For every company that has seen a significant run-up in health care costs because of AIDS, dozens have worried about what the disease could do to their benefits costs. At the same time that the National Leadership Coalition on AIDS is signing on corporate chief executives for out-front roles in public discussions of the epidemic, other companies are responding by trying to impose caps on the reimbursement AIDS patients can expect from their workplace health insurance.
That's a risky reaction to the crisis, two lawyers warn corporate personnel specialists in the latest issue of HR Magazine, the publication of the Society for Human Resource Management.
"Employers should be aware of the legal risks they run by placing a benefits exclusion or ceiling for AIDS on insurance benefits," David Israel and Debra Scott write. "With a number of existing and emerging legal remedies available to employees, the risk of liability is high."
Ironically, the warning from Israel and Scott comes even though this summer, in the leading case on the subject, a U.S. District Court in Houston upheld a company-imposed limit on AIDS insurance coverage.
The case, now being reviewed by the U.S. Court of Appeals in New Orleans, was brought by John McGann, an employee of H&H Music Co. in Houston. McGann was diagnosed in December, 1987, as having AIDS.
The next summer, H&H Music switched from a medical insurance policy underwritten by Great American Life Insurance Co. to a self-insured plan.
Under both proposals, employees could collect up to $1 million in medical benefits, but a special exception was added to the self-insured plan: If the claims were AIDS-related, the payouts would stop at $5,000.
McGann insists that the switch violated the Employee Retirement Income Security Act (ERISA), the basic federal legislation controlling the fairness of employee benefit plan terms. The law, he said, does not allow a company to single out one condition for substantially less generous reimbursement and it does not allow an employer to remove coverage from an employee for a condition that has already been diagnosed.
The Houston court rejected both arguments. The fact that a company has offered workers certain benefits does not mean that it has to continue those benefits forever, the opinion said. All that ERISA requires is that employees be told what they are getting and that they get what they have been promised.
H&H Music's description of its medical benefits said the plan could be changed at any time, so that's warning enough, the ruling said.
The judge found that the motivation for the change was not discrimination against McCann personally, but the reality that without a cap on AIDS claims, the entire plan might collapse and H&H would be forced to cancel all coverage.
Israel and Scott suggest that other courts may not follow the Houston precedent if presented with a similar situation.
There is little doubt that companies have the right to change benefit schedules -- it happens all the time -- but the lawyers say there may be a "distinction between routine changes in a medical plan and changes made after an expensive claim has been filed."
But even if ERISA allows a company to put a limit on reimbursement for a particular medical problem, such a policy may violate other employee-protection statutes. For instance, almost three years ago the civil rights division of the state labor department in Oregon ruled that being less generous in covering AIDS medical expenses than those related to other illnesses amounts to unlawful sex discrimination.
The reason: more than 90 percent of those afflicted with AIDS are male.
In 1992, when the Americans with Disabilities Act takes effect, employees litigating against a special benefits limitation for AIDS will have another approach to try.
The Senate committee report on the measure makes clear that a person with AIDS or with a virus that causes AIDS is among those covered by the new law.
Most of the discussion of the new law focuses on the way companies must be willing to adapt working conditions to accommodate disabled employees or job applicants -- installing a talking computer for a blind clerk, for instance, or moving a work station so it can be reached by someone in a wheelchair.
But the statute also bars discrimination against the disabled in "terms or conditions and privileges of employment." That clearly would bar a company from, for instance, adopting a health insurance plan that covers all employees except recovering alcoholics. It may well also ban a limitation on coverage for AIDS. The first companies to challenge that interpretation may be courting massive legal bills.