State-Level Legislation and Potential National Impact

In 2020, every industry – including healthcare – felt the financial impact of Covid-19, and now we’re seeing the ripple effects of the initial splash on both the national and state levels with new legislation designed to “help” those impacted by the Coronavirus by changing the rules around medical debt collection. 

On the national level, Senate Bill S.355 – Covid-19 Medical Debt Collection Relief Act of 2021 was introduced in February, 2021, and referred to the Committee on Health, Education, Labor, and Pensions. As of early September 2021, it hasn’t moved any further, but the real changes have been taking place on the state level. While individually these may not seem like much, states tend to follow other states legislation. Below we will highlight several of the recent laws enacted in states across the country.

New Mexico

Patients Debt Collection Practices Act

Senate Bill 71 took effect on July 1, 2021, placing several requirements on healthcare facilities and debt collectors/buyers, most notably prohibiting collection actions against indigent patients, defined as those making less than 200% above the poverty limit.

Other highlights include:

• Selling of debts and filing lawsuits, liens or garnishments against indigent patients is barred.
• Healthcare facilities and third-party providers must verify insurance and provide information on public insurance/programs/financial assistance.
• Billing Statements must include: (1) a description of the date, amount and nature of all charges: (2) whether the patient’s insurance has been verified; (3) if the patient was screened for programs that assist with health care costs; and (4) if the health care facility or third-party health care provider has or will bill insurance or public programs to assist with the healthcare costs. Debt collectors and debt buyers must also be provided with these billing statements before communicating with or taking actions against patients.
• Information on billing statements must be offered during communications and debt owner once every 30 days.
• Within 30 days of receipt of payment on a medical debt, debt owners must send a receipt to the person who made the payment that shows: (1) the amount paid; (2) the date of the payment; (3) the new balance; (4) the interest rate and interest accrued since the last payment; (5) the account number; (6) the current owner of the debt, and the name of the creditor; and (7) if the payment was accepted as a payment in full of the debt. Payments must be applied on the date they were received, or if it was received after business hours, the next business day.
• Debt owners are prohibited from creating an agreement with a patient where they waive their right to resolve a dispute.

Nevada

Nevada Medical Debt Collection Law

Nevada also passed a bill that went into action on July 1, 2021. Nevada Bill SB248 applies to all debts for goods and services provided by medical facilities. The broad definition includes the financing or extension of credit for a third party if the sole purpose of the extension of credit is for purchasing goods or services from a healthcare facility or provider.

The major action of this bill is a 60-day notification period. During this period, collection agencies are prohibited from taking any action to collect a medical debt and are required to send the debtor a written notification via registered or certified mail that includes:

• Facility name
• Date that goods and/or services were provided
• Principal amount of debt
• Name of collection agency
• Information regarding whether the debt has been assigned to a collection agency or how the collection agency otherwise obtained the debt for collection

Patients are allowed to initiate contact with the collection agency during the 60-day period, but the collection agency must wait the full 60 days to take action. Collection agencies are allowed to accept voluntary payments during the 60-day notification period as long as, 1) the patient initiates contact; 2) the collection agency discloses to the patient that the payment is not demanded or due during the 60-day period; and 3) the medical debt will not be reported to any credit reporting agency during the 60-day period.

While the law does not specify how the disclosure must be given to the patient, it does state that voluntary payments do not extend the applicable statute of limitations, admit liability or waive any defense the patient may have to the collection of the medical debt. Also, the law prohibits collection agencies from taking   commencing a civil action for debt less than $10,000 and charging or collecting fees of more than 5-percent of the debt.

Debtors may opt to initiate contact with the collection agency during this 60-day period, but this does not allow the collection agency to take action before the expiration of the 60-day period.

Collection agencies are permitted to accept voluntary payments from the debtor during the 60-day notification period if the following conditions are met: (1) the debtor initiates the contact; and (2) the collection agency discloses to the debtor that a payment is not demanded or due during the 60-day period; and (3) the medical debt will not be reported to any credit reporting agency during the 60-day period. The law does not specify how this disclosure must be given to the borrower. Voluntary payments do not extend the applicable statute of limitations, admit liability, or waive any defense the borrower may have to the collection of the medical debt.

Maryland

Medical Debt Protection

Earlier this year we wrote about Maryland’s debt collection bill and how it was waiting for Governor Larry Hogan’s signature. SD 514 and HB 565 were unanimously approved in the state Senate and House respectively, and simply because the governor did not veto them, they will go into effect on January 1, 2022.

The bill will impact both hospitals and the collections agencies they work with. According to the bill’s fiscal and policy note, there are requirements for hospital debt collection policies and payment arrangements, and it also prohibits hospitals from taking specified actions when collecting debt. 

Based on the wording of the bill, hospitals must annually submit its policy on the collection of debts owed by patients as well as a specified report to the Health Services Cost Review Commission (HSCRC), which then HSCRC must compile into an annual medical debt collection report. 

The bill states, when attempting to collect debt owed on a hospital bill, a hospital may not, among other things: 

• Request a lien against a patient’s primary residence. 
• Request the issuance of or take action causing a court to issue a body attachment or an arrest warrant against a patient. 
• Request a writ of garnishment of wages or file an action resulting in an attachment of wages if the patient is eligible for free or reduced-cost care. 
• Make a claim against the estate of a deceased patient if the deceased patient was known by the hospital to be eligible for free care or if the value of the estate after tax obligations are fulfilled in less than half of the debt owned (however, a hospital may offer the family of the deceased patient the ability to apply for financial assistance). 
• File an action against a patient or give notice to a patient until after 180 days after the initial bill was provided. 
• File an action against a patient until the hospital determines whether the patient is eligible for free or reduced-cost care. 

If a hospital utilizes a debt collector for collection activity, the hospital and the debt collector must be jointly and severally responsible for meeting the hospital debt collection requirements, which could mean your collections partner would need to track and act upon additional information.

The main portion of the bill will take effect on January 1, 2022; however, provisions related to the HSCRC and MHCC study and reporting requirements went into effect on June 1, 2021. 

Illinois

Medical Debt Amendments

Illinois may have passed the bill with the most impact for hospitals with Senate Bill 1840. The bill, which was signed into law on August 26, 2021, amends both the Illinois Community Benefits Act and the Hospital Uninsured Patient Discount Act (HUPDA).

According to a release from the Illinois Health and Hospital Association, “the overall intent of the bill is to advance health equity by increasing access to hospital services for uninsured individuals and increasing transparency with respect to financial assistance provided to uninsured individuals by private hospitals.” 

Some of the main areas that will impact hospitals and their collections partners include:

• The maximum amount a hospital can collect from an uninsured patient is being reduced to 20% of a person’s income (previously 25%).
• Discount eligibility will begin at $150 for uninsured patients for all medically necessary healthcare (previously $300).
• Hospitals will be required to notify patients that they can include healthcare received in the last 12 months towards the maximum collectible amount. This information should be included clearly and in plain language on financial assistance applications, along with hospital bills, invoices or summary of charges provided by the hospital.
• Hospitals are required to include a statement containing a website, phone number, or both as provided by the Attorney General on all hospital bills, invoices, and balance statements. 
• The bill requires hospitals to permit eligible uninsured patients to initiate applications for financial assistance prior to receiving services, and for those with hospital stays more than 20 days to initiate an application within 90 days after discharge or date of service.
• Under the Hospital Uninsured Patient Discount Act, hospitals may make the availability of discounts and maximum collectible amounts contingent on the uninsured patient first applying for coverage under public health insurance programs if there is reasonable belief that the uninsured patient may be eligible for one of these programs.

California

While California hasn’t passed any recent legislation, there are two bills currently working their way through the legislative branch.

One bill was created to amend the Credit Services Act of 1984. It did pass in the Banking & Finance and Privacy & Consumer Protection committees, but it was referred back to the appropriations committee.

A.B. 1089 would require the Department of Financial Protection and Innovation to license, regulate and oversee credit services organizations starting January 1, 2023. The bill would prohibit credit services in California without a license and “require each licensee to, among other things, file reports with the commissioner of the Department of Financial Protection and Innovation under oath, maintain a surety bond and pay to the department its proportional share of all costs and expenses reasonably incurred in the administration of these provisions, as estimated by the department.”

Credit service organizations would also be unable to send a dispute to a consumer credit reporting agency, creditor, debt collector or debt buyer more than 180 days after the disputed account has been removed, or from failing to provide along with its first written communication to a credit reporting agency or data furnisher sufficient information to investigate a dispute of an account.

A second bill, focused on medical debt, is advancing through the legislative branch. A.B. 1020 passed in the California Assembly. It requires hospitals to have a written policy on how they send accounts to third-party debt collectors and enacts limits on collection actions. It is now under consideration by the Senate.

As these laws and bills continue to be passed and work their way through state legislative branches, we could see additional states follow suit. We’ll continue to watch both national and state-level legislation to keep you up to date on the ever-changing medical debt landscape.