Financing Medical Bills: What You Need to Know

There are many important aspects that we can invest in throughout our lifetimes. Stocks, retirement, and savings for houses or college are all respectable components of a budget.

However, one of the most important places we can invest in is in our health.

Despite taking the best care of yourself, accidents and illness can still strike. The cost of these medical expenses can be staggering. On average, people in the United States owe at least $220 billion in medical debt. This number is staggering, especially considering this is not the only debt that many Americans carry. If you are struggling with medical debt, or looking for ways to finance your health, know that you are not alone. In fact, there are several actionable steps that you can take to finance medical bills and get on top of your expenses.

Dealing with Insurance

Dealing with insurance can be a hassle, but this is the first step in dealing with any medical expenses. First off, many medical bills can oftentimes be a misunderstanding with one’s insurance company, or a miscommunication between the doctor and billing. If you receive a staggering medical bill, the first step is to call your insurance and inquire as to why the expenses were not covered. Sometimes this can be as simple as circling back with your doctor and having them state that this was a necessary procedure.

Oftentimes, medical debt results as a misunderstanding of one’s coverage. While a majority of providers are covered under a PPO, individuals with an HMO need to ensure that they are seeing in-network providers. A good rule of thumb is to always double check with your insurance either by calling or going online to ensure that the provider that you are seeing is in-network and therefore will be covered by insurance.

However, if you are in a situation where you are seeing in-network doctors, but have a medical condition or illness that causes you to seek medical care often, you may still have medical debt. In this instance, you may be in search of options to finance your medical debt.

Medical Bill Finance Solutions

If your medical bills are piling up and you feel underwater, it is important to understand that there are steps you can take to handle these expenses. If you are in this situation, you may want to consider:

• Payment plans
• Medical Credit Cards
• HSA or FSA Accounts
• Personal Loans
• A Title Loan
• Negotiation and Assistance

Many providers will work with you to pay off your medical expenses. The important step here is to make sure that you are proactively communicating with providers and addressing any outstanding bills in a timely manner. When you call to speak with a provider, you can typically set up a payment plan that will have you making monthly payments toward your debt.

In addition, many providers offer medical credit cards. These credit cards are designed specifically to help you pay off medical debt and typically have lower interest rates. However, it is important that you carefully read the terms and conditions of these credit cards. Many cards will boast 0% to low interest rates for the first year, and then drastically increase the rate after the 1 year mark.

Health Savings Accounts (HSA) or Flexible Spending accounts (FSA) can be set up through your employer. The way that both of these accounts work is that your employer designates pre-tax money from your paycheck towards a savings account that can only be used on medical expenses. There is usually a limit to these accounts and you need to use the funds in the account before the end of the year. However, HSA and FSA accounts can be a great way to proactively save for any medical expenses.

Personal loans are another option for those who have a great deal of medical debt. Personal loans can usually be taken out from a bank or credit union. However, these types of loans usually have high qualification requirements, and borrowers who receive final approval need a good credit score.

Lastly, depending on your situation you may qualify for government-based assistance. There are several programs in assistance that can help you to pay for medical bills such as:

• Medicaid: Provides health insurance for adults and children with limited income and resources
• Children’s Health Insurance Program (CHIP): This US Department program provides matching funds to states for health insurance to families with children.
• Medicare: For individuals 65 and older or those with disabilities.
• The Affordable Care Act (ACA): For low income individuals who are seniors, persons with disabilities as well as parents or caretakers of dependent children.

Regardless of the path you choose, one of the most important takeaways should be the importance of communication. Communicating with your providers in a timely manner and understanding that they are typically willing to negotiate is a vital step that you can take toward eliminating your medical debt. Providers would rather negotiate with you and have you pay a reduced amount or make monthly payments than never receive money for the services performed.

Long-Term Impact of Medical Debt

Seeking assistance when feeling overwhelmed by debt is also important because there are many far reaching impacts of medical debt.

Should a bill get sent to collections, there is no longer anything that your provider can do to help you and you will need to deal directly with the credit collection agency. At this point, your options become far more limited.

Furthermore, if you are dealing with a healthcare provider directly, this usually won’t harm your credit as long as you communicate and make payments. Healthcare providers do not typically report your amount due to credit bureaus and thus it does not impact your credit score.

However, the moment that a bill goes to collections, this can have an impact on your credit score. Collections fall under the “payment history” category which factors into your credit score. This category is one of the biggest factors in your credit score calculation. Even if you settle this debt as soon as it goes to collections, this can still have implications. Unfortunately, a negative mark can stay on your credit report for up to seven years.

Through proactive communication, research, and timely response to bills and inquiries, you can position yourself in a solid place to address medical debt and keep those bills from piling up.

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