Won't Rates Go Up If I Hire a Disabled Person?
How Health Insurance Rates Are Calculated
Do Disabled Workers Require Special Insurance?
Disability, Health Insurance and the Law
Related Links
Won't Rates Go Up If I Hire a Disabled Person?
Employers may consider hiring people with disabilities
but hesitate because they wonder if those individuals
will wind up increasing health insurance costs for
their companies. Although it is not lawful in the U.S.
and many other countries to not hire an individual on
this basis, it is likely that some hiring decisions
have unfortunately been made due to this fear.
What an employer may fear, specifically, is that a
disabled worker, having greater healthcare
expenditures, will cause the health insurance provider
to raise his company's premiums to account for the
added expense. The employer neither wishes to have the
cost of employee benefits rise nor to have to pass on
greater employee contributions to the cost just
because of one person. This concern decreases the
apparent value of the job candidate with a disability,
and, as a result, that person is passed over for the
job.
The fear may be real, but it could not be further
from the truth. The impact of disabled workers on
health insurance costs is negligible. Such a concern
among employers is entirely groundless.
This unnecessary fear is based on two basic
misconceptions. The first, and oddly less relevant, is
that people with disabilities get sick or need more
health care more often than normal. Disability is not
necessarily synonymous with ill health. Many
disabilities have no health effects other than that
which caused the disability. A deaf person is just as
likely to be in the peak of health as a hearing
person. Someone who uses a wheelchair may have no
other health care concerns than whatever caused the
paralysis or other condition that necessitated the
wheelchair. That cause may very likely have no ongoing
repercussions or need further treatment.
For example, my blindness is caused by Stargardt's
Disease, but it is a mistake to conclude that I will
need extra treatment because of it. It is not a
disease in that sense. It is a hereditary condition,
and I was born with it. There is no ongoing and
accelerating impact, and there is no treatment. Like
blindness due to an accident, the "disease" is more
accurately described as a condition. It just is. Any
health problems I have are utterly unrelated to it and
are no different from those of any other employee in a
company.
But even if an individual with a disability really
were "sicker" than others, it would likely have a
minimal impact on a company's insurance premiums --
due to how insurance rates are calculated. Health
insurance works on the principle that any given group
will have a mix of people who range from those who
never go to a doctor to those who have ongoing health
care needs. The vitality of a health plan depends on
the premiums of all in the pool paying for the higher
medical costs of the few people with greater needs.
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How Health Insurance Rates Are Calculated
Your individual company's health insurance rates are
calculated based on what is called actuarial
experience. An actuary is someone who specializes in
the math behind risk. This risk is referred to
as "experience" -- that is, the relationship, usually
expressed as a percentage or ratio, of claims to
premiums for a stated period.
If this sounds like gambling, you may not be
surprised that the first insurance company, Lloyd's of
London, was a coffee house where ship owners bet each
other whether their voyages to the New World would
arrive in one piece. In essence, an insurance provider
of any kind is betting with you that you won't need
their help, and you are betting you will.
Paul Stilp recently renewed the health insurance for
his organization, National Organization on Disability
(NOD). Of his 13 staff members, almost half have
disabilities. But these are not necessarily the same
people who use their health insurance frequently. And
working through a broker, NOD is able to buy insurance
as part of a large pool of small employers. "Our rates
just did go up 19 percent," Stilp points out, "but the
broker told us our disabled employees were not the
reason." Like other employers in the pool, NOD's
premium hike was based on the experience (the number
of claims) made by members of the entire pool.
The impact of one, two or even a few employees with
disabilities on your health care history will be so
negligible as to make no difference in your rates. You
are more likely to see your rates increase because of
an increase in the average age of your employees or
the pool's participants or the number of women of
childbearing age working for you or the experience of
other employers in your pool than your company's
employees with disabilities.
The most common cause of insurance premium rate
increases is medical inflation, which is about 10
percent or two to three times the rate of consumer
inflation in general. Rates go up because of higher
costs of doctor visits, hospital stays, and
pharmaceuticals overall. Disability is not a
significant factor in this medical inflation..
There are other ameliorating factors. About 97
percent of individuals with disabilities have
Medicare/Medicaid coverage, according to the
U.S. Department of Health and Human Services
(DHHS). In many cases, disabled individuals
who work may be able to continue to keep their
Medicare coverage at the same time they enroll in a
health insurance plan offered through an employer.
In the event of double coverage (through Medicare and
the group health plan), a federal requirement
called "Medicare Secondary Payer" (MSP) comes into
play. The MSP rules determine which plan is "primary"
(i.e. pays its benefits first). Basically, when a
person with a disability is on Medicare and enrolls in
a group health plan, that plan is primary, if the
employer has 100 or more employees. If the company
has fewer than 100 employees, then Medicare is primary.
In that fewer-than-100-employee situation, the group
health plan will actually pay out less in benefits
than it would if the person did not have Medicare.
So, there is no reason to believe that hiring a
disabled person will have a significant impact on your
rates. But that is not the only insurance concern
employers often have when it comes to hiring people
with disabilities.
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Do Disabled Workers Require Special Insurance?
Health insurance costs will not rise overall if you
hire a disabled person, but will she need different,
more extensive and expensive health insurance because
she is disabled?
Again, the answer is no. As I mention above,
disability and illness are not synonymous. Stilp
commented that one NOD employee, who happens
to use a wheelchair, is an athlete and very fit and
is very likely the healthiest person on the staff.
On the other hand, studies have shown that a
perception of poor health can influence the amount of
health care a person seeks. A study done by
DHHS shows that, while only about five percent
of nondisabled persons of working age described
their health as poor, nearly 50 percent of disabled
persons in the same age bracket did. Perhaps this is
the reason that adults with disabilities visit the
doctor's office more than twice as often.
In addition, "ADA (Americans with Disabilities Act)
Title V allows insurers and health benefit plans to
make health-related distinctions, provided that these
practices are not used as a subterfuge to evade the
purposes of the ADA," states the Job Accommodation
Network) (JAN).
Where those "health-related distinctions" are
permitted to insurers and health benefit plans, JAN
explains, "any coverage limits or exclusions based on
disability must be justified by sound actuarial data
or other legitimate business or insurance
justification." JAN offers the example of a person
who has AIDS: "Benefits for the treatment of AIDS at a
lower level than the cap applicable to the treatment
of all other physical conditions" may be illegal
since "the cost of AIDS is comparable to the costs of
other commonly covered conditions."
Nevertheless, special health insurance is not
required. "If an employer provides health insurance to
employees in general, the employer must provide equal
access to employees with disabilities," advises JAN.
Under the law, an employer must provide the same
health insurance benefits to a disabled employee as he
does to a nondisabled person in equivalent employment.
It is unlawful to provide less but not a requirement
to provide more. In other words, there is no need for
additional insurance. A nondisabled worker is just as
expensive -- on average, which is how rates are
figured -- to insure.
So, as an employer, you need not fear added cost due
to more extensive insurance coverage for workers with
disabilities.
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Disability, Health Insurance and the Law
As stated above, under the ADA, "if an employer
provides health insurance to employees in general, the
employer must provide equal access to employees with
disabilities," according to JAN.
There is only one exception to the requirement that
the disabled person's coverage be equal to a
nondisabled employee's, and the following is how JAN
describes it.
-
Plan sponsors may use accepted principles
of insurance risk classification and current and
accurate actuarial data but not data based on myths,
fears, stereotypes or false or outdated assumptions
about a disability. Disability-based limitations or
exclusions will not be considered to violate the ADA
if they are either:
- Based on legitimate actuarial data, or actual
or reasonably anticipated experience, and apply
equally to conditions with comparable actuarial data
and/or experience or
- Necessary because no alternative to a disability-
based distinction is available to prevent
an "unacceptable" change, such as:
- A drastic increase in premiums, co-
payments or deductibles;
- A drastic alteration in the scope of coverage
or level of benefits; or
- Other changes that would make the plan
unavailable to a significant number of other
employees, or so unattractive that the
employer could not compete in recruiting and
maintaining qualified workers due to the
superiority of health insurance plans offered
by other employers in the community, or so
unattractive as to result in significant
adverse selection.
It is important also to note that:
- The ADA also applies to employer-sponsored,
self-funded and administered employee welfare benefit
plans.
- Many states will have additional requirements. For
example, while the ADA does not prevent exclusion of
coverage for pre-existing conditions, regulations in
many states prohibit such exclusion for any employee.
- These provisions apply equally to a disabled
dependent of a worker, if the employer's insurance
plan covers other employees' dependents.
- These provisions also apply to "employment
agencies, labor organizations, and joint labor
management committees." See EEOC.
Making a hiring decision based on real or
mistaken fears of increased health care costs is
itself strictly unlawful. "Personnel decisions
regarding an individual with a disability may not take
account of whether, or to what extent, an individual
is or would be covered under a health benefit plan,"
JAN points out. "For example, an employer may not
refuse to hire a qualified applicant who has a
disability or has a dependent with a disability
because of concern about the potential impact on
health insurance costs."
But, more important, electing not to hire a disabled
person based solely on this unfounded fear is self-
defeating. There will be no impact on your health
insurance costs, and you will miss out on someone who,
based on statistical studies, will most likely, in
fact, have as good or better performance and
attendance than your nondisabled workers.
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See Related Links below, where you can get your health
insurance questions answered:
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Related Links:
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Are There Any Limitations on What an Insurance Company Can Charge for Insurance?
Free advice. Part of an extensive list of questions and answers about health insurance.
Disabled, The: Their Health Care and Health Insurance, Michele Adler, U.S. Department of Health and
This research paper compares access to health care and health insurance between nondisabled and disabled persons in the U.S.
EEOC NOTICE Number 915.002
Interim Enforcement Guidance on the application of the Americans with Disabilities Act of 1990 to disability-based distinctions in employer-provided health insurance. This is a full report about how the ADA affects health insurance in employee benefit plans.
Health Benefit Plans and the ADA, Job Accommodation Network
Very clearly and simply addresses all questions about requirements for providing health insurance for disabled employees.
Health Insurance Association of America
Insurance and Benefits, Hire This Ability
Another explanation of health insurance and ADA requirements.
Insurance.com
National Association of Insurance Commissioner
Your state's Office of the Insurance Commissioner, which you can locate through the National Association of Insurance Commissioners' web site.
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