Interim Enforcement Guidance on the application of the ADA to disability-based distinctions in employer-provided health insurance

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effect until rescinded or superseded. 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.