As published in The Self-Insurer,
As we get mired down in implementing newly enacted regulations sometimes we forget about those that have been around for some time, and how their application and interpretation over more than a couple decades may impact our day-today operations.
The Americans with Disabilities Act of 1990 (ADA) is a civil rights law that prohibits disability-based discrimination in employment, transportation, public accommodations, telecommunications and governmental activities.
It is important that Third Party Administrators and employers understand the thorny issues that exist when dealing with the interplay between the ADA and employee benefits. Most employers typically think of “reasonable accommodation” issues when they think of the ADA. However, the regulations are much broader than that, and they are inextricably intertwined with the world of benefits.
It is not ostensibly apparent that the ADA applies to employee benefits but that is in fact the case. Title I of the ADA prohibits covered employers from discriminating against qualified disabled individuals with regard to job application procedures, hiring, advancement, discharge, compensation, job training, and “other terms, conditions, and privileges of employment” which includes “[f]ringe benefits available by virtue of employment, whether or not administered by the [employer].” 29 C.F.R. 1630.4(f). Employee benefits, including group health plans provided by an employer, are fringe benefits available by virtue of employment.
The Department of Labor (DOL), along with four other federal agencies, enforces the ADA. The Department of Justice (DOJ), the Federal Communications Commission (FCC), the Department of Transportation (DOT) and the Equal Employment Opportunity Commission (EEOC).
The EEOC enforces Title I employment provisions of the ADA and has created a framework for analyzing ADA claims under Section 501(c), and in 1993 published Interim Enforcement Guidance on the application of the ADA to disability-based distinctions in employer provided health insurance.
It is important to remember that to be protected by the ADA an individual must meet the definition of “disability.” For the purposes of the ADA, a disability is a physical or mental impairment that substantially limits one or more major life activities; a record of such impairment exists; or an individual is regarded as having an impairment. In some instances, the same diagnosis may be considered a disability for one individual but may not be considered a disability for another.
In determining if an employee benefit health-related term or provision violates the ADA, the first issue to analyze is whether the challenged plan term or provision is a “disability-based distinction.” According to the EEOC a plan term or provision will be considered disability-based if it singles out a particular disability, a discrete group of disabilities, disability in general (all conditions that substantially limit a major life activity), or a treatment or procedure used exclusively or nearly exclusively to treat a particular disability. If it is determined that the challenged plan term or provision is a disability-based distinction then we need to consider whether the distinction is within the protective ambit of Section 501(c) of the ADA.
To fall within the protective ambit of Section 501(c), a determination must be made as to whether the plan meets Section 501(c)’s two prong test: 1) the plan is either a bona fide insured health plan that is not inconsistent with state law or is a bona fide self-insured health plan; and 2) the disability-based distinction is not a subterfuge. If these two prongs can be met, it will be determined that the challenged disability-based distinction is within the protective ambit of Section 501(c) and does not violate the ADA. (Section 501(c) is only available to health plans with disability based distinctions that do not totally exclude coverage to a category or categories of disabled individuals.)
To satisfy the first prong the plan is only required to prove that the plan pays benefits, and that its terms have been accurately communicated to covered employees. To satisfy the second prong the plan is required to prove that the plan is not using the provision as a subterfuge to evade the purpose of the ADA. A subterfuge exists when the provision is not justified by the risks or costs. There are several ways to prove this, including looking at similar conditions, actuarial data, actual or reasonably anticipated experience, legitimate risk assessments, underwriting, traditional insurance classification and administration practices.
Disability-based limitations or exclusions will not be considered a subterfuge and therefore do not violate the ADA if:
- They are based on legitimate actuarial data, or actual or reasonably anticipated experience, and apply equally to conditions with comparable actuarial data and/or experience; or
- They are necessary because no alternative to a disability-based distinction is available to prevent an “unacceptable” change such as:
- A drastic increase in premiums, co-payments or deductibles;
- A drastic alteration in the scope of coverage or level of benefits; or
- Other changes that would make the plan unavailable to a significant number of other employees, or so unattractive that the employer could not compete in recruiting and maintaining qualified workers due to the superiority of benefits offered by other employers in the community, or so unattractive as to result in significant adverse selection.
Disability-based distinctions involving dependents are protected under the ADA as well. However, the ADA does not require that the coverage accorded dependents be the same in scope as the coverage accorded the employee; the ADA does not require that dependents be accorded the same level of benefit as accorded the employee; and the ADA does not require equal coverage for every type of disability.
As we know, TPAs, employers, and group health plans are always at risk for being challenged by an employee or dependent that is unhappy. Employers simply need to weigh the risks and make sure they are aware of any potential exposure. This is yet another great opportunity for TPAs to assist in educating their clients and ensuring that their benefits are drafted in such a way that they are protected or at least aware of potential challenges, and in doing so, it is always prudent to encourage employers to review and consider any other governing documents that might exist that would impact their decision, including but not limited to Human Resource policies and/or procedures, Employee Handbooks, and any Collective Bargaining Agreements.
This article is intended for general informational purposes only. It is not intended as professional counsel and should not be used as such. This article is a high-level overview of regulations applicable to certain health plans. Please seek appropriate legal and/or professional counsel to obtain specific advice with respect to the subject matter contained herein.