- Employers and insurers are alarmed about a recent federal appeals court
decision that the common practice of limiting mental-health benefits under
group disability policies may violate the Americans with Disabilities Act.
- They fear the ruling, by the Sixth U.S. Circuit Court of Appeals in
Cincinnati, could open a new line of attack for people who want to challenge
caps on mental-health benefits in both disability and medical-insurance
plans.
- The ruling comes as pressure is mounting on employers to provide mental-health
benefits comparable to those for physical ailments in their disability
and medical-insurance plans. Last year's health-insurance legislation,
for instance, will require many employers to eliminate lower dollar caps
on benefits for mental-health problems than for physical ailments in group
medical plans. That law, however, still allows other restrictions such
as higher copayments for mental-health benefits or limitations on therapy
sessions.
- New challenges under the Americans with Disabilities Act, which prohibits
discrimination on the basis of physical or mental disabilities, could present
an even greater threat to employers trying to limit mental-health coverage,
says Henry Saveth, an attorney and principal for benefit consultant Foster
Higgins. At Xerox Corp., Patricia Nazemetz, director of human-resource
practice, fears the company might have to lift a recently imposed mental-health
cap in its disability program if the Sixth Circuit decision is upheld.
- Indeed, in settling a suit brought under the ADA by a former employee,
the city of Phoenix last year dropped the mental-health cap in its disability
plan, which covers 12,000 employees. Philip Kundin, deputy personnel director
for the city, says he expects disability costs to rise by about 10% as
a result.
- The Sixth Circuit case was brought by Ouida Sue Parker, 55 years old,
a former Schering-Plough Corp. employee. She sued the pharmaceutical giant
and its disability insurer, Metropolitan Life Insurance Co., in 1994 after
MetLife terminated her benefits under the two-year cap on mental-health
benefits in the company's long-term disability plan. Ms. Parker, who had
worked for Schering-Plough since 1981, was working for the company's Schering-Plough
HealthCare Products unit in Memphis when she left in 1990 after being diagnosed
with depression.
- Two-year caps on mental-health benefits are a common feature of group
disability insurance, which provides salary replacement for workers sidelined
by illness or injury. Most disability policies cover physical ailments
until age 65.
- In its decision last fall, a three-judge appeals court panel said the
two-year limit could be challenged under the ADA and sent the case back
to federal district court to determine whether the cap violated the ADA.
- In the past, ADA claims against mental-health disability caps have
floundered because courts have said that people filing for disability aren't
eligible for protection under the portion of the law that bans discrimination
in the workplace. That provision was intended to protect disabled employees
who can perform their job duties, not people claiming they can't work because
of disabilities, courts have said.
But the Sixth Circuit said Ms. Parker was entitled to protection under
another part of the ADA, which prohibits discrimination against disabled
people in a "public accommodation." Insurers have contended that
part of the ADA requires them simply to make their offices accessible by
taking such steps as installing wheelchair ramps and audio-assistance devices
for the hearing impaired.
