Senate OKs capping medical debt interest rates in Colorado

An effort to lower interest rates for the more than 700,000 Coloradans with medical debt took a major step forward on Friday, receiving approval from the state Senate. 

If passed into law, Senate Bill 93 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.

"There are people all over the state struggling with medical debt after dealing with severe and chronic illnesses and health issues," said bill sponsor Rep. Lisa Cutter, D-Littleton. "We're just making it a better process. ... This is something they shouldn't be having to deal with at a time when they're already really low." 

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. 

The Senate passed the bill in a 26-9 vote on Friday, advancing the bill to the House for further consideration. Democrats were united in their support for the bill, while Republicans were more split, with three Republicans voting "yes" and nine voting "no."

Sen. Janice Rich, R-Grand Junction, said she thinks capping interest rates for medical debt is unfair to those with other kinds of debt. She also argued that pausing debt collections when a patient is appealing their coverage could allow patients to continuously appeal so that they never have to pay. 

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"That seems to unfairly discriminate against other debt that's out there," said Rich, who voted against the bill. "It seems to be a workaround to have the hospital carry the debt." 

Sen. Jim Smallwood, R-Parker, said he he shares Rich's concern about continuous appeals and urged the bill sponsors to consider addressing that issue in the House. But Smallwood defended lowering interest rates for medical debt while voting in support of the bill, saying it is inherently different than debt incurred from buying a house or a car. 

"What we have to remember is, very often, this was not a decision that the purchaser made," Smallwood said. "What we're dealing with is not a decision the purchaser wanted to make or felt like they could afford or even knew what the price was going to be before they went and made that 'purchase.' ... Medical debt needs to be looked at little bit differently than most consumer debt." 

Smallwood also committed to working with the bill sponsors over the summer to potentially update the bill to change the interest rate from a 3% cap to a prime minus, so that it will change over time at the same pace as other interest rates, but still remain lower. 

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. 

The bill will next to be sent to the House for another vote in the coming weeks. If passed, the bill would need final approval from Gov. Jared Polis to take effect immediately upon signage. 

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