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Beware using medical costs as employment factor

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in Discrimination and Harassment,Firing,HR Management,Human Resources

As health insurance costs rise dramatically, it’s becoming harder and harder to provide employees with coverage. Now add to the equation the fact that many states allow insurers to set rates based on experience ratings, group demographics or a combination of those factors.

Put it all together, and it may be tempting to refuse to hire an applicant who could raise your insurance costs. By the same token, it may seem like a good idea to terminate employees who keep filing expensive health insurance claims for themselves or their dependents.

Don’t do it! The penalties for such discrimination can be high. Courts recently have begun clamping down on employers that act against medically expensive employees. Often, the ADA is the legal basis for such lawsuits.

It works like this: The ADA makes it illegal to discriminate against employees or applicants because of their association with disabled people. This so-called association discrimination includes refusing to hire someone (or firing an employee) because a family member has an expensive medical disability such as cancer, a birth defect or developmental difficulties that may mean huge medical bills for years to come.

As the following appeals court case shows, any direct discussion of costs may mean a lawsuit.

Recent case:
Phillis Dewitt worked as a nurse at Proctor Hospital. She received promotions and excellent evaluations that referred to her as an “outstanding clinical manager who consistently goes the extra mile.”

While Dewitt may have gone to lengths for the hospital, the hospital didn’t seem to have returned the favor. The hospital provided health insurance for employees and their dependents through a hybrid self-insurance and catastrophic coverage plan. The hospital covered medical expenses up to $250,000 per year, after which an insurance policy covered the rest.

The HR office regularly tracked expenses and noticed that Dewitt’s husband was racking up big bills for prostate cancer. At one point, Dewitt’s supervisor pulled her aside and suggested that she put her husband into hospice care rather than undergoing chemo and other expensive treatment.

Then, after a financial crisis in which the hospital invited managers to come up with creative solutions to budgeting, Dewitt was fired. Her husband died about a year later.

She sued, alleging association disability discrimination. The 7th Circuit Court of Appeals said her case should go forward. It reasoned that there was direct evidence of association discrimination. A jury will decide how much that might be worth. (Dewitt v. Proctor Hospital, No. 07-1957, 7th Cir., 2008)

Final note:
Employees can prove association disability in two ways. The first is through direct evidence, as in this case. The second is through a four-part test. The employee must show:

  1. She was qualified for her job.
  2. She was subject to an adverse employment action, such as termination.
  3. Her employer knew about her association with a disabled person.
  4. The employer took the adverse action because of the expense associated with a disabled family member, the job distraction inherent in having a sick family member or prejudice against disabled people.

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