Policy With a Big Hole : Court action on firms’ self-insured health plans points up need for reform

This week’s Supreme Court action allowing companies that fund their own health insurance to slash the benefits paid for catastrophic diseases is but the latest scary sign of how tattered the nation’s health care system has become.

The decision--potentially affecting 70 million Americans covered by self-insurance health plans--should be yet another reminder, if any were needed, to the incoming Clinton Administration of the urgent need for comprehensive health care reform.

With two justices dissenting, the Supreme Court refused to hear an appeal from an AIDS patient whose total medical benefits were reduced from $1 million to $5,000 after he revealed his illness to his employer. Two lower federal courts had ruled that companies that self-insure their employees have the right to alter terms of medical benefits.

This case has revealed a gaping loophole in federal and state laws governing medical benefits underwritten by employers.

In effect, the court has allowed companies not only to refuse to provide coverage for certain costly illnesses, such as AIDS, cancer or Alzheimer’s disease, but also to drop coverage after an employee reveals an illness.

Yet it is precisely to protect themselves in the event of such medical and financial catastrophes that Americans buy health insurance, paying increasingly higher premiums in recent years for less comprehensive policies. Monday’s court action represents disturbing news to the 50% to 60% of Californians who have health insurance through their jobs: Their “insurance” against calamity could prove to be anything but.

Bill Clinton’s election victory last week said much about the public’s demand for White House leadership on the issue of health care. Clinton made this crisis a centerpiece of his campaign and promised to send a comprehensive reform plan to Congress during the first 100 days of his presidency. The Supreme Court’s action should prod the next Administration to add to its agenda legislation closing the latest legal loophole in health insurance coverage for American workers.