At a Glance
In this article you will learn the process of what happens when a medical bill goes to collections and what your next steps should be if this happens to you.
Medical bills always seem to be last on the priority list when it comes to personal finance. Patients often assume that the insurance company will take care of them. They also believe those pesky co-pays and uncovered services are insignificant. Unfortunately, those are valid bills, and they add up as time goes by. Eventually, they get sent to collections.
Learning how to payoff medical bills on time will help you avoid collection actions, but there are times when economic hardships prevent that from happening. It’s best to be proactive in those scenarios. Reach out to the medical provider to ask for a payment plan or hardship forgiveness. If that doesn’t work and the account goes to collections, expect the following:
1. Notification by the Collection Agent
When your medical bills become past-due, the medical provider will send you notices. Those notices stop when the account goes to collections. The collection agent will attempt to contact you by phone or mail to negotiate a payment plan. Don’t ignore these calls. You’ll have a small window of time to prevent medical bill collections from being reported to the credit bureaus.
2. Credit Bureau Reporting of Collection Actions
The three major credit bureaus, which are Experian, TransUnion, and Equifax, have a certain amount of latitude in how they report medical bill collections. Experian waits until the collection account is 180 days past due before displaying it on your credit report. That’s your window for negotiation. Take advantage of it and work with the collection agent.
3. Pursuing Medical Debt Consolidation
This is a step best taken before the account goes into collection, but it could also be an option for getting the collection agent off your back. There are several online lenders who specialize in medical debt consolidation. Your local bank or credit union might be able to help also. If you own a home, you could take out a home equity loan to pay off the debt.
4. Asking for a Debt Settlement Amount
Collection agents typically enter negotiations with the intent of collecting at least some, but not necessarily all the money that you owe. They know that the fact that you’re in collections in the first place means you’re struggling financially. Ask for a settlement amount. In some cases, the collection agent will agree to take less and space that amount out over several payments.
5. Debt Relief and Debt Forgiveness for Financial Hardship
If you were treated at a non-profit hospital, the IRS requires that the provider gives you a 240-day grace period to apply for financial assistance. If the account went into collections prior to 240 days, the collection action is in violation. Check your dates. If you have a financial hardship, or are disabled, apply for debt forgiveness during that window of time.
6. Check the Statute of Limitations
Each state has a statute of limitations that dictates how long a collection agent can come after you for an unpaid medical bill. In most cases, that time frame is seven years. If you have medical bills still outstanding after the statute of limitations has expired, the collection agent and the medical provider can no longer take legal action against you.
7. Seek Help from a Medical Bill Advocate
There are certain things you should avoid when trying to pay off medical bill collections. One is paying with your credit card. That creates more debt. Another is negotiating large settlements without the help of a medical bill advocate. These are people with knowledge of how the medical billing industry works. Seek one out to help you with your medical bills.
Frequently Asked Questions
How long can a collection agency collect on a medical bill?
The statute of limitations for medical bill collections is different in every state, but it generally ranges three to seven years from the time the first bill is issued.
Should I pay medical bills in collections?
If the bill is still owed and the statute of limitations has not expired, you should pay the bill.