Health Insurance and the Morbidly Obese Employee

Can an employer introduce differentiated health insurance premiums for morbidly obese individuals without violating the Americans with Disabilities Act and the Connecticut Fair Employment Practices Act?

Brief Answer

An employer can charge morbidly obese employees a higher premium only if it can prove that the distinctions are based on sound actuarial principles, or are related to actual or reasonably anticipated experience, and that employees with other conditions that pose the same risks and costs are charged the same higher rate.

Discussion

I. Morbid Obesity Probably Covered by ADA and CFEPA.

Both the Americans with Disabilities Act (“ADA”), 42 U.S.C. §12101, and the Connecticut Fair Employment Practices Act (“CFEPA”), Conn. Gen. Stat. § 46a-60, prohibit disability based discrimination. Whether morbid obesity is a covered disability is unsettled, however, several cases indicate that plaintiffs may be able to state a cause of action by alleging perception based disability discrimination, or by showing their obesity is linked to an underlying physiological condition. Cook v. Rhode Island Dept. of Mental Health, Retardation , 10 F.3d 17, 1st Cir. 1993) (morbid obesity held to be perceived disability under § 503); Warner v. Asplundh Tree Expert Co. , No. 3-03-CV-1267, 2003 U.S. Dist. LEXIS 22329 (D. Conn. 2003) (morbid obesity found to be physical disability under CFEPA, and a perceived disability under ADA); and Connor v. McDonald’s Restaurant , No. 3:02CV382, 2003 U.S. Dist. LEXIS 4108 (D. Conn. 2003) (morbidly obese plaintiff found to have stated ADA and CFEPA perceived disability claim without pleading any underlying physiological disorder).

Given the evolving case law, and recent government pronouncements that morbid obesity treatments will be covered under Medicare, an employer should proceed under the theory that disability discrimination claims based on morbid obesity would be covered by both ADA and CFEPA.

II. Health Care Coverage Under ADA and CFEPA.

Generally, an employer may not discriminate against a qualified individual with a disability, on the basis of disability, with respect to fringe benefits. EEOC Compliance Manual, Chapter 3: Benefits, § I. Introduction (“Manual”). The ADA, however, permits employers to make disability based benefit distinctions where the distinctions are founded on sound actuarial principles, or are related to actual or reasonably anticipated experience. Id. Premium differences based on disability are unlawful unless the employer can show that the disability based distinction is not a “subterfuge” to evade the purposes of the ADA. Id. A “subterfuge” refers to disability based disparate treatment that is not justified by the risks or costs associated with the disability because they are not based on sound actuarial principles, or related to actual or reasonably anticipated experience. Id. at section IV, B. Whether a provision or premium differential is a “subterfuge” is determined on a case by case basis. Id.

Even where employers can produce actuarial data that demonstrates that the risks and costs of treatment of a condition justify differential treatment, employers must also show they have treated other conditions that pose the same risks and costs the same way. Id. See also, 29 C.F.R. 1630.16(f). Further, the actuarial data must not be seriously outdated and/or inaccurate, or based on erroneous assumptions that people with the condition pose greater risks. EEOC Interim Enforcement Guidance, Number 915.002, n.14, June 8, 1993. If there is evidence that an employer has treated other conditions differently from the disability at issue, the employer will be found to have discriminated by singling out a particular disability for disadvantageous treatment. Manual at § IV, B. Given that the courts rely on ADA interpretations when enforcing CFEPA, CFEPA’s approach to health care premiums should be read as being consistent with ADA.

Assuming obesity is a covered disability, an employer may charge a higher premium to morbidly obese employees only if it can prove that the higher rate is not a “subterfuge” by showing an actuarial justification for the higher rate, and that employees with other similar risk factors are treated similarly.

Alternatively, an employer can show that the disability based treatment is necessary to maintain the solvency of the plan, or that a failure to charge the morbidly obese a higher rate would increase the cost to other participants so substantially that the benefit plan would be effectively unavailable to a significant number of them. Id.

Conclusion

Given the evolving case law and the enforcement principles outlined above, an employer should not charge morbidly obese employees a higher medical premium, unless the higher rates are soundly supported by current, accurate actuarial data, and all other employees with similar risk profiles are also charged a higher premium.