Court seen fostering less care for victims of costly illnesses

November 10, 1992|By Dallas Morning News

WASHINGTON -- Critics contend a U.S. Supreme Court decision not to stop the cutting of medical benefits for a man with AIDS will encourage employers across the country to lessen medical benefits for sufferers of many costly, chronic illnesses.

"I think it turns the insurance industry on its head, because it means employers don't have to gamble anymore," says Larry Gostin, executive director of the American Society of Law and Medicine in Boston.

"If someone is sick with a chronic disease, you don't have to cover them. I think it's an unconscionable decision," he says.

A divided U.S. Supreme Court yesterday refused to review whether federal pension law prohibits a Houston company from slashing medical benefits for John "Jack" McGann, an employee with AIDS.

The justices voted 7-2 to leave intact a groundbreaking decision by the U.S. 5th Circuit Court of Appeals in New Orleans, which declared that federal law did not bar self-insured companies from reducing health coverage.

Justices Harry A. Blackmun and Sandra Day O'Connor voted to hear the case, but it requires support from at least four justices to be reviewed.

The Bush administration urged the court to deny review, arguing that the Employee Retirement Income Security Act of 1974 permitted H&H Music Co. of Houston to reduce its medical coverage for an AIDS-infected warehouseman.

Several large health organizations, including the American Medical Association, had lobbied the administration to request court review. Gay rights groups also asked the high court to hear the case.

The court's action does not set national legal precedent but does mean that the 5th Circuit's ruling is law in Texas, Louisiana and Mississippi, the states in the circuit.

Solicitor General Kenneth W. Starr, the Bush administration's top appellate attorney, suggested in his brief that the 5th Circuit's ruling could be eclipsed by anti-bias provisions of the Americans With Disabilities Act.

Evan Wolfson, staff attorney for the Lambda Legal Defense and Education Fund, a gay rights group, says the decision to let the 5th Circuit ruling stand "turned on a green light to this kind of discrimination."

He, too, predicts that the ruling would affect more than those suffering from AIDS.

"It means that anybody is vulnerable if they happen to get sick with the wrong disease," he says.

Fifty-nine percent of U.S. employers provide group health coverage under self-insured plans, according to a 1990 survey by A. Foster Higgins & Co.

The Supreme Court case stemmed from Mr. McGann's efforts to compel H&H Music Co. to pay medical expenses he incurred after being diagnosed with acquired immune deficiency syndrome in December 1987.

Mr. McGann, a one-time folk singer who worked in the company's sheet-music warehouse, informed his supervisor of his illness in early 1988, when the company's medical coverage for AIDS sufferers was a maximum of $1 million.

In August 1988, company officials announced that they were switching their coverage to become self-insured. Along with changing insurance methods, the company dropped coverage for AIDS to a maximum of $5,000.

Mr. McGann exhausted his benefits a few months after the new policy took effect, says his attorney, Donald Skipwith. He left H&H because of an AIDS-related illness in 1990 and died in June 1991 at 47.

Mr. McGann filed his lawsuit in 1989. After he died, his executor continued the suit.

Mr. McGann was not subject to the protections of the Americans With Disabilities Act because that law did not take effect until last July.

His lawsuit contends that H&H had violated that part of the 1974 federal law that prohibits employers from discriminating against an employee for "exercising any right to which he is entitled" by a benefit plan.

Mr. McGann alleged that the company's change in insurance coverage was retaliatory and intended to interfere with his collection of medical benefits.

H&H, which is owned by Brook Mays Music Co. of Dallas, argued that the federal pension statute did not bar self-insured companies from altering their medical benefits as long as it was done on a group basis.

Mark Huvard, an attorney for H&H, says the company changed insurance coverage after it had borne the costs of two other AIDS-related illnesses and seen its insurance costs outstrip employee payments.

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