New York is becoming the second state in the union to shield its citizens' credit ratings from being damaged by unpaid medical debt.

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New York is becoming the second state in the union to shield its citizens' credit ratings from being damaged by unpaid medical debt. A bill prohibiting credit reporting companies like Equifax, Experian, and TransUnion from include medical debt in individuals' credit reports was signed into law by New York Governor Kathy Hochul on Tuesday.  

New York Bans Inclusion of Medical Debt in Credit Reports

A bill prohibiting credit reporting companies like Equifax, Experian, and TransUnion from include medical debt in individuals' credit reports was signed into law by New York Governor Kathy Hochul on Tuesday. Colorado also removes medical debt, with some exceptions, from credit reports.

Having bad credit makes it more difficult to have a credit card authorized, purchase a house or vehicle, or receive a loan. Additionally, those with poor credit may pay extra for vehicle or house insurance.

Per a KFF Health News and NPR study, over 25% of Americans claim they have past-due medical or dental expenses that they are unable to pay.

According to the KFF-NPR investigation, medical debt disproportionately affects communities of color and lower-income individuals, even if it also affects those who are not covered.

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Legislative Actions Against Medical Debt

Compared to 17% of White Americans, 28% of Black and 22% of Hispanic Americans nationwide have medical debt. Data from the Census Bureau indicate.

Hochul's measures coincide with the Biden administration's attempts to resolve the issue. Officials said in September that they intended to draft federal regulations in 2024 that would prohibit credit reporting companies from using medical debt as leverage.

Legislators in at least a dozen states have proposed legislation to reduce the financial harm caused by medical debt in place of federal protection. While some of the laws would safeguard personal property from being seized in the event that unpaid medical bills are collected, others would establish relief programs to prevent medical debt from ruining credit ratings.

As policymakers' attention turns more and more to this issue, the credit reporting business is likewise moving. It was agreed last year by Equifax, Experian, and TransUnion to remove the majority of medical debt off credit records. Companies no longer include medical debt under $500 as of this year.

Consumer advocates argue that more needs to be done, but detractors contend that it becomes more difficult for healthcare providers to collect payments when minor medical invoices are removed from a person's credit record.

Legislators who are Republicans worry that the new laws in New York may likewise have unforeseen effects.

Republican Assembly member Josh Jensen opposed the bill, arguing that although it is important to prevent individuals from being financially burdened by emergency medical debt, the law is overly broad and ought not to be applied to non-emergency medical treatment.

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