|Medical bills can make your credit
When Sarah Martin walked out of the emergency room
after several hours of tests and observation following a traffic
accident, she assumed the worst was over.
After all, Martin (not her real name), a young professional,
had blue chip auto insurance with a well-known national insurer,
as well as top-of-the-line health coverage through her Palm Beach,
Fla., employer. She didn't expect the bill for her brief, noninvasive
ER stay to exceed the $10,000 personal injury limit on her auto
policy, but she gave the hospital both insurance cards just in case.
A few months later, the real nightmare began. Suddenly,
medical bills began arriving; the total would eventually exceed
$13,000. When she contacted her insurers, she found to her horror
that neither had paid her medical bills.
"It was back and forth, back and forth. Both
of my insurance companies were dropping the ball, the hospital was
dropping the ball, and that's why these bills weren't getting paid,"
It got worse. Her physicians turned her accounts over
to third-party collection agencies that soon began calling and writing,
requesting payment. And six months later with an eye toward buying
a home, Martin checked her credit report and discovered a medical
bill on it.
"It's very frustrating. When you have good insurance
coverage, you should have peace of mind," says Martin. "The
fact is that these bills are not getting paid, and I'm the one who
is suffering. It's like a second blow. It's like when you need them,
you practically have to do their job for them."
Caught in the Crossfire
Cases like Martin's have become increasingly common as more consumers
find themselves caught in the crossfire between their doctors and
their health insurance companies. Here's how it happens:
Your physician submits a bill to your health care
organization or insurance company. For whatever reason, payment
is delayed or denied entirely. Meanwhile, you quite logically refuse
to pay; after all, you're insured. You may not even know a bill
hasn't been paid.
The doctor then turns the matter over to a collection
agency. It reports the debt as delinquent to the credit reporting
agencies -- Experian, TransUnion
and Equifax -- and commences
hounding you to pay up.
"Typically, the doctor's office is not the one
reporting to the credit reporting agency, it is the collection service
that is putting the ding," says Mike Kidwell, vice president
and co-founder of Myvesta debt counseling service.
"And rightfully so. If you're not paying your bill and that
bill is unpaid, the fact that it has had to go to collections in
an effort to be paid is true and factual information."
You read that right. Even though you have health insurance,
you are ultimately responsible for your medical bills. What's more,
as unfair as it seems, once that blemish appears on your credit
report, it's going to stay there for seven years unless you can
that it is a factual error.
Consumers pay in medical disputes
Consumers find themselves on the losing end of an age-old grudge
match between the medical establishment and health insurers, one
that has taken a particularly mean-spirited turn due to administrative
issues often blamed on the HMO industry.
Doctors, frustrated with the Byzantine claims process
and slow payment habits of some insurers, have successfully lobbied
for prompt-payment statutes. Many states now require insurers to
pay up on clear claims (undisputed claims) within 45 days of receipt
or face fines, interest and restitution. In Texas alone, laggards
were ordered to pay millions in fines and restitution.
Health insurers tend to simply pay the fines, calling
the zero-error expectations of prompt-pay legislation unrealistic.
In desperation, some physicians have turned to collection agencies
to hound you, not your insurer, for payment.
That practice is deplorable, according to Charles
Inlander, president of the People's
Medical Society, an Allentown, Pa.-based consumer rights group.
"They (doctor bills) shouldn't go into collection.
This is a tactic that doctors are using to try to intimidate consumers
to push their insurance company," he says. "They should
be going after the insurance company and not you, but they know
it's easier to go after you because you get scared."
Inlander notes that some unscrupulous doctors have
used the labyrinthine health care system to double dip, collecting
on the same bill from both the patient and the insurance company.
His advice? Get angry -- then get even.
"I basically advise people to call the doctor
office and tell them you're never going to use that doctor again
and you're going to report them to the insurance department,"
he says. "It's a double-whammy. They're doing something that
is improper in the first place, and then they're really tarnishing
"Frankly, I think that doctors that do that should
be exposed, and then they should be looked into by the state in
terms of their license, in terms of shoddy business practices."
Credit health checkup
Even after patients recover, credit ratings may suffer. Julie McAdory,
branch manager for Consumer Credit
Counseling Service in New Orleans, says consumers are often
unpleasantly surprised to see unpaid medical bills turn up on their
"A lot of times after their insurance company
pays, people really don't follow through and they don't keep track
of it and don't even know that that medical expense is back there.
We see a lot of that," she says. "They may have one medical
facility and 10 to 15 entries on there from different accounts that
they aren't even aware of."
Once an unpaid bill shows up on your credit report,
you have four options: pay it, dispute it, explain it or ignore
it. Paying the bill won't erase it from your credit report, but
it will be marked paid, a far more positive entry than an unpaid
To dispute it, you're going to have to prove that
it is erroneous in fact, such as a clerical error. If you can, the
credit reporting service will gladly delete the entry.
If the ding was situational, say the result of nonpayment
by your insurer, you have up to 100 words to explain on a consumer
statement that the reporting agency will attach to your credit report.
Will that explanation make a difference to a prospective
creditor or employer?
"Yes," says McAdory. "I have spoken
to creditors and lenders in the past several years who say they
are taking those things into consideration. They are looking at
a person's situation and giving more people a break because of things
that have happened to them through no fault of their own."
Experts agree it's a good idea to pull your credit
report from all three companies on an annual basis, especially if
you have incurred considerable medical expenses. People who haven't
checked their reports in a while are "going to be shocked,"
"I was just reviewing a client's credit report
with them, it's probably eight pages, and on every page I found,
on average, five errors per page," says Kidwell. "Let's
admit it, mistakes happen. Garbage in, garbage out."
Fear of physicians
The nightmare didn't end quickly for Sarah Martin. Months after
her first encounter with credit problems related to her insurance
claims, she was contacted by yet another collection agency about
a $300 outstanding medical balance.
"What's worse, this collection agency bought
the accounts of the previous collection agency, so the original
one didn't reflect payment or something. I had to go through all
this again. Where does this end? It's ridiculous."
Although her doctor has recommended a follow-up outpatient
procedure, Martin is understandably leery.
"I'm afraid. I don't want to go through all that
again. It's medically necessary that I have it, but I don't want
to go through the hell of insurance again. And it shouldn't be that
Jay MacDonald is a contributing editor
based in Florida.
-- Updated: Aug. 12, 2003