent
If you don’t recognize the charges you’re being billed for and you suspect that you’re a victim of identity theft, immediately file a report with the Federal Trade Commission at IdentityTheft.gov. You should also place a fraud alert on your credit report with Experian, TransUnion, or Equifax (you only need to notify one credit bureau and they’ll notify the other two).
2. Make sure you know your rights
If you have a medical bill in collections, there are several laws protecting you. It’s important to know what your rights are and what debt collectors aren’t allowed to do.
Specifically, read up on these laws:
- No Surprises Act (NSA): From January 1, 2022 onwards, you shouldn’t receive surprise medical bills for emergency services you received from a provider that you didn’t know was out-of-network. 7 If you find yourself in this situation, file a complaint with the Centers for Medicare and Medicaid Services.
- Fair Debt Collection Practices Act: You have protection from debt collector harassment and abuse under the Fair Debt Collection Practices Act (FDCPA). If you’re dealing with debts in collection, familiarize yourself with your rights so that you know what debt collectors can and can’t do when trying to collect payments from you.
3. Don’t ignore your debt collectors
As tempting as it may be, ignoring debt collectors is never a good idea. This is true even if you’re confident your debt is invalid and your debt collector has no right to make you pay it.
If you ignore your debt collector, it might provoke them into suing you. The court could issue a judgment against you, enabling your debt collector to garnish your wages or bank account or place a lien (legal claim) on your property. 8
The only exception is if your medical debt is so old that it’s become time-barred (meaning it’s passed the statute of limitations on debt). In this case, you can send the debt collection agency a letter asking them to stop contacting you, and they’ll have to comply. 6
However, if they do (illegally) sue you over a time-barred medical debt, you can’t ignore the lawsuit summons—you still have to show up to court. Failure to appear can have serious consequences, even if you’re guaranteed to win the lawsuit or have it dismissed when you do appear.
4. Negotiate with your collector to pay or settle the debt
If your debt is valid (and isn’t time-barred), then your best move is probably to pay it. You can pay in a lump sum, pay in installments over time, or settle your medical collections for less than the full amount you owe by negotiating a debt settlement agreement with your debt collectors.
Clearing your medical debt will come with several benefits. Not only will you silence your debt collectors once and for all, but paying the collection account will also improve your credit score.
Medical bills affect your credit score once they’re sent to collections, but after July 1, 2022, the three main credit bureaus will remove any paid medical collections from your credit reports. 5 This means that paying your medical bills in collection will reverse any damage they originally caused to your credit.
What you can do to avoid unexpected medical collections
Not knowing about overdue medical bills until they’re already in collections can be a nightmare. Fortunately, there are things you can do prevent medical bills from going to collections without warning in the future:
- Understand your health insurance coverage: Health insurance usually won’t cover all of your medical expenses (unfortunately). Make sure to always clarify which charges you’re responsible for paying, and don’t hesitate to ask your health insurance company any questions you have about your coverage or other rights.
- Set up a payment plan with your healthcare provider: If you can’t afford to pay your medical expenses, ask your healthcare provider about alternative repayment options, and get your agreement in writing. As long as you make complete and timely payments, your debt shouldn’t go to collections.
- Check your credit reports regularly: Monitoring your credit will allow you to catch any erroneous medical collections that are added to your credit reports so that you can immediately dispute the relevant items on your credit reports using a sample letter for disputing medical bills. Remember that there’s a 180-day lag between medical bills being sent to collections and them showing up on your report, so even if your credit reports are clean, that doesn’t guarantee you don’t have a medical collection account.
- Confirm that your provider has your contact info: As mentioned, most hospitals and clinics will at least try to contact you before sending your bill to a debt collection agency. Ensure that they can do this by checking that they have accurate and up-to-date contact information (meaning your phone number, email address, and mailing address).
No matter what happens, you’re not alone. The recent changes to how medical collections are treated by credit reporting agencies is a sign that steps are being taken to allow people to get the care they need without damage to their credit or finances.