VIEWPOINTS : The Virtues of Cost Containment and Compassion : Do companies have the right to deny medical coverage to AIDS patients?

T he Circle K Corp. this year adopted a policy of cutting off medical coverage in some circumstances to workers who become sick or injured as a result of AIDS, alcohol, drug abuse or self-inflicted wounds. It was believed to be the first time a major company sought to deny insurance coverage to employees based on, in Circle K’s words, “personal life-style decisions.” After civil libertarians and gay-rights activists protested the policy earlier this month, the company agreed to suspend it pending a review. Free-lance writer Meredith F. Chen asked various authorities whether they believed such a medical insurance policy is ethically or legally defensible and to suggest other ways for employers to curb health-care expenses. Excerpts follow:

Kirk O. Hanson, a lecturer at Stanford University’s business school and a corporate ethics consultant:

“The examples given by Circle K--AIDS, alcoholism, drug abuse and self-inflicted wounds--involve so many different factors that it is a travesty in most cases to call them matters of personal life-style decisions.

“This is entirely the wrong approach to controlling medical costs. In the case of alcohol and drug abuse, more and more companies are recognizing that treatment programs are a productive investment in restoring employees to full working status. Instead of being a drain on the corporation, such programs are actually a productive investment.

“AIDS medical expenses are clearly a severe national and corporate concern, but to construct a specious argument about a personal choice does not contribute to the difficult choices the country must make in how to finance the medical costs of AIDS.

“There are lots of experiments going on and lots of progress is being made by companies in controlling medical expenses. The use of second opinions, the use of incentive programs to encourage employees to use company selected panels of doctors and encouraging employees to patronize prepaid health-care plans are techniques that are dealing effectively with part of the health-care cost escalation. The focus on alcoholism, drug abuse, suicide and AIDS sounds like a misplaced focus probably motivated by a resentment of employees who have these problems.”

Robert F. Bray, spokesman for the Human Rights Campaign Fund, a lobbying group for the civil rights of homosexuals:

“Responsible companies don’t turn their backs on employees who need support, care and assistance. To turn their backs on these employees is what we consider corporate genocide.

“We have companies that have taken the lead in the right way to handle AIDS in the workplace. The Circle K company is a textbook case of how not to handle AIDS in the workplace. What about employees who smoke cigarettes, for example. Does that mean if they go on to develop cancer, they won’t be covered? Where do we draw the line?

“One good way for companies to curb their medical costs is to follow the example of IBM. They have . . . health programs, exercise programs, stress reduction programs and AIDS education programs that feature very responsible, non-judgmental information on AIDS. A good way to reduce health-care costs is to produce healthy employees.

“One way to create unhealthy employees is discriminating against them. AIDS discrimination has had a chilling effect. Employees who are at risk for AIDS will go underground. They won’t come forward to be tested, they won’t come forward for treatment, they won’t come forward for support and counseling. Discriminatory policies actually contribute to the spread of AIDS.”

Ray Cox, senior vice president of corporate affairs for Circle K Corp.:

“There is a misunderstanding of what Circle K’s intentions are so far as our medical policy is concerned. The medical policy that we announced on Jan. 1 this year took away no medical coverage from anyone who qualified under our plan at Dec. 31, 1987. . . . It (would apply) only to those employees who (joined) the company on or after Jan. 1, 1988.

“We feel that people who want to come to work for us may make a choice at that point. ‘Yes, that medical plan is acceptable to me, I have no problem with it.’ Or, ‘No, I don’t like the medical plan. It doesn’t give me enough coverage.’ Then they have the choice to either accept it and come to work for us or seek employment somewhere else.

“Our focus is strictly cost containment and all that we are doing in this program is exercising the traditional, reasonable, prudent management prerogatives that are aimed at controlling costs. . . . “ . . . I’ll use myself as an example. Let’s say that I go home tonight and I sit down and I have too much to drink and I get drunk and I fall down the steps and I hurt myself. Not covered (under Circle K’s proposed medical plan). Because I had a choice. I didn’t have to sit there and get smashed. I go home tomorrow night and I engage in some sort of illegal drug abuse and get high and I fall down the steps. I’m not covered.

“If I get AIDS as a result of a medical accident, that’s a blood transfusion or some accident in a hospital, I am covered. If I get AIDS from my wife who has been promiscuous and she picked up AIDS and passed it along to me, I am covered.

“If I get AIDS from engaging in a hazardous behavior or activity--that can be translated to mean a homosexual activity or an activity where I acquired AIDS as a result of a dirty needle--I’m not covered. Those are the instances. . . . Technically, I’m not covered under the policy but the company probably would continue to pay the bill.

“Have we denied any (health insurance) claims under the new policy? No, we have not. How many claims have we had under the new policy? We have had none.

“What we are hoping to achieve is to promote a positive life style or positive health attitude among our employees encouraging them not to engage in dangerous, high-risk activities such as getting drunk, using illegal drugs.”

Harold Loeb, senior vice president of Hay/Huggins Co., an employee benefits consulting firm:

“My personal opinion is that (Circle K) doesn’t have the moral right to do that (deny coverage to AIDS patients and others). . . . We are hearing companies balk at the increased cost of medical coverage, but they’ve balked at everything else that has caused their medical expenses to increase, and quite frankly we’ve not heard anything special from our clients about precluding expenses related to these diseases.

“I believe that we could see a dramatic increase in medical expenses if nothing is done to stem the tide of the spread of AIDS. I would say that, to date, AIDS has not been a major factor in the rise of health-care costs. The costs of technological advancements is probably the leading cost in the advancement of health care but that brings with it better care.”

Bill Custer, research associate with the Employee Benefits Research Institute:

“There is no federal statute against it, and if a firm self-funds--that is, if it keeps reserves to pay health-insurance claims itself as opposed to buying health insurance from a commercial insurer--then it is exempt from state law.

“The issue is who is going to pay for care for these specific ailments. The Circle K policy was flawed in the sense that they were trying to blame the victim. Most corporations would be reluctant to install a similar type of program.”