Chase Manhattan Faces EEOC Lawsuit

In a lawsuit that could have far-reaching consequences, the federal government is suing the nation’s largest bank for not offering employees mental-health disability benefits on a par with coverage they receive for physical ailments.

The Equal Employment Opportunity Commission contends that Chase Manhattan Bank and its insurer are violating the Americans With Disabilities Act by limiting benefits for those with mental disabilities.

“Mental disorders are medical disorders, just like heart disease and cancer,” said Ron Honberg of the National Alliance for the Mentally Ill, an Arlington, Va.-based nonprofit advocacy group. “It seems strange to me that we would allow one organ of the body to be singled out for a lower level of coverage.”

But Chase says its employees would pay 30% to 40% more for the same level of insurance coverage if the courts agree with the EEOC.

The government filed the lawsuit in federal court in New York this week on behalf of 28 bank workers who had requested disability benefits.

The federal commission says the bank and Unum Life Insurance Co. have denied employees with mental illnesses disability pay --a percentage of their salary when not working--after 18 months. Employees with physical illnesses have the right to receive disability benefits--or return to work if they can--until age 65.

The EEOC demands that the New York-based bank cover back pay and damages for the 28 employees whose long-term benefits were cut off, according to the federal complaint.

Congress has grappled with parity for health insurance, as most health plans provide less coverage for mental illnesses than for physical problems. Despite efforts to mandate parity, disparate coverage is legal, and this case has no direct implications for health coverage.

“If we would prevail, it could mean that companies will decide in general . . . to have more stringent conditions for long-term disability,” said Peggy Mastroianni, associate legal counsel for the EEOC.

The 28 workers cited in the lawsuit had worked for Chemical Bank, which merged with Chase in 1996 and began operating under the latter’s name.

John Farrell, Chase Manhattan’s director for human resources, said Wednesday that he could not comment on the lawsuit.

But he said that if mental-health patients received equal disability benefits, employees would end up paying 30% to 40% more for the same level of insurance, or opt for lesser coverage.

“And that’s the real debate,” Farrell said.

Unum, which administers the bank’s plan for long-term disability, said it would have no comment until it had a chance to review the lawsuit. The insurer, based in Portland, Maine, is the leading disability provider in the nation, said spokeswoman Tracy Sherman.