70% of Medical Collection Debt Will Leave Consumer Credit Reports
Equifax, Experian, and TransUnion will adjust their medical collection debt reporting to reduce the amount of debt displayed on consumer credit reports.
Three nationwide credit reporting agencies have announced that they will remove nearly 70 percent of medical collection debt tradelines from consumer credit reports to help ease the burden that accompanies past-due medical bills.
Equifax, Experian, and TransUnion will also make additional adjustments to their medical debt collection reporting. Starting July 1, 2022, the credit reporting agencies will no longer include paid medical collection debt on consumer credit reports.
In addition, the companies plan to increase the time before past-due medical debt collection appears on a consumer credit report from six months to one year. According to the press release, this will allow consumers to have more time to communicate with their health plan or healthcare providers to address the unpaid debt before it shows up on their credit report.
Starting in the first half of 2023, the credit reporting agencies will stop including medical collection debt tradelines on consumer credit reports altogether for past-due debt under $500, the companies said.
Two-thirds of medical debts result from one-time or short-term medical expenses stemming from acute medical care, according to Kaiser Family Foundation data cited in the press release.
After conducting a review of medical debt prevalence on credit reports, Equifax, Experian, and TransUnion announced these adjustments to medical debt collection reporting. What’s more, the companies said the move would help relieve some of the financial and personal stress consumers faced during the COVID-19 pandemic.
“Medical collection debt often arises from unforeseen medical circumstances. These changes are another step we’re taking together to help people across the United States focus on their financial and personal wellbeing,” Mark W. Begor, chief executive officer of Equifax; Brian Cassin, chief executive officer of Experian; and Chris Cartwright, chief executive officer of TransUnion, said in a joint statement. “As an industry, we remain committed to helping drive fair and affordable access to credit for all consumers.”
This decision from the country’s three largest credit reporting agencies to limit medical debt collection inclusion on consumer credit reports comes shortly after recent data revealed the severity of the situation.
In 2021, consumer credit reports disclosed around $88 billion in past-due medical debt, a February 2022 report from the Consumer Financial Protection Bureau (CFPB) found. About 43 million credit reports showed medical debt collections, with most debt tradelines under $500. In addition, 20 percent of households reported having medical debt.
When credit reporting agencies list the medical debt on credit reports, it could lower consumer credit scores and lead individuals to face barriers in accessing credit, employment opportunities, or housing. It could also push consumers to avoid medical care for fear of furthering their debt.
In particular, younger Americans have faced the brunt of past-due medical debt. For example, around half of Millennial and Generation Z individuals reported that their medical debt hurt their credit score and caused them to cut back on certain spending habits, a survey from HealthCare.com found.
Additionally, data from Discover Personal Loans revealed that most consumers faced more than $2,000 of medical debt in 2021.
The removal of medical debt collections from consumer credit reports could help relieve financial stress for individuals, especially since medical debts are less likely to predict future payment problems than other debt collections, according to CFPB. Additionally, medical debt on credit reports may not always be accurate due to overbilling or multiple charges for the same visit.
(Note from your Revenue Cycle Management partner at ebix, Inc. – We are always at the forefront of industry insights and believe this announcement from Victoria Bailey, March 2022 of revcycleintelligence.com, will be of interest to you.)