When Health Insurance Doesn’t Cover Your Bills

Health insurance is supposed to protect you from financial ruin in the event of a medical emergency. However, for millions of Americans, this definitely isn’t the case.

According to the Commonwealth Fund Biennial Health Insurance Survey, 43.4% of U.S. adults ages 19 to 64 were inadequately insured in 2020, as measured by high out-of-pocket costs and deductibles relative to income. More than a third of that group reported struggling to pay medical bills, and 35% were making installment payments on medical debt. Among those reporting problems with medical debt, 40% received a lower credit rating as a result, 37% exhausted savings, and 26% found themselves unable to pay for basic necessities.

Medical debt is the most common collection item reported on consumer credit reports, and estimates of U.S. medical debt in collections range from $81 billion to $140 billion, according to the Consumer Financial Protection Bureau (CFPB). According to a 2016 survey by the Kaiser Family Foundation and The New York Times, more than one in four Americans had trouble paying a recent medical bill. In 2014, half of those with medical debt as the only collection category on credit reports had otherwise clean records with no indication of serious past delinquencies, according to the CFPB. 

Consumers not saddled with medical debt may still struggle with excessive medical bills. Excluded services, out-of-network providers, and excessive copays can leave even those with health insurance coverage coping with costly bills for medical care.

Key Takeaways

  • Many people with health insurance struggle to pay their medical bills or have medical debt listed on their credit reports with no other types of debt. 
  • There are steps you can take to reduce the risk of incurring high medical bills, including screening potential providers, confirming the accuracy of your insurance information, and requesting itemized bills.
  • Should you face an exorbitant medical bill, you might consider making payment arrangements with your provider, inquiring about financial assistance programs, or negotiating the final balance.
  • Amid a political push to minimize the burden of medical debt, consumer credit reporting agencies in March 2022 unveiled measures they said would remove nearly 70% of medical debt collection items from credit reports.

How to Curb Costly Medical Expenses

Here are some tips for avoiding costly medical bills.

Screen Providers

Before receiving services, confirm with the provider that they are in your insurance plan's provider network. For more advanced services, such as surgery, confirm that all the participating providers are also in the network.

Otherwise, you could incur hefty fees because out-of-network providers (for example, the anesthesiologist involved in your surgery) don’t have to abide by the rates negotiated by your insurer.    

Confirm the Accuracy of Insurance Information

Each time your health insurance changes, share the updated information with your provider so that your claims are not processed using the old policy still on file. If you don’t, your claim will be rejected, and you may have to cover the cost of treatment.

While it’s fairly simple for the billing staff to resubmit the claim to your new insurance company, you could still end up in the hot seat with the collections department if you don’t get everything straightened out in time. Even worse, you might end up paying for services that should have been covered under your policy.

Request Itemized Bills

Medical billing specialists process thousands of claims, so mistakes are bound to happen. Various groups have provided estimates about the extent of this problem, ranging from an error rate of 7.1% for paid claims according to the American Medical Association to reports of errors on up to 80% of claims from billing review groups, as reported by CNBC.

For this reason, you should always request itemized bills and carefully review each line for duplications, services you didn’t receive, price discrepancies, and any other issues. If you spot inaccuracies, immediately reach out to your provider’s billing department to resolve any issues.

Compare Quotes for Services

Who says you can’t shop around for medical providers? In fact, the Affordable Care Act requires hospitals to list prices for all the services they provide. Unfortunately, a patient entering hospital treatment for an emergency medical condition can't possibly know what services will be needed, much less if they're available at a lower cost elsewhere, limiting the utility of such lists as comparison shopping tools.

Only 34% of respondents in a 2021 poll even knew such lists are available, and 53% said they understood their insurance plan only somewhat, versus 33% who said they understood it completely. The same poll of the insured found that more than 4 in 10 have received an unexpected medical bill and 75% were concerned about financial hardship as a result of medical expenses.

While the U.S. healthcare system is clearly a long way from useful price transparency, the more questions about costs, coverage, and provider alternatives you ask, the less likely you will be to face a nasty surprise later. Compare the out-of-pocket costs among providers. And keep in mind that hospitals and emergency rooms tend to charge much more than outpatient centers and walk-in clinics for an identical service or procedure.

What to Do If You're Buried in Medical Debt 

If you're struggling with medical bills, here are a few suggestions: 

Make Payment Arrangements

Payment plans can be a viable option if your medical bills are too high to be paid off by the due date. However, it’s important to make timely payments and contact the medical provider immediately if your financial situation changes.

Inquire About Financial Assistance Programs

Some hospitals and medical providers have in-house programs or are connected with organizations that provide assistance to patients in financial need. Speak with the billing department to learn more.

Negotiate the Final Balance

As a last resort, you can meet with the billing administrator and attempt to negotiate the final balance. Many hospitals and other medical providers would rather collect a partial payment than none at all.

Special Considerations

In March 2022, the three main consumer credit reporting agencies—Equifax, Experian, and TransUnion—announced measures they said would remove nearly 70% of medical collection debt tradelines, or items, from consumer credit reports. These include:

  • Removing medical collection debt that has been paid off from consumer credit reports, effective July 1, 2022.
  • Increasing the length of time before medical collection debt appears on a consumer credit report from six months to a year, also effective July 1, 2022.
  • Starting in the first half of 2023, the agencies will stop listing on credit reports medical collection debts below $500.

The changes came amid renewed criticism of the medical debt burden and collection practices from the Biden administration and regulators including the CFPB. In April 2022, the Biden administration unveiled medical debt initiatives including a review of the billing and collection practices of 2,000 healthcare providers, a CFPB review of whether medical debt should ever be included on a credit report, and changes in government loan programs' underwriting standards to eliminate consideration of medical debt.

The Bottom Line

Carrying adequate health insurance coverage isn’t always enough to keep the rising costs of medical care under control. Fortunately, there are proactive steps consumers can take to understand their coverage, curb costs and safeguard their rights when it comes to medical billing and debt collections.

Article Sources

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  1. The Commonwealth Fund. "U.S. Health Insurance Coverage in 2020: A Looming Crisis in Affordability."

  2. Consumer Financial Protection Bureau. "Medical Debt Burden in the United States," pp. 5-6.

  3. Kaiser Family Foundation and The New York Times. "Medical Bills Survey," Page 3.

  4. Consumer Finance Protection Bureau. "Consumer Credit Reports: A Study of Medical and Non-Medical Collections," Page 7.

  5. CNBC. "Rx for a Painful Medical Bill: Don’t Pay It...Just Yet."

  6. The Commonwealth Fund. "Hospital Price Transparency: Making It Useful for Patients."

  7. Mitre. "Mitre-Harris Poll Survey: 75% of Health-Insured Individuals in the U.S. Concerned About Medical Bills."

  8. TransUnion. "Equifax, Experian, and TransUnion Support U.S. Consumers With Changes to Medical Collection Debt Reporting."

  9. The White House. "Fact Sheet: The Biden Administration Announces New Actions to Lessen the Burden of Medical Debt and Increase Consumer Protection."