Medical Debt in Collections. 

Under the laws governing collection agencies, "medical debt" means any obligation for the payment of money arising out of any agreement or contract, express or implied, for the provision of health care services. 

A health care provider or health care facility may sell or assign medical debt to a collection agency no sooner than 120 days after the initial billing statement has been transmitted to the patient or other responsible party.  A collection agency may report medical debt to a credit reporting agency or credit bureau 180 days after the original obligation was received by or assigned to the collection agency.  

Consumer Protection Act. 

The Consumer Protection Act (CPA) declares a variety of business practices unlawful.  These unlawful practices include:  engaging in unfair methods of competition and unfair or deceptive acts or practices in the conduct of commerce or trade; the formation of contracts, combinations, and conspiracies in restraint of trade or commerce; and monopolizing or attempting to monopolize trade.  A person injured by a violation of the CPA may bring a civil action to enjoin further violations and to recover actual damages, costs, and attorney's fees.  Recovery may also include an increased award of triple the actual damages.   

A plaintiff who brings a private claim under the CPA must establish five elements:  (1) an unfair or deceptive act or practice; (2) the act or practice occurred in trade or commerce; (3) a public interest impact; (4) injury to the plaintiff's business or property; and (5) causation.  However, a per se violation of the CPA is established when the Legislature declares in statute that a certain act or practice violates one or more elements of the CPA, usually declaring that the violation affects the public interest, is an unfair or deceptive act in trade or commerce, and is an unfair method of competition.  This thereby leaves the last two elements, injury and causation, left for the plaintiff to establish. 

Under the laws governing collection agencies, the definition of "medical debt" is modified to mean debt owed by a consumer to a person whose primary business is providing medical services, products, or devices, or to the person's agent or assignee, for the provision of medical services, products, or devices.  Medical debt includes, but is not limited to, medical bills that are not past due or that have been paid.  The definition of "medical services, products, or devices" includes, but is not limited to, any service, drug, medication, product, or device sold, offered, or provided to a patient by a health care provider or health care facility, except that it does not include cosmetic surgery.  Reconstructive surgery resulting from trauma, infection, or other diseases is not considered cosmetic surgery. 

Hospitals, physician groups, other professional partners, and collection agencies are prohibited from reporting adverse information about medical debt to credit reporting agencies.  A credit reporting agency may not include medical debt on a consumer's credit report. 

If a person, health care provider, health care facility, hospital, physician group, professional partner, or licensed collection agency furnishes information regarding medical debt to a credit reporting agency, the medical debt is void and unenforceable.  Enforcement is provided for under the CPA, establishing a per se violation for the reporting of medical debt to a credit reporting agency.  In addition, a violation is deemed a violation of the law governing the license of the hospital, physician group, or professional partner. 

(In support) Health care costs continue to rise, and even with insurance, deductibles and copays can add up, forcing some people into medical debt.  A trip to the emergency room can cause someone to end up with thousands of dollars in debt.  Medical debt is not a reliable way to predict whether someone will pay other loans.  A person could be paying all of their bills on time and get hit with a medical emergency that disrupts their life.  No one applies to get sick or have a medical emergency.  A lot of people receive collection notices for medical bills that they do not even owe.  Medical debt is a great asset stripper for low-income people, as many people have insurance but are underinsured.  All hospitals provide charity care, and about half of Washington residents are eligible for charity care, but many low-income people do not get screened by the hospital.  Many hospitals already prohibit the reporting of medical debt. 

Medical debt is the number-one cause of bankruptcy.  Credit reports help determine whether a person is qualified for housing, transportation, and jobs, and the purpose is to assess credit worthiness.  If medical debt is not provided to credit reporting agencies, people can qualify for better rates for other loan products.  Multiple other states have done this.  In addition, the Consumer Financial Protection Bureau (CFPB) issued a final rule to prohibit medical debt reporting.  However, this federal rule was paused, and there are significant concerns about the future of the CFPB.  This legislation would help fill in the role of the CFPB and offer stronger protections for Washingtonians.

(Opposed) If the goal is to contain health care costs, this will not help.  An increased default risk will increase the cost of health care.  People will prioritize debt payments reflected on their credit reports.  The medical debt does not just disappear because it is not reported to a credit-reporting agency.  Someone still has to pay it.  In addition, people who paid off medical debt have not been shown to significantly improve their financial security or credit worthiness.  Lastly, the Fair Credit Reporting Act preempts this.  States are prohibited from regulating consumer credit reports, and this conflicts with federal provisions.

(In support) Senator Marcus Riccelli, prime sponsor; Adam Zarrij, The Leukemia and Lymphoma Society; Amanda Martin, Northwest Consumer Law Center; Julia Kellison, Northwest Justice Project; Jeremy Griffin; Teddi McGuire, Providence Health; and Katrina LaMarche, Washington State Hospital Association (WSHA).