First Party Servicing on Medical Accounts: The Federal and State Landscape Continues to Shift

Companies that provide first party, early-out and billing services on medical accounts scramble to stay abreast of the continuously shifting regulatory requirements that, up until just a few years ago, rarely experienced any significant changes on an annual basis. The Consumer Financial Protection Bureau (CFPB) is presently contemplating widespread regulation of first party collections while many state regulators seek to shoe-horn servicers of medical accounts that are not in default into the definition of a “debt collector” to require state collection agency licensure and oversight.

Presently, there are two significant changes to the first party medical environment – one on the Federal level and one state requirement – about which every company in industry must be aware: 

Credit reporting rule for medical accounts changes, but what date should we use?

Starting September 15, 2017, the Credit Reporting Agencies (CRAs) will require that a furnisher not report a medical account on a consumer’s Credit Bureau Report (CBR) that is less than 180 days old. While this is a well-intended change to allow insurance companies and other third party payors sufficient time to process and pay medical claims without affecting a consumer’s credit, it is unclear when the 180 days begins. If the servicer uses the date of discharge from the hospital or completion of medical services as the starting point of the 180 days, then consumer attorneys will likely argue that the account is in default the day after discharge and that the first party servicer is subject to the FDCPA. If the servicer uses a date sometime after discharge – perhaps 90 days after discharge – then the total delay before credit reporting would be 270 days (90 days after discharge plus 180 days). 

The best approach for calculating the start of the 180 days is to work with the creditor (the healthcare provider) to develop a consistent policy – reviewed by counsel – that is consumer centric and also considers possible ramifications to the requirements of servicing accounts that are not in default pursuant to the FDCPA.  

Texas requires notice of mediation on medical accounts

Starting September 1, 2017, servicers of medical accounts in Texas will be required to provide notice to consumers that certain accounts are eligible for mediation. The law provides, in relevant part, that the disclosure must state as follows:

“You may be able to reduce some of your out-of-pocket costs for an out-of-network medical or health care claim that is eligible for mediation by contacting the Texas Department of Insurance at [website] and [phone number].”

The law states that mediation requirements generally apply to out-of-network charges in excess of $500, subject to several considerations.  

The challenge for this disclosure is in determining where it is applicable due to a charge being out-of-network. Certainly including this disclosure with all Texas accounts could result in numerous requests for mediation filed with the Texas Department of Insurance on accounts that were not out-of–network. Please note that while the implementation date is September 1, 2017, this disclosure requirement only applies to accounts incurred on or after January 1, 2018.  

For more information on First Party and Early Out servicing, listen to this 12 minute podcast titled: “Overlooked Traps for First Party and Early Out Servicers.”

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