Less than a month after fending off a bill to boost state oversight of healthcare mergers and acquisitions, Colorado hospitals scored a second big legislative victory Tuesday, helping to defeat a bill that would have placed limits on healthcare debt collections.
In fact, many of the House Health and Human Services Committee members who pushed House Bill 1267 to an 8-5 defeat specifically cited the detrimental effect they believed the proposal would have on small, rural hospitals, many of which are struggling to stay open. In that way, opposition mirrored that which led to the death of the oversight-increasing Senate Bill 41 on March 5, showing the outsized influence that hospitals in hamlets from Cortez to La Junta are having this session in blocking efforts to regulate the sector further.
HB 1267, sponsored by Democratic Reps. Junie Joseph of Boulder and Javier Mabrey of Denver, sought to target what backers called the most extreme means of recouping unpaid bills by hospitals, providers and their hired debt-collection agencies. Specifically, it would have banned collectors from garnishing debtors’ wages, seizing bank accounts with less than $5,000 in them or threatening to take someone’s home or personal property.
Colorado courts approved about 14,000 wage-garnishment orders annually between 2022 and 2024, many aimed at low-income individuals who received emergency services and now had to choose between buying necessities or repaying health systems, Mabrey said. Witnesses spoke of agonizing choices to pawn their late husband’s wedding ring and to go into further debt via high-interest payday loans — often, Mabrey said, so that health systems making nine- or 10-figure profits could add slightly to their revenue totals.
Sponsors fight “moral failure”
“The legal system treats corporate debt as a financial tool to be managed. It treats working-class debt as a failure that is meant to be punished,” Mabrey told the committee. “Colorado is one of the wealthiest states in the wealthiest country in the history of the world, and it is a moral failure that people face losing their home or their savings because they get sick.”
While even HB 1267 opponents acknowledged that the rate of medical debt is a problem, they pushed back that the bill could create even bigger problems for a health system already facing looming financial troubles. Namely, it would take away healthcare providers’ ability to collect money they are owed for often high-cost services that they rendered, which in turn would create a dip in revenues that would threaten the provision of certain services or even the operations of certain facilities.
Already, 70% of hospitals are running at unsustainable operating margins of 4% or less, meaning further revenue declines will cause them either to shift costs further to insured patients or to reduce unprofitable services, Colorado Hospital Association leaders said. And the distress is worse at rural hospitals, which see more uninsured and Medicaid patients and face further reimbursement cuts as a federal law seeks to pare down the number of people on the public insurance program for low-income Americans.
Some providers might have to bill upfront without collection
By removing any legal obligation for repayment of services, the bill will cause repayments to plummet at a time when many small hospitals already must spend six months or more trying to get them, said Zac D’Argonne, president of the Eastern Plains Health Consortium. His group of 15 facilities already uses debt collection as a last resort — a sentiment echoed by many hospital leaders — but the threat of that last resort is what compels many individuals who otherwise would not pay to do so, he and others said.
Without having that modicum of certainty of repayment, providers like the Women’s Center of Northern Colorado, an OBGYN practice with 150 employees, would have to begin demanding payment upfront, said Scott Kenyon, business manager for the center. That could put patient access at risk, he said.
“The bill significantly hurts providers’ ability to collect long-term debt,” said Meghan Dollar, senior vice president of governmental relations for the Colorado Chamber of Commerce. “Those costs do not disappear. They just shift.”
The sponsors pared back the scope of the original bill “tremendously” in an amendment Tuesday, getting rid of provisions like a mandatory 30-day notice before sending bills to collections, required payment plans and caps on what payment-plan charges, Joseph said. The amendment focused the bill on not allowing garnishment of wages or taking of life-support financial means from low-income Coloradans, which is why it barred seizure of bank accounts less than $5,000 but not those of folks with more means, Mabrey said.
Supporters speak of debt costing them peace, valuable possessions
A rewritten version of the bill still would have permitted providers to send correspondence to debtors, to send unpaid bills to debt collectors and to sue debtors, but it would have protected the poorest Coloradans from losing homes or cars or savings accounts. Mabrey emphasized that even Texas has a constitutional provision on garnishing wages for medical debt, and he said he could not find evidence that the ability to dip into patients’ paychecks to get repayment was a key to any providers’ business plan.
Over the course of a six-hour hearing, a wide range of debtors told stories about threats, about losing wages that would have gone to buy their children food and about falling into medical debt because providers failed to bill their insurers properly. Officials from groups like the Colorado Center for Law & Policy and Towards Justice noted 60% of bankruptcies are caused by medical debt and said that forced collections from low-income individuals do little to alleviate the financial peril that hospitals say they face.
But as many supporters’ stories centered around their own personal hardships, Scott Allely — a past president of the Associated Collection Agencies of Colorado, Wyoming and New Mexico — said the state has passed not one but seven laws since 2019 to address just that.
Colorado laws already help minimize medical debt
Colorado already reduced the amount of wages that could be garnished, limited out-of-network bills and required providers to offer indigent-care pay plans to people who could not afford their full out-of-pocket costs, Allely noted. It banned lenders ability to consider medical debt when considering credit-worthiness — a changed that reduced patient payments “dramatically” after 2023 — and required more transparency in debtor lawsuits, he added.
Three Democrats voted with all five Republicans on the committee to kill the bill, and two of them, Reps. Katie Stewart of Durango and Eliza Hamrick of Centennial, specifically cited their fear that further loss of revenue could be a final straw for some rural hospitals. Both praised certain aspects of the bill, particularly a provision that would have made it illegal for collectors to threaten deportation to undocumented immigrants, but said the overall approach was not the right one to deal with the issue of medical debt.
“I worry about the unintended consequences of the bill, the shutting of clinics and patients’ access to health care,” Hamrick said.