New Jersey's legislature has referred a new bill to its Consumer Affairs Committee that would impact how medical debt is handled prior to being referred to a collection agency. If passed, the bill would require healthcare professionals and facilities to provide income-based repayment options for patients before sending debts to collection agencies. Four primary sponsors and two co-sponsors introduced the bill on January 14, 2020. 

Specifically, the bill requires that:

  • Healthcare professionals and facilities wait at least 90 days after first providing the patient with a bill before referring the debt for collection or legal action.
  • Prior to the referral of the debt, the healthcare professional or facility must offer the patient an income-based repayment option where the payments do not exceed 15% of the patient's discretionary income.
  • The debt not be referred to a collection agency if the patient is in compliance with the payment plan—defined as making 11 scheduled payments in a 12-month period.
  • Healthcare professionals or facilities discharge the debt—including any accrued interest—if the patient dies or becomes fully and permanently disabled, or defer the debt—without charging interest during the deferment period—during the period of disability if a patient becomes temporarily totally disabled. 

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insideARM Perspective

If this bill is passed, healthcare providers may find themselves needing to overhaul their payment processes. It seems unlikely that providers—especially smaller medical offices—have the capability to administer such a program. This capability or resource gap is the reason why providers refer debts to agencies, which are much better equipped to administer nuanced payment plans. The bill would be better suited if the income-based repayment plan could be administered through a collection agency.

The bill as written leaves certain crucial details vague. What, exactly, is "discretionary income"? Are providers left to determine that themselves? Wouldn't it be better to provide a precise calculation of what is considered discretionary in order to prevent confusion and to create uniformity? What about the disability—who or what exactly certifies when the patient is considered disabled.

Leslie Bender, Chief Strategy Officer and General Counsel at BCA Financial Services, provides further insight:

There has been a growing concern about “surprise billing” and understanding the root causes of “surprise billing” is complicated, at best. Not only is it challenging for the insureds to stay up-to-date on what their plan covers, it is also challenging for healthcare professionals and institutional healthcare providers to understand all of the plan types and which services are covered.  While this can lead to billing mistakes and reimbursement errors, because it is the physician who has a more constant face to face relationship with the patient, a fair amount of the frustration is directed at the healthcare provider who may simply be navigating the same uncertain waters of what is/is not covered and how to address it. New Jersey’s new law, if enacted, creates an even more complex layer of issues. 

Moreover, the law would propose to defer or eliminate medical debts associated with providing care and treatment to a patient in the case of permanent disability, death, and temporary disability. The debt elimination is categoric and does not take into account medical bills or expenses that are covered by health insurance – or that arose from accidents or injuries in which a third party is liable? It seems illogical to eliminate or defer medical bills if and when a third party or health insurance is readily available to cover them. Another concern—could legislation like this inadvertently disincent healthcare providers from providing treatment to terminally ill or disabled patients?


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