California Governor Gavin Newsom is currently considering a bill that would prohibit credit agencies from reporting medical debts.
The bill SB1061, introduced by State Senator Monique Limón, was passed by the California legislature on August 28 and is now awaiting Governor Newsom’s signature. The aim of this legislation is to prevent medical debts from appearing on credit reports and not be used to assess applicants’ creditworthiness.
According to the bill, this measure is designed to protect Californians from the heavy burden of medical bills that some individuals find unmanageable.
Limón pointed out in legislative analysis that consumers often have no choice but to incur debt for medical services and may not be able to seek cheaper alternatives to save money, making it unlikely for these debts to predict willingness or ability to pay.
“We also know that medical debt disproportionately impacts low-income consumers, African-American and Latino communities, and young people who already face structural barriers to achieving financial health,” said Limón.
Furthermore, she highlighted that medical debts reported to agencies contain more inaccuracies compared to other forms of debts, due to errors in billing, reimbursement, and insurance disputes.
The bill does not forgive debts or restrict debt collection agencies from pursuing debts owed for medical services received.
Supporters including Attorney General Rob Bonta, advocacy group California Low-Income Consumer Coalition, and California Nurses Association representing over 100,000 members believe the bill is necessary to protect consumers.
The National Consumer Law Center in Boston noted that out of fear of accumulating medical debt, some individuals may avoid seeking medical care, which could have negative impacts on their health.
Supporters of the bill pointed out that for many Californians, the cost of medical services and insurance deductibles can reach $4,000 or higher, making this legislation necessary for alleviating debt burdens.
An analysis released on August 27 by consultants working for the State Senate indicated that over 40% of American adults carry medical debt that exceeds their ability to pay.
According to the analysis, reporting medical debts to credit agencies could prevent individuals from obtaining housing, employment, insurance, and other essentials.
On the opposing side, opponents including 360 medical groups representing doctors, the California Association of Collectors advocating for credit and collection industry, and the Consumer Data Industry Association representing credit bureaus believe the bill’s text is too ambiguous and could have negative effects on the medical industry.
A non-profit organization in California representing over 600 companies, the Receivable Management Association, and the collection association stated in legislative analysis, “If SB1061 is implemented, it will cause significant disruptions to the reporting, handling, and collection of all types of debts, causing harm to consumers, healthcare providers, and the business community.”
Opponents mentioned that one provision of the bill would invalidate any debts reported to credit agencies on or after July 1, 2025, and raised concerns that other loan products could be reclassified as medical debts.
Governor Newsom has until September 30 to decide whether to sign the bill.