Are Employer-Sponsored Health Benefit Plans Creating Discrimination in the Workplace?

Deborah Martin Norcross, Esq.
Peter P. Perla, Esq.

Labor and Employment Law Quarterly, Spring 2003,
published by the Labor & Employment Section of the
New Jersey State Bar Association

Most practitioners associate discrimination in the workplace with claims alleging wrongful discharge, failure to hire or promote, and hostile work environment. In the last several years, however, anti-discrimination laws increasingly have provided a basis for challenging coverage exclusions in employee-sponsored health benefit plans.

Recent court decisions interpreting Title VII of the Civil Rights Act of 1964 (Title VII), 1 42 U.S.C. § 2000e-2(a), the Pregnancy Discrimination Act of 1978 (PDA), 2 42 U.S.C. § 2000e(k) and the Americans With Disabilities Act of 1990, §2 et seq. (ADA), 3 42 U.S.C. §12101 et seq. have both narrowed and broadened health care coverage available to male and female employees, particularly in the areas of coverage for infertility treatments and access to contraceptive drugs and devices. Following is an analysis of how this body of law is developing.

Is An Employer-Sponsored Health Care Plan Required To Provide Coverage for Infertility Treatments?

Infertility is an unfortunate and common problem. Although treatments are available, they carry a high price tag and often are too costly for someone with no insurance or whose insurance plan specifically excludes these procedures. Insurers began excluding infertility treatments from health plans in the early 1990s. They argued that infertility was not an “illness,” artificial insemination was not a “treatment,” and treatment for infertility was not “medically necessary.”
4 James B. Roche, After Bragdon v. Abbott: Why Legislation is Still Needed to Mandate InfertilityInsurance, 11 B.U. Pub. Int. L.J. 215, 216 (citing Pamela Prager, Insurance Coverage for InfertilityTreatment (visited March 11, 2003) <http://www.inciid.org/legal.html>).

The legality of this reasoning was first tested by the U.S. Supreme Court’s decision in Bragdon v. Abbott. 5 524 U.S. 624 (1998). Bragdon did not specifically address an insured’s right to coverage for infertility treatments. Its significance lies in the Court’s holding that reproduction is a major life activity entitled to protection from discrimination under the ADA. 6 Id. at 639-40. The Court reasoned that “reproduction and the sexual dynamics surrounding it are central to the life process itself.” 7 Id. at 638.

To some, the Supreme Court’s recognition of reproduction as a major life activity seemed a logical stepping stone toward legally mandated coverage of infertility treatments. 8 James B. Roche, After Bragdon v. Abbott: Why Legislation is Still Needed to Mandate InfertilityInsurance, 11 B.U. Pub. Int. L.J. 215, 221.

Notwithstanding the ruling in Bragdon, however, the courts have not yet found that the exclusion of infertility insurance from an employer’s health care plan is a violation of the ADA.

For example, in Saks v. Franklin Covey Co., the U.S. Court of Appeals for the Second Circuit found that it was not unlawful discrimination for a health benefit plan to deny coverage for “infertility treatments that can only be performed on women.”
9 316 F.3d 337, 340-41 (2nd Cir 2003).

The plan at issue excluded coverage for surgical impregnation treatments to male and female employees. 10 Id. at 341.

The court reasoned that “[b]ecause male and female employees afflicted by infertility are equally disadvantaged by the exclusion of surgical impregnation procedures” the plan did not discriminate on the basis of sex. 11 Id. at 347.

Whether an insurer lawfully can exclude infertility coverage from an otherwise comprehensive health care plan is an issue that also has been addressed by some legislatures. New York and New Jersey each require that group health insurers cover medical expenses incurred in the diagnosis and treatment of infertility under certain circumstances.
12 N.Y. Ins.Law §3221 (McKinney 2002); N.J.S.A. 17B:27-46.1x.

The New Jersey statute provides that “[a] group health insurance policy which provides hospital or expense benefits for groups with more than 50 person, which includes pregnancy-related benefits, shall not be . . . issued . . . unless the policy provides coverage for persons covered under the policy for medically necessary expenses incurred in the diagnosis and treatment of infertility.” 13 N.J.S.A. 17B:27-46.1x.

The New Jersey statute also provides an exception for “religious employer[s].” 14 Id.

In New York, coverage for medical expenses incurred in the diagnosis and treatment of infertility must be made available to individuals between the ages of 21 and 44. Coverage for in vitro fertilization and vasectomy reversal, however, is not required. 15 N.Y. Ins.Law §3221 (McKinney 2002).

Although it still may be permissible for some employers to provide health care plans that selectively exclude infertility treatments from coverage, the courts have followed a different path where an employer’s health care plan excludes coverage for contraceptives.

Does An Employer-Sponsored Health Care Plan Have to Provide Coverage of Contraception?

On December 14, 2000, the U.S. Equal Employment Opportunity Commission issued a landmark determination addressing the issue of whether an employer-sponsored health care plan must provide coverage for prescription contraceptive drugs and devices where it covers other prescription drugs and devices. 16 U.S. Equal Employment Opportunity Commission, Commission Decision on Coverage of ContraceptionUnder Title VII (December 14, 2000), http://www.eeoc.gov/docs/decision-contraception.html; see also U.S.Equal Employment Opportunity Commission, Questions and Answers: Commission Decision on Coverageof Contraception, No. 288. The EEOC found “reasonable cause” to conclude that it is unlawful discrimination under Title VII and PDA for an employer to exclude coverage for prescription contraceptives in a health care plan it sponsors. 17 Id.

The Commission reasoned that since “prescription contraceptives are available only for women . . . [an employer’s] explicit refusal to offer insurance coverage for them is, by definition, a sex-based exclusion.” 18 Id.

In so holding, the Commission rejected employers’ arguments that they were not required to provide coverage for contraceptives because of “cost considerations” and because “their insurance plan covered only abnormal physical or mental conditions.” 19 Id.

Shortly after this EEOC determinations were announced, federal courts began handing down similar decisions. The case of Erickson v. Bartell Drug Company was the first to do so.
20 141 F.Supp.2d 1266, 1268 (W.D. Wash 2001)

The plan at issue in Erickson covered a majority of prescription drugs except for contraceptive devices. 21 Id. at 1268, n.1.

1 The court concluded that the plan discriminated on the basis of sex because it “create[d] a gaping hole in the coverage offered to female employees.” 22 Id. at 1277.

2 The Erickson court reasoned that “when an employer decides to offer a prescription plan covering everything except a few specifically excluded drugs and devices, it has a legal obligation to make sure that the resulting plan does not discriminate based on sex-based characteristics and that it provides equally comprehensive coverage for both sexes.” 23 Id. at 1272. (citation omitted).

3 In EEOC v. United Parcel Service, Inc., a male employee sued his employer under Title VII after being denied coverage for his wife’s oral contraceptive prescription under his employer-sponsored health benefit plan. 24 141 F.Supp.2d 1216, 1217 (D.Minn. 2001)

4 The employee alleged that the insurance plan in question was discriminatory because it excluded contraceptive coverage for all purposes, including treatment for female hormonal disorders, but did not exclude medical prescriptions for male hormonal disorders. 25 Id.

5 The employer moved to dismiss the complaint. 26 Id. at 1218.

6 The court denied the employer’s motion, finding that the allegations in the complaint sufficiently pled disparate impact and treatment claims under Title VII. 27 Id. at 1220.

7 Health care coverage continues to be tested and challenged in the court systems. On October 16, 2001, and January 11, 2002, separate class action suits were filed in the U.S. District Court for the Northern District of Georgia against Wal-Mart Stores, Inc. and CVS Pharmacy, Inc. 28 Nancy Montwieler, Judge Grants Female Wal-Mart Employees Class Status Challenging ContraceptivePolicy, Daily Labor Report No. 174 (September 9, 2002).

8 In the Wal-Mart case, plaintiffs allege that the denial of coverage for prescription contraceptive drugs and devices under their employee health insurance violates Title VII. 29 Nancy Montwieler, Judge Grants Female Wal-Mart Employees Class Status Challenging ContraceptivePolicy, Daily Labor Report No. 174 (September 9, 2002).

9 The plaintiffs in the CVS case also are challenging the contraceptive coverage available to them through their employer-sponsored health insurance. 30 http://www.plannedparenthood.com/articles/020702_insurance.html.

Legislation Is On The Horizon In The Private Sector.

Some federal employees are guaranteed contraceptive coverage in the health insurance plans provided through their employer.
31 U.S. Office of Personnel Management Retirement and Insurance Service, Benefits Administration Letter,No. 98-418 (November 6, 1998); see also Omnibus Consolidated and Emergency SupplementalAppropriations Act of 1999 (H.R. 4328, Public Law 105-277).

1 Since 1999, Congress has required all insurers who participate in the Federal Employees Health Benefits Program (FEHBP) to provide coverage for prescription contraceptives approved by the FDA where other prescription drugs also are covered. 32 Id.

2 Over 5 years ago, Sens. Olympia J. Snowe (R-ME) and Harry Reid (D-NV) along with Reps. Jim Greenwood (R-PA) and Nita M. Lowery (D-NY) introduced the Equity in Prescription Insurance and Contraceptive Coverage Act of 2001.
33 http:/www.agi-usa.org/pubs/journals/gr040510.html

3 If passed, the bill would mandate coverage of prescription contraceptives, devices, and contraceptive services under health care plans. 34 EPICC-S. 104 & H.R. 1111.

4 Under the bill, health insurers would be required to do the following: 35 Id.

• provide coverage for the 5 FDA-approved contraceptives and devices and also outpatient contraceptive services;
• abstain from denying eligibility to insureds because of contraceptive usage or, in the alternative, provide incentives to insureds to encourage them not to use contraceptives;
• stop penalizing health care providers who prescribe contraceptives or offering incentives to health care providers who withhold contraceptive drugs, devices or outpatient services; and
• stop charging higher deductibles and co-pays for contraceptive services.
  

Conclusion

Both federal and state law developments bear monitoring. The trend in the courts, and certainly the EEOC’s position, seem to be moving toward mandated coverage. Even employers who are not subject to the New Jersey law or the comparable law in another state, therefore, would be well advised to review their policies and at least consider whether what they are saving by excluding coverage for infertility treatment and contraceptives is outweighed by the risk of potential litigation.

Deborah Martin Norcross, formerly a partner at Jackson Lewis LLP in New York, is Of Counsel to Mason,Griffin & Pierson, P.C. in Princeton. Peter P. Perla is an associate with the firm.

This article was previously published in the Spring 2003 issue of Labor and Employment Law Quarterly, a publication of the New Jersey State Bar Association, and is reprinted here with permission.

   

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