Colorado bill would cap medical debt interest, implement other consumer protections

Cindy Powers underwent emergency surgery to fix a life-threatening abdominal obstruction in 2004. Over the next five years, she received 18 additional surgeries to address complications, infections and hernias, before her condition was finally fixed in 2009.

But while her medical nightmare had come to an end, the financial nightmare was just beginning.

Even with health insurance, Cindy had accumulated $250,000 in medical debt from her surgeries and hospital visits. Unable to pay off the massive amount of debt, Cindy and her husband, James Powers, said they filed for Chapter 13 bankruptcy. A few years later, they lost their home to foreclosure.

“We felt hopeless,” James said. “Nineteen years later, my family and I continue to feel the effects of medical debt. Only recently have we been able to start picking up the pieces and begin looking forward to life unburdened by debt.”

Medical debt is the leading cause of bankruptcy nationwide. In Colorado, over 12% of residents are in collections for medical debt and the state’s combined medical debt totals $1.3 billion, according to a 2022 report from the federal Consumer Financial Protection Bureau.

Lawmakers said Senate Bill 93 will address this situation.

If passed by the state legislature, the bill would cap interest rates at 3% for medical debt, down from the current 8%. The bill would also pause debt collections when a patient is appealing their coverage; require debt collectors to verify the total debt owed and provide a payment plan at a patient’s request; and, require health care providers to provide a cost estimate for medical services before the services are provided at a patient’s request.

Bill sponsor Sen. Sonya Jaquez Lewis, D-Longmont, said the bill would provide relief for Coloradans struggling with medical debt, in addition to increasing transparency and cracking down on deceptive trade practices in the medical debt industry.

“This bill will begin to untangle the complicated web of medical debt,” Jaquez Lewis said. “It’s time to be bold in our efforts to protect patients and make sure every Coloradan can afford the help they need.”

The Senate Health and Human Services Committee advanced the bill on Thursday, voting 7-2 to send the bill to the full Senate for consideration. Six Democrats and one Republican voted in support of the bill, while two Republicans voted against it.

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The vote came after more than an hour of testimony from attorneys raising concerns about the bill, representing organizations including the Colorado Creditors Bar Association, Bankers Association and Associated Collection Agencies. The vast majority of the testimony centered on an aspect of the bill that they said would have inadvertently violated patient privacy, which was amended out of the bill.

However, some opponents criticized the 3% interest rate cap on medical debt, saying it unfairly discriminates against health care providers.

“It creates challenges to recovering money for health care providers,” said Heather Cannon, an attorney and member of the Colorado Creditors Bar Association. “Rural communities are already struggling to keep their doors open and have difficulty attracting and keeping qualified health care providers.”

Sen. Jim Smallwood of Parker, the only Republican who voted “yes” on the bill, said he thought they struck a “good balance” with the amendments made it committee, adding that he wants it to be easier for patients to figure out their medical debts.

Among Coloradans who have problems paying off medical debt, 37.2% are unable to pay for necessities like food, heat or rent, according to a 2017 survey by the Colorado Health Institute. The survey also found that 46.2% have accumulated credit card debt for medical expenses, 15.7% took out a loan and 5.4% declared bankruptcy.

This data is all too real for James and Cindy Powers, who said their personal story is not unique and that medical debt is “at a crisis level” while testifying in support of the bill Thursday.

“I don’t want anyone to have to go through the same emotional and financial pain that my family did,” James said. “If this bill had been around at the beginning of our medical debt struggles, our lives would be very different today."

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