Santa Monica Firm Begins Selling AIDS Insurance

Times Staff Writer

With fear over the deadly disease AIDS running high, a Santa Monica insurance firm is selling medical insurance for acquired immune deficiency syndrome using some of the same controversial techniques used years ago to sell cancer and polio policies at the height of their notoriety.

After receiving approval from the California Department of Insurance nearly one year ago, Coastal Insurance Co. of Santa Monica this fall began mailing consumers a letter-sized brochure and application form warning that:

For the record:

12:00 AM, Nov. 28, 1985 FOR THE RECORD
Los Angeles Times Thursday November 28, 1985 Home Edition Business Part 4 Page 2 Column 3 Financial Desk 2 inches; 61 words Type of Material: Correction
Transamerica Occidental Life Insurance Co. does not screen applicants for health insurance by requiring blood tests for acquired immune deficiency syndrome, as erroneously reported on Nov. 22. Transamerica offers no individual health insurance policies, and there is no AIDS testing for group health insurance policies. Blood tests are only used for some individual life insurance policies for residents in high-risk areas.

“AIDS knows no boundaries. Men and women, adults and children have been stricken by the disease. . . . There is more to the battle against AIDS than illness. There is a financial reality as well.”

The brochure, which advertises “AIDS medical expense insurance that pays up to $78,000 per year” for an annual premium of $291, quotes newspaper articles and a doctor about the potential growth and cost of treating the disease. By next year, company officials hope to step up their promotional effort.


“We intend, after the first of the year, to go into a fairly large direct-mail campaign in the states where we are licensed,” said Gerald Milton, chairman of Coastal, which is licensed to sell insurance in California, Washington, Nevada and Arizona. Coastal, which advertises its policy as a supplement to regular health insurance, is one of the few companies in the nation to offer the policy.

Last June, a Dallas insurance firm believed to be the first in the nation to offer AIDS insurance stopped selling the policy because of poor demand.

Cindy Kirkpatrick, a spokeswoman for Provident American Insurance Co., said the firm sold only 200 AIDS policies between April, 1984, and June, 1985. She said she did not know how much in premiums the company had collected during the 15-month period, but she said the firm has two pending AIDS claims.

Purchasers of Coastal AIDS policies would be paid up to $64,000 in the first year for continuous hospitalization for AIDS and up to $73,000 in each following year. But Coastal’s brochure says the policy “Covers only AIDS which first makes itself known more than 90 days after the policy is issued.”


The high premium cost and relatively low benefits paid by so-called dread disease policies, which cover such illnesses as cancer, polio and AIDS, have drawn criticism from insurance experts. They say comprehensive health insurance policies, usually available through employers, offer consumers more for their money.

Have Limitations

“Generally, we recommend a comprehensive health insurance policy,” said Amy Biderman, a spokeswoman for the Health Insurance Assn. of America in Washington. “But if people feel better knowing they have this kind of dread disease policy, so be it--it’s a free marketplace. But be aware of the limitation of these policies. An AIDS policy is certainly not going to cover anything else besides AIDS.” And even then, she added, the policy may not pay enough benefits.

Adds John Dorfman, executive editor of Consumer Reports magazine, which has been highly critical of cancer insurance policies since it conducted a comparison of their benefits versus costs: “You need medical insurance regardless of what causes you to be sick. But, in most cases, you would be better off beefing up your present comprehensive policy than buying specialized insurance.”


But Milton argues that, unlike the sympathy accorded to cancer and polio victims, AIDS victims sometimes are scorned--and even fired from their jobs, which means that they lose their health insurance benefits. “We can’t put our heads in the sand and say AIDS will go away,” he said. “I’m not the one to putting the feeling of fear in people’s hearts. The constant attention of the media and all the television stations are doing that. What we are trying to do is present a product to the public that will protect them if they get a terrible disease. We’d be the first to be delighted if they got a vaccine to prevent it.”

AIDS so far has struck more than 13,500 throughout the country, claiming some 7,000 lives, according to the Centers for Disease Control in Atlanta. The disease cripples the immune system.

Several medical experts have estimated that, currently, the medical costs for treating AIDS patients can reach as high as $140,000. And, with the number of victims expected to double in the next 12 to 15 months, some major health and life insurers, such as Los Angeles-based Transamerica Occidental Life Insurance Co., have begun to try to screen some applicants for health insurance by requiring them to take blood tests.