Finally: Medical Debt Can’t Ruin Your Credit. Here’s Why That’s a Big Deal.
For years, hospitals and debt collectors have used one line to push people into paying bills—even when the bills were wrong:
“If you don’t pay this, it’ll go on your credit report.”
And that worked. Because nobody wants their credit score wrecked over a disputed $1,400 emergency room charge from two years ago.
But here’s the truth: a huge percentage of those bills were never accurate to begin with.
Now, the federal government is stepping in—and it’s about time.
The New Rule That Changes Everything
In April 2025, the Consumer Financial Protection Bureau (CFPB) finalized a new rule that bans medical debt from being included on credit reports.
That means if you’re being hounded over a medical bill, even one that’s gone to collections, it won’t tank your credit score anymore.
This is a huge win for consumers—and a big blow to one of the most aggressive tactics used by hospitals and collection agencies.
“Too many people have had their credit destroyed by medical bills they didn’t owe or never should have been charged for in the first place.”
— CFPB Director Rohit Chopra, April 2025
Why This Was Needed: Hospital Billing Is a Mess
Let’s be blunt: hospital billing is often inaccurate, inflated, and completely opaque.
Some stats that drive it home:
- Up to 80% of medical bills contain errors, according to a 2023 study by Medliminal.
- 66% of bankruptcies in the U.S. are tied to medical debt—even for people who had insurance.
- Hospitals routinely “upcode” procedures or charge wildly different prices depending on who’s paying.
- Collection agencies buy debt for pennies and pursue people relentlessly—even when the charges were never valid.
And here’s the worst part: for years, the threat of credit damage was used to get people to pay, even when they were right to dispute the charges.
The Game Hospitals Played
Hospitals knew exactly what they were doing. They’d bill the wrong amount—or bill the wrong person entirely. Then, if the patient pushed back, the hospital would:
- Send it to collections
- Let it hit your credit
- Say, “We can’t fix it until you pay”
It wasn’t just unfair. It was predatory.
And for people already dealing with a health crisis, it added financial anxiety to physical stress.
The New Rule: What It Does and Doesn’t Do
Here’s what changed:
✅ Medical debt can no longer appear on credit reports, regardless of amount or collections status.
✅ Debt collectors are restricted from using credit as leverage when trying to collect medical bills.
✅ Lenders and landlords can’t use medical debt against you when making decisions.
How This Helps—And Why Transparency Still Matters
This rule gives people breathing room. It removes one of the biggest tools hospitals used to push patients into paying without asking questions.
But it’s only one piece of the puzzle.
Over the last few years, we’ve seen a wave of federal transparency regulations aimed at hospitals and insurers, including:
- The No Surprises Act, banning surprise out-of-network bills in emergencies.
- Hospital price transparency rules, requiring hospitals to post pricing online (though compliance is still spotty).
- Disclosure requirements for PBMs and insurers to show what they’re actually paying.
It’s a slow-moving shift, but the goal is clear: give people and employers real visibility into what healthcare actually costs—and what they’re getting.
What This Means for Employers
Even though this new credit rule protects individuals, it should also be a wake-up call for businesses.
If your employees are getting hit with bad bills—or scared into paying something they shouldn’t—it creates:
- Distrust in your benefits plan
- Stress that impacts productivity
- A reputation issue for your company
That’s why we don’t just focus on insurance rates—we focus on what’s behind the numbers.
In our private program at Kennion, we’ve:
✅ Cut medical claims by 48%
✅ Reduced post-acute costs by 79%
✅ Kept pharmacy spend 63% below benchmark
✅ Held renewals at an average 4%, often with no plan design changes
Those outcomes aren’t magic—they come from building a plan where transparency and accountability actually exist. And making sure your people don’t get screwed by a billing department hiding behind complexity.
Bottom Line
Medical debt should never have been a credit weapon to begin with. Now, finally, it isn’t.
But if we want lasting change, we’ve got to keep pushing—for clarity, fairness, and accountability at every level of healthcare.
If you’re tired of doing the same thing and getting the same results, maybe it’s time to think differently. That’s what we do here at Kennion. We bring options, experience, and a commitment to actually fixing what’s broken. Want to know if it could work for your business?