How Medical Bills May Impact Your Credit Score

If you’re lucky enough to have health insurance and good credit, then you may not be worried about medical bills. But a New York Times article from earlier this year showed that a single unpaid medical bill can slash your credit score by 100 points, potentially costing thousands of dollars in higher interest rates.

If you’re uninsured, as 52 million working-age Americans were for a time in 2010 according to the Commonwealth Fund, medical bills can prove even more problematic.

Mark Rukavina, principal at Community Health Advisors and former executive director of the Access Project, points out that unlike general credit card debt or student loans, medical bills are “generally incurred after an illness or injury so it’s not something that can be easily planned for.” A routine surgical procedure can result in bills totaling thousands of dollars, while more intensive treatments can cost five or six figures.

Further complicating the issue is the fact that “sometimes it’s a little unclear how the cost of that care is going to be covered, whether insurance is covering the bill or if the patient is covering it,” says Rukavina, adding that roughly half of bills in collection are medical-related.

If you’re unsure about whether to pay that $89 bill or if insurance will cover it, talk to your provider. “Don’t ignore bills and don’t expect them to go away,” says Rukavina. “It’s far less likely it will be sent to collections if you’re communicating with the provider. The earlier, the better.” If you work out an extended payment plan with your provider, get it in writing and make payments on time, he adds.

Some states regulate when medical bills can be sent to collections and reported to the credit bureaus, and the Affordable Care Act includes some provisions on billing processes at nonprofit hospitals. “There are standards on the timeframe in which people must be notified of and given the opportunity to apply for financial assistance,” explains Rukavina.

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Congress is also considering the Medical Debt Responsibility Act, which would require credit bureaus to delete delinquent medical debt under $2,500 within 45 days after the debt is resolved.

Of course, it’s not unusual for a medical bill to contain errors. The American Medical Association reports that error rates for private health insurers on paid medical claims was 9.5 percent in 2012. If you suspect an error on your bill, Rukavina suggests asking for a bill summarizing the services. “If they believe something has been billed in error, first talk to the provider, then the insurer,” he says. “If they don’t get resolution that way, speak to a state agency. Many states have state insurance programs or Offices of Patient Protection that can help people navigate health insurance claims problems.”