As a way to manage finances, many consumers opt for medical coverage with high deductibles. While the reduced expense of lower insurance premiums helps to maintain a balanced budget, the financial drain of covering costly deductibles and co-pays in a medical crisis could quickly exhaust a savings account. We don’t always have the luxury of time to plan for large medical expenses; it is often under emergency circumstances, when we’re least prepared, that unexpected and costly hospitalization occurs. The outcome is an outstanding balance which must be paid, however, don’t reach for a credit card. At times like this, when figuring out ways to pay medical debt, it’s helpful to have insight into the medical billing process and its impact on personal credit.
Medical Debt Difference
There have been some recent changes in the way medical debt is reported which in turn, affect how personal credit and credit scores are impacted. First, a required waiting period must be exhausted before medical debt can be reported to a credit agency. A regulation requires Equifax, TransUnion, and Experian to wait 180 days (six months) before an unpaid medical expense can be added to a credit report. Additionally, medical debt is often turned over to a collection agency and, provided the debt is paid in full, the collection agency debt is not included in a personal credit report. This explains why using a credit card to help with hospital bills is not practical. Not only is it advisable to avoid high credit card interest, but more importantly, the special consideration given to medical debt could not be applied.
Worth the Risk?
Allowing medical debt to remain unpaid is a risky proposition, but according to a June 2018 Consumer Reports article, “nearly 3 in 10 insured Americans had an unpaid medical debt sent to [a] collection agency.” When a medical debt appears on a credit report, the negative effect on a personal credit score can be financially harmful. As a means to manage consumer loan risk, lenders rely on credit scores to predict whether an individual is financially accountable. A low credit score could result in preventing or impacting a financial transaction such as obtaining a new credit card, purchasing a car, or applying for a mortgage. Additionally, landlords and potential employers run credit checks and unfavorable scores could impede getting a new home or even a new job.
A low credit score can also come with a higher price tag. Individuals with poor credit are typically charged a higher interest rate if credit is approved. As reported by the Consumer Federation of America, a new car loan, for example, could add an extra $5,000.00 in interest for someone with a low credit score compared to someone with a higher score. A good credit score would lead not just to obtaining a loan, but also to securing a more favorable rate on a loan. Reducing debt and improving a low score also take time, possibly up to two years, or even longer depending on the type of debt involved.
Plan to Pay
Medical expenses have the potential of growing into large sums since billing charges can include hospitalization, out-of-network bills, doctors’ fees, diagnostic tests, and surgical procedures to name a few. It is a good idea to contact healthcare and insurance providers to verify amounts owed and assess the ability to pay. By making a habit of tracking medical expenses, a person is less likely to overlook any financial obligations and run the risk of compiling unmanageable medical debt. In cases where the amount of debt is overwhelming, even after insurance is applied, medical billing resolution specialists like Human Health Advocates can be consulted to assist with negotiating payment.
Human Health Advocates, LLC, located in Boca Raton Florida, serves clients both statewide and throughout the nation. It is a very highly reviewed entity and affiliated with the Better Business Bureau. Its members are Board-Certified Patient Advocates who specialize in medical debt reduction. If you are having difficulty understanding or managing your medical bills and/or health insurance Explanation of Benefits (EOB’s), reach out…..get help…..contact one of our Board-Certified Patient Advocates. We review medical bills and health insurance determinations to locate errors in providers’ charges and processing. We prepare insurance appeals for denied claims. We negotiate reductions in your medical debt from hospitals and other medical providers. If you have problems with your medical bills or health insurance, get in touch. WE CAN HELP!
By Human Health Advocates