Three of the major U.S. consumer reporting agencies, Equifax, TransUnion and Experian, recently announced a new National Consumer Assistance Plan, which includes changes to reporting consumers’ medical debts. The plan became effective in the state of New York starting March 8 after cooperative discussions and a settlement agreement between the agencies and New York Attorney General Eric Schneiderman.
It will eventually be implemented nationwide, according to the attorney general’s office. Equifax, TransUnion and Experian are consumer reporting agencies that maintain consumer credit reports on approximately 200 million consumers. The CRAs compile credit information via voluntary submissions from data furnishers, such as collection agencies.
According to the Consumer Financial Protection Bureau, 43 million people in the U.S. have medical collections on their consumer credit reports. In December 2014, the bureau also announced it would require reports from the major CRAs on accuracy and how disputes from consumers are being handled. Medical debt is a huge market in the credit and collection industry. In fact, healthcare-related debt accounted for nearly 38 percent of all debt collected in 2013 and 52 percent of all debt collected in 2010, according to surveys by ACA and Ernst and Young.
The new plan for the CRAs aims to enhance their ability to collect complete and accurate consumer information and will provide consumers more transparency and a better experience interacting with credit bureaus about their consumer credit reports. During discussions in the months leading up to the agreement, the New York attorney general and other state attorneys general allowed the CRAs to collaborate in an unprecedented manner to share industry best practices and develop a plan that will offer consistent and meaningful benefits to consumers.
ACA International, as part of a Medical Debt Collection Task Force led by the Healthcare Financial Management Association, contributed to developing best practices, released just over a year ago, to help make paying medical bills an easier and fairer proposition for consumers. The best practices for healthcare providers and their business partners include following up with CRAs when a consumer’s account is resolved.
The National Consumer Assistance Plan announced by Equifax, TransUnion and Experian also includes following up with CRAs, and focuses on enhancements in two primary areas: consumer interaction with national CRAs and data accuracy and quality. The settlement agreement between the New York attorney general and the CRAs that likely resulted in the National Consumer Assistance Plan states, “CRAs shall prevent the reporting and display of medical debt identified and furnished by collection furnishers when the date of the first delinquency is less than 180 days prior to the date that the account is reporting to the CRAs.”
This means medical debts won’t be reported until after a 180-day waiting period from the date of delinquency. Date of delinquency, as defined in the Fair Credit Reporting Act, is “the month and year of the commencement of the delinquency on the account that immediately preceded collection activity, charge to provide or loss, or similar action.” This date needs to be determined by the provider and furnisher based on the underlying financial agreements and the creditor’s policies for when an account becomes “delinquent.”
Typically, the date of delinquency will precede the date of placement with the agency. The 180-day waiting period for reporting medical debts in the agreement will allow insurance payments to be applied, according to the New York attorney general. The CRAs will also remove previously reported medical collections that have been or are being paid by insurance from consumers’ credit reports.
Debt collection agencies whose healthcare provider clients request that they report consumers’ accounts to the three CRAs also rely on them to follow up when the account is paid. Tom McGregor, president and CEO of DataTrac Receivables Recovery in Anderson, S.C., said deleting consumers’ paid medical accounts from their report altogether might not address the issue of improving their credit rating.
“We all understand that typically a medical incident or a bill incurred as a result of medical necessity is not a voluntary purchase, such as going to Best Buy and buying a TV,” McGregor said. “Since we’re negatively impacting their credit file when we place [an] item, why shouldn’t it be positively impacted when we mark it paid?”
McGregor spent 12 years of his career working in credit reporting and, at that time, he thought more data was better. “Then the emphasis switched to accuracy of data—you didn’t want to delete anything unless it was [from] a mistake or error,” he noted. He said the agreement between the CRAs and attorney general, in terms of deleting consumers’ paid accounts, seems like a quick fix more than a solution. “The accuracy is critical; there is no doubt about that. If the data is not accurate, it is useless to begin with,” McGregor said. “It looks to me that it could ultimately compound a bad problem rather than resolve it.”
Implementation of the agreement requirements will occur over three years and 90 days from the March 8 effective date and includes three phases. Requirements for medical debt collections, including the delay of sending accounts to CRAs and removing paid medical bills from consumers’ credit reports, are included in phase three. CRAs have until the completion date to meet those requirements. CRAs have within six months from the effective date to complete phase one and 18 months from the effective date to complete phase two of the implementation plan. “The implementation date is going to be important on this,” said Mark Rukavina, a principal at Community Health Advisors in Chestnut Hill, Mass.
As more details on the agreement emerge, it is important for agencies working in healthcare collections and their healthcare provider clients to communicate about their expectations and plans going forward. Healthcare providers that do allow collection agencies they work with to report patients’ unpaid medical accounts to CRAs should contact them to make sure they are working on systems to comply with the agreement.
“A lot of the details aren’t completely clear at this point,” Rukavina said. “It would be prudent for hospitals to be talking to their agencies about this, and it would be prudent for agencies to let their hospitals know that they are fully aware of the agreement.”