How the No Surprises Act and Bankruptcy Work Together for Patients with Unexpected Medical Bills

Medical debt is one of the leading causes of financial stress for Americans, often forcing individuals and families into difficult financial situations, including bankruptcy. The No Surprises Act, which went into effect in January 2022, aims to protect patients from unexpected and often exorbitant medical bills. But while this law addresses many billing issues, it doesn’t eliminate all medical debt, and bankruptcy may still be necessary for those overwhelmed by healthcare costs.

Consult a Los Angeles medical debt lawyer to explore how the No Surprises Act works, the limitations of the law, and how it intersects with bankruptcy for patients facing significant medical debt.

What Is the No Surprises Act?

The No Surprises Act is a federal law designed to protect patients from unexpected medical bills, particularly for out-of-network care. Surprise medical bills often arise when patients receive care from providers outside their insurance network without realizing it—such as during an emergency or at an in-network facility where some specialists are out-of-network.

The law offers several protections for patients, including:

1. Emergency Services Protection: Patients cannot be billed for out-of-network rates for emergency services, even if they receive care at an out-of-network hospital or facility.
2. Out-of-Network Providers at In-Network Facilities: Patients are shielded from being charged out-of-network rates for services provided by out-of-network providers at in-network facilities.
3. Transparent Billing Practices: Healthcare providers must give patients clear, upfront cost estimates for scheduled services and provide an explanation of their rights under the law.
4. Arbitration Process: The law establishes a dispute resolution process between insurers and healthcare providers to resolve payment disagreements, leaving patients out of the middle.

These protections reduce the burden of surprise bills but do not eliminate medical debt entirely. Patients may still face substantial bills for in-network care, copayments, deductibles, and uncovered treatments, potentially leading to overwhelming debt.

The Gaps in the No Surprises Act

While the No Surprises Act provides critical protections, it does not address all sources of medical debt. Here are some limitations of the law:

1. In-Network Cost-Sharing Still Applies: Even if a bill is protected under the No Surprises Act, patients are still responsible for in-network copays, deductibles, and coinsurance. These costs can add up, particularly for those with high-deductible health plans.
2. Uninsured Patients Are Still Vulnerable: The law primarily benefits insured patients. Uninsured individuals may still face financial challenges related to medical bills, even with upfront cost estimates.
3. Certain Providers Are Excluded: While the law covers most emergency and non-emergency services, certain providers or situations may not fall under its scope. For example, if a patient consents in advance to receive care from an out-of-network provider, the protections may not apply.
4. Existing Medical Debt Remains: The No Surprises Act does not erase medical debt incurred before the law went into effect or debt resulting from in-network services that are still expensive.

When Bankruptcy Becomes Necessary for Medical Debt

Even with the No Surprises Act in place, many patients struggle to manage high medical bills, especially if they have other debts such as credit card balances, personal loans, or mortgages. Bankruptcy offers a legal way to address overwhelming debt, including medical expenses.

The two most common types of bankruptcy for individuals are:

1. Chapter 7 Bankruptcy: Known as “liquidation bankruptcy,” Chapter 7 allows you to discharge unsecured debts, including medical bills, credit card balances, and personal loans. This option is best for individuals with little to no disposable income and limited assets.
2. Chapter 13 Bankruptcy: Often called “reorganization bankruptcy,” Chapter 13 allows you to restructure your debts into a manageable repayment plan lasting three to five years. After completing the plan, any remaining qualifying debts, including medical bills, may be discharged.

How the No Surprises Act and Bankruptcy Work Together

The No Surprises Act and bankruptcy can complement each other in providing relief for patients overwhelmed by medical debt. Here’s how they intersect:

1. Reducing the Debt You Owe Before Bankruptcy: By protecting patients from unexpected out-of-network bills, the No Surprises Act may prevent additional debt from accumulating. For example, if you receive emergency care at an out-of-network facility, the law ensures you won’t be billed excessive out-of-network rates.
2. Clarifying What You Owe: The law’s transparency requirements can help you understand the exact amount you’re responsible for before filing for bankruptcy. Knowing the extent of your medical debt allows you to make informed decisions about whether bankruptcy is the best solution.
3. Protecting You from Future Surprise Bills: For those emerging from bankruptcy, the No Surprises Act helps ensure that future medical bills won’t include unexpected charges, reducing the likelihood of falling back into financial distress.
4. Combining Legal Protections for Comprehensive Relief: The No Surprises Act provides upfront protections, while bankruptcy offers a long-term solution for resolving medical debt that exceeds your ability to pay. Together, these tools can provide a path to financial recovery.

Tips for Managing Medical Debt with the No Surprises Act and Bankruptcy

1. Know Your Rights Under the No Surprises Act: If you receive a medical bill you believe violates the No Surprises Act, you can dispute it. Contact your insurance provider or use the federal dispute resolution process to challenge the charge.
2. Review Your Medical Bills Carefully: Even with the No Surprises Act, billing errors can occur. Ensure that your bills are accurate and comply with the protections provided by the law.
3. Consult a Bankruptcy Attorney: If medical debt remains unmanageable despite the No Surprises Act, consult an experienced bankruptcy attorney. They can help you explore whether Chapter 7 or Chapter 13 bankruptcy is right for you and guide you through the process.
4. Take Action Quickly: Both the No Surprises Act and bankruptcy have time-sensitive components. If you plan to dispute a bill or file for bankruptcy, acting promptly ensures you maximize your legal protections.

Contact Wadhwani & Shanfeld

The No Surprises Act offers crucial protections against unexpected medical bills, but it doesn’t eliminate all sources of medical debt. For patients overwhelmed by healthcare costs, bankruptcy may be the best solution to regain financial stability. Together, these tools can provide a safety net for individuals and families struggling with the high cost of medical care.

If you’re facing significant medical debt and want to understand your rights under the No Surprises Act or whether bankruptcy is the right option for you, contact Wadhwani & Shanfeld today. Our experienced attorneys can help you navigate the complexities of medical debt and guide you toward a fresh financial start. Reach out for a consultation and take the first step toward financial freedom.

Source:

cms.gov/newsroom/fact-sheets/no-surprises-understand-your-rights-against-surprise-medical-bills