Many of the nation's employers, looking for ways to cut the cost of health insurance for their workers, have taken on the job themselves.

Instead of buying a policy from an insurance company, the employer pays the claims out of its own pocket. It may hire an insurer to process the paperwork, but otherwise it functions as if it were its employees' insurance company.

This self-insurance not only spares the employer from paying the insurance company's profit, but under federal law it also exempts the employer from a range of state and local requirements that may increase the costs of the coverage.

Employers turn to self-insurance to avoid having to provide such state-required benefits -- called "mandates" -- as chiropractic services, some cosmetic treatments and a variety of specialized therapies. The list of mandates in many states runs to 30 or 40 items, some of which are very expensive.

But now a small number of employers are trying to use self-insurance to escape the cost of something else: AIDS.

Arguing that federal law overrides state anti-discrimination laws as well as insurance mandates, employers are switching to self-insurance and then capping benefits for AIDS and related ailments at a fraction of what is allowed for other physical illness.

Legal challenges to the strategy have produced mixed results. A federal court in Texas upheld a company's plan there last summer, but a hearing officer of the Indiana State Civil Rights Commission last month concluded that a Fort Wayne firm's limit on AIDS benefits violated a state law that prohibits discrimination against the handicapped. The officer concluded that federal law did not override the state on this issue.

AIDS activists fear that if the companies succeed in using federal law to defeat state anti-discrimination laws, thousands of other firms will take the same route.

"This is a serious problem. It's one of many devices" being used to discriminate against AIDS victims and "is further evidence of the need for a uniform universal health care system," said Evan Wolfson, a staff attorney at the Lambda Legal Defense and Education Fund, a gay rights group in New York, who worked on the Indiana case.

He said his office has received complaints that companies in New York, New Jersey and Georgia have begun restructuring their health plans along the lines of the Indiana and Texas firms.

Experts on employee benefits noted that large employers, which account for the bulk of self-insured plans, have not taken this tack with respect to AIDS.

At issue is the extent to which the federal Employee Retirement Income Security Act, the main federal law governing pensions and other employee benefits, preempts state law. In other contexts, courts have construed this ERISA preemption broadly, suggesting to some legal experts that without congressional action companies may be able to use the preemption in the AIDS situation as well.

"The body of case law on ERISA ... gives a very broad reading to the preemption, so if you apply that historical reasoning, logic leads you to the conclusion" that it would extend to health plans that limit AIDS benefits, said Woody Eno of the Health Insurance Association of America, a trade association here.

He cautioned, however, that when civil rights concerns are introduced, the issue could be viewed differently. "The courts are going to have to ask themselves, what did Congress intend? Did it intend for ERISA to override civil rights protections?" Eno said, adding that he believes courts will be split on the issue for some time.

Wolfson and other AIDS activists are hopeful that if they are unable to win in court on ERISA, the newly passed Americans With Disabilities Act will solve the problem when it become effective next year.

The Indiana case, which goes before the full state civil rights commission later this month, involves Lincoln Foodservice Products Inc. Beginning Jan. 1, 1988, Lincoln changed its health insurance plan for its salaried employees, dividing benefits into two "tiers." One tier, covering most physical ailments, carried a $1 million lifetime benefit, while the other tier, covering mental illness, alcoholism, drug abuse, AIDS and AIDS-related complex (ARC), had much lower lifetime benefits.

In the case of AIDS, the lifetime limit was $50,000.

The AIDS limits were challenged by Kenneth Westhoven, an engineer who had gone to work for Lincoln in 1982. Westhoven, who died last month, was diagnosed as having ARC in 1986 and AIDS in 1988.

Lincoln says it redrew its plan as a cost-control measure. It points out that it took steps to help Westhoven stay on the job as long as possible and to educate other employees about AIDS in the workplace.

In a statement released by its attorney, Thomas Kimbrough of the Fort Wayne firm of Barrett & McNagny, the company conceded that AIDS is a handicap and it "vehemently takes the position that it will not discriminate against individuals in its employment practices on the basis of any handicap."

But it also argues that it provides health insurance voluntarily and would be free to provide none at all if it so chose. Further, other plans show "similar caps on a host of other illnesses," such as mental illness.

The question of AIDS benefits arises at a time when employers across the country are struggling with the rising cost of health care. It is also a politically charged question. In recent years several companies, notably the Circle K convenience store chain, have sought to cut health benefits for "lifestyle-related" ailments. Those firms have backed down in the face of widespread protests, but gay rights and other activists worry that other less conspicuous but just as restrictive policies will take their place.

At this point, people with AIDS or the potential for AIDS risk loss of coverage if they change jobs, and sometimes even if they don't.

"It's a terrible situation," said Wolfson. "It's the new serfdom. People can't leave their jobs for fear of destabilizing their insurance. And then even if they stick to their tools or the factory or whatever, the plan may be pulled out from under them anyway."