It goes without saying that medical bills sometimes can come as a shock to people who don’t have enough health insurance to cover them. Not being able to afford the bills puts people under a significant amount of debt which can make things really stressful and overwhelming. As per research, more than 50% of the US citizens have medical debts. People in the US owe at least $220 billion altogether which shows that medical debt is quite common and because it’s inevitable, you can’t really do anything to stop it.
Now for someone who is already struggling through a financial crisis, it can become really difficult to pay such huge debt amounts. The solution? There are multiple debt relief options out there specifically for people who have outstanding balances to pay off but their financial situation just doesn’t allow them.
Is It Possible To Settle A Medical Debt?
Among all the debt relief options, debt settlement is the most popular one especially because it helps reduce the debt. For example, in debt consolidation, you take up a new loan to pay off your other creditors and you don’t really save money here. But in a debt settlement, you negotiate with your creditor on lowering the debt amount.
As far as medical debt is concerned, well, yes, you can definitely negotiate with your lender and pay less than what you originally owe. In order to achieve your settlement goals, you first need to understand your medical bills to prepare a better proposal.
Understanding Medical Bills In Detail
Unlike other debts and bills, medical bills come with multiple complex terms that are a little confusing for someone who isn’t related to the field. For example, the term EOB means “Explanation Of Benefits”. It’s a document that your insurance company sends you to explain the costs and benefits they cover for your particular medical service. There are more of such terms like copayment, deductibles and coinsurance. Let’s explain them all for you;
Deductibles: It’s the amount that you have to pay out of your pocket before your insurance comes into action. You should always keep a track of your deductibles in your yearly plan.
Copayment: Copayment is the fixed amount that you have to pay for a particular medical service like a doctor’s visit or a prescription medicine. It’s a relatively smaller amount as compared to the overall cost of the service.
Out Of Pocket Maximum: You have to pay a maximum amount for the services covered each year. After you reach the figure, your insurance will then take care of the rest of your 100% costs.
Coinsurance: After meeting your deductibles, the percentage of the medical bills that you are responsible for is known as coinsurance. For example, if your coinsurance is 20%, you pay the amount and then your insurance will cover the rest of the 80% for you.
What Happens When You Have Unpaid Medical Debt?
When you have piled up unpaid medical bills, the provider will first make attempts to collect the amount on his own. It can be through emails, messages, calls or he might just ask you directly to pay the amount in full or settle it.
If you still don’t make your payments, the provider will then assign your debt to a debt collection agency and this is where things can become really stressful. If you are lucky, the collection agency will simply ask you the same, either pay in full or opt for a debt settlement. However, debt collectors can sometimes really use relentless tactics to get the money out of your pocket. If you have large unpaid bills, the agency can sue you for it, can garnish your wages or even seize your bank accounts to recover the outstanding amount.
The Impact Of Unpaid Medical Debt On Your Credit Report
If a collection agency is dealing with your medical bills then yes, the collections account can really hurt your credit score and you might face several financial restrictions. Most importantly, a poor credit score can really affect your chances of getting a new loan, a new job and sometimes it even causes housing and rental problems.
Luckily, you do get some ease with the new medical debt rules;
- No medical debt will be added to your credit report until it’s a year old.
- If you owe less than $500, your debt won’t appear on your credit history
- Once you pay the medical debt, it won’t show on your credit report at all
Even if your debt is under $500 and is old, it still doesn’t mean that you should ignore your outstanding balance. You should pay it or enter into a debt settlement agreement with the creditor as soon as you can. Yes, the old and low debt amounts don’t show on your credit report but you should know that creditors can request your records of unpaid bills anytime and they can easily find out if you’ve ever had debt that you weren’t able to pay off.
How To Negotiate Your Medical Bills?
No matter how big your medical bills are, you shouldn’t ever put them aside and ignore them. Instead, it’s best that you pay it off as soon as you can or start a negotiation if you can’t afford it.
Here’s a step by step guide that explains how you negotiate and manage your medical bills;
1-Reviewing Your Bills For Any Inaccuracies
The first thing you need to do is to check if your medical bill is correct. There can be multiple issues with your bill like incorrect coding or double billing. There can be coverage disputes and insurance issues too so you have to first identify them and if you find any then make sure to dispute them timely. This seems like an overwhelming process but it can save you from overpaying in the long run.
2-Negotiating For A Lower Settlement
If your financial condition doesn’t allow you to pay the medical debt then it’s best to ask the primary provider if there are any discounts he offers on the debt. You need to learn the art of negotiation here because with the right tactics, you can definitely convince your provider to grant you some relief. Some hospitals even offer debt relief programs to those who can’t afford the bills so it’s important to first inquire about it all.
3-Seek Outside Assistance
If your provider or your insurance company isn’t helping you with your bills then it’s important to try and seek assistance from the government or non profit organizations. There are multiple state and federal resources that can help you manage your medical debt without any hassle. Also, check if the company that you work at offers any medical assistance programs.
4-Ask For A Payment Plan
If not settlement, you can ask your provider to offer you some sort of a payment plan that can help break the large bill amount into smaller installments. Ask for interest free plans so that you don’t end up paying more than what you owe in the longer run.
5-Consider Applying For A Medical Credit Card
There are credit card companies that offer medical credit cards, you just need to find the right ones that will help you pay your medical bills in installments. Spreading payments over time can help you pay your debt easily as you’ll just have to pay the minimum monthly installments. Just make sure to know all the terms and conditions before getting the card. For example, some credit card companies have a promotional period which is interest-free. Try to pay off your debt before that period ends to save yourself some money.
Overall Verdict
If you just got caught off guard with a huge medical bill and if you can’t pay the amount off then it’s best to negotiate on a lower settlement with your provider. Medical emergencies and bills are always inevitable and if you can’t afford them then instead of completely ignoring the debt and creating severe problems for yourself, it’s best to at least pay a lump sum amount and sort your financial situation on time.
FAQs
Q1. What Is The Minimum I Can Pay On Medical Bills?
There are rumours out there that you need to pay a minimum of $5 on your medical bills and this is completely a myth. There’s no legal minimum figure set for medical bills.
Q2. What Is The Best Way To Handle A Medical Debt?
The best way to handle medical debt is to set up a payment plan. When you break down your debt into smaller monthly installments, it just gets a lot easier to become debt-free in a shorter time span.
Q3. Does Medical Debt Affect Credit Score?
Yes, unpaid medical debt can reduce your credit score but only if it’s reported to the credit bureaus after a certain time passes. With the recent changes, it’s possible to remove some medical debts off your credit reports.
Looking for debt relief assistance with your medical debt? Try Mountains Debt Relief to lead a better, sounder and debt-free financial future.