Q&A; : AIDS Ruling Casts Pall on Health Plans

A controversial Supreme Court decision this week has workers worried whether they are at risk of having their health insurance benefits slashed.

The decision allows companies to severely cut health insurance benefits after learning that one or more employees has become terminally ill.

H&H; Music, a small, self-insured company headquartered in Houston, revised its health package to pay a maximum of only $5,000--down from $1 million--for AIDS-related ailments after learning that one of its employees contracted the deadly disease.

The Supreme Court refused to hear the case, letting stand a lower court ruling allowing the change.

Could your benefits be similarly ripped out from under you if you or a covered family member contracted a serious ailment?

The answer is yes, benefit experts say. However, the risks are far greater for about 40% of American workers employed by companies that self-insure.

Here are some answers to questions about how the decision may affect you:

Q: How do you find out whether your employer is self-insured?

A: If you are in a group benefits plan, you should have something called a “summary plan description.” This document should spell out whether your plan is insured through an outside carrier or through the company itself.

What you can’t do is look at your insurance card, see that it’s issued by an insurance company, and assume that means you’re insured by an outside carrier.

Many self-insured companies contract with insurers simply to administer their plans. In other words, an XYZ insurance card does not necessarily mean XYZ insurance.

If you’re confused, your company’s employee benefits representative should be able to answer your questions.

Q: Why are the risks greater if your employer is self-insured?

A: Most states prohibit discrimination against ailing employees. But the Employee Retirement Income Security Act specifically exempts self-insured firms from these state laws.

The exemption was designed to make it easier for national and international firms to comply with various state insurance laws, but it also allows single-state employers to skirt the non-discrimination restrictions.

Q: Should you worry if your employer is self-insured?

A: Not necessarily. Some experts believe that H&H; is an unusual case. Large employers are particularly unlikely to change benefit plans simply because one or two workers have gotten sick, they say.

The biggest risk is with small self-insured companies because they simply do not have enough employees to adequately spread the costs of caring for terminally ill workers.

Q: Are you safe if your employer contracts with an independent insurer for coverage?

A: For the time being, but not indefinitely. Companies are contractually obligated to maintain current insurance programs until coverage comes up for renewal once each year. However, there is nothing to stop companies from altering benefits at that point.

Q: Can companies take benefits away from just one worker?

A: No. Any change in benefits must affect all employees. H&H;, for example, terminated its old benefit plan and replaced it with a new, more limited plan. Other workers who contract AIDS would also be subject to the new plan limitations.

Q: Is there anything you can do if your employer terminates or limits your benefits?

A: You can’t stop your employer from slashing health insurance benefits. However, most companies will offer workers a variety of insurance choices, some of which are not likely to be pared and are well-suited to individuals with terminal ailments.

Health maintenance organizations, for example, will usually accept new patients regardless of their pre-existing medical conditions. There are usually no waiting periods for coverage and no exclusions. Workers insured through an HMO are also less likely to see their companies slash benefits, industry experts say.

Q: Why would HMOs accept people with pre-existing conditions?

A: It is one of several conditions that allow HMOs to retain a special favored status as a “federally qualified” company. Only about 50% of the nation’s HMOs are federally qualified, but they cover about 75% of the HMO participants.

Q: How do you know if the HMO is federally qualified?

A: They’ll tell you. Call the HMO’s member service department and ask. You’d also be tipped off by reading benefit literature. If the HMO accepts any employee during the open enrollment period, regardless of health, it is probably federally qualified.

Q: What’s the downside of choosing an HMO?

A: You can only go to specific doctors and hospitals if you want the cost of your medical care to be covered. Most HMOs deny payment to anyone who gets care outside of the system, except in emergency.

Emergency care is usually covered no matter where it was given, but the HMO gets to decide what constitutes an emergency. If you believe that you’re having a heart attack in the middle of the night and choose to go to a hospital that’s outside the system, you better hope it wasn’t just heartburn. If it was, those emergency bills are probably going to be your responsibility.

Some also complain of long waits for surgery or even to see an HMO doctor. In other words, if you expect to be reimbursed, the term “patient” may be particularly apropos.