How to avoid surprise medical charges on card-on-file
Patient responsibility statement may give broad access to your card
Expert on consumer credit laws and regulations.
After a visit to urgent care, a credit card user was disputing the bill. Then she learned it had been paid.
"They used the card number my husband paid the $30 copay with," she said in an email sent to CreditCards.com. "Is this legal?"
According to complaints from card users, surprise medical charges like this are happening more often. Urgent care offices, dentists and even hospitals are hitting patients with unexpected charges, long after their visit.
Whether it's legal depends on the "patient statement of financial responsibility" the office uses, and the circumstances.
"The extent of authorization depends on what they sign," Chicago consumer attorney Daniel Edelman said via email. "A general acknowledgment of financial responsibility and payment by credit or debit card does not authorize further charges or debits."
See related: When is a charge on a credit card unauthorized?
How to avoid surprise medical charges on your credit card
Card-on-file statement authorizes charges
However, many patient statements of financial responsibility contain "card-on-file" language. This lets the office store your card number indefinitely – and use it to cover an unpaid balance.
Practice management companies are recommending that medical offices use the card-on-file language to boost collections of medical bills.
The clause that hands over the keys to your credit card account is easy to overlook in the lengthy financial responsibility document, full of legalese.
This sentence appears on the third page of a six-page financial responsibility statement used by a chain of primary care offices:
"[Y]ou authorize [the company] to securely store your credit card information, and only charge it should you have an outstanding balance or any leftover balance from a processed claim in the future."
The statement also says that the patient is responsible for keeping the office updated with current credit card information.
Medical practice managers seek financial backstop
Medical practice managers defend the card-on-file as a safeguard from large unpaid bills. Most providers collect only a small portion of the fee – the copayment or deductible – at the time of service, putting them at financial risk.
But to patients, it seems like they are being placed on the hook for amounts they're not aware of – until the charge hits their card.
"When I went [to an urgent care office], I paid a copay," another card user said in an email to CreditCards.com. "Almost a month later I see a charge I didn't authorize from this place for the full amount of the bill."
Other consumers writing in online forums say their card was unfairly charged for appointment cancellation or bill collection fees.
See related: 5 reason not to put medical charges on credit cards
Debit cards have greater protections from unexpected charges
People paying by cash or check are not subject to pre-authorized charges. And debit cards, which are governed by the Electronic Funds Transfer Act, face tighter restrictions than credit cards against unexpected charges.
"If a debit card is involved, notice should be given to the financial institution," Edelman said. Pre-authorized charges require a signed statement plus a written notice before amounts are debited from your account.
Tip: Protections against surprise charges are greater on a debit card than a credit card under the Electronic Funds Transfer Act. A pre-authorized charge on a debit card requires a signed authorization – and a written notice must be sent to the cardholder before the transaction goes through.
What do medical providers say?
The American Dental Association said it encourages offices to collect the amount the patient is responsible for at the time of the visit.
"Sometimes that is difficult, as dental benefit plans have many different methods for determining what benefits are due a patient," the association said via a representative in an email response to questions.
But if a balance remains, "the practice's financial policy will determine if the patient is sent a statement or charged through the patient's credit card."
The Urgent Care Association declined to comment.
Financial responsibility goes beyond card access
Limiting access to your credit card account doesn't protect you from responsibility for the ultimate bill, legal experts said.
"If a medical office has a signed copy of this agreement from the customer, it's hard for the customer to deny they agreed to it," said Ronald Wilcox, a consumer lawyer in San Jose, California.
But providing blanket access to your card can undercut efforts to collect insurance, and undermines your position in negotiations to reduce the amount due.
Charges billed after a visit appear in card networks as a "card-not-present" transaction, a Mastercard representative said. The card-not-present status alerts the card issuer that the potential for dispute (and fraud) is higher for this transaction.
"The cardholder should contact their issuer to dispute a charge," Mastercard said in an emailed statement provided by spokeswoman Robyn Cottelli. If the card issuer agrees with your dispute, they will issue a chargeback to credit your account for the disputed sum, or a portion of it.
Winning a chargeback dispute will not shield you from responsibility for the bill in the longer run. But having control of your ability to make and withhold payment puts you on firmer ground when dealing with insurers and providers.
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