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|ADA and Health Fall 2000|
OUTLINE: ADA AND HEALTH COVERAGE
I. Introduction. This will address 2 situations:
1. Under the ADA, can a plan limit certain types of treatment?
2. Under the ADA, can a TPA/insurer administer/insure that plan?
HYPOTHETICAL: Employer wants to limit AIDS treatment to $25,000 lifetime. All other benefits are subject to a $1 million lifetime limit.
A. The ADA prohibits Employers from discrimination against a "Qualified Individual With a Disability." (QUIDs)
1. Employer -- 15 or more employees and any agent of an employer.
2. Qualified -- individual who, with or without "reasonable accommodations" can perform the essential functions of a job.
3. Disability -- a physical or mental impairment that substantially limits a Major Life Activity; or a record of having an impairment or being regarded as having an impairment.
So, in the first instance, we are only concerned if this limitation affects a QUID; if not qualified or if not disabled, no problem.
B. The ADA prohibits discrimination against QUIDs with respect to the terms, conditions, and privileges of employment, including fringe benefits.
C. There is a safe-harbor for health benefit plans: The ADA does not prohibit a person (including an insurer and TPA) from:
"underwriting risks, classifying risks, or administering such risks that are . . . not inconsistent with State law; or . . .
"establishing, sponsoring, observing or administering the terms of a bona fide benefit plan" whether the plan is or is not subject to State insurance law. (If the plan is subject to state insurance law, that law must be followed.)
However, this cannot be used as a "subterfuge" to evade the purposes of the ADA.
A. Assume that a person with AIDS/HIV is a QUID. Clearly, the employer cannot exclude that person from the plan or cut off benefits for non-AIDS/HIV conditions after the $25,000 has been exhausted. What about the $25,000 limit?
B. There seem to be two views:
1. EEOC suggests it might be, or at the very least, the burden is on the employer to prove compliance with the safe harbor.
In June 1993, the EEOC issued to its investigators a policy statement entitled, "Interim Guidance on Application of ADA to Health Insurance" which adopts a two step test:
a. Does the challenged provision result in a "disability-based distinction"? It does if it singles out:
--A particular disability (e.g. AIDS);
--A discrete group of disabilities (e.g. cancers);
--Disabilities in general; or
--A procedure or treatment of a particular disability or group of disabilities (e.g. AZT to treat AIDS).
However, distinctions which apply to a multitude of dissimilar conditions or which limit/exclude benefits to disabled and non-disabled are generally allowed even if they have a greater impact on the disabled. Thus, eye care, mental/nervous conditions and experimental treatments can be limited.
b. The Employer must then prove both that: the plan is bona fide and that the limitation is not a subterfuge to evade the ADA.
i. A plan is bona fide if it exists, pays benefits, and has been accurately communicated to eligible employees (e.g. through an SPD.).
ii. According to the EEOC, the distinction is not a subterfuge to evade the ADA if it is justified by the risks or costs associated with the disability. Unfortunately, the Guidance gives four non-exclusive but difficult ways of demonstrating this:
1. The distinction is justified by actuarial data or actual/reasonably expected experience and that conditions with similar data are treated similarly; or
2. The distinction is necessary and required to avoid the insolvency of the plan and no other change could be made to avoid the insolvency; or
3. The distinction is necessary and required to avoid a change in coverage or premium so drastic so as to make the plan effectively unavailable, create significant adverse selection, or destroy the employer's ability to compete in recruiting/maintaining its workforce; or
4. The treatment has no medical value and the plan does not cover other treatments without medical value.
The EEOC claims that it intends to issue further guidance "sometime next year."
2. A second view is that the limit would not violate the ADA. This view is based on the ADA's legislative history and the US Supreme Court's opinion in Ohio v. Betts, 492 U.S. 158 (1989).
a. The ADA's legislative history supports allowing coverage limitations. For example, the House Committee report says:
"it is permissible for an employer to offer insurance policies that limit coverage for certain procedures or treatment. . . that limitation must apply to persons with or without disabilities.
"The Committee does not intend that any provision of this legislation should affect the way the insurance industry does business in accordance with the State laws and regulations under which it is regulated."
B. Betts involved interpreted "subterfuge" language in the ADEA in a way so as to make it almost meaningless.
Although there are not many reported cases, the Eighth Circuit seemed to adopt the EEOC view in Henderson v. Bodine Aluminum, Inc., F.3d , 1995 WL 566954 (8th Cir. 1995). (There is a district court decision going the other way, however.)
IV. CAN TPA ADMINISTER?
If the limit does not violate ADA, no problem. If the limit does violate ADA, still probably no problem.
A. Although ADA defines "Employer" as including an agent of the employer, a TPA (or insurer) probably is not an agent. But cf. Carparts Distribution Center v. Automotive Wholesaler's Assoc. of New England, Inc., 37 F.3d 12 (1st Cir. 1994).
B. TPAs and insurers are also protected by the Safe Harbor.
C. The ADA also prohibits discrimination by "public accommodations."
"No individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodations by any person who owns, leases. . . or operates a place of public accommodation."
1. A public accommodations includes an "office of an accountant or lawyer, pharmacy, insurance office, professional office of a health care provider, hospital, or other service establishment."
2. At least one decision has held that this prohibition is not limited to the physical dimension. Carparts.
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