Advocacy, Incorporated Handout Materials

HC5 — Discrimination In Insurance

October, 2000

Employers are not obligated to provide a health insurance plan to employees. But once an employer with 15 or more employees decides to offer insurance benefits, it must do so in a manner that treats everybody the same way. Employees with disabilities and their dependents (provided dependent coverage is offered) must have the same access to the plan as nondisabled employees and their dependents. Under the ADA and Texas state law, an employer generally may not categorically or arbitrarily limit coverage to an employee or family member based on the person's diagnosis (e.g., cancer or AIDS) or disability (e.g., cerebral palsy or schizophrenia). The insurer must have specific proof that a person's particular medical condition proses an unreasonable risk. However, there are some exceptions to this general principle. If the employer can show that coverage of an employee or family member will

  1. jeopardize the fiscal soundness of the health plan,
  2. cause the plan to reduce benefits for everyone, or
  3. result in a drastic increase in premiums, the employer may deny coverage.

However, the employer must have the supporting medical and financial data to justify such a denial.

Similarly, employer health plans may limit or deny coverage for pre-existing medical conditions based on the treatment costs, even though persons with disabilities are adversely impacted. A pre-existing condition, however, will never justify a decision to totally exclude employees or their dependents from insurance coverage. So, an employee with an illness or injury unrelated to a person's pre-existing condition may not be the basis for denial. A person with a pre-existing condition may not be denied insurance coverage for illnesses or injuries that are unrelated to the pre-existing condition. Furthermore, because federal and state laws, other than the ADA, regulate pre-existing condition clauses, an attorney should be consulted about what other laws may apply to a particular situation. For example, pre-existing condition clauses generally do not apply at all if the new employee just left a job where he had group insurance.

Apart from employer-provided health insurance plans, there are insurance policies that individuals can buy directly from a company or through an insurance broker. Unfortunately, individual applicants for health insurance have much less protection than employees covered by their employer's group plan. Federal appeals court for Texas has ruled that the ADA does not require health insurance companies to justify a decision to deny an individual insurance policy to a person with a disability. According to the federal appeals court, the protection the ADA extends to group health plans is not applicable to the contents of an individual insurance policy. In other words, insurance companies are only obligated to ensure that persons with disabilities have physical access to the insurance office or building--nothing more. This means that it is not illegal for an insurance company to deny health coverage to an individual applicant based on disability. Moreover, this reasoning appears to extend not only to health insurance but to a whole array of insurance products including life, auto, and property. Fortunately, in Texas, state insurance law makes it illegal for an insurance company to deny coverage when there is no business justification for such a decision. Consequently, both employer-provided health insurance and individually underwritten health care policies may not categorically exclude coverage to a person with a disability.

Discrimination in insurance is one of the most complicated areas of disability law. As described above, conduct by an insurer that is not discriminatory under federal law may still be illegal under other state laws governing insurers. Because the facts of your particular situation are important, it is always advisable to consult with an attorney who is familiar with insurance law and disability discrimination.

If you believe your employer has discriminated against you and if your employer has at least 15 employees, your rights are enforced by the Equal Opportunity Commission and the Texas Commission on Human Rights. Please contact Advocacy, Inc. for a copy of the handout, Employment Discrimination. If the insurance issue you wish to complain about does not involve employer- provided insurance, you can file a complaint with the U. S. Department of Justice. Please ask for Advocacy, Inc.'s handout How to File a Complaint Under the Americans with Disabilities Act.

And whether or not the insurance you wish to complain about is provided by an employer with at least 15 employees or insurance you attempt to buy for yourself or a family member, you can complain to the Texas Department of Insurance. You can send a letter with the following information:

Texas Department of Insurance
Consumer Services Division
P. O. Box 149091
Austin, Texas 78714-9091
1-800-252-3439
(512) 463-6515.

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