Employee Benefit Issues
and the American with Disabilities Act
Lissa J. Paris, Esq.
Murtha Cullina LLP
Hartford, Connecticut
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1.
The Americans With Disabilities Act Issues in Employee Benefit Pian
A.
Introduction
Generally, ERISA is not a source of law for disability discrimination claims.
The statute permits plan sponsors (generally employers) to design welfare plans
with whatever limitations they wish and to amend them freely so long as they
follow the plan's formal procedures. Lockheed v. Spink, 517 U S . 882 (1996);
Inter-Modal Rail Employees Ass'n v. Atchinson, 520 U.S. 510, 515 ( I 997);
Hughes Aircraft v. Jacobson, 525 U.S. 432 (1999). Only the most egregious
behavior, where the plan sponsor takes on the role of a fiduciary, leads to claims
of fiduciary breach. Varity v. Howe, 516 U.S. 489 (1996). Thus, in McGann v.
H&H Music Co., 946 F.2d 401 (5th Cir. 1991), cert. denied, 506 U.S. 981 (1992),
the defendant amended its coverage for AIDS-related claims from a $1,000,000
lifetime cap to $5,000 after plaintiff told defendant that the plaintiff had contracted
AIDS. In response to the plaintiff's claim for discrimination under ERISA Section
510, the court held that since the benefit action was not directed only at the
plaintiff, and he had no vested welfare rights. The defendant remained free to
amend the plan at any time. Consequently, the arena for challenging welfare
plan coverage has moved to the Americans with Disabilities Act.
11.
Overview Of The ADA
A.
Potential Defendants Under the ADA
The ADA prohibits discrimination by covered entities, including private
employers, against qualified individuals with a disability. Title I covers private
employers, Title I 1 public employers, and Title Ill public accommodations.
Specifically, it provides that no covered employer "shall discriminate against a
qualified individual 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); see also $j12111(2) ("The
term 'covered entity' means an employer, employment agency, labor
organization, or joint labor-management committee"). At least one circuit has
held that the definition does not include insurers. In Weyer v. Twentieth Century
Fox Film Corp., 198 F.3d 1104 (9th Cir. ZOOO), the court ruled that UNUM Life
Insurance Company of America which was the administrator of the employer's
group long-term disability plan was not a "covered entity" under Title I of the
ADA.
Note that under 42 U.S.C. § 12111(5)(B)(i), the term "employer" for ADA
purposes not include the "United States or a corporation wholly owned by the
government of the United States." The court in Whaley v. United States, 82
F. Supp. 2d 1060 (D. Neb. ZOOO), held that suits "against a federal agency or
against an officer of a federal agency in his or her official capacity constitutes a
suit against the United States, and [is] not permitted under the ADA."
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Consequently, the CIA and its director were not "covered entities" under Title I of
the ADA. See also Baldwin v. United States Army, 223 F.3d 100 (2d Cir. 2000)
(uniformed members of the armed forces are barred from bringing claims under
the ADA).
The ADA does not explicitly include states or state agencies in its
definition of employer, but does provide, in 42 U.S.C. $j12202, that states are not
immune under the Eleventh Amendment to the U.S. Constitution from actions in
either state or federal courts for violations of the ADA.
Following the Supreme Court's decision in Kim& v. Florida Bd. of Regents,
528 U.S. 62 (2000), which held that Congress lacked authority to abrogate a
state's Eleventh Amendment immunity under the ADEA, a similar dispute arose
as to whether, in extending the ADA to the states, Congress had properly
abrogated, pursuant to Section 5 of the Fourteenth Amendment, the state's
Eleventh Amendment immunity.
Resolving a split among the circuit courts, a bitterly divided (5-4) Supreme
Court held that Congress had also not validly abrogated the states' immunity
from suit with respect to the ADA. Therefore, the Eleventh amendment barred
suits by state employees to recover damages by reason of a state's failure to
comply with Title I of the ADA. Board of Tr. ofthe Univ, ofAlabama v. Garrett,
531 U.S. 356 (2001). In Hason v. MedicalBd. of Ca., 279 F.3d 1167 (gthCir.
2002), the Ninth Circuit held that Garrett did not apply to claims under Title II of
the ADA. Plaintiff alleged the denial of a medical license because of mental
disability violated Title 11. The court found both that Garrett did not apply and the
claim stated a cause of action. In April, 2003 the Supreme Court dismissed its
grant of certiorari: 123 S. Ct. 1779 (2003). However, in Tennessee v. Lane 124
S. Ct. 1978 (2004), the Court held that the architectural barriers which limited
individuals courthouse access violated Title II of the ADA. The decision is limited
to the right of access to courthouses. It is unclear how far it may be expanded.
In Constantine v. Rectors & Visitors of George Mason Univ., 41 1 F3d 474 (2005)
the Court held that defendant had waived its immunity under § 504 of the
Rehabilitation Act and sovereign immunity did not bar relief under Title I1of the
ADA. She alleged discrimination because defendant refused to allow her to
retake examination which she failed because of a migraine.
While the impact of the decisions in the Garrett and fane cases are still
being assessed, the 11th amendment does not bar suits for ADA violations
against political subdivisions of a state such as cities, counties and similar
municipal corporations. In Evans v. City of Bishop, 238 F.3d 586 (5th Cir. 2000),
the court held that the reasoning of Kimel did not bar a suit against a city for
ADEA violations, because Eleventh Amendment immunity applies only to states
and not to other political subdivisions of a state, unless the other political entity
such as a city is so controlled by the state "that it stands in the shoes of the
state." Evans, 233 F.3d at 589-90.
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B.
Potential Plaintiffs Under the ADA
1.
Definition of the Term “Qualified Individual With a
Disa biIity”
A “qualified individual with a disability” is identified as “an individual with a
disability who, with or without reasonable accommodation, can perform the
essential functions of the employment position that such individual holds or
desires.” 42 U.S.C. § 1211l(8).
In turn, a “disability” is defined as:
(A)
a physical or mental impairment that substantially limits one
or more of the major life activities of such individual;
(B)
a record of such impairment; or
(C)
being regarded as having such an impairment.
42 U.S.C. § 12102(2).
Given this definition, an individual who is totally disabled cannot sue for
discrimination under the ADA. Weyer, 198 F.2d at 1108. In Niemerer v. TriState Fire Protection District, 2000 U.S. Dist. LEXIS 12621 (N.D. 111. 2000) (Aug.
24, 2000), the court held that an employee’s spouse lacked standing as a
qualified individual with a disability.
2.
Burden of Proof
a.
The Basic Elements
To establish a claim under the ADA, a plaintiff must demonstrate that
he/she is: (1) disabled within the meaning of the ADA; (2) qualified, that is, with
or without reasonable accommodation (which plaintiff must describe); and (3)
able to perform the essential functions of the job. See Martin v. Kansas, 190
F.3d 1120 (IOthCir. 1999). Plaintiff must also show that his or her employment
was terminated because of his or her disability. Id.
b.
Proving Disability
As stated above, a “disability” is defined as: ”(A) a physical or mental
impairment that substantially limits one or more of the major life activities of such
individual; (B) a record of such an impairment; or (C) being regarded as having
such an impairment.” 42 U.S.C. Cj 12102(2).
Persons who are taking prescription medications for various medical
conditions are not per se disabled for ADA purposes. E O C v. J.B. Hunt Transp.
Inc., 128 F. Supp. 2d 117 (N.D.N.Y. 2000).
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i. “Impairment”
Although not defined in the ADA, the EEOC has defined an “impairment”
as a physiological disorder affecting one or more named body systems, a mental
disorder or a psychological disorder. Compliance Manual Section 902: Definition
of the Term “Disability,” EEOC Compliance Manual (CCH) 6880-6889 (March
1995). Normal deviations in height, weight, and strength are not considered
impairments; however, morbid obesity is considered an impairment by the
EEOC. Id. Further, the EEOC recognizes that an irregularity in height, weight or
strength caused by an underlying disorder can be an impairment. Id.
ii. “Substantially Limits” and “Major Life Activity”
The ADA does not define either “substantially limits” or “major life activity.”
According to the regulations implementing the ADA, “major life activities” include
“functions such as caring for oneself, performing manual tasks, walking, seeing,
hearing, speaking, breathing, learning, and working.” Martin v. Kansas, 996 F.
Supp. 1282, 1288 (D. Kan. 1998) (citing 29 C.F.R. 5 1630.2(i)), affd 190 F.3d
1120 (IOth Cir. 1999). Other activities, such as sitting, standing, lifting and
reaching, may be considered “major life activities.” Id. The Supreme Court
found reproduction a major life activity. Bragdon v. Abbott, 524 U.S. 624 (1998).
In Toyota Motor Mfg. of Ky., Inc. v. Williams, 534 US. 184 (2002) the Court held
that for an impairment to have a “substantial” effect on a major life activity it must
limit that activity “to a large degree” The activity limited must be of central
importance to daily life outside of work. Ms. Williams’ inability to perform her job
which involved repetitive manual tasks, because of carpal tunnel syndrome, did
not constitute a disability. Id.
c.
“Regarded As” Disabled
The regulations implementing the ADA explain that a person is “regarded
as” having an impairment that substantially limits a major life activity if he/she:
(i)
has a physical or mental impairment that does not
substantially limit major life activities but is treated as
constituting such limitation;
(ii)
has a physical of mental impairment that substantially limits
major life activities only as a result of the attitudes of others
toward such impairment; or
(iii)
has none of the impairments defined in the regulations but is
treated as having a substantially limiting impairment.
Martin v. Kansas, 996 F. Supp. 1282, 1289, affd on other grounds (citing 29
C.F.R. § 1630.2(1)(1)-(3)).
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3.
Medications, Corrective Devices and Other Mitigating
Measures
In Sutfon v. United Airlines, 527 U.S. 471 (1999), twin sisters brought an
ADA claim based on their denial of employment as commercial airline pilots. The
Supreme Court upheld a dismissal of plaintiffs’ claim under Fed. R. Civ. P.
12(b)(6) for failure to state a claim on which relief could be granted . Both sisters
suffered severe myopia and, uncorrected, their visual acuity was 20/200 or worse
in the right eye, and 20/400 or worse in the left eye. However, with the use of
corrective lenses, both women had 20/20 vision. The Court determined that
neither woman was disabled under the ADA as “the determination of whether an
individual is disabled should be made with reference to measures that mitigate
the individual’s impairment . . . .” Suffon,527 U S . at 475. With glasses serving
as a mitigating measure, both women had perfect eyesight. The Court therefore
concluded that the women were not substantially limited in the major life activity
of working because, according to the Court, the statutory phrase “substantially
limits” requires, at a minimum, that plaintiffs allege they are unable to work in a
broad class of jobs, and not just as pilots. Sutfon,527 US. at 489. Accordingly,
the Supreme Court held they could not claim protection under the ADA.
In so holding, the Court rejected the opinions of the Equal Employment
Opportunity Commission (EEOC) and the Department of Justice (DOJ), as
espoused in their ADA Guidelines, that a disability should be determined without
regard to mitigating measures. 29 C.F.R. pt. 1630, App. Section 1630.2(j) (1998);
28 C.F.R. pt. 35, App. A Section 35.1 04 (1998); 28 C.F.R. pt. 36, App. B, Section
36.104 (1998). The Court, noting that the existence of a disability is an
individualized inquiry, felt that the guidelines’ approach “would often require
courts and employers to speculate about a person’s condition and would, in may
cases, force them to make a disability determination about how an uncorrected
impairment usually affects individuals, rather than on the individual’s actual
condition.” Sutfon, 527 U.S. at 483.
The EEOC has since taken action to amend its interpretive guidance on
Title I of the ADA. See 65 Fed. Reg. 36327 (June 8, 2000) (amending 29 C.F.R.
$j§1630.2(h) and 0)).
The Court further explained its Sutton decision in two companion cases.
In Alberfson‘s, Inc. v. Kirkingburg, 527 U.S. 555 (1999), it held that in judging
whether an individual possesses a “disability” within the meaning of the ADA,
mitigating measures must be taken into account, including both measures
undertaken with artificial aids, like medications and devices, and measures
undertaken, whether consciously or not, with the body’s own systems. In Murphy
v. United Parcel Serv., Inc., 527 U.S. 516 (1999), it found that an employee was
not “disabled” due to his high blood pressure, within the meaning of the ADA,
where, when plaintiff was medicated for his condition, his high blood pressure did
not substantially limit him in any major life activity; see also ?odd v. Academy
Corp., 57 F. Supp. 2d 448 (S.D. Tex. 1999) (an epileptic deemed not disabled
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because with medication he was not substantially limited in a major life activity);
Robb v. Horizon Credit Union, 66 F. Supp. 2d 913 (C.D. Ill. 1999) (individual
diagnosed with depression but could be treated with anti-depressant medications
which allowed her to work without any medical restrictions was not limited in
major life activity, and, thus, did not suffer from “disability” within meaning of
ADA).
However, the mere existence or availability of a mitigating measure does
not, by itself, preclude a finding of “disability,” within the meaning of the ADA.
For example, in Belk v. Southwestern Bell Tele. Co., 194 F.3d 946 (8th Cir.
1999), plaintiff suffered from the residual effects of polio, forcing him to wear a
full-length leg brace at all times. He applied for a position for which his employer
required a physical exam that included sit-ups and leg lifts. Plaintiff requested
accommodation with respect to these tests. The employer permitted some
minor modifications in the tests for plaintiff, but he nevertheless failed to qualify
for the position. Plaintiff filed a complaint alleging that employer failed to afford
him a reasonable accommodation with respect to the leg lift test.
In Belk, the defendant argued that plaintiff was not “disabled” for purposes
of the ADA because he could walk and engage in many physical activities with
the use of his leg brace. The court disagreed, quoting Sutton in stating that the
mere use of a corrective device alone is not enough to relieve an individual of a
disability. Rather, the court said, one has a disability if, notwithstandingthe use
of the corrective device, the individual is limited in a major life activity. The court
found plaintiff to be disabled in the major life activity of walking because the full
motion of his leg was limited by the brace, and his gait was hampered by a
pronounced limp. See also Finical v. Collections Unlimited, lnc., 65 F. Supp. 2d
1032 (D. Ariz. 1999) (in determining whether an employee with a hearing
impairment had a “disability” within the meaning of the ADA, the court would not
consider mitigating measures, such as hearing aids, that the employee did not
actually use).
In EEOC v. J. B. Hunt Transp., lnc., 128 F. Supp. 2d I17 (N.D.N.Y. 2000),
the court held that an employer, which had conditionally offered employment to a
group of applicants, did not violate the ADA when it refused to hire them after it
learned that they were taking various prescription medications which appeared
on a company list that had been established to comply with DOT regulations.
4.
Are Disabled Former Employees Covered?
There is currently a split among the federal circuit courts regarding
whether a disabled former employee may be a “qualified individual” capable of
suing under Title I of the ADA. The Seventh, Ninth, and Eleventh Circuits have
each held that access to Title I of the ADA is unambiguously limited to job
applicants and current employees capable of performing essential functions of
available jobs. See, e.g., Weyer v. Twentieth Century Fox f i l m Corp., 198 F.3d
1104 (9th Cir. 2000) (rejecting any analogy between Title I of the ADA and Title
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VI1 of the Civil Rights Act because Title I of the ADA, unlike Title VI1 of the Civil
Rights Act, unambiguously excludes former employees); Gonzales v. Garner
Food Sews., lnc., 89 F.3d 1523 (I
I t h Cir. 1996) (stating that the plain language
of the ADA clearly demonstrates the intent of Congress to limit the scope of the
ADA to only job applicants and current employees capable of performing
essential functions of available jobs); EEOC v. CNA Ins. Cos., 96 F.3d 1039 (7th
Cir. 1996) (distinguishing Title VI1 of the Civil Rights Act in holding that a former
employee could not bring a claim under Title I of the ADA).
Other circuit courts rely on reasoning similar to that of the Supreme Court
in Robinson v. Shell Oil Co., 519 U.S. 337 (1997). In Robinson, the Court held
that the term “employees” in Section 704(a) of Title VI1 of the Civil Rights Act
includes former employees. The Court began its inquiry by noting that the “first
step in interpreting a statute is to determine whether the language at issue has a
plain and unambiguous meaning.” Robinson, 519 U.S. at 340. The Court then
reasoned that the statute was ambiguous because “there was no temporal
qualifier in the statute such as would make plain that Section 704(a) protects only
persons still employed at the time of the retaliation.” Robinson, 519 U.S. at 341.
The Court ultimately concluded that, because the surrounding provisions clearly
contemplated suits by former employees, “it is far more consistent to include
former employees within the scope of ’employees’ protected by Section 704(a).”
519 US. at 345.
By analogy, some courts reason that Title I of the ADA is ambiguous as to
whether one must be a “qualified individual” at the time of the discrimination and
whether a disabled former employee can sue, because Title I also contains no
“temporal qualifiers.” See, e.g., Castellano v. City of New York, 142 F.3d 58 (2d
Cir. 1998); ford v. Schering-Plough Corp., 145 F.3d 601 (3d Cir. 1998). These
courts conclude that denying former employees access to Title I of the ADA is
inconsistent with Section 12112(b)(2) of the Act, which puts the provision of
fringe benefits within the ambit of the Act, because certain fringe benefits such as
pensions and disability benefits are provided only post-employment and are
meaningful only in that context. Castellano, 142 F.3d at 67.
C.
Making a Claim
I.
Exhaustion of Administrative Remedies
The ADA requires compliance with the administrative procedures specified
Title VI1 of the Civil Rights Act of 1964.42 U.S.C. §§ 12117(a), 12188(a).
Therefore, absent special circumstances a federal court will require compliance
with such administrative procedures before the court may consider a suit that
seeks recovery for an alleged violation of the ADA. See Bonilla v. Muebles J.J.
Alvarez, lnc., 194 F.3d 275 (1st Cir. 1999).
Instead of starting entirely from scratch when drafting the ADA, Congress
borrowed liberally from Title VII. Id. Among other things, it engrafted onto the
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ADA the full panoply of procedures described in Section 2000e of Title VII, and
decreed that those enumerated procedures shall be applicable to proceedings
under Title I of the ADA. Id.
Section 2000e-5 of Title VI1 states that a charge must be filed with the
EEOC within 180 days after the alleged unlawful employment practice occurred
or within 300 days if the person aggrieved has initially instituted proceedings with
an authorized state or local agency. Accordingly, an individual who seeks to
recover for an asserted violation of the ADA, like an individual who seeks to
recover for an asserted violation of Title VII, must first exhaust administrative
remedies by filing a charge with the EEOC or, alternatively, with an appropriate
state or local agency within the prescribed time limits. Bonilla v. Muebles J.J.
Alvarez, lnc., 194 F.3d 275; see also Gallegos v. N. Y.C. Health and Hosp. Corp.,
1998 U.S. Dist. LEXIS 16089 (Oct. 14, 1998); Lipscomb v. Clearmont Const. Co.,
930 F. Supp. 1105, aff‘d 91 F.3d 131 (4th Cir, 1996); Sherman v. Optical lmaging
Sys., lnc., 843 F. Supp. 1168 (E.D. Mich. 1994).
D.
Damages Available
As explained above, enforcement of the ADA is placed under the aegis of
EEOC procedures. Since the enactment of the Civil Rights Act of 1991, these
procedures provide for jury trials, compensatory damages for pain and suffering,
and punitive damages in addition to the more traditional remedies of
reinstatement, cease and desist orders and backpay. See Panken and Williams,
“Disabilities In The Workforce: The Impact Of The Americans With Disabilities
Act,” SD50 ALI-ABA 757 (April 8, 1999); 42 U.S.C. § 12117(a). The ADA also
provides a court with the discretion to allow the prevailing party, other than the
United States, a reasonable attorney’s fee, including litigation expenses and
costs. 42 U.S.C. § 12205. In general, a prevailing plaintiff will recover an
attorney’s fee unless special circumstances would render such an award unjust.
Roe v. Cheyenne Mountain Conference Resort, lnc., 124 F.3d 1221, 1231 (10th
Cir. 1997).
The statutory cap on the maximum award of compensatory damages for
future pecuniary losses under the ADA, 42 U.S.C. § 1981(a)(b)(3), does not
include an award for front or back pay. Pollard v. E./. duPont deNemours & Co.,
532 U.S. 843 (2001).
111.
Important Issues
A.
-
ADA Title I Benefit and coverage issues for employees
through employee benefit plans
Title I of the ADA, 42 U.S.C. $5 12111-12117, prohibits discrimination
against a qualified individual with a disability because of the disability of such
individual-
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[I]n 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).
The ban on discrimination expressly includes "fringe benefits available by
virtue of employment, whether or not administered" by the employer. 42 U.S.C. §
12112(b); 29 C.F.R. § 1630.4(f).
Many types of conditions for which plan participants may seek coverage
under employee welfare benefit plans are specifically excluded from the ADA
definition of disability under several different provisions of the statute and the
EEOC regulations:
illegal drug use, 42 U.S.C. § 12210ta);
homosexuality and bisexuality, 42 U.S.C. § 12211(a);
sexual behavior disorders, 42 U.S.C. § 1221l(b)(l);
compulsive gambling, kleptomania, pyromania, 42 U.S.C.
§ 1211(b)(2);
psychoactive substance use disorders resulting from current
use of illegal drugs, 42 U.S.C. § 1211(b)(3);
temporary non-chronic physical or mental impairments of
short duration, 29 C.F.R. Pt. 1630, Appendix, discussion of
§ 1630.20);
characteristic predisposition to illness or disease, id. ,
discussion of 29 C.F.R. § 1630.2(h);
advanced age, id., discussion of 29 C.F.R. $j1630.2(h);
other conditions, such as pregnancy, that are not the result
of physiological disorder, id.; and
in the opinion of at least one court, common personality traits
such as poor judgment or a quick temper where those are
not symptoms of a mental or psychological disorder. See
Daley v. Koch, 892 F.2d 212, 214 (2d Cir. 1989).
The Circuit Courts have held that as long as disabled employees receive
the same benefit package as the non-disabled, no discrimination occurs. See
Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1116-18 (9th Cir.
2000). So long as every employee is offered the same plan regardless of that
employee's contemporary or future disability status, then no discrimination has
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occurred even if the plan offers different coverage for various disabilities. Ford,
145 F.3d at 608. The ADA “does not require equal coverage for every type of
disability; . . .“ Id. at 145 F.3d at 608; accord EEOC v. Staten Island Sav. Bank,
207 F.3d 144, 148 (2d Cir. 2000) (gathering cases).
The ADA and the Rehabilitation Act ensure that disabled persons are
treated evenly in relation to non-disabled persons, but the federal disability
statutes “are not designed to ensure that persons with one type of disability are
treated the same as persons with another type of disability.” Lewis v. Kmart
Corp., 180 F.3d 166, 171-72 (4th Cir.), cert. denied, 528 U.S. 1136 (2000).
Remember, however, that the ADA does not invalidate any law of any
State or a political subdivision of any state “that provides greater or equal
protection for the rights of individuals with disabilities than are afforded by this
chapter.” 42 U.S.C. § 12201(b). Depending on the type of state or local law and
the type of employee welfare benefit plan, the scope and extent of ERISA
preemption may be dispositive on the question of the enforceability of a state or
local law that requires certain types of benefit coverages for persons with
disabilities.
6.
-
Title 111 Public Accommodations and the ADA
ADA Title Ill litigation involving benefit issues largely centers on whether
an insurance policy or benefit plan is a “public accommodation” under the ADA.
The statute guarantees:
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.
42 U.S.C. § 12182(A). To avoid Title 1’s requirement that the discriminating entity
be an employer and most courts’ requirement in disability insurance cases that
the employee be able to work, plaintiffs have looked to Title Ill with mixed results.
In one of the first cases addressing this issue, Carparts Distrib. Ctr. v.
st Cir. 1994), plaintiff, an employee
Automotive Wholesaler’s Ass’n, 37 F.3d 12 (I
and owner of Carparts, was diagnosed with AIDS. Carparts self-insured its
health benefits through defendant. Defendant amended its plan to limit AIDS
coverage to $25,000. The circuit court held that public accommodations are not
limited to actual physical structures and remanded for the district court to
determine whether the services offered by an insurer included insurance policies.
In contrast, Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006 (6th Cir. 1997)
(en banc), cert. denied, 522 U.S. 1084 (1998), held that Title Ill coverage was
limited to physical structures.
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In most cases, courts have held that while Title Ill prevents a refusal to sell
goods and services to a disabled purchaser, it does not govern which goods and
services an entity chooses to sell. Thus, in Ford v. Schering-Plough Corp., 145
F.3d 601 (3d Cir. 1998), cert. denied, 525 U.S. 1093 (1999), plaintiff sued her
employer and its insurance provider for a disparity between physical disability
and mental disability coverages in a disability insurance policy. The court held
that while an insurance office may be a place of public accommodation, Title Ill’s
purpose is to guarantee “accessibility to the goods offered by a public
accommodation, not to alter the nature or mix of goods that the public
accommodation has typically provided.’’ Id. at 613. Consequently, plaintiffs
claim failed.
Similarly, in Doe v. MufuaI of Omaha Ins. Co., 179 F.3d 557 (7th Cir.
1999), cert. denied, 528 U S . 1106 (ZOOO), the court upheld a $25,000 AIDS cap
in a group insurance policy against a Title Ill challenge. The court found a
difference between refusing to sell a policy to a disabled person (or charging
him/her a higher price), and offering policies that contain caps for various
diseases which may be disabilities under the ADA. However, it found Title Ill
covered the sale of insurance policies. It held that “Sec. 302(a) does not require
a seller to alter his product to make it equally valuable to the disabled and the
nondisabled, even if the product is insurance.” Id. at 563. Accord, Weyer v.
Twentieth Century Fox Film Corp., 198 F.3d 1104 (9th Cir. 2000).
PaIlozzi v. AIlsfafe Life Ins. Co., 198 F.3d 28, amended on denial of reh’g,
204 F.3d 392 (2d Cir. 2000), addresses the situation of failure to sell policies to
the disabled. There, the defendants, who both suffered from mental disabilities,
claimed that Allstate refused to sell them life insurance because of their
disabilities. The court rejected defendant’s claim that Title Ill of the ADA does
not regulate insurance underwriting. Finding that “the most conspicuous ‘goods’
and ‘services’ provided by an ‘insurance office’ are insurance policies,” it held
that the refusal to sell constituted a denial of a public accommodation. Id. at 31.
Significantly, the court did not address caps on coverage, but simply access to
insurance. Accord Wai v. AIIsfafe Ins. Co., 75 F. Supp. 2d 1 (D.D.C. 1999).
Several circuits hold that Title Ill cannot be used to challenge insurance
policies offered through employment because a “benefit plan offered by an
employer is not a good offered by a place of public accommodation.’’ Among
other things, the courts found no nexus between the benefit disparity and
services which MetLife offered from its insurance office. Parker, 121 F.3d at
1010. Accord McNeiI v. Time Ins. Co., 205 F.3d 179, 188 (5th Cir. 2000).
Weyer, 198 F.3d 1104. In these circuits, former disabled employees, who have
no standing to sue under Title I, cannot bring their cases under Title Ill.
C.
Subterfuge
Section 501(c) of the ADA, 42 U.S.C. § 12201(c), provides that:
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"Subchapters I through Ill of this chapter and title IV of this Act 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; or
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
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 (I), (2) and (3) shall not be used as a subterfuge to evade the
purposes of subchapters I and Ill of this chapter."
Because the only other limitations on benefit plans under 5 501 (c) are
that the plan be "bona fide," see Piquard v. City of East Peoria, 887 F. Supp.
1106, 1120 (C.D. Ill. 1995) (a benefit plan is "bona fide" if it exists and pays
benefits), and not contrary to state law, often the central question in determining
whether a plan is exempted under § 501(c) is what constitutes "subterfuge" - a
term that is not defined by any provision of either the ADEA or the ADA.
Subterfuge Under ADEA.
In Public Employees Retirement Sys. of Ohio v. Betts, 492 U.S. 158, 16768 (1989), the Supreme Court considered the meaning of "subterfuge" within the
context of section 4(f)(2) of the ADEA, 29 U.S.C. § 623(f)(2), prior to its
amendment in 1990. The Court first held that plans adopted before the
enactment of the ADEA could not be a subterfuge under that Act. While the
ADA's legislative history might suggest that this lack of retroactive application
does not apply to the ADA, see S. Rep. No. 116 at 8, see also 29 C.F.R. §
1630.16(f), several courts have ignored the legislative history and held otherwise.
Modderno v. King, 82 F.3d 1059, 1064-65 (D.C. Cir. 1996), cerf. denied, 117 S.
Ct. 772 (1997); E O C v. Aramak Cora, 208 F.3d 266, 270-72 (D.C. Cir. 2000);
Fitts v. Federal /Vat'/Mortgage Ass'n, 236 F.3d 1 , 4 (D.C. Cir. 2001).
The Betts Court also held that the term "subterfuge" was meant only to
prohibit those terms of a plan that have the effect of discriminating in the nonfringe-benefit aspects of employment. 492 U.S. at 180. The Court found that
Congress meant to exempt benefit plans from the ADEA except to the extent
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they were a subterfuge for age discrimination in other aspects of employment.
Id.
Application of Betts' interpretation of subterfuge to the ADA
The EEOC rejects application of Betts' holdings to interpretation of the
ADA. The EEOC asserts that the language of the ADA explicitly includes fringe
benefits and the legislative history rejects any safe harbor for pre-ADA plans;
therefore, in the EEOC's view, Congress could not have meant for Betts to apply
to the ADA. See "EEOC: Interim Guidance on Application of ADA to Health
Insurance" (6/8/93) ("EEOC Guidance") BNA fair Employment Practices Manual
40571 15, Part 1118 at n.lO.
Judicial interpretation of the term "subterfuge" under the ADA is at
variance with the EEOC position. Compare Doe v. Mutual of Omaha Ins. Co.,
179 F.3d 557, 561-62 (7th Cir. 1999), cerf. denied, 528 U.S. 1106 (2000);
Leonard v. lsrael Discount Bank of New York, 199 F.3d 99 pp. 3-5 (2d Cir. 1999);
Ford v. Shering--Plough Corp., 145 F.3d 601, 611 (3d Cir. 1998), cert. denied,
525 U.S. 1093 (1999); Modderno, 82 F.3d at 1064-65; and Krauel v. lowa
Methodist Medical Ctr., 95 F.3d 674, 678-79 (8th Cir. 1996) (all rejecting EEOC's
position); with Henderson v. Bodine, 70 F.3d at 960-61 (implicitly accepting
EEOC position). The emerging view appears to be that:
r ] h e subterfuge clause in Section 501(c) of the ADA should be
construed as in Betts, to require an intent to evade, making it
inapplicable to a plan formulated prior to the passage of the Act
regardless whether the plan relies on sound actuarial principles.
Leonard, 199 F.3d 3.
Thus, in Fitts v. Federal Nat'l Mortgage Ass'n, 236 F.3d 1 (D.C. Cir. ZOO?),
and EEOC v. Aramark Corp., 208 F.3d 266 (D.C. Cir. ZOOO), the courts found
that insured group LTD plans which were in existence prior to passage of the
ADA could not be deemed subterfuges to avoid the purposes of the statute.
Accord EEOC v. Deloitte & Touche, 2000 WL I0247000 (2d Cir. 2000) (a 1988
agreement between an employee and his employer which excluded the
employee's pre-existing cancer from the employer's death benefit arrangement
was protected by the 501(c) safe harbor provision).
D.
EEOC Regulations -Are They Entitled To Deference?
As a general rule, agency interpretations of their own regulations are
afforded deference by federal reviewing courts and are sustained unless "plainly
erroneous or inconsistent with the regulation." Paralyzed Veterans of Am. v.
D.C. Arena, L.P., 117 F.3d 579, 584 (D.C. Cir. 1997), cert. denied, 523 U.S. 1003
( I 998). How much deference should be given to an agency's "informal policy
pronouncements" is unsettled. Doe, 179 F.3d 563; see also Commonwealth
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€dison Co. v. Vega, 174 F.3d 870 (7th Cir. 1999) (discussing the weight to be
given to DOL advisory opinion letters and a DOL amicus brief).
In litigating under the ADA, attorneys must be aware that the federal
courts have not consistently deferred to the DOJ and EEOC interpretive
guidelines under the ADA, reasoning that "[wlhile an agency's reasonable
interpretation of an ambiguous provision in a statute that it administers is entitled
to judicial deference (cites omitted), 'no deference is due to agency
interpretations at odds with the plain language of the statute itself.' (cite omitted)"
Leonard v. Israel Discount Bank of New York, 199 F.3d 99 (1999). Indeed, in
Sutton v. United Airlines, 527 U S .471 (1999), the court rejected the EEOC's
definition of disability since it went beyond its statutory power. Inconsistent
agency interpretations are entitled to even less deference. INS v. CardozaFonseca, 480 U.S. 421 , 445 (1987).
While many courts have not followed the EEOC's Guidances, they provide
a "safe harbor" for compliance. The EEOC Guidance concerning benefits sets
forth a two-step analysis to determine whether a medical plan violates the ADA.
The first step examines whether the plan contains a disability-based distinction.
If it does not, the plan does not violate the ADA. If it does, then the burden falls
to the employer to prove that the distinction is justified.
Disability-based distinctions
A "distinction" is any difference in benefits under a plan. Under the EEOC
Guidance, a distinction is based on a disability if it singles out a particular
disability, a group of disabilities, or disability in general. For example, according
to the EEOC, a cap on AIDS benefits, because it affects only disabled
individuals, is "disability-based." EEOC Guidance, Part IIIB. Interim
Enforcement Guidance in the application of the ADA to disability-based in
employer provided health insurance.
In terms of employment discrimination law, the EEOC's position is that a
medical plan can only violate the ADA through "disparate treatment," and not
"disparate impact." For example, a plan that limits payments for blood
transfusions is not discriminatory, because it affects both disabled and nondisabled persons. Though disabled persons will probably need more blood
transfusions than non-disabled persons, the EEOC nonetheless takes the
position that this distinction is not disability-based. Id., n.7.
The EEOC does not mandate, however, that an employer provide
reasonable accommodations under its medical plan to disabled employees.
Accordingly, under the EEOC Guidance on Reasonable Accommodation under
the ADA (3/1/99), BNA, supra, 405:7601; see 29 C.F.R. Part 1630, Appendix at
discussion of Section 1630.2(0), an employer need not have a better medical
plan for its disabled employees than for its non-disabled employees.
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435
Is the distinction justified?
If a disability-based distinction is found, the employer must establish that
the distinction is justified. At this stage, the employer must prove that the plan is
not a "subterfuge" under the ADA. The EEOC Guidance suggests five methods
to meet this burden:
First, the employer may prove that the plan does not have a disabilitybased distinction. Of course, if the plan does not have a disability-based
distinction, "subterfuge" never becomes an issue. Part IIIB.
Second, the employer may prove that the distinction is necessary to
ensure that the plan follows commonly accepted or legally required standards of
fiscal responsibility. "Necessary" in this context means that there is no way to
achieve the same result with a non-disability-based distinction. However, no
matter what the cost savings under a disability-based distinction, a reduction in
all benefits would likely amount to the same or greater savings. Further, it is
unclear exactly what standards the EEOC refers to, as medical plans generally
do not have assets themselves and benefits are paid by insurance companies or
from the employer's assets. Part lllC.2(c).
Third, the employer may prove that the disability-based distinction is
necessary to avoid an unacceptable increase in premiums or cutback in
coverage. However, only premium increases or coverage cutbacks that would
make coverage unavailable to employees would be deemed unacceptable.
Further, even if the premium increase or benefit cutback is "unacceptable," the
employer would still have to prove that it is "necessary," Le., the employer would
have to show that the same effect could not be avoided by a non-disability-based
distinction. Part lllC.2(d).
Fourth, the employer may prove that the treatment being denied has no
medical value, Le., that scientific evidence proves that the treatment does not
cure the condition, slow its degenerative effects, alleviate its symptoms, or
maintain the current health of the individuals receiving the treatment. However, if
the plan reimburses worthless treatments for any nondisabling conditions, this
method cannot justify the exclusion of worthless treatments for disabling
conditions. Part lllC.2(e).
Finally, an employer may prove that the per-capita cost of the disabling
condition for which the treatment is limited is at least as high as the per-capita
cost of non-disabling conditions. So, for example, if capping cancer benefits at
$200,000 results in a per-capita cost of $400, and the per-capita cost of noncapped coverage of pregnancy benefits is $600, then the plan would be a
subterfuge. However, if the per-capita cost of pregnancy benefits was $400, then
the cap would be justified and the plan would not be a subterfuge. The difficulty
in this method lies in deciding how to classify benefits for the purpose of
determining their per-capita cost. For example, m employer could use "cancer
436
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benefits" or could break that category down further to "breast cancer benefits,"
"prostate cancer benefits," etc.
Application of EEOC Guidance by the courts.
As noted above, most courts have rejected the EEOC's interpretation of
"subterfuge." In Piquard, 887 F. Supp. at 1125, the court partially adopted the
Betts interpretation instead of the EEOC's. The court's analysis centered on
whether the plan was being used to discriminate on the basis of disability in nonfringe benefit areas of employment; therefore, the existence of a disability-based
distinction was irrelevant. Id. This interpretation of subterfuge has been adopted
by the Seventh, Second, Third, Sixth, Eighth, and D.C. Circuits. See Doe, 179
F.3d at 561-62, Leonard, 199 F.3d at 104; Ford, 145 F.3d at 61 1; Parker, 121
F.3d at 1019; Krauel, 95 F.3d at 678-79; fitfs v. Federal Nat'l Morfg. Ass'n, 236
F.3d 1 (D.D.C. 2001); EEOC v. Aramark Corp., 208 F.3d 266 (D.D.C. 2000); and
Modderno, 82 F.3d at 1064-65.
Significance of State Laws.
State laws may present or impose significant limitations on the design of
employee welfare benefit plans in the following respects:
a.
It has been clear since Metropolitan Life Ins. Co. v.
Massachusetts, 471 U S . 724,739-47 (1985), that
insured welfare benefit plans, Le., plans which provide
for benefits through group insurance policies or
contracts with HMOs, must comply with the mandated
benefit requirements of state insurance laws.
Pursuant to ERISA § 514(b)(2)(A), there is no
preemption of state laws which regulate insurance.
b.
As to self-funded or self-insured welfare benefit plans,
however, ERISA does preempt the application of
state mandated benefit laws because, pursuant to
ERISA § 514(b)(Z)(B), employee benefit plans cannot,
for purposes of state insurance laws, be deemed to
be an insurance company or other insurer or to be
engaged in the business of insurance.
c.
The ADA specifically states that it does not bar more
stringent state laws. 42 U.S.C. § 12201(b).
Conversely, some courts have held that the approval
of an insurance policy under state insurance law does
not necessarily mean that the policy is exempted
under § 501(c)(2). See World Ins. Co. v. Branch, 966
F. Supp. 1203,1209 (N.D. Ga. 1997), aff'd in part,
-17437
vacated in part on other grounds, 156 F.3d at 1142
(11th Cir. 1998).
Under the EEOC Guidance on Application of ADA to Health Insurance, it
is the view of the EEOC that, in order to "gain the protection of section 501(c)" for
a challenged disability based insurance distinction, the employer must prove
either that:
the health insurance plan is a bona fide health
insurance plan that is not inconsistent with
state law; i.e., the plan exists and pays
benefits, its terms have been accurately
communicated to eligible employees, and the
plan's terms are not inconsistent with
applicable state law as interpreted by the
appropriate state authorities; or
(ii)
the health insurance plan is a bona fide selfinsured health insurance plan; i.e., the plan
exists and pays benefits and its terms have
been accurately communicated to covered
employees.
As the court observed in Doe v. MutualofOmaha Ins. Co., 179 F.3d 557,
562 (7th Cir. 1999), cert. denied, 528 U.S. 1106 (2000), . . section 501(c) is
obviously intended for the benefit of insurance companies rather than plaintiffs . .
..
'I.
11
The EEOC issued a Compliance Manual Section on Employee Benefits.
EEOC Compliance Manual 915.003, Section 3 (10/3/00).
E.
Estoppel Issues
1.
Judicial Estoppel
Much of the confusion regarding so-called judicial estoppel in the context
of benefits claims has been resolved by the Supreme Court's recent decision in
Cleveland v. Policy Mgrnt. Sys. Corp., 526 U.S. 795 (1999). In Cleveland, the
plaintiff suffered a stroke and thereafter filed a claim for Social Security Disability
Insurance ("SSDI") benefits in which she stated that she was unable to work.
She nonetheless subsequently returned to work and, based on her return, her
SSDI claim was denied. A few weeks later, she was fired. She then sued under
the ADA, asserting that her former employer discriminated against her by failing
to reasonably accommodate her stroke-related impairments.
The district court granted summary judgment to the employer. The court
ruled that the plaintiff was estopped from asserting that she was a "qualified"
438
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individual with a disability because of her statement in her SSDl claim that she
was unable to work. On appeal, the Fifth Circuit agreed. Cleveland v. Policy
Mgmt. Sys. Corp., 120 F.3d 513 (SthCir. Tex. 1997). However, the Supreme
Court held that the plaintiff's statements on her SSDl application were not a
concession that she was unable to work for purposes of the ADA. The Court
pointed out four major differences between SSDl disability and ADA disability.
See Cleveland, 526 U.S. at 800.
First, SSA does not take reasonable accommodations into account. when
making SSDl disability determinations.. Under the ADA, however, reasonable
accommodations must be taken into account. Thus, a person who is unable to
work for SSDl purposes may be able to work when provided with a reasonable
accommodation.
Second, the SSDl process incorporates a set of assumptions under which
some individuals who would be qualified for purposes of the ADA would
nevertheless be deemed unable to work for purposes of SSDI.
Third, an individual's condition can change over time in ways that might
allow the individual to remain eligible for SSDl (for example, under the SSA's
transition to work program) but also qualified to work.
Fourth, the basic concept of pleading in the alternative permits an
individual to file a claim for SSDl benefits and simultaneously sue her employer
under the ADA.
Nevertheless, the Court held, employers are still entitled to summary
judgment if an SSDVADA claimant fails to provide a "sufficient explanation" for
any apparent inconsistency between the two claims. The explanation must be
sufficient to warrant a reasonabte juror's conclusion that at the time the plaintiff
told the SSA she was "unable to work," she really was able to "perform the
essential functions" of the job, with or without "reasonable accommodation."
In decisions subsequent to Cleveland, courts have closely examined
whether the plaintiff can establish the elements of a prima facie case of
discrimination under the ADA. See, e.g., Giles v. General Elec. Co., 245 F.3d
474 (5th Cir. 2001); Reed v. Petroleum Helicopters, lnc., 218 F.3d 477 (5th Cir.
2000); Lloyd v. Hardin County, lowa, 207 F.3d 1080 (8th Cir. 2000); Loeb v.
Trans World Airlines, lnc., 1999 U S . App. LEXIS 25475 (Oct. 7, 1999); Feldman
v. American Mem'l Life Ins. Co., 196 F.3d 783 (7th Cir. 1999).
The basic line of analysis is that inconsistent statements between an SSA
disability claim and an ADA lawsuit are not automatically disquatitying, but the
plaintiff has the burden to offer some explanation for the inconsistency and, in the
absence of an adequate explanation, the ADA claim should be dismissed.
DiSanto v. McGraw-Hill, Inc., 220 F.3d 61 (2d Cir. 2000).
2.
Collateral Estoppel
-19439
Federal courts are required by federal common law to apply the same
preclusion doctrine to the determination of a state administrative agency acting in
its judicial capacity as would be applied by a court of the forum state. Universify
of Tenn. v. Elliott, 478 U.S. 788, 799 (1986). Therefore, federal courts are
directed to look to state law to determine whether collateral estoppel applies. In
Sfafford v. True Temper Sports, 123 F.3d 291, 294-95 (5th Cir. 1997), the court
applied collateral estoppel to preclude an ERISA retaliation claim because the
issue had been fully and fairly litigated before the Mississippi Unemployment
Compensation Board. See also, Marrese v. American Acad. of Orthopaedic
Surgeons, 470 U.S. 373, 382 (1985).
The Sixth Circuit has declined to apply collateral estoppel to preclude
litigation over a denial of disability benefits because the benefit plan was not a
party at the state court administrative level. See Perez v. Aefna Life Ins. Co., 96
F.3d 813, 820-21 (6th Cir. 1996), vacated on other grounds, 106 F.3d 146 (6th
Cir. 1997), remanded on reh’g en banc, 150 F.3d 550 (6th Cir. 1998). The court
held that because state law was unclear as to whether mutuality was a required
element of an application of collateral estoppel, it should not apply the doctrine.
F.
Pre-Existing Conditions
Since the enactment of the Health Insurance Portability and Accountability
Act of 1996 (“HIPAA”), which limits the circumstances in which a pre-existing
condition exclusion may apply under a group health plan, such health plan
exclusions have been less problematic to persons with serious health conditions.
Nevertheless, such clauses in health plans continue to exist and thus present
significant issues under the ADA.
In general, courts hold that a uniform pre-existing condition clause that
excludes from coverage the treatment of conditions that pre-date an individual’s
eligibility for benefits, is not a disability-based distinction, and thus does not
violate the ADA. See, eg., McLaughIin v. General Am. Life Ins., 1998 U S . Dist.
LEXIS 16994 (E.D. La. Oct. 21, 1998) (plaintiff denied health coverage for
treatment of sickle cell disease based on the health plan’s general pre-existing
condition exclusion clause); EEOC v. /-/insdaleHosp., 1999 U.S. Dist. LEXIS
10588 (N.D. Ill. June 29, 1999) (amputee denied coverage for a new prosthesis
based on a health plan provision that excluded coverage for a prosthesis to
replace a body part lost prior to the time an individual became eligible for
coverage under the plan). However, while a health plan may deny an individual
with a pre-existing condition coverage for that condition for the period specified in
the plan without violating the ADA, the plan cannot deny coverage for illnesses or
injuries unrelated to the pre-existing condition. Anderson v. Gus Mayer Boston
Sfore of Delaware, 924 F. Supp. 763 (E.D. Tex. 1996). Thus, it may be unlawful
under the ADA for a plan to deny any health coverage based on the existence of
a pre-existing condition Id.
440
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G.
Mental Health Limitations
Most health plans have much lower limits for benefits for mental disorders
than for physical disorders. The EEOC Guidance expressly states that a
distinction between lifetime maximum mental and physical benefits is not based
on disability and therefore does not violate the ADA. EEOC Guidance, supra.
Similarly, most disability plans contain a two year coverage maximum for mental
health disability coverage. Defendants have been successful defending these
limits on three grounds: no discrimination, no standing to sue, no subterfuge.
In Modderno v. King, 82 F.3d 1059, 1065 (D.C. Cir. 1996), cert. denied,
519 U S . 1094 (1997), the court held that a $75,000 limitation on mental health
benefits did not violate the ADA, even though there was no similar limitation on
benefits for physical conditions because benefits do not have to be equal among
different disabilities. See also Ford v. Schering-Plough Corp., 145 F.3d at 608;
Parker, 121 F.3d at 1006; Lewis v. Krnart Corp., 180 F.3d 166 (4th Cir. 1999);
Bril v. Dean Wifter, Discover& Co., 986 F. Supp. 171, 175 (S.D.N.Y. 1997) (all
holding that limits on benefits for mental health disorders that are less generous
than coverage for physical disabilities do not violate the ADA), Weyer, supra;
EEOC v. Staten lsland Sav. Bank, 207 F.3d 144 (2d Cir. 2000)). With respect to
subterfuge and mental health benefit limitations, see Fifts, supra; Ararnark,
supra; Leonard, supra.
Significantly, however, the court in Fifts v. Federal Nat'l Mortgage Ass'n,
191 F.Supp. 2d 67 (D.D.C. 2002) (on remand from 236 F.3d 1 (D.C. Cir. 2001))
held that bipolar disorder was a physical condition and covered under an
employment disability policy. Interpreting the ERISA policy under traditional
contract law, the court found that the policy limitation for "mental, nervous or
emotional disease[s] or disorder[s] of any type was too vague to exclude bipolar
disorder." The court adopted a psychologist's opinion that the condition is a
"neurobiological" disorder that affects the "physical and chemical structure of the
brain." Id. at 7, and interpreted the policy against the insurer. However, in Fuller
v. S.P. Morgan Chase Co., 2005 U.S. App LEXlS 19437 (Sept. 9,2005), the
Second Circuit Court held that the administrators' classification of bipolar
disorder as a "mental" disorder using DSMIV as its authority was a valid exercise
of its discretionary authority.
In lwata v. lntel Corp., 349 F. Supp. 2d 135 (D. Ma. 2004) the court
rejected the prevailing view that employers can provide different levels of long
term disability benefits for physical and mental disabilities. Relying on the
reasoning in the vacated decision of Johnson v. K-Mart, 273 F.3d 1035 (11th Cir.
2001) it found that limiting LTD benefits to 24 months for the mentally disabled
violates the ADA. lwata at 2004 U.S. Dist. LEXIS 24973 *30-31. See also
Fletcher v. Tuffs University, 367 F. Supp. 2d 99 (D. Ma. 2005).
Limits on drug and alcohol treatment may be considered along with
limitations on mental health benefits. The ADA contains specific provisions
-21441
relating to the use of drugs and alcohol. See 42 U.S.C. § 12114. Under these
provisions, alcoholics and persons who have completed a drug rehabilitation
program are considered disabled; current drug users, however, are not
protected.
A limitation of mental health benefits must comply with the Mental Health
Parity Act of 1996 (“MHPA”), which became effective on January 1, 1998. 42
U.S.C. 5 3OOgg-5 (1996). The MHPA prevents lifetime caps on mental health
benefits in a group health plan if physical benefits are not similarly capped. 42
U.S.C. § 300gg-5(a)(I)(A). However, several exclusions apply. First, employers
with fewer than fifty-one employees are exempt. 42 U.S.C. § 3OOgg-5(c)(l).
Also, the MHPA does not apply if compliance would cause the cost of insurance
to increase by more than one percent. 42 U.S.C. § 300gg-5(~)(2).The law has
been extended, with a sunset date of December 31,2006. Be aware of
congressional action to extend the scope of mental health coverage.
H.
Experimental Treatments
The EEOC Guidance suggests that a broad-based exclusion of
experimental treatments or drugs is not a violation of the ADA because it is not a
disability-based distinction. However, some employees have successfully
challenged limitations on experimental treatments. In Henderson v. Bodine, 70
F.3d 958 960-61 (8th Cir. 1995), the Eighth Circuit indicated that if a plan
covered experimental treatment for some conditions, the ADA may require the
plan to provide that treatment for other similar conditions. The Henderson court
did not, however, analyze the subterfuge issue, instead relying on the EEOC’s
guidelines. A court that interprets subterfuge differently might find that limitations
on experimental conditions are acceptable if they do not discriminate on the
basis of disability in non-fringe-benefit aspects of employment.
1.
AIDSIHIV
Much controversy initially surrounded the issue of whether the inability to
reproduce and bear children constituted a disability. The Supreme Court largely
resolved this issue in Bragdon v. Abbott, 524 U.S. 624 (1998). That case
involved an asymptomatic HIV positive woman whose dentist refused to treat her
in his office because of fear of infection. He was willing to treat her in the
hospital. She sued, claiming that the dentist had violated Title Ill of the ADA.
The Court first looked to determine whether the plaintiff suffered from an ADAdisability. Reciting the medical evidence demonstrating HIV’s serious physical
effects on a person from the moment of infection, it found HIV a “physical
impairment during every stage of the disease.” The Court went on to hold
reproduction as an ADA major life activity upon which HIV imposes a substantial
limitation.
While Bragdon v. Abbott will undoubtedly help persons with HIV obtain
reasonable accommodations and fight disability discrimination in obtaining and
-22442
remaining in employment, in light of the cases discussed above, it does not
require employers or insurers to offer equal benefits to persons with HIV, either
because the ADA does not cover benefit differences or an exclusion is not a
subterfuge. See, e.g., McNeil v. Time Ins. Co., 205 F.3d 179 (5th Cir. 2000)
(Title Ill of the ADA does not regulate the content of insurance policies. Thus, a
cap of $10,000 for AIDS treatments during the first two years of the policy (as
opposed to $2 million life time maximum for other conditions) was not in violation
of the ADA). Doe v. Mutual of Omaha, 179 F.3d at 557. Attorneys should be
aware that the EEOC does not agree with most courts’ allowing caps on
coverage for certain disabilities or the court’s Betts interpretation of subterfuge.
See EEOC Interim Policy Guidance on ADA and Health Insurance, (June 8,
1993) at Ill B, C(2).
J.
Infertility Treatments
In Krauel v. lowa Methodist Med. Ctr., 95 F.3d 674 (8th Cir. 1996), plaintiff
claimed that defendant’s failure to cover infertility treatment constituted ADA
discrimination. While Bragdon v. Abbott implicitly overrules the court’s finding
that infertility does not substantially affect a major life activity, two other grounds
support the court’s holding that a health insurance policy’s exclusion of infertility
treatment does not violate the ADA. First, the court also held that the exclusion
of infertility is not “disability based” distinction because it does not single out a
particular group of disabilities but applies equally to all plan participants. Second,
it found that the plan fell within the insurance safe harbor (Betts) protection. The
benefit exclusion was not a subterfuge.
Similarly, in Saks v. Franklin Covey Co., the Second Circuit held that the
exclusion of the infertility treatments disadvantages male and female employees
equally and, therefore, falls outside the purview of Title VII. It found no protected
classification based on reproductive capacity and therefore no ADA violation.
Saks v. Franklin Covey Co., 316 F.3d 337 (2d Cir. N.Y. 2003). Accord, Lehman
v. Adecco North Am., LLC, 2001 U.S. Dist LEXIS 6391 (N.D. Ill. Apr. 3,2001).
K.
Hearing Aids
The EEOC Guidance states that an individual who uses a hearing aid to
correct only slight hearing loss is not necessarily disabled under the ADA. Thus,
an exclusion for all hearing aid expenses should pass muster under the EEOC’s
guidelines because it impacts disabled and non-disabled employees/participants
equally. This reasoning was applied by the court in Micek v. City of Chicago,
1999 U.S. Dist. LEXIS 16263 (N.D. Ill. Sept. 30, 1999), where a plaintiffs claim
that the failure of the City’s health plan to provide a hearing aid benefit was a
violation of the ADA was rejected. The court reasoned that there was no
violation of the ADA because ”. . . plaintiffs receive exactly the same coverage
that other City employees receive, regardless of disability. Id. at n.11.
Notwithstanding this interpretation, the EEOC filed suit against Hertz Corporation
in 1997, claiming that a $150 limit on benefits paid for hearing aids contained in
-23443
the Hertz medical plan violated the ADA. BNA Pension and Benefits Reporter,
Vol. 24, page 1104 (May 5, 1997). The case settled on confidential terms.
Although courts generally do not view corrective eyewear as a sign of a
disability under the ADA, courts may be more receptive to the argument that the
need for a hearing aid is a sign of a disability, perhaps because the use of
corrective lenses is much more common in society than the use of hearing aids.
Even so, given the court decisions to date on the Section 501(c) "safe harbor" it
appears to be unlikely that a court will find that uniform plan limitations or
exclusions regarding hearing aids are discriminatory, unless a state law requires
otherwise.
L.
Prescription Drugs
The ADA prohibits employers from making disability-related inquiries of
employees, unless the inquiry is job-related or consistent with business
necessity. 42 U.S.C. § 12112(d)(4)A). It is often difficult to determine whether
an employer's inquiries about an employee's prescription drug use is appropriate
under the ADA. For example, in Roe v. Cheyenne Mountain Conference Resort,
Inc., 124 F.3d 1221, 1226 (10th Cir. 1997), the employer adopted a policy
requiring, as a condition of employment, that employees report "without
qualification" all drugs present within their system. The policy further provided
that "prescription drugs may be used only to the extent that they have been
reported and are approved by an employee supervisor." Id.
Although the district court recognized that the employer's inquiry regarding
prescription drug use would be permissible if the employer could demonstrate the
inquiry was job-related and consistent with business necessity, the court found
the employer failed to make any such showing. Roe v. Cheyenne Mountain
Conference Resort, 920 F. Supp. 1153, 1155 (D. Colo. 1996). Therefore, the
district court determined the policy constituted a "disability-related inquiry" and
granted summary judgment in favor of the plaintiff on her medical inquiry claim.
Id. The Tenth Circuit upheld the district court's determination that the employer's
prescription drug disclosure policy violated the ADA. Roe v. Cheyenne Mountain
Conference Resort, 124 F.3d 1221 (IOth Cir. 1997).
In Wyland v, Boddie-Noel Enters., Inc., 165 F.3d 913 (4th Cir. 1998), an
employee sought to be promoted to a supervisory position with respect to fast
food franchises. The job would require the employee to do a lot of driving in a
company car. The employer required the employee to disclose his prescription
drug use. Upon discovering the employee was taking prescription narcotics in
connection with a back injury, the employer asked that the employee take
quarterly drug tests to demonstrate that the prescription narcotics were no longer
in his system. When the employee failed to timely report for a quarterly drug
screen, he was terminated. The employee sued his employer under the ADA,
alleging wrongful discrimination and impermissible disability-related inquiries. On
the issue of whether the prescription drug inquiries and quarterly drug testing
444
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was inappropriate under the ADA, the court found they were both job-related and
necessary for a business purpose. The court said the employer needed to
ensure that the employee was capable of driving the company car as required to
perform his job. Therefore, the court held the employer did not violate the ADA.
M.
Other Common Exclusions and Limitations
Given the broad interpretation of the Section 501(c) "safe harbor'' and the
Circuit Courts' holdings that equal availability of the same policy to all does not
constitute discrimination, it appears that most types of plan limitations or
exclusions will not be found to be in violation of the ADA so long as they are
equally and generally applicable to all plan participants, are consistent with state
laws, and are not disease or disability-specific. See EEOC Guidance at Part Ill
B.
In Templet v. Blue CrossBlue Shield of Louisiana, 2000 U.S. Dist. LEXIS
15605 (Oct. 19, 2000), the court held that an insurance policy's exclusion of
benefits for weight related conditions did not violate the ADA.
N.
State Law Mandates
In addition, attorneys should make sure to check individual state statutes
that may mandate coverage of specific types of health related conditions. For
instance, Connecticut mandates insured plans to cover all mental health
conditions listed in the most recent edition of the Diagnostic and Statistical
Manual ("DSM") on the same basis as they cover physical conditions. 1999
Conn. Legis. Serv. P.A. 99-284 (West). The Ninth Circuit upheld a Washington
state law requiring all plans to cover the cost of various alternative health
practitioners. Washington Health Physicians Sew. Ass'n v. Gregoire, 147 F.3d
1039 (9th Cir. 1998), cet-t. denied, 525 U.S. 1141 (1999). Massachusetts
requires insured plans to cover fertility treatments.
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