Are you at risk under the ADA? - Americans with Disabilities Act and employee benefits

The Americans with Disabilities Act may have more impact on your benefits plan than you think.

Many employers' benefits plans include treatment limitations in this era of cost-cutting. However, those limitations must be carefully reviewed so they do not appear to be a subterfuge under the Americans with Disabilities Act (ADA).

In July 1990, the ADA was signed into law. A year later, the Equal Employment Opportunity Commission (EEOC) issued interim guidelines based on the legislation. One year after that, those guidelines went into effect for medium-size to large companies. But despite this activity, the law still raises many questions for corporate benefits managers as they struggle to ensure that their companies comply.

"The guidelines are interim. Many of the terms are not fully defined, and most of the law is still untested. There's plenty of room for even well-intentioned companies to get into trouble," says Michael Lew, a partner with Coopers & Lybrand, CPAs in Chicago.

Despite pitfalls inherent in the new law, experts say that by studying the act and then following some fundamental rules of thumb, most corporations will be able to avoid lawsuits. "Once you understand the basic guidelines," says Lew, "you can probably elude trouble by using common sense."

Review current policies

The initial step to bringing your company's policies into compliance with the ADA, according Henry von Wodtke, director of research at Buck Consultants Inc., benefits consultants in New York, is to conduct a review of current policies. He says the first area to review should be hiring practices, since they tend to be the most problematic in terms of the ADA. The second area to look at should be employee benefits. "Benefits are not as complex as hiring practices, but there are some areas of benefits that can trip up a company, even one that thought it was on the right back track vis-a-vis the ADA," he says.

Whe the bill was passed three years ago, Xerox Corp., a manufacturer of office equipment, in Stamford, Conn., decided to do an extensive review of its policies, including its benefits plans that cover its 54,000 employees. Accordingly, it formed a committee from a cross-section of employees. That group included workers who identified themselves as disabled.

Beatriz Vidal, manager of corporate workplace diversity at Xerox, says the task force included workers with a wide range of disabilities, from those who had mild visual impairments to those in wheelchairs.

Obviously, that group, untrained in law, could not determine if the company's benefits package compiled with the ADA. Xerox didn't want to look only at the law, but at the satisfaction level of all workers, including those who would fall under the law. "The guidelines [from EEOC] are not yet complete. The best way to make certain that we won't get into trouble is to see to it that workers are happy with our plans," Vidal says.

In most companies, the review of current practices is less formal. Jim Tomney, assistant vice president of benefits compliance with New York Life Insurance Co., in New York, says that despite his company's history of hiring and accommodating people with disabilities, "I spent a good deal of time reading up on the issue in journals and news reports and looking at the regulations." New York Life employs 5,000 people.

The fact that New York Life didn't need a committee-based review was partly due to some work the benefits compliance department did a few years ago. The company, which has a number of employees with disabilities working from home, had decided that those home-based workers should have the same benefits as those working in the home office. "If we hadn't done that, we might have had a problem on our hands with the ADA," says Tomney.

Whether your company plans an extensive review or a less formal evaluation of current policies, applying some basic rules of thumb can make the process more accurate.

Targeting specific diseases

The most significant red flag to hunt for when reviewing current benefits is a policy that provides disparate treatment for specific diseases or conditions, says Kaye McDevitt, director of disability management services at Unum Life Insurance Co. of America, Portland, Maine. "If your plan says, 'We're not covering AIDS or we're limiting payments for cancer to a lifetime maximum that's lower than the maximum for other diseases', you can be reasonably certain you'll have some trouble under the ADA," McDevitt says.

However, Charles Lee, vice president and management consultant at Towers Perrin, a consulting firm in Valhalla, N.Y., adds that while it is difficult under the ADA to provide different caps, deductibles, or copayments for specific illnesses, there is nothing illegal about providing disparate treatment for different procedures or equipment, such as transfusions or eyeglasses. Companies should be careful that the disparate treatment is not, or does not appear to be, a subterfuge to avoid the provisions of the ADA. "You can put a cap on blod transfusions, even if doing so happens to affect people with AIDS or hemophilia particularly heavily. But you probably can't put a limit on AZT, since that drug is, at present, used only for AIDS," Lee says.

Other caps to avoid, says Lee, are limits on dialysis treatment, chemotherapy, and prosthetic devices, all of which are used primarily for one type of illness or disability.

One exception to the rule against targeting specific illnesses or conditions is that mental health benefits can be treated disparately, experts say. Consultants say that capping mental health benefits in general--as opposed, for example, to capping benefits for people with schizophrenia--does not discriminate against one single illness. Using such limits would probably be questionable had it not been for the fact that the Senate Committee on Labor and Human Resouirces specifically mentioned mental illness as an example of a group of illnesses that could be treated disparately. Most states have laws which allow separate mental health benefits caps and deductibles in health plans.

The safest route is to avoid targeting specific illness or disabilities, but some companies may find that doing so is the only effective way to ensure a fiscally sound benefits program. In recognition of that, the law makes provisions for disparate treatment of illnesses under certain conditions. David Maslen, a principal at Alexander & Alexander Consulting Group, in Lyndhurst, N.J., says that some firms may want to take advantage of this exception. But, he warns, "You're going to be called upon to defined your actions. There will probably be a price in legal costs and bad publicity."

Those companies willing to brave the potential legal storms should be prepared to prove the following:

* Disparate treatment of the illness or condition is necessary to ensure that the plan remains fiscally sound, and there are no non-discriminatory alternatives that achieve the same purpose; or

* Disparate treatment of the illness or condition is necessary to prevent a large increase in premiums (or other financial disadvantages to employees such as higher copayments or deductibles), and there are no nondiscriminatory alternatives that achieve the same purpose; or

* The treatment has no medical value.

While the third defense can be determined by your medical department, Maslen suggests that a present, it would be difficult for most companies to succeed with either of the first two defenses. "If you try to say that, for example, AIDS would result in financial problems, be prepared to answer the opposing lawyer when he or she asks why covering heart disease isn't equally burdensome."

The point, says Maslen, is that, so far, there is probably no disease that most companies would be willing to eliminate that poses a financial burden on a plan more than any other disease.

The safest way to cut health care costs, says Michael Snyder, director of benefits strategy, at Eastman Kodak Co., a manufacturer of chemicals, photographic equipment, and office imaging equipment, in Rochester, N.Y., to "have workers share in the financial burden." His company, which employs 132,600 people worldwide, is looking at such measures as raising deductibles, coinsurance, and employee contributions. By instituting changes such as those, corporations can cut their share of the health care dollar and indirectly lower costs by giving workers an incentive to shop for cost-effective medical care, Snyder says.

Excluding pre-existing conditions is also permissible, says McDevitt, "as long as you make sure that all pre-existing conditions are treated in the same fashion."

Another area to consider when cutting costs is dependent coverage. However, thre are some pitfalls to avoid. An employer can provide dependent coverage that is different from employee coverage, or it can provide no coverage for dependents. But an employer cannot treat dependents with different illnesses or conditions disperately. An employer also cannot refuse to hire someone because of the impact that person's dependent would have on the company's health insurance costs.

Hiring policies

Benefits plans pertain to hiring only in the sense that a disabled person cannot be denied employment because of the effect that employment would have on the company's benefits plan.

As a result part of the review process at Ben & Jerry's Homemade Inc., an ice cream manufacturer, in Waterbury, Vt., with 550 employees, included a book at hiring practices. Kathy Stigmon, personnel operations manager, changed some questions recruiters ask employees. "We did not discriminate because of medical conditions, but we altered a few questions to eliminate any impression that we did," Stigmon says.

The ADA allows companies to require workers to take a physician exam to ensure that they can perform the normal duties of their job. But exams should be given only after a conditional job offer is made.

Wellness programs

According to Maslen, wellness programs designed to maintain the physical health of employees are allowed under the ADA. However, companies should be careful that the programs do not have a disperate and negative effect on workers with disabilities. Certainly a voluntary program is safe. But companies that requires all people who have had heart attacks or all people who have had alcohol or drug problems to attend a wellness program "are tempting a lawsuit," Maslen says.

Maslen adds that wellness programs that offer incentives to stop smoking, are okay. "But if they penalize someone, they may not be."

Returning after a disability

One way to ensure compliance with the ADA while controlling benefits costs is to make it easier for workers on disability to return to the job.

Patricia Nazemetz, director of benefits at Xerox, says that her company recently changed its disability insurer. The contract required the insurer to recommend ways to make returning to work easier.

"The bottom line is that now we're relatively certain we're in full compliance. And the bonus is that we have saved at least a few dollars on disability coverage," she says.

COPYRIGHT 1993 A Thomson Healthcare Company
COPYRIGHT 2004 Gale Group