The Frugal Creditnista

Using the ACA to Remove Medical Debt from Your Credit Reports!

The Affordable Care Act (ACA) is for nonprofit hospitals, which represent the majority of hospitals in the United States.

It mandates that nonprofit medical institutions need to have clear, written policies in place to identify patients eligible for financial assistance prior to providing medical care.

These written policies should detail (1) who is eligible for financial assistance/charity care and (2) spell out the application process for those applying for help. They should be publicized to both patients and throughout the communities that they serve.

Under the ACA, hospitals are prevented from charging eligible patients who qualify for assistance more than those who receive discounts because they are privately insured or are on Medicare. They must receive the lowest amounts available for their specific treatment.

Another benefit of the ACA, is that nonprofit hospitals cannot take extraordinary collection actions against patients for outstanding medical debt prior to screening them to see if they are eligible for financial assistance first.

What is considered “extraordinary collection actions”?

According to the IRS, it’s suing patients for a judgment, wage garnishments, selling patient debts to collection agencies or providing the information needed for collection agencies to report patient debt to the credit bureaus.

None of these actions can take place, per the ACA, until a bill has reached a minimum of four months past due. During this four-month time frame, – a.k.a. the notification period – medical providers have to provide patients with a clear summary that spells out the financial assistance/charity care options available to them.

What happens after the four months have passed?

The hospital can turn over the debt to a collection agency, or perform any of the other extraordinary collection actions mentioned, however, they must notify the patient in writing first.

Patients have up to eight months after receiving the initial bill to apply for financial assistance, so even if a debt is turned over to a collection agency after the four-month notification period has passed, consumers can still apply for aid.

AND, when the collection agency obtains the debt after the four-month period, they are still responsible for providing patients with their billing information and payment plan options to help satisfy their medical debt. This is important to know because some hospitals turn over their past due debts as a part of their normal business procedures. Hiring a collection agency that is well versed on the guidelines and procedures under the ACA is important for non-profit hospitals, in order to avoid liability.

What happens if a hospital does not abide by the guidelines in the ACA?

The Internal Revenue Service can take away the various tax breaks they receive as a nonprofit.

Your Next Steps:

  1. Review your credit reports for medical collections.
  2. Do some research. Did you have insurance? Did they submit a claim? Did your insurance provider receive the claim? Was it submitted properly? Were you charged according to your plan’s agreement for in and out of network providers?
  3. Were you offered any hardship assistance? If not, seek it under the ACA. If approved, your medical debt will be significantly reduced, or forgiven completely, resulting in a $0 balance and complete removal from your credit reports.

If denied, you can appeal their decision, pay the debt in full, or – my personal preference – settle the account.  It’s easier to deal directly with the hospital after this process, than with the collection agency.

  1. If the debt is fairly old, some hospitals may no longer have information on the debt. If so, send a validation letter to the collection agency to see if they can prove the validity of the debt. If not, it can’t report on your credit report, nor can it be collected upon. Collection agencies must prove you owe the debt, not the other way around. If the hospital, nor the collection agency can prove it, you don’t owe it.

Hope this helps! 

If you're looking for assistance in tackling medical debts on your credit reports, feel free to schedule a consultation here.

Or, I can teach you how to handle them on your own inside of my Members Club, Credit on Fire Academy, either way, I'm here for you! 🙂

~ Netiva

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One Response

  1. Hello and thank you for all you do.

    I have medicare. I’m responsible for 20% of the allowable amount (my understanding).
    Been attending for profit facility and numerous other doctors. I’ve used up all my savings paying and trying to keep up with medical premiums and medicine cost. 5 bills have made it to collections. 8,000. 1,000. And so on. That was the 20% from chemotherapy and lung treatments. I have stopped my treatment. It’s overwhelming. I don’t qualify for assistance.

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