"Illness is the night side of life, a more onerous citizenship. Everyone who is born holds dual citizenship, in the kingdom of the well and in the kingdom of the sick. Although we all prefer to use only the good passport, sooner or later each of us is obliged, at least for a spell, to identify ourselves as citizens of that other place."

Susan Sontag

"Illness As Metaphor"

Timmy Dawkins was swept into that other place -- the nightside -- when he was just 3 years old. His parents, Valerie and Ed Dawkins, who live in the tiny town of Louisville, Ill., weren't expecting it, any more than anyone ever expects it.

Timmy is the baby of the family, the youngest of four. His cancer was diagnosed in November 1986, and for the next two years the Dawkinses' life was dominated by trips to St. Louis Children's Hospital two hours away, radiation and chemotherapy and a persistent sense of dread. The Dawkinses saw their son lose his hair and 20 percent of his body weight and become what Valerie calls "a grouchy little bear."

"He didn't understand what was happening to him," she says. "When you get sick and your mother can't kiss you and make it better, you have to grow up very fast."

But after two years of treatment, Timmy began to grow stronger. Last winter, the doctors told his parents that he has a 95 percent chance of permanent recovery. "Today he looks like a normal, healthy boy," his mother says, "except he's not as tall as he should be." Still, Timmy has lingering problems from the cancer and the treatments -- he has lost some hearing and must take growth hormone to compensate for a damaged pituitary gland. And for his parents there is the worry, which never goes away, that the disease may one day return.

One thing the Dawkinses never thought they'd have to worry about was the cost of Timmy's care. The whole family was covered by the health plan at North Clay District School, where Ed teaches, and it paid most of the bills for Timmy's treatment -- about $225,000. But in August 1988 while Timmy was undergoing his final chemotherapy treatments, the Dawkinses learned that the school was having trouble renewing its insurance policy.

Golden Rule had covered the school's employees for nine years; they didn't want to make it 10. "Your group is in {a} category of business that we do not desire to continue," they said in a letter to the school. At the end of September, coverage would end. "If you have a strong desire to continue your coverage with Golden Rule," the letter continued, "we are willing to discuss a premium at which your program could be continued." The company said the increase would be at least 100 percent.

When the school asked for a final quote, the news was even worse. Under the new policy, individuals would have to pay $232 a month for health coverage, families $611 -- an increase of 200 percent. It was more than anyone could afford. For part-time cooks and bus drivers, the premiums would actually be higher than their salaries.

"It's a small town, and there's a lot of coffee-shop talk," says Karen Foster, a former first-grade teacher at North Clay School and leader of the teachers' union. "Everyone was saying, 'The school can't get insurance because of the Dawkins family.' "

Golden Rule's director of government relations, Anda Olsen, says that all the company's policies went up in price that summer -- the average increase was 50 percent. Olsen says that the increase in premiums for the school was not a result of the Dawkins case, but a reflection of general rate increases. "In fact, we weren't even aware that the little boy had cancer," she says.

When Karen Foster shopped for another health plan, the Dawkinses' worst fears were confirmed. "We approached 20 different companies," says Foster, "but couldn't get a single bid. It was all laid off on Tim Dawkins. One agent told us, 'We'll write you insurance, but we can't take Tim.' It got me so angry! I figured, these people are going through enough agony, they don't need this."

Foster finally did find a company, one that specializes in insuring schoolteachers, that would take them on. The deductibles are high, $500 for individuals and $1,000 for families, but the premiums are only 15 percent higher than before. Still, it bothers Valerie Dawkins that other teachers must bear the cost of Timmy's illness. "For a healthy person, it isn't a good plan," she says. "But everyone was great. They accepted this plan because they knew that without it we wouldn't have insurance."

While Timmy was in the hospital, Valerie Dawkins met other parents who weren't fortunate enough to have insurance when their children became sick. "They had to sell everything or move around trying to avoid their hospital bills," she says. That possibility terrifies her. But she knows that the school may not be able to protect her family forever. "Are they going to be as sympathetic next year," she asks, "if costs keep going up?"

If the Dawkinses were to lose their group coverage, no insurance company would write them a policy they could afford, and they would join the approximately 37 million other Americans who must do without health insurance. Many of those 37 million are children -- their parents have jobs without benefits or with plans that don't cover the family. Others are people who make too much money to qualify for Medicaid -- the federal-state health program for the poor -- but too little to afford private insurance. Still others are people much like the Dawkinses, who've been dropped through the safety net by insurance companies determined to cancel people with expensive illnesses. Every year, the number of people who are "going bare" -- insurance company slang for the uninsured -- grows by 1 million. The High Cost of 'Going Bare'

The safety net, many are finding, is fraying. More and more claims are being denied or tied up in review. More health problems are being written out of policies. Premiums are being doubled or tripled when people get sick. And some people are dangerously close to going bare.

Brent Nance of AIDS Project Los Angeles says he gets at least 30 calls a day from AIDS patients who are having problems with their insurance. An insurance counselor, one of the few in the country who specializes in AIDS, Nance works at a small cluttered desk in a room full of small cluttered desks, and his conversation is repeatedly interrupted by the jangle of the phone. "It just keeps getting worse," he says.

Nance said he has seen clients priced out of health coverage as soon as they test positive for the human immunodeficiency virus. One insurer hiked premiums from $200 to $1,500 a month for a man who had shown no symptoms of the disease; he was forced to drop his policy. When another client submitted claims for AIDS-related treatments, his company used a different tactic: They combed through his medical records and found that he'd been seeing a psychologist -- information he'd neglected to disclose on his application form. Withholding information about pre-existing conditions was grounds for cancellation, they said, even though the therapy had nothing to do with the condition he was making claims for.

"I think the insurance industry should hang its head in shame on this issue," says Nance. "Some companies have done a good job. But most have scapegoated, looked for loopholes, and just done all they could do to escape this pandemic.

"No one should sit back and think to themselves, 'This doesn't affect me, this is only a problem for people with AIDS,' " Nance says. "You could be having the same problems if you developed lung disease, or cancer, or any serious illness."

"Sure, we're the folks people love to hate," says Robert Waldron, a spokesman for the Health Insurance Association of America, the industry's trade association based in Washington. "In most exchanges of goods and services, the consumer feels good about his purchase. He rolls the new car out of the shop, smelling terrific. But you don't know if you'll ever get a delivery on insurance. And you only get delivery on it when something bad has happened."

On a balmy spring day in Washington, Waldron and Jon Gabel, head of the group's health market research department, are drinking coffee in a gray-appointed conference room. "Times are tough" is the prevailing theme of their discussion. The insurance industry lost more than $5 billion in the past two years. Insurers responded by boosting prices an average of 12 percent between 1987 and 1988, according to Gabel's calculations, though others put the figure higher. Nothing on the horizon makes them optimistic.

"There are 10 percent fewer companies {writing} group health than there were in 1986," says Gabel. "Major companies are dropping out. They're saying, 'What am I doing this for? I could be making more money buying treasury bills!' "

Waldron and Gabel say the biggest enemy is the exploding cost of health care -- expected to reach $600 billion this year, which already accounts for more than 11 percent of the nation's spending. The average price of a hospital stay shot up more than 80 percent between 1981 and 1987, almost 200 percent in the 10 years before that. Medical miracles add to the costs: Magnetic resonance imaging scanners take detailed pictures of the body's organs at $1,000 a shot. Heart transplants, no longer experimental, cost $100,000. And according to Public Citizen's Health Research Group, about a third of what is spent on health care is wasted by doctors and hospitals who simply charge too much or provide unneccessary care. They say about half of all caesarean deliveries are unjustified, for example; so are about 20 percent of all heart bypass operations.

As the population ages, more demands will be made on the system. Twelve percent of Americans are now over 65; they account for 36 percent of the nation's health bill. By the year 2000, the elderly population will swell to 20 percent.

At the same time, insurers feel hemmed in by state laws that prescribe services they must offer. In 29 states, they are required to cover treatment for alcohol and drug abuse in all their group policies. Insurers who want to do business in Maryland, Maine, Hawaii and Arkansas must cover in-vitro fertilization. In 26 states, they must cover chiropractic care. Such state mandates have more than doubled in the past decade. The services they prescribe are often extras -- "bells and whistles," Waldron calls them -- and they drive up costs.

Rising costs on one side, stiff competition on the other; patients and companies looking for health care bargains are abandoning private insurance for health maintenance organizations, which use just one hospital or clinic and charge a flat rate. Most big corporations have decided that it's even cheaper to go into the health insurance business themselves. With "self-insurance," a company invests the money it would be handing over to an insurer and pays employee doctor bills itself.

Finally, to hear people in the industry tell it, the public just doesn't understand insurance. Health insurance is a product, not a public utility, says Carl Schramm, president of the HIAA. When legislators try to prevent insurers from protecting themselves -- most obviously by testing applicants for the AIDS virus -- they send a subliminal message that anyone who wants or needs health insurance should be able to get it. But that's not the industry's job, says Schramm. "There is a significant difference," he says, "between the right to health care and the right to insurance."

Waldron insists that most insurers serve their clients well, but he admits that some people are being missed by the system. Cases like the Dawkinses' may be atypical "horror stories," as Waldron calls them. Or they may be signs of a system so full of holes that it is failing to hold more of those who depend on it. Skimming the Cream?

The sound of a siren pierces the quiet of a peaceful street of brick row houses in Alexandria. Moments earlier, two cars had collided at a corner near the offices of the National Insurance Consumers Organization, a Ralph Nader-sponsored group headed by Robert Hunter, federal insurance administrator under Presidents Ford and Carter.

At the sound of the ambulance, Hunter gestures toward the window. "See, that could happen to any of us!" he says. "The one kind of insurance everyone needs is health insurance. There are no exceptions.

"It used to be relatively easy to get insurance," he continues. "But today, more and more people are being shut out."

Hunter says that the overall aim of many insurance companies is to "skim the cream" from the market. At any one time, it's estimated that 80 percent of the nation's doctor and hospital bills are run up by just 20 percent of the population. "Cream-skimming" is the attempt by insurers to avoid people who may fall in that 20 percent, and cover only those who are healthy -- and likely to stay that way. To do that, insurers are defining more people as "high risk."

One San Francisco woman in her mid 30s who requested anonymity says she has rarely missed a day of work; she found herself unexpectedly shut out of health coverage when she left her job and benefits to work as a freelance paralegal. The first insurer she contacted gave four reasons for denying her coverage, one of which was a persistent case of acne. A major health maintenance organization didn't want to take her on because of a blood platelet count her doctor says is not a problem. A third insurer refused her because she is seeing a therapist.

She is a victim of tightened underwriting -- the process through which insurance companies calculate the risks of covering a particular individual or group. Underwriting is the principal tool of the cream-skimmers, and it means two things: fewer people qualify for coverage. And those who do may be charged more, according to the number of claims they have filed in the past.

Insurers today ask for more information from policy applicants and dig deeper into their medical backgrounds than ever before. In some parts of the country, it is routine for insurers to require a blood test for AIDS along with an application. Of 61 insurance companies surveyed by the congressional Office of Technology Assessment, 18 said they considered sexual orientation in underwriting. Some go even further to avoid risk: In one notorious case, an insurer provided agents with an "AIDS profile," instructing them to segregate applications from "single males without dependents (who) are engaged in occupations that do not require physical exertion." Others have used zip codes and addresses in an effort to exclude applicants from neighborhoods where gays are presumed to live.

But insurers aren't just looking to block people at risk for serious illnesses. They're watching for signs of "high utilization." Psychotherapy is a common red flag for denial of coverage. "I think companies believe anyone who takes care of himself in this way," says one insurance broker, "is more likely to take care of himself in other ways as well."

Even people eligible for group plans through their jobs can find themselves subject to tightened underwriting. It used to be that members of group plans paid uniform low rates for coverage, no matter what their health status. Now some companies single out women of childbearing age as high risks and charge them more. Hunter recently received a call at the National Insurance Consumers Organization from a man who was paying more for his health insurance than others in his employee plan simply because he was older. "This kind of practice defies the idea of the group," he says. "Classifying people like this simply wasn't done in the past."

People with serious illnesses in their medical files may no longer be able to find refuge in a group plan at all. That's because insurers increasingly set their rates based on a group's "claims experience" -- instead of averaging expenses over the widest possible pool, they reduce the group to its smallest fragments. As a result, many small companies find themselves asked to choose between affordable coverage and the welfare of one or two employees, as in the Dawkinses' case.

"Everyone is trying to pass costs along to someone else," says Washington health policy consultant Lynn Etheredge. "What we're seeing is the breakdown of the principle of health insurance, which is that we are all in this together; we are all here to share the costs. Now the idea is, 'I don't want to pay for that sick guy. Let him go somewhere else.' "

Even when that "sick guy" finally finds insurance, his problems aren't necessarily over. Some insurers have found other ways to avoid paying the bills -- from delaying legitimate payments to denying coverage for certain prescription drugs, or refusing to pay for illnesses related to a pre-existing condition.

A group of occupational therapists in Durham, N.C., warns patients to expect two or three claim denials before getting any money, even if they have a doctor's referral. Many people get discouraged after one or two tries, says the bookkeeper for the practice -- and that means money in the insurer's pocket. "For some insurance companies, if they can get out of paying, they will do so," she says. "You have to tear your hair out to get them to pay."

Many cancer and AIDS patients have trouble with claims for expensive drugs prescribed "off-label," that is, for a purpose other than that originally approved by the Food and Drug Administration. Half of all chemotherapy prescriptions are off-label. Off-label prescribing is well within FDA rules, and it's often state-of-the-art medicine. But some insurers use "FDA approval" as a smokescreen. New York attorney Mark Scherzer has handled suits against insurers by AIDS patients who cannot get AZT paid for. "What they're doing," he says, "is depriving doctors of their range of discretion in treating patients."

Insurance companies can also cut costs with pre-existing conditions clauses. These are nothing new; nearly all companies use them to protect themselves from clients who shop for insurance or a job with good health benefits only after they get sick. "But there is no question that insurers misuse them," says Robert Hunter. These days, having had a kidney stone can make it difficult to get reimbursed for treatments for anything from your kidneys to your bladder. And where a three-month exclusion was once routine, policies are now likely to exclude conditions for 12 months -- or even longer.

Dean Meyer, a former director of the California Insurance Brokers Association with 25 years of experience in the business, gave up his health policy when he was elected supervisor in Trinity County, a rural area near the Oregon border. Now that he's no longer a supervisor, his original insurer has agreed to resume his policy, but they've refused to cover him for anything that might go wrong with his heart or his circulatory system. Meyer says he lies awake nights worrying whether the heart bypass surgery his doctor says is inevitable will cost him his ranch and his life savings.

"I'm out in the cold," says Meyer. "Once you start having insurance problems, what you know, where you've been, just doesn't matter." Fighting Back

Many Americans probably assume that if their insurance company won't pay the bills, they can at least sue. The Holmes family of Fountain Valley, Calif., found out how difficult that was when they tried to take their health insurer to court last year.

In 1987, doctors told Delores Holmes, then 47, that without a new liver she had only a year to live. A nurse, Holmes was covered through her job by the Pacific Mutual Life Insurance Company. When administrators at the University of California Los Angeles Medical Center, where she was being treated, called Pacific Mutual to find out whether it would cover the cost of a liver transplant, they were told the answer was yes.

But according to Holmes's daughter, Sherri, when her mother was on her way to the hospital for the operation, hospital staff called the company for final confirmation and didn't get it. Instead, a Pacific Mutual representative said that a clerical error had been made. The transplant was not covered under the terms of Holmes's policy.

By then, Holmes had waited several months, assuming her insurance would cover the cost of her transplant; because of the error, she did not immediately apply for Medi-Cal, the state insurance program for the poor, which does pay for liver transplants.

When UCLA told her that her insurance company was refusing to pay for the transplant, Holmes immediately applied for Medi-Cal -- but it was too late. Over the next two months, her condition deteriorated rapidly, and the doctors told her family that she was no longer strong enough for the operation. She died in February 1988.

A year and a half later, the house still holds an air of mourning. The immaculate rooms seem suspended in time, like the photos of ocean waves, caught at the point of breaking, that hang on the living room wall. "She'd still be alive today if she hadn't had any insurance, that's the irony," says Edward Holmes, Delores's husband. "We would have had time to get her on Medi-Cal, and we could have sold the house to pay for the rest."

Shortly after Holmes's death, a company spokesperson told a reporter for the Orange County Register that a mistake had occurred. A clerk had initially misread Holmes's policy and erroneously assured UCLA that a transplant was covered. But, the spokesperson said, when the error was discovered, the hospital was immediately informed.

Nonetheless, the family decided to sue for "wrongful death," just as they could have if Delores Holmes had died on the operating table as the result of a doctor's negligence. "I felt I had to make the point that the insurance company did wrong," says Edward Holmes.

The case was settled out of court, after a two year legal battle. Initially the Holmeses' claim was rejected by a court; the matter was later settled while it was on appeal. As one of the terms of the undisclosed settlement, both parties agreed not to discuss the case. Mending the Safety Net

"I don't think we can blame the insurance companies," says Pat Christen, executive director of the San Francisco AIDS Foundation, who has seen many clients struggle to get and keep health coverage. "As a private industry, they need to make money. People shouldn't be shocked when the bottom line comes before health. The question is, is that the kind of health care system we want?"

Robert Hunter of the National Insurance Consumer Organization agrees that insurance companies aren't the bad guys. It's just that asking private industry to meet public goals isn't logical -- or effective. "We're telling insurance companies, 'You take care of people, even if it costs you,' " he says. "But no one insurance company is going to step forward and agree to take care of the people with the big health problems. If one did, all the other companies would say, 'Great, let them go down the tubes.' "

Hunter and others say the time has come to set up a national health plan. "The concept has always been intellectually appealing," he says. "It may now be a matter of economic necessity."

But health insurers say they think it's a bad idea. "In that kind of system, when the money runs out, the medicine runs out," says Waldron. "You are going to have political decisions ruling the roost, and that means decisions are made for the consumer, not by the consumer."

The industry has its own ideas for patching the holes in the safety net. The first is Medicaid reform: Only 38 percent of those below the poverty line qualify for the government program. Payments for those it does cover are so low that hospitals shift costs to patients with private insurance. In Illinois, for example, the Employee Benefit Research Institute estimates that privately insured patients pay $282 more for each hospital stay because of Medicaid underpayments. HIAA has also proposed measures that would make insurance more affordable for small businesses.

In 19 states, insurers have banded together in "high-risk pools" to sell insurance to people who find coverage hard to get because of their health. Expanding that option to every state would take care of people who are now uninsurable, industry representatives say.

But do these proposals go far enough? Robert Griss of the World Institute on Disability says that high-risk pools are too expensive for most people -- up to $4,000 more a year than average.

In any case, the insurance industry is being outpaced by public opinion. The American Medical Association still opposes national health insurance, but the New England Journal of Medicine came out in favor of the idea last year.

Opposition in the business community is melting away, too, as the costs of the current system weigh on the bottom line. Chrysler chief executive Lee Iacocca has begun quoting this statistic: For each car his company produces here, $700 of the sticker price goes to pay for employee health care; in the company's Canadian plants, the cost is $223 per car.

Philip Lee, director of the Institute for Health Policy Studies at the University of California in San Francisco, says we missed opportunities during the New Deal and under President Johnson to establish national health insurance. Now there may be another chance. "These things go in 20-year or 30-year cycles," he says, "so we need to be ready."

In the meantime, for those whose insurance fails them, a turn in what Susan Sontag calls the "nightside of life" will continue to have the bitter edge of nightmare. "Insurance is supposed to be something you can depend on when things go bad," says Valerie Dawkins. "But we found out, when we had this terrible thing happen to us, that there is no insurance. They ought to give it another name."Constance Matthiessen is a staff writer with the Center for Investigative Reporting in San Francisco. Researcher Nancy Vogel contributed to this story. Excerpted from In Health magazine

l989, Hippocrates Partners. Getting the Most Out of Health Insurance

If you want to hang on to your health coverage and keep claim denials to a minimum, here are some basic things you can do: Follow the rules of your policy to the letter.

Don't withhold any information about your health, past or present, on an insurance application or claim form. If you do, you may lose your policy or be forced to pay back claims.

Many plans require you to get approval from the insurance company before going to the hospital or to get a second doctor's opinion on a proposed operation. If you don't, it could mean the difference between the insurance company picking up all or just part of the tab.

Use the insurance company's claim forms. Submitting the doctor's form, or filling your insurer's form out incompletely, may delay payment.

Know how and when your policy can be canceled. If you carry your own insurance, pay your premiums on time. Some plans will cancel you the day your payment becomes overdue. Others will drop you if you cannot return to work full-time after an illness. If you have trouble getting a claim paid, appeal first to your insurer.

Some reimbursement problems are simply misunderstandings between doctors and insurance companies about the coding on claim forms. Have your doctor call the company for you, if possible.

Keep trying, in writing. Some companies will reject claims two or three times before finally coughing up. Saying you've sent a copy of your letter to the state department of insurance will sometimes do the trick.

Every state's insurance department has an office in the state capital. Contact them if all else fails. Don't change jobs or insurance companies without lining up another plan.

Make sure your last day on your current plan is day one on your new plan. Know what conditions will be excluded from your new plan, if any, and for how long.

If you are on a group health plan now, it probably has a "conversion clause" that will tell how and when you can switch to an individual plan. Conversion policies are usually expensive, and they often do not cover pre-existing conditions for a year or more. If you work for a company with more than 20 employees, a federal law called COBRA (Consolidated Omnibus Budget Reconciliation Act) allows you to stay in your group plan for 18 months after you leave the job. You'll have to pay your own premiums, but the rates will be the same as for others in your group. If you have trouble getting insurance, keep shopping.

Independent brokers handle policies from many different companies. Seek out one who specializes in policies for people in your profession or with your particular medical history.

Blue Cross and Blue Shield used to accept individuals regardless of their health, but they have tightened requirements in recent years. The Blues in 11 states and the District still offer "open enrollment" for their health plans, but usually only for a few weeks each year.

If you have been rejected by one or more insurance companies, you may be able to buy a policy through a high risk pool. Nineteen states have them, but not the District, Maryland or Virginia. Premiums are apt to be 50 percent higher than average, and you usually must wait a year before making any claims for a pre-existing condition.

You may be offered individual coverage only if treatments for conditions relating to a current health problem are not included -- ever. There may be room to negotiate, however. One man who'd had a benign skin growth removed was offered a policy that excluded all types of cancer from coverage. When he threatened to complain to the insurance commission in his state, the company relented and wrote him a policy that excludes skin cancer alone. Nancy Vogel