California Medical Debt Collection Laws – Overview
If you receive a notice from a debt collector it is important that you respond to the letter as soon as possible. This is true in case you do not owe any debt.
Otherwise, the debt collector will keep pursuing the collection and even sue you. This negative information may cause your credit to suffer.
The new medical debt law in California came into effect on 1st January 2021. The three major credit reporting agencies will not be including medical debts under borrowers’ credit reports effective from 3/30/2023.
According to this law, debt collection agencies licensed to work in California will have restrictions on the extent of action they can take to collect a medical debt.
In addition, their healthcare clients will now need to have a written policy on how they hand over accounts to third-party collection agencies, among other major changes.
Details of the New California Medical Debt Collection Laws
The new law is titled ‘Assembly Bill No. 1020 and puts new restrictions on hospital debt collection. It also raises the income level for hospital charity care eligibility to 400% of the federal poverty level.
The California Association of Collectors Inc. (CAC) had been advocating for amendments to the A.B. 1020 during the legislative process on top priority.
Displaying Notice of Debt Collection Criteria
The new legislation requires hospitals to prominently display a notice of their policy regarding financially qualified and self-pay patients on their website, along with a link to the policy.
The original A.B. 1020 amends and adds several California statutes. This is an effort to impose new limitations on the collection of certain hospital debts.
This includes laws that dictate when and how debt collection agencies may buy and collect hospital debt.
Amending Section 127425 of CHSC
Once in effect, the new law will successfully amend Section 127425 of the California Health & Safety Code.
It will prohibit hospitals from selling patient debt to debt collectors who are absent in certain conditions. It also imposes new rules for hospitals before they can assign a bill to a collection agency.
Besides this, the rule increases the time that hospitals must wait before assigning debt collection to agencies to a period of 6 months, or 180 days.
This rule applies to reporting debts to consumer credit agencies and filing collection action for non-payment.
Additional Notice to Patients
Under the new law, hospitals are prohibited from assigning hospital debt for collection or sale of a hospital debt to a debt collection agency unless and until the hospital has sent the patient a notice which includes the following details:
- The dates of service of the medical bill that the hospital plans to assign to a debt collection agency.
- The name of the entity (a debt collection agency) to which the hospital will assign or sell the bill in question.
- A statement detailing how to obtain an itemized bill from the hospital.
- The name and plan type of the health insurance carrier of the patient on record with the hospital at the time of service, or, a statement that the hospital does not have the information.
- An application for the hospital’s charity care and financial assistance initiatives.
- The dates on which the hospital or collection agent originally sent the patient a notice about applying for financial assistance, and a financial assistance application, along with the date if applicable, on which the hospital made the decision to provide the financial assistance application to the patient.
Amending California Civil Code Section 1788.14
The new law also amends the current California Civil Code Section 1788.14. It prohibits debt collection agencies from collecting medical debts without including the first written communication with a consumer.
The hospital will now need to send a copy of the notice prior to assigning the debt collection task to a debt collection agency.
In addition, debt collectors are required to attach a statement that the debt collector will wait 180 days from the date of notifying the consumer for repaying the original amount owed to the hospital.
This should also be included in the first written communication from the debt collection agency to the consumer.
This should be done before reporting adverse information to a credit reporting agency, or before filing a lawsuit against the consumer for non-repayment of hospital bills.
Apart from this, the new law also adds section 1788.185 to the California Civil Code. It imposes restrictions on the legal collection of debts that originated with a general acute care hospital.
These new provisions in the law specify certain factual allegations that need to be included in any complaint filed for legal action in a hospital debt collection case.
Besides this, the new rule requires hospitals to attach documents relating to applications of financial aid programs to any complaint for the collection of hospital debt.
If you believe that a debt collection agency may be possibly breaking a law, you can report your complaint to the Attorney General’s Office at the official website using this link https://oag.ca.gov/contact/consumer-complaint-against-business-or-company.
It is important to consult with a lawyer before proceeding to file a complaint against any debt collection agency.
I am a dedicated healthcare researcher and an enthusiast specializing in medical grants, medical education and research. Through my articles, I aim to empower healthcare professionals and researchers with valuable insights and resources to navigate these critical aspects effectively.