Will Hiring People with Disabilities Increase Health Insurance Costs?

The Americans with Disabilities Act and Equal Employment Opportunity Commission prohibit companies from refusing to hire qualified candidates due to fears that their disabilities will increase health care costs. But do employees with disabilities really drive up health care costs in the first place?

The evidence suggests that if they do, it’s not by much.

Americans with disabilities do incur higher health care bills, on average, than those without disabilities, according to a study published in Health Affairs. But it varies a lot depending on the type of disability.

The study’s authors found that people with spinal cord injuries have higher-than-average health care costs, but people with blindness, deafness and intellectual disabilities have close-to-average costs, yet are still often incorrectly perceived as being more expensive. Prior to the Affordable Care Act, which prohibited insurers from denying coverage based on pre-existing conditions, those group often found it difficult to get insured in the individual market.

Pooled risk levels costs

The additional health care costs of a single person with a disability become even more negligible in the employer insurance market, where risk is pooled among all employees in the plan.

"Even if an individual with a disability had medical costs higher than others, (he or she) would likely have a minimal impact on a company's insurance premiums because of how insurance rates are often calculated," according to the University of Washington’s Disabilities, Opportunities, Internetworking, and Technology Center.

"Health insurance rates work 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."

Consider all cost factors

A research paper by The Conference Board, a nonprofit that specializes in business management advice, found several other factors that also minimize the effect workers with disabilities have on employers’ health care costs:

• People with disabilities are more likely to work part-time, and part-time workers aren’t eligible for health benefits at most companies.
• Most employer health plans are structured so that employees pay a portion of the costs — and the employees’ share is rising. This further defrays the costs a company would incur to insure any single employee.
• If employees are military veterans, the U.S. Department of Veterans Affairs covers any health care related to disabilities caused by their service.

"Given the mitigating factors above," the paper’s authors wrote, "it is reasonable to say that a substantial portion of the greater cost of health care for the entire population of people with disabilities is not passed on to employers."

The authors said they could not produce a precise estimate of the impact on individual employers’ health care costs because of "state-by-state variation and other variables." (Some states require insurance plans to cover more than others).

But a survey of human resources managers conducted by Cornell University found that "companies’ health, life and disability insurance costs rarely rise because of hiring employees with disabilities."

In summary, federal law prohibits turning away qualified candidates because of fears that their disabilities will increase health insurance costs. But the evidence suggests those fears are largely unfounded anyway.