DISABILITY ISSUES
Vol. 19 No. 1

Access to insurance is often a problem for people with mental disabilities. Some insurance companies refuse to underwrite health, disability, and life insurance for people with mental disabilities. Of those that do, many offer limited coverage, including high co-payments, deductibles, arbitrary limits on coverage and time limitations. Congress took a first step in restricting this discriminatory practice by passing the Mental Health Parity Act of 1996 which went into effect on January 1, 1998. Among the key provisions of that Act is the banning of different lifetime limits and annual caps in health insurance coverage of mental health and medical/surgical treatment.

Mental health consumers and their advocates had hoped that ADA could provide a vehicle to challenge unfair insurance practices. To date, however, plaintiffs have had difficulty using ADA to address insurance discrimination.

The ADA states clearly that employers cannot refuse to hire or fire someone because of concerns about insurance costs, condition employment on exclusion from a health insurance plan or deny individuals with disabilities equal access to the same terms or conditions of insurance as other employees. ADA’s applications to the practices of insurance companies and policies themselves are more cryptic, and possibly less favorable to people with disabilities-especially those with mental disabilities.

The statute says that the ADA is not intended to prohibit insurers from "underwriting risks, classifying risks or administering such risks" as long as these classifications are not inconsistent with state law, and so long as the insurer does not classify risks as a "subterfuge to evade the purposes" of the ADA.

ADA’s insurance provisions have created substantial conflict regarding whether the ADA allows insurers to continue their exclusion and differential treatment of individuals with disabilities and whether employers violate the ADA if they contract with insurers who treat people with mental disabilities differently. In 1993, the EEOC addressed these issuesin an interim Enforcement Guidance, which was designed to analyze how the ADA applies to employer-provided health insurance. Although the guidance is favorable for most individuals with disabilities, it specifically excludes people with mental disabilities from the protection of the ADA in this important area.

However, the guidance can be interpreted so that distinctions based on a particular mental disability (i.e., schizophrenia) would be considered a violation.

Typically, people disabled as a result of mental impairments receive disability benefits for only two years, while those disabled as a result of physical conditions receive benefits until death or age 65. Many mental health consumers see this differential treatment as unfair and a violation of the ADA.

In the case of Lewis v. K-Mart, 7 F. Supp. 2d 743 (E.D. Va. 1998), a district court struck down a two year cap on long-term disability benefits for mental disabilities as violating ADA. The court noted that K-Mart offered Mr. Lewis insurance benefits with inferior coverage because of his disability, without any actuarial justification. The court concluded that K-Mart violated the ADA by "offering Lewis a benefit plan which discriminates on the basis of mental disability."

Advocates seeking to challenge discrimination in long-term disability insurance are aided in the fact that the EEOC’s insurance guidance applies explicitly only to health insurance. Moreover, the EEOC itself took a case challenging disparate disability insurance coverage for people with mental disabilities (EEOC v. CNA Insurance Cos.), although, the case was dismissed by a federal appeals court in late September 1998.

As this decision demonstrates, long-term disability insurance litigation has frequently been sidetracked by assertions that an individual who is now totally disabled and unable to work is not covered by the ADA.

Cutting off benefits for people with mental disabilities after two years is disastrous for employees, many of whom have worked for years and paid into a plan, only to have it fail them when they need it most. If an insurer capped benefits for African-American workers but not for Hispanic workers, courts would have no trouble finding racial discrimination because of the long-standing history of bias against African-Americans. Similarly, courts should recognize policies that cap benefits only for mental disabilities and not for physical ones as discriminatory because the policies are based on a history of treating people with these disabilities as second-class citizens.

Source: Bazelon Center for Mental Health Law http:// bazelon.org/welcome.html

Reprinted from Access New England a Publication of the New England ADA Technical Assistance Center.