Introduction Statutory Requirements Administrative Agency Interpretations The Caselaw What Avenues are Left? Assessing the Actuarial Basis for Health-Related Underwriting in Medical and Disability Insurance Notes

The ADA’s Application to Insurance Coverage^[1]

Prepared by
Jennifer Mathis, Bazelon Center for Mental Health Law

June 2004

Introduction

The application of the Americans with Disabilities Act (ADA) to the terms and availability of insurance policies, including health insurance, disability insurance, mortgage insurance, and life insurance, has been the subject of a great deal of litigation since the enactment of the ADA in 1990.  Titles I, II, III and V of the ADA all have some bearing on discrimination in insurance policies, but the precise scope of the ADA’s application to insurance policies is far from clear.  The insurance provisions of the ADA were heavily negotiated between the insurance industry, the disability community, and congressional staff, and the resulting statutory language left many issues subject to the interpretation of the courts.  ADA plaintiffs challenging discrimination in insurance coverage have fared very poorly in the courts.  However, some viable avenues for challenging insurance discrimination under the ADA and state laws remain.  This paper provides an overview of the statutory and regulatory provisions of the ADA that are applicable to insurance, explores what the courts have done in ADA insurance cases, and describes what types of claims remain worth pursuing.

Statutory Requirements

Title I: Employer-Provided Insurance Benefits

Title I of the ADA, which applies to employment, provides that a covered employer shall not “discriminate against a qualified person with a disability because of the disability of such individual in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment.”  42 U.S.C. § 12112(a) (emphasis added).  The statute clarifies that the term “discriminate” includes “participating in a contractual or other arrangement or relationship that has the effect of subjecting a covered entity’s qualified applicant or employee with a disability to the discrimination prohibited by this title . . . [including a relationship with] an organization providing fringe benefits to an employee of the covered entity . . . .”  Id. § 12112(b)(2).  Title I also defines discrimination to include “limiting, segregating, or classifying a job applicant or employee in a way that adversely affects the opportunities or status of such applicant or employee because of the disability of such applicant or employee.”  Id. § 12112(b)(1).  These provisions clearly reach discrimination in the fringe benefits of employment, including insurance coverage provided, directly or indirectly, through an employer.  The extent to which employer-provided insurance coverage can permissibly disadvantage individuals with disabilities is less clear.

Title II: Public Benefits Plans

Title II of the ADA applies to state and local government activities.  It provides that “no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity.”  42 U.S.C. § 12132.  While most of ADA insurance litigation has included claims against employers under Title I or claims against insurers under Title III, claims have also been brought under Title II of the ADA challenging discrimination in public insurance pools or retirement systems for public employees.  See, e.g., Castellano v. City of New York, 142 F.3d 58 (2d Cir. 1998) (city police and firefighters who retired with disability pensions challenged failure to provide them with higher pension benefits afforded to those who retired after twenty years of service); Rogers v. Dep’t of Health & Environmental Control, 174 F.3d 431 (4^th Cir. 1999) (former state employee challenged caps on mental health benefits in state’s long term disability insurance plan). 

Title III: Private Insurance Plans

Title III of the ADA, which applies to public accommodations, provides that “[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, privileges, advantages or accommodations of any place of public accommodation by any person who owns, leases . . . or operates a place of public accommodation.”  Id. § 12182(a).  Insurance offices are specifically listed in Title III as a covered place of public accommodation.  Id. § 12181(7)(F).  Title III provides that discrimination includes “subject[ing] an individual or class of individuals on the basis of disability . . . directly or through contractual, licensing or other arrangements, to a denial of the opportunity of the individual or class to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity.”  Id. § 12182(b)(1)(A)(i).  Discrimination also includes affording such individuals an opportunity to participate “that is not equal to that afforded to other individuals.”  Id. § 12182(b)(1)(A)(ii).  Questions that have arisen in litigation include whether Title III applies to the provision of insurance policies and, if so, whether it requires changes in the terms and conditions of insurance policies.

Title V: The “Safe Harbor”

Title V of the ADA, which contains miscellaneous provisions, includes a provision known as the insurance “safe harbor” provision that limits the application of Titles I and III to insurance coverage.  The safe harbor provision states that:

Titles I through IV of this Act shall not be construed to prohibit or restrict-

1. 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; or
2. a person or organization covered by this chapter from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; or
3. a person or organization covered by this Act from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that is not subject to State laws that regulate insurance.  Paragraphs (1), (2), and (3) shall not be used as a subterfuge to evade the purposes of subchapters I and III.

42 U.S.C. § 12201(c).  The meaning of the requirement that the safe harbor not be used as a “subterfuge” to evade the purposes of Titles I and III has been the subject of a great deal of litigation, as discussed below.  Some courts have held, based on prior Supreme Court precedents construing other antidiscrimination laws, that insurance plans cannot be used as a subterfuge if they were adopted before the effective date of the ADA.  Others have looked at statements in the legislative history to conclude that Congress intended the date of adoption of the plan to be irrelevant.

Administrative Agency Interpretations

Justice Department Regulations

The Justice Department’s regulations implementing Title III of the ADA contain insurance-related provisions that track the language of the safe harbor provision.  28 C.F.R. § 36.212.  The Department’s interpretive guidance adds that “[l]anguage in the committee reports indicates that Congress intended to reach insurance practices by prohibiting differential treatment of individuals with disabilities in insurance offered by public accommodations unless the differences are justified (citing various committee reports).  28 C.F.R. Part 36, App. B, § 36.212.  The guidance goes on to note that the safe harbor provision:

was intended to emphasize that ‘insurers may continue to sell to and underwrite individuals applying for life, health, or other insurance on an individually underwritten basis, or to service such insurance products, so long as the standards used are based on sound actuarial data and not on speculation.’ . . . The committee reports indicate that underwriting and classification of risks must be ‘based on sound actuarial principles or be related to actual or reasonably anticipated experience. . . .  Moreover, ‘while a plan which limits certain kinds of coverage based on classification of risk would be allowed . . . , the plan may not refuse to insure, or refuse to continue to insure, or limit the amount, extent, or kind of coverage available to an individual, or charge a different rate for the same coverage solely because of a physical or mental impairment, except where the refusal, limitation, or rate differential is based on sound actuarial principles or is related to actual or reasonably anticipated experience.’

Id. (citations to committee reports omitted).

EEOC Regulations

The Equal Employment Opportunity Commission’s regulations implementing Title I of the ADA provide that it is unlawful for a covered employer to discriminate based on disability in regard to “fringe benefits available by virtue of employment, whether or not administered by the covered entity.”  29 C.F.R. § 1630.4(f).  The EEOC’s regulations contain requirements more specific to insurance that essentially repeat the language of the insurance safe harbor provision.  29 C.F.R. § 1630.16(f).  In its interpretive guidance, the EEOC further clarifies that the date that an insurance or benefit plan was adopted is irrelevant to whether the activities permitted by the safe harbor are being used as a subterfuge.  In addition, the interpretive guidance states that a covered entity cannot deny a qualified individual with a disability equal access to insurance or subject a qualified individual with a disability to different terms or conditions of insurance based on disability alone if the disability does not pose increased risks.  Id. Part 1630, App., § 1630.16(f).  These provisions of the interpretive guidance are based on Congressional committee reports.  See also id. Part 1630. App., § 1630.5 (Title I is intended to require that people with disabilities have equal access to employer-provided health insurance, but those insurance plans may continue to use pre-existing conditions clauses unless they are used as a subterfuge to evade the purposes of Title I; limits on coverage of certain procedures are permissible if they are applied equally to people with and without disabilities).

EEOC’s Interim Guidance on Health Insurance

In 1993, the EEOC published an Interim Enforcement Guidance on the Application of the ADA to Disability-Based Distinctions in Employer-Provided Health Insurance.  In this guidance, the EEOC stated that disability-based distinctions in insurance are prohibited unless they fall within the ambit of the ADA’s safe harbor provision.^[2]  If an employer uses a health insurance plan that makes disability-based distinctions, in order to avoid liability the employer must prove that (1) the plan is either a bona fide insured plan that is not inconsistent with state law, or a bona fide self-insured plan, and (2) the disability-based distinction is not being used as a subterfuge to evade the purposes of the ADA.^[3]  Insurance distinctions that are not based on disability and are applied equally to all insured employees do not violate the ADA.^[4]

The EEOC explained that a disability-based distinction occurs when an insurance plan “singles out a particular disability (e.g., deafness, AIDS, schizophrenia), [or] a discrete group of diseases (e.g., cancers, muscular dystrophies, kidney diseases), or disability in general” and provides lesser benefits.^[5]  Not all health-related distinctions, however, would be considered disability-based distinctions.  For example, the agency noted that many plans provide a lower level of benefits for treatment of mental/nervous conditions than for treatment of physical conditions.  “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.”^[6] 

Once a disability-based distinction is established, an employer has the burden of proving that the plan is bona fide and the distinction is not being used as a subterfuge.  The employer may use a number of ways to prove that there is no subterfuge, according to the EEOC, including: (1) demonstrating that it has not engaged in disability-based disparate treatment but rather treats all similar conditions in the same way, (2) demonstrating that the disparate treatment is justified by legitimate actuarial data or by actual or reasonably anticipated experience, (3) demonstrating that the disparate treatment is necessary to the fiscal soundness of the plan, (4) demonstrating that the disparate treatment is necessary to prevent an unacceptable change in either the coverage of the health insurance plan or in the premiums charged for the plan (that is, a “drastic increase in premium payments . . . or a drastic alteration to the scope of coverage or level of benefits provided,” that would make the plan effectively unavailable to a significant number of employees or make it so unattractive as to result in significant adverse selection or result in the employer’s inability to compete in recruiting and maintaining qualified workers).^[7]

The Caselaw

Despite the ADA’s statutory mandates and some promising interpretations in regulatory guidance and legislative history, ADA plaintiffs challenging insurance discrimination have typically failed to succeed in the courts for a variety of reasons.  While courts have afforded some limited amount of protection to individuals with disabilities in the provision of insurance or fringe benefit policies,^[8] ten federal circuits have held that employers or insurance companies are not required to provide plans that cover all disabilities equally.^[9]  Challenges to discrimination in long-term disability insurance have fared particularly badly, with eight federal circuits holding that offering or providing long-term disability policies with different benefits for mental and physical disabilities does not violate the ADA.^[10]  Most of the district courts that have addressed the issue in the remaining circuits have agreed that inequality in insurance benefits does not constitute an ADA violation.^[11] 

This document does not purport to provide an exhaustive analysis of caselaw, legal arguments and strategies concerning the ADA’s application to insurance benefits, but instead provides an overview of the current status of the law in this area.  The courts have taken a variety of analytical paths in rejecting ADA claims challenging discrimination in the terms and conditions of insurance policies.  For purposes of discussion, the courts’ reasoning can be grouped into several major categories:

• Some courts have prevented ADA plaintiffs from successfully challenging differential coverage of mental health and physical health treatment on the ground that such broad-based distinctions do not constitute disability-based distinctions.

• Several courts have rejected Title I claims involving the provision of long-term disability benefits on the ground that when individuals seeking long-term disability benefits label themselves as being unable to work, they also label themselves unqualified to work.  As a result, the plaintiffs are not protected by Title I of the ADA, which only protects “qualified” persons with disabilities. 

• Three circuits have asserted that claims cannot be advanced under Title III of the ADA because an insurance or fringe benefit policy is not a statutorily defined place of “public accommodation” and therefore plaintiffs cannot avail themselves of Title III protection.

• Some courts have held that the “safe harbor” provision of Title V of the ADA exempts insurers and employers from having to provide equal terms and conditions in insurance benefit policies if the insurance plan was adopted before the ADA’s effective date.

• Several courts have ruled that the ADA was intended only to prohibit favoring persons without disabilities over those with disabilities, and therefore does not prohibit intra-class discrimination (i.e. discrimination that favored one class of persons with disabilities over another class of persons with disabilities).

• Some courts have held that, as long as everyone obtains access to the same benefit package, the fact that some individuals will benefit less from the contents of that package because it provides less coverage for some types of treatments does not render an insurer in violation of the ADA.

1.  The Plan Does Not Contain a Disability-Based Distinction

As noted above, the EEOC’s 1993 Interim Guidance on Health Insurance stated that the framework for analyzing disability-based discrimination claims in insurance is that the plaintiff must demonstrate that the plan contains a disability-based distinction, and then the employer must establish that such distinction is not a subterfuge to evade the purposes of the ADA.  The guidance further stated, however, that distinctions “between the benefits provided for the treatment of physical conditions on the one hand, and the benefits provided for the treatment of ‘mental/nervous’ conditions on the other  . . . are not distinctions based on disability” because the category of “mental/nervous” conditions included many conditions that did not rise to the level of being disabilities.^[12]  

This provision of the Interim Guidance has been used to defeat ADA challenges to distinctions based on different treatment of mental and physical health benefits in health insurance plans, as well as other types of benefit distinctions.^[13]  Advocates have argued that mental/physical distinctions in the context of long-term disability benefits do constitute disability-based distinctions, since long-term disability insurance is only provided to individuals with disabilities.  Notably, the Interim Guidance explicitly states that it does not apply to long-term disability benefits.  Nonetheless, a number of courts have extended the EEOC’s conclusion that providing different health insurance benefits for mental and physical illness is not a disability-based distinction to the context of long-term disability benefit plans.^[14] 

Additionally, some courts upholding mental/physical distinctions in benefits have relied on the 1996 enactment of the Mental Health Parity Act (subsequent to the ADA’s passage), which restricts the ability of insurance providers to provide lesser benefits for mental disabilities than for physical ones, to conclude that the ADA was not intended to prohibit this type of discrimination.^[15]  According to these courts, there would have been no need for a mental health parity law if the ADA were intended to reach these situations.  Advocates should note, however, that the ADA’s legislative history and regulatory guidance suggest that it requires not parity, but rather justification of disability-based distinctions, either by actuarial data or reasonably anticipated experience.

2.  Plaintiff is Not a “Qualified Employee” For Purposes of Challenging Discrimination in Post-Employment Benefits

Because of the difficulty posed by the EEOC’s interim guidance on health insurance, many plaintiffs, including the EEOC itself, turned toward challenging differential treatment of mental and physical health benefits in the context of long term disability insurance.  In that context, caps on mental health benefits could be considered a disability-based distinction because long-term disability insurance is provided only to people with disabilities.  Plaintiffs challenging discrimination in long-term disability insurance and other post-employment benefits have encountered other problems, however.

Three circuits have held that Title I does not protect former employees challenging disparities in post-employment benefits because they are no longer able to do their jobs.^[16]   These courts have held that a former employee seeking or receiving disability benefits due to an inability to continue working is no longer a “qualified person” able to perform his or her job duties, as required by Title I.  As a result, the former employee cannot avail him or herself of Title I protections to sue his or her employer for disparity in benefits conferred.  As the Sixth Circuit noted in one case, at the time the plaintiff “could ‘perform the essential functions’ of her job, she was not disabled for purposes of her long term disability claim, and therefore was not covered by the Disabilities Act, and at the time her insurance benefits were terminated, she could no longer perform her job.”^[17]  According to this analysis, the plaintiff finds herself in a double bind – she is not discriminated against prior to accessing the insurance benefits, but as soon as she is discriminated against, she is not covered by the ADA. 

However, not every court has accepted this analysis.  Three circuits have analyzed the employee’s qualifications at the time that the benefits accrued rather than at the time that the employee seeks to use them.^[18]  The Second Circuit explained: “As evidenced by the ADA's language and legislative history, it is inconceivable to us that Congress would in the same breath expressly prohibit discrimination in fringe benefits, yet allow employers to discriminatorily deny or limit post-employment benefits to former employees who ceased to be ‘qualified’ at or after their retirement, although they had earned those fringe benefits through years of service in which they performed the essential functions of their employment benefits.”^[19] At least one district court followed this logic as well.^[20] 

3.  Title III’s Regulation of Public Accommodations Does Not Reach the Terms and Conditions of Insurance Plans

Title III disallows, inter alia, the provision of separate or unequal benefits in a place of public accommodation.^[21]  Numerous plaintiffs have asserted that the provision of unequal insurance or fringe benefits violates Title III of the ADA.  These plaintiffs have met with mixed success.  Three circuits have held that Title III only ensures physical access to locations open to the public and, therefore, an insurance policy is not a “public accommodation” under Title III.^[22]  These courts concluded that, while an insurance office is a place of public accommodation, the products offered at the location are not, in and of themselves, public accommodations.^[23] 

In so holding, the Sixth and the Third Circuits analogized to the television broadcast of a football game.^[24]  They held that while the football stadium itself would be a place of public accommodation, the television broadcast—a service offered by the lessor of the place of public accommodation—would not be a public accommodation.^[25]  The court concluded that there must be a “nexus” between the place of public accommodation (the insurance office) and the user (the insured employee).^[26]  In the case of benefit packages, the employee receives the benefits from his or her employer.  The employee has a nexus with his or her employer.  The employer has a nexus with the insurance company.  However, according to the Third Circuit, the relationship between the plan provider and the employee is too attenuated to fashion a nexus.^[27] 

Both the First and Second Circuits disagreed, holding that the ADA's prohibition on disability discrimination in the products and services of places of public accommodation is not limited to physical structures. ^[28]  As a result, according to these courts, the ADA applies to the provision of insurance policies.^[29]  The extent of the protection, however, is unclear.  The First Circuit, for example, held that Title III’s protections are not limited to physical structures and do apply to the sale of insurance regardless of whether individuals enter the insurance company’s building to receive coverage, but the court declined to decide whether Title III requires modifications in discriminatory terms and conditions of an insurance policy.^[30]

The Second Circuit held that Title III does regulate insurance underwriting practices.^[31]  The court concluded the text of the ADA shows that Congress intended the ADA’s protections to extend to discrimination in the terms and conditions of insurance policies.^[32]  Specifically, the court held that Title III bars discrimination “in the full and equal enjoyment of goods [and] services,”^[33] and that the “most conspicuous ‘goods’ and ‘services’ provided by an ‘insurance office’ are insurance policies.”^[34]  Further, the court noted that the safe harbor provision – discussed infra at III(c) – provided additional support for this analysis.^[35]  The court noted that the “exemption for insurance underwriters whose practices are ‘not inconsistent with State law’ strongly implies that the Act is intended to reach insurance underwriting practices that are inconsistent with State law.”^[36] The court held that “an entity covered by Title III is not only obligated by the statute to provide disabled persons with physical access, but is also prohibited from refusing to sell them its merchandise by reason of their disability.”^[37]  This is a limited ruling, however.  In this case, the insurer rescinded the offer of an insurance policy after learning of the individuals’ mental disabilities.^[38]   The court did not hold that equality of benefits or actuarial justification was required.  In two other cases, the Second Circuit held that offering unequal benefits packages does not violate the ADA.^[39]

Thus, while some courts have held Title III applicable to the provision of insurance benefits, those courts have generally concluded that if the same benefit package is provided to everyone, regardless of “contemporary or future disability status”^[40] and regardless of whether they suffer from physical or mental disabilities,^[41] the ADA is not violated.  This suggests that a claim based on total exclusion from insurance benefits is more likely to succeed than a claim based on disparity of benefits.

4.  The Plan is Not a Subterfuge and Therefore is Protected Under the Safe Harbor Provision

The “safe harbor” provision, contained in Title V of the ADA, exempts the “establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such a risk” from ADA coverage. ^[42]  To qualify for this exemption the plans (1) need to be based on or consistent with State law, ^[43] and (2) cannot be used as a “subterfuge” to evade Titles I and III of the ADA.^[44] 

The EEOC’s Interim Guidance on health insurance, discussed above, defined “subterfuge” as a “disability-based disparate treatment that is not justified by the risk or costs associated with the disability.”^[45]  Using the EEOC’s definition, plaintiffs have argued that the “safe harbor” provision is inapplicable where different benefits are not justified by actuarial data.  However, courts have typically rejected arguments that the subterfuge clause requires insurers to provide actuarial justifications for differentials in benefits.^[46]

Some courts have read the safe harbor provision more broadly than the EEOC and have interpreted the word "subterfuge" to mean a “scheme, plan, stratagem, or artifice of evasion.”^[47]  This reading is based on the Age Discrimination in Employment Act’s definition of the term, as construed by the Supreme Court in Public Employees Retirement System of Ohio v. Betts, 492 U.S. 158 (1989).^[48]  These courts have concluded that because the ADA was passed after the Court’s ruling in Betts, Congress was “on full alert as to what the Court understood the word to mean . . . .”^[49]  They have found subterfuge only where the employer or insurer has intentionally discriminated in the provision of insurance to in order to carry out non-insurance related discrimination.  For example, it would be subterfuge for a provider to put place a cap on benefits with the intent to deter potential subscribers from buying the insurance policy.^[50]  Most of these courts have held that policies adopted before the ADA’s enactment could not have been used as a subterfuge to evade the ADA’s purposes.^[51]  This narrow interpretation severely limits plaintiffs’ ability to utilize the subterfuge clause and converts the safe harbor provision into an extraordinarily broad protection for defendants.

5. The ADA Does Not Reach Discrimination Between Different Classes of People with Disabilities

Many courts have concluded that the ADA does not reach discrimination between classes of people with different disabilities, and therefore does not reach insurance policies that provide different levels of benefits for mental and physical health conditions.  These courts have concluded that the ADA only reaches discrimination between people with disabilities and people without disabilities.^[52] 

This interpretation of the ADA closely tracks the Supreme Court’s reasoning in Traynor v. Turnage with respect to the Rehabilitation Act.^[53]  The Traynor plaintiffs, veterans who were alcoholics, wanted the Veterans Administration (VA) to provide an extension to a time limit imposed for using educational benefits provided under the G.I. Bill.  The VA regularly provided extensions for other types of disabilities but would not provide an extension for persons with alcoholism.^[54]  The plaintiffs alleged that the policy violated Section 504 of the Rehabilitation Act because it prevented extension of benefits if the veteran’s disability was the product of “willful misconduct,” which the VA deemed alcoholism to be.^[55]  The Supreme Court held that this policy did not violate Section 504 because “[t]here is nothing in the Rehabilitation Act that requires that any benefit be extended to one category of handicapped persons also be extended to all other categories of handicapped persons.”^[56]  The Supreme Court found that the central purpose of Section 504 was “to assure that handicapped individuals receive ‘evenhanded treatment’ in relation to nonhandicapped individuals.”^[57]   Following this logic and citing Traynor, several courts held that the ADA does not apply to discrimination between different classes of people with disabilities, and therefore is not violated when insurance policies provide different level of benefits for mental disabilities than for physical disabilities.^[58]          

In 1999, the Supreme Court suggested that the ADA does reach discrimination between different classes of people with disabilities.  In a footnote in Olmstead v. L.C.,^[59] the Court rejected the view that the ADA requires only evenhanded treatment between people with disabilities and people without.  It dismissed the dissent’s contention that “this Court has never endorsed an interpretation of the term ‘discrimination’ that encompassed disparate treatment among members of the same protected class,” stating that this assertion is “incorrect as a matter of precedent and logic.”^[60] 

However, even after the Court’s ruling in Olmstead, two circuits held that plaintiffs cannot advance ADA claims based on the provision of different levels of long-term disability coverage for persons with mental disabilities than those with physical ones.^[61]  In Weyer v. Twentieth Century Fox Film Corp., the Ninth Circuit Court of Appeals stated that Olmstead did not apply to insurance classifications because it would conflict with earlier Court decisions, “which both endorse distinctions between types of disabilities, and Congress’s clear intention . . . that the Act was not intended to reach common insurance practices such as underwriting of risks.”^[62]  In EEOC v. Staten Island Savings Bank, the Second Circuit concluded that the Olmstead footnote simply indicated that the ADA focuses on discrimination against individuals, not classes.  It did not mean that the ADA requires anything more in the insurance context than that access to an employer’s fringe benefit program may not be denied or limited on the basis of an individual’s disability.^[63]   The Eleventh Circuit, however, did accept this argument, concluding that “the Supreme Court’s construction fo the ADA in Olmstead leads us to the conclusion that K Mart’s LTD plan – which differentiates between individuals who are totally disabled due to a mental disability and individuals who are totally disabled due to a physical disability . . . appears prima facie to distinguish among beneficiaries on a basis that constitutes a form of discrimination contravening Title I of the ADA.”^[64]

6.  Everyone Is Offered the Same Plan                  

Most circuits have held that offering benefit plans that provide different levels of service for different disabilities does not “facially discriminate.”^[65]  These courts have held that “[s]o long as every employee is offered the same plan regardless of that employee’s contemporary or future disability status, then no discrimination has occurred even if the plan offers different coverage for various disabilities.”^[66]  

What Avenues are Left?

As this overview suggests, there are few avenues that hold promise for future challenges to ADA insurance claims.  The federal courts have rejected the ADA’s application to discriminatory insurance benefits for a myriad of reasons, and there are no federal circuit court decisions in this area that are helpful in more than a limited way.  While there are arguments that have not been foreclosed in every circuit, in light of the near uniformity of federal court rulings against ADA plaintiffs raising insurance issues, such courts are likely to approach these claims with some skepticism.

The avenue that appears to hold the most promise is challenging total exclusions from insurance based on an individual’s disability.^[67]  Most of the damaging case law in this area does not affect the viability of total exclusion claims.  In addition, advocates may want to look at the possibility of bringing state anti-discrimination law claims to challenge disability-based discrimination in insurance benefits.^[68]  It is unclear at this point in time whether state law claims will suffer the same fate that ADA claims have suffered in the courts, but they are relatively untested in this area, and any helpful state law language should be fully explored.  Advocates should also explore other state law claims such as contract claims,^[69] state insurance law claims,^[70] and state mental health parity law claims,^[71] to the extent that such laws create privately enforceable rights and are not preempted by ERISA.

Notes

^[1] An earlier version of this paper was produced in 2001 with funding from the Training and Advocacy Support Center of the National Association of Protection and Advocacy Systems.  Christine Vaughn compiled the research for that original version.

^[2] http://www.eeoc.gov/policy/docs/health.html at Part II.

^[3] Id. at Part III.A.

^[4]  Id. at Part III.B.

^[5] Id.

^[6] Id.

^[7] Id. at Part III.C.

[8] See Carparts Distribution Ctr, Inc. v. Automotive Wholesaler’s Assoc., 37 F.3d 12, 19 (1st Cir. 1994) (holding that “public accommodation” within the meaning of Title III of the ADA is not limited to physical structures and cannot exclude certain disabilities from coverage), Pallozzi v. Allstate Life Ins. Co., 198 F.3d 28 (2d Cir. 1999) (Title III guarantees more than mere physical access to an insurance agency and therefore insurers cannot refuse to issue a life insurance policy because of the purchaser’s disability status), Ford v. Schering-Plough, 145 F.3d 601 (3d Cir. 1998) (employers must offer every employee the same plan, regardless of their current or future disability status), McNeil v. Time Ins. Co., 205 F.3d 179, 187-88 (5th Cir. 2000) (insurance providers must offer the same product to all potential subscribers), Kimber v. Thiokol Corp., 196 F.3d 1092, 1101-02 (10th Cir. 1999) (employers must offer every employee the same plan, regardless of their current or future disability status).

[9] EEOC v. Staten Island Sav. Bank, 207 F.3d 144, 148 (2d Cir. 2000), Ford, 145 F.3d 601, 608 (3d Cir. 1998), Rogers v. Dep’t of Health & Envir. Control, 174 F.3d 431, 436 (4th Cir. 1999), Lewis v. K mart Corp., 180 F.3d 166 (4th Cir. 1999), McNeil, 205 F.3d 179, 188 (5th Cir. 2000), Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006 (6th Cir. 1997), Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557 (7th Cir. 1999), EEOC v. C N A Ins. Co., 96 F.3d 1039, 1044 (7th Cir. 1996), Krauel v. Iowa Methodist Med. Ctr., 95 F.3d 674, 678 (8th Cir. 1996), Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1115 (9th Cir. 2000), Kimber v. Thiokol Corp., 196 F.3d 1092, 1101-02 (10th Cir. 1999), Modderno v. King, 82 F.3d 1059 (D.C. Cir. 1996), EEOC v. Aramark Corp., 208 F.3d 266 (D.C. Cir. 2000).  In Gonzales v. Garner Food Servs., 89 F.3d 1523 (11^th Cir. 1996), cert. denied, 520 U.S. 1229 (1997), the Eleventh Circuit had also rejected an ADA claim challenging an employer’s adoption of an insurance cap on coverage of AIDS-related treatment on the ground that plaintiff was no longer an employee when the discrimination in post-employment benefits occurred, but Gonzales was later overruled by Johnson v. K Mart Corp., 273 F.3d 1035 (11^th Cir. 2001).

[10] EEOC v. Staten Island Sav. Bank, 207 F.3d at148 (2d Cir.), Ford, 145 F.3d at 608 (3d Cir.), Rogers v. Dep’t of Health & Envir. Control, 174 F.3d at 436 (4th Cir.), Lewis, 180 F.3d 166 (4th Cir.), Parker v.  Metropolitan Life Ins. Co., 121 F.3d 1006 (6th Cir.), EEOC v. C N A Ins. Co., 96 F.3d at 1044 (7th Cir.), Weyer v. Twentieth Century Fox Film Corp., 198 F.3d at 1115 (9th Cir.), Kimber v. Thiokol Corp., 196 F.3d at 1101-02 (10th Cir.), Modderno v. King, 82 F.3d 1059 (D.C. Cir.), EEOC v. Aramark Corp., 208 F.3d 266 (D.C. Cir.).

[11] First Circuit:  Witham v. Brigham & Women’s Hospital, Inc., Civ. No. 00-268-M, 2001 U.S. Dist. LEXIS 7027 (D.N.H. May 31, 2001), Wilson v. Globe Specialty Prods., Inc.,  117 F. Supp.2d 92 (Mass. 2000), Pelletier v. Fleet Fin. Group, Inc., 2000 U.S. Dist. LEXIS (D.N.H. Sept. 19, 2000), Connors v. Maine Med. Ctr., 42 F. Supp.2d 34 (D. Me. 1999); but see Boots v. Northwestern Mut. Life Ins. Co., 77 F. Supp.2d 211 (D.N.H. 1999) (denying motion to dismiss because capping disability benefits for mental illnesses at 24 months while providing such benefits for physical illnesses until the age of 65 could give rise to a claim of discrimination under Title III); Fifth Circuit:  Fermin v. Conseco Direct Life Ins. Co., SA-98-CA-0943, 2001 U.S. Dist. LEXIS 6204, *36-40 (W.D. Tex. May 1, 2001) (extending the holding in McNeil v. Time Insurance Co., 205 F.3d 179, 199 (5th Cir. 2000), which held that a health insurance plan that limited coverage for AIDS to $10,000 did not violate the ADA, to a long-term disability plan that had different coverage for mental and for physical disabilities), Templet v. Blue Cross/Blue Shield of La., CA-99-1400, 2000 U.S. Dist. LEXIS 15605 (E.D. La. Oct. 19, 2000); Eleventh Circuit:  Worldwide Ins. Co. v. Branch, 966 F. Supp. 1203 (N.D. Ga. 1997), vacated as moot, 156 F.3d 1142 (11th Cir. 1998).

[12] http://www.eeoc.gov/policy/docs/health.html at Part III.B.

[13] See e.g., Krauel, 95 F.3d at 677-78 (8th Cir.) (allowing the exclusion of fertility based treatments in health insurance plan). 

[14] See, e.g., Rogers, 174 F.3d at 435-36 (4th Cir.), Parker 121 F.3d at 1018-19 (6th Cir.), Weyer, 198 F.3d at 1116 (9th Cir.).

[15] Staten Island Sav. Bank, 207 F.3d at 152 (2d Cir.), Ford, 145 F.3d at 610 (3d Cir.), Rogers, 174 F.3d at 435-36 (4th Cir.), Parker, 121 F.3d at 1018 (6th Cir.), Weyer, 198 F.3d at 1117 (9th Cir.). 

[16] See Parker v. Metropolitan Life Ins., 99 F.3d 181, 185 (6th Cir. 1996), rev’d on other grounds, 121 F.3d 1006 (6th Cir. 1997)(en banc), EEOC v. C N A Ins. Co., 96 F.3d at 1045 (7th Cir.), Weyer, 198 F.3d at 1110 (9th Cir.).  The Eleventh Circuit had also ruled this way, see Gonzales, 89 F.3d at 1531 (11th Cir.), but Gonzales was subsequently overruled by a later panel decision.  See supra at n. 9.

[17] Parker, 99 F.3d at 186 (6th Cir.).

[18] Ford Motor Corp., 145 F.3d 601 (3d. Cir.); Castellano v. City of New York, 142 F.3d at 69 (2d Cir.).  See also Johnson v. K Mart Corp., 273 F.3d at 1033-48 (11^th Cir.).

[19] Castellano, 142 F.3d at 69.

^[20] Connors v. Maine Med. Ctr., 42 F. Supp.2d 34, 39-45 (D. Maine 1999).

[21] 42 U.S.C. § 12182(b)(1)(A)(ii).

^[22] See Ford, 145 F.3d at 614 (3d Cir.); Parker, 121 F.3d at 1014 (6th Cir.) , Lenox, 149 F.3d 453 (6th Cir. 1998), Weyer, 198 F.3d at 115 (9th Cir.).

[23] Parker, 121 F.3d at 1010-11 (6th Cir.); Ford, 145 F.3d at 612 (3d Cir.).

[24] Parker, 121 F.3d at 1011 (6th Cir.); Ford, 145 F.3d at 612-13 (3d Cir.).

[25] Parker, 121 F.3d at 1011 (6th Cir.); Ford, 145 F.3d at 612 (3d Cir.).

[26] Ford, 145 F.3d at 612-13 (3d Cir.).

[27] Id. at 613.

[28] Pallozzi, 198 F.3d at 33 (2d Cir.), Carparts Distrib. Ctr., 37 F.3d at 19 (1st Cir.).  See also Doukas v. Metropolitan Life Ins. Co., 950 F. Supp. 422, 425-26 (D.N.H. 1996) (Title III applies to contents of mortgage disability insurance policy).

[29] Pallozzi, 198 F.3d at 33 (2d Cir.), Carparts Distrib. Ctr., 37 F.3d at 19 (1st Cir.).

[30] Carparts Distrib. Ctr., 37 F.3d at 20 (1st Cir.).

[31] Pallozzi, 198 F.3d at 31 (2d Cir.).

[32] Id.

[33] Id., citing 42 U.S.C. § § 12181(7)(F), 12182(a).

[34] Id. at 31.

[35] Id. at 32.

[36] Id.

[37] Id. at 32-33.

[38] Id. at 30.

[39] Leonard F., 199 F.3d at 101 (2d Cir.); Staten Island Sav. Bank, 207 F.3d at 148 (2d Cir.).

[40] Ford, 145 F.3d at 608 (3d Cir.).

[41] Pallozzi, 198 F.3d at 33 (2d Cir.).

[42] 42 U.S.C. § 12201(c) reads in full:

Subchapters I through III of this chapter and title IV of this Act shall not be construed to prohibit or restrict – (1) 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; or (2) a person or organization covered by this chapter from establishing, sponsoring, observing or administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law; or (3) a person or organization covered by this chapter from establishing, sponsoring, observing, or administering the terms of a bona fide benefit plan that is not subject to State laws that regulate insurance.  Paragraphs (1), (2), and (3) shall not be used as a subterfuge  to evade the purposes of subchapter I and III of this Chapter.

[43] 42 U.S.C. § 12201(c).

[44] 42 U.S.C. § 12201(c).

[45]  Interim Enforcement Guidance On The Application Of The Americans With Disabilities Act To Disability-Based Distinctions in Employer-Provided Health Plans" (June 8, 1993), at Part III.C.2. http://www.eeoc.gov/policy/docs/health.html.

[46]Ford, 145 F.3d at 611 (3d Cir.).  See also Leonard F., 199 F.3d at 101-05 (2d Cir.) (refusing to extend subterfuge clause to policies created before the adoption of the ADA), Modderno, 82 F.3d at 1064 (D.C. Cir.) (same), EEOC v. Aramark Corp. 208 F.3d at 271-272 (D.C. Cir.) (same), Krauel, 95 F.3d at 679 (8th Cir.) (rejecting the EEOC guidance on subterfuge because it is “at odds” with the ADA), Weyer, 198 F.3d at 1115 (9th Cir. 2000) (ruling for defendant on basis of safe harbor provision without applying subterfuge clause).  But see Pallozzi, 198 F.3d at 36 (2d Cir.) (“[T]he subterfuge clause suggests that, notwithstanding compliance with state law, Titles I and III do apply to insurance practices where conformity with state law is used as a subterfuge to evade their purposes.”), Zamora-Quezada v. HealthTexas Medical Group of San Antonio, 34 F. Supp.2d 433, 444 (W.D. Tex. 1998) (presuming safe harbor provision is applicable where defendants engaged in financial practices that created cost-cutting incentives to delay or deny services in order to force higher-cost individuals with disabilities to go elsewhere, to prevail defendants would have to establish a bona fide benefit plan engaged in lawful risk assessment; motion for dismissal or summary judgment denied because record does not contain actuarial, statistical and empirical data used in making payment and utilization decisions).

[47] See, e.g., Ford, 145 F.3d at 611 (3d Cir.) (citations omitted).

[48]  Id.

[49]   Modderno, 82 F.3d at 1065 (D.C. Cir).  See also Leonard F., 199 F.3d at 104 (2d Cir.), Ford, 145 F.3d at 611 (3d Cir.), Krauel, 95 F.3d at 679 (8th Cir.).

[50] Doe, 1999 WL 353014 (7th Cir.). See also Leonard F, 199 F.3d at 105 (2d Cir.), Ford, 145 F.3d at 611 (3d Cir.), Krauel, 95 F.3d at 679 (8th Cir.), Modderno, 82 F.3d at 1064-65 (D.C. Cir.).

[51] See, e.g, EEOC v. Aramark Corp., 208 F.3d at 271-72 (D.C. Cir.); Johnson v. K Mart Corp., 273 F.3d at 1059 (11^th Cir.) (employer could be found to be using the safe harbor as a subterfuge only if plan was adopted after ADA’s passage and employer specifically intended to use it as a subterfuge).  But see Doukas v. Metropolitan Life Ins. Co., 950 F. Supp. at 431 (legislative history of ADA demonstrates Congress’s unambiguous intent not to follow Betts interpretation; Congress did not intend to exempt pre-existing plans).

[52] See infra note 58.

[53] Traynor v. Turnage, 485 U.S. 535 (1988).

[54] Id. at 538.

[55] Id. at 539.

[56]Id. at 549.

[57] See id. at 548.

[58] Staten Island Sav. Bank, 207 F.3d at 149 (2d Cir.); see also Ford, 145 F.3d at 608 (3d Cir.), Lewis, 180 F.3d at 171 (4th Cir.), Parker, 121 F.3d at 1015 (6th Cir.), C N A Ins. Co., 96 F.3d at 1044 (7th Cir.), Krauel, 95 F.3d at 678 (8th Cir.), Weyer, 198 F.3d at 1115 (9th Cir.), Kimber, 196 F.3d at 1101-02 (10th Cir.), Modderno, 82 F.3d t 1062 (D.C. Cir.).

[59] 527 U.S. 581 (1999).

[60] Id.. at 602 n. 10.

[61] Staten Island Sav. Bank, 207 F.3d 144 (2d Cir.), Weyer, 198 F.3d 1104 (4th Cir.).

[62] Weyer, 198 F.3d at 1117-18 (4th Cir.).

[63] Staten Island Sav. Bank, 207 F.3d at 151 (2d Cir.).

[64] Johnson v. K Mart Corp., 273 F.3d at 1054 (11^th Cir.).

[65] See e.g., Staten Island Sav. Bank, 207 F.3d at 151.

[66] Ford, 145 F.3d at 608 (3d Cir.), Lewis, 180 F.3d at 171 (4th Cir.), Rogers, 174 F.3d 431 (4th Cir.), Parker., 121 F.3d at 1015 (6th Cir.), Weyer, 198 F.3d at 1115 (9th Cir.), Modderno, 82 F.3d at 1062 (D.C. Cir.).

[67] See, e.g., Anderson v. Gus Mayer Boston Store of Delaware, 924 F. Supp. 763 (E.D. Tex. 1996) (holding that safe harbor provision is not applicable in cases of total denial of insurance; no actuarial risk makes someone uninsurable; while some disability-based distinctions are permissible under the ADA, complete denial is a per se violation of the ADA’s mandate that employers provide individuals with disabilities equal access to insurance coverage).

[68] See, e.g., Winslow v. IDS Life Ins. Co., 29 F. Supp.2d 557 (D. Minn. 1998) (permitting ADA and Minnesota Human Rights Act claims challenging insurance disparities to proceed); but see Kolton v. County of Anoka, 645 N.W.2d 403 (Minn. 2002) (adopting federal courts’ reasoning when interpreting state statute and upholding differential benefits).

[69] See, e.g., Elam v. First Unum Life Ins. Co., 57 S.W.3d 165 (Ark. 2001) (reversing summary judgment for insurer on issue of whether bipolar disorder fell within the policy’s definition of physical disorder rather than mental illness and remanded for determination of whether the policy was ambiguous).

[70] See, e.g., Natoli v. First Reliance Standard Life Ins. Co., No. OO CIV. 5914(DC), 2001 WL 15673 (S.D.N.Y. Jan. 5, 2001) (denying motion to dismiss state insurance law claim challenging cap on long term disability benefits for mental health conditions); but see Sparks v. Morrison & Foerster Long-Term Disability Ins. Plan, 129 F. Supp.2d 182 (N.D.N.Y. 2001) (no private right of action to enforce same provision, but provision is not preempted by ERISA and may be enforced by State Superintendent of Insurance).

[71] See, e.g., Andrews-Clarke v. Lucent Techs., Inc., 157 F. Supp.2d 93, 106 (D. Mass. 2001) (Massachusetts mental health parity law nmust be enforced by Attorney General rather than private litigants).