Both houses of the New Jersey Legislature recently passed Assembly Bill No. 3861 (AB 3861), known as the Louisa Carman Medical Debt Relief Act. The legislation’s stated aims are to prevent undue financial hardship and protect patients from aggressive debt collection practices. Medical debt in general and how and whether it can be included in consumer reports has been a hot topic at the state and federal level. We have written on recent developments regarding medical debt here, here, here, and here.

Key provisions of AB 3861 include:

  • Prohibition on Reporting Medical Debt:
    • Medical creditors and debt collectors are prohibited from reporting a patient’s medical debt to consumer reporting agencies (CRAs) for health care services performed on and after the effective date of the bill.
    • CRAs cannot include a patient’s paid medical debt or medical debt of less than $500 in consumer reports.
  • Restrictions on Collection Actions:
    • Medical creditors and debt collectors must wait 120 days after the first bill is sent before engaging in collection actions, and they must offer a reasonable payment plan to the patient.
    • Collection actions cannot be initiated against patients who comply with the terms of a reasonable payment plan.
  • Interest Rate Cap:
    • The bill caps the interest rate on medical debt at 3% per annum, including any judgments on medical debt.
  • Garnishment Provisions:
    • The bill prohibits the garnishment of wages for patients with annual incomes less than 600% of the federal poverty level to collect medical debt.
  • Insurance Appeals:
    • Medical creditors and debt collectors cannot communicate with patients or initiate lawsuits regarding unpaid charges if an internal or external review of a health insurance decision is pending.
  • Remedies:
    • Any portion of a medical debt reported to a CRAs in violation of the bill’s provisions is considered void.

With the bill having cleared both legislative houses, it now awaits Governor Murphy’s signature.