Got unpaid hospital bills? New state law keeps them off your credit report

Under the new law, medical providers (including dentists) can no longer report debts incurred after July 1 to credit agencies. Credit card bills do not qualify.

John Craven

May 10, 2024, 8:58 PM

Updated 11 days ago

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A new state law could mean relief for 280,000 Connecticut residents struggling with medical debt.
Gov. Ned Lamont signed a bill on Thursday that keeps unpaid medical bills off your credit report.
$20,000 IN DEBT
Jessica Elizondo, of Danbury, knows all about medical debt.
"My family incurred over $20,000 in medical debt," she recently told state lawmakers.
Elizondo ended up with the massive bill – despite having health insurance – after a surprise trip to the emergency room. Five years later, her family is still paying it off.
"We called the collection agency to ask if we could defer payments up until we kind of got back on our feet," she said. "And we were told that we couldn't, or else our credit would be impacted."
RELIEF FROM CREDIT DAMAGE
Under the new law, medical providers (including dentists) can no longer report debts incurred after July 1 to credit agencies. Credit card bills do not qualify.
State Sen. Matt Lesser (D-Middletown), a cancer survivor, wrote the law.
"I hear horror stories every day," he said. "I've had people who have lost their homes, who've had all kinds of bad things happen to them, just because they were in a car accident, because they had a cancer diagnosis."
Health care advocates said the law will especially benefit patients of color.
"This burden disproportionately impact Black and Hispanic communities, women and those with lower incomes," said acting state Health Care Advocate Sean King. "All of these constituents are hard-working, well-intentioned members of our communities – some may be family or close friends – who have every intention and desire to satisfy their debts."
New York and Colorado have already passed similar measures.
The new law means Elizondo no longer has to choose between her physical health and her financial health.
"Now, every time something happens, I'm worried," she said. "Should I go to an ER; should I go to an emergency clinic? You know, in fear of racking up more medical debt."
"SEVERE UNINTENDED CONSEQUENCES?"
The credit reporting industry warned that the new law could backfire.
"Any legislation which attempts to suppress the reporting of this information in its entirety could have severe unintended consequences," Sarah Otis, with the Consumer Data Industry Association, wrote lawmakers.
Credit agencies already exclude debts under $500 and remove late payments as soon as they're paid off, CDIA said. But the group said that mandatory restrictions could lead to higher interest rates and less money available to borrow.
"Failure to include medical debt in its entirety means that credit reports are less accurate and therefore less reliable for scoring models," Otis wrote.
Lesser called it an unfounded scare tactic.
"I'm not surprised that the credit agencies didn't like a bill to cut them out," he said. "Medical debt is really not a good predictor of someone's overall financial condition or their ability to repay loans."
The Connecticut Hospital Association even supported the bill.
"We think this is a reasonable change to the statute and in line with current practice for most hospitals in Connecticut," CHA testified. "Under current law, hospitals are permitted to report patient information to a credit rating agency only after a year has elapsed since the date the patient received a bill for service."
RELIEF FOR OLDER BILLS TOO
Got older health care bills? Relief could be on the way for you too.
Later this year, Connecticut plans to cancel $650 million in medical debt. Under a first-in-the-nation program, the state will pay a third party vendor $6.5 million to assume the debt for pennies on the dollar.
People who owe money don't have to do anything. They'll be notified that their debt is paid off.
Lamont announced the details on ABC's "Good Morning America" in February.
"This is not something they did because they were spending too much money," he said. "This is something because they got hit with a medical emergency."
The money is coming from federal American Rescue Plan Act funds. Lamont originally pushed for about three times as much spending, which some legislators did not support.


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