Excellent credit scores are in the 800 range. However, it is easy to fall from this rating if you have unpaid and overdue medical bills. Medical offices usually have a “Pay in Full” policy that requires patients to pay for their services immediately after the service, or even before. If you don’t have insurance and will be paying out of pocket, frequently you can receive a discount if you pay at the time of the service. If you do not pay for the medical services on time and do not make arrangements with the billing department, typically after six months your bill will be sent to a third-party debt collector.
Third-Party Collector Gets Involved
Once the third-party debt collector receives the bill, they then report it to the three credit bureaus. From here on, it becomes impossible to remove the entry on your credit report. Your credit score and your healthcare are therefore closely related. When you try to buy a house or car, or take out other types of loans, your credit score plays a big factor in whether or not you will get the loan. If you do receive the loan, your credit score will be a determining factor for the interest rate.
There has been backlash, however, from people who feel that when it comes to credit cards and borrowing at will, individuals have a choice and should therefore be held responsible for their financial decisions. But when it comes to medical bills that end up with collection agencies, there should be some kind of forgiveness. Nobody decides when they will need medical attention, and medical care is not an optional expense, particularly in the event of an emergency.
Errors and Mistakes by Medical Billing and Insurance Companies
Some of the medical bills that end up at collection agencies stem from insurance and hospital mistakes and errors. The individual is sometimes not even aware about their credit score dwindling because of these snafus made by medical providers. This is why the federal government mandates that every person is entitled to a free credit report each year. In the event of identity theft, it is even possible for these medical bills to belong to another individual entirely. Check your credit report regularly; this cannot be emphasized enough.
Even people who are covered by health insurance are not exempt from credit score downfalls. When a person receives medical care, the provider sends the bill to the insurance company. Sometimes the insurance company will refuse to cover the charges, and because of the delay in payment the provider may grow impatient and report the bill to a third-party collector. This is another reason for the need to differentiate medical bills from other bills.
Future Medical Bills and Credit Scores
The Fair Isaac Corporation is an organization that seeks to correct this growing problem. It has developed a system called medFICO and this helps medical providers check a potential patient’s record, which helps them determine if they will be able to pay a medically related debt. There are opponents to this who claim that it is a source for identity theft.