Gov. Murphy signs new medical debt protections into law

The new law will allow residents to seek out the care they need without facing the risk of financial calamity, Gov. Phil Murphy said Monday. (Courtesy of the Attorney General's Office)

New Jerseyans with medical debt will enjoy a series of new protections under a bill Gov. Phil Murphy signed into law Monday.

The law , dubbed the Louisa Carman Medical Debt Relief Act after a Murphy administration staffer who died in a car crash in January, will bar owners of medical debt from reporting most of a patient’s debt to credit-rating agencies and cap interest on medical debt to 3%, among other things.

“We are going to take a monumental step forward in ensuring that our state’s families can seek out the care they need and when they need it without facing the risk of financial calamity,” Murphy said during a bill signing ceremony in Trenton.

Numerous speakers at the event credited Carman as the bill’s chief architect.

“This woman put a bunch of boulders on her back from day one and walked straight up a mountain to get this thing done, so this is so, so richly deserved,” Murphy said to a crowd that included members of Carman’s family.

The new law bars medical debt holders from moving to collect such debts in the 120 days following the sending of the first medical bill, and it requires they offer patients a payment plan before they move to collect.

Payments under such plans can total no more than 3% of a patient’s monthly income, and creditors must adjust payments to account for changes in the debtor’s financial circumstances. The plans are required to offer a 60-day grace period for late payments.

Creditors and collections agencies cannot move to collect on medical debt if the debtor accepts a payment plan and holds to its provisions , and the 3% cap on medical debt interest is also applied to court judgements on such debt.

“No one should ever have to live in poor health because of the debt that they incurred taking care of themselves or their families,” said bill sponsor Sen. Shirley Turner (D-Mercer).

The bill won bipartisan support in the Assembly but was opposed by every Republican in the Senate, which passed it in a strict party-line vote.

Regardless of whether a patient agrees to a payment plan, creditors and collectors are entirely barred from garnishing the wages of those making less than 600% of the federal poverty level — $90,360 for an individual and $187,200 for a family of four in 2024.

The law does permit creditors to report some medical debt to credit rating agencies, including debts backed by collateral, debt to veterinarians, certain loan debt, debt on credit cards issued solely to pay for health care costs, and debt arising from insurance payments the patient kept instead of sending to their health care providers.

If a creditor reports any other medical debt to credit rating agencies, the law immediately makes that debt void and leaves the creditor exposed to a civil suit under the New Jersey Fair Credit Reporting Act and related statutes.

The law allows the attorney general to order any gains a creditor or collections agency made by violating its provisions to be returned to the patient, another provision meant to keep medical debt from reverberating through a person’s life.

“Anyone who has ever faced the burden of a health care crisis immediately followed by overwhelming medical debt knows how extremely life-challenging it can be afterwards,” said Assemblywoman Verlina Reynolds-Jackson (D-Mercer).

The provisions barring the reporting of medical debt and imposing penalties on those who do so went into effect immediately with the bill’s signing , while the rest of the bill will remain inactive until July 22, 2025.

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