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Medical bill denials in the United States have increased by 11% since the start of the COVID-19 pandemic, according to a recent study by Change Healthcare. Overall, health insurance companies refuse to pay nearly a quarter of the bills they receive, and it is patients, not health care providers, who often pay the price. I should know. This happened to me because of my pregnancy.
A few declined medical bills can inflict serious and costly damage to your financial life; a credit score drop of 150 points can do that to a person. But if you know what to expect and what collection agencies are allowed and not allowed to do, you can mitigate the problem. In the world of credit and finance, knowing your rights can make all the difference.
Medical bills pile up, especially during pregnancy.
In early 2020, as the coronavirus first swept the globe, our family had another surprise in store: At 39, I found out I was pregnant.
I am battling a fairly rare neurological disease called pseudotumor cerebri (PTC). With PTC, your cerebrospinal fluid pressure can increase, causing brain swelling, optic nerve swelling, headaches, and vision problems. In other words, it’s a lot of pain and not a lot of fun. So the pregnancy itself was difficult and the doctors classified me as high risk.
Our baby boy was not due until the end of the year, but complications from the PTC turned what was supposed to be a routine maternity checkup into an emergency C-section. Baby Jayden made his world debut about six weeks early, and after a quick kiss from mom and dad, he was rushed to the NICU.
Our family was lucky. Despite my high-risk pregnancy, my son’s premature delivery, and being in NICU, everyone weathered the storm and is mostly healthy.
But the experience — along with a kidney operation for my daughter that happened around the same time — left my family with over $200,000 in medical bills. We had medical coverage in place, but our plan has a $3,000 deductible that resets each year.
At the end of 2020, my family was responsible for $6,000 in medical deductibles. Also, most weeks we had hundreds of dollars in co-pay due. Of course, many people’s experiences with health care bills are far worse, but even those bills have taken a toll on our family budget.
And even if you’re lucky enough to have health coverage, like me, billing errors can happen. And it happened to me again and again. Payments slipped through the cracks; in my case, the provider’s billing department never sent them to my medical coverage provider. Coding errors have occurred. The claims were dismissed.
According to the LBL Group, 80% or more of medical bills contain errors. And when billing issues arise, surprise (expensive) medical bills often follow. So on top of those copayments and the $6,000 deductibles we owed, even more bills were flooding my mailbox. And my phone was exploding with calls.
80% or more of medical bills contain errors. And when billing issues arise, surprise (expensive) medical bills often follow.
The importance of follow-up
I was a mother of three children, had a full-time job and was breastfeeding a premature baby. I couldn’t find enough time in my schedule to take a shower most days; the idea of sorting out billing errors was a non-starter.
However, once the baby was a few months old, I finally found the time to contact billing services and my medical coverage provider, hoping to get them to work together. Of course, because of the pandemic, it’s been harder than ever to get someone on the phone to try to resolve billing issues; I often sat waiting for over an hour.
After hours on the phone and dozens of emails, I thought I had it all figured out. I did not have.
Dealing with collection agents
For the first time in my life, a collection account appeared on my credit reports. In fact, there were two of them. And to add insult to injury, these accounts dropped my credit score by 142 points. Because I subscribe to several free credit monitoring services, I found out about the problem the same day it happened. I immediately called the collection agency.
The debt collector had a small list of several unpaid bills from the same hospital. Note that a hospital usually does not bill you for all services at once; in my case, there were a lot of small bills for services such as anesthesia, drugs from the hospital pharmacy, surgeon’s fees, pediatrician’s fees, etc.
Once again, all these bills have been Assumed be covered by my medical sharing plan. But numerous billing errors had left them unpaid.
I contacted my medical coverage provider and asked them to call the hospital with me on the phone. Together, we were able to go through the list of accounts that the billing department had turned over to collections. The hospital agreed to recall all but two of the bills and submit them to insurance with the correct billing code (you know, like they should have done in the first place).
In all honesty, I didn’t feel like I owed the two bills the hospital refused to call back. But since they were only a few hundred dollars and I could happily afford them, I decided to make a settlement offer to the collection agency.
When the collection agency informed me that they were recording our call, I revealed that I was also recording on my end. The debt collector accepted what is called a payment settlement for deletion. As long as I paid both accounts (minus a 20% discount I had negotiated), they were asking the credit bureaus to erase the account from my credit report. For good measure, I requested a copy of the settlement agreement in writing.
In 2020, the Consumer Financial Protection Bureau received nearly 83,000 complaints about unfair debt collection practices. This figure represents an increase of 11% compared to the agency’s figures in 2019.
I don’t believe that all collection agencies are bad. But debt collectors have a bad reputation for a reason; there is a lot of manipulation and outright dishonesty in the debt collection industry.
In my case, the agency had promised to request the removal of the account from my credit report after receiving their payment, but they lied. Surprise! Instead of asking the credit bureau to erase the account, the collection agency updated the balance. My (almost) $200 collections that I had settled for $160 now showed a new balance of $40 – the 20% discount I had negotiated.
These two updates to my credit file balances lowered my credit score by an additional eight points. At that time, the two collection accounts had cost me 150 points less than my credit score.
Fortunately, I had recorded the conversation with the collection agency. So I called the company and politely asked for a supervisor. At first, the supervisor argued with me. That’s when I let him know I knew my rights: The Fair Debt Collection Practices Act (FDCPA) prohibits lying to someone in an attempt to collect a debt. Promising to delete an account in exchange for payment and not following through was illegal.
When the supervisor pushed back, I encouraged her to go back and listen to the recording. I also let her know that if she did not correct the error, I would contact a consumer protection attorney with my copy of the registration and settlement offer letter that I had on file.
Eventually, the supervisor confirmed that she had listened to the recording. She agreed to send deletion requests to the three major credit bureaus: Equifax, TransUnion and Experian.
The next day I received notifications from my credit monitoring services. My credit score had rebounded 150 points to 812.
Your credit matters
I’m so glad I protected myself by writing and filing my settlement appeal with the collection agency. Having proof that the collection agency had promised to delete these accounts was the silver bullet I needed to resolve a frustrating situation.
If you’re wondering how big a 150 point credit drop really is, here’s an example: My husband and I applied for a new mortgage the month after the medical collection incident. The FICO Loan Savings Calculator provides estimates of the APR you may qualify for for a mortgage, based on your credit score:
That difference might not seem like a huge amount, but consider this: the median sale price of a home in November 2021 was $358,000, according to the National Association of Realtors. On a 30-year fixed mortgage for this amount, here’s how much home loans would cost you with these two different APRs:
A 3.263% APR would make your monthly mortgage payment $1,561. you would pay $203,814 in total interest (if you have never moved or refinanced).
A 3.876% APR would equal a monthly mortgage payment of $1,684. The total interest on the mortgage would be $248,115.
The loan with the higher interest rate would cost you $123 more each month. Over the term of the loan, you will pay $44,301 in additional interest charges.
A lower credit score can cost you in other ways as well. You could pay more money each time you apply for financing. And if the credit damage is severe enough, you may have trouble qualifying for certain loans and credit cards.
At the end of the line
Dealing with a pile of medical bills (or any other debt) is no fun. I can confirm this. But if you ignore the problem, it is ultimately you who will pay the price.
So know your rights, and if you ever find yourself in a situation like mine, be as proactive as possible. Take notes, record calls (and indicate that you do), and put everything in writing when talking to creditors or debt collectors. Then, if things go wrong, you’ll be in a better position to seek legal help if you need it.