California Attorney General boosts bill banning medical debt from credit reports

California Attorney General Rob Bonta announced Monday that he is throwing his weight behind legislation to bar medical debt from showing up on consumer credit reports, a Democratic-led effort to offer protection to patients squeezed by health care bills.

Bonta is a sponsor of Sen. Monique Limón's bill, which seeks to block health care providers, as well as any contracted collection agency, from sharing a patient's medical debt with credit reporting agencies. It would also prevent credit reporting agencies from accepting, storing, or sharing any information concerning medical debt. Medical debt isn't necessarily an accurate reflection of credit risk, and its inclusion in credit reports can depress credit scores and make it hard for people to get a job, rent an apartment, or secure a car loan.

"This is a broken part of our current system that needs to be fixed," Bonta, a Democrat, told KFF Health News. "This is California’s opportunity, and we relish the ability to be up in front of key issues."

If enacted, California would become the third state to remove medical bills from consumer credit reports, following Colorado and New York in 2023. Minnesota has a proposal to do the same. Last year, the Biden administration announced plans to develop similar federal rules through the Consumer Financial Protection Bureau, but they have yet to be released. And should former President Donald Trump return to the White House, he would have the prerogative to undo the rules.

Limón said it's important for the state to enshrine its own protections into law alongside the federal push. "We may be waiting for a very long time to see outcomes that California could potentially deliver in the next year," said the Santa Barbara Democrat.

Bonta said he's not sure what sort of opposition to the bill to expect, but he wonders if providers and collection agencies will be resistant.

A KFF Health News analysis found that credit reporting threats are the most common collection tactic used by hospitals to get patients to pay their bills. A hospital, for example, might be concerned that a credit score ban might make it more difficult to get patients to pay for medical care they have already received.

The three largest U.S. credit agencies — Equifax, Experian, and TransUnion — have said they would stop including some medical debt on credit reports as of 2022. Among the excluded debts are paid-off bills and those less than $500, but the agencies' voluntary actions left out millions of patients with bigger medical bills on their credit reports.

Limón said she often hears from constituents about the impact medical debt has on their lives. Medical debt disproportionately affects low-income, Black, and Latino Californians, according to the California Health Care Foundation.

And, increasingly, people with healthy incomes who often carry medical insurance are incurring medical debt. A KFF Health News-NPR investigation found that about 100 million people across the country are saddled with medical debt, which has forced some to give up their homes, ration food, and take on extra work.

Though the legislation wouldn't forgive medical debt, Limón said she hopes it will encourage people to seek medical care when they need it.

"You hear so many people now that are concerned about getting medical care because they can’t afford it and instead wait to get worse," Limón said. "If the bill passes, we’ll see less fear and more people going to get medical care."