Among its myriad elements, the Affordable Care Act contains a breakthrough provision that, if implemented, could dramatically alter the way that health insurance coverage works for persons with disabilities.  [PPACA § 1302(b)(4)(B)]  This provision, applicable to health insurance products sold in the individual and small group markets and therefore subject to the essential health benefits (EHB) coverage standard, requires the Secretary of Health and Human Services to bar the use of insurance coverage rules that discriminate on the basis of disability.

However, final EHB rules issued on February 20, 2013, effectively leave this ban unimplemented.  A draft CMS document made available to the public on February 21 by Inside Health Policy suggests that the agency will monitor qualified health plans (QHPs) for potential discrimination.  But the monitoring process suggested in the draft excludes any mechanism for detecting one of the most potent forms of plan discrimination, the use of benefit designs and coverage determination procedures that cause the denial of coverage for children and adults whose disabilities prevent them from “recovering” from their disability.  Whether the ACA protections are left unimplemented remains to be seen.

The Statutory Text Of The ACA

The ACA’s EHB statute contains extensive and seemingly contradictory instructions to the HHS Secretary.  On one hand, the statute directs the Secretary to create an EHB policy that ensures that “the scope of . . . essential health benefits . . . is equal to the scope of benefits provided under a typical employer plan. . .”  [PPACA §1302 (b)(2)(A)] On the other hand, the statute directs the Secretary to modify the EHB package to take into account certain “considerations.”  Among these considerations is a prohibition against the use of “coverage decisions . . . reimbursement rates . . . incentive programs, or [the design of] benefits in ways that discriminate against individuals because of their age, disability, or expected length of life.”

Despite the seeming contradiction, it is possible to read the two provisions in a manner that aligns these two competing concerns.  In essence, the statute provides that a typical employer plan represents the starting point for the EHB package while also requiring the Secretary to apply “considerations” to modify the package in order to ensure that discrimination does not occur.

Since the EHB package already contains other statutory provisions that require modification of “typical” employer plans (e.g., the addition of service classes, including habilitation and pediatric vision and oral health services that already are not “typical” in an employer plan context), it seems eminently reasonable to interpret the EHB statute to require additional modifications aimed at preventing discrimination based on disability.  The Secretary concedes this much in her final rule, which reiterates the non-discrimination provision of the statute.

The Current Picture: How Insurers Discriminate Against Persons With Disabilities

Seeking to shield themselves against what they perceive to be excessive financial exposure, insurers have, over many years, perfected strategies for avoiding coverage of persons with disabilities, including outright eligibility exclusions based on pre-existing conditions, discriminatory pricing, discriminatory marketing practices, and discrimination in the design and implementation of coverage itself.  Discrimination does not stop at the point of enrollment or overt limitations and exclusions.  Insurers also can introduce more subtle, but potent, forms of discrimination that ensure that, once enrolled, plan members with disabilities receive coverage that is less effective and appropriate.  These types of discriminatory practices frequently come to light only when challenged in cases in which a denial of coverage is appealed.

For example, an insurer can define a benefit in a manner that excludes from its scope clinically appropriate care for certain disabilities, for instance limiting speech therapy benefits to people who need treatment to “restore” prior speech or “recover” lost speech.  Under this definition, coverage would be available to a 55-year-old stroke victim but not to a child whose cerebral palsy from birth has interfered with the development of speech from the outset.  Similarly, an insurer might use a generally applicable definition of medical necessity that includes only treatments that are necessary to improve function or recover lost function.  This definition of medical necessity would effectively bar physical therapy for a patient with multiple sclerosis for whom treatment is essential to maintain a current level of functioning or to avert the greater loss of function.  (See Note 1)

How The ACA Alters The Picture

The ACA disrupts insurance discrimination strategies in a number of ways.  The first and most obvious is the law’s prohibition against exclusion from insurance altogether on the basis of health or pre-existing condition.  The ACA also bars discrimination in pricing on the basis of health status (with certain exceptions for employer-sponsored wellness programs).  The ACA also prohibits insurers from imposing annual and lifetime benefit caps which reduce the value of coverage for people whose conditions merit more treatment expenditures.

The ACA’s prohibition on disability discrimination in the EHB market represents yet another extremely important effort to halt decades of harmful limitations that affect persons with disabilities and serious health conditions.  By barring benefit designs and coverage determinations (along with payment incentives) that discriminate, the EHB statute effectively seeks to halt insurer practices that place otherwise-covered benefits beyond the reach of persons with disabilities simply because they cannot “recover” in the normal sense of the term.

Federal Civil Rights Safeguards For Persons With Disabilities Offer No Protection Against Discrimination In Benefit Design

One might imagine that the Americans with Disabilities Act (ADA) and Section 504 of the Rehabilitation Act of 1973, both landmark laws in the protection of persons with disabilities, already bar these forms of insurance discrimination against persons with disabilities.  This is not the case, however.  The United States Supreme Court ruled in Alexander v Choate that Section 504 does not reach the content of Medicaid coverage, and therefore the state of Tennessee had the power to apply strict durational coverage limits on hospital care that reduced benefits below levels that were medically necessary for persons with disabilities.

Similarly, in Doe v Mutual of Omaha, the United States Court of Appeals for the Seventh Circuit held that the ADA does not reach the content of health insurance.  Doe  was a particularly shocking case: the insurer not only excluded all but $5,000 annually in treatment for HIV/AIDS and related conditions (a limit that would not be permitted under the ACA), but it also stipulated in its briefs and arguments before the court that there was no actuarial justification for drawing this type of discriminatory distinction.

Because federal civil rights laws do not reach the content of insurance coverage, the EHB statute represents a crucial breakthrough in the federal regulation of benefit design and decision-making.  The EHB bar against discrimination seemingly promises not only  that will people with disabilities have access to coverage, but that the coverage they receive will no longer be designed to exclude necessary and effective treatments on the basis of their disability through a subtle but effective “recovery” standard.

The EHB Final Rule

As was the case with the proposed rule, the final EHB rule simply parrots the statute.  The rule provides that “an issuer does not provide EHB if its benefit design, or the implementation of benefit design, discriminates based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health condition.” Unlike federal regulations implementing Section 504 or the ADA or Title VI of the 1964 Civil Rights Act, the final non-discrimination rule does not offer specific applications of this broad prohibition, leaving consumers, insurers, and insurance regulators without any guidance as to what HHS considers discrimination in benefit design or its “implementation.”

In the preamble to the final Essential Health Benefit regulation (pages 51-52), HHS provides a lengthy discussion regarding its failure to provide more detail as to what is meant by this prohibition, HHS states as follows:

[The final rule] would provide a framework and legal standard from which to develop analytic tools to test for discriminatory plan benefits.  Such analyses could include evaluations to identify significant deviation from typical plan offerings including such limitations for benefits with specific characteristics . . . . We believe that [the] range of prohibited discrimination [under the ACA] implicitly encompasses not just the categories of benefits included in the benefit design but also the implementation of their design . . . . Enforcement of [this provision] . . . first looks to states and then to the Secretary where a state does not substantially enforce.  The approach to nondiscrimination will reserve flexibility for both HHS and the states to respond to new developments in benefit structure and implementation and to be responsive to varying circumstances across the states.”

The HHS commentary is deeply problematic on several grounds.  First, HHS suggests that before discrimination can be halted, special analytic tools to measure the impact of insurer performance will be needed.  Yet discrimination in benefit design can be viewed with the naked eye, simply by looking at the benefit definitions and terms of coverage set forth in policies themselves.

Second, the commentary indicates that HHS is concerned only with discrimination that involves deviation from “typical plan offerings.”  But the point of the statute was its desire to overcome the discriminatory features of “typical” plan offerings where discrimination against persons with disabilities is concerned.

Third, in delegating the primary enforcement work to states (which is consistent with the structure of the Public Health Service Act, of which the non-discrimination provisions are a part), HHS nonetheless leaves states with a deeply incomplete and misleading view of not only the purpose of the EHB statute but its very terms.  States are led to believe that their job is to root out atypical behavior, when in fact the statute is aimed at a basic alteration of insurer practices.

Draft HHS Market Oversight Guidance

The draft guidance made public by Inside Health Policy suggests that in fact HHS is in the process of developing certain analytic tools to monitor discrimination.   These tools include  an “outlier analysis of QHP cost sharing” in relation to certain benefit classes including inpatient hospital stays, inpatient mental/behavioral health stays, specialist visits, pregnancy and newborn care, and specific conditions including behavioral health conditions.  In addition, the document notes that “CMS will collect attestations that issuers’ QHPs still not discriminate against individuals on the basis of health status, race, color, national origin, disability, age, sex, gender identity or sexual orientation, consistent with” the final rule.

The draft further states that “CMS will also review information contained in the ‘explanation’ and ‘exclusions’ sections of the plans and benefits template with the objective of identifying clearly discriminatory anomalies or wording.”  But the final rule already stipulates that what the agency is concerned about is deviation from typical conduct; thus, this analytic approach suggests that as long as discrimination falls into the “typical” category, such as imposing a recovery standard on benefit definitions and medical necessity standards, HHS will not pursue the conduct.

Concluding Thoughts

For the time being, implementation of the EHB non-discrimination statute appears to be dead in the water.  HHS’ decision effectively to ignore the plain terms of the law is even more ironic given a January 2013, federal court-approved settlement involving HHS and a nationwide class of Medicare beneficiaries in Jimmo v. Sebelius.  The Jimmo case involved the use of discriminatory coverage standards by HHS’ Medicare contractors; for years these standards were used to effectively deprive beneficiaries with disabilities from receiving otherwise-covered Medicare treatments simply because they could not meet an expectation of “improvement.”

The improvement standard, found nowhere in the Medicare statute or regulations, had been grafted on to the terms of coverage over the years by agency contractors, apparently without objection on the part of HHS.  The litigation, brought by the Center for Medicare Advocacy, resulted in a landmark settlement in which HHS has promised to assure that the application of this standard is halted in the case of beneficiaries who need treatment to maintain health and avert further deterioration, even if they cannot “improve.”  The Jimmo settlement makes it abundantly clear that HHS is well aware of this form of discrimination, since it has been permitting exactly this practice for years under its own insurance program.

It remains to be seen whether HHS truly intends to simply set aside the terms of the EHB non-discrimination statute and permit the perpetuation of “typical” insurer discrimination against children and adults with disabilities. But the notion that discrimination is all right as long as it is “typical” seems to us to represent an abandonment of the very protection that Congress intended to extend to persons with disabilities in the EHB-governed market.


Note 1. See generally, Sara Rosenbaum and David Frankford et al., Law and the American Health Care System (2d ed.), Foundation Press, NY, New York (2012); Rosenbaum, S., Teitelbaum, J., Hayes, K. “Crossing the Rubicon: The Impact of the Affordable Care Act on the Content of Insurance Coverage for Persons with Disabilities,” Notre Dame Journal of Law, Ethics & Public Policy, Issue No. 2. Vol. 25 (August 2011): 527-62.