Will Keeping Your Kids On Your Insurance Hurt Your Credit?

Some parents are now keeping their adult children on their health insurance plans thanks to the Affordable Care Act. That law requires healthcare plans that offer dependent coverage to make the coverage available until a child reaches the age of 26.

But just because parents are willing to pay for their kid’s health insurance, it doesn’t mean they want to pay for all their medical expenses. Yet, because the insurance policy is in their name, some parents are getting bills for their kids and are worried that if they don’t take care of them, their credit is at risk.

For example, one of our readers wrote:

I have a 20-year-old son, who does not live with us, is not in college and does not have insurance through his employer. We have continued to keep his insurance coverage on our family policy, “just in case” something would happen. However, he has made three visits to the ER in 3 months for non-life threatening emergencies. I have asked him several times to call me first, or go to urgent care instead, but apparently he isn’t listening.

Are my husband and I still responsible for the deductibles at these expensive visits? It just doesn’t seem fair, that I am expected to pay these, if 1. I haven’t authorized the visit/expense and 2. Am not even able to find out what was done. I hate to drop him, but can not keep paying high dollar medical bills for non-life-threatening issues.

We’ve written before that parents are usually responsible for their minor children’s medical expenses, even if that child was in the custody of an ex-spouse at the time. We’ve also warned that under some state laws, spouses may be liable for their husband or wives’ essential medical bills even if they didn’t sign anything specifically agreeing to that responsibility.

But the medical bills of an adult child? That may be another matter, says attorney David L. Trueman. “Even though it is dependent coverage, it is separate coverage” (and the) “primary insured is not a guarantor,” he says, unless they sign a form agreeing to be responsible for bills not covered by insurance.

In other words, just because you keep your adult children on your health insurance, that doesn’t mean you will have to foot their medical bills.

Trueman also reminds patients to understand how their insurance works. “There are some contracts with in-network providers where they have agreed they will not bill the patient for unpaid expenses (besides co-pays or deductibles),” he explains.

Medical bills can have a significant impact on a consumer’s credit reports and scores. According to a report by industry trade group ACA International, “health care related debt (from hospitals, physician groups and clinics) is the leading debt category, accounting for nearly 38% of all debt collected in the industry.” And medical bills don’t typically appear on credit reports until they are sent to collections, so this type of reporting is almost always negative. While the newest version of FICO scores will treat medical bills differently, it may be a very long time before that scoring model is widely adopted by lenders.

In the meantime, Stephanie will want to reach out to the companies who are trying to collect from her. She can send them certified letters explaining that her son is an adult, and she is not financially responsible for his bills.

And like anyone who dealing with medical billing issues, she should check her credit reports (here’s how she can get her credit reports for free) and monitor her credit scores on a regular basis. She can get a free updated credit score every 14 days at Credit.com. If collection accounts do appear on her credit reports, she will want to dispute them right away.

But she’ll also want to have a heart-to-heart with her son and help him understand that he is legally responsible for these debts, and if he doesn’t pay them, he should expect to get collection calls. These unpaid bills could even land him in court if he is sued for the debt. At a minimum, he’ll be dealing with the repercussions on his credit for the next seven years or more. So he should monitor his credit as well.