National Alliance on Mental Illness
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(800) 950-NAMI; email@example.com
The United States District Court had jurisdiction over the case based upon the existence of a federal question. 28 U.S.C. § 1331. The case involves a civil action arising under the Americans with Disabilities Act, 42 U.S.C. §§ 12101 et seq.
United States District Court Judge Leonie Brinkema entered a final judgment disposing of all claims with respect to all parties on June 11, 1998. The United States Court of Appeals for the Fourth Circuit has jurisdiction over the appeal pursuant to 28 U.S. C. § 1291.
The National Alliance for the Mentally Ill (NAMI) is the nations leading grassroots advocacy organization solely dedicated to improving the lives of persons with severe mental illnesses. NAMI has more than 185,000 members and 1,200 state and local affiliates in all 50 states, the District of Columbia, Puerto Rico, and Canada. NAMIs efforts focus on support to persons with severe mental illnesses and their families; advocacy for nondiscriminatory and equitable federal, state, and private-sector policies; research into the causes, symptoms and treatments for brain disorders; and education to eliminate the pervasive stigma towards severe mental illnesses. An important aspect of NAMIs mission is to advocate for fair and non-discriminatory long-term disability insurance benefits for people with severe mental illnesses.
The Employment Law Center (ELC) is a project of the Legal Aid Society of San Francisco, a private, non-profit organization. The primary goal of the ELC is to improve the working lives of disadvantaged people. Since 1970, the Center has represented clients in cases covering a broad range of employment-related issues including discrimination on the basis of race, gender, age, disability, pregnancy, and national origin. The Centers interest in the legal rights of those with disabilities is longstanding. The ELC has and is representing clients faced with discrimination on the basis of their disabilities, including clients with claims brought under Title I of the Americans with Disabilities Act. The Center has also filed amicus briefs in cases of importance to disabled persons.
The American Psychiatric Association (APA), with more than 40,000 members,
is the nation's leading organization of physicians specializing in psychiatry. The APA and its members have an interest in promoting judicial awareness of accurate information about the diagnosis and treatment of mental illnesses and in ensuring that persons with debilitating mental illnesses not suffer the added disability of discrimination based on myths and prejudice.
Disability Rights Advocates (DRA) is a non-profit public interest law firm that specializes in class action civil rights litigation on behalf of persons with disabilities throughout the United States. DRA works to end discrimination in areas such as access to public accommodations, employment, transportation, education, and housing. In conjunction with the Disability Statistics Center at the University of California, San Francisco, DRA has published a report entitled "Disability Watch: A Status Report on the Condition of People with Disabilities in the United States."
The Disability Rights Education and Defense Fund (DREDF) is a national law and policy center dedicated to furthering the civil rights of people with disabilities. DREDF provides legal representation to people with disabilities in both individual and class action cases on a broad range of issues affecting those with disabilities, including cases brought under Title I of the Americans with Disabilities Act. In addition, DREDF has worked on major disability rights legislation and disability rights cases heard by the United States Supreme Court. DREDF played a central role in the effort to pass the Americans with Disabilities Act.
The National Association of Protection and Advocacy Systems (NAPAS) is a membership organization for the nationwide system of protection and advocacy (P&A) agencies. P&As are mandated under federal law to provide legal representation and related advocacy services on behalf of all persons with disabilities. In fiscal year 1997 alone, P&As served well over 700,000 people with disabilities through a variety of mechanisms: individual case representation, systemic advocacy, information and referral and education efforts.
The National Depressive and Manic-Depressive Association (National DMDA) is the nations largest patient-run, illness specific organization. Founded in 1986 and headquartered in Chicago, Illinois, National DMDA has a worldwide, grassroots network of 275 chapters and support groups. It is guided by a 65-member Scientific Advisory Board composed of the leading researchers and clinicians in the field of depressive illnesses.
The World Institute on Disability is a private, non-profit corporation focusing on major policy issues from the perspective of the disabled community. Founded in 1983 by persons who have been deeply committed to the independent living movement, WID functions as a research center and as a resource for information, training, public education and technical assistance.
Whether the district court erred in ruling that Kmarts long-term disability insurance policy, which contains a two-year cap on mental disability benefits but allows benefits for physical disabilities to age 65, creates a disability-based distinction which is a violation of Title I of the ADA.
Amici incorporate, by reference, the Statement contained in Harold Lewis brief to this Court.
The plain language of Title I and Section 501(c) of the Americans with Disabilities Act (ADA) bars disability based discrimination in employer provided long-term disability plans. Distinctions in coverage between "physical" and "mental" disabilities in these plans therefore violate Title I, unless based on sound actuarial data or experience justifying these distinctions. Moreover, the ADAs legislative history establishes that it is unnecessary to demonstrate that provisions in a long-term disability policy were written with specific intent to discriminate. Finally, Supreme Court authority establishes that a policy that distinguishes between categories of employees with disabilities according to generalized determinations lacking any substantial basis is unlawful. OConnor v. Consolidated Coin Caterers Corp., 517 U.S. 308, 116 S. Ct. 1307 (1996); Traynor v. Turnage, 485 U.S. 540, 108 S. Ct. 1372 (1988).
Kmart provided no actuarial or other experience-based evidence at trial to justify the two year cap on benefits for persons with mental disabilities in its long-term disability plan. In contrast, Harold Lewis provided compelling evidence that imposing such caps is unnecessary, runs contrary to prevailing scientific evidence, and is grounded in outdated, prejudicial stereotypes about mental illnesses. Kmarts long term disability plan, with its arbitrarily imposed limits on benefits for mental disabilities, without any actuarial justification, is a precise example of the type of disability-based discrimination that the ADA was enacted to eliminate. Consequently, the District Court correctly concluded that the two year cap on benefits for mental disabilities in Kmarts long-term disability plan constitutes disability-based discrimination, in violation of the ADA.
"The ADA is a comprehensive piece of civil rights legislation which promises a new future: a future of inclusion and integration, and the end of exclusion and segregation." House Comm. on the Judiciary, 101st Cong., 2nd Sess., H.R. Rep. No. 101-485(III), p. 26 (1990). The purpose of the Act is "to assure equality of opportunity," 42 U.S.C. § 12101(a)( 8), "to provide a clear and comprehensive national mandate to end discrimination against individuals with disabilities," 42 U.S.C. § 12101(b)(1), and "to bring persons with disabilities into the economic and social mainstream of American life." Senate Comm. on Labor and Human Resources, 101st Cong., 1st Sess., S. Rep. No. 101-116, p. 2. Consistent with this sweeping purpose, the District Court deemed unlawful the challenged and unjustified policy excluding some individuals -- solely on the basis of their disabilities -- from enjoying the critical long-term disability benefits provided others. Disability-based distinctions in long-term disability benefits are permissible under the ADA only if justified with sound actuarial data. As Kmart provided no such justification in this case, the District Courts ruling should be upheld.
I. TITLE I AND SECTION 501(C) OF THE AMERICANS WITH DISABILITIES ACT PROHIBIT DISABILITY-BASED DISCRIMINATION IN EMPLOYER PROVIDED DISABILITY INCOME INSURANCE.
In enacting the Americans with Disabilities Act, Congress found that "individuals with disabilities continually encounter various forms of discrimination, including outright intentional exclusion, the discriminatory effects of architectural, transportation, and communication barriers, . . . exclusionary qualification standards and criteria, segregation, and relegation to lesser services, programs, activities, benefits, jobs, or other opportunities." 42 U.S.C. § 12101(a)(5). Congress noted that Title I of this legislation "prohibits use of a blanket rule excluding people with certain disabilities . . ." Senate Comm. on Labor and Human Resources, 101st Cong., 1st Sess., S. Rep. No. 101-116, p. 27.
The plaintiff and appellee in this case, Harold Lewis, has endured just such a blanket exclusion. Mr. Lewis challenges the discriminatory terms of a disability insurance policy provided to him by his employer, Kmart Corporation. Mr. Lewis worked for Kmart Corporation for more than 10 years. During this time, he paid all of the costs of the premiums of this policy with the expectation that it would provide security to his family in the event he became unable to work due to disability. Solely on the basis of his disability -- depression -- the policy provided by Kmart discontinued his disability income benefits after 24 months. Conversely, all other recipients of income benefits remain eligible until age 65. The company can provide no actuarial justification for excluding Mr. Lewis. Based on his disability, Mr. Lewis has been excluded from the disability income program, and denied equal benefits.
The plain language of the Americans with Disabilities Act (ADA) bars disability discrimination in employer-provided disability income insurance. Title I of the ADA prohibits employers from discriminating against employees on the basis of disability "in regard to . . . employee compensation, . . . and other terms, conditions and privileges of employment." 42 U.S.C. § 12112(a). "Discrimination is prohibited against a qualified individual with a disability in all parts of the employment process. Specifically included as part of the employment process are job application procedures, hiring, advancement, discharge, compensation, and job training, and other terms, conditions, and privileges of employment." House Comm. on the Judiciary, 101st Cong., 2nd Sess., H.R. Rep. No. 101-485(III), p. 35-36 (1990) (emphasis added). Accordingly, under Title I, "an employer could not adopt a different pay scale, benefits, promotion opportunities or working area for employees with disabilities." Id.
The disability-based limitation challenged here falls directly within the scope of prohibited "discrimination," as defined by the express terms of the statute. Disability-based limitations in employer-provided insurance constitute prohibited "discrimination" because they "classify[ ]. . . [an] employee in a way that adversely affects the opportunities or status of such . . . employee because of the disability of such . . . employee." 42 U.S.C. § 12112(b)(2). Further, such limitations constitute "standards, criteria, or methods of administration that have the effect of discriminating on the basis of disability." 42 U.S.C. § 12112(b)(3)(A).
Under the Acts express terms, it does not matter if the discriminatory "term, condition, [or] privilege" of employment is administered by an entity other than the employer. Discrimination is explicitly defined as including "participating in a contractual or other arrangement or relationship that has the effect of subjecting . . . [an] employee with a disability to the discrimination prohibited by this title (such relationship includes a relationship with . . . an organization providing fringe benefits to an employee . . .)." 42 U.S.C. § 12112(b)(2). The Acts legislative history confirms that Title Is prohibition on discrimination covers "fringe benefits available by virtue of employment, whether or not administered by the covered entity." (emphasis added).
Title V, section 501, of the ADA confirms that Title I of the Act applies to employer-provided long-term disability insurance, and requires actuarial justification for disability-based limitations. That "safe harbor" provision delineates the circumstances under which employers may lawfully provide insurance plans that include disability-based distinctions which would otherwise violate the provisions of Title I: employers are not prohibited from "establishing, sponsoring, observing or administering 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," provided that the employer is not engaging in "a subterfuge to evade the purposes of Title I . . .." 42 U.S.C. § 12201(c)(emphasis added). Thus, under this rule, a disability-based plan term contained in employer-provided long-term disability insurance must be based on underwriting risks to avoid running afoul of Title I of the Act.
The legislative history further explains the requirement that employer-provided insurance be based on "underwriting risks." See Lewis v. Aetna Life Ins. Co., 982 F. Supp. 1158, 1165 (E.D. Va. 1997) (consideration of legislative history appropriate to determine meaning of § 12201(c)). Simply stated, consistent with the nondiscrimination provisions of the Act, a person with a disability cannot be subjected to limitations in the amount, extent or kind of long-term disability insurance coverage solely because of a physical or mental impairment, unless the limitations are based on increased risk supported by actuarial data or experience. This basic principle is clearly outlined in the major reports issued by the committees sponsoring the ADA: "Under the ADA, a person with a disability cannot be denied insurance or be subject to different terms or conditions of insurance based on disability alone, if the disability does not pose increased risks." House Comm. on Education and Labor, 101st Cong., 2nd Sess., H.R. Rep. No. 101-485(II), p. 136 (1990)(emphasis added); Senate Comm. on Labor and Human Resources, 101st Cong., 1st Sess., S. Rep. No. 101-116, p. 84 (1989).
The legislative history further specifies that to qualify under the exemption for increased underwriting risk, a plan may not rely on mere speculation about risk, but must offer sound actuarial data or experience:
The ADA does not require employers to provide "parity" in benefits or to abandon insurance plans that utilize sound actuarial risk factors. Rather, the ADA simply introduces a standard of objective fairness into the process of insurance rating. If a disability is to be deemed a risk factor, then there must be actuarial data showing actual increased risk. If a disability is to be the basis for limiting the amount, extent or kind of coverage provided, then that limitation must be supported by legitimate actuarial data. A disability cannot be treated differently than other traits posing similar risk. While actuarially based risk classification is permitted, the limitation of long-term disability benefits based only on speculation and unsupported assumptions about the risks or costs a disability might pose violates the Act. Indeed, Congress found that "many of the problems faced by disabled people are not inevitable, but instead are the result of discriminatory policies based on unfounded, outmoded stereotypes and perceptions, and deeply imbedded prejudices toward people with disabilities. These discriminatory policies and practices affect people with disabilities in every aspect of their lives, from securing employment, to participating fully in community life, to securing custody of their children, to enjoying all of the rights that Americans take for granted." House Comm. on the Judiciary, 101st Cong., 2nd Sess., H.R. Rep. No. 101-485(III), p. 25 (1990).
In this case, plaintiff Harold Lewis alleged and proved at trial that he was subjected to "treatment inferior to that accorded to others solely on the basis of [his] disability." Lewis v. Aetna Life Ins. Co., 982 F. Supp. 1158, 1166 (E.D. Va. 1997). At trial, defendant Kmart Corporation offered no evidence of actuarial data or experience in defense of its disability-based policy limitation. Lewis, 7 F. Supp. 743,747 (E.D. Va. 1998). Accordingly, judgment was properly entered in favor of Mr. Lewis.
II. A VIOLATION OF TITLE IS NON-DISCRIMINATION MANDATE DOES NOT REQUIRE A SPECIFIC INTENT TO DISCRIMINATE.
There is no requirement that a disability-based limitation in employer-provided long-term disability benefits be implemented with malicious intent to constitute a violation of the ADA. In enacting the ADA, the United States Congress specifically enumerated the wide range of actions and inactions that may constitute disability-based discrimination, finding that "individuals with disabilities continually encounter various forms of discrimination, including outright intentional discrimination, the discriminatory effects of architectural, transportation, and communication barriers, . . . failure to make modifications to existing facilities and practices, exclusionary qualification standards and criteria, segregation, and relegation to lesser services, programs, activities, benefits, jobs, or other opportunities." 42 U.S.C. § 12101(a)(5). According to the legislative history:
Senate Comm. on Labor and Human Resources, S. Rep. No. 116, 101st Cong., 1st Sess., at 6 (1989); House Comm. on Education and Labor, H.R. Rep. No. 485(II), 101st Cong., 2d Sess., at 29 (1990). The United States Supreme Court has noted that "[d]iscrimination against the handicapped was perceived by Congress to be most often the product, not of invidious animus, but rather of thoughtlessness and indifference -- of benign neglect." Alexander v. Choate, 469 U.S. 287, 295 (1985) (emphasis added). Indeed, "much of the conduct that Congress sought to alter in passing the Rehabilitation Act would be difficult if not impossible to reach were the Act construed to proscribe only conduct fueled by a discriminatory intent." Id. at 297. Accordingly, where meaningful access to a benefit is denied persons with disabilities, even where the challenged policy is facially neutral, a cause of action will lie for disability discrimination. Id. at 299-301 (facially neutral hospital days limitation contained in state health program upheld where disabled not denied meaningful access).
Moreover, unlike Choate, this case does not challenge a facially neutral policy limitation alleged to have a disparate impact upon individuals with disabilities, who might need more benefits. This case challenges an explicit disability-based limitation contained in employer-provided insurance, which on its face provides unequal benefits to individuals with mental disabilities. Where such a limitation is based not on actuarial data but mere speculation, the requirements of Title I are violated. No additional specific or malicious intent to discriminate is required.
The United States Supreme Court decision in Public Employees Retirement Systems of Ohio v. Betts, 109 S. Ct. 2854 (1989), interpreting the term "subterfuge" in the context of the Age Discrimination in Employment Act (ADEA), does not govern this case. That case analyzed a blanket exemption provided employers who "observe the terms of . . . any bona fide employee benefit plan such as a retirement, pension, or insurance plan, which is not a subterfuge to evade the purposes of this chapter . . .." Id. at 2860, citing 29 U.S.C. § 623(f)(2). Because a "bona fide" plan was defined as one that "exists and pays benefits," all plans were swept up in the exemption to the ADEAs nondiscrimination provisions, subject to a showing of subterfuge.
Section 12201 of the Americans with Disabilities Act, by contrast, exempts only those otherwise violative terms "that are based on underwriting risks," subject again to a showing of subterfuge. Unlike the statute analyzed in Betts, there is no blanket exemption in the ADA. Because Kmart Corporation has failed to offer any evidence to support a defense that its disability-based limitation is based on underwriting risks, the Court need not even consider the United States Supreme Courts interpretation of the term "subterfuge" included in another (and subsequently amended) statute.
The legislative history of the Americans with Disabilities confirms that the requirement that employer-provided long-term disability insurance be based on underwriting risks is not waived or affected in any way by the date on which a particular plan was adopted. All three committees with jurisdiction over the Act issued reports flatly stating that the requirement applied "regardless of the date an insurance plan or employer benefit plan was adopted."
In addition to the plain language of the safe harbor exemption -- which requires plan terms to be based on underwriting risks to avoid violating the Act, regardless of any findings regarding "subterfuge" -- and the language of all major committee reports, key sponsors of the legislation disavowed any broad exemption requiring malicious intent or shielding pre-Act plans. For example, Representative Waxman of California noted on the floor of the House that "the term subterfuge in the ADA should not be read as the Supreme Court read that term in Betts," and further that "there is no requirement of an intent standard under the ADA or a blanket exception for insurance plans that were adopted prior to the enactment of the ADA." Congressional Record, 101st Cong. 2nd Sess, 136 Cong Rec H 4614, *H4626 (Thursday, July 12, 1990)(emphasis added). Similarly, Senator Kennedy of Massachusetts stated on the floor of the Senate that the provisions language "does not connote that there must be some malicious or purposeful intent to evade the ADA on the part of the insurance company or other organization, and "does not mean that a plan is automatically shielded just because it was put into place before the ADA was passed." Congressional Record, 101st Cong. 2nd Sess, 136 Cong Rec S 9684, *S9697 (Tuesday, July 10, 1990)(emphasis added). Other legislators reiterated this understanding of the section:
Contrary to Kmarts assertions, the District Courts ruling does not depend upon these floor statements. However, because they are consistent with the plain language of the statute and with the committee reports, the statements may be considered as evidence of congressional intent to clarify the meaning of section 501(c). Brock v. Pierce County, 476 U.S. 253, 263 (1986). No broad exemption was intended.
III. SUPREME COURT AUTHORITY SUPPORTS THE DISTRICT COURTS RULING.
The District Court in this case based its decision on the statutory language of the ADA, as well as the Supreme Court construction of an analogous federal civil rights statute prohibiting age discrimination. In OConnor v. Consolidated Coin Caterers Corp., 517 U.S. 308, 116 S. Ct. 1307, 1301 (1996), the Supreme Court rejected the argument that age-based discrimination against an individual protected by the statute, and in favor of another also protected, is not actionable. "The fact that one person in the protected class has lost out to another person in the protected class is thus irrelevant, so long as he has lost out because of his age." Id. (emphasis added). Accordingly, Kmarts construction of the ADA must be rejected. Otherwise, "[u]nder defendants logic, an employer could hire an employee with a physical disability over a more qualified employee with a mental disability solely because of the mental disability, without violating the ADA, simply because both applicants were members of the protected class." Lewis, 982 F. Supp. at 1168.
This analysis is consistent with Traynor v. Turnage, 485 U.S. 535, 108 S. Ct. 1372 (1988). That case -- which predates the adoption of section 501(c) -- analyzed a challenge to a distinction among veterans receiving certain educational benefits from the federal government. Under a provision imposed not by a private company but enacted by Congress, veterans were permitted to use their benefits up to ten years from their discharge date. Those veterans who delayed their education because of "a physical or mental disability which was not the result of [their]own willful misconduct" were granted an extension for using the benefits. As a result of the exclusion of those disabled because of willful misconduct, individuals diagnosed with "primary alcoholism" were denied the extension. The Supreme Court upheld the distinction because the veterans denied the extension "are not . . . denied benefits solely by reason of [their] handicap, but because they engaged with some degree of willfulness in the conduct that caused them to become disabled." Id. at 1383. No such basis exists here for excluding Mr. Lewis from receiving his long term disability benefits. Indeed, the Traynor Court cautioned that "[i]t would arguably be inconsistent with § 501 for Congress to distinguish between categories of disabled veterans according to generalized determinations that lack any substantial basis." Id. (emphasis added). Under this reasoning, it is certainly inconsistent with Title I and section 501 of the ADA for Kmart -- a private corporation -- to impose unjustified disability-based distinctions. Because the challenged plan provision distinguishes between categories of disabled employees according to generalized determinations lacking any substantial basis, it is unlawful under OConnor and Traynor.
IV. KMART AMICIS CONTENTION THAT NONDISCRIMINATORY TREATMENT OF MENTAL HEALTH BENEFITS IN LONG-TERM DISABILITY POLICIES WOULD HAVE "PROFOUND AND PERNICIOUS CONSEQUENCES" RESTS ON UNSUPPORTED AND UNSUBSTANTIATED CLAIMS AND ASSUMPTIONS.
In their amicus brief submitted in support of Appellant Kmart, the American Council of Life Insurers (ACLI) and Health Insurance Association of America (HIAA) contend that requiring equitable coverage for mental and physical disabilities in long-term disability ("LTD") policies would have "profound and pernicious consequences." Amicus Brief for the American Council of Life Insurers and Health Insurance Association of America at 19, Lewis v. Kmart (No. 98-2179). There is no evidence in the record to support these assumptions. To the contrary, the arguments raised by ACLI and HIAA are contradicted by the record or depend on false assumptions and unfounded speculation.
ACLI and HIAA attempt to substantiate their claim with three arguments. First, they assert that mental disability claims are increasingly common and difficult to evaluate and diagnose. Therefore, they conclude, there is "great risk" that these claims will be "abused or over-utilized." Id. at 20. Second, they argue that the imposition of caps on long-term disability benefits for people with mental disabilities is a necessary mechanism for controlling costs stemming from mental disability claims. Id. Finally, they allege that if the ADA were construed to require equitable coverage of "mental" and "physical" disabilities in long-term disability policies, the likely consequence would be an increase in insurance costs, a decline of coverage for all disabilities, or a discontinuation of benefits. Id. at 21. The record contradicts all of these arguments.
The ability of psychiatrists to accurately diagnose major depression and other severe mental illnesses was testified to without contradiction at trial by John Rush, M.D., an expert psychiatrist who appeared on behalf of Appellee Harold Lewis at trial. When asked about the reliability of the diagnosis of depression by a qualified psychiatrist, Dr. Rush, a leading authority on depression, stated that "the reliability of DSM-IV major
depression is on the order of 80 to 85 percent." Joint Trial Exhibit at 0458. When asked how this compared with the diagnosis of conditions not in the DSM, Dr. Rush responded that they are comparable. He referenced a 1993 report report published in the American Journal of Psychiatry which, relying on a "huge body of evidence", concluded that major mental disorders "can be reliability diagnosed ." Id.
In his testimony, Dr. Rush also established that major depression can be evaluated and studied through a number of laboratory tests that distinguish the brain functions of depressed individuals from those who do not suffer from depression. These laboratory tests include EEG evaluations, functional brain imaging, structural brain imaging (such as MRIs) and endocrine tests. Joint Trial Exhibit at 0459. As with other medical disorders, e.g. heart disease, cancer, and diabetes, clinical depression is diagnosed through both the observation and evaluation of symptoms and through laboratory tests to detect or rule out secondary medical causes.
In asserting that the elimination of two year caps on long-term disability benefits for depression and other mental illnesses in long-term disability policies would lead to abuse or over-utilization of claims, ACLI and HIAA also disregard procedures contained in Mr. Lewis and other long-term disability policies which serve to ensure that only those individuals who truly qualify for these benefits will receive them. Indeed, Mr. Lewis Aetna plan contains a number of safeguards against abuse and over-utilization, including progressively stringent eligibility requirements, precise disability evaluation procedures, and requirements for recipients of long-term disability benefits to be reevaluated periodically to determine if they still qualify for these benefits.
Mr. Lewis long-term disability policy with Aetna stipulates that a policy-holder must be certified by Aetna as being disabled from working before he/she qualifies for payments under the plan. During the first 30 months of a disability period, a person qualifies for payments under the plan only if s/he is evaluated as "not able, solely because of disease or injury, to perform the material duties of your own occupation." Joint Appendix at 0068. After 30 months, the standard for qualifying for continuing payments becomes even stricter. To qualify, the policy holder must be determined to be "not able, solely because of disease or injury, to work at any reasonable occupation." Id. (emphasis added).
Moreover, to qualify for long-term disability benefits, the Kmart policy requires a policyholder to be under the care of a physician, which, in the case of a person asserting a claim based on a condition covered in the DSM, is a psychiatrist. Id. at 0082. Furthermore, the plan vests authority with Kmart to require applicants to submit to an independent medical examination by a physician of its own choosing. Failure to participate in such an examination is per se grounds for denying certification for benefits. Id. at 0068. These safeguards clearly place responsibility on policyholders like Mr. Lewis to demonstrate that they are truly disabled from working, and thereby minimize the chances that someone will be found eligible who is not qualified.
Finally, as an additional safeguard against abuse of long-term disability benefits, Kmarts policy requires beneficiaries to be periodically re-certified to ensure that they still qualify for benefits. Under the terms of the plan, the initial determination of eligibility for benefits need not be for an indefinite time period. Rather, the plan affords Aetna with complete discretion to certify benefits for a fixed period of time only, and to require beneficiaries to be periodically reevaluated for continuing eligibility.
ACLI and HIAA also assert in their amicus curiae brief that the imposition of limits on the extent or duration of mental disability benefits is a necessary step for controlling "substantial costs that would result from affording mental health benefits of unlimited duration." Amicus Curiae brief for the American Council of Life Insurers and the Health Insurance Association of America, Id. at 20. This is, at bottom, an empirical claim that Kmart chose not to defend with actuarial or other evidence in the District Court. In fact, neither the record nor relevant, real world practices provide the needed support for ACLI and HIAAs "necessity" defense of discrimination.
Kmart presented no actuarial evidence at trial. The only expert actuarial testimony was provided by Arthur Anderson on behalf of Appellee, Harold Lewis. Mr. Anderson testified that, in his opinion, there is not enough data available to make the determination that costs would go up if the two year cap on mental disabilities was lifted from Kmarts plan. Joint Transcript at 0506. Mr. Anderson also testified that the DSM is not used in the actuarial field, and consequently there is no information in that field that could be used to evaluate the risks in long-term disability policies associated with all of the conditions named in the DSM.
ACLI and HIAA base their arguments that uncapped long-term disability plans will lead to substantial cost increases on an HIAA survey of 1996 claims data revealing that the percentage of claims arising from mental disorders is substantially higher for uncapped policies. HIAA, Disability Claims for Mental and Nervous Disorders, 1996 (March, 1998), cited in Amicus Curiae brief for the American Council of Life Insurers and the Health Insurance Association of America, Id. at 20. This article and the information allegedly contained therein is neither part of the record nor widely available to the public. Therefore, amici have no way of evaluating the accuracy of this information. However, assuming arguendo that the data are true, it is nevertheless not relevant to determining whether uncapped long-term disability plans will lead to higher costs. The above-referenced HIAA report addresses only long-term disability claims, not costs. As discussed above, there are ample mechanisms built into the long-term disability plan at issue in this case to screen out claims that do not rise to the level of disability necessary to qualify for these benefits.
The availability and adoption by some employers of non-discriminatory group long-term disability plans is further evidence that these plans are not excessively costly for employers and beneficiaries. Indeed, Amicus NAMI, a charitable, non-profit organization, provides its employees with such a long-term disability policy. In doing so, NAMI has neither incurred significant increases in premiums for itself and its employees, nor has it deemed it necessary to impose caps or limitations on overall long-term disability coverage.
Moreover, at least two other cases challenging caps on mental disability benefits in long-term disability policies have been settled after employers agreed to provide uncapped plans. In one case, a settlement was reached with the defendant after it agreed to adopt an uncapped plan for all of its employees. Leonard F. v. Israel Discount Bank, Civ. Act. 95-6964, (So. Dist., N.Y., 2/17/98), (settlement agreement and stipulation of dismissal). See also, Harris v. City of Phoenix, Civ. Act. 95-0361, (Dist. Ct. Az., May 1, 1996), (consent decree abandoning differential in mental and physical disability benefits).
Finally, it must be noted that Aetna provides non-discriminatory plans to employers who request them. In fact, Aetna provides such plans to at least two employers with more subscribers than Kmarts plan, one with 80,000 subscribers, the other with 30,000 subscribers. Joint Appendix at 0506. However, Kmart continues to refuse to offer such a plan to its employees, despite the fact that it does not contribute a penny towards the premiums for long-term disability benefits. Indeed, it is hard to fathom why Kmart continues to limit its employees to a plan with a two year cap on benefits for mental disabilities, particularly in view of the District Courts opinion in this case.
Science has made significant advances in the last 20 years in the understanding and the treatment of severe mental illnesses such as major depression. In fact, successful outcomes achieved in treating major depression compare favorably with treatment outcomes achieved through conventional methods for treating heart disease, such as Angioplasty.
Due to these significant treatment advances, major depression no longer results in work absences lasting more than 24 months for most people. In his expert testimony at trial, John Rush, M.D. explained that, in 75% of all cases, the symptoms of major depression go into remission within nine to twelve months. Joint Appendix at 0472. Finally, according to Dr. Rush, the symptoms of major depression remain severe and debilitating in only about 5% of all cases. And, not more than half of this 5 percent, or 2-1/2 percent of all people diagnosed with major depression, experience long-term symptoms so severe that they are unlikely to be able to return to work within two years. Id. at 0473.
When the recovery statistics discussed above are considered in the context of receipt of long-term disability benefits, it is clear that very few individuals who qualify for these benefits based on mental disabilities will remain out of work for more than two years. In fact, actuary Arthur Anderson, appearing on behalf of the Appellee, Harold Lewis, testified at trial without contradiction that a company with a long-term disability plan covering 10,000 employees, with a six-month period before benefits commence, would expect to see three or four claims based on "mental/nervous" disorders in a given year. Joint Appendix at 0506. Kmarts long-term disability plan covers approximately 20,000 people. Id. Therefore, applying the statistics given by Mr. Anderson, it can be estimated that six to eight claims based on mental disorders are submitted per year. In linking these statistics with the return to work statistics provided by Dr. Rush in his testimony (see above), most of these claimants will probably return to work within two years of commencing long-term disability benefits. Therefore, very few of these individuals will require long-term disability benefits for more than two years.
In sum, Kmart Amicis arguments that eliminating two year caps on benefits for people with DSM conditions will lead to widespread abuses and runaway costs are grounded in faulty, stereotypical assumptions that have no basis in fact. They should therefore be disregarded by the Court.
V. STIGMA-BASED DISCRIMINATION IN THE FORM OF CAPS ON MENTAL DISABILITIES IN LONG-TERM DISABILITY POLICIES ARE OFFENSIVE, BURDENSOME AND COUNTER-THERAPEUTIC.
No actuarial data were introduced at trial to justify selective caps on "mental/nervous" benefits in long-term disability policies. Therefore, the only rational explanation that can be given for the existence of these limits is that they reflect long-standing stigma and discriminatory attitudes towards people who suffer from these disorders.
Historically, people with major depression and other mental illnesses have been stigmatized. This stigma permeates writings from medieval to modern times. Tr at 29. It was once thought that mental illness was related to being possessed with demons. Id. While such concepts are no longer prevalent, people suffering from major depression and other mental illnesses are still largely viewed as constitutionally weak, products of poor upbringing, and responsible for their own plight.
Today, we of course know better. We know that major depression is a real medical illness -- as real as heart disease, cancer and other organic conditions affecting the body. Despite this fact, long-term disability policies cover these disorders at lower levels. This is a glaring example of how prejudice and stigma against persons suffering from severe mental illnesses has been permitted to exist unabated. This is precisely the sort of discrimination based on stigma that the ADA was enacted to eliminate.
Discriminatory caps on mental disability benefits in long-term disability policies also have the potential to hamper the recovery of people with depression and other mental illnesses, thereby decreasing their chances of reentering the workforce. Without a stable stream of income derived from these benefits, individuals may be forced to forego desperately needed care, or they may be forced to seek care from systems financed with federal or state dollars. In addition to creating unnecessary dependence on publicly funded programs, services funded through Medicaid, Medicare or state mental health dollars are frequently inadequate to address the treatment needs of people with major depression and other severe mental illnesses.
Discriminatory caps in long-term disability plans such as Kmarts cause extreme financial and emotional hardship for claimants like Harold Lewis. Mr. Lewis paid into his plan for many years with the expectation that it would protect his familys financial stability if he were to become unable to work due to medical reasons. Unfortunately, Kmarts plan completely failed him in his hour of need, simply because his disability affects the brain rather than the heart, lungs, or pancreas. When all of the narrow legal arguments raised by Kmart and its amici are peeled away, it is apparent that the long-term disability policy at issue in this case was based on little more than discriminatory attitudes and practices towards people with severe mental illnesses.
For the reasons set forth above, the District Courts conclusion that Kmarts long-term disability plan constitutes discrimination in violation of Title I of the Americans with Disabilities Act should be affirmed.
Attorneys for Amici Curiae