The U.S. Equal Employment Opportunity Commission

     EEOC NOTICE
     Number 915.002 
     Date 6/8/93
 

     1.     SUBJECT:  Interim Enforcement Guidance on the application of      
     the Americans with Disabilities Act of 1990 to disability-based 
     distinctions in employer provided health insurance.

     2.     PURPOSE:  This interim enforcement guidance sets forth the      
     Commission's position on the application of the Americans with      
     Disabilities Act to disability-based distinctions in employer      
     provided health insurance.

     3.     EFFECTIVE DATE:  Upon issuance.
      
     4.     EXPIRATION DATE:  As an exception to EEOC Order 205.001,      
     Appendix B, Attachment 4, § a(5), this Notice will remain in      
     effect until rescinded or superseded. 

     5.     ORIGINATOR:  Americans with Disabilities Act Division,      
     Office of Legal Counsel.

     6.     INSTRUCTIONS:  This enforcement guidance is to be used on an  
     interim basis until the Commission issues final guidance after 
     publication for notice and comment.  File after [     ] of Volume II 
     of the Compliance Manual. 

     7.     SUBJECT MATTER:
 

     I.     INTRODUCTION
          
          The interplay between the nondiscrimination principles of the 
     ADA and employer provided health insurance, which is predicated on 
     the ability to make health-related distinctions, is both unique and 
     complex.  This interplay is, undoubtedly, most complex when a health 
     insurance plan contains distinctions that are based on disability.  
     The purpose of this interim guidance is to assist Commission 
     investigators in analyzing ADA charges which allege that a 
     disability-based distinction in the terms or provisions of an 
     employer provided health insurance plan violates the ADA.1  This 
     interim guidance does not address the application of the ADA to other 
     issues arising in the context of employer provided health insurance.  
     Nor does it address the application of the ADA to other types of 
     "fringe benefits," such as employer provided pension plans, life 
     insurance, and disability insurance.  These subjects will be 
     addressed in future documents.
                 
     II.  BACKGROUND AND LEGAL FRAMEWORK

              
          The ADA provides that it is unlawful for an employer2 to 
     discriminate on the basis of disability against a qualified 
     individual with a disability in regard to "job application 
     procedures, the hiring, advancement, or discharge of employees, 
     employee compensation, job training, and other terms, conditions, and 
     privileges of employment."  42 U.S.C. § 12112(a).  Section 
     1630.4 of the Commission's regulations implementing the employment 
     provisions of the ADA further provides, in pertinent part, that it is 
     unlawful for an employer to discriminate on the basis of disability 
     against a qualified individual with a disability in regard to 
     "[f]ringe benefits available by virtue of employment, whether or not 
     administered by the [employer]."  29 C.F.R. 
     § 1630.4(f).  Employee benefit plans, including health insurance 
     plans provided by an employer to its employees, are a fringe benefit 
     available by virtue of employment.  Generally speaking, therefore, 
     the ADA prohibits employers from discriminating on the basis of 
     disability in the provision of health insurance to their employees.

          The ADA also prohibits employers from indirectly discriminating 
     on the basis of disability in the provision of health insurance.  
     Employers may not enter into, or participate in, a contractual or 
     other arrangement or relationship that has the effect of 
     discriminating against their own qualified applicants or employees 
     with disabilities.  42 U.S.C. § 12112(b)(2); 29 C.F.R. 
     § 1630.6(a).  Contractual or other relationships with 
     organizations that provide fringe benefits to employees are expressly 
     included in this prohibition.  42 U.S.C. § 12112(b)(2); 29 
     C.F.R. § 1630.6(b).  This means that an employer will be liable 
     for any discrimination resulting from a contract or agreement with an 
     insurance company, health maintenance organization (HMO), third party 
     administrator 

     (TPA), stop-loss carrier, or other organization to provide or 
     administer a health insurance plan on behalf of its employees.
                                              

          Another provision of the ADA makes it unlawful for an employer 
     to limit, segregate, or classify an applicant or employee in a way 
     that adversely affects his or her employment opportunities or status 
     on the basis of disability.  42 U.S.C. § 12112(b)(1); 29 C.F.R. 
     § 1630.5.  Both the legislative history and the interpretive 
     Appendix to the regulations indicate that this prohibition applies to 
     employer provided health insurance.  S. Rep. No. 116, 101st Cong., 
     1st Sess. (Senate Report) (1989) at 28-29; H.R. Rep. No. 485 part 2, 
     101st Cong., 2nd Sess. (House Labor Report) (1990) at 58-59; H.R. 
     Rep. No. 485 part 3, 101st Cong., 2nd Sess. (House Judiciary Report) 
     (1990) at 36; Appendix to 29 C.F.R. § 1630.5.  
          
            Several consequences result from the application of these 
     statutory provisions.  First, disability-based insurance plan 
     distinctions are permitted only if they are within the protective 
     ambit of section 501(c) of the ADA. (See the discussion in Section 
     III, infra.)  Second, decisions about the employment of an individual 
     with a disability cannot be motivated by concerns about the impact of 
     the individual's disability on the employer's health insurance plan.  
     Appendix to 29 C.F.R. § 1630.15(a).  Third, employees with 
     disabilities must be accorded "equal access" to whatever health 
     insurance the employer provides to employees without disabilities.  
     See Appendix to 29 C.F.R. § 1630.16(f).  Fourth, in view of the 
     statute's "association provision," 42 U.S.C. § 12112(b)(4); 29 
     C.F.R. § 1630.8, it would violate the ADA for an employer to 
     make an employment decision about any person, whether or not that 
     person has a disability, because of concerns about the impact on the 
     health insurance plan of the disability of someone else with whom 
     that person has a relationship.  

          As previously noted, this interim guidance is devoted solely to 
     the ADA implications of disability-based health insurance plan 
     distinctions.  The ADA implications of other issues arising in the 
     context of employer provided health insurance will be addressed in 
     future guidance. 
             
     III.  DISABILITY-BASED DISTINCTIONS

          A.  Framework of Analysis

          Whenever it is alleged that a health-related term or provision 
     of an employer provided health insurance plan violates the ADA, the 
     first issue is whether the challenged term or provision is, in fact, 
     a disability-based distinction.  If the Commission determines that a 
     challenged health insurance plan term or provision is a disability-
     based distinction, the respondent will be required to prove that that 
     disability-based distinction is within the protective ambit of 
     section 501(c) of the ADA. 
 

           In pertinent part, section 501(c) permits employers, insurers, 
     and plan administrators to establish and/or observe the terms of an 
     insured3 health insurance plan that is "bona fide,"4 based on 
     "underwriting risks, classifying risks, or administering such risks 
     that are based on or not inconsistent with State law," and that is 
     not being used as a "subterfuge" to evade the purposes of the ADA.  
     Section 501(c) likewise permits employers, insurers, and plan 
     administrators to establish and/or observe the terms of a "bona fide" 
     self-insured health insurance plan that is not used as 
     a "subterfuge."  42 U.S.C. § 12201(c).  The text of section 
     501(c) is incorporated into § 1630.16(f) of the Commission's 
     regulations.5         
          Consequently, if the Commission determines that the challenged 
     term or provision is a disability-based distinction, the respondent 
     will be required to prove that: 1) the health insurance plan is 
     either a bona fide insured health insurance plan that is not 
     inconsistent with state law, or a bona fide self-insured health 
     insurance plan;6 and 2) the challenged disability-based distinction 
     is not being used as a subterfuge.  If the respondent so 
     demonstrates, the Commission will conclude that the challenged 
     disability-based distinction is within the protective ambit of 
     section 501(c) and does not violate the ADA.  If, on the other hand, 
     the respondent is unable to make this two-pronged demonstration, the 
     Commission will conclude that the respondent has violated the ADA.
                    
          B.  What Is a Disability-Based Distinction?

          It is important to note that not all health-related plan 
     distinctions discriminate on the basis of disability.  Insurance 
     distinctions that are not based on disability, and that are applied 
     equally to all insured employees, do not discriminate on the basis of 
     disability and so do not violate the ADA.7  

          For example, a feature of some employer provided health 
     insurance plans is a distinction between the benefits provided for 
     the treatment of physical conditions on the one hand, and the 
     benefits provided for the treatment of "mental/nervous" conditions on 
     the other.  Typically, a lower level of benefits is provided for the 
     treatment of mental/nervous conditions than is provided for the 
     treatment of physical conditions.  Similarly, some health insurance 
     plans provide fewer benefits for "eye care" than for other physical 
     conditions.  Such broad distinctions, which apply to the treatment of 
     a multitude of dissimilar conditions and which constrain individuals 
     both with and without disabilities, are not distinctions based on 
     disability.  Consequently, although such distinctions may have a 
     greater impact on certain individuals with disabilities, they do not 
     intentionally discriminate on the basis of disability8 and do not 
     violate the ADA.9 

          Blanket pre-existing condition clauses that exclude from the 
     coverage of a health insurance plan the treatment of conditions that 
     pre-date an individual's eligibility for benefits under that plan 
     also are not distinctions based on disability, and do not violate the 
     ADA.  Universal limits or exclusions from coverage of all 
     experimental drugs and/or treatments, or of all "elective surgery," 
     are likewise not insurance distinctions based on disability.  
     Similarly, coverage limits on medical procedures that are not 
     exclusively, or nearly exclusively, utilized for the treatment of a 
     particular disability are not distinctions based on disability.  
     Thus, for example, it would not violate the ADA for an employer to 
     limit the number of blood transfusions or X-rays that it will pay 
     for, even though this may have an adverse effect on individuals with 
     certain disabilities.

        Example 1.  The R Company health insurance plan limits the benefits 
        provided for the treatment of any physical conditions to a maximum of 
        $25,000 per year.  CP, an employee of R, files a charge of 
        discrimination alleging that the $25,000 cap violates the ADA because 
        it is insufficient to cover the cost of treatment for her cancer.  
        The $25,000 cap does not single out a specific disability, discrete 
        group of disabilities, or disability in general.  It is therefore not 
        a disability-based distinction.  If it is applied equally to all 
        insured employees, it does not violate the ADA.

          In contrast, however, health-related insurance distinctions that 
     are based on disability may violate the ADA.  A term or provision is 
     "disability-based" if it singles out a particular disability (e.g., 
     deafness, AIDS, schizophrenia), a discrete group of disabilities 
     (e.g., cancers, muscular dystrophies, kidney diseases), or disability 
     in general (e.g., non-coverage of all conditions that substantially 
     limit a major life activity).  
                                  
          As previously noted, employers may establish and/or observe the 
     terms and provisions of a bona fide benefit plan, including terms or 
     provisions based on disability, that are not a "subterfuge to evade 
     the purposes" of the ADA.  Such terms and provisions do not violate 
     the ADA.  However, disability-based insurance distinctions that are a 
     "subterfuge" do intentionally discriminate on the basis of disability 
     and so violate the ADA.
                                        
        Example 2.  R Company's new self-insured health insurance plan caps 
        benefits for the treatment of all physical conditions, except AIDS, 
        at $100,000 per year.  The treatment of AIDS is capped at $5,000 per 
        year.  CP, an employee with AIDS enrolled in the health insurance 
        plan, files a charge alleging that the lower AIDS cap violates the 
        ADA.  The lower AIDS cap is a disability-based distinction.  
        Accordingly, if R is unable to demonstrate that its health insurance 
        plan is bona fide and that the AIDS cap is not a subterfuge, a 
        violation of the ADA will be found.                    

        Example 3.  R Company has a health insurance plan that excludes from 
        coverage treatment for any pre-existing blood disorders for a period 
        of 18 months, but does not exclude the treatment of any other pre-
        existing conditions.  R's pre-existing condition clause only excludes 
        treatment for a discrete group of related disabilities, e.g., 
        hemophilia, leukemia, and is thus a disability-based distinction. 
        CP, an individual with acute leukemia who recently joined R Company 
        and enrolled in its health insurance plan, files a charge of 
        discrimination alleging that the disability-based pre-existing 
        condition clause violates the ADA.  If R is unable to demonstrate 
        that its health insurance plan is bona fide and that the disability-
        specific pre-existing condition clause is not a subterfuge, a 
        violation of the ADA will be found.   
        

          It should be noted that the ADA does not provide a "safe harbor" 
     for health insurance plans that were adopted prior to its July 26, 
     1990 enactment.  As the Senate Report states, subterfuge is to be 
     determined "regardless of the date an insurance or employer benefit 
     plan was adopted."  Senate Report at 85; see also House Labor report 
     at 136-138; House Judiciary Report at 70-71; Appendix to 29 C.F.R. 
     § 1630.16(f).  Consequently, the challenged disability-based 
     terms and provisions of a pre-ADA health insurance plan will be 
     scrutinized under the same subterfuge standard as are the challenged 
     disability-based terms, provisions, and conditions of post-ADA health 
     insurance plans.10
       
          C.  The Respondent's Burden of Proof
               
          Once the Commission has determined that a challenged health 
     insurance term or provision constitutes a disability-based 
     distinction, the respondent must prove that the health insurance plan 
     is either a bona fide insured plan that is not inconsistent with 
     state law, or a bona fide self-insured plan.   The respondent must 
     also prove that the challenged disability-based distinction is not 
     being used as a subterfuge.  Requiring the respondent to bear this 
     burden of proving entitlement to the protection of section 501(c) is 
     consistent with the well-established principle that the burden of 
     proof should rest with the party who has the greatest access to the 
     relevant facts.11  In the health insurance context, it is the 
     respondent employer (and/or the employer's insurer, if any) who has 
     control of the risk assessment, actuarial, and/or claims data relied 
     upon in adopting the challenged disability-based distinction.  
     Charging party employees have no access to such data, and, generally 
     speaking, have no information about the employer provided health 
     insurance plan beyond that contained in the employer provided health 
     insurance plan description.  Consequently, it is the employer who 
     should bear the burden of proving that the challenged disability-
     based insurance distinction is within the protective ambit of section 
     501(c).    

               1.  The Health Insurance Plan Is "Bona Fide" and                     
     Consistent with Applicable Law

            In order to gain the protection of section 501(c) for a 
     challenged disability-based insurance distinction, the respondent 
     must first prove that the health insurance plan in which the 
     challenged distinction is contained is either a bona fide insured 
     health insurance plan that is not inconsistent with state law, or a 
     bona fide self-insured health insurance plan.12  If the health 
     insurance plan is an insured plan, the respondent will be able to 
     satisfy this requirement by proving that: 1) the health insurance 
     plan is bona fide in that it exists and pays benefits, and its terms 
     have been accurately communicated to eligible employees; and 2) the 
     health insurance plan's terms are not inconsistent with applicable 
     state law as interpreted by the appropriate state authorities.13  If 
     the health insurance plan is a self-insured plan, the respondent will 
     only be required to prove that the health insurance plan is bona fide 
     in that it exists and pays benefits, and that its terms have been 
     accurately communicated to covered employees.

               2. The Disability-Based Distinction Is Not a Subterfuge

          The second demonstration that the respondent must make in order 
     to gain the protection of section 501(c) is that the challenged 
     disability-based distinction is not a subterfuge to evade the 
     purposes of the ADA.  "Subterfuge" refers to disability-based 
     disparate treatment that is not justified by the risks or costs 
     associated with the disability.  Whether a particular challenged 
     disability-based insurance distinction is being used as a subterfuge 
     will be determined on a case by case basis, considering the totality 
     of the circumstances.     
                            

          The respondent can prove that a challenged disability-based 
     insurance distinction is not a subterfuge in several ways.  A non-
     exclusive list of potential business/insurance justifications 
     follows.

          a.  The respondent may prove that it has not engaged in the 
     disability-based disparate treatment alleged.  For example, where a 
     charging party has alleged that a benefit cap of a particular 
     catastrophic disability is discriminatory, the respondent may prove 
     that its health insurance plan actually treats all similarly 
     catastrophic conditions in the same way.  

          b.  The respondent may prove that the disparate treatment is 
     justified by legitimate actuarial data,14 or by actual or 
     reasonably anticipated experience, and that conditions with 
     comparable actuarial data and/or experience are treated in the same 
     fashion.  In other words, the respondent may prove that the 
     disability-based disparate treatment is attributable to the 
     application of legitimate risk classification and underwriting15 
     procedures to the increased risks (and thus increased cost to the 
     health insurance plan) of the disability, and not to the disability 
     per se. 
      

          c.  The respondent may prove that the disparate treatment is 
     necessary (i.e., that there is no nondisability-based health 
     insurance plan change that could be made) to ensure that the 
     challenged health insurance plan satisfies the commonly accepted or 
     legally required standards for the fiscal soundness of such an 
     insurance plan.  The respondent, for example, may prove that it 
     limited coverage for the treatment of a discrete group of 
     disabilities because continued unlimited coverage would have been so 
     expensive as to cause the health insurance plan to become financially 
     insolvent, and there was no nondisability-based health insurance plan 
     alteration that would have avoided insolvency.

          d.  The respondent may prove that the challenged insurance 
     practice or activity is necessary (i.e., that there is no 
     nondisability-based change that could be made) to prevent the 
     occurrence of an unacceptable change either in the coverage of the 
     health insurance plan, or in the premiums charged for the health 
     insurance plan.  An "unacceptable" change is a drastic increase in 
     premium payments (or in co-payments or deductibles), or a drastic 
     alteration to the scope of coverage or level of benefits provided, 
     that would: 1) make the health insurance plan effectively unavailable 
     to a significant number of other employees, 2) make the health 
     insurance plan so unattractive as to result in significant adverse 
     selection16, or 3) make the health insurance plan so unattractive 
     that the employer cannot compete in recruiting and maintaining 
     qualified workers due to the superiority of health insurance plans 
     offered by other employers in the community.  

          e.  Where the charging party is challenging the respondent's 
     denial of coverage for a disability-specific treatment, the 
     respondent may prove that this treatment does not provide any benefit 
     (i.e., has no medical value).  The respondent, in other words, may 
     prove by reliable scientific evidence that the disability-specific 
     treatment does not 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 individuals with the disability who receive the 
     treatment.17         
                 
     IV. COVERAGE OF DEPENDENTS

          The coverage of an employee's dependents under an employer 
     provided health insurance plan is a benefit available to the employee 
     by virtue of employment.  Consequently, insurance terms, provisions, 
     and conditions concerning dependent coverage are subject to the same 
     ADA standards, including the application of section 501(c) to 
     disability-based distinctions, as are other insurance terms, 
     provisions, and conditions.
 
 

          The ADA, however, does not require that the coverage accorded 
     dependents be the same in scope as the coverage accorded the 
     employee.  For example, it would not violate the ADA for a health 
     insurance plan to cover prescription drugs for employees, but not to 
     include such coverage for employee dependents.  Nor does the ADA 
     require that dependents be accorded the same level of benefits as 
     that accorded the employee.  Thus, it would not violate the ADA for a 
     health insurance plan to have a $100,000 benefit cap for employees, 
     but only a $50,000 benefit cap for employee dependents. 

     V. CHARGE PROCESSING

          1.  In General

          Charges alleging that a term or provision of an employer 
     provided health insurance plan discriminates on the basis of 
     disability should be processed in accordance with the foregoing 
     guidance.  When confronted with a charge alleging that a health 
     insurance plan distinction is a disability-based distinction that 
     violates the ADA, the investigator should initially determine whether 
     the challenged insurance term or provision is, in fact, a disability-
     based distinction .  To do this, the investigator should determine 
     whether:      

        1)  the insurance term, provision, or condition singles out a 
        particular disability, discrete group of disabilities, or disability 
        in general; and/or 

        2)  the insurance term, provision, or condition singles out a 
        procedure or treatment used exclusively, or nearly exclusively, for 
        the treatment of a particular disability or discrete group of 
        disabilities (e.g., exclusion of a drug used only to treat AIDS).  
        (Section III. B, supra.)
          
          If it is determined that the challenged insurance term or 
     provision is not a disability-based distinction and is applied 
     equally to all insured employees, the investigator should conclude 
     that the health insurance plan distinction does not violate the ADA.

          On the other hand, if the challenged insurance term or provision 
     is found to be a disability-based distinction, the investigator 
     should determine whether the respondent can justify the disability-
     based distinction by satisfying the requirements of section 501(c) of 
     the ADA.  To make this determination, the investigator should take 
     the steps described below. 

        1)  The investigator should obtain evidence from the respondent that 
        the health insurance plan is a bona fide plan.  (Section III.C.1, 
        supra.)

        2)  If the health insurance plan is an insured plan, the investigator 
        should also obtain evidence from the respondent that the health 
        insurance plan is not inconsistent with the applicable state law(s). 
        (Section III.C.1, supra.)

        3)  The investigator should obtain evidence from the respondent 
        relevant to any business/insurance justification proffered to justify 
        the disability-based insurance distinction.  The evidence obtained    
        should be specific and detailed.  For example, if the respondent is 
        relying on actuarial data to justify the disability-based 
        distinction, the investigator should require a detailed explanation 
        of the rationale underlying the disability-based distinction, 
        including the actuarial conclusions arrived at, the actuarial 
        assumptions relied upon to reach those conclusions, and the factual 
        data that supports the assumptions and/or conclusions.

        Similarly, if the respondent asserts that the disability-based 
        distinction is justified by actual or reasonably anticipated 
        experience, the investigator should obtain evidence about the 
        respondent's insurance claims experience, and the way in which the 
        respondent has reacted to similar previous experience situations.  If 
        the respondent asserts that the disability-based distinction was 
        necessary to prevent the occurrence of an unacceptable change in 
        coverage or premiums, or to assure the fiscal soundness of the health 
        insurance plan, the investigator should obtain evidence of the 
        nondisability-based options for modifying the health insurance plan 
        that were considered and the reason(s) for the rejection of these 
        options.  If the respondent asserts that its health insurance plan 
        excludes a disability-specific treatment because it is of no medical 
        value, the investigator should obtain evidence regarding the 
        scientific evidence relied upon by the respondent in reaching that 
        determination.  (Section III.C.2, supra.)       
 
 

      
          Commission staff should direct questions concerning the guidance 
     or its application in particular cases to the Office of Legal Counsel 
     Attorney of the Day.      
 
 
 

     ____________________               _____________________________
     Date                                   Approved:  Tony Gallegos
                                                       Chairman
 
 

     1.     In light of the recent amendments to the Rehabilitation Act of 
     1973, the analysis in this interim guidance also applies to federal 
     sector complaints of discrimination arising under section 501 of that 
     statute.

     2.     The ADA also prohibits employment agencies, labor 
     organizations, and joint labor management committees from 
     discriminating in employment against qualified individuals with 
     disabilities.  However, for convenience, only the term "employer" is 
     used throughout this document.

     3.     An "insured" health insurance plan is a health insurance plan 
     or policy that is purchased from an insurance company or other 
     organization, such as a health maintenance organization (HMO).  This 
     is in contrast to a "self-insured" health plan, where the employer 
     directly assumes the liability of an insurer.  Insured health 
     insurance plans are regulated by both ERISA and state law.  Self-
     insured plans are typically subject to ERISA, but are not subject to 
     state laws that regulate insurance.  

     4.     The term "bona fide" is defined in Section III (C)(1), infra.

     5.     Section 1630.16(f) states:

            (f)  Health insurance, life insurance and other benefit plans-
          
          (1)  An insurer, hospital, or medical service company, health      
     maintenance organization, or any agent or entity that administers 
     benefit plans, or similar organizations may underwrite risks, 
     classify risks, or administer such risks that are based on or not 
     inconsistent with State law.

          (2)  A covered entity may establish, sponsor, observe, or      
     administer 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.

          (3)  A covered entity may establish, sponsor, observe, or      
     administer the terms of a bona fide benefit plan that is not      
     subject to State laws that regulate insurance.

          (4)  The activities described in paragraphs (f)(1), (2) and      
     (3)... are permitted unless these activities are being used as a 
     subterfuge to evade the purposes of [Title I of the ADA]. 

     6.     If an employer provided health insurance plan is a "multiple 
     employer welfare arrangement" (MEWA) pursuant to section 3(40) of 
     ERISA, it may be subject to certain state insurance laws even if it 
     is self-insured.  See footnote 13, infra.

     7.     The term "discriminates" refers only to disparate treatment.  
     The adverse impact theory of discrimination is unavailable in this 
     context.  See Alexander v. Choate, 469 U.S. 287 (1985), a case 
     brought under § 504 of the Rehabilitation Act of 1973.  See also 
     the discussion of Choate in the Senate Report at 85; House Labor 
     Report at 137.     

     8.     However, it would violate the ADA for an employer to 
     selectively apply a universal or "neutral" non-disability based 
     insurance distinction only to individuals with disabilities.  Thus, 
     for example, it would violate the ADA for an employer to apply a 
     "neutral" health insurance plan limitation on "eye care" only to an 
     employee seeking treatment for a vision disability, but not to other 
     employees who do not have vision disabilities.  Charges alleging that 
     a universal or "neutral" non-disability based insurance distinction 
     has been selectively applied to individuals with disabilities should 
     be processed using traditional disparate treatment theory and 
     analysis.

     9.       This position is consistent with the case law developed 
     pursuant to § 504 of the Rehabilitation Act of 1973, as amended, 
     29 U.S.C. § 794, the statute on which the ADA is patterned.  
     Courts faced with challenges to insurance plan distinctions between 
     physical benefits and mental/nervous benefits under the 
     Rehabilitation Act have held that such distinctions are rational and 
     do not discriminate on the basis of disability.  See, e.g., Doe v. 
     Colautti, 592 F.2d 704 (3d Cir. 1979)(holding that Pennsylvania's 
     medical assistance statute was not required by the Rehabilitation Act 
     to provide the same level of benefits for inpatient hospital 
     treatment of mental illness as for inpatient hospital treatment of 
     physical illness;  the court noted that care for physical illness and 
     care for mental illness were two different benefits), and Doe v. 
     Devine, 545 F. Supp. 576 (D.D.C. 1982), aff'd on other grounds, 703 
     F. 2d 1319 (D.C. Cir. 1983)(holding that Blue Cross "cutbacks" in 
     mental health benefits for federal employees are reasonable and do 
     not discriminate on the basis of disability). 

     10.     It has been suggested that the Commission should interpret 
     "subterfuge" under the ADA as having the same meaning as was accorded 
     that term under the Age Discrimination in Employment Act (ADEA) of 
     1967, 29 U.S.C. § 621 et seq.  In Ohio Public Employees 
     Retirement System v. Betts, 492 U.S. 158 (1989), the Court held that 
     a pre-ADEA benefit plan could not be a subterfuge, and that, since 
     the ADEA did not expressly apply to fringe benefits, subterfuge 
     required a showing of the employer's specific intent to discriminate 
     in some non-fringe aspect of the employment relationship.  However, 
     both the language of the ADA, expressly covering "fringe benefits," 
     and the Act's legislative history, rejecting the concept of a "safe 
     harbor" for pre-ADA plans, make plain congressional intent that the 
     Betts approach not be applied in the context of the ADA.

     11.     See Morgado v. Birmingham-Jefferson County Civil Defense 
     Corps., 706 F.2d 1184, 1189 (11th Cir. 1983, cert. denied, 464 U.S. 
     1045 (1984) (employer relying on Equal Pay Act provision allowing pay 
     differentials for reasons other than sex must prove entitlement to 
     provision's protection because such facts "are peculiarly within the 

     knowledge of the employer"); EEOC v. Whitin Machine Works, Inc., 635 
     F.2d 1095, 1097 (4th Cir. 1980) (when facts are "within [the] unique 
     knowledge" of the employer, it bears burden of proof concerning those 
     facts); EEOC v. Radiator Specialty Co., 610 F.2d 178, 185 n. 8 (4th 

     Cir. 1979) ("general principle of allocation of proof to the party 
     with the most ready access to the relevant
     information" requires Title VII defendant to show inappropriateness 
     of labor pool statistics). 

     12.     See footnote 3, supra, for a discussion of the difference 
     between "insured" and "self-insured" insurance plans.     

     13.     The term "applicable state law" refers both to the 
     determination of: 1) which state's laws are applicable to the 
     particular charge (e.g., which state's laws are applicable in the 
     event that the health insurance policy was drawn up in accordance 
     with the laws of the state of Maryland, but the insured employee 
     resides in the state of Virginia) and 2) which laws of that 
     appropriate state are relevant to the particular charge.  With 
     respect to health insurance plans that are MEWAs, applicable state 
     law is determined with reference to ERISA section 514 (b)(6)(A).  
     Questions concerning the "applicable state law" should be directed to 
     the Regional Attorney.

     14.     Actuarial data that is seriously outdated and/or inaccurate 
     is not legitimate actuarial data.  The respondent, for example, will 
     not be able to rely on actuarial data about a disability that is 
     based on myths, fears, or stereotypes about the disability.  Nor will 
     a respondent be able to rely on actuarial data that is based on false 
     assumptions about disability, or on assumptions that may have once 
     been, but are no longer, true.  For example, a respondent would not 
     be able to justify an exclusion of epilepsy from its insurance plan 
     that is based on an erroneous assumption that people with epilepsy 
     are more likely to have serious accidents (and thus file more claims 
     for insurance benefits) than are individuals who do not have 
     epilepsy.

     15.     Risk classification refers to the identification of risk 
     factors and the grouping of those factors that pose similar risks.  
     Risk factors may include characteristics such as age, occupation, 
     personal habits (e.g., smoking), and medical history.  Underwriting 
     refers to the application of the various risk factors or risk classes 
     to a particular individual or group (usually only if the group is 
     small) for the purpose of determining whether to provide insurance.    

     16.     Adverse selection is the tendency of people who represent 
     poorer-than-average health risks to apply for and/or retain health 
     insurance to a greater extent than people who represent average or 
     above average health risks.  Drastic increases in premiums and/or 
     drastic decreases in insurance benefits foster an increase in adverse 
     selection, as those who are considered to be "good" insurance risks 
     drop out and seek enrollment in an insurance plan with lower premiums 
     and/or better benefits.  An insurance plan that is subjected to a 
     significant rate of adverse selection may, as a result of the 
     increase in the proportion of "poor risk/high use" enrollees to "good 
     risk/low use" enrollees, become not viable or financially unsound. 

     17.     However, the respondent may be found to have violated the ADA 
     if the evidence reveals that the respondent's health insurance plan 
     covers treatments for other conditions that are likewise of no 
     medical value.
 
 

     This page was last modified on July 6, 2000.

 

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