The Americans with Disabilities Act

The Americans with Disabilities Act (ADA), which deals with employment, public services, public accommodations, and telecommunications, is the most far-reaching legislation ever enacted in this country to make it possible for disabled persons to join the mainstream of everyday life.

At the time the act went into effect in 1992, it was estimated that almost 45 million Americans are disabled, and nearly $300 billion of government resources were devoted annually to this group. Fifteen million of the disabled were of working age, but only about 30 percent of these were in the workforce, compared with 80 percent of the nondisabled.

As with any social legislation, the act provides benefits, including a better quality of life, for many disabled persons and annual savings in the form of decreased government payments to the disabled. However, there are also costs, many of which are borne by employers and some of which take the form of increased expenditures for employee benefits.

Title I of the ADA, which pertains to employment, makes it unlawful for employers with 15 or more employees to discriminate on the basis of disability against a qualified individual with respect to any term, condition, or privilege of employment. This includes employee benefits.

Congress gave the responsibility for enforcing Title I to the EEOC, which has numerous regulations and a lengthy technical assistance manual to help qualified individuals understand their rights and to facilitate and encourage employer compliance.

While the act has resulted in significant improvements in public accommodations and the availability of telecommunications for the disabled, the percentage of disabled in the workforce has increased only slightly. However, it should be noted that many employers hired the disabled before ADA. Although intuition might suggest that the disabled would be more likely than other employees to have conditions requiring ongoing medical care, many employers who have made an effort to hire the disabled have not found this to be the case. In fact, some employers feel that the disabled make excellent workers and actually save them money. With jobs more difficult to obtain for the disabled, there is the feeling that the disabled are less likely to switch employers (thus minimizing costs to train new employees) and may actually work harder to keep the jobs they have. Whether this situation will continue as more severely disabled persons enter the workforce and have more opportunities to change jobs is an unanswered question.

Effect on Employment Practices
The ADA defines a disabled person as one who has a physical or mental impairment that substantially limits one or more major life activities, such as caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, and learning. The EEOC specifically mentions the following as being disabilities: epilepsy, cancer, diabetes, arthritis, hearing and vision loss, AIDS, and emotional illness. A person is impaired even if the condition is corrected, as in the case of a person who is hearing-impaired and wears a hearing aid. The ADA does exclude from the definition of disability persons who are currently engaged in the illegal use of drugs. However, anyone who has successfully completed a supervised rehabilitation program or is currently in such a program is subject to the act's protection as long as he or she is not currently abusing drugs.

The act does not set quotas or require that the disabled be hired. It does, however, provide that a person cannot be discriminated against if he or she is able to perform the essential functions of a job with or without reasonable accommodation, which includes making existing facilities that employees use readily accessible and usable by individuals with disabilities. Reasonable accommodation may be as simple as rearranging furniture or changing the height of a work space to accommodate a wheelchair. (There are estimates that a significant percentage of the disabled can be accommodated with expenditures of $100 or less for each disabled person.) Reasonable accommodations do not include changes that would cause undue hardship for an employer. The act defines undue hardship as a significant difficulty or expense by the employer in light of such factors as the cost of the accommodation, the employer's financial resources, and the impact on other employees. With one exception, reasonable accommodation is for specific individuals for an individual job; it need not be made just because a disabled person may someday apply for work. The exception is that an employer must make facilities for applying for a job accessible to the handicapped and provide employment information that is usable by persons who are hearing-impaired or vision-impaired.

As a general rule, the ADA prohibits medical examinations or inquiries into a person's disability status prior to an offer of employment. Many questions that were previously asked of prospective employees are no longer allowed. For example, an employer cannot ask about prior illnesses or injuries, sick days used at a previous employer, prescription drugs taken, or the like.

The portion of the ADA pertaining to employment practices is lengthy and complex. However, it should be noted that this part of the act continues to be a source of many lawsuits and complaints to the EEOC. The vast majority of these lawsuits and complaints pertain to issues of hiring, termination of employment, and the failure to make reasonable accommodations. Employee benefits, on the other hand, have been a less significant issue.

Effect on Employee Benefits
The ADA was less precise with respect to employee benefits, and the original technical assistance manual was vague. However, the situation was significantly clarified in June 1993, when the EEOC issued interim enforcement guidance for EEOC investigators to use when investigating ADA claims pertaining to health insurance.

The ADA specifically allows the development and administration of benefit plans in accordance with accepted principles of risk assessment. The EEOC guidelines state that the purpose of the act is not to disrupt the current regulatory climate for self-insured employers or the current nature of insurance underwriting. Furthermore, its purpose is not to alter current industry practices in sales, underwriting, pricing, administrative and other services, claims, and related activities. The act allows these activities based on classification of risks as regulated by the states, unless these activities are being used as a subterfuge to evade the purpose of the ADA.

The 1993 guidelines stipulate that employees with disabilities be accorded equal access to whatever health insurance coverage the employer provides to other employees. Coverage for dependents is also subject to ADA rules, but the scope of coverage for dependents can be different from the scope of coverage that applies to employees. In addition, the guidelines state that decisions about the employment of a person cannot be based on concerns about the effect of the person's disability on the employer's health insurance plan.

The EEOC guidelines recognize that certain coverage limitations are acceptable. For example, a lower level of benefits than is provided for physical conditions is permissible for mental and nervous conditions. Even though such a limitation may have a greater impact on certain persons with disabilities, the limitation is not considered discriminatory because it applies to the treatment of many dissimilar conditions and affects individuals both with and without disabilities. Similarly, a lower level of benefits for eye care is singled out as acceptable. However, there have been a number of lawsuits on the issue of whether different benefits for mental and physical disabilities violates the ADA. The EEOC now feels that such disparities are a violation, but the courts that have heard these lawsuits have not agreed with this position.

The guidelines allow blanket preexisting-condition clauses that exclude from coverage the treatment of conditions that predate an individual's eligibility for benefits under a plan. The exclusion of experimental drugs or treatment and elective surgery is also permissible. The guidelines allow coverage limits for procedures that are not exclusively, or nearly exclusively, utilized for the treatment of a specific disability. This category includes, for example, limits on the number of blood transfusions or X-rays, even though such limits may adversely affect persons with certain disabilities.

However, disability-based provisions are not allowed. These include the exclusion or limitation of benefits for (1) a specific disability, such as deafness, AIDS or schizophrenia; (2) a discrete group of disabilities, such as cancer, muscular dystrophy, or kidney disease; and (3) disability in general.

If the EEOC determines that a health plan violates the ADA, the burden of proving otherwise is on the employer. However, the guidelines contain the following "noninclusive list of potential business/insurance justifications" that an employer can use to prove that a plan provision that has been challenged by the EEOC is not a violation of the ADA (Note that the quoted words are taken directly from the guidelines. While examples used in the guidelines answer some questions about the exact meaning of the words, their precise meaning is open to interpretation until clarified by regulation or the courts.):

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

The employer may prove that "the disparate treatment is justified by legitimate actuarial data, or by actual or reasonably anticipated experience, and that conditions with comparable actuarial data and/or experience are treated in the same fashion."

The employer may prove that "the disparate treatment is necessary 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." For example, the employer 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 alternative that would have avoided insolvency.

The employer may prove that "the challenged insurance practice or activity is necessary 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 copayments 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 selection, or (3) make the health insurance plan 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.

"If coverage for a disability-specific treatment is denied, the employer 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 disabled individuals who receive the treatment."

Nondiscrimination Rules
For many years, nondiscrimination rules have applied to employee benefit plans that provide retirement benefits. The purpose of these rules is to deny favorable tax treatment to plans that do not provide equitable benefits to a large cross section of employees. In effect, the owners and executives of a business cannot receive tax-favored benefits if a plan is designed primarily for them. Nondiscrimination rules in recent years have slowly been applied to various other types of employee benefit plans, but these rules, each of which is complex, have not been uniform.

Congress attempted to eliminate this lack of uniformity by adding Section 89 to the Internal Revenue Code as part of the Tax Reform Act of 1986. This code section was extremely far-reaching and complex, and it would have been very costly both for the government to implement and for employers to comply with. As a result, Section 89 was repealed in 1989, and all the old nondiscrimination rules it replaced were reinstated.