High court lets stand rule to cut health benefits AIDS victim's health insurance had been restricted

November 10, 1992|By Lyle Denniston | Lyle Denniston,Washington Bureau

WASHINGTON -- With the support of the Bush administration, employers across the country gained the Supreme Court's implied permission yesterday to take away or reduce sharply health benefits for workers who develop AIDS or other high-cost illnesses.

The court, taking up one of the country's most important test cases on AIDS and health insurance, simply accepted the administration's advice and declined to hear a challenge to employers' right to single out AIDS victims for much lower insurance coverage.

Specifically, the court refused to consider a legal challenge to a Houston company's decision to cut its plan for $1 million in lifetime health coverage to $5,000 -- but only for workers with AIDS. The change came after one of the company's workers developed AIDS and claimed health benefits.

Although the ruling came in a case involving recuded insurance benefits for AIDS, the ruling was broad in scope and would allow an employer to reduce health coverage for any other disease as a way of cutting health plan costs.

Groups active in the fight for health care for AIDS victims had warned the court, beforehand, that the case could have a domino effect, causing workers with the disease to become uninsured and thus making them dependent either on charity care from hospitals or -- if they are poor enough -- on Medicaid.

The administration argued that some workers with AIDS may still be able to sue their employers under the 2-year-old Americans With Disabilities Act -- if they can prove that the company changed its health coverage as a means of discriminating against AIDS victims.

The case turned aside by the court yesterday was a test of the right of companies to reduce employee health plans for specific diseases without running afoul of a 1974 federal pension law that generally forbids discrimination in health, pension and other job benefits. That law is known formally as the Employee Retirement Income Security Act (ERISA).

In a ruling a year ago, the 5th U.S. Circuit Court of Appeals in New Orleans ruled that nothing in that law makes it illegal for an employer to change a plan to reduce coverage of a specific disease. Workers have no right to the benefits their company provides if the company needs to change benefits to get its costs down, the Circuit Court added.

Employers may modify their existing health plans, the Circuit Court said, unless they do so with the aim of discriminating against an individual worker who has exercised guaranteed rights of employment. Health benefits are not guaranteed rights unless the company expressly promises not to alter them, according to the ruling.

The Circuit Court decision came in the case of a Houston man who died of AIDS last year. John W. "Jack" McGann had applied for health benefits in 1988 after learning, on a hospital visit for pneumonia, that he had AIDS. He was covered at the time by a company health plan insured by an outside company.

Within four months, his own company -- H & H Music Co. -- notified its workers that it was changing its workers' medical coverage from an insured plan to a self-insured plan. It imposed a cap on treatment of workers with AIDS, from a $1 million lifetime maximum to a $5,000 maximum. No other illnesses or diseases lost the maximum coverage.

Some 16 months later, Mr. McGann had used up his $5,000 in benefits, and he sued the company, claiming discrimination based on his exercise of the right to file medical claims. After he died, the case was carried on by the administrator of his estate.

Recent estimates have shown that it costs about $32,000 a year to treat a person with AIDS -- about $85,000 for treatment for the remainder of his life.

The decision against Mr. McGann's claims by the Circuit Court last November had focused nationwide attention on the case as it moved on to the Supreme Court. Before acting on the appeal, the Supreme Court asked the Bush administration for a reaction.

The administration, while saying that the case "implicates health care policy issues of serious concern" to the federal government, urged the court not to hear this case.

It said that the Circuit Court's decision on the meaning of the 1974 law was right and that the issue should be left either to potential new legislation or to lawsuits under the 1990 law protecting the disabled from bias on the job.

The court's order bypassing the case offered no comment, noting simply that two justices -- Harry A. Blackmun and Sandra Day O'Connor -- had voted to hear it. But it takes the votes of four justices to grant review of a case.

In another action, the court also turned down an appeal challenging the constitutionality of state laws that put "caps," or dollar ceilings, on the amount in damages that can be won for injuries or deaths caused by someone's wrongdoing.

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