LAST YEAR the D.C. Council passed an unwise law that has already had adverse effects on some people in this city. The law prohibits insurance companies from denying health or life insurance coverage to persons who test positive for the AIDS virus. Nor may the companies charge higher rates to these people, even though the risk assumed is very much greater for those who have the virus. After this law was passed, almost all insurers immediately ceased writing health and life policies in the District. Group policies -- the kind provided through employment, for example -- continue to be available, since individual physical examinations are not usually required. But if you live in the District of Columbia and are trying to buy your own protection or to supplement the coverage you have at work, you are in trouble.

We opposed the passage of this law and continue to urge reassessment and revision. But the D.C. Council is the right forum for action, not the U.S. Senate. Last year, Sen. Jesse Helms tried to persuade his colleagues to overturn the city law, but he did not succeed. Now he proposes to tie up the District's budget with a heavy-handed restriction. At his urging, the Senate has passed an amendment to the D.C. appropriations bill that would freeze all spending in the city unless the council repeals the insurance law by Dec. 31.

This kind of blackmail is not new. The District unfortunately serves as a handy target for a number of federal legislators trying to make a point with the folks back home or some national interest group or other. Usually the fight is over whether the citizens of this city should be allowed to spend their own money -- not federal money -- to provide abortion services to the poor. Other states can do this, but no other jurisdiction is in the unfortunate position of the District: subject to the supervision or the whims of overseers on the Hill.

We hope that the latest Helms amendment does not survive a conference with the House. The council can make this more likely by reviewing the law and making modifications. Jeffrey Levi, executive director of the Gay and Lesbian Task Force, has said that gay activists and representatives of the insurance industry are already working on amendments. But under any circumstances, most Washingtonians would rather live with a law they don't like that was enacted by their own representatives than have the power of self-government snatched away by lawmakers who have no roots or responsibilities her