The Americans With Disabilities Act and Medical Plans

THE AMERICANS WITH DISABILITIES ACT
AND MEDICAL PLANS

by Wayne Jacobsen
O'Melveny & Myers
Newport Beach, California

Glasser Legalworks
and Fordham University School of Law
ERISA Litigation Conference
©1998

I. OVERVIEW OF AMERICANS WITH DISABILITIES ACT
A. Persons Protected
C. EEOC Compliance Manual Defining the Term "Disability."
D. Conditions Not Covered
E. QUID
F. Provisions Aimed At Employee Benefit Programs
G. Remedies.

II. IMPACT OF ADA ON MEDICAL PLANS
A. When can a medical plan limit or reduce benefits for a particular illness?
B. The Statutory Scheme
C. EEOC's Interim Guidance on Application of the ADA to Health Plans
D. Interpretations of the EEOC Guidance

III. SPECIFIC PLAN PROVISIONS
A. Preexisting Conditions
B. Mental Health Limits
C. Experimental Treatments
D. Caps On Expenses For Specific Conditions
E. Recommendations

Chapter I. OVERVIEW OF AMERICANS WITH DISABILITIES ACT

The Americans with Disabilities Act ("ADA") was enacted in 1990 to "provide clear, strong, consistent, [and] enforceable standards [for] ending discrimination against individuals with disabilities" and to bring such individuals into the economic and social mainstream of American life.1 The ADA contains a prohibition against discrimination on the basis of disability in regard to "job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other. . . privileges of employment." ^[2]

A. Persons Protected. The ADA protects two classes of people.

1. The first class consists of qualified individuals with disabilities. ^[3]

2. The other class consists of persons with a known relationship or association with a disabled individual. Thus, an employer could not discriminate in employment against an individual because that individual has a disabled member in his family. ^[4]

B. Definition of Disability.

1. A physical or mental impairment that substantially limits one or more major life activities. ^[5]

2. Having a record of such physical or mental impairment. ^[6]

3. Being regarded as having such physical or mental impairment regardless of whether an individual has such an impairment. ^[7]

The treatment of a non-disabling medical condition may itself cause an employee to become disabled. ^[8]

C. EEOC Compliance Manual Defining the Term "Disability."

1. Concerned that the original language of the ADA, without further interpretation, could be defined too broadly, the EEOC issued guidance and instructions for determining whether an individual has a disability. ^[9]

2. The EEOC Definition attempts to define the three elements of the term "disability"--"impairment," "major life activity," and "substantially limits"--by using examples and making references to regulations, case law, and the ADA itself. ^[10]

a. Impairment. An impairment is a physiological disorder affecting one or more of a number of body systems or a mental or psychological disorder.

(1) One example given by the EEOC is as follows: If a person cannot find a job because that person has the equivalent of a second-grade education and therefore cannot read, that person does not have an impairment for purposes of the ADA. If, however, that person cannot read because that person has severe dyslexia, that person has an impairment.

(2) Normal height, weight, and strength deviations are not considered impairments. The EEOC Definition, however, does consider severe obesity--defined as body weight more than 100% over the norm--an impairment. Additionally, the EEOC Definition recognizes that there may be an impairment if the height, weight, or strength of an individual is affected by an underlying physical disorder.

b. Major Life Activity. Major life activities are those basic activities that the average person in the general population can perform with little or no difficulty. EEOC regulations define "major life activities" as functions such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working. ^[11]

c. Substantially Limits. The term "substantially limits" is a comparative term that implies a degree of severity and duration. The primary focus is on the extent to which an impairment restricts one or more of an individual's major life activities. Determining whether an impairment substantially limits a major life activity requires a case-by-case analysis because the same types of impairments often vary in severity and often restrict people to different degrees or in different ways. To be considered substantially limited, an individual's ability to perform a major life activity must be restricted as compared to the ability of the average person to perform the activity. If an impairment does not substantially limit a major life activity, the impairment is not a disability.

(1) According to the EEOC Definition, a person with a permanent knee impairment that causes him pain when he walks for extended periods does not have an impairment that substantially limits his ability to walk because the average person in the general population would not be able to walk for extended periods without experiencing some discomfort. But a person with sickle cell anemia, who can walk for only a short distance, has a disability that substantially limits his ability to walk.

(2) An individual with a mild form of Type-II, non-insulin-dependent diabetes, who doesn't need insulin or other medication and whose doctor has placed no significant restrictions on his activities, has an impairment, but the impairment does not substantially limit any of his major life activities. A different person with similar diabetes, whose condition requires the person to follow a strict regimen, including a stringent diet and exercise routine, is significantly restricted in how he functions in his day-to-day life. Therefore, that person has an impairment that substantially limits one or more of his major life activities.

(3) According to the EEOC Definition, some impairments are so severe that there is no doubt they substantially limit major life activities. Such impairments include: insulin-dependent diabetes, legal blindness, deafness, manic depressive syndrome, alcoholism, and HIV infection, including asymptomatic HIV infection. ^[12]

D. Conditions Not Covered.

1. The following conditions are specifically excluded from the ADA's definition of disability:

a. temporary physical or mental impairments; ^[13]

b. current illegal drug use; ^[14]

c. homosexuality and bisexuality; ^[15]

d. sexual behavior disorders; ^[16]

e. predisposition to illness; ^[17]

f. personality traits; ^[18]

g. environmental, cultural, or economic disadvantages; ^[19]

h. advanced age; ^[20]

i. pregnancy. ^[21]

E. QUID.

A "Qualified Individual with a Disability" ("QUID") is an individual with a disability who, "with or without reasonable accommodation," can perform the essential functions of the employment position in question. ^{[22] The term "reasonable accommodation" covers a variety of practices that allow a disabled person to perform the functions of the job. Examples of reasonable accommodations include: making existing facilities readily accessible to and usable by individuals with disabilities, restructuring jobs, modifying work schedules, and providing qualified readers or interpreters.} [23] A person is not a QUID, however, if he cannot satisfy the basic attendance requirements of a position ^{[24] or if he is totally disabled.}

A number of cases have considered whether an individual who is totally disabled may nonetheless be considered a QUID. The Equal Employment Opportunity Commission argued that a totally disabled individual was qualified to perform the essential functions of the "employment position" of a "disability benefit recipient." The Seventh Circuit quickly dismissed EEOC's argument, holding that "an 'employment position' is a job." EEOC v. CNA Insurance Companies, 96 F.3d 1039 (7th Cir. 1996). ^[25]

But other courts have allowed totally disabled plaintiffs to sue as QUIDs. The Third Circuit found that a former employee who is now totally disabled may still sue as a QUID in order to "effectuate the full panoply of rights guaranteed by the ADA." ^{[26] Another court allowed a totally disabled former employee to sue regarding disability benefits to avoid "an irrational result."} [27]

A number of courts have considered whether the characterization by a plaintiff as being "totally disabled" for other purposes estops the plaintiff from claiming to be a QUID. The Circuits are split. The Second and Third Circuits have applied judicial estoppel. ^{[28] The D.C. Circuit and Sixth Circuit have refused to apply judicial estoppel.} [29] The Fifth Circuit has a rebuttable presumption that the plaintiff is estopped. ^{[30] The Seventh Circuit refuses to apply estoppel because the definitions of total disability are different for Social Security and the ADA.} [31] The Eighth Circuit requires strong counterveiling evidence to overcome statements of total disability. ^{[32] The Ninth Circuit says that the normal summary judgment standard should be enough, but estoppel is available in extreme cases.} [33] The Tenth Circuit rejects estoppel but says the statements may be relevant evidence. ^{[34] And estoppel is available in the Eleventh Circuit based on the individualized circumstances.} [35] In summary, the trend seems to be away from per se estoppel and toward using the statements as evidence that must be overcome. Often the courts have focused on the fact that Social Security applications consider disability without taking into account the potential for accommodation. ^[36]

Courts have also considered whether individuals who were not employees at the time the allegedly discriminatory action occurred have standing to bring an action under the ADA. The Eleventh Circuit held that an individual who did not hold and did not desire to hold a position with the employer at or after the time of the alleged discriminatory conduct could not be a QUID. Gonzales v. Garner Food Services, Inc., 89 F.3d 1523 (11th Cir. 1996) (cert. denied).

Plaintiffs who are faced with a standing problem because they cannot satisfy the definition of a QUID have attempted to sue under Title III of the ADA, which prohibits discrimination in the goods and services provided by a "place of public accommodation." See the discussion of Parker v. Metropolitan Life Insurance Company and Car Parts Distribution Center v. Automotive Wholesalers Association, infra.

F. Provisions Aimed At Employee Benefit Programs.

1. Title I. The employment provisions of Title I of the ADA ^{[37] broadly prohibit discrimination with respect to all terms, conditions, and benefits of employment, including: employee compensation, sick leave or other types of leave, and fringe benefits available on account of employment, whether or not administered by the employer.}

2. Who is covered by the ADA? Title I covers private employers with 15 or more employees, agents of such employers, employment agencies, labor unions, joint labor-management committees, and state and local governments. ^[38]

a. An employer or other covered entity may not do through a contractual relationship what it is prohibited from doing directly. ^{[39] Thus, the ADA forbids employers from contracting with others to provide fringe benefits if the third-party provider itself engages in discrimination based on disability status.} [40]

b. Trade associations and their administering trusts for health benefit plans may be "employers" of association members' employees for purposes of Title I of the ADA. In Car Parts Distribution Center, Inc. v. Automotive Wholesaler's Ass'n, the First Circuit Court of Appeals found that the issue was not whether the trade association was the plaintiff's employer, but whether it could be considered an "employer" under the ADA, and therefore subject to liability. ^[41]

(1) According to the court, a trade association can be considered an employer for purposes of Title I if: (1) it exercises control over important aspects of employment with respect to employee health care coverage, i.e., has authority to determine benefit levels, (2) it exists solely for the purpose of enabling entities to delegate their responsibility to provide health insurance for their employees, or (3) it is an agent of a covered entity and acts on behalf of the entity in providing and administering employee health benefits.

(2) The court also left open the possibility that Title III prohibits more than discrimination in access to physical structures. Thus, even if a trade association is not an employer, it may be subject to the ADA under Title III.

(a) Some courts have reasoned that Title III must include more than discrimination in physical access to places of public accommodation because (1) if Title III is violated only by discrimination that prevents physical access to a place of public accommodation, then many persons who do not suffer from a physical disability but are explicitly protected by Title III could bring a Title III claim only if the public accommodation took affirmative steps to block such persons' physical access; ^{[42] (2) Title III's prohibitions on discrimination extend beyond denial of physical access to a place of public accommodation;} [43] and (3) it would be illogical to require a plaintiff to be physically present at a place of public accommodation to be entitled to non-discriminatory treatment since discrimination can occur when a plaintiff only has contact with the place by telephone and correspondence. ^[44]

(b) Other courts have refused to extend the Title III protections to employment related disputes. Parker v. Metropolitan Life Insurance Company, 121 F.3d 1006 (6th Cir. 1997). In Parker, the plaintiff claimed that a long-term disability plan which provided longer benefits for physical disabilities than mental disability was discriminatory. Since the plaintiff was not a qualified individual with a disability, she attempted to proceed under Title III. Title III provides that "no individual shall be discriminated against on the basis of disability and the 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." The court reasoned that Title III does not apply to an insurance policy provided as a fringe benefit of employment. ^[45]

c. An employer may be liable for engaging in unlawful activity prohibited by the ADA, even if it is not the employer of the person claiming discrimination.

(1) In United States v. Illinois, the court held that the State could be liable for denying a police officer admission to a pension plan, even though the State was not the employer of the municipal officer. ^{[46] The court found that the State is an employer under the ADA; that the State affects the police officer's terms, conditions, or privileges of employment; and that since the ADA is silent as to requiring a direct employment relationship for liability, such a requirement should not be read into the statute.} [47]

d. The owner of a company can not be held individually liable under the ADA unless the owner meets the statutory definition of an "employer." In EEOC v. AIC Security Investigations, the jury awarded damages against both the corporate employer and the corporation's sole shareholder after finding that the defendants had fired the plaintiff because he had cancer. ^{[48] The Seventh Circuit upheld the award of damages against the corporation, but reversed as to the owner because she didn't meet the statutory definition of "employer."} [49] G.

Remedies.

The remedies available under the ADA are the same as those available under Title VII of the Civil Rights Act. Before an individual can file a lawsuit, he or she must file a charge with the EEOC and/or the relevant state agency and receive a right to sue letter. The remedies for violation of Title I include injunctive relief, back pay, job reinstatement, attorney's fees, and compensatory and punitive damages in the case of intentional discrimination. Punitive and compensatory damages are limited, depending on the size of the employer. The maximum amounts range from $50,000 to $300,000. ^[50]

Chapter II. IMPACT OF ADA ON MEDICAL PLANS.

A. When can a medical plan limit or reduce benefits for a particular illness?

This question, often the subject of periodical articles, is usually phrased in the context of AIDS: Does the ADA overrule McGann v. H & H Music Co., ^{[51] which held that a cap on AIDS-related medical expenses did not violate section 510 of ERISA?}

B. The Statutory Scheme.

1. General Structure. The ADA's broad coverage stems from its sweeping definition of disability. As previously discussed, the ADA defines disability as a physical or mental impairment that substantially limits one or more of an individual's major life activities. ^{[52] The legislative history makes clear that this concept should be broadly implemented.} [53] In addition, the legislative history and implementing regulations state that whether a person has a disability must be assessed without regard to the availability of mitigating measures, such as reasonable accommodations or auxiliary aids. ^{[54] Under this interpretation, individuals with significant hearing loss are disabled, even if the use of a hearing aid improves their level of hearing. Similarly, individuals with impairments (such as epilepsy or diabetes) that substantially limit major life activities are individuals with disabilities, even if medication controls the effects of the impairments.} [55]

2. The ADA has five titles. Title I regulates employment practices. Title II requires modifications with regard to certain public services like transportation. Title III prohibits discrimination against disabled persons with respect to goods, services, and similar items provided in places of public accommodations. Title IV concerns telecommunications services for the disabled. Finally, Title V contains miscellaneous provisions, including section 501(c), the subsection that states the relationship of the ADA to employee benefit plans.

3. Title I. Title I's basic prohibition is found in section 102(a), which prohibits discrimination against a QUID with regard to job application procedures, hiring, advancement, discharge, employee compensation, job training, and other terms, conditions and privileges of employment. ^{[56] Since an employee benefit plan is either a term or condition of employment, employee benefit plans fall within Title I.}

a. While the ADA is sometimes said to bar discrimination against the disabled, it is actually an affirmative action statute. The ADA requires employers to bear additional costs on behalf of disabled persons. This is the result of section 102(b)(5)(A), which states that prohibited discrimination includes:

"[N]ot making reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless such covered entity can demonstrate that the accommodations would impose an undue hardship on the operation of the business of such covered entity." ^[57]

b. Section 101(10) defines undue hardship as a significant difficulty or expense when considered in light of the employer's financial resources and the type of operation. ^{[58] The fact that a reasonable accommodation might equal a large percentage of the QUID's wages is not necessarily significant; rather, the cost of the reasonable accommodation is compared to the financial resources of the employer.} [59]

c. The application of Title I does not require an intent to discriminate. Section 102(b)(3) defines discrimination as utilizing standards, criteria, or methods of administration that have the effect of discrimination on the basis of disability. ^[60]

4. Section 501(c). ^{[61] The most important provision in applying the ADA to medical plans is section 501(c). This section exempts certain medical plans from the ADA. The extent of the exception is the subject of sharp debate, as explained below.}

a. Impact of the ADA on Medical Plans Absent Section 501(c).

(1) Absent section 501(c), it is unclear how the ADA would apply to medical plans. Take the simplest possible plan. It has a deductible (say $500), a co-payment ratio (say 80/20), and pays without exception all usual and customary medical charges for medically-necessary services. Despite its simplicity, if section 501(c) did not exist, this plan might violate the ADA.

Since the ADA is an affirmative action statute, an employer can be required to incur greater costs on behalf of disabled persons than other persons. In light of this, a disabled person could argue that (1) disabled persons as a group incur greater medical costs than non-disabled persons and, therefore, (2) it is necessary to have better medical plan terms for disabled persons than non-disabled persons so that both groups end up with the same out-of-pocket costs. If the average disabled person has $3,000 in annual doctor's bills, and the average non-disabled person has $2,000, the average non-disabled person will have total costs of $800 under our hypothetical plan while the disabled person will have total costs of $1,000. The disabled person must consequently be given a better medical plan (i.e., a lower deductible or higher co-payment) to be made even.

(2) Absent section 501(c), the task of applying the ADA to employee benefit plans would have been quite problematic. A comparison to the Age Discrimination in Employment Act ("ADEA") ^{[62] highlights the reason. Under ADEA, discrimination in employee benefit plans against persons over 40 is measured by asking whether equal costs or equal benefits are being provided on behalf of older persons. This approach is a dubious candidate for importation into the ADA because the cornerstone concept of the ADEA is that older persons may not be discriminated against--there is no requirement that discrimination occur in favor of older persons. In effect, almost a contrary rule exists under the ADA--discrimination in favor of the disabled is mandated in the sense that additional costs may have to be incurred on their behalf.}

(3) The Third and Sixth Circuits have held that discriminating between individuals with different disabilities is not prohibited by the ADA. Parker v. Metropolitan Life Insurance Company, 121 F.3d 1006 (6th Cir. 1997); Ford v. Schering-Plough, 1998 U.S. App. Lexis 10315 (3d. Cir. May 22, 1998). The benefit at issue in both cases was a long-term disability plan which provided two years of benefits for mental disabilities, and benefits until age 65 for physical disabilities. The Parker court reasoned that this plan is not discriminatory:

"The same policy is provided to all employees who, when they receive it, are not disabled but working. The fact that some may become disabled for different reasons does not amount to discrimination in providing the policy. The ADA simply does not mandate equality between individuals with different disabilities. Rather, the ADA... prohibits discrimination between the disabled and the non-disabled."

The Ford court used the same reasoning to reach the same result. If the analysis of the Sixth Circuit in Parker is correct, then employers apparently need not worry about benefit differentials in their medical plans. If the analysis is correct, any employer which provided the same benefit plan to all employees, whether or not disabled, would arguably not be discriminating, even if the medical plan distinguished between various conditions. ^[63]

b. Section 501(c) and Medical Benefits.

Section 501 applies to Titles I through IV of the ADA and provides as follows:

"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 subchapters I and III of this chapter."

5. Subterfuge. a.

Section 501(c) states that its exceptions should not be used as subterfuge to evade the purposes of Title I and III of the ADA. The critical question under the ADA is what constitutes a subterfuge.

(1) This conclusion is most readily seen in section 501(c)(3), the paragraph that applies in the case of a self-funded medical plan. Other than the requirement that the plan be "bona fide," section 501(c)(3) imposes no restriction on the ADA exemption. Since it seems unlikely that a typical medical plan is not "bona fide," ^{[64] if the "subterfuge" concept is interpreted narrowly, it is possible to conclude that a self-funded plan is completely exempted by the first sentence of section 501(c)(1).}

(2) From the employer's point of view, section 501(c)(2) is the applicable section in the case of an insured medical plan. Again, if "subterfuge" has a narrow meaning, section 501(c)(2) would normally provide a complete exception. To the extent a plan has differential payment provisions (no hearing aids, limits on mental illness, etc.), it is engaging in the classification of risks. Section 501(c)(2) simply requires that the risk classification not be inconsistent with state law. All this literally appears to mean is that the terms of the insurance policy must be legal under the state law. In other words, except for subterfuge, the employer's compliance burden is limited to asking its insurer whether it has lawfully issued the insurance policy. ^{[65] At least one court has held, however, that the approval of an insurance policy under state insurance law is not sufficient to satisfy section 501(c)(2). World Insurance Company v. Branch, 966 F.Supp. 1203 (N.D. Georgia 1997). The Branch case involved an insurance policy which capped benefits for HIV positive individuals at $5,000, whereas other treatments were capped at $2 million. The court held that the insurance policy violated the ADA "because there is a complete absence of evidence demonstrating that [the insurance company's] decision to cap its coverage of AIDS was based on sound actuarial principles, reasonably anticipated experience, or bona fide risk classification...."} [66]

b. The Concept of Subterfuge Under the Betts Case.

Once the analysis of section 501(c) narrows to ascertaining the meaning of the word "subterfuge," Public Employees Retirement System of Ohio v. Betts ^{[67] ("Betts") assumes great significance.}

(1) Betts, which dealt with "subterfuge" under the ADEA, contained two holdings. First, the Court reaffirmed its earlier holding in United Air Lines, Inc. v. McMann, ^{[68] that benefit plans adopted prior to the enactment of the ADEA could not be a subterfuge to evade the purposes of the ADEA. The ADA's legislative history suggests that this "grandfathering" aspect does not apply to the ADA.} [69]

(2) Betts also held that the term "subterfuge" was only meant to prohibit plan terms which had the effect of discriminating in non-fringe benefit aspects of the employment relationship. The Court found that Congress intended to exempt employee benefit plans from the coverage of the ADEA except to the extent plans were used as a subterfuge for age discrimination in other aspects of the employment relationship. c.

Applying Betts' Interpretation of Subterfuge to the ADA.

(1) Although the ADA's legislative history makes clear that Congress intended to overrule Betts' first holding, meaning that plans adopted prior to the ADA could be a subterfuge, the history is consistent with the notion that Betts' second holding--its interpretation of subterfuge for post-enactment plans--was intended to apply to the ADA. Assuming this is true, a provision in a medical plan should be considered a subterfuge, and thus a violation of the ADA, only if it discriminates in some non-fringe benefit aspect of the employment relationship. The fact that medical plans provide different or lesser benefits to disabled persons, or on account of certain disabilities, should not constitute discrimination under the ADA. So viewed, it is difficult to conceive of circumstances under which typical medical plans could be challenged.

(2) The EEOC rejects applying Betts' interpretation of "subterfuge" to the ADA. The EEOC asserts that, because the ADA's language expressly covers "fringe benefits" and the legislative history rejects the "safe harbor" for pre-ADA plans, the congressional intent was not to apply Betts to the ADA. ^[70]

(3) Judicial interpretation of the term "subterfuge" under the ADA is still in its early stages. Although several courts that have interpreted the term have rejected the EEOC Guidance, ^{[71] others appear to have implicitly accepted it.} [72] C.

EEOC's Interim Guidance on Application of the ADA to Health Plans.

1. Introduction. The EEOC's position as to whether certain exclusions and limitations violate the ADA is set forth in the EEOC Guidance.

2. Is the plan discriminatory? The EEOC Guidance uses a 2-step analysis to determine if a medical plan violates the ADA. The first step is to determine whether the plan contains a disability-based distinction. If the answer is no, then the plan does not violate the ADA. If the answer is yes, then the employer must prove that the disability-based distinction is justified.

3. Disability-based distinction. A "distinction" in a plan is any difference in the terms of benefits. Under the EEOC Guidance, a distinction is "disability-based" only if that basis can be determined by reading the medical plan. A distinction which, on its face, does not single out disabled individuals is not disability-based. This is true even if, in practice, the distinction affects disabled individuals more than non-disabled individuals. ^[73]

a. The EEOC's own example can help to illustrate this. According to the EEOC Guidance, a plan which limits the number of blood transfusions it will pay for does not contain a disability-based distinction even though this may have an adverse effect on individuals with certain disabilities. The reasoning of the EEOC Guidance is that some individuals who need blood transfusions are not disabled under the ADA. Therefore, if all blood transfusions are limited, a disability-based distinction does not exist. The seemingly obvious fact that disabled employees may have a much greater need for blood transfusion than non-disabled employees does not affect the EEOC's analysis.

b. Under the EEOC Guidance, a distinction is disability-based if it singles out a particular disability, a discrete group of disabilities, or disability in general. Another example can help to illustrate this. The EEOC Guidance states that a limitation on benefits payable for AIDS treatment is a disability-based distinction. This follows from the fact that, under the ADA, the condition of being HIV positive is always considered a disabling condition. ^{[74] Accordingly, a cap on AIDS benefits can only affect disabled individuals, and is therefore a disability-based distinction.}

c. It is important to recognize what the EEOC Guidance does not do. Perhaps the most widely-publicized requirement of the ADA is Section 102(b)(5)(A), which makes it discriminatory for an employer to fail to provide "reasonable accommodations" to employees with disabilities. ^{[75] The EEOC might conceivably have pointed to the "reasonable accommodation" requirement as a basis for requiring medical plans to contain special provisions to accommodate disabled employees. The EEOC did not do so. Accordingly, under the EEOC Guidance, medical plans need not be better for disabled employees than for non-disabled employees.}

d. As noted above, some courts have held that the ADA does not mandate equality between individuals with different disabilities. Under the analysis of the Parker court, a plan which singled out a particular disability or a discrete disability would apparently not be considered discriminatory under the ADA. 121 F.3d 1006 (6th Cir. 1997). The Sixth Circuit applied the Parker analysis to hold that a medical plan which paid for some organ transplants, but not heart transplants, was not discriminatory. Lenox v. Healthwise of Kentucky, 1998 U.S. App. LEXIS 15087 (6th Cir., July 8, 1998).

4. Is the discrimination justified? If a disability-based distinction exists, the employer still has a chance--at least in theory--to justify the existence of the distinction. As a practical matter, however, if the EEOC Guidance is correct, the game is just about over once a disability-based distinction is found. Under the EEOC Guidance, employers will find it very difficult to justify almost any disability-based distinction. The problem is that to justify a disability-based distinction, the employer must prove that it is not a "subterfuge" to evade the purposes of the ADA. Under the EEOC Guidance, employers will find it very difficult to prove that a subterfuge does not exist. The EEOC lists five non-exclusive methods by which an employer can prove that a disability-based distinction is not a subterfuge. Only one of these methods appears to have any chance of actually being used successfully by employers.

a. The first method is to prove that the plan did not have a disability-based distinction. If that were the case, of course, then there would be no need to prove that the plan in not a subterfuge. Therefore, this first method is useless.

b. The second method, also useless, is to prove that the disability-based distinction is "necessary" to ensure that the plan satisfies "commonly accepted or legally required standards for the fiscal soundness." According to the EEOC, a disability-based distinction is only "necessary" if there is no way to achieve the same result without using a disability-based distinction. For example, assume that a plan needs to reduce costs by $100,000 in order to achieve fiscal soundness. It determines that it could save $100,000 by capping AIDS reimbursements at $5,000 per participant. It is inconceivable that the same cost reduction could not be achieved by a slight reduction in reimbursements for all benefits under the plan. Accordingly, the AIDS cap would not be considered "necessary." Another problem under this second method is that standards for fiscal soundness of medical plans do not exist. In fact, medical plans rarely have any assets of their own. Benefits are almost always paid from the assets of the employer or an insurance company.

c. Under the third method, the employer proves that the disability-based distinction is necessary to avoid an "unacceptable" increase in premiums or cutback in coverage. This method is useless because it would find "unacceptable" only those premium increases or cutbacks in coverage which would make coverage unavailable to employees. If the employer foots the bill, the coverage will remain available, it will just cost the employer more. Furthermore, even if a premium increase or benefit cutback were "unacceptable," the employer must prove (as was the case for the second useless method) that the increase or cutback was "necessary." This can be done only by proving that the increase or cutback could not be avoided by a non-disability based change to the plan.

d. The EEOC's fourth method is to prove that the treatment being denied has no medical value. ^{[76] After throwing this tiny scrap to employers, the EEOC then limits its availability, making this method useless also. If the plan reimburses worthless treatments for any non-disabling conditions, then this method is not available to justify the exclusion of worthless treatments for disabling conditions.}

e. The fifth approach allows an employer to show that a distinction is not a subterfuge by showing that the per-capita cost of the disabling condition for which coverage was limited is at least as high as the per-capita cost of non-disabling conditions. Although this method may be useful, its exact application is open to a great deal of debate. As a simplified example, consider an AIDS cap of $100,000. An employer might show that one-half of one percent of its population is expected to contract AIDS. The per capita cost would therefore be $500. If the employer could show that the per-capita cost of each other condition covered by the plan was less than $500, the AIDS cap would not be a subterfuge.

(1) The most obvious problem with this method is how to define the "conditions" with which the AIDS cap would be compared. For example, if the AIDS cap were compared to the "condition" of cancer, with an average cost of $600, the plan in the example would be a subterfuge. However, if the AIDS cap were compared to the "conditions" of skin cancer ($200), lung cancer ($200) and breast cancer ($200), the plan would not be a subterfuge.

5. The EEOC Guidance also states that other, unspecified, methods might be used to show that a subterfuge does not exist. It will remain to be seen if other useful methods emerge. Whatever method is used, the EEOC Guidance states that the burden of proof is on the employer. D.

Interpretations of the EEOC Guidance.

1. The EEOC Guidance is too strict. As discussed above, under the EEOC Guidance it is very difficult for an employer to prove that a disability-based distinction is not a subterfuge. Some courts have rejected the approach of the EEOC Guidance as too strict. In Piquard v. City of East Peoria, after an analysis of Betts, the EEOC Interim Guidance, and the ADA's legislative history, the district court rejected the EEOC's interim policy definition of "subterfuge" and instead partially adopted the Betts' interpretation. ^[77]

a. The court thus held that the subterfuge sentence of section 501(c) means that a disability-based distinction in a benefit plan that is consistent with state law and is based on underwriting, classifying, or administering risks may not be used to discriminate in non-fringe benefit areas of employment.

(1) Thus, a disability-based distinction in a benefit plan violates the ADA only if it discriminates in some non-fringe benefit aspect of the employment relationship. ^[78]

(2) The court declined to determine whether subterfuge under the ADA includes Betts' intent requirement or shifting of the burden of proof to the plaintiff.

b. The district court adopted Betts' interpretation of subterfuge, requiring the discrimination to affect some non-fringe benefit aspects, because:

(1) otherwise section 501(c)(1)-(3) would be rendered nugatory;

(2) the example given by the House and Senate reports supports this interpretation (prohibiting an employer from refusing to hire an individual because its current insurance plan doesn't cover the person's disability); and

(3) any legislative history suggesting Betts should not apply to the ADA is only in regard to the intent requirement (discrimination need not be malicious intent) and applicability to pre-ADA plans.

c. The district court rejected the EEOC argument that, because the ADA expressly covers fringe benefits, Betts is inapplicable. Instead, the court found that the ADA's prohibition on discrimination in fringe benefits applies to those benefit plans that do not qualify under the exceptions in Sections 501(c)(1)-(3).

Under Betts, "subterfuge" has a much different and narrower meaning than the meaning suggested by EEOC. If other courts follow Piquard and apply the Betts' definition of subterfuge under the ADA, it will be unnecessary to worry about whether a disability-based distinction exists. Instead, any plan which does not discriminate in some non-fringe benefit aspect of the employment relationship will be exempt from the ADA. The Third, Sixth, Eighth and DC Circuits have adopted the narrow definition of subterfuge found in Betts. ^[79]

2. The EEOC Guidance is too lenient. The EEOC's position appears to be that the ADA prohibits only disparate treatment in medical plans. Under the EEOC Guidance, a distinction in a plan is not disability-based, no matter how much it affects disabled persons, so long as any non-disabled person could also be affected. This approach contradicts the statutory provisions of the ADA and its legislative history. Section 102(b)(3)(A) of the ADA prohibits the utilization of standards or criteria "that have the effect of discrimination. . . ." ^{[80] The legislative history states that this provision "incorporates a disparate impact standard."} [81] So, if a court accepts the concept that a disability-based distinction warrants special scrutiny, there is a real risk the court may expand the concept beyond the EEOC's limited definition.

3. The correct standard? The problem with conceding that plan provisions which have a disparate impact can constitute discrimination under the ADA is that no obvious limit on such cases exists. The ADA's legislative history states that the ADA should be interpreted in accordance with a United States Supreme Court case, Alexander v. Choate. ^{[82] The Alexander Court set forth only the fuzziest of standards: a disabled individual must be provided with "meaningful access" to the benefit. Under this standard, a facially-neutral standard that has such an adverse impact that it denies meaningful access would be discriminatory. The "meaningful access" test would of course be open to endless debate.}

4. Even if the courts expand the scope of the ADA beyond the EEOC's view, it would appear that punitive damages should not be available against an employer which satisfies the EEOC Guidance.

Chapter III. SPECIFIC PLAN PROVISIONS.

A typical medical plan contains a series of limitations or exclusions for various types of treatments. Although the EEOC Guidance may not be correct, it is fairly easy to apply to the common limitations and exclusions. Since private plaintiffs are not likely to feel constrained by the EEOC Guidelines, challenges by private plaintiffs are also discussed below.

A. Preexisting Conditions.

1. Plans often limit coverage for conditions which existed at the time an employee became a participant in the plan. Typically, such a limitation applies to any preexisting condition. This type of broad-based limitation satisfies the EEOC Guidance: although it contains a distinction, it is not disability-related. A narrower limitation, however, which excludes only certain specific preexisting conditions, may not satisfy the EEOC Guidance. The EEOC uses the example of a preexisting condition clause which excludes treatments for preexisting "blood disorders," but which does not limit treatment for other preexisting conditions. Under the EEOC Guidance, the exclusion of preexisting blood disorders is a disability-related distinction. Accordingly, such a clause violates the ADA, unless the employer can prove that it is not a "subterfuge."

& 2. nbsp; Although a broad-based preexisting condition clause satisfies the EEOC Guidance, it is not invulnerable to attack from a private plaintiff. A private plaintiff may argue that a preexisting condition clause results in discrimination against disabled individuals because disabled individuals are more likely to have a preexisting condition than non-disabled individuals. B.

Mental Health Limits.

1. Most health plans have a much lower limit on benefits for mental conditions than for physical conditions. For example, a plan with a $1 million lifetime maximum benefit may have only a $30,000 lifetime maximum benefit for mental health conditions. Typically, expenses related to drug and alcohol abuse are considered part of the mental health limits. The EEOC Guidance expressly states that the distinction between lifetime maximum mental and physical benefits does not violate the ADA because it is not based on disability. ^[83]

2. It is likely that a broad limitation on mental health benefits will also stand up to a challenge by an employee. In Modderno v. King, a case governed by the Rehabilitation Act, the D.C. Circuit Court of Appeals held that a $75,000 limitation on mental health benefits was not a violation, even though there was no similar limitation on benefits for physical illnesses. ^{[84] Modderno is valid authority under the ADA because the Rehabilitation Act was amended in 1992 to incorporate the standards of several sections of the ADA.}

a. The Modderno court reasoned that the limitation on mental health benefits was valid under the Section 501(c) safe harbor so long as it wasn't a subterfuge. The court adopted the Betts definition of subterfuge and found that the limitation could not be a subterfuge since it was adopted prior to the 1992 amendment importing the ADA standard. In so finding, the Modderno court ignored the portion of the ADA's legislative history that suggests a plan is not immune from charges of discrimination simply because it was adopted prior to the enactment of the ADA. However, a court that adopted the Betts definition of subterfuge could abide by the legislative history and still find that a limit on mental health benefits does not violate the ADA because such a limitation does not discriminate in any non-fringe benefit aspect of the employment relationship. ^[85]

b. Nonetheless, an employee can likely show that disabled individuals are in greater need of mental health benefits than non-disabled individuals. If an employee convinces a court that this disparate impact results in discrimination, then it would be up to the employer to prove that there was no subterfuge. This will be almost impossible if the Court adopts the EEOC interpretation of subterfuge.

c. In Parker v. Metropolitan Life Insurance Company, the Sixth Circuit held that a plan which distinguishes between mental and physical disabilities did not violate the ADA. The court noted the Modderno case and the subterfuge analysis, but relied on its reasoning that the ADA does not mandate equality between different disabilities. ^{[86] Accordingly, under the Sixth Circuit's analysis, there was no need to examine the subterfuge question.}

3. Specific limits on drug and alcohol treatment programs deserve special attention. The ADA contains specific provisions concerning the use of drugs and alcohol. ^{[87] Although alcoholics and those who have completed a drug rehabilitation program and are no longer using illegal drugs are considered disabled under the ADA, current drug users are generally not protected by the ADA. Thus, an employer may terminate an employee who is currently using illegal drugs, prohibit the use of drugs or alcohol while on the job, and hold alcoholics and drug addicts to the same performance standards as other employees. Under these provisions, the broad limits on expenditures for drug and alcohol treatment programs that are typically contained in health plans are apparently permissible. Furthermore, a plan apparently could specifically exclude from coverage treatment programs designed for current drug users. But a specific exclusion of treatment programs for alcoholism would apparently be a disability-based distinction. Finally, if a plan does allow reimbursement for drug rehabilitation programs, an individual who is currently using drugs may not be denied access. C.}

Experimental Treatments.

1. The EEOC Guidance states that a broad-based exclusion of coverage for all experimental drugs or treatments is not a disability-based distinction. Experimental treatment limitations are often used to exclude coverage of very expensive treatments that are used in desperate, life or death situations. Presumably, in all or virtually all such situations, a person seeking an experimental treatment would be considered disabled under the ADA. For that reason, a limitation on experimental treatments appears to stretch to the limits the EEOC's theory that disability-based distinctions can be found only under the terms of a plan, rather than in their application.

2. Limitations on experimental treatments, however, have been successfully challenged by some employees. The Eighth Circuit indicated in Henderson v. Bodine that if a plan covers "experimental" treatments for some conditions, the ADA may require the plan to provide that treatment for other similar conditions. ^{[88] The court's reasoning suggests that the battle ground surrounding the exclusion of experimental treatments will center on whether a particular treatment is experimental or accepted for a given condition. The court, however, did not analyze the meaning of subterfuge--it simply accepted the meaning assigned to the word by the EEOC. Courts that analyze and resolve the meaning of subterfuge differently may hold that limitations on experimental treatments are permissible, so long as such limitations do not discriminate against an employee in any non-fringe benefit aspect of the employment relationship.}

a. In Henderson, the court entered a preliminary injunction requiring the plaintiff's health benefit provider to assure a hospital of payment for the costs of expensive, high-dose chemotherapy ("HDCT") that might be used to treat the plaintiff's breast cancer. The plaintiff's health policy covered HDCT only for specifically listed cancers. Breast cancer was excluded, and the plaintiff alleged discrimination based on her cancer type.

b. The court found that if the plaintiff could show that HDCT is a non-experimental treatment--"that is, if it is widespread, safe, and a significant improvement on traditional therapies," and that the plan provides the treatment for other conditions directly comparable to the one at issue, then the denial of treatment arguably violates the ADA.

c. Apparently accepting the EEOC's definition of subterfuge, the court noted that if HDCT is an accepted treatment for breast cancer, and if Bodine covers HDCT for other cancers for which it is an accepted treatment, denying HDCT treatment for breast cancer is discrimination based on disability type. ^{[89] The court, however, never undertook an independent analysis of the meaning of subterfuge, nor did it consider the meaning given to the word by the Supreme Court in Betts.}

3. The Bodine Court's approach was questioned by a district court in Hilliard v. BellSouth Medical Assistance Plan. ^{[90] The court in Hilliard refused to issue an injunction requiring a medical assistance plan to provide insurance coverage for high dose chemotherapy with peripheral stem cell rescue ("HDC/PSCR"). Rather than focusing on whether the treatment was experimental or whether the exclusion constituted a disability-based distinction, the court focused on whether the treatment was covered under the terms of the plan.}

a. The court rejected analogies to Bodine, claiming that Bodine turned on the question of whether HDCT was an experimental treatment. According to the court, in the instant case, it did not matter whether the treatment was experimental. Since the plan covered HDC/PSCR only for three specifically listed conditions--and the plaintiff's multiple myeloma wasn't one of those listed conditions--HDC/PSCR was not covered for that condition.

b. According to the court, to prove an ADA violation, the plaintiff needed to show that the adverse action was taken because of the disability. The plaintiff was unable to do this because the defendant had limited coverage of HDC/PSCR before the defendant was diagnosed. Since the court erroneously disposed of the ADA claim on this basis, ^{[91] it did not consider whether or not the exclusion of HDC/PSCR for plaintiff's cancer-type was a disability-based distinction, and if so, whether it constituted a subterfuge.}

c. The court did note, however, that the plaintiff had not shown that multiple myeloma should be treated like the three specifically listed conditions. Presumably, this means that the plaintiff did not show that HDC/PSCR is a non-experimental treatment for multiple myeloma. If plaintiff had done so, and the court had not required a showing of intentional discrimination, the court may have found that the plan contained a disability-based distinction. Then, the court would have been forced to interpret subterfuge. D.

Caps On Expenses For Specific Conditions.

1. AIDS or HIV Infection.

a. The most talked-about example of a cap on expenses for a specific condition is a cap on expenses related to AIDS. HIV infection and AIDS are disabilities under the ADA, at least for individuals who can credibly claim that the infection limits their ability to reproduce. ^{[92] Under the EEOC Guidance, caps on specific illnesses that are disabling are disability-related distinctions. Accordingly, any such distinction, including an AIDS cap, violates the ADA unless the employer shows that the distinction is not a subterfuge to avoid the purposes of the ADA. As noted above, the meaning of "subterfuge" is likely to be argued in the courts for years to come.}

b. The EEOC has been extremely aggressive in challenging caps on expenses related to AIDS. As a result, although no court has decided whether the ADA allows self-insured companies to cap the health benefits provided to workers with AIDS, ^{[93] AIDS caps are rarely found in benefit plans.}

1) In December, 1995, the EEOC reached a $1 million settlement with the Mason Tenders District Council Welfare Fund over a claim that the Fund was violating the ADA by refusing to cover AIDS-related illnesses. ^{[94] The Fund had argued throughout the lawsuit that it was protected by Section 501(c) because it had actuarial reasons for making a disability-based distinction; the Fund argued that it had to limit AIDS benefits because of losses from huge healthcare bills and a dearth of construction work. The EEOC countered this argument by noting that the Fund provided coverage for many other high-priced conditions.} [95]

2) A federal district court judge approved a consent order in EEOC v. Tarrant Distributors in October, 1994, in which an employer voluntarily dropped a $10,000 lifetime cap on benefits related to AIDS and HIV. ^{[96] Under the consent order, Tarrant agreed to ensure all employees and dependents with AIDS or HIV will receive equivalent coverage as plan participants without the condition. Tarrant also agreed to pay $40,000 of a plan participant's medical bills, to donate $20,000 to AIDS research, and to file annual reports with the EEOC for five years. The order also found that ERISA does not preempt the prohibition of discrimination under the ADA or Title VII of the Civil Rights Act of 1964.} [97]

2. Infertility

a. Unlike AIDS caps, exclusions on benefits for fertility treatments are very common. Under the analysis provided in the EEOC Guidance, an exclusion of benefits for fertility treatments violates the ADA if (a) infertility is a disability under the ADA, (b) the exclusion of fertility treatments is a disability-based distinction, and (c) the distinction is not protected by 501(c).

(1) The EEOC has not spoken to whether someone with an infertility problem is disabled under the ADA. However, since the ADA's legislative history indicates that HIV infection is a disability because it limits the major life activity of procreation (a view confirmed by the Supreme Court in Bragdon v. Abbott) ^{[98] , it can be argued that a person with a fertility problem is disabled under the ADA.}

(2) Under the EEOC Guidance, caps on specific illnesses that are disabling are disability-related distinctions. Thus, if infertility is a disability, the exclusion of fertility treatments violates the ADA unless the employer shows the distinction is not subterfuge.

(3) Based on the EEOC's definition of subterfuge, such an exclusion violates the ADA unless the exclusion is justified by the risks or costs associated with infertility.

b. In Krauel v. Iowa Methodist Medical Center, (a pre-Bragdon case) the court found that the exclusion of benefits for fertility treatments does not violate the ADA. ^[99]

(1) Although the ADA's legislative history suggests that procreation is a major life activity, courts had disagreed on this. ^{[100] In Krauel, the court found that reproduction is not a major life activity and thus infertility is not a disability under the ADA. However, since that decision, the Supreme Court declared in Bragdon v. Abbott, that reproduction is a major life activity.} [101]

(2) In Krauel, the court held that even if infertility was a disability under the ADA, the exclusion of fertility treatments was not a disability-based distinction. ^{[102] The court reasoned that both cancer--a disability, and age--a condition not recognized as a disability, can cause infertility. Thus, the exclusion of fertility treatments could affect disabled and non-disabled. Since the Bragdon decision was about HIV, the issue of whether the exclusion of fertility treatments is a disability-based distinction remains open.}

(3) The Krauel Court also rejected the EEOC's definition of subterfuge. Instead, the court adopted the definition given to the word by the Supreme Court in Betts and found that the exclusion could not be a violation of the ADA since the employer didn't discriminate against the employee in any non-fringe aspect of the employment relationship.

c. Although the only court to rule on the issue has found that the exclusion of fertility treatments does not violate the ADA, individuals suffering from infertility are likely to continue challenging these exclusions, hoping that other courts will resolve the crucial issues differently.

3. Cosmetic or Elective Surgery.

a. Limitations on cosmetic or elective surgery should be safe from attack under the ADA. Although severe disfigurement can be a disability under the ADA, in most instances the conditions which would be treated by cosmetic or elective surgery would not constitute disabilities under the ADA. Accordingly, limitations on cosmetic or elective surgery would not be considered disability-based distinctions under the EEOC Guidance.

b. Sex change operations can also be put in this category. Under the ADA, transsexualism is not considered a disability. Accordingly, medical plans can safely exclude sex change operations from coverage.

4. Prescription Drugs.

a. Medical plans typically have separate limits for the reimbursement of prescription drug expenses. Such separate limits appear to be safe. Under the EEOC Guidance, a general restriction on reimbursement for prescription drugs would not be a disability-based distinction, since prescription drugs are used by both disabled and non-disabled individuals. Furthermore, a general limit on prescription drug reimbursements would not appear to provide a worrisome basis for a lawsuit by an individual plaintiff.

b. If the plan limits reimbursements for specific drugs, however, disability discrimination may result. The easiest example to understand is a restriction on reimbursement for AZT, which is a drug used virtually exclusively by HIV-positive individuals. As noted above, the condition of being HIV-positive is considered to be disabling. Accordingly, a limitation which specifically applied to AZT would be a disability-based distinction. The limitation could be justified only by showing it is not a subterfuge.

5. Dental Benefits. Most medical plans exclude dental benefits, other than for treatments required as a result of an injury. A limitation on dental benefits would not be considered a disability-related distinction, and should therefore pass muster under the EEOC Guidance. Limitations on dental benefits do not appear to be a likely source of lawsuits by individuals. 6.

Eye Care.

a. Under the EEOC Guidance, an exclusion or limitation on eye care coverage is permissible. Since most people with poor vision are not disabled under the ADA, ^{[103] a limitation on benefits for eye care is not a disability-based distinction. Thus, such a limitation is likely to withstand a lawsuit by a private plaintiff.}

b. But employers should carefully draft eye care limitations. The EEOC Guidance endorses plans that exclude or limit all eye care. If instead, a plan generally pays for eye care, but limits payment for correction of disabling vision conditions, it may be subject to attack, even under the EEOC Guidance. The employer would then be required to justify the plan by showing it is not a subterfuge. 7.

Hearing Aids.

a. Many plans exclude the reimbursement of expenses for hearing aids. The EEOC Guidance does not specifically address such exclusions. However, the EEOC Definition notes that an individual who uses a hearing aid to correct a slight hearing impairment may not have a disability under the ADA. ^{[104] Since an exclusion on hearing aid expenses might therefore affect both disabled and non-disabled individuals, such a plan may not be discriminatory under the EEOC Guidance. Despite that reasoning, the EEOC on April 30, 1997, filed suit against Hertz Corporation, claiming that a $150 limit on benefits paid for hearing aids contained in the Hertz medical plan is discriminatory. BNA Pension and Benefits Reporter, Vol. 24, page 1104 (May 5, 1997).}

b. An exclusion on the reimbursement of hearing aids, however, illustrates that even if employers comply with the EEOC Guidance, they may still be subject to attack by private plaintiffs. Unlike eye cases, where courts find that most people who need glasses are not disabled, it is much more likely that a court will find someone who uses a hearing aid disabled under the ADA. ^{[105] Thus, a court may find that the exclusion of expenses for hearing aids is a disability based distinction and find such a plan discriminatory. An easy solution to this problem is not apparent. Although exclusions for "eye care" are common, most employers probably would not want to exclude coverage of "ear care" in their plans. Accordingly, employers wishing to exclude reimbursement for hearing aids may need to show that the exclusion does not constitute a subterfuge.}

8. Speech Therapy. Some plans explicitly exclude treatment for speech therapy. It is a close call as to whether such an exclusion satisfies the EEOC Guidance. If it were shown that some non-disabled persons use speech therapy--perhaps for minor, non-disabling speech defects--then the exclusion might not be a disabling condition. One would presume, however, that the vast majority of speech defects constitute disabilities, which would make the exclusion discriminatory. Again, the employer could justify the exclusion by showing that it is not a subterfuge.

9. Podiatry Benefits. Certain plans exclude podiatry benefits. For example, the plan may specify that there is no reimbursement for orthopedic shoes. Under the EEOC Guidance, such an exclusion should not be considered disability-based. Both disabled individuals and non-disabled individuals might be in need of podiatry benefits and orthopedic shoes. The contrast with the hearing aids example can illustrate the point. It is difficult to conceive of a situation in which an individual who needs a hearing aid would not be considered disabled. By contrast, orthopedic shoes might be prescribed for a variety of non-disabling conditions, such as flat feet.

10. Weight Loss Treatment and Programs. The EEOC's inclusion of severe obesity in its definition of impairment creates the question of whether a plan can exclude benefits for weight loss programs. In Cook v. Rhode Island, Dept. of Mental Health, Retardation and Hospitals, ^{[106] the First Circuit Court of Appeals upheld a $100,000 jury verdict to a woman fired because her employer thought her obesity would prevent her from doing her job. Presumably, however, the exclusion of weight loss treatments would not constitute a disability-based distinction because both disabled (i.e., severely obese) and non-disabled (i.e., mildly obese) participants would be affected. E.}

Recommendations.

1. It is possible to rephrase a restriction on medical benefits so that it is less likely to constitute a disability-based distinction under the ADA. For example, an exclusion on benefits for a specific pre-existing condition might be changed into a restriction on benefits for all pre-existing conditions. If a plan can be shown to satisfy the EEOC Guidance, the chances that a company will become the target of a lawsuit brought by the EEOC itself are obviously reduced. Furthermore, although compliance with the EEOC Guidance does not assure victory in a lawsuit brought by an employee, compliance should protect a company against punitive damages.

2. For most employers, the medical plan is the most expensive benefit. It is often also the most important benefit to employees. Medical plans, however, are often not as carefully drafted as other employee benefit plans. Medical plans are often vague or out of date, and sometimes fail to take advantage of defenses which may exist. For example, the United States Supreme Court's Firestone ^{[107] decision permits employers to exercise discretion in interpreting their plans, subject to only a limited review by the courts, but only if the right of discretion is explicitly reserved in the plan document.}

3. Employers should review their medical plans to ensure all available steps have been taken to protect their plans from attack under the ADA.

^{[83] EEOC Compliance Manual ¶ 6902 (CCH) (March, 1995).}

Notes:

^{[ [1] ]} 42 U.S.C. § 12101 et seq. Return to Text

^{[2] 42 U.S.C. § 12112. Return to Text}

^{[3] Appendix § 1630.8 to ADA regulations issued by the Equal Employment Opportunity Commission (29 C.F.R. § 1630). Return to Text}

^{[4] 29 C.F.R. § 1630.8. Return to Text}

^{[5] 42 U.S.C. § 12102(2)(A). Return to Text}

^{[6] 42 U.S.C. § 12102(2)(B). Return to Text}

^{[7] 42 U.S.C. § 12102(2)(C). Return to Text}

^{[8] Christian v. St. Anthony Medical Center, Inc., 117 F.3d 1051 (7th Cir. 1997). Return to Text}

^{[9] The EEOC's guidance is given to its investigators in a document labeled "Compliance Manual Section 902: Definition of the Term 'Disability'" ("EEOC Definition"). EEOC Compliance Manual (CCH) ¶ 6880-6889 (March, 1995). Return to Text}

^{[10] Unless otherwise stated, all definitions and explanations in Section C are drawn from the EEOC Definition. Return to Text}

^{[11] 29 C.F.R. § 1630.2(i). Return to Text}

^{[12] An examination of the judicial treatment of the impairments the EEOC considers disabling reveals that courts sometimes disregard EEOC Guidance. With respect to insulin-dependent diabetes, see Chandler v. City of Dallas, 2 F.3d. 1385, 1391 (5th Cir. 1993) (holding that individual with insulin-dependent diabetes was not "handicapped" under Rehabilitation Act when individual did not consider his diabetes to be a substantial limitation on his major life activities); Coghlan v. H.J. Heinz Co., 851 F. Supp. 808, 813 (N.D. Tex. 1994) (holding that insulin-dependent diabetes is not per se a disability under ADA). With respect to HIV infection, the courts had disagreed. Compare Doe v. Kohn Nast & Graf, P.C., 862 F. Supp. 1310, 1321 (E.D. Pa. 1994) (holding that an asymptomatic HIV-positive person is disabled under the ADA) with Ennis v. National Ass'n of Business and Educ. Radio, Inc., 53 F.3d 55, 60 (4th Cir. 1995) and Runnebaum v. Nationsbank, 1997 U.S. App. LEXIS 21615 (4th Cir. August 15, 1997) (declining to conclude that HIV-positive status is per se a disability). But the Supreme Court in Bragdon v. Abbott, 118 S. Ct. 2196 (1998), decided that reproduction is a major life activity and that even asymptomatic HIV infection substantially limits reproduction. Bragdon leaves open the question of whether asymptomatic HIV infection is a disability in individuals who would not intend to reproduce, even if they were not infected. Return to Text}

^{[13] Appendix § 1630.2(j). Return to Text}

^{[14] 42 U.S.C. § 12210(a); 29 C.F.R. § 1630(a). Return to Text}

^{[15] 42 U.S.C. § 12211(a); 29 C.F.R. § 1630.3(e). Return to Text}

^{[16] 42 U.S.C. § 12208. Return to Text}

^{[17] Appendix § 1630.2(k). Return to Text}

^{[18] See, e.g., Daley v. Koch, 892 F.2d 212, 214 (2d Cir. 1989) (applicant's personality traits of poor judgment and impulse control, and irresponsible behavior do not constitute impairments). Return to Text}

^{[19] S. Rep. No. 116, 101st Cong., 1st Sess. 22 (1989); H.R. Rep. No. 485 pt. 2, 101st Cong., 2d Sess. 51-52 (1990). Return to Text}

^{[20] 29 C.F.R. pt. 1630 app. § 1630.2(h). Return to Text}

^{[21] Appendix § 1630.2(h). Return to Text}

^{[22] 42 U.S.C. § 12111(8). See also, Mannell v. American Tobacco Co., 871 F. Supp. 854 (E.D. Va. 1994) (holding that an individual must be a QUID for the specific job at issue). Return to Text}

^{[23] 42 U.S.C. § 12111(9). Return to Text}

^{[24] See, e.g., Tyndall v. National Educ. Ctrs., 31 F.3d 209, 213 (4th Cir. 1994); Carr v. Reno, 23 F.3d 525, 529 (D.C. Cir. 1994); Sawinski v. Bill Currie Ford, Inc., 881 F. Supp. 1571 (M.D. Fla. 1995). Return to Text}

^{[25] See also Erwin v. Northwestern Mutual Life Ins. Co., 1998 WL 154627 (S.D. Ind. 1998) (follows CNA--benefit recipient is not a job) and Bril v. Dean Witter, Discover & Co., 986 F.Supp. 171 (S.D.N.Y. 1997) (totally disabled cannot be a QUID). Return to Text}

^{[26] See Ford v. Schering-Plough Corp., 1998 WL 258386, at *5 (3rd Cir. 1998). Return to Text}

^{[27] See Lewis v. Aetna Life Ins. Co., 982 F.Supp. 1158, 1162 (E.D.Va. 1997). Return to Text}

^{[28] See Violette v. IBM, 762 F. Supp. 446 (D.Vt. 1996), aff'd, 116 F.3d 466 (2nd Cir. 1997) and McNemar v. Disney Stores, Inc., 91 F.3d 610 (3rd Cir. 1996). Return to Text}

^{[29] See Swanks v. Washington Metro Area Transit Auth., 116 F.3d 582 (D.C. Cir. 1997) and Blanton v. Inco Alloys International, Inc., 108 F.3d 104 (6th Cir. 1997). Return to Text}

^{[30] See Cleveland v. Policy Management Sys. Corp., 120 F.3d 513 (5th Cir. 1997); McConathy v. Dr. Pepper/Seven Up Corp., 131 F.3d 558 (5th Cir. 1998). Return to Text}

^{[31] See Weigel v. Target Stores, 122 F.3d 461 (7th Cir. 1997); McCreary v. Libbey-Owens-Ford Co., 132 F.3d 1159 (7th Cir. 1997). Return to Text}

^{[32] See Dush v. Appleton Elec. Co., 124 F.3d 957 (8th Cir. 1997); Moore v. Payless Shoe Source, Inc., 139 F.3d 1210 (8th Cir. 1998); Downs v. Hawkeye Health Serv., 1998 WL 348201 (8th Cir. 1998). Return to Text}

^{[33] See Johnson v. Oregon Dep't of Human Resources, 141 F.3d 1361 (9th Cir. 1998). Return to Text}

^{[34] See Smith v. Midland Brake Inc., 138 F.3d 1304 (10th Cir. 1998); Rascon v. US West Communications, Inc., 143 F.3d 1324 (10th Cir. 1998); Aldrich v. Boeing Co., 1998 WL 351034 (10th Cir. 1998). Return to Text}

^{[35] See Talavera v. School Bd. of Palm Beach County, 129 F.3d 1214 (11th Cir. 1997); Taylor v. Food World, Inc., 133 F.3d 1419 (11th Cir. 1998). Return to Text}

^{[36] See, e.g., McCreary v. Libbey-Owens-Ford Co., 132 F.3d 1159, 1164-65 (7th Cir. 1997). Return to Text}

^{[37] 42 U.S.C. § 12111-12117. Return to Text}

^{[38] 42 U.S.C. § 12111(2). Return to Text}

^{[39] 29 C.F.R. app. § 1630.6. Return to Text}

^{[40] Anderson v. Gus Mayer Boston Store, 924 F. Supp. 763 (E.D. Tex. 1996) (holding that employer violates ADA by selecting a group insurer that refuses to extend coverage to an employee with a disability because of that disability, unless the employer makes provisions for the excluded individual to receive comparable health insurance). Return to Text}

^{[41] 37 F.3d 12 (1st Cir. 1994). Return to Text}

^{[42] Kotev v. First Colony Life Ins., 927 F. Supp. 1316, 1322 (C.D. Cal 1996). Return to Text}

^{[43] Id. at 1322 (noting that discrimination prohibited by Title III includes: the imposition or application of eligibility criteria that screen out or tend to screen out an individual with a disability; a failure to make reasonable modifications in policies, practices, or procedures, etc.); see also Chabner v. United of Omaha Life Ins. Co., 994 F.Supp. 1185, 1192-93 (N.D. Cal. 1998); Lewis v. Aetna Life Ins. Co., 982 F.Supp. 1158, 1164 (E.D. Va. 1997); Doe v. Mutual of Omaha Ins. Co., 1998 WL 166856 at *3 (N.D. Ill. 1998). Return to Text}

^{[44] Baker v. Hartford Life Ins., No. 94-C4416, 1995 WL 573430 at *3 (N.D. Ill. 1995); Lewis v. Aetna Life Ins. Co., 982 F.Supp. 1158, 1165 (E.D. Va. 1997). Return to Text}

^{[45] The same result was reached in Lenox v. Healthwise of Kentucky, Ltd., 1998 WL 374754 (6th Cir. 1998) (citing Parker); Leonard F. v. Israel Discount Bank of New York, 767 F.Supp. 802 (S.D.N.Y. 1997); Pallozzi v. Allstate Life Ins. Co., 1998 WL 139410 (N.D.N.Y 1998) (citing Leonard F.); Ford v. Schering-Plough Corp., 1998 WL 258386 (3rd Cir. 1998) (employment is covered by Title I); Erwin v. Northwestern Mutual Life Ins. Co., 1998 WL 154627 (S.D.Ind. 1998) (an employer insurance plan is neither public nor a physical place). Return to Text}

^{[46] 5 NDLR 341 (N.D. Ill. Sept. 12, 1994). Return to Text}

^{[47] Id. But see, Ehret v. Louisiana, 862 F. Supp. 1546 (E.D. La. 1992) (requiring a direct employer/employee relationship in context of ADEA). Return to Text}

^{[48] 55 F.3d 1276, 1279 (7th Cir. 1995). Return to Text}

^{[49] Id. at 1282 (holding that no individual liability exists under the ADA). See also, Miller v. Maxwell's Int'l Inc., 991 F.2d 583, 587-88 (9th Cir. 1993) (holding that no individual liability exists under ADEA and Title VII), cert. denied, 114 S.Ct. 1049 (1994). Return to Text}

^{[50] Civil Rights Act of 1991 § 102, Pub. L. No. 102-166. Return to Text}

^{[51] 946 F.2d 401 (5th Cir. 1991). Return to Text}

^{[52] 42 U.S.C. § 12102(2). Return to Text}

^{[53] For example, the term is said to include orthopedic, visual, speech, and hearing impairments, cerebral palsy, epilepsy, muscular dystrophy, multiple sclerosis, HIV infection, cancer, heart disease, diabetes, mental retardation, emotional illness, and specific learning disabilities. S. Rep. No. 116 at 22. Return to Text}

^{[54] See S. Rep. No. 116 at 23; EEOC Definition at ¶ 6886. Return to Text}

^{[55] Id. Despite the EEOC's directive to ignore mitigating measures when determining whether a disability exists, courts do not apply this reasoning to corrective lenses used to improve vision. See, e.g., Chandler v. City of Dallas, 2 F.3d 1385, 1390 (5th Cir. 1993) (holding that vision that can be corrected to 20/60, or even 20/200, does not render an individual disabled under Rehabilitation Act) cert. denied, 114 S.Ct. 1386 (1994); Sweet v. Electronic Data Systems, Inc., 1996 WL 204471 (S.D. N.Y. 1996) (holding that vision correctable to 20/20 in one eye and 20/80 in the other does not qualify as a disability because it does not substantially limit any major life activity). Courts reason that the ADA only protects individuals with impairments "significantly more severe than those encountered by the average person in every-day life" and that physical or mental limitations that are both minor and commonplace do not constitute disabilities under the ADA. Sweet, 1996 WL 204471 at *3. Since the need for eyeglasses is "minor" and "widely shared," such a need does not constitute a disability under the ADA. Joyce v. Suffolk County, 911 F. Supp. 92, 96 (E.D. N.Y. 1996). Return to Text}

^{[56] 42 U.S.C. § 12112(a). Return to Text}

^{[57] 42 U.S.C. § 12112(b)(5)(A). Return to Text}

^{[58] 42 U.S.C. § 12111(10). Return to Text}

^{[59] Some courts, however, have interpreted undue hardship in relation to both the employer's resources and the benefits of the accommodation to the disabled worker. Under such an interpretation, courts find an accommodation constitutes an undue hardship if the cost is excessive in relation to either the benefits of the accommodation or the employer's financial health. See, Vande Zande v. Wisconsin Dept. of Admin., 44 F.3d 538, 543 (7th Cir. 1995). Return to Text}

^{[60] The report of the House Committee on Education and Labor states that this language prohibits discrimination which is measured solely by disparate impact. H.R. Rep. No. 485 at 61. See also, Helen L. v. DiDario, 46 F.3d 325 (3d Cir. 1995) (determining that discrimination need not be intentional or overt). Return to Text}

^{[61] 42 U.S.C. § 12201(c). Return to Text}

^{[62] 42 U.S.C. § 621 et seq. Return to Text}

^{[63] Most courts have reached the same result as in Parker. See the discussion infra on mental health limits. Return to Text}

^{[64] See Piquard v. City of East Peoria, 887 F.Supp. 1106, 1120 (C.D. Ill. 1995) (holding that benefit plan is "bona fide" if it exists and pays benefits). Return to Text}

^{[65] State law could, in a particular case, be a significant limitation--the ADA specifically states that it does not bar more stringent state laws; if a state law required all insurance policies to affirmatively cover certain risks, this would appear to be legal. Similarly, if a state law paralleled the ADA but lacked an exception comparable to §501(c), the more broad-reaching state law would supplant the federal law. Return to Text}

^{[66] Other courts have followed Branch, e.g. Lewis v. Aetna Life Ins. Co., 982 F.Supp. 1158 (E.D. Va. 1997); Pallozzi v. Allstate Life Ins. Co., 998 F.Supp. 204 (N.D.N.Y. 1998); Doe v. Mutual of Omaha Ins. Co., 999 F.Supp. 1188 (N.D. Ill. 1998); Chabner v. United of Omaha Life Ins. Co., 994 F.Supp. 1185 (N.D. Cal 1998) (each holding that there must be some actuarial justification in order for a plan not to be considered a subterfuge). Return to Text}

^{[67] 492 U.S. 158 (1989). Return to Text}

^{[68] 434 U.S. 192 (1977). Return to Text}

^{[69] The Senate Report states that subterfuge is to be determined "regardless of the date an insurance or employee benefit plan was adopted." S. Rep. No. 116 at 85. See also, 29 C.F.R. § 1630.16(f) app. At least one court, however, has ignored this legislative history and held that a provision in a mental health plan that was adopted before the ADA could not be a subterfuge. See discussion of Modderno v. King, 82 F.3d 1059 (D.C. Cir. 1996) infra. Return to Text}

^{[70] The EEOC's position is set forth in a set of instructions given by EEOC to its investigators. The "Interim Enforcement Guidance" ("EEOC Guidance") may be found in the EEOC Compliance Manual ¶ 6902 (CCH) (March, 1995). Return to Text}

^{[71] See discussions of Modderno v. King, 82 F.3d 1059 (D.C. Cir. 1996); Krauel v. Iowa Methodist Medical Ctr., 915 F. Supp. 102 (S.D. Iowa 1995); Piquard v. City of East Peoria, 887 F. Supp. 1106 (C.D. Ill. 1995) infra and Parker and Ford, supra. Return to Text}

^{[72] See discussion of Henderson v. Bodine, 70 F.3d 958 (8th Cir. 1995) infra. Return to Text}

^{[ ] 73 To put this in terms of employment discrimination law, the EEOC Guidance states that the only form of discrimination under which a medical plan may violate the ADA is "disparate treatment." Plans which merely have a "disparate impact" do not violate the ADA--at least in the EEOC's view. Return to Text}

^{[74] But see note 12 supra. Return to Text}

^{[75] 42 U.S.C. § 12112(b)(5)(A). Return to Text}

^{[76] A treatment may be defined as having no medical value if the employer can prove with scientific evidence that the treatment doesn't cure the condition, slow the degeneration/deterioration or harm attributable to the condition, alleviate the symptoms of the condition, or maintain the current health status of the individuals who receive the treatment. Return to Text}

^{[77] 887 F. Supp. 1106 (C.D. Ill. 1995). Return to Text}

^{[78] The court subsequently granted summary judgment for the defendant because the plaintiffs had failed to assert that they had been discriminated against in some non-fringe benefit aspect of their employment relationship. Return to Text}

^{[79] See discussions of Modderno v. King, and Krauel, infra, and Ford and Parker, supra. Return to Text}

^{[80] 42 U.S.C. § 12112(b)(3)(A). Return to Text}

^{[81] H. Rep. No. 485 at 61. Return to Text}

^{[82] 469 U.S. 287 (1985). Return to Text}

^{[83] EEOC Compliance Manual 6902 (CCH) (March, 1995). Return to Text}

^{[84] 82 F.3d 1059 (D.C. Cir. 1996). Return to Text}

^{[85] See, e.g., Ford v. Schering-Plough Corp., 1998 WL 258386 (3d Cir. 1998) (using Betts definition of subterfuge, court found that a limit on mental health benefits does not violate the ADA). Return to Text}

^{[86] See also Ford v. Schering-Plough Corp., 1998 WL 258386 (3rd Cir. 1998); Rogers v. Department of Health and Envtl. Control, 985 F. Supp. 635 (D.S.C. 1997); Bril v. Dean Witter, Discover & Co., 986 F. Supp. 171 (S.D.N.Y. 1997) (limits on mental disabilities do not violate the ADA); but see Lewis v. Aetna Life Insurance Co., 982 F.Supp. 1158 (E.D. Va. 1997) (holding that an insurer cannot discriminate between mental and physical disabilities). Return to Text}

^{[87] See 42 U.S.C. 12114. Return to Text}

^{[88] 70 F.3d 958 (8th Cir. 1995). Return to Text}

^{[89] 70 F.3d at 960 (citing construction of section 501(c) in EEOC Guidance). Return to Text}

^{[90] 918 F. Supp. 1016 (S.D. Miss. 1995). Return to Text}

^{[91] See note 47 supra and accompanying text. Return to Text}

^{[92] See Bragdon v. Abbott, note 12, supra. Return to Text}

^{[93] The northern district of Illinois ruled that an insurance plan (not an employee benefit plan) could not cap AIDS benefits. See Doe v. Mutual of Omaha Ins. Co., 1998 WL 166856 (N.D.Ill. 1998). The court reasoned that if two individuals, one with AIDS and one without, developed pneumonia, the one without AIDS would be covered up to $1 million in expenses and the other $25,000 and that constitutes discrimination on the basis of disability. Id. at *8. Return to Text}

^{[94] Edward Felsenthal, Fund That Denied Benefits for AIDS Settles EEOC Suit, Wall St. J., Dec. 15, 1995, at B10. Return to Text}

^{[95] Id. See also, EEOC v. Allied Services Div. Welfare Fund, et. al., Civil Action No. 93-5076 WMB (C.D.Cal.) (settlement that lifted $5,000 cap on AIDS-related benefits where other illnesses had a $300,000 lifetime maximum). Return to Text}

^{[96] No. H-94-3001 (S.D. Tex. Oct. 11, 1994). Return to Text}

^{[97] See also, EEOC v Laborers Dist. Council Bldgs., No. 94-3971 (E.D. Pa. Jan. 3, 1995) (consent decree eliminating AIDS cap and paying damages to private plaintiffs); Estate of Kadinger v. International Broth. of Elec. Workers, Local 110, 63 Empl. Prac. Dec. P 42,783 (D. Minn. 1993) (consent decree lifting cap on AIDS-related benefits and paying compensatory and punitive damages to private plaintiffs). Return to Text}

^{[98] 118 S. Ct. 2196, 2205 (1998). Return to Text}

^{[99] 95 F.3d 674 (8th Cir. 1996). Return to Text}

^{[100] Compare Krauel v. Iowa Methodist Medical Center, 95 F.3d 674 (8th Cir. 1996) and Zatarain v. WDSU-Television, Inc., 881 F.Supp. 240, 243 (E.D. La. 1995) (both holding that reproduction is not a major life activity) with Pacourek v. Inland Steel Co., 916 F. Supp. 797, 801-04 (N.D. Ill. 1996) (holding that infertility is an impairment, reproduction is a major life activity, and thus an infertile employee is disabled under the ADA). Return to Text}

^{[101] 118 S. Ct. 2196, 2205 (1998). The case concerned a woman with HIV who had been refused dental services. The Court found that her asymptomatic HIV was a disability under the ADA because it substantially limited the major life activity of reproduction. Therefore, although one can assume from that decision that other types of infertility are also disabilities, the court did not directly address infertility or the exclusion of fertility treatments as a disability-based distinction. Return to Text}

^{[102] 915 F. Supp. at 108. Return to Text}

^{[103] See note 42 supra. Return to Text}

^{[104] EEOC Definition at ¶ 6886. According to the EEOC, an impairment that only slightly affects an individual's hearing does not substantially limit the individual's ability to hear. Thus, such an impairment does not constitute a disability. Return to Text}

^{[105] As discussed in note 42 supra, courts reject the notion that a person with poor but correctable vision is disabled under the ADA. This is due in part to the fact both poor vision and the need for glasses are very common in our society. The use of hearing aids, by contrast, is not commonplace. Return to Text}

^{[106] 10 F.3d 17 (1st Cir. 1993). Return to Text}

^{[107] Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101 (1989).}