Can Medical Debts Prevent You From Getting a Job?

It’s perhaps one of the cruelest situations in which to find oneself: recovering from an illness or injury, or coping with a disability that involves expensive medical treatments; trying to get back to work, but unable to do so because of your medical bills. That scenario is perhaps not as far-fetched as it may sound.

Consider that Federal Reserve researchers found in a 2003 study that more than half of collection agency accounts and nearly one-fifth of lawsuits listed on credit reports are for medical debts. While not all employers check credit, plenty do. Some 13% of organizations polled by the Society for Human Resource Management (SHRM) conduct credit checks on all job candidates, while another 47% consider the credit history of candidates for select jobs. (Four out of ten do not conduct credit checks.)

“There’s a perception that medical debt is somehow treated differently than other debt,” says Mark Rukavina, executive director of the healthcare research and advocacy organization The Access Project. “But I don’t think (employers) peel back the onion far enough to see where the debt came from. The problem is that virtually all of the medical data on credit reports is there because it’s been reported by a collection agency makes it very difficult for an employer to distinguish (it from other debt).”

[Related Reader Question: How Can I Remove a Medical Collection Account From My Credit Reports?]

The perception described by Rukavina seems common. The internet is rife with articles and opinions stating that medical debt doesn’t affect credit the same way as other debt. (I may have even said that at some point.) Citing the results of a survey about the use of employer background screening tools, SHRM stated that “Medical debt is not considered during the hiring process.”

But if that information appears on credit reports, how can we be certain it’s not considered?

I decided to try to confirm whether medical debts are somehow excluded from credit reports employers receive. Yet, when I tried to find any evidence of that, I came up empty-handed. I checked with the Consumer Data Industry Association (CDIA), which referred me to the individual consumer reporting agencies. I also checked with the National Association of Professional Background Screeners to see if they had additional information, but they referred me back to CDIA.

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TransUnion and Equifax did not reply to my repeated requests for information. Experian responded promptly to my query, however, and spokesperson Rod Griffin told me:

Medical collection accounts will appear on Experian credit reports for employment and insurance purposes. However, the financial obligation will show only as “medical collection.” There will be no information that would indicate the kind of treatment received, the type illness that was treated or other information that would divulge private medical information.

He also added that:

Credit scores are never used in employment decisions, and the report employers receive has a number of differences, such as account numbers being truncated or omitted, birth date removed, and so on to ensure consumer privacy and compliance with EEOA regulations.

This brings us back to my question, “Can medical debt keep you from getting a job?” The answer appears to be “yes.” And that’s where it gets tricky.

Robert Miller, a human resources director who serves on SHRM’s Special Expertise Panel for Employee Health Safety and Security, told me that medical debt can affect someone’s ability to get a job. “But that doesn’t necessarily mean it will,” he cautioned.

He explained, “It may be a protected class issue with regard to Americans with Disabilities Act or Family and Medical Leave Act.” Miller, who helps write questions for certification exams for human resources professionals, says that employers can ask prospective hires about medical collections on their credit reports, but must comply with those laws. They can say, “What happened here?” But “they cannot ask about the illness or the diagnosis,” he states.

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A Discussion You Do Not Want to Have… »

Image: Brandi Jordan, via Flickr.com

Chi Chi Wu, an attorney with the National Consumer Law Center, expressed concern that a conversation about medical debt take could take employees to a place they don’t want to go. “There is an argument that employers understand,” she says, “but frankly you may not want to get into that with a prospective employer.” As illustration, she gives the example of someone who had cancer. “You don’t want to have to discuss that with an employer.”

While Miller says that employees are not required to discuss their specific illness or diagnosis with a prospective employer, he also acknowledges that not all firms employ staff trained to properly screen credit reports and to ask the right questions while avoiding the wrong ones. “What you are talking about is a risk management issue,” he notes.

Of course, for the job hunter, the risk is that they may not get the job if their credit reports lists large debts or collection accounts of any kind.

[Related article: Proposed Law Could Help Millions Facing Medical Debt]

There are some limited protections that affect how medical debts appear on credit reports. The FCRA requires that medical information be limited to data about the debt, and not include information about the type of illness or treatment that was received. For example, “the fact that you owe money to a fertility center does show up,” explains Wu.

Rukavina worries that credit reports are “kind of a backdoor way for employers to get information that otherwise wouldn’t be available to them.” He also points out that a lot of medical debt shows up as credit card debt, and it’s impossible for an employer to know that a maxed-out credit card is due to hospital bills or expensive prescriptions, for example.

One way to avoid the problem completely would be to limit or ban the use of credit reports by employers. But wouldn’t that be throwing the baby out with the bath water?

“We have yet to see any data-based evidence or argument that there is any basis for using credit checks for employment outside the national security area, and we aren’t sure there are any there either,” says Ray P. McClain, director of the Employment Discrimination Project of the Lawyers Committee for Civil Rights Under Law national office.

He notes that limited research has been done on the correlation between job performance and credit history. In a 2004 study by Dr. Jerry Palmer and Dr. Laura Koppes of Eastern Kentucky University, for example, the credit reports of nearly 200 current and former employees working in the financial services areas of six companies were examined. Those with good credit were no more likely to receive positive performance evaluations and were no less likely to be terminated from their jobs.

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Rukavina believes the “sensible solution would be to suppress medical (debt) data on a credit report used for employment screening purposes.” I agree. He’s also a fan of the Medical Debt Responsibility Act of 2011, proposed legislation that would remove medical collection accounts with an original balance of $2500 or less from consumer’s credit reports 45 days after they are paid or settled. I support that legislation as well.

But legislative and regulatory solutions take time. In the meantime, what’s a job hunter to do?

1. Review your credit reports to identify any potential medical collection accounts that may be reported. Remember, if you are unemployed and looking for a job, you are entitled to an additional free copy of your credit report each year.

2. Understand that you do not have to disclose any information about illnesses or medical conditions with prospective employers.

3. Prepare an explanation for the medical bills without discussing your medical conditions or treatments. For example, “I had a large bill that insurance didn’t cover and it went to collections, but I am working with them and expect to be able to pay it off even faster when I am employed.” Keep it short and sweet. If they press for information about medical conditions, you can file a complaint with the Equal Employment Opportunity Commission.

4. Try to avoid having accounts sent to medical collections, if at all possible. “Don’t wait to address your medical issues or your medical bills. If you can contact the billing officer at your doctor’s office they can make monthly payment arrangements that can fit into your budget,” says Neil Ellington, Executive Vice President with CESI Debt Solutions.

Speak up! Has medical debt affected your ability to get a job? Share your story in the comments section below.

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