Cathy Munzer is a single mother who lost her health insurance during the coronavirus pandemic. Munzer, who was a yoga and fitness instructor at two major Manhattan gyms, was fired in March and is struggling to find work.
Now her medical bills are in collections after she fell behind on payments for treating kidney stones in an emergency room.
After that, she started paying $ 200 a month for health insurance through Fidelis Care, a New York-based health insurance company, but it came with a $ 2,000 deductible. That has further increased her medical costs due to out-of-pocket expenses. Every time she’s visited a doctor since then, she’s paid $ 150 per visit, she says.
‘This is going to bankrupt me. My biggest fear is that my savings will run out, ”says Munzer, 53, who has also postponed oral surgery because her insurance doesn’t cover it. “What happens when unemployment ends? How will I survive? “
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Medical debts are piling up as millions of unemployed Americans are struggling to make ends meet after losing health insurance after a historic spate of layoffs this year.
In August, consumer finance company Credit Karma conducted an analysis of nearly 20 million members in the US and found that they have a total of $ 45 billion in medical debt collection cases, which equates to an average of approximately $ 2,200 in debt per member.
Medical debt has increased further during the pandemic, up 7% from late last year and just over 3% since the pandemic started, Credit Karma said. Experts expect it to continue to rise in the coming months as there is a 180-day delay before unpaid medical debt can show up in consumer credit reports, said Colleen McCreary, chief people officer at Credit Karma.
“This is a lot of money when you consider that nearly half of Americans have not saved $ 400 in an emergency,” McCreary says. “What’s worse is that this number is expected to increase in the coming months as Americans begin to regulate their finances in the wake of the pandemic.”
Unforeseen medical expenses can drive people from the doctor to the collection agency. A separate survey during the pandemic found that 56% of adults in the U.S. had medical debts sent to debt collections and nearly two-thirds owe less than $ 5,000, while 5% owe more than $ 50,000, according to one Debt.com Survey performed from June 17 to July 6.
Hospitalization accounted for a quarter of the medical debt, the study found, followed by diagnostic tests for X-rays, MRIs and lab costs (22%), emergency room visits (19%) and doctor visits (15%).
“We often hear horror stories about chronic conditions or complicated surgery that push medical costs to shocking levels,” said Don Silvestri, president at Debt.com, in a note. Even smaller amounts can overwhelm your income and savings. The result is that a debt collection agency is chasing you. ‘
Two-thirds of those filing for bankruptcy cite medical problems as a factor, according to a study in the United States last year American Journal of Public Health including Americans who filed for bankruptcy between 2013 and 2016.
For those struggling to pay medical bills, here are ways to minimize the financial damage:
How do you prevent medical debts from being sent to debt collections?
Best practice is to get in touch with a medical provider and insurance company early on before sending an account to debt collection. Some consumers may not realize they can negotiate with medical providers to find the best ways to pay off their debt, experts say. In fact, about 60% of respondents in the Debt.com survey attempted not to negotiate medical debt payments or their bills, while nearly 35% did. Just under 5% used a medical billing attorney.
What actions do you need to take once an account goes to collections?
First, make sure the medical bill is legit to avoid scammers. According to credit rating agency Experian, a debt collection agency must send you a written explanation of your invoice within five days of your request. If there are any errors or the bill was incorrectly sent to collection, dispute it or contact the medical provider and insurance company to resolve the issue. Debt collection agencies can offer repayment plans and may be willing to accept a lower payout, Experian says.
How do medical debts sent to collections affect credit scores?
According to Experian, there is a 180-day wait for unpaid medical debts to show up on consumers’ credit reports. When sent to debt collections, medical debts can have a negative effect on credit scores and can remain on a report for up to seven years.
Newer credit score models, including FICO 9 and VantageScore 4.0, weigh medical collections less than other types of collections, so they don’t affect a person’s credit score as much. However, not all creditors use these new scoring models, so medical collections can still hurt your ability to get credit in the future.
If a consumer is in a situation where they are struggling to pay off multiple forms of debt, including credit card or loan debt, they may want to consider addressing those payments first as they come with much higher interest rates, McCreary says.
Avoid using a credit card to pay off medical debts, experts say. Since medical debts don’t typically come with late fees and require little to no interest, exchanging them with high interest credit card debt isn’t the best financial move. A higher balance means a higher credit utilization ratio, which negatively affects your creditworthiness.
What health care options are there for those who have lost coverage?
For those and their husbands who lost health insurance due to a job loss, check out the options for purchasing a different health insurance plan, McCreary says.
COBRA is a federal law that allows Americans to continue health insurance from their previous employer for up to 18 months after losing their job. The provider’s coverage and network remain the same, but participants pay a premium in return for their coverage. But some could be hit with a hefty bill as their employer no longer has to contribute to their premium.
Unemployed Americans have 60 days after losing their job to decide whether to opt for COBRA coverage.
What payment options are available for medical bills?
There are several payment options to consider, but the most common method is to negotiate a payment plan with your healthcare provider, but be sure to inquire about possible associated costs to make sure it’s an affordable option, McCreary explains. from.
Financial support. Hospitals sometimes have financial assistance programs to help patients get the care they need. Qualification criteria vary, but these programs usually take into account income, assets, and whether the care or treatment received is a medical need, McCreary says.
Tapping into equity. As we entered 2020 with a record equity amount, homeowners may want to look into home equity options such as a HELOC or cash-out refinance, McCreary said. But it can come with risks. HELOCs allow consumers to borrow money with a revolving credit line against the equity of their home.
Medical loan. Medical loans can be unsecured personal loans meaning they do not require collateral, but applications for these types of loans focus on factors such as credit history and income, so this option should be for those who are in a stable financial situation.
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