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Medical Debt and Insurance

Nearly half of all collections accounts that appear on credit reports have to do with medical debt. According to the Federal Reserve, approximately 1 in 6 credit reports contain a medical debt collection. Unpaid medical bills resulted in lowered credit scores for 2 out of 5 Americans. Even worse, nearly 2 million people will file bankruptcy this year due to overwhelming medical bills. Medical debt is the number 1 reason for filing; surpassing mortgage and credit card debt.

Where things get even more complicated is if you are the victim of an accident. If the one who caused the accident doesn't have any insurance, you are left holding the bag. You can attempt to sue for damages, but that will be like trying to "squeeze blood out of a turnip" - as the saying goes. If the person does have insurance, don't expect his/her insurance company to be prompt, or even play fair.

Insurance companies are very skilled at how to not pay out on claims. They will investigate every last detail to prove their client is not at fault, or at least not entirely at fault. Insurance companies are also known to drag things out as long as possible in attempts to coax the victim into settling for much less than full payment. They know medical bills are piling up and credit scores are getting trashed, making the victim much more desperate to settle.

Rare is the case where the insurance company is cooperative and fair. So don't expect to be treated as such, even if you are completely innocent.

You are responsible for your medical bills

Regardless of how you ended up in the hospital or doctors office, you are responsible for your bills. Even if it was someone else's fault; settling insurance claims can be a long and tedious process. The doctors, nurses and other hospital staff aren't going to wait to get paid for their services. If the bill goes unpaid interest will start to accrue or the bill will get turned over to collections.

How to pay for your bills

Until the insurance company decides to either take you to court or offer a settlement, you will have to come up with alternate ways to pay your bills. One option is to submit your bills to your health carrier. You may have a benefit called a negotiated fee plan. If you do, the medical provider will agree to provide services at a discounted rate. Your insurance company will be reimbursed by the defendant's insurance company, if the case is found in your favor. If your insurance doesn't carry this benefit or you don't want to draw from your own policy, there are few other options. Most people don't have a large enough cash reserve to cover the bills, so they resort to credit cards. Often that means maxing them out. Iinterest charges will leave you paying more for the services and high credit utilization ratios will hurt your credit. But both scenarios are still better than your bills becoming delinquent or going to collections.

Contact the hospital or medical provider

Some medical service providers will negotiate payments, especially if you are the victim of an accident who is awaiting a claim settlement. See if they are willing to hold off on payments until you get money from the claim. Notify them with any updates you receive on your case. Most providers also offer payment plans. Do your research and seriously weigh all options to see what best fits your circumstances.