Californians with medical debt will no longer have to worry about unpaid medical bills showing up on their credit reports under legislation signed Tuesday by Gov. Gavin Newsom, adding the nation鈥檚 most populous state to a growing effort to protect consumers squeezed by unaffordable medical bills.
The (D-Santa Barbara) and backed by Democratic Attorney General Rob Bonta, will block health care providers, as well as any contracted collection agency, from sharing a patient鈥檚 medical debt with credit reporting agencies. At least eight states have banned medical bills from consumer credit reports in the past two years. In June, the Biden administration proposed similar federal protections, but it鈥檚 unclear when the rules will be enacted 鈥 or, if former President Donald Trump is elected again, if they will be at all.
鈥淣obody chooses to get sick, and then your credit gets ruined,鈥 said Chi Chi Wu, a senior attorney with the National Consumer Law Center. 鈥淭hat鈥檚 why we encourage states to keep adopting laws. In case something goes wrong at the federal level, the states could protect their own consumers.鈥
When California鈥檚 new law goes into effect in January, it will extend these protections to credit reports used for employment and tenant screening, Wu said. This is in addition to the proposed federal ban on reporting to credit agencies that inform credit card companies and mortgage lenders.
California lawmakers noted that medical debt 鈥 unlike other kinds of debt 鈥 of credit risk, and its inclusion can depress credit scores and make it hard for people to get a job, rent an apartment, or secure a car loan.
But California lawmakers have left a glaring loophole. Patients who pay hospital bills using medical credit cards or medical specialty loans 鈥 which can come with interest rates 鈥 won鈥檛 get that debt taken off their credit report, as residents of , , and do. It’s a through late-in-the-game 鈥渉ostile鈥 amendments, which 鈥渋nfluential entities opposed to the measure prevailed鈥 in including, Lim贸n said. In a 2022 , 15% of adults said they had used a medical credit card.
Kelly Parsons-O鈥橞rien, legislative chair of the California Association of Collectors, which represents collection agencies, said the exemptions were essential because medical credit card holders can buy nonmedical items and medical loans can be refinanced with nonmedical debt, making it 鈥渋mpossible鈥 for creditors to know what鈥檚 actually a medical charge.
鈥淢ore consumers will get into situations where they cannot afford to pay, and lenders will be operating in the dark,鈥 Parsons-O鈥橞rien said.
The three largest U.S. credit agencies 鈥 Equifax, Experian, and TransUnion 鈥 said they would stop listing some medical debt, including paid-off debts and those less than $500, but millions of patients were left with bigger medical bills on their credit reports. The Consumer Financial Protection Bureau that 15 million Americans still had medical bills on their credit reports.
About report carrying some type of medical debt, which disproportionately affects low-income, Black, and Latino patients, according to the California Health Care Foundation.
have enacted legislation to protect consumers from surprise billing and medical debt, according to the National Conference of State Legislatures. Newsom, a Democrat, also signed legislation on Tuesday on all real property owned by Californians who typically earn less than 400% of the federal poverty level. It expands current state law that protects a patient鈥檚 home from debt collectors.
A 国产麻豆精品Health News analysis found that credit reporting is the most common collection tactic used by hospitals to get patients to pay their bills. A credit score ban might make it more difficult for hospitals to collect.
When Sacramento resident Sonia Hayden and her boyfriend applied for a home loan last year, she discovered her credit score had dropped about a hundred points. It had been downgraded because of an approximately $200 emergency room charge after a car accident years ago.
The 44-year-old said her insurance covered tens of thousands of dollars in medical bills but that the hospital miscoded the $200 charge and she never received a bill for it. That, she said, should also have been charged to insurance.
Hayden tried unsuccessfully for over a year to resolve the issue with her health insurer. It鈥檚 still on her credit report. She was eventually able to get a home loan, but her interest rates were higher because of her credit score.
鈥淢edical bills, they’re not on purpose, you know?鈥 said Hayden, who testified in support of the legislation. 鈥淚t was already a super traumatic accident. I almost died. And then to have this super stressful medical bill 鈥 nobody鈥檚 asking for that. It shouldn鈥檛 affect your credit.鈥
This article was produced by 国产麻豆精品Health News, which publishes , an editorially independent service of the .听
