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Being Alive

AIDS/HIV and Health Insurance


Being Alive 1992 Oct 5: 8

Health insurance is a critical issue for people with AIDS/HIV. Getting it, keeping it, and using it can prove to be major obstacles in today's health insurance market. It is not uncommon for health insurance companies to discriminate against those with AIDS/HIV believing that such persons pose a serous financial exposure. To minimize their risk, companies have been known to engage in practices that are discriminatory and illegal. The following is an outline of some of those unlawful acts.

UNDERWRITING "Underwriting" is the term used to describe an insurance company's risk selection process, or, in other words, who the company decides it will accept and who it will reject. Typically, this is accomplished through the use of a written application that inquires into the applicant's health history. The insurance company reviews the completed application to determine whether the insured is desirable as a health insurance risk.

It is unlawful in California for any insurance company to use the results of a blood test to detect antibodies to the probable causative agent of AIDS in determining the suitability of someone for health insurance. This means that insurance companies cannot ask about or use HIV test results in passing on an application for health insurance. Any health insurance application which asks about blood tests cannot be construed to include HIV. Moreover, any questions about whether applicants have taken any form of antibody tests or whether an applicant has been told not to donate blood would be improper. This prohibition, however, does not apply to questions concerning the health of the immune system, such as blood tests used to determine a T-cell count.

It is also unlawful for an insurance company to select risks on the basis of sexual orientation. This is discrimination and is prohibited under California law in any type of insurance transaction including the underwriting of health insurance. Accordingly, any questions on a health insurance application that seek to elicit information concerning the applicant's sexual orientation are per se illegal. Insurance companies may violate this law by establishing underwriting standards for single males thought to be gay or by refusing to insure persons in certain geographical areas or certain occupations which are identified with the gay community.

In one recent case, it was learned that Blue Cross of California developed a "homosexual profile" to be used in underwriting and rescinding insurance policies of those who developed AIDS/HIV. The use of this profile was found to be unlawful and discriminatory.

CLAIM PROBLEMS Insurance policies are designed to exclude or limit illnesses or injuries which manifest themselves prior to a policy's effective date. Most policies contain a "pre-existing condition" exclusion which excludes conditions originating prior to the policy's effective date. In interpreting these exclusions, the courts have found that a particular condition originates when the insured possesses symptoms from which a reasonably accurate medical diagnosis can be made.

The courts have also found that the insurance company carries the burden of proof on this issue. Because there are uncertainties surrounding the definition of AIDS, as well as the clinical findings utilized to substantiate such a diagnosis, this is a difficult exclusion for an insurance company to apply. Unless a firm diagnosis of full-blown AIDS is made prior to the policy's effective date, an insurance company should not be able to rely on this exclusion in denying coverage.

Insurers also use the insurance application as a basis for limiting their liability. When a health insurance company receives a claim within the contestable period of the policy (usually the first two years), it will routinely examine the application to determine whether any relevant information was omitted. If so, the insurance company can "rescind" the policy, that is, return the premium and void the contract from its inception. However, before the insurance company can rescind, it must show that the insured knew he suffered from a particular condition and that the presence of the condition would have caused the insurance company to reject the individual if the condition had been disclosed on the application.

It is not uncommon for insurance companies to abuse this practice when confronted with someone who is diagnosed after the effective date of the policy with AIDS/HIV. When faced with what it perceives is a large claim exposure, a company will scrutinize the claimant's past medical records looking for conditions which were not disclosed on the application. Suddenly the applicant's undisclosed colds or flues become significant conditions which certain insurance companies will rely on in contending that disclosure would have led to a rejection of the application. This contention can usually be refuted by reference to the insurance company's procedures for accepting or rejecting other applicants.

Often times, information will be omitted from the application because of the representations of an overzealous insurance agent. This occurs when the applicant discloses a particular condition to the selling agent at the time the application is taken and the agent, eager to sell the policy and make a commission, assures the applicant that the condition is not the type of illness the company is concerned about. The information is then omitted from the application.

When a claim arises and the company performs its investigation, it does not bother to question the agent about any disclosure that was made. It merely rescinds the policy. In this situation, the agent's representations must be brought to the attention of the insurance company as the company will usually be bound by any knowledge acquired by the agent.

Another problem area is that posed by the type of treatment received. An insurance company may contend that a certain treatment is "experimental" or not "reasonably necessary." This usually is not a successful basis for denying coverage as any treatment which is utilized by a physician and can be reasonably said to be performed for the purpose of improving the patient's condition will be deemed necessary.

LARGE PREMIUM INCREASES Premium increases are a fact of life in today's health insurance market. However, not all increases are appropriate or legal. Certain insurance companies engage in a type of discrimination which singles out the sickest insureds for the most severe premium hikes. This practice is prevalent in the small group area (less than 25 persons). An insurance company will see a person's claim history or diagnosis as a basis for determining future premium increases. The goal is to force those who are likely to incur the largest claims off the policy without formally canceling the policy.

Needless to say, those with AIDS/HIV are prime targets for these practices. At the first premium renewal date following someone's treatment for AIDS/HIV, the company will institute one of a continuing series of dramatic premium increases. This has the effect of forcing the AIDS/HIV patient to deplete his or her assets to keep the premiums current for the all-important coverage. Many people in this situation eventually lose their coverage and are forced to seek treatment at county facilities.

Any person who receives a large premium increase following a diagnosis or treatment for AIDS/HIV should question the company's rating methodology. A complete explanation of the basis of the increase should be requested. If the insurance company has raised a person's premiums based upon his or her diagnosis or treatment, the company may be found to have breached the insurance contract or committed fraud.

CANCELLATIONS Certain insurance companies cancel blocks of policies when they become unprofitable. If proper notice is given regarding the cancellation, it is seemingly legal on its face. Indeed, the Department of Insurance rarely questions any cancellation when it is accompanied by sufficient notice. However, depending on the basis of the cancellation, and the representations made concerning the policy when it was sold, a cancellation may be actionable as a fraud or a breach of the insurance contract. The company should be questioned about the reasons for the cancellation and a formal written explanation should be demanded.

REDUCTIONS IN COVERAGE Another ploy used by insurance companies is to reduce or eliminate certain coverage from the policy which is deems are too expensive or are subject to over-utilization. This action, like a cancellation, may be done legally in certain situations. It cannot be used, however, to reduce or eliminate benefits for someone who has a disability and is in the process of treating it. Once a person suffers a disability, and receives treatment, the rights of that person become fixed under the contract and cannot be extinguished by a subsequent change in the policy language.

People with AIDS/HIV are largely at the mercy of insurance companies when coverage is contested. The insurance company's superior financial and legal strength and the insured's deteriorating health make for an unfair fight. Information, however, can be a great equalizer. Any time coverage is contested, a person with AIDS/HIV should make all relevant inquiries and thoroughly question any explanation offered.

(Robert S. Gianelli is a partner in the law firm of Gianelli and Morris, and can be reached at 213.488.9667.) 


Information in this article was accurate in October 5, 1992. The state of the art may have changed since the publication date. This material is designed to support, not replace, the relationship that exists between you and your doctor. Always discuss treatment options with a doctor who specializes in treating HIV.