New York State has enacted legislation to exclude unpaid medical debt from the credit reports of its residents.
Governor Kathy Hochul signed the bill into law on Wednesday, December 13th, along with three additional bills.
The bill bars credit reporting agencies from gathering or disclosing any information regarding medical debts. Also, it prevents hospitals and healthcare providers within the state from reporting these debts.
This move positions New York as the second state, following Colorado, to implement such a policy.
Hochul, emphasizing the new law’s impact, stated, “Medical debt is such a vicious cycle. It truly hits low-income earners, and it forces them to stay low-income earners because they can’t ever get out from under it.”
“No one should ever have to make a horrible choice between their physical health and their financial health,” she added.
The new legislation will be implemented with immediate effect.
While the law is a significant stride forward, it does have limitations. It does not cover medical debts incurred on credit cards, except those issued exclusively for healthcare services.
It also does not extend to out-of-state healthcare providers.
Despite these restrictions, the law addresses a major concern for many New Yorkers, especially those facing substantial medical bills, which can often impede their ability to rent homes, secure loans, or find employment due to poor credit reports.
Proponents of the law argue that credit reports, which aim to evaluate financial responsibility, fail to account for unforeseen life events such as illness or injury.
A study by the Urban Institute revealed that over 740,000 New Yorkers had unpaid medical debts on their credit reports as of early 2022.
The study also found a higher prevalence of medical debt in communities of color compared to predominantly white areas.
This year, three major United States credit reporting companies agreed to omit medical debts under $500 from credit reports, a move advocates deemed insufficient, especially considering that in New York’s lowest-income communities, more than half of those with medical debt owed amounts exceeding $500.
The legislation passed in June, despite Republican concerns about its broad scope, aligns with the federal Consumer Financial Protection Bureau’s ongoing efforts to minimize the impact of medical debt on credit assessments.
This initiative is part of the Biden administration’s broader goal to reform how medical debt influences creditworthiness evaluations.
The other three bills signed into law alongside the medical debt bill include consumer protection measures.
One bill prohibits the sale of medicine at exorbitant prices during drug shortages, ensuring fair access to essential medications.
Highlighting the importance of the law, Assembly member Karines Reyes stated, “This legislation tackles the affordability and access crisis in health care by allowing New York State to sue and penalize entities that engage in the price gouging of medicines, due to drug shortages.
“This new law will allow state officials to analyze, identify and engage bad actors that seek to excessively profit off of high prescription drug prices, leaving seniors, the disabled and the most marginalized without sorely-needed medicine or an ability to pay their other bills,” Reyes added.
The second bill mandates companies to clearly inform customers about automatic subscription renewals and provide straightforward cancellation instructions, enhancing transparency in subscription services.
The third bill requires merchants to display the maximum price a consumer might pay for a product, regardless of the payment method.