Subject: Employers and Insurers Have Reasons to Fear Expensive Epidemic Date: Published: 10/18/85 320 lines Source: Wall Street Journal. Copyright Dow Jones & Co. Inc. Aids Costs: Employers and Insurers Have Reasons to Fear Expensive Epidemic --- Because They Pay for Care, Then for Death Benefits, Businesses Ponder Prices --- Blood Tests, Tough Questions --- A Wall Street Journal News Roundup By this time next year, the Centers for Disease Control in Atlanta expects to have counted 28,000 cases of AIDS -- an approximate doubling of today's total. The CDC makes no specific projections beyond that -- there are too many unknowns about AIDS -- but a CDC statistician says that the next doubling, to 56,000 cases, may then take a little longer to occur, perhaps 12 to 20 months. As a fatal disease that typically involves great suffering and recurrent hospitalizations, Acquired Immune Deficiency Syndrome is a tragedy for its victims, the majority of whom (some 73%) are homosexual men. It also is a cause of concern to those who pay the bills for this particularly expensive disease. The CDC estimates that the average AIDS case has resulted in hospital costs of $140,000. Life-insurance companies, as well as employers who pay for their workers' medical care, have reason to be thinking about their social obligations and their dollar costs. Because AIDS kills a lot of relatively young people, the disease plays hob with the actuarial tables insurers use in setting life-insurance premiums, and insurers are understandably anxious to protect themselves from claims involving policies recently issued to people already sick or especially likely to get AIDS. Employers seem eager to gird themselves against the day when the disease strikes down their own workers. They fear contagion, and they fear publicity. Whether warranted or merely fed by hysteria, the fears are real. Interviews conducted by Wall Street Journal reporters in a number of U. S. cities suggest that most companies have experienced few if any AIDS cases that they are willing to talk about. But businessmen can count and are clearly nervous; as of Monday, reported AIDS cases had reached 14,125. With rare exception, companies say they will keep people with AIDS on the job. And employers expect to foot medical expenses as they would with any catastrophic illness, such as cancer, which last year killed more than 452,000 Americans. The life-insurance industry, for the most part, is tentative about changing practices. It is constrained by law and the responsibility it feels not to unduly invade the privacy of applicants. In most cases that means companies don't plan or won't be allowed to require applicants to undergo controversial blood testing that might indicate exposure to the AIDS virus, and they don't plan to ask searching questions about AIDS. The exceptions get plenty of publicity, but companies with such familiar names as Prudential, Metropolitan, Equitable, Aetna, Cigna and Travelers say they have no such plans. Still, companies are skittish and in some instances freely admit to looking askance at an insurance application just because it comes, say, from a single man living in New York City. Others, sensing opportunity, have offered AIDS insurance to the symptomless fearful. On Oct. 1, Home Office Reference Laboratory, a Shawnee Mission, Kan., lab that tests blood and urine samples for about 1,000 life-insurance companies, began running a series of tests for exposure to the HTLV-3 virus that is presumed to cause AIDS. The lab, a subsidiary of Business Men's Assurance Co. of Kansas City, Mo., is performing the tests for about 25 life-insurance companies, according to Ken Stelzer, the lab's president. He says 300 to 500 blood samples were tested in the first two weeks. A positive finding indicates that a person has AIDS antibodies in his blood and therefore has been exposed to the virus. It doesn't indicate that he has AIDS or will get it. But researchers believe that his chances of developing AIDS within five years are between 5% and 20%. Because the disease is invariably fatal, insurers tend to consider anyone with AIDS antibodies an unacceptable risk. The CDC believes that as many as one million Americans have been so exposed. Life insurers are among the first businesses (other than blood banks guarding the safety of blood products) to make much use of AIDS-antibody tests. Others would like to. In Houston, a vitriolic debate over AIDS, homosexuality and morality dominates this fall's city-council race. A group of candidates known as the "straight slate" wants all local food-handlers, daycare workers and blood-bank employees to be forced to take blood tests and to carry health cards. Employment-benefit consultants say that some big companies are considering adding AIDS-antibody tests to pre-employment physicals. Nationwide Life Insurance Co., a Columbus, Ohio, concern, plans blood tests for certain insurance applicants where the procedure isn't prohibited by states. "We don't view the AIDS virus as having civil rights any more than cancer has civil rights," says Stephen Rish, the company's vice president for individual life and health operations. He says he recognizes that not everyone who tests positive will develop AIDS, but then not everyone with an abnormal electrocardiogram is going to have a heart attack, either. Still, such people often are uninsurable. Northwestern Mutual Life Insurance Co., Milwaukee, a leading writer of life-insurance policies, says that it has asked all 50 state insurance regulators for permission to add a question to its forms inquiring whether applicants have any "indication" of AIDS or a disease of the immune system. The question has been approved in 16 states. Northwestern Mutual has paid $1.1 million in death benefits on 17 policies that it believes were held by AIDS victims. The payments averaged $65,000 but ranged from $1,000 to $500,000. The company expects these costs to increase sharply. Lincoln National Corp., of Fort Wayne, Ind., says it paid $1.5 million in AIDS-related death claims in the first eight months of this year. It is seeking permission to add several AIDS questions to its forms, and has approval from 40 states. Lincoln National didn't seek permission for its questions about antibody testing in California, Wisconsin or Florida, where the questions are prohibited by law. The company doesn't sell policies in New York, where the state insurance superintendent, James P. Corcoran, has said he wouldn't tolerate questions about AIDS blood tests. Massachusetts licenses three labs to test blood for AIDS exposure, and they are forbidden to do tests without evidence of the patient's informed consent. The regulation, which was approved in June, is intended to make sure that no one is tested against his will. Business Men's Assurance plans to begin administering AIDS blood tests within the next week or two, according to Gregg Sadler, the company's vice president of risk appraisal and customer service. Mr. Sadler says that in California and Wisconsin, where tests for exposure to the HTLV-3 virus aren't allowed, the company will use other, more expensive tests that indicate immune-system problems. If the tests are positive, Mr. Sadler says, "then that person wouldn't be insurable." Northwestern Mutual's assistant medical director, Robert Gleeson, says criteria for requiring blood tests may include some geographical factors. "At some point," Dr. Gleeson says, "you have to recognize that half the disease, currently, comes from two places -- New York and San Francisco. I don't want to write a grandmother from Platte, Neb., that she's positive. She's not a true risk." Dr. Gleeson adds: "We feel that we should be allowed to screen for this disease exactly as we screen for all other diseases... . In smoking, we can say there is extra risk. We also can say there is extra risk in true exposure to HTLV-3." The National Institutes of Health and the CDC define a "true positive" test for the HTLV-3 virus quite precisely. They require positive results on both the so-called "Elisa" test and "Western blot" test. Elisa stands for Enzyme-lined immunosorbent assay, and it must be confirmed because it yields a substantial number of false positives. Northwestern Mutual will pay $8.75 for the two Elisa tests and $65 for the more laborious Western blot test. Dr. Gleeson says he isn't sure whether Northwestern Mutual will turn down applicants who test positive; it may just sock them with a big premium surcharge consistent with the fact that they are statistically 20 times more likely to die within five years than someone with negative test results. Provident American Insurance Co., of Dallas, says it tried to market an AIDS health-insurance policy, charging an annual premium of $180. But the policy was offered for only a little more than a year because it had only about 200 takers. E. N. Young, Provident's president, says he figures that it wasn't the price of the policy but the stigma attached to AIDS that warded off customers. Coastal Insurance Co., in Santa Monica, Calif., still offers such coverage. Northwestern Mutual's Dr. Gleeson says that his company's eagerness to ferret out potential AIDS victims is warranted by the incidence of the disease. "We aren't talking about small numbers," he says. AIDS is currently the 12th leading cause of death among adult males, he says, and the average expected age of death for an AIDS patient is 35 years. In the general population, he adds, "we expect only one death per 1,000 people at age 35. We don't expect much death." AIDS is expensive and sure to get more so. Hospital care for the first 9,000 AIDS patients is said to have cost $1.25 billion. Thomas Ferguson, a vice president of group marketing for Equitable Life Assurance Society of the U. S., an issuer of group-health plans, is unimpressed with AIDS costs relative to the nation's total health-care bill, which runs about $387 billion. He says Equitable wants "to figure out how important financially {AIDS} would be to us and our customers if the growth rate continues." The proliferation of AIDS cases "could be a serious cost problem," he says, "but it would have to become several times bigger than it is now." The recent flurry of activity among insurers is occasioned, of course, by the rising number of AIDS cases and the availability since last March of the new blood tests. Insurers fear that people who believe they are AIDS risks will take blood tests at a clinic that guarantees them confidentiality and then go on an insurance-buying spree. "Buying life insurance becomes a very good deal when your number comes up on the roulette wheel," says one insurance-company official. In no state can an insurance company challenge death-benefit claims if a policy has been in force for two years. And that is true even if a policyholder lied on his application form. Some companies are beginning to challenge life insurance claims where the dead person had held insurance for a short time and is suspected of buying the policy in the knowledge that he had AIDS. Employers are surely as concerned about the cost of caring for AIDS patients as anyone in the U. S. Nearly all large companies themselves bear the full cost of employees' health-insurance claims. Insurance companies administer the plans for a fee but usually don't themselves incur the risk. Many, though not all, companies contacted for this report are trying to treat AIDS as just another illness. At Time Inc., for instance, the company's chief administrative officer, Bruce Hiland, recently sent a memorandum to all the publishing and video company's department heads, telling them to treat AIDS cases as they would any disability. Noting that AIDS "continues to run its devastating course," Mr. Hiland wrote: "Our policy ... is that AIDS and pre-AIDS employees are fully entitled to the ethical considerations and legal rights awarded anyone with an illness at Time Inc. " "These include," he continued, "protection of the individual's privacy, confidentiality and civil liberties. This disease should, in spite of its notoriety, be considered as any medical problem with attendant absence and disability." United Airlines has taken a somewhat different course. The company says it is handling AIDS on a case-by-case basis, and one of its cases landed the carrier in union arbitration proceedings. United placed a flight attendant suffering from AIDS on unpaid leave and wouldn't allow him to work again until he took a physical. The arbitrator who handled the dispute granted the attendant back pay, according to a United spokesman, but also ruled that he would have to pass United's physical to resume flying. Recent publicized fears in New York about public contact with AIDS victims, particularly in the schools, seem to have moved a good many employers to seek advice about dealing with workers with the disease. Management consultants say that in recent weeks they have begun to get a stream of questions from client companies. "We've begun getting all sorts of calls," says Leon Warshaw, the executive director of the New York Business Group on Health, a coalition of businesses interested in health issues in the workplace. "Employers want to know if their health coverage costs will rise, and can they set up screening barriers to employment," he says. Health and labor officials say that New York law prohibits employers from firing workers on the basis of disability. If he is physically able to, an employee must be allowed to work. Still, labor relations lawyers say that companies are legally removing some AIDS victims from jobs. Jerome Sloan, a partner with Sloan & Luks, a New York law firm specializing in labor relations, says an employee can be placed on disability leave if he is physically unable to work or if absenteeism exceeds the sick days a company typically allows for other chronic ailments. Mr. Sloan says that most AIDS disputes between employers and workers are being settled before they become public, "because nobody wants that kind of publicity." Keith O'Connor, an official with the New York City Human Rights Commission, says the agency has negotiated "numerous" settlements in which fired employees with AIDS have received "substantial settlements if they agree not to file a lawsuit." Some of the settlements, he says, include extended health benefits. But settling cases can take time. "We've had situations where we get them some money," says Mr. O'Connor, "and a few months later they die." Don Bohl, who is editing a guidebook on AIDS issues on the job for American Management Associations in New York, says "New York companies don't even want to be identified as having enlightened policies about helping employees with AIDS. " He contrasts that attitude with several companies in San Francisco "that are eager to get their policies on record." Progressive policies in San Francisco make companies "look like heroes." In New York, he says, "companies are worried about becoming pariahs." Employment-benefit consultants say that, in fact, few clients seem concerned that the cost of caring for AIDS victims will overburden their health-insurance program. David Glueck, a vice president of Towers, Perrin, Foster & Crosby, a Chicago-based benefits consulting firm, says, "It isn't costs that are driving employer concerns; it's the fear issue. They're worried about how other employees and customers will react to the knowledge that someone with AIDS is working for them." Costs, and perhaps homophobia, do plague some employers. The owner of a 5,000-employee company in California's Central Valley, who was angry about the big medical bills run up by an employee's son who had AIDS, tried to change his company's health-insurance plan to exclude payments for AIDS and other sexually transmitted diseases. But the California Insurance Department thwarted him. The company is self-insured and therefore bears the costs of paying claims administered by Blue Cross of California. The owner of the unidentified company was "absolutely incensed" at paying AIDS-related hospital bills, says Leona Butler, a Blue Cross vice president. The bills exceeded $75,000, she says. Blue Cross wanted to keep the employer's business, so it agreed to seek approval of a group health plan that wouldn't cover any sexually transmitted disease. The custom-tailored plan would have covered AIDS contracted through a transfusion, Ms. Butler says. The California insurance department denied the request. The employer presumably is still angry, though Blue Cross professes not to be at all unhappy with the result. "We think it's a very bad policy to start excluding AIDS," Ms. Butler says. (This article is made available here by Dow Jones Co. for the personal and non-commercial use of callers to this bbs, in the hope that it will be of some help to those who are suffering from the disease and others who are seeking to help them.)