Colorado House Bill 23-1126 Erases Medical Debt from Credit Reports

It’s no secret that healthcare costs in the U.S. have spiraled out of control. Medical debt has long plagued American households for many years now, and Coloradans are no exception. It has forced families to sacrifice essentials, delay care, and endure financial hardships that ripple across their lives.

For years, consumers have had no protection from the devastating impact medical debt can have on credit scores. However, with the passage of Colorado House Bill 23-1126 in August 2023, the state has set a groundbreaking precedent.

This new law will prohibit credit reporting companies from including medical debt on credit reports. It also includes provisions to erase existing medical debt from credit reports, which can help thousands of Coloradans regain financial control and rebuild their lives.

“This bill is a huge relief for our clients, giving folks the chance to rebuild their lives without fear of medical debt wrecking their credit,” said Keith Fuicelli of Fuicelli & Lee Injury Lawyers in Denver.

The Growing Crisis of Medical Debt in Colorado

The sheer scale of the medical debt crisis is staggering. In 2023, approximately 700,000 Coloradans had medical debt in collections. Medical bills are the leading cause of financial stress in the state, pushing many to the brink of financial ruin.

Coloradans with medical debt often struggle to access housing, jobs, loans, and even basic utilities due to poor credit scores, worsening an already challenging situation.

Medical debt disproportionately affects low-income individuals, but the issue cuts across all demographics. Anyone who has suffered a serious injury or illness that requires frequent or constant care knows how medical expenses can overcome your life.

If you fall behind and your medical debt goes to collections, that debt traditionally shows up on your credit report. When your credit score drops below an even moderate level, your ability to buy a car, rent an apartment, own a credit card, and even find a job is severely hindered, and the cycle of debt becomes even harder to break.

That’s why the passage of Colorado House Bill 23-1126 is such an important step forward for state residents. By ensuring that medical debt no longer appears on credit reports, this law directly addresses one of the most harmful consequences of healthcare-related financial struggles.

What is Colorado House Bill 23-1126?

Effective August 2023, Colorado HB 23-1126 prohibits the inclusion of medical debt information on consumer credit reports. This law is a pioneering step in consumer protection, making Colorado the first state to adopt such legislation.

Another benefit for Coloradans is that under this law, the burden is placed on credit reporting agencies—not consumers—to ensure that medical debt is no longer reflected on credit reports.

Consumers can now expect greater financial security as they seek new housing, employment, or loans without the lingering fear of being penalized for unpaid medical bills. Removing medical debt from credit reports is essential for individuals recovering from financially devastating medical events. It clears the path for them to rebuild their lives.

HB 23-1126 and Medical Debt FAQS

Can Unpaid Medical Bills Affect Your Credit in Colorado?

Prior to this legislation, unpaid medical bills could significantly harm credit scores in Colorado. Many Coloradans found themselves with tarnished credit reports due to unavoidable medical expenses, which limited their financial opportunities.

Now, thanks to House Bill 23-1126, medical debt will no longer be reported to credit agencies, ensuring that healthcare costs don’t impede their access to credit or housing.

What Happens If You Don’t Pay Medical Bills?

While House Bill 23-1126 prevents medical debt from appearing on credit reports, it’s important to note that the debt itself doesn’t disappear. Unpaid medical bills can still result in debt collection actions, and hospitals or medical providers may pursue legal measures to recover the amount owed.

However, under the new law, this debt will not affect your credit score. You may still be targeted for collections, but your financial recovery won’t be hindered by a drop in credit.

What is the Interest on Medical Debt in Colorado?

Senate Bill 23-93, another critical piece of legislation passed in 2023, caps the interest consumers pay on medical debt at 3% per year, down from 8%. This cap may offer substantial relief to consumers who would otherwise face insurmountable interest charges on their unpaid medical bills.

Colorado joins a growing list of states that have moved to limit the financial strain imposed by high-interest medical debt. Many Coloradans believe that no interest should be paid on medical debt and are pushing for further reform.

Are There Any Exceptions or Exclusions to Colorado House Bill 23-1126?

The new law applies broadly, but there is one notable exception: medical debt may still appear on your credit report if you’re applying for a loan exceeding the Federal Housing Finance Agency’s conforming loan limit for a single-family home, which currently stands at $766,550. Outside of this scenario, no other exclusions allow medical debt to be reported.

Medical expenses that the consumer charged to a credit card are not covered by the new law and will still appear on credit reports.

The “Big 3” Credit Reporting Agencies: What You Need to Know

The Big Three credit reporting agencies—Equifax, Experian, and TransUnion— collect, manage, and report consumers’ credit information. Here’s a brief overview of what consumers should know about them:

1. How Do They Get Their Information? Credit reporting agencies compile data from various sources, including banks, credit card companies, lenders, and, yes, even hospitals and other medical care providers. They also gather information from public records, such as bankruptcies and foreclosures.
2. What Do They Use This Information For? These agencies create a credit report, which lenders, landlords, and employers often use to determine a person’s creditworthiness. A lower credit score can result in denied loan applications, higher interest rates, and limited housing options. With House Bill 23-1126, medical debt will no longer be a factor in these decisions.
3. How Can Consumers Check Their Credit Reports? Under federal law, consumers are entitled to one free credit report per year from each of the Big Three credit reporting agencies. Coloradans can check their credit reports to ensure that medical debt has been removed either by visiting AnnualCreditReport.com or calling (877) 322-8228. If consumers find an error on their credit report, they can dispute the error directly with the reporting agency.

The Broader Context: U.S. Medical Debt Forgiveness and National Trends

Colorado’s efforts to curb the negative effects of medical debt are part of a growing national movement. The U.S. Medical Debt Relief Act of 2023 (H.R. 6003), sponsored by Rep. Katie Porter (D-CA), seeks to provide nationwide relief by preventing medical debt from appearing on credit reports for the first two years after the bill is issued.

While this federal bill is still in the early stages of the legislative process, it signals a broader recognition of the medical debt crisis across the country.

Colorado’s leadership on this issue is evident. Along with House Bill 23-1126 and Senate Bill 23-93, the state has established itself as a frontrunner in providing financial protections to its residents. These laws, coupled with the Hospital Discounted Care program, demonstrate the state’s commitment to addressing the root causes of medical debt and ensuring that healthcare costs don’t devastate Coloradans’ financial futures.

Empowering Consumers to Take Control of Their Finances

For Coloradans who have faced financial ruin due to medical debt, House Bill 23-1126 may offer many consumers a new beginning. However, the credit relief provided by the new law doesn’t come automatically. Consumers must still be proactive in managing their credit reports and disputing any mistakes.

The best way for consumers to protect themselves is to regularly check their credit reports, ensure that their medical debt is removed, and act quickly to dispute any errors.

Financial Toxicity: The Hidden Burden of Injury and Medical Debt

The term “financial toxicity” was coined by researchers to describe the devastating impact that medical debt and the financial fallout from serious injuries can have on a person’s life.

While medical professionals focus on physical recovery, the economic burden that follows a severe injury can be just as crippling, affecting both mental and physical health long after the event.

A recent study examining the financial strain on patients following significant injuries found that 88% experienced financial toxicity within the first year after their injury. This goes beyond medical bills—it’s the combination of reduced income, unemployment, and constant stress over financial responsibilities that causes a person’s quality of life to spiral out of control.

One of the most troubling aspects of financial toxicity is how it creates a cycle of harm. Injuries often lead to prolonged recovery periods, during which patients may lose their jobs, see their incomes drastically reduced, or face unemployment altogether.

These financial strains affect not only patients’ ability to pay medical bills but also daily living expenses, putting their families under enormous stress. Unsurprisingly, financial toxicity is closely tied to worse physical and psychological outcomes and an overall deterioration in their quality of life.

The study’s findings paint a clear picture: medical debt, particularly after a significant injury, can turn a person’s life upside down. The stress caused by financial toxicity infiltrates every aspect of life, affecting mental health, relationships, and overall well-being. Those without sufficient insurance or with larger families often face the steepest challenges. Medical debt can seem like an insurmountable obstacle, and the emotional toll it takes can make it difficult for individuals to see a path forward.

For individuals who have sustained injuries, seeking legal help might be a way to alleviate some of the financial burdens caused by medical debt. Compensation for injuries can make a crucial difference in helping individuals and families regain financial stability and reducing the long-term effects of financial toxicity.

Final Thoughts

House Bill 23-1126 is a landmark achievement for Colorado and a critical measure for residents grappling with the weight of medical debt. By eliminating the impact of medical debt on credit scores, the law helps level the playing field and allows individuals to rebuild their financial lives.

Coupled with Senate Bill 23-93, which caps medical debt interest at 3%, and other consumer protection efforts, Colorado is paving the way for more equitable healthcare financing.

As more states and even the federal government consider similar measures, Colorado serves as a model for how to balance the needs of consumers with the challenges of healthcare costs. For Coloradans, these laws are more than just legislative victories; they may be lifelines for a healthier, more financially secure future.

How Can Fuicelli & Lee Help You?

Medical debt can erode not just physical health but emotional resilience. If you have been injured by someone else’s negligence, obtaining full, fair, and complete compensation for your injuries can help you improve every part of your life and move forward.

At Fuicelli & Lee, our Denver personal injury lawyers are committed to helping injured Coloradans reclaim their lives with life-changing settlements and awards.

We firmly believe that you and your family should never be sacked by medical debt, especially if your injuries were caused by someone else in an accident you never saw coming.

Call Fuicelli & Lee today at (303) 444-4444 or through our online form to schedule a consultation with one of our Denver personal injury attorneys. All case evaluations and initial consultations are free, and you are under no obligation to act.

Don’t be hounded any longer by medical expenses, lost wages or income, and all the stress that comes with being injured. Call us today.