SUPREME JUDICIAL COURT

Suffolk, ss.

No. SJC - 08787

GROUP INSURANCE COMMISSION, ET AL.,

__________________________________________________________________

SUPERIOR COURT DEPARTMENT, SUFFOLK DIVISION

FOR MENTAL HEALTH; NATIONAL ALLIANCE FOR THE MENTALLYILL/MASSACHUSETTS; AND, JUDGE DAVID BAZELON

CENTER FOR MENTAL HEALTH LAW

IN SUPPORT OF THE PLAINTIFF-APPELLANT

__________________________________________________________________

                    Susan Stefan

                    BBO # 600897

                    Center for Public Representation

                    246 Walnut Street

                    Newton, MA 02160

                    617-965-0776

                    Robert D. Fleischner

                    BBO #171320

                    Center for Public Representation

                    22 Green St.

                    Northampton, MA 01060

                    413-586-6024

Table of Authorities

Interest of Amici

Statement of Issues

Statement of the Case

Statement of Facts

Summary of Argument

Argument

    I.

THE NATURE OF DISABILITY INSURANCE AND ITS

A History of the Mental/Physical DisabilityDistinction in Insurance Coverage
9

B.
The Distinction Between Health Insurance andDisability Insurance
12

    II.

NO ACTUARIAL DATA SUPPORTS THE APPELLEES'

        A.

The Legal Relevance of Actuarial Data
16

        B.

There Is No Actuarial Evidence to Show

            with Dropping the Requirement for

            Hospitalization Would Drive Away

            Insurance Purchasers

        1.
No Actuarial Data Supports the Use

of Hospitalization as a Proxy for theInability to work Due to PsychiatricDisability
21

            2.

Little or No Reliable Actuarial Data

                Contention that Its Policy is

                Necessary

            3.

No Actuarial Data Supports the

Contention that the Nature of Mental

                Contributes to Vastly Increased

                Insurance Costs

            4.

Insurance Companies Rely on Myths,Stereotypes, and False Assumptions

                Ignoring Their Own Actuarial Data

    III.    EVEN IF COSTS ARE HIGHER, EQUALLY EFFECTIVE

        COST-CONTAINMENT STRATEGIES CAN BE DEVISED

        THAT DO NOT DISCRIMINATE ON THE BASIS OF

        PSYCHIATRIC DISABILITY

CONCLUSION

APPENDICES

Table of Authorities

CASES

Baranek v. Kelly, 630 F.Supp. 1107 (D.Mass. 1986)

Barone v. Hackett, 602 F. Supp. 481 (D.R.I. 1984)

Car Parts Distribution Center v. Automotive

Wholesaler's Ass'n, 37 F.3d 12 (1^st Cir. 1994)

Concerned Parents to Save Dreher Park Center v.

City of West Palm Beach, 846 F.Supp. 986

(S.D.Fla. 1994)

Dahill v. Police Department of Boston, 434 Mass. 233

(2001)

Doe v. Mutual of Omaha, 179 F.3d 557(7^th Cir. 1999)

Doukas v. Metropolitan Life, 950 F.Supp.422

(D.N.H. 1996)

EEOC v. CNA Insurance Co., 96 F.3d 1039 (7^th Cir. 1996)

Goldman v. Standard Insurance Company, 1999 U.S. Dist.

LEXIS 20191 (N.D.Ca. Dec. 20, 1999)

Leonard F. v. Israel Discount Bank, 101 F.3d 687

(2^nd Cir. 1996)

Lewis v. Aetna Life, 7 F.Supp.2d 743 (E.D.Va. 1998),

rev'd, Lewis v. Kmart, 180 F3d 166 (4^th Cir. 1999),

cert. den. 528 U.S. 1136 (2000)

Lynn Teachers Union Local 1037 v. Massachusetts

Commission Against Discrimination, 406 Mass. 515

(1990)

Parker v. Metropolitan Life Ins., 121 F.3d 1006

(6^th Cir. 1997)

Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104

(9^th Cir. 2000)

Winslow v. IDS Life Insurance Company, 29 F.Supp.2d

557 (D.Minn. 1998)

Worden-Gregoire v. Walmart, 2001 Mass.Comm.Discr.

Lexis 81 Nov. 28, 2001)

STATUTES and LEGISLATIVE HISTORY

29 U.S.C. § 1185a

42 U.S.C. § 300gg-5

G.L. c. 32A §10D

G.L. c. 151 B

G.L. c. 151B § 9

G.L. c. 175 § 47B

Ch. 184, Acts of 2002, line item 5095-0016

P.L. 102-321, 106 Stat. 323, 380, 388 (1992)

Senate Committee on Labor and Human Resources,

Sen. Rep. 116, 101^st Congress, 1^st Session (1989)

BOOKS, PERIODICALS, PAMPHLETS

11 Disability Compliance Bulletin (Vol. 6) p.5

(March 12, 1998)

Baker, Tom, On the Genealogy of Moral Hazard,

75 Texas Law Review 237 (1996)

Brooks, Clark, Unfair Disability Coverage Alleged:

San Diego Sued Over Insurance Benefits for Mental

Illnesses, San Diego Union Tribune, B-1,

Feb. 15, 1998

Department of Mental Health, Fiscal Years 2002-2004

State Mental Health Plan (2001)

EEOC, Interim Enforcement Guidance on the Application

of the Americans with Disabilities Act of 1990 to

Disability-Based Distinctions in Employer-Provided HealthInsurance, EEOC Notice No. 915.002 (June 8, 1993)

Gaulding, Jill, Race, Sex and Genetic Discrimination

in Insurance: What's Fair? 80 Cornell L. Rev.1646 (1995)

Harrison, B.M., Recent Developments: Mental Health Parity,

39 Harv. J. on Legis. 255 (2002)

Health Insurance Association of America, Disability Claims

for Mental and Nervous Disorders (July 1995)

Health Insurance Association of America, Source Book of

Health Insurance Data (1984-1985)

Health Insurance Association of America, A Survey of

Disability Management Programs, Dec. 1999

Kirchstein, R., Nat'l Institutes of Health, Insurance

Parity for Mental Health: Costs, access, and Quality,

Final Report to Congress by the National Advisory Mental

Health Council, (2000)

McCabe, Kathy, Hospital Opens Psych Unit: Whidden

Will Keep 44 Beds, Boston Globe (North), May 16, 2002

National Association of Insurance Commissioners, Model

Regulation on Unfair Discrimination in Life and Health

Insurance on the Basis of Physical or Mental Impairment

(1993)

Office of Technology Assessment, Medical Testing and

Health Insurance, OTA-H-384, (1998)

Palmieri, Frank, Firm Settles ADA Case Involving Mental

Health, Employee Benefit News (April 1, 1998)

Report of the Transactions of the Society of Actuaries,

Reports of Mortality, Morbidity, and Other Experience

(1984)

Sing, M., Hill, S., Smolkin, S. Heiser, N., The Costs

and Effects of Parity for Mental Health and Substance

Abuse Benefits, US DHHS Pub. No. (SMA) 98-3205

(Mar. 1998)

Spencer, B.F., Group Benefits in a Changing Society

(1981)

    Individuals who are served by or who are membersof these organizations have encountered discriminationin insurance. Consequently, amici have an interest inthe resolution of this case. Moreover, since eachorganization advocates for fair and non-discriminatoryinsurance benefits, including long-term disabilityinsurance, they are uniquely positioned to conveyauthority and arguments to this Court concerning thediscriminatory nature of the Commonwealth's long-termdisability policy.

    Founded in 1913, amicus Massachusetts Associationfor Mental Health (MAMH) provides education, advocacy,leadership, and information to agencies, individuals,and families on national, state, and local mentalhealth issues. MAMH uses its network of volunteers toadvocate, plan and advise on all aspects of mentalhealth, including the provision of community basedservices, insurance, housing, employment, and educationfor mental health consumers and their families.

    Amicus National Alliance for the MentallyIll/Massachusetts (NAMI/Mass)is this state's affiliateof the National Alliance for the Mentally Ill.NAMI/Mass is a grass roots self-help, support andadvocacy organization of consumers, families andfriends of people with serious mental illness, such asschizophrenia, bipolar disorder (manic-depressiveillness), major depression, obsessive-compulsivedisorder, and anxiety disorders. The Massachusettschapter has over 2,400 members. NAMI/Mass provideseducation about mental illness, supports increasedfunding for research, and advocates for adequate andnon-discriminatory insurance coverage, public services,treatment, housing, rehabilitation, and jobs for peoplewith severe psychiatric illnesses.

    Amicus, the Judge David L. Bazelon Center forMental Health Law is a national, nonprofit public- interest organization which works to advance the legalrights of people with mental disabilities and ensuretheir equal access to the services and supports theyneed for participation in community life. The BazelonCenter has successfully challenged many of the barriersto dignity and choice that confront people with mentalillness. The Bazelon Center works to clarify and upholdthe rights of people with mental disorders and toensure them equal access to health care, insurancecoverage, housing and employment.

    1.    Does the Group Insurance Commission policyviolate G. L. c. 151B, § 4(16), by denying plaintiff- appellant Currie's continued long-term disabilitybenefits solely because her disability is labeled asmental rather than physical?

On May 1, 2000, Ms. Currie, a state employee, filed her Complaint in the Superior Court Department.(Appendix [A.]95.) She challenged provisions of herGroup Insurance Commission (GIC) long-term disability(LTD) insurance policy which conditioned the receipt of benefits beyond one year on confinement in aninstitution in cases of disability based on mentalillness, while providing ongoing benefits withoutsimilar conditions to employees with physicaldisabilities. Her complaint alleged that the provisionsviolated her rights under the MassachusettsConstitution and the Commonwealth's disability anti- discrimination law.(A. 95.) On June 5, 2000, a SuperiorCourt judge preliminarily enjoined the defendants fromterminating Ms. Currie's LTD benefits. An amendedcompliant was filed (A. 191) and the injunction wastwice extended. (A.398, 440.)

    However, after hearing arguments on the parties'cross motions for summary judgment, the Superior Court,on February 6, 2002, dismissed the complaint. (TheSuperior Court's order [hereafter “Slip op.”] appearsin the Addendum to this brief [Addendum] at p. 4.)

    Ms. Currie appealed the judgment of the SuperiorCourt, and on May 24, 2002, was granted directappellate review by this Court. The Court solicitedamicus briefs on June 21, 2002.

    Ms. Currie's policy provides LTD benefits for oneyear for individuals disabled due to mental illness.(A. 667.) After one year, benefits cease unless theindividual is confined to a hospital or institution, inwhich case benefits continue for the duration of theconfinement.(A. 667.) Physically disabled employees areafforded benefits until they are able to return to workor reach the age of 65, without regard to whether ornot they are hospitalized. (A. 665, Addendum p.3 [Slipop. P.3].)

     Ms. Currie has been a state employee since 1985.(A. 76, Addendum p.2 [Slip op. p. 2].) She has paidpremiums to participate in the GIC's LTD plan. (A. 44,78.) Ms. Currie has schizophrenia (a mental disabilityunder the terms of the GIC policy) which, in June 1999,forced her from work. (A. 76-77, 83, 86.) Thoughhospitalized for a brief period, Ms. Currie hasreceived out-patient psychiatric care which has enabledher to avoid hospitalization. Nevertheless, she remains unable to return to work. (A. 77, 82, 89, 91.)

    Ms. Currie applied for LTD benefits under herpolicy and her application was approved in October1999. However, she was also informed that the benefitswere limited to one year or, thereafter, only if shewas confined in a mental hospital. (A. 48, 667,Addendum p.3 [Slip op. p. 3].) The one year of benefitshas expired.

                 Summary of Argument

    This brief supports Ms. Currie's claim under G.L.c. 151B. Amici contend that the Commonwealth may notfacially discriminate against its employees withpsychiatric disabilities by refusing to permit them topurchase effective protection against long-termdisability without providing actuarial evidence thatits limits on coverage for psychiatric disability arenecessary to maintain the viability of the LTD program.

    Amici make two arguments. First, the challengedprovision is not based on valid underwriting orclassifying risks, and without such justification itconstitutes illegal discrimination. (Infra at 16-20.)Second, the Commonwealth is not free to meet itslegitimate cost-containment goals by choosing the mostdiscriminatory option among a host of possiblealternatives to control costs in its long-termdisability program. (Infra at 31-34.)

    The GIC cannot show an actuarial basis to justifythe need for a differentiation in coverage betweenpsychiatric and physical disability as drastic as theone challenged in this case. While it is commonlybelieved that insurance companies have extensivelyresearched and validated data supporting distinctionsin coverage, this is not necessarily the case. (Infraat 10-16.) Defendants in cases challenging disparitiesin insurance coverage generally do not defend byshowing a sound actuarial basis for their policies,but--as in this case--by denying that they need to showany actuarial basis for their policies at all. Amicicontend that under Massachusetts law , if the GIC canshow no actuarial basis for disparity in disabilitycoverage protection that facially discriminates againsta protected class, it cannot be entitled to summaryjudgment. (Infra at 20-31.)

    The GIC's primary defense is based on federalcourts interpreting the Americans with Disabilities Act(ADA) . For a variety of reasons, federal courts inother circuits interpreting the ADA, which has a “safeharbor” provision inapplicable to disabilitydiscrimination under G.L. c. 151B, have rarely calledupon defendants to provide any actuarial rationale incases involving psychiatric disability. (Infra at 18-19.) In any event, this court has not interpreted G.L.c. 151B in lock-step with the ADA when the intent ofthe Legislature and the interpretations of MCAD havepointed in different directions, as they do here . Inaddition, the First Circuit's interpretation of theADA's coverage of insurance policies conflicts witheach of the cases cited by appellees from othercircuits. (Infra at 18-20.)

    Amici agree that maintaining a viable LTD programfor the Commonwealth's employees is a legitimate stateinterest, but disagree that this resolves the issuebefore this Court. The crux of the question under G.L.c. 151B is whether the discriminatory policy at issuein this case is necessary to maintain the viability ofthe LTD program for the Commonwealth's employees. (Infra at 20-31.)

    The marginal increase in costs attributable topaying disability benefits to people with psychiatricdisabilities living in community settings rather thanin hospitals is not so substantial as to threaten theviability of the LTD program, and there are many othercost-containment strategies available that would notdiscriminate so starkly against people with psychiatricdisabilities. Amici contend that the State violatedG.L. c. 151B when it chose the most discriminatorycost-containment strategy in the face of explicit statepolicy to the contrary, and when other, lessdiscriminatory means were easily available. (Infra at31-34.)

    A A.

A History of the Mental/Physical DisabilityDistinction in Insurance Coverage

    As the civil rights movement gained force, an“anti-discrimination” model (rather than “fairdiscrimination”) was used with some success tochallenge insurance company practices that adverselyaffected suspect or quasi-suspect classifications, suchas ethnic minorities and women. More recently, theanti-discrimination model has been invoked to restrictthe widespread practice of refusing to sell life,health, or disability insurance to women who arevictims of domestic violence, and to prohibit insurersfrom using genetic screening to deny coverage toindividuals who are highly likely to develop breast cancer, Huntington's Chorea, and other diseases forwhich genetic markers have been discovered.   (See footnote 2) 

    The fair discrimination and anti-discriminationmodels generally share the assumption that insurancecompany policies are actuarially sound. Women who arevictims of domestic violence and people who havegenetic markers for certain diseases, are, in fact,more likely to file medical, disability and lifeinsurance claims. Accordingly, arguments in favor ofequal access to health and disability benefits forpeople with psychiatric disabilities are often framedin anti-discrimination terms, essentially concedingthat the underlying actuarial basis for discriminationis valid.    However, a more thorough examination of insurancecompany practices toward people with psychiatricdisabilities shows that these decisions are often basedon outdated studies, draw the wrong conclusions fromgood studies, or even rely on precisely the sorts ofirrational stereotypes associated with “unfair”discrimination.

    Group long-term disability coverage is arelatively new entrant to the insurance field. It beganto be written in the early 1960s as an adjunct to grouphealth insurance.   (See footnote 3)  Thus, exceptions and exclusions inhealth care coverage were generally adopted into thenew long-term disability coverage without rationale orresearch. Health care coverage exclusions for “mentaland nervous” conditions were, in turn, based not onresearch but apparently on one disastrous individualexperience:

In the early days of major medical plans, it wasnot common to have any special limit on mental andnervous disorders. However, the employees of alarge publishing company in New York City (wherethere is no shortage of psychiatrists) helped tochange that practice when they discovered that themajor medical plan would pay most of the expensesincurred while visiting a psychiatrist. Thecarrier suffered large losses on the case andsubsequently introduced the mental and nervousdisorder limitation.   (See footnote 4) 

    Subsequent carrier limitations on mental andnervous disorders followed suit, without researchingwhether the experience of this particular carrier hadany bearing on the populations of people they covered.These health insurance exclusions were carried overinto the long-term disability product, without anyconsideration of the distinctions between healthinsurance and disability insurance.

    B.

The Distinction Between Health Insurance andDisability Insurance

    There are a number of relevant distinctionsbetween health insurance and disability insurance. Mostobviously, health insurance pays for health treatmentfor employees: therapy, medication, hospitalization,testing, and emergency care. Its costs are related tothe costs, mode and frequency of treatment. Disabilityinsurance, on the other hand, replaces income for aformer employee who is currently--although notnecessarily permanently--unable to work. The amount ofdisability income collected is based on pre-disabilityincome level and not on the type or severity of thedisability suffered, the modality of its treatment, orits expense.

    Because so many fewer workers become disabled thanrequire medical treatment, disability insurance is amuch smaller program in terms of costs and expenses.For example, plans that have a six-month eliminationperiod before commencement of benefits record a totalincidence of claims--mental and physical--of just 3.59per thousand.   (See footnote 5)  Generally, claims for benefits based onpsychiatric disabilities with more generous limitationsthan GIC's run about 7 to 8 percent of all claimsfiled.   (See footnote 6)  Therefore, if GIC has 38,000 covered employees,it probably receives between nine and ten claims basedon psychiatric disability per year. Because there areso few claims, it is easy to use case management,rehabilitation, and utilization review to control costsassociated with those claims--techniques which a HealthInsurance of America Association study show save $13.00for every dollar invested.   (See footnote 7) 

    In addition, while employers typically pay asubstantial amount for health insurance premiums,disability insurance programs are often--as is the casehere--elective and paid for entirely by employees.Thus, the GIC's refusal to change the terms of theprogram is not based on its own costs, but on theprediction that extra premium cost would drive awaysufficient numbers of the currently participatingmembers to make the entire program unaffordable.However, the GIC has produced no data on what the extracost would be, and what marginal additional cost wouldmotivate current purchasers of disability insurancecoverage to cease coverage entirely. There is nothingto suggest that those employees who choose to pay fordisability insurance would refuse to continue electingcoverage.

     The often cited moral hazard   (See footnote 8)  and adverseselection   (See footnote 9)  arguments are also different in healthinsurance and disability benefits: paying disabilitybenefits for psychiatric disabilities does notencourage people to receive additional treatments suchas psychotherapy that they might not otherwise seek.Because of the cost of health care, and because healthinsurance covers entire families, with each memberpotentially having costly health conditions, it is alsomore likely that people will adversely select forhealth insurance coverage than for disability coverage.

    The distinctions between health insurance anddisability insurance have led the Equal EmploymentOpportunity Commission (EEOC) to take the position thatdisparities between coverage for physical andpsychiatric disabilities in health insurance are notforbidden by the Americans with Disabilities Act, butthat such disparities in coverage in disabilityinsurance do violate the ADA.   (See footnote 10)  II. NO ACTUARIAL DATA SUPPORTS THE APPELLEES' POSITION

    Despite the differences between health insuranceand disability insurance, the arguments that are putforward in favor of limitations on coverage forpsychiatric conditions for both forms of insurance aresimilar.

    Insurers usually argue that their practice ofcharging differential rates or excluding certaincategories of people or losses from coverage are simplyreflections of economic reality. People who appear tobe discriminated against are treated differentlybecause they pose objectively greater risks of loss.The principal arguments appear to be that mentalillnesses are more subjective, more difficult todiagnose, more difficult to treat, and that it isharder to determine the line between “true disability”and “non-disability.”

    A. The Legal Relevance of Actuarial Data

    The GIC argues that the decision to drasticallylimit coverage for people with psychiatric disabilitiesneed not be supported by actuarial data, or indeed anyevidence at all. See Defendant's Summ. Jud. Memo., p.9. This argument was made in the section of thatmemorandum devoted to constitutional claims. Whateverthe validity of the argument in that section, amicicontend that under G.L. c. 151B, appellees must presentactuarial data supporting their facially discriminatorypolicies in order to show that eliminating thesepolicies would fundamentally alter their program .

    Positions such as the GIC's relating to coverageare common: “Kmart has not met this burden [ofactuarial justification] and acknowledges that it hadno actuarial justification [for picking thediscriminatory plan].” Lewis v. Aetna Life,7 F.Supp.2d743, 747 (E.D.Va. 1998), rev'd, Lewis v. Kmart, 180 F3d166 (4^th Cir. 1999), cert. den. 528 U.S. 1136 (2000). See also, Doe v. Mutual of Omaha, 179 F.3d 557 (7^thCir. 1999)(defendant stipulates that no actuarial datasupports its restrictions on AIDS coverage).

    Defendants have not been required to show anyactuarial basis for their decisions because federalcourts in other circuits interpreting the ADA haveaccepted defenses which are not acceptable under FirstCircuit and Massachusetts law. For example, one of thecases cited below by the GIC holds that discriminationcharges against insurance companies under the ADA mayonly be brought in the area of physical accessibility.Parker v. Metropolitan Life Ins., 121 F.3d 1006 (6^thCir. 1997)(en banc). Other cases cited by appelleeshold that only employees who are able to work havestanding to sue under Title I for employmentdiscrimination, even relating to provisions indisability insurance. EEOC v. CNA Insurance Co., 96F.3d 1039, 1044 (7^th Cir. 1996). Still other courtshave decided that the ADA's safe harbor provisionspreclude liability . Weyer v. Twentieth Century Fox FilmCorp., 198 F.3d. 1104, 1115(9^th Cir. 2000).

    However, under both First Circuit precedent andMassachusetts law, none of these precedents have force.Employees who are no longer able to work may recover ondiscrimination claims, Worden-Gregoire v. Walmart, 2001Mass.Comm.Discr.LEXIS 81 at *17 (Nov. 28, 2001)(findingfor plaintiff even though her multiple sclerosisrendered her unable to work), and this Court has heldthat the Legislature intended the safe harborprotection applies only to age discrimination ininsurance. Lynn Teachers Union Local 1037 v.Massachusetts Commission Against Discrimination, 406Mass. 515 (1990). Thus, most of the ADA precedentscited by the GIC below are inapplicable toMassachusetts law.

    The First Circuit's decision in Car PartsDistribution Center v. Automotive Wholesaler's Ass'n,37 F.3d 12 (1^st Cir. 1994) holds that an insurer suchas the GIC may be sued under the employmentdiscrimination title of the ADA if it functions as anemployer or acts on behalf of the employer in providingor administering employment benefits such as insurance.Id. at 17. The First Circuit implicitly rejectedarguments that the contents of insurance policies arenot subject to the ADA, and that employees who nolonger can work may not sue under the ADA. See also,Barone v.Hackett, 602 F.Supp. 481, 483 (D.R.I.1984)(state agency that administers benefits may besued as “employer” under Title VII); Baranek v. Kelly,630 F.Supp. 1107, 1113 (D.Mass. 1986).

    Thus, the federal precedents cited by appelleeshave little force in the First Circuit, and even lessapplicability to Massachusetts law. Under Massachusettslaw, amici contend, defendants will finally have toshow that there is an actuarial basis for theirallegedly non-discriminatory actuarial decision:choosing a policy that singles out psychiatricdisabilities and the people who suffer from them fordrastically adverse treatment.

    B B.

There Is No Actuarial Evidence to Show Thatthe Increase in Cost Associated with Droppingthe Requirement for Hospitalization WouldDrive Away Insurance Purchasers

    The refusal to extend disability insurancecoverage to people with psychiatric disabilities islargely based on stereotypes and unfounded assumptions,precisely the kind of discrimination that G.L. c. 151Bprohibits and was designed to combat. The General Courthas instructed that this statute is to be construedliberally to accomplish its remedial purposes. G.L. c.151B § 9. As this Court has noted, “Surely one aspectof that remedial purpose is to encourage impairedpersons to overcome or mitigate their disabilities.”Dahill v. Police Department of Boston, 434 Mass. 233,240 (2001).

    Ms. Currie, who is diagnosed with schizophrenia,is seeking to overcome her disability. Without incomeprotection during periods of disability, her chances ofaccomplishing this goal are significantly diminished.If she worked for most other employers, she would beeligible for disability benefits under the federalSocial Security Disability Insurance program withouthaving to be hospitalized. Because she is employed bythe Commonwealth and does not participate in the SocialSecurity system (A. 41, 79), her access to meaningfulincome protection through group long-term disabilityinsurance has been foreclosed, simply because she has apsychiatric disability.

        1.

No Actuarial Data Supports the Use ofHospitalization as a Proxy for theInability to Work Due to PsychiatricDisability

    In claims involving psychiatric disability, thesingle argument that is not also applicable to healthinsurance coverage is the uncertainty of determiningjust when a person with a psychiatric disability is“disabled enough” to warrant coverage for inability towork. Because of this alleged difficulty, it is argued,hospitalization serves as a screening mechanism andproxy for true disability in the case of psychiatricdisability.

    This could be true for one of two reasons: that itis so difficult for mental health professionals todetermine actual disability in a patient thathospitalization serves as a better proxy for such adisabling condition than a physician's judgment, orthat people are more disposed to malinger long-termpsychiatric disability and physicians cannot detectthese malingerers.

    However, no data supports either of thesecontentions. By contrast, much data exists to supportthe opposite conclusion: that the requirement ofhospitalization simply serves as an artificial anddiscriminatory limitation on the number of potentialapplicants for disability insurance rather than anactuarially supported reflection of the number ofemployees so severely disabled by psychiatricconditions that they cannot work.

    In Massachusetts, in particular, the number ofpsychiatric beds available in hospital settingsrepresents a tiny fraction of the number of people whoare so disabled by psychiatric conditions that theycannot work. The Department of Mental Health, usingnational epidemiological studies, has estimated that5.7% of the population suffer from “serious mentalillness.”   (See footnote 11)  Based on 1990 census data, that is 260,173Massachusetts citizens.   (See footnote 12)  There are about 3,700inpatient hospital beds, both private and public,available in Massachusetts: about 1100 in the publicsystem and 2590 private hospital beds.   (See footnote 13)  TheCommonwealth has lost 313 private psychiatric beds-- 12.5% of the total number of private beds available--and 100 state psychiatric beds in the last two years   (See footnote 14)  and the most recent state budget requires the closingof another state hospital.   (See footnote 15)  Private facilities havewaiting lists for beds.   (See footnote 16)  To the extent that this meansthat people are receiving needed treatment in communityrather than hospital settings, amici applaud thisdevelopment. However, to the extent that appelleesargue that being hospitalized is a true proxy for beingunable to work due to a psychiatric disability, theyare drastically undercounting. It is simply not fairthat Commonwealth citizens like Ms. Currie who cannotwork due to psychiatric disability have theirlivelihoods dependent on the ever-diminishing number ofhospital beds available.

    Rather than a proxy for true disability, the useof hospitalization as a screening mechanism simplyassures that the number of people receiving disabilitybenefits on the basis of psychiatric disability will bekept artificially low by the lack of availablepsychiatric beds in Massachusetts. This is not adistinction supported by actuarial analysis, nor is ita legal basis for discrimination on the basis ofpsychiatric disability.

    2.

Little or No Reliable Actuarial Data Existsto Support Appellees' Contention that ItsPolicy is Necessary

    However, the incidence rate--the rate ofdisability claims to the covered population--is stilllow, because relatively few long-term claims areactually filed for reasons relating to mental illness.UnumProvident, the largest provider of long-termdisability insurance with 28.5% market share, reported400,000 new claims for both short term and long-termdisability in 2001, out of a total covered populationof 25,000,000.   (See footnote 17)  Of the long-term disability claims,claims relating to cancer, pregnancy, back injuries,and cardiac problems were filed most often, accountingfor 45% of all claims.

    Reports from LTD insurance programs for governmentemployees are mixed. Whereas San Diego eliminateddisability coverage for people with mental healthconditions in 1994 because of the volume of claims (andwas promptly sued),   (See footnote 18)  Phoenix settled a similar lawsuitby agreeing to institute parity in disability benefits,and reported little in the way of rising costs. Whenasked about instituting parity for long-termdisability, the Phoenix personnel fiscal specialist wasquoted as saying: “Economically, I don't think it hadmuch of an impact at all.”   (See footnote 19) 

    The low cost of providing parity in long-termdisability benefits for psychiatric conditions isperhaps most graphically illustrated by the fact thatthe defendant in Leonard F. v. Israel Discount Bank,101 F.3d 687 (2^nd Cir. 1996)(table case) settled a casechallenging disparity in long-term disability benefitson the grounds that providing equal access to long-termdisability benefits for all its employees was less expensive than litigating the case.   (See footnote 20) 

B.3 3.
No Actuarial Data Supports the Contentionthat the Nature of Mental Health Diagnosis orTreatment Contributes to Vastly IncreasedInsurance Costs

    The experience of states that have mandated morecomplete parity_-including Massachusetts   (See footnote 22)  _-is thatcosts have increased very little. Generally, costincreases have been measured at between one percent   (See footnote 23)  and two to four percent.   (See footnote 24)  The National Advisory MentalHealth Council has made similar findings, estimating that moving to full federal parity, closer to what many states require, would increase premium costs by 1.4percent.   (See footnote 25) 

    4 4.

Insurance Companies Rely on Myths,Stereotypes, and False Assumptions in MakingCoverage Decisions, Often Ignoring Their OwnActuarial Data

    Insurance practices based on invalid assumptionsare hardly unique to psychiatric disabilities. Forexample, insurers have denied coverage to peoplebecause they carry a single gene for sickle-cell anemiaor Goucher's Disease, in spite of the basic medicalfact that such individuals have absolutely no chance ofdeveloping the disease.   (See footnote 26)  It should not be surprisingthat social stereotypes and prejudice carry over intoindividual assessments and decision making of insuranceagents or even high-level executives.

    What is surprising, however, is the tenacity ofthe stereotypes at the policy and practice level.Insurance companies have historically relied on manualsand actuarial research precisely to have an objectivebasis for decision-making. Yet in many cases broughtunder the ADA, insurance companies refusing coverage topeople with psychiatric disabilities were actingagainst the recommendations of their own manuals. Thesedecisions were not driven by the profit motive:companies often denied coverage altogether toindividuals whom the manuals considered to bereasonable risks for coverage.

    For example, one insurer had a uniform policy ofdenying disability insurance to anyone who had receivedany mental health services, including simply seeing atherapist, within two years of applying for theinsurance. Goldman v. Standard Insurance Company, 1999U.S.Dist.LEXIS 20191 (N.D.Ca. Dec. 20, 1999). Anotherinsurer precluded coverage for anyone with “anoccurrence” of bipolar disorder more than twice in alifetime, or once within five years of applying for thepolicy. Doukas v. Metropolitan Life, 950 F.Supp. 422(D.N.H. 1996). Yet another insurer denied coverage toanyone “who has received treatment for a mental ornervous condition, regardless or seriousness, withinthe twelve months prior to application.” Winslow v. IDSLife Insurance Company, 29 F.Supp.2d 557 (D.Minn.1998). In Winslow, the underwriting manual did notrequire the automatic rejection of an applicant, butsimply a longer exclusion period; nevertheless, thecompany--against its own financial interest--rejectedthe applicant. No insurance underwriting text supportsany of the policy decisions described above, butinsurance companies made them anyway.

    The manuals themselves are not withoutdifficulties. A book on underwriting produced by theInsurance Institute of America grouped “mentalimpairment” with “a criminal record” and “use of drugs”in describing risks that should be looked at “veryclosely.” In 1988, insurance manuals were recommendinghigher premiums for people with “mild psychoneurosis”and total exclusion from coverage of people withschizophrenia.   (See footnote 27) 

    However, most insurance companies have beenwilling to provide parity for “mental and nervousconditions” in health and disability insurance, butunreasonably inflated additional premiums havediscouraged employers from purchasing this coverage. Asargued below, there are other ways to achieve costcontainment than exclusion or drastic limitations ofcoverage.

III. EVEN IF COSTS ARE HIGHER, EQUALLY EFFECTIVE COST- CONTAINMENT STRATEGIES CAN BE DEVISED THAT DO NOTDISCRIMINATE ON THE BASIS OF PSYCHIATRIC DISABILITY

    When women's participation in the workforceincreased, applications for maternity leave andpregnancy disability increased, and presumablyinsurance claims and costs increased. Nevertheless, asa society we are vastly improved by the participationof women in the workforce, and to deny women access tocoverage under disability insurance for gender-specificdisabilities such as pregnancy would be rejected asgender discrimination, even if it saved considerableamounts of money.

    Similarly, although Congress found that one reasonfor the staggeringly high unemployment of people withall kinds of disabilities was employer fear of risinghealth insurance and disability insurance costs, itexplicitly rejected this rationale as discriminatorywhen it passed the ADA.   (See footnote 28)  It is probably true that asemployment of people with serious psychiatricdisabilities increase, applications for healthinsurance benefits and disability benefits throughemployer programs will also increase, not because ofabuse, malingering and moral hazard but simply becausethere were far fewer employees like Ms. Currie withschizophrenia in the past.

    Whether extending coverage to people withpsychiatric disabilities costs more should not be theend of the inquiry. Most states and many employers arefaced with difficult budget concerns. The law forbidsthem from meeting those concerns by disabilitydiscrimination. Concerned Parents to Save Dreher ParkCenter v. City of West Palm Beach, 846 F.Supp. 986,991-992 (S.D.Fla. 1994).

    In Dreher Park, the City of West Palm Beach'srecreation department dealt with a declining budget bydrastically cutting recreation programs for people withdisabilities. West Palm Beach emphasized that disabledpeople were not excluded from regular recreation, inmuch the same way that defendants in insurance caseshave argued that people with psychiatric disabilitiesare free to buy insurance policies which do not covertheir particular disability. The court in Dreher Park,was not persuaded, implying that the enormous disparitybetween the cuts to the regular program and the cuts tothe program for people with disabilities tended to showintentional discrimination on the basis of disability. Id. at 992.

    A number of non-discriminatory steps exist tomitigate the costs of LTD insurance. Decreasing thepercentage of salary paid in disability income; caps onamount of disability benefits paid to all recipients,ceasing benefit payments at age 64 rather than age 65,or more rigorous focus on utilization review andrehabilitation efforts, are only a few of numerous waysto contain costs that are not discriminatory.

     There is universal consensus that aggressiverehabilitation approaches such as assigning casemanagers and devising programs to allow employees toreturn to work part-time are enormous cost-savers. TheHealth Insurance Association of America estimates thatevery dollar spent on these programs in long-termdisability returns thirteen dollars of savings.   (See footnote 29)  Yetmany employers do not have such programs; in othercases, employers have them but employees are unaware ofthem. These programs are especially effective in casesinvolving psychiatric disabilities.

                Respectfully submitted,

                AMICI CURIAE    

                _____________________

                Susan Stefan

                BBO # 600897

                Center for Public Representation

                246 Walnut Street

                Newton, MA 02160

                617-965-0776

                ______________________

                Robert D. Fleischner

                BBO # 171320

                Center for Public Representation

                22 Green Street

                Northampton, Massachusetts

                413-587-6265

August 16, 2002

                ___________________________

                Robert D. Fleischner

August 16, 2002

APPENDICES

Parties' Cross-Motions for Summary Judgment...........1

2. G.L. c. 32A §10D..................................................14

3. G.L. c. 175 § 47B.................................15