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Idaho businessman proposes medical debt legislation

photo of hospital

Hospitals may need to change their billing practices if a proposal leads to legislation and passes. File photo

Idaho hospitals are waiting to see the details of legislation that would place limitations on their ability to collect medical debt, based on a proposal by an Idaho businessman.

Frank VanderSloot, founder and chief executive of the health care products company Melaleuca, described the proposal on Oct. 14 to some 50 legislators visiting him as part of the 2019 Idaho Legislative Tour, sponsored by the Greater Idaho Falls Chamber of Commerce. A billionaire, he is a prominent GOP donor and one of Idaho’s biggest living businessmen.

“I’ve just seen the concepts he is proposing and haven’t seen any details of what the legislative language might look like,” said Brian Whitlock, president of the Idaho Hospital Association, in an email message. “We are certainly happy to provide input and suggestions as they formulate legislation.  For now, I really don’t have much to comment on.”

Representatives from the St. Luke’s Health System and the Saint Alphonsus Health System also declined to comment, deferring to Whitlock.

‘Do the right thing’ 

photo of frank vandersloot

Frank VanderSloot

The proposal specifies that health care providers cannot collect on medical debt unless:

  • Within 30 days of service, providers have submitted all bills to the patient’s insurance plan.
  • Within 30 days of service, providers have provided notice of services rendered to the patient and health care facility.
  • Within 60 days of service, the health care facility provides a consolidated notice to the patient.
  • The health care provider sends a final bill, after insurance payment, that clearly states what is still owed.

“We’re hoping that our state senators and our state representatives will buckle down and do the right thing here,” VanderSloot told legislators.

In addition, VanderSloot proposed incentives toward debt collection in small claims court, reducing attorney fees.

Without specifying names, VanderSloot said he had talked with insurance companies and they approved of the idea. “They love this,” he said.

Dean Cameron, director of the Idaho Department of Insurance (DOI) and a former legislator, said in an email message he had not seen the legislation and so couldn’t comment on it specifically.

“In general, there is a need that providers send their bills to the carrier in a reasonable time frame. I would think 30 days would be sufficient,” Cameron said. “If legislation were introduced, I would encourage that consumers would need to be held harmless. I would have heartburn with an approach that allowed a carrier to decline paying a claim and then the entire bill was sent to the consumer.”

In addition, he suggested an appeals process for extenuating circumstances, such as the external review process already provided by the DOI.

‘Atrocious attorney fees’

The issue came to VanderSloot’s attention when a medical debt collection firm approached his company to garnish an employee’s wages to pay a medical debt. The debt consisted of a $294 medical bill – and the employee said she didn’t even know where it came from – plus $1,013 in attorney fees and interest that had apparently accumulated over several years.

The medical debt company, which VanderSloot didn’t name, then sued Melaleuca and billed the employee an addition $5,583 in attorney fees for that court battle, he said.

After VanderSloot learned that this was not an uncommon situation, he said he put $500,000 into a fund to help people pay for an attorney in such cases who couldn’t otherwise afford one. People were getting default judgments because it cost more to defend against the case than to pay the bills, he said, adding that 483 people came forward in a few weeks.

One such firm alone filed 2,431 cases in a 12-month period, VanderSloot told legislators. “That is a huge burden on the courts,” he said.

Moreover, the emphasis was more on accumulating attorney fees rather than collecting medical debt, he said. In fact, one hospital told him that the large attorney fees and contact from the firms led people to pay the attorney before they paid the doctors, he said.

VanderSloot emphasized to legislators that his issue was with the “atrocious attorney fees” that some medical debt collection companies charged.

“We don’t think that that increases the quality of our medical care, and we think it hurts Idahoans dramatically,” he said. “We want our doctors to be paid. We want our hospitals to be paid. We want them to prosper. We’re not challenging how much they make.”

Other tactics from some medical debt collection companies included telling people they didn’t need to show up in court, which led to a default judgment; telling people not to get an attorney, because it would run up their bill and claiming people had to pay the debt in no more than five payments, which wasn’t true, VanderSloot said.

“Is it legal in Idaho? Yes, evidently it is,” he said.

About Sharon Fisher