People of Color in New York Would Particularly Benefit from Medical Debt Protections

Author: Emily Vaculik, Citizen Action of New York    

The COVID-19 pandemic has exacerbated the debt problems of many Americans but has had particularly bad impacts on those already struggling. Families devastated by the impacts of the virus often have to confront additional burdens — abusive debt collection tactics for their medical bills. Decades of discriminatory financial policies have led to a disproportionate amount of debt collection harassment in Black and Brown communities. In December 2019, The Urban Institute found that debt collection had affected 42% of Black consumers; but only 26% of white consumers. According to an article in the New York Amsterdam News, the largest portion of debt for communities of color comes from medical services and student loans (read the article here).

              A 2017 survey by the Consumer Financial Protection Bureau (CFPB) found that Black Americans are contacted by debt collectors at higher rates than white respondents: 44% of Black respondents reported being contacted about debt, while only 29% of whites were contacted. Even when income gap differences are accounted for, Black Americans are sued at higher rates: 45% of respondents living in communities of color faced debt collection litigation, while only 27% of similarly situated respondents in white communities were sued.

              On October 30, 2020, the CFPB released a regulatory revision for the enforcement of the Fair Debt Collection Practices Act, the federal law that prohibits debt collection companies from abusive, unfair or deceptive debt collection practices. The revision allows consumers to limit the amount of harassing phone calls from debt collectors by restricting how often debt collectors may contact affected consumers. While the revision was important, it did not do enough to remedy abusive debt collection practices – particularly for communities of color. Debt collectors have the ability to seize money and personal property in their pursuit of debt collection – devastating families economically and often impeding them from paying for their basic needs like food, clothing, housing and utilities. This has a particularly detrimental effect on Black and Brown communities trying to recover from their discriminatory exclusion from the financial mainstream.  

              New York should consider adopting stronger policies regarding debt regulation to protect consumers from harassing debt collection practices. One legislative proposal is the Patient Medical Debt Collection Protection Act (PMDPA), which particularly addresses medical debt – one of the main sources of debt for Black Americans. The PMDPA addresses several debt collection practices, including shortening the statute of limitations for collection of medical debt and lowering interest rates on medical debt. New York needs stronger protections to protect consumers, particularly Black and Brown consumers, from pervasive predatory debt collection practices.

Between 2015 and 2019, New York’s hospitals sued 40,000 New Yorkers who could not pay their medical bills. Hospitals were unable to file new lawsuits against patients for a couple of months during the pandemic. However, a quick look at just the most litigious hospitals shows over 500 cases filed since courts starting accepting civil cases again.

A new map from the Community Service Society (with help from BetaNYC) shows where residents are most likely to be sued by their hospital. Residents of Fulton and Steuben County – areas where patients lack many choices about hospital care – are most frequently sued. In the New York City area Nassau, Suffolk, and Queens County residents are most frequently sued.

What can we do?

  • Read the original report, which provides more data on the lawsuits, which hospitals filed them, how it impacts health equity, and describes measures that New York could take to stop these abuses.
  • Tell your legislators to stop hospitals and debt buyers from taking collection actions against patients during the pandemic. S8365/A10506 would achieve this and more: it would stop interest from accruing on medical debt during the pandemic, permanently cap interest rates on medical debt at the U.S. Treasury rate from the current 9 percent, extend grace periods for insurance premiums, and stop late fees or credit agency reports against members who pay late premiums.
  • Take action on CSSNY’s End Medical Debt campaign and increase support for the Patient Medical Debt Protection Act. The Patient Medical Debt Protection Act was introduced before the pandemic and already has with 34 sponsors in the State Assembly (A08639) and 18 sponsors in the State Senate (S06757). This bill does more to make hospital billing fairer for patients, including requiring a standardized itemized bill and stopping hospitals from charging unfair facility fees that are not covered by insurance.

There is an urgent need for New York to protect patients from unfair billing practices, and the Patient Medical Debt Protection Act does just that: We can’t take another 40,000 patients being sued before we fix this problem.

Consumers in New York have the chance to comment on requested premium increases in the individual and small group health insurance markets. The applications, where insurers justify their requests, are available through the New York State Department of Financial Services (DFS) (you can submit comments online here; see below for direct links to each individual application). Comments are due by July 5.

This process is called prior approval because in New York, the state must approve the changes insurance companies want to make to their premiums ahead of time. DFS reviews the applications to make sure that premium increases are linked to actual increases in costs, instead of things that insurers could do better at controlling.

In the individual market, the average request was 11.7 percent this year. The average requested increase was 11.4 percent in the small group market. Insurers attribute an average of 3.1 percent of the increases to the impact of the COVID-19 pandemic. Some plans cite COVID-related testing and treatment, increase in hospital costs, and the possibility of a vaccine next year as reasons to approve rate increases. It is also important to note that this year health care utilization dropped as consumers cancelled and postponed doctor’s visits and non-urgent surgeries because of the pandemic, while insurers continued to collect premiums.

DFS takes its regulatory duties seriously, and they want to hear from consumers about what it means for their families when premiums go up year after year. Last year, DFS decreased insurers’ requested rate for individual coverage from 9.2 percent to 6.8 percent, which saved consumers over $50 million. It also reduced rates for small group coverage from 12.2 percent to 7.9 percent, a 35% decrease that saved small businesses over $313 million.

HCFANY submits detailed comments every year – you can see the types of arguments we make in our letters from 2019 (link) and 2018 (link). However, consumer comments do not require as much detail as HCFANY provides. If you decide to comment, you can simply provide the name of your insurance company and plan and discuss how a rate increase would affect you. What changes would you have to make if your insurance company was allowed to increase their rates? Will you still buy insurance? We’ve written some longer instructions if you want more guidance (link), but the important thing is to speak frankly about your own experiences.

Comments are posted publicly. That means your comment won’t just inform DFS; it will be part of the bigger conversation occurring about the affordability of health care in New York. Consumers are not a big enough part of those discussions – we should take advantage of every chance we get to change that!

Individual Market Applications

Direct links are provided below for each insurance carrier that participates in New York’s individual market through our health insurance exchange. The narrative summary is a short (under ten pages) explanation for why the insurance company thinks it has to raise rates. The full applications are very long but links are provided for those who want to examine them more closely.

  • CDPHP Health Plan: Narrative Summary (link), Complete Application (link)
  • Excellus: Narrative Summary (link), Complete Application (link)
  • Fidelis (NYHQC): Narrative Summary (link), Complete Application (link)
  • Healthfirst PHSP: Narrative Summary (link), Complete Application (link)
  • HealthNow: Narrative Summary (link), Complete Application (link)
  • HealthPlus Empire: Narrative Summary (link), Complete Application (link)
  • HIP/Emblem: Narrative Summary (link), Complete Application (link)
  • Independent Health: Narrative Summary (link), Complete Application (link)
  • MetroPlus: Narrative Summary (link), Complete Application (link)
  • MVP Health Plan: Narrative Summary (link), Complete Application (link)
  • Oscar: Narrative Summary (link), Complete Application (link)
  • Unitedhealthcare of New York: Narrative Summary (link), Complete Application (link)

By Bob Cohen, Policy Director, Citizen Action New York

The COVID-19 pandemic is exposing just how broken the US health care system is, including our inability to control disease outbreaks when many people simply cannot afford basic medical care. Patients should never fear seeking medical care because of cost, but for many New Yorkers that is the reality. And a new report by the Community Service Society highlights one of the worst outcomes for patients who cannot pay their medical bills – lawsuits filed against them by the hospitals they turned to for help. The report, “Discharged Into Debt,” finds that New York hospitals have filed over 30,000 debt collection lawsuits in the past five years. The study only looked at hospitals in 26 of New York’s 62 counties – which means the actual number of lawsuits is much higher.

New York State’s non-profit hospitals have a social mission. Legally, they are charities that pay no federal, state or local taxes and receive a total of $1.1 billion each year from the ICP. As a condition for receiving this funding, hospitals are required to offer financial assistance to patients without insurance.

The report, based on an examination of the New York State Ecourts public database and a sample of hundreds of individual case files, documented a number of abusive practices by New York hospitals. For example, hospitals claimed in legal papers that they were entitled to payment for unspecified items like “miscellaneous” and “ancillary procedures” charges. And, because New York allows hospitals to charge an outrageous 9% interest rate on outstanding bills and to tack on court fees on top of that, the median amount the hospital sued on was $1,900 but the median judgment amount was $2,300. In many cases, hospitals sued patients that were eligible for financial assistance without offering it, as required by law.

The report also found large racial disparities in the treatment of patients that owe medical debt, particularly upstate. In counties like Onondaga (Syracuse), Monroe (Rochester), Albany and Erie (Buffalo), a much higher proportion of people were referred to collections for medical debt in communities of color than white communities.

And, the study documents, patients were almost always totally outmatched by large collection law firms retained by the hospitals. Process servers often illegally serve relatives or co-tenants instead of patients, violating basic provisions of the U.S. constitution and in state laws designed to make sure people have reasonable notice of lawsuits so they can adequately defend themselves. And, 97% of the patients in the study were unrepresented and didn’t even attempt to respond to the lawsuit. The result is often wrecked credit, and unpaid judgments that threaten the financial futures of consumers and their families.

The CSS report adds to the case for passage of the Patient Medical Debt Protection Act (A.8639/S.6757), which addresses some of the most egregious medical billing practices.  Fixing these practices, including lawsuit abuses, is a critical step in fixing our broken health care system and making health care affordable to low and moderate income New Yorkers.