The Law and Insurance Plans Frequently at Odds

This article is provided as a courtesy service of the Great Lakes ADA News Service under a subcontract with the Disability News Services and funded by the U.S. Department of Education, NIDRR #133D60011. Please review the Conditions for Reproduction of this Article.

(1,345 words, posted April 6, 2000)

by Leye Jeannette Chrzanowski 
Copyright ©2000 The Disability News Service, Inc. 

According to the Congressional Budget Office (CBO), some 43 million Americans under age 65 lacked health insurance in 1997. Today, most people receive health and other insurance benefits through an employer. But do the employment and/or public accommodations provisions of the Americans With Disabilities Act (ADA) or other laws protect people with disabilities? 

The ADA 

Section 102 (a) of the employment provisions in Title I of the ADA states that no covered entity, which includes an employer, “shall discriminate against a qualified individual with a disability because of the disability of such individual in regard to...[the] terms, conditions, and privileges of employment.” And Title III generally prohibits discrimination in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases [or leases to], or operates a place of public accommodation. Title III includes a long list of private entities which qualify as a “public accommodations” when such operations “affect commerce,” including insurance 
offices, professional offices of health care providers, hospitals, or other service establishments. 

While the law may protect people from disability-based discrimination in the workplace and public accommodations, the law also protects insurance companies and underwriters. Titles I through III of the ADA and Title IV “shall not be construed to prohibit or restrict an insurer, hospital or medical service company, health maintenance organization, or any agent, or entity that administers benefit plans, or similar organizations from underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law....” 

Section 501(c) of Title V of the ADA, known as the “safe harbor” provision, exempts insurance providers from the regulatory scope of the ADA's provisions with one caveat — the provision “shall not be used as a subterfuge to evade the purposes of the employment and public accommodations provisions of the 
law.” 

Equal Employment Opportunity Commission (EEOC) 

According to EEOC issued guidance, employers who establish benefit plans, which are not disability-based and apply equally to all insured employees, do not violate the ADA. However, this does not mean that an employer must provide equal coverage for all disabilities. Based on EEOC guidance, an employer would not violate the law if a health insurance plan covers treatment of physical and mental/nervous conditions but offers a lower level of benefits for the latter. Likewise, some plans may provide fewer benefits 
for eye care than for other physical conditions. The EEOC concludes, “Such broad distinctions, which apply to the treatment of a multitude of dissimilar conditions and which constrain individuals both with and without disabilities, are not distinctions based on disability. Consequently, although such distinctions may have a greater impact on certain individuals with disabilities, they do not violate the ADA.” Acceptable benefit plan limitations also include...

blanket pre-existing condition clauses which exclude health insurance 
coverage for treatment of conditions that pre-date an individual's 
eligibility for benefits under company's plan; and 
universal limits or exclusions for all experimental drugs and/or treatments, 
or all elective surgery. 


In contrast, according to EEOC, health-related insurance distinctions which single out a particular disability such as deafness, AIDS, schizophrenia, and so on, or a group of disabilities such as cancers, muscular dystrophies, kidney diseases, or conditions that substantially limit a major life activity are disability-based discrimination. An employer would violate the ADA, for example, if he or she applied health insurance limits on eye care for employees with visual disabilities, but no limits on those without. Employers can establish limits in their benefit plans that do not intentionally “subterfuge to evade the purposes” of the ADA. For example, if an employer offered health insurance lifetime caps of $100,000 for employees, but capped lifetime insurance at $50,000 for employees with AIDS, the employer would have to demonstrate that the lower AIDS cap was not subterfuge. EEOC holds that subterfuge is determined “regardless of the date an insurance or employer benefit plan was adopted.” However, the ADA does not provide a “safe harbor” for health benefit plans adopted prior to the law's 1990 enactment. 

Some Disabilities Targeted More Than Others 

Despite the law and EEOC's guidance, the insurance provisions of the ADA have created problems — especially for people with HIV/AIDS and psychiatric disabilities who have been hardest hit by disability-based discrimination in employer benefit plans. The EEOC has favorably resolved several lawsuits against employers such as Lee Data Corporation, Mason Tenders Welfare Trust Fund, Metro Traffic Control, Inc. who offered lesser medical benefits to people with AIDS or AIDS-related illnesses than for all other catastrophic illnesses. The outcomes for people with psychiatric or mental disabilities, however, have been less favorable. 

Ouida Sue Parker, for example, filed a complaint against her employer, Schering-Plough Health Care Products, Inc. who limited long-term disability benefits to 24 months for mental conditions but provided long-term disability benefits until age 65 for physical conditions. The Sixth Circuit Court of Appeals, dismissed her Title I complaint, reasoning that the company provided 
the same policy to all employees “who, when they receive it, are not disabled but working. The fact that some may become disabled for different reasons  does not amount to discrimination in providing the policy.” 

The court also ruled that her Title III complaint against Metropolitan Life, the insurance underwriter, had no merit because employer-sponsored plans are not available to the public, and the contents of an insurance policy are not covered under Title III. The court determined Title III only covers physical access to places of public accommodations. 

Federal and State Action 

Because health benefit plans generally offer more coverage for physical conditions than for mental conditions, Congress attempted to address parity in employer benefit plans when it passed the Mental Health Parity Act of 1996  (MHPA). Beginning in 1998, P.L. 104-204 requires limited mental health parity for all U.S. group health plans which already offer mental health benefits and serve more than 50 employees. Employers with 50 or fewer employees, and those with more than 50 employees who can demonstrate an increase of one percent or greater in total annual health premium costs as a result of mental health parity are exempt. Unfortunately, the law will cease to apply to benefits furnished by an employer on or after September 31, 2001. 

This law overrides the Employment Retirement Income Security Act (ERISA) exclusions in state-level parity laws which exempt at least one-third of the population covered by self-insured employers. Still many people are left unprotected at the state level. At the end of 1999, only 28 states had enacted parity laws. 

In 1999, Congress again attempted to address the issue when members introduced several parity bills. For example, S. 796, the Mental Health Equitable Treatment Act of 1999, would prohibit group plans from discriminating or setting arbitrary limits on services provided to people with psychiatric disabilities. H. 796, the companion bill in the House, however, is limited to severe and disabling biologically based disorders, which include people with schizophrenia, bipolar disorder, major depression, obsessive compulsive disorder, panic disorder, post-traumatic stress disorder, autism, anorexia nervosa and attention deficit/hyperactivity disorder. 

H.R. 1515, the Mental Health and Substance Abuse Parity Amendments of 1999, amends the sunset provisions of the MHPA, and prohibits private health insurance plans from imposing limits on inpatient-stays and outpatient-visits, as well as different deductibles, co-payments, out-of-network charges and so on for mental health and substance abuse treatment. 

Hoping private sector employers would follow suit, on June 7, 1999, the U.S. Office of Personnel Management (OPM) notified all of its 285 participating health plans that they must offer full mental health and substance abuse parity to continue to participate. OPM surveys revealed that health benefit parity would add minimal cost to existing premiums, and would increase employee productivity. 

Nevertheless, a patchwork of state and federal insurance laws coupled with confusing court decisions have created a multitude of problems — especially for people with disabilities and chronic health conditions who depend on insurance to cover their health care and other needs.

This work was performed under a subcontract with the Board of Trustees of the University of Illinois, and funded by the U.S. Department of Education, NIDRR #133D60011.
 

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