This year, the landscape of medical debt collection is undergoing major transformation. Significant new federal and state legislation is redefining how collectors can pursue medical debts, driven by increasing concerns about consumer protections and the broader financial impacts of medical debt. For debt collection professionals, understanding these changes and adapting processes accordingly is crucial to ensure compliance and avoid penalties.
This review outlines the key legislative changes, their effective dates, and actionable compliance strategies to keep your collections in line with new regulations.
The Evolving Rules of Medical Debt in 2024
Medical debt remains a pressing issue in the U.S., prompting lawmakers to prioritize transparency, fairness, and consumer protection. In 2024, the focus is on restricting how and when medical debts are reported to credit agencies, ensuring patients receive appropriate notifications.
States are responding in different ways. Some have extended the time allowed before medical debt can be reported to credit bureaus, while others have banned reporting medical debt altogether. Some states also mandate that healthcare providers and collection agencies evaluate patients for financial assistance or create repayment plans suited to their budgets. Additionally, certain jurisdictions now forbid the sale of medical debt to protect consumers from aggressive collection tactics.
Staying informed and compliant with these jurisdiction-specific rules is more critical than ever.
Key Medical Debt Legislation
Federal Legislation
Medical Debt Relief Act of 2024
This federal law introduces key changes to credit reporting practices:
• Limits how long medical debt can remain on credit reports.
• Requires consumers to be notified before debt is reported.
• Mandates verification of debt accuracy before reporting to credit agencies.
FTC Health Breach Notification Rule (HBNR)
Effective July 29, 2024, this updated rule broadens the definition of a “breach of security” to include unauthorized disclosures of health information. It applies to health apps, connected devices, and digital services outside HIPAA’s scope. Debt collectors handling sensitive health data need to review and update their breach notification policies accordingly.
State-Level Legislation
Several states have passed laws affecting medical debt collection. Here are some key examples:
California SB 1061
Effective January 1, 2025
This law prohibits a person from furnishing information regarding a medical debt to a consumer credit reporting agency and will make a medical debt void and unenforceable if information is furnished to a consumer credit reporting agency. The law narrowly defines medical debt to mean “a 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.”
Connecticut SB 395
Effective July 1, 2024
This law prohibits the furnishing of medical debt to a credit rating agency for use in a credit report. The law defines medical debt as “an obligation or alleged obligation of a consumer to pay any amount related to the receipt by the consumer of health care goods or health care services.” It also requires that a health care provider doing business in Connecticut include in any contract entered with a collection entity on and after July 1, 2024, for the purchase or collection of medical debt a provision that prohibits the furnishing of any portion of medical debt to a credit rating agency. The law makes any portion of a medical debt that is reported to a credit rating agency void. The law excludes from the definition of medical debt, debt charged to a credit card “unless the credit card is issued under an open-end or closed-end credit plan offered specifically for the payment of charges related to health care goods or health care services.”
Minnesota SB 4097
Effective Dates Ranging
This omnibus law contains a number of provisions, including:
1. A waiver of the collection agency license for non-resident collection agencies in certain circumstances [pages 122-123] Effective: August 1, 2024.
2. Cleanup amendments to the coerced debt statute that was adopted in 2023 [pages 123-126] Effective: January 1, 2025.
3. Prohibits a person or entity from:
- Reporting medical debt to a credit reporting agency.
- Charging interest, fees, charges, or expenses incidental to the charged-off medical debt unless the amount is expressly authorized by the agreement creating the medical debt or is otherwise permitted by law.
- Challenging a debtor’s claim of exemption to garnishment or levy in a manner that is baseless, frivolous, or otherwise in bad faith.
- Violating a list of prohibitions which parallel existing state and federal collection prohibitions.
The law defines “medical debt” as “debt incurred primarily for medically necessary health treatment or services.” Medical debt includes debt charged to a credit card or other credit instrument on or after October 1, 2024, under an open-end or closed-end credit plan offered specifically to pay for health treatment or services. Importantly, the law indicates that medical debt does not include:
- Debt charged to a credit card or other credit instrument under an open-end or closed-end credit plan that is not offered specifically to pay for health treatment or services.
- Services provided by a veterinarian.
- Services provided by a dentist.
- Debt charged to a home equity line of credit [pages 126-131] Effective: October 1, 2024.
New Jersey AB 3861
Effective July 22, 2025
This law prohibits a medical creditor or medical debt collector from reporting a patient’s medical debt to any consumer reporting agency for health care services performed on and after the effective date. It also prohibits a consumer reporting agency from making any consumer report containing a patient’s paid medical debt or a medical debt of less than $500 regardless of the date it was incurred. “Medical debt” means a debt arising from the receipt of health care services. Medical debt does not include:
- Debt charged to a credit card unless the credit card is issued under an open-end or closed-end credit plan offered solely for the payment of health care services or goods.
- Debt arising from services provided by a veterinarian.
- Debt charged to a home equity or general-purpose line of credit.
- Debt arising from an insurance payment for the health care provider’s services but retained by the subscriber.
- Secured debt.
Florida HB 7089
Effective July 1, 2024
This law, among other things, for medical debt from a licensed Florida hospital for services:
- Establishes a three-year statute of limitations.
- Provides a $10,000 property exemption from legal process for interest in a single vehicle and personal property of $10,000 if the consumer does not qualify for a homestead exemption.
- Requires the posting of a consumer-friendly list of standard charges on the hospital’s website.
- Prohibits collection activities unless the hospital has performed certain prescribed actions.
Illinois SB 2933
Effective January 1, 2025
This law prohibits a consumer reporting agency from furnishing any consumer report or credit report containing any adverse information that the consumer reporting agency knows or should know relates to medical debt incurred by the consumer or a collection action against the consumer to collect medical debt. “Medical debt” means a debt arising from the receipt of health care services, products, or devices but does not include debt charged to a credit card or an open-end or close-end extension of credit made by a financial institution to a borrower unless the open-end or close-end extension of credit may be used by the borrower solely for the purpose of the purchase of health care services.
Rhode Island HB 7103-A
Effective January 1, 2025
This law bans the reporting of “medical debt” to credit bureaus. Medical debt is defined as “an obligation of a consumer to pay an amount for the receipt of healthcare services… products, or devices, owed to a healthcare facility or a healthcare professional…”
Virginia HB 34
Effective July 1, 2024
This law changes the statute of limitations on medical debt from five years to within three years of the due date on the final invoice. In the event of breach of a payment plan, an action is barred if not commenced within three years from the date of breach by the debtor.
Compliance Measures for Debt Collection Professionals
Documentation and Notification Protocols: Ensure healthcare providers issue the required notifications to patients before debts are reported. Maintain accurate records to confirm all collection activities align with state and federal laws.
Credit Reporting Compliance: Update your credit reporting processes to comply with states that restrict or prohibit reporting medical debt. Promptly remove debts from credit reports once resolved, especially those under specific thresholds.
Health Breach Notification Policies: In light of the FTC’s updated HBNR, revise breach notification policies to include unauthorized disclosures of digital health data. Train staff to recognize and respond to data breaches effectively.
Training and Process Updates: Provide regular training on new compliance requirements. Review contracts with healthcare providers to ensure they reflect laws prohibiting medical debt reporting. Adjust workflows to integrate new notification and reporting rules.
Risk Management: Conduct internal audits to identify and mitigate compliance risks. Understanding potential penalties and implementing safeguards can help avoid costly infractions.
Stay Informed and Ahead: To remain compliant, it’s essential to track federal and state-specific requirements. Engaging with industry associations and staying informed about proposed legislation will help you adapt your practices promptly.
Conclusion
The legislative changes in 2024 mark a significant turning point for medical debt collection. By understanding and complying with new federal and state laws, updating processes, and maintaining transparent practices, debt collection professionals can successfully navigate this evolving environment. Proactively using industry resources and staying informed will ensure your agency remains compliant and effective.
