Dear Penny: Our Insurance Rescinded Hospital Payments and Billed Us. Help!

A wife kisses her sick husband on the he'd while he lays on the couch with a blanket over his legs.
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Dear Penny,

My husband is currently retired and his only income is a small pension from the state of Maryland from when he was a C.O., disability checks from the VA (100% service related) and Social Security Disability checks. I work full time and make about $80,000 annually with salary and quarterly bonuses.

He had several hospitalizations within the last couple of years. Just recently, we’ve received a new explanation of benefits from his private insurance through the state of Maryland, and it looks like they took back the money they had initially paid to the hospital and now, almost a year and a half later, the hospital is sending us new bills for those visits that add up to almost $10,000.

My first question is: Is that even legal to do?

My second question is: If we just don’t pay it and let it go to collections, could his disability checks or his pension be garnished? Could they come after me for his medical debt and garnish my salary? Thanks in advance.

— Swimming in Medical Debt

Dear Swimming,

Insurance companies do have a right to take back payments made in error to service providers. Under Maryland law, they only have six months after the initial payment to reverse it, but could have up to 18 months if the reversal is based on your husband having access to other insurance that would cover the service (called coordination of benefits or C.O.B.). These rules vary by state.

If you think his insurance plan should cover the services, you can appeal with your insurance company for a chance to reverse their decision. If you do that, let the service providers know in the meantime, so they don’t send your bills to collections.

What will happen if you don’t pay the medical bills?

Regardless of the source of your insurance, the bills are owed to service providers — hospitals, doctors, labs, etc. — so those are most likely private companies. (Unless he received services from a VA hospital or clinic; those are owned and operated by the federal government.)

When you owe debt to a private company — including to a debt collector — they have to sue you to win the right to garnish your wages; you shouldn’t be blindsided by it. Your husband would have to receive a summons to appear in court, where he has an opportunity to fight or negotiate whatever they’re asking for. Wage garnishment should be a last option; he might be able to negotiate a settlement, so he can eliminate the debt with a lower lump-sum payment or a payment plan.

Maryland isn’t a community property state (as nine states are), so you’re not responsible for your husband’s debts. A debt collector couldn’t win the right to garnish your wages in a lawsuit against him. It’s possible, though, that they’d consider your shared household income as part of your husband’s resources when deciding on a settlement or monthly payment amount.

As of April 2023, the major credit bureaus no longer include in your credit report medical debt that’s less than a year old or any single bill that’s less than $500, so the debt will have less of an impact on your credit score than it might have in the past.

Dana Miranda is a Certified Educator in Personal Finance®, author, speaker and personal finance journalist. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.