The Americans with Disabilities Act of 1990 (ADA) is a civil rights law for indi­viduals who currently have a disability, have a record of disability, or are regard­ed as having a disability. The ADA protects against disability-based discrimina­tion in employment, governmental and commercial activities, transportation, and telecommunications.

For purposes of the ADA, a disability is a physical or mental impairment—for example, a visual impairment, HIV disease, or mental retardation – that substantially limits one or more major life activities. The ADA definition of major life activities includes not only activities such as walking, seeing, breathing, learning, bending, sleeping, and thinking, but also the operation of major bodily functions like the endocrine, respiratory, or circulatory systems.

Employers covered by the ADA may not discriminate against “a qualified individual with a disability,” - that is, an individual with a disability who meets the necessary prerequisites for a job and can perform the essential job functions with (or without) reasonable accommodation. ADA Title I applies to employers, including employment agencies, labor unions, and joint labor-management committees, with at least fifteen employees. Title I prohibits both purposeful discrimination in employment and practices with discriminatory impact related to job application procedures, hiring, advancement, discharge, compensation, training, and other terms, conditions and privileges of employment. Criteria that have the effect of excluding individuals with disabilities from employment opportunities may not be used unless the criteria are job-related and are justified by business necessity. Title I also establishes the obligation for a covered entity to reasonably accommodate a qualified individual with a disability, except in the case of undue hardship.

No. Personnel decisions regarding an individual with a disability may not be based upon whether, or to what extent, the individual is or would be covered under a health benefit plan. Employers may not fire or refuse to hire a qualified applicant who has a disability, or who has a dependent with a disability, in order to avoid potential increases in health insurance costs.

Yes. In its 1993 Interim Enforcement Guidance, the Equal Employment Opportunity Commission (EEOC) described how the ADA applies to health benefit plans.

First, the ADA requires employers to provide all employees - with a disability or without a disability - the same health insurance benefits. In other words, employers must accord employees with disabilities equal access to whatever health insurance they provide to em-ployees without disabilities. However, eligibility for health benefits need not be extended to employees with disabilities if such benefits are not extended to nondisabled employees in similar circumstances, e.g., part-time employees.

In addition, the ADA prohibits employers from participating in any contractual arrangement that subjects the employer’s applicants or employees to discrimination on the basis of disability. This prohibition includes any third-party provider of health insurance whose health benefit plan fails to accord individuals with disabilities equal access to health insurance.

ADA Title V allows bona fide insured or self-insured employee benefit plans to make some health-related distinctions for risk classifications based upon, or not inconsistent with, state law. However, this “insurance exemption” may not be used as a “subterfuge” to evade the purposes of the ADA. According to the EEOC, health insurance distinctions that are not disability-based do not violate the ADA, even if they have a disproportionate impact on individuals with disabilities.

Thus, employers, insurers and unions generally may apply insurance distinctions, such as applicable limitations and exclusions, provided that they apply the distinctions uniformly to all employees. For example, employers may offer health insurance that does not cover pre-existing conditions for a period of time specified in the plan, even if that exclusion for pre-existing conditions adversely affects employees with disabilities.

The ADA also generally permits facially neutral limitations such as lifetime coverage caps applied to all employees. Further, a health plan may exclude or limit coverage for specific procedures or treatments if they are not exclusively or nearly exclusively applicable to a particular disability. For example, a plan may limit the number of blood transfusions or x-rays that the plan will pay for, even though this may have an adverse effect on individuals with certain disabilities such as hemophilia. Likewise, a plan may limit or deny coverage for all “experimental” drugs and/or treatments for all “elective surgery.” Plans may also exclude or provide lower levels of coverage for broad categories of conditions that are not drawn along lines of disability, such as treatment of “mental or nervous conditions” or “eye care.”

However, all such provisions are allowable under the ADA only if they meet the requirements of applicable state law and are not used as a subterfuge. Health plan terms also must meet the requirements of other applicable federal laws, such as the Health Insurance Portability and Accountability Act and the Mental Health Parity Act.

The EEOC’s enforcement guidance identifies a plan term or provision as disability-based if it singles out a particular disability, a discrete group of disabilities, disability in general (all conditions that substantially limit a major life activity), or a treatment or procedure used exclusively or nearly exclusively to treat a particular disability.

What justifies a disability-based distinction? The most reliable way for a health plan to comply the ADA is to avoid singling out diseases or conditions considered disabilities under the ADA.

However, if the plan does single-out a disabil­ity or disabilities, the EEOC 1993 Enforcement Guidance requires the respondent employer (or employer’s insurer, if any), to prove that a disability-based distinction is permitted by: (1) showing that the health plan either is a bona fide plan that is consistent with state law or is a bona fide self-funded plan; and (2) prov­ing that the disability-based risk classification is not being used as a subterfuge to evade the purposes of the law. Plan sponsors may use accepted principles of insurance risk classifica­tion and current and accurate actuarial data, but not data based on myths, fears, stereo­types or false or outdated assumptions about a disability. Disability-based limitations or exclusions will not be considered to violate the ADA if:

• they are based on legitimate actuarial data, or actual or reasonably anticipated experi­ence, and apply equally to conditions with comparable actuarial data and/or experi­ence; or
• they are necessary because no alternative to a disability-based distinction is available to prevent an “unacceptable” change such as:
  • A drastic increase in premiums, co-pay­ments or deductibles;
  • A drastic alteration in the scope of cover­age or level of benefits; or
  • Other changes that would make the plan unavailable to a significant number of other employees, or so unattractive that the employer could not compete in re­cruiting and maintaining qualified work­ers due to the superiority of health insur­ance plans offered by other employers in the community, or so unattractive as to result in significant adverse selection.

The EEOC and some courts define “subterfuge” as any disability-based disparate treatment that is not based on actuarial data or the employer’s actual or reasonably anticipated experience relating to the risk involved. This means that any coverage limits or exclusions based on disability must be justified by sound actuarial data or other legitimate business or insurance justification.

For example, a cap on benefits for AIDS-related illnesses that is substantially lower than that for other illnesses would be a disability-based distinction. The lower AIDS cap would violate the ADA unless the disability-based distinction could be justified by actuarial data. Studies demonstrating that the cost of AIDS is comparable to the costs of other commonly covered conditions make it unlikely that this type of disparate treatment could be justified.

That same plan also may be found to have used the insurance exemption as a subterfuge if it used an AIDS cap to deter people with AIDS from accepting employment or enrolling in the plan.

Disability-based distinctions involving dependent coverage will be analyzed in the same fashion as disability-based distinctions in employee coverage. The ADA, however, does not require that the coverage accorded dependents be the same in scope as the coverage accorded employees. For example, a $100,000 benefit cap for employees but only a $50,000 cap for dependents would be permitted.