The California Association of Collectors advocated for several amendments to the law and has FAQs available to help with compliance with A.B. 1020, which imposes new restrictions on hospital debt collection.
12/20/2021 1:00 P.M.
4.5 minute read
California’s medical debt law takes effect on Jan. 1, 2022, which means agencies licensed in the state will have limits on collection actions and their health care clients will be required to have a written policy on how they send accounts to third-party debt collectors, among other changes.
California Gov. Gavin Newsom signed A.B. 1020 in October.
The law, Assembly Bill No. 1020, imposes new restrictions on hospital debt collections and raises the income level for hospital charity care eligibility to 400% of the federal poverty level. Advocating for amendments to A.B. 1020 during the legislative process was one of the top priorities for the California Association of Collectors Inc. (CAC) and their legislative team. The legislation requires hospitals to prominently display a notice of their policy for financially qualified and self-pay patients on their website with a link to the policy.
A.B. 1020 amends and adds various California statutes in an effort to impose new restrictions on the collection of certain hospital debts, including when and how debt buyers may purchase and collect hospital debt.
When in effect, the new law will amend Section 127425 of the California Health & Safety Code to prohibit hospitals from selling patient debt to debt buyers absent certain conditions and imposes requirements on hospitals before they can assign a bill to collections. In addition, it increases to 180 days the time that hospitals must wait before reporting debts to consumer credit agencies or filing collection actions for nonpayment.
Among the requirements imposed on hospitals, the law will prohibit assignment of a hospital debt for collections or sale of a hospital debt to a debt buyer unless and until the hospital has sent its patient a notice that includes:
- The date or dates of service of the medical bill or bills that the hospital intends to assign to collections or sell to a debt buyer.
- The name of the entity the bill to which the hospital will be assigning or selling the bill or bills in question.
- A statement informing the patient how to obtain an itemized hospital bill from the hospital.
- The name and plan type of the health coverage for the patient on record with the hospital at the time of services or a statement that the hospital does not have that information.
- An application for the hospital’s charity care and financial assistance.
- The date or dates on which hospital (or its agent) originally sent the patient (1) a notice about applying for financial assistance and (2) a financial assistance application, as well as the date or dates, if applicable, on which the hospital made a decision about the financial assistance application.
At the same time, the law will amend California Civil Code Section 1788.14 to prohibit debt collectors from collecting hospital debts without including in the first written communication with a consumer a copy of the notice that the hospital will now be required to send its patient prior to assigning the debt for collections or selling the debt to a debt buyer. In addition, debt collectors must include in their first written communication with consumers a statement that the debt collector will wait at least 180 days from the date the consumer was initially billed for the hospital services that are the basis of the debt before reporting adverse information to a credit reporting agency or filing a lawsuit against the consumer.
Finally, the new law will add section 1788.185 to the California Civil Code to impose requirements on legal collections for debts that “originated with a general acute care hospital.” These new provisions of law will specify certain factual allegations that must be included in any complaint filed in a legal action to collect hospital debt and further require that documents relating to applications for financial assistance to be attached to any complaint for the collection of hospital debt.
As part of its preparation for compliance with the law, the CAC hosted a webinar for its members and released Frequently Asked Questions on topics including what type of debt is subject to A.B. 1020; requirements in written communications with consumers; credit reporting; liability for a debt collector if their hospital client is not compliant; and more.
The CAC has also provided text of the law as signed by the governor and documents showing the amendments made before it was approved.
ACA members can learn more about the legislation and other laws taking effect in California next year during the Dec. 29 ACA Huddle with June Coleman, of counsel at Messer, Strickler, Burnette Ltd., Cindy Yaklin, president of States Recovery Systems Inc., and Kelly Parsons-O’Brien, collections manager at Pacific Credit Services.
Visit the ACA Huddle webpage to complete a one-time registration for the ACA Huddle and access recordings of the ACA Huddle presentations.
Each ACA Huddle, sponsored by Connect International, Solutions by Text, Pay N Seconds and QBE, also features an update on the current landscape for receivables businesses from a federal and state advocacy perspective, as well as compliance.
Remember, subscribe to ACA Daily and Member Alerts under your My ACA profile when logged in to acainternational.org to receive updates on the ACA Huddle.
Read more on medical debt regulations at the state level in the January/February 2022 issue of Collector magazine coming soon. Subscribe to Collector magazine on ACA’s publications website.
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