The D.C. City Council approved a bill yesterday to prohibit health and life insurance companies from denying coverage to persons who test positive for exposure to the AIDS virus, providing them with more protection than any other such legislation in the country.

The legislation was opposed by the national insurance industry, which warned in a $200,000 media campaign that enactment would result in higher insurance premiums for District residents or in insurers leaving the city entirely. Proponents said the bill would prevent unfair discrimination against persons deemed by the insurance industry to be at risk of getting AIDS but who have not actually developed the deadly disease.

The bill, given preliminary approval by a unanimous voice vote of the council, would not extend protection to persons who have acquired immune deficiency syndrome. The council is expected to give final approval to the measure in two weeks and Mayor Marion Barry has indicated he will sign it.

Some insurance companies in the District have begun asking applicants if they have tested positive for exposure to the AIDS virus, and a number are requiring these tests of some or all applicants, according to the D.C. superintendent of insurance and industry representatives. Persons who test positive have found it difficult or impossible to get health or life insurance, proponents of the bill said.

"They [the industry] want to, in effect, deny insurance to a whole class of people," said council member John Ray (D-At Large), chairman of the Committee on Consumer and Regulatory Affairs and author of the legislation. "Discrimination does exist."

The bill prohibits insurers from denying coverage to anyone on the basis of a positive test showing exposure to the AIDS virus. For five years, the companies cannot charge higher rates to those who test positive than to those who do not, but at the end of that period insurers can petition the superintendent of insurance to allow higher premiums for those with positive tests, based on risk assessments determined by experience during that time.

The issue is of particular concern to the gay community, because many AIDS victims and persons testing positive for exposure to the virus are homosexual men. The local gay community responded to the insurance industry's television, radio and newspaper advertising campaign with a less visible but intensive lobbying of City Council members.

The insurance industry has said it needs to be able to use the tests to assess whether a person has a higher risk of eventually getting AIDS, but proponents of the bill said that most persons who have been exposed to the virus do not develop the disease. The gay community also has charged that the industry has started "red-lining," denying insurance to younger unmarried men who live in areas known to have a high proportion of homosexual residents.

The council measure, in an attempt to prevent redlining, would ban companies from using factors such as age, sex, marital status or sexual preference in determining whether to provide insurance coverage.

"The council is taking a courageous stand," said Council Chairman David A. Clarke. "It says we are going to stand firm against fear, stand firm against hysteria."

However, Russ Iuculano, legislative director of the American Council of Life Insurance Companies, warned, "It creates a dangerous precedent."

California, where the first piece of legislation on the issue went into effect in April 1985, prohibits insurers from using specific types of blood tests that detect antibodies to the AIDS virus in a person's system, indicating exposure to the virus. Wisconsin prohibits use of such tests until the state epidemiologist approves one as medically significant and reliable for underwriting purposes, which has not yet happened there.

But insurers in those states use other types of tests that show abnormalities in a person's immune system, according to industry representatives. Neither state includes the District's five-year moratorium on higher premiums for those who test positive for exposure to the virus.

While life and health insurance now generally do not cost more in the District than in the surrounding suburbs, individual insurance companies likely will increase rates across the board for city residents to make up for the added risk they must assume if the legislation goes into effect, according to Iuculano of the insurance industry.

Several City Council members expressed anger yesterday at the insurance industry advertisements that began appearing last week. They accused the industry of using misleading information and inflammatory rhetoric in opposing the bill.

"Everybody has a right to open their mouth; some people have the capacity to put their foot in it," Clarke said. "Their effort backfired."

"I was flabbergasted" at the industry campaign, said council member Frank Smith (D-Ward 1). "The public didn't buy that garbage they were putting out . . . . They inflamed people all right."

Between September 1980 and April 13, 1986, there were 358 cases of AIDS reported in the District and 194 deaths from the disease.