RENEWED FOCUS ON AIDS : Magic’s Revelation Spotlights Insurance

Magic Johnson’s revelation that he is infected with the AIDS-causing virus has focused attention on the friction between California insurers and lawmakers over AIDS testing and the grounds for refusing coverage.

Johnson’s blood test was required as a condition of a life insurance policy that the Lakers wanted to buy to protect their interest in a large loan to Johnson.

State law allows life and disability insurance companies to require testing for the human immunodeficiency virus (HIV) and to refuse coverage to those testing positive.

However, it is illegal in California to refuse health insurance coverage on the basis of a positive HIV blood test, according to Peter Groom, senior counsel for the California Department of Insurance. The rationale for the law was that people were refusing to have themselves tested for fear that the results would be used against them.

Health insurers have tried several ways to get around the prohibition. Since the law specifies HIV blood tests, Groom said, some firms have switched to urine or saliva tests for the virus. The state has attempted to close the loophole by banning requirements for any HIV tests, effective Jan. 1, he said.

A positive HIV test almost automatically excludes someone from life insurance coverage. However, according to Richard Nagler of Woodland Hills, who has been in the life and health insurance business for 20 years, there are still some policies available with liberal entry requirements. They tend to be for professional groups, alumni associations and the like.

On the health insurance side, it is difficult to obtain individual insurance at any price, but large group policies may not have stiff barriers to entry. Since it is illegal to require HIV testing, someone who has tested positive but has never received treatment or shown symptoms of AIDS-related illness may enter such group policies.

The California Major Risk Medical Insurance Program, formed last Jan. 1 to cover people who are otherwise uninsurable, reached its maximum enrollment of 10,000 people in less than six months. There are 3,500 people on the waiting list--which means a wait of at least one year, a spokeswoman said.

Nagler defended the industry’s practice of rejecting applicants who test HIV-positive.

“There just isn’t enough evidence yet to show what the life expectancy is, so we can’t price it,” he said.

However, Nagler expects the industry to begin offering coverage as the statistical base grows.

In general, he said, insurers are far less nervous about AIDS than a few years ago. There are two main reasons: First, blood testing has enabled companies to screen out infected patients, and second, the cost of treatment has turned out to be far lower than originally forecast.

AIDS-related health-insurance claims average $30,000 to $50,000, Nagler said. That’s steep, but it’s about the same as for a heart bypass patient and much lower than a typical claim for a very premature infant.

Nationally, life and health insurers paid an estimated $1.2 billion in AIDS-related claims in 1990, up from $1 billion in 1989, according to a survey released in September by the American Council of Life Insurance and the Health Insurance Assn. of America.

AIDS-related claims in 1990 accounted for 3.5% of all group life insurance claims, 2% of individual life insurance claims, 1.4% of group health and accident insurance claims and 1.3% of individual health and accident claims, according to the survey.

HIV and Insurance

Life and Disability Insurance:

* It is legal under California law for insurance companies to require HIV testing as a condition of coverage.

* Companies can legally write policies specifically exempting coverage for AIDS, but it’s complicated.

* A positive HIV test or AIDS-related illness generally makes life insurance impossible to obtain, but some policies with liberal conditions still exist.

Health Insurance:

* It is illegal in California to require a blood test for HIV antibodies as a condition of coverage, or to question applicants about HIV status.

* However, it is now legal to require other tests, such as urinalysis for HIV or an HIV antigen test. On Jan. 1, such tests become illegal in California.

* Companies can legally require medical records that may confirm AIDS-related treatment.

* Medical coverage for people testing positive for the HIV virus or an AIDS-related illness is sometimes obtainable under private group plans.

Medical coverage for people with AIDS or AIDS-related illnesses is obtainable through the California Major Risk Medical Insurance Program, but the waiting period may exceed one year.

Source: California Department of Insurance