Care That's There for You -- Unless You Need It

CHEVY CHASE. — Chevy Chase. -- Almost every day since Harris Wofford used the health-care issue to win an upset Senate race, headlines have breathlessly portrayed broad reform of the current system as just around the corner. Cooler heads say this won't happen soon because polls show most middle-class voters remain satisfied with the care they receive from their employment-based group health insurance.

Some companies, however, are taking a radical step to rein in skyrocketing health costs. If the move takes hold -- and two federal appeals courts recently gave employers a green light -- it FTC may not be long before voter satisfaction turns to the outrage necessary for fundamental change.


The idea is to remove from coverage certain workers who are expected to run up the highest medical bills. The most recent cases involved cutting benefits for a particularly expensive disease as soon as one employee contracted it and dismissing a worker with heavy health-care expenses related to her family coverage.

The cost-control efforts businesses have been using -- such as "managed care" plans and increased employee co-payments and deductibles -- provided short-term savings but aren't designed to control the rising cost of care itself. The latest, more extreme practices by employers can be seen as a predictable response to this failure.


They also can be expected to strike an angry chord among workers; polls show their major health-care worry is that somehow their insurance won't protect them if they develop catastrophic illness.

Consider the case of Thelma Fleming, a 35-year-old nurse with a Tennessee nursing home that is part of a large chain. She gave birth prematurely to a daughter who suffered from a build-up of brain fluid resulting from developmental abnormalities. The infant had to be kept in the hospital for the first three months of her life, at a cost of $80,000.

Ms. Fleming wanted to leave her job at the nursing home to take a similar position at another run by the same chain closer to her residence. She was told to report to her new post on a particular day. But when she showed up, she was told the chain no longer needed her services.

Ms. Fleming brought a pregnancy-discrimination suit against her employer, which admitted its decision was based on high insurance costs associated with the illness of her child after birth. The U.S. Court of Appeals in Cincinnati recently denied the claim, saying bias based on medical conditions of newborn children isn't covered by sex-discrimination law. "Unlike pregnancy and its attendant medical conditions, dependent medical expenses are not gender-specific," the court said.

The case is expected to be appealed to the Supreme Court if the appeals panel refuses to rehear it. Helen Norton, an attorney with the Women's Legal Defense Fund in Washington, said the case spotlights the major problem with the current health-care system. "People don't want to leave their jobs for fear of losing their health coverage, so employers are beginning to lop off employees based on perceived costs attributed to them," she said.

Nowhere is evidence of this trend more clear than with respect to AIDS. In an unusually sweeping ruling three days after the Fleming case was decided, the U.S. Court of Appeals in New Orleans held that employers may change their self-insured group health plans to save money after learning an employee has a particular illness.

Believed to be the highest-level decision to address the issue, the ruling was that a company's decision to cap AIDS benefits for employees is not prohibited by the federal pension and welfare-benefits law, which supersedes state laws with respect to self-insured plans. A majority of all employers has moved to self-insure, rather than continue to contract with a private company, to gain immunity from tough state employment and health-insurance laws.

Writing for the court, Judge Will Garwood didn't mince words or attempt to limit the scope of the ruling. Federal law "does not prohibit an employer from electing not to cover or continuing to cover AIDS, while covering or continuing to cover other catastrophic illnesses, even though the employer's decision in this respect may stem from some 'prejudice' against AIDS or its victims generally," he said. "The same, of course, is true of any other disease and its victims."


The case involved an employee of a Houston company who, upon learning he had AIDS, told his employer. Seven months later, the company became self-insured and capped AIDS benefits at $5,000 per employee. Previously, each employee was allowed up to $1 million of health benefits over a lifetime.

This ruling is also expected to be appealed to the Supreme Court. Another decision by a federal district court upholding a Georgia firm's $25,000 AIDS-benefit cap is currently before the U.S. Court of Appeals in Atlanta.

Evan Wolfson, an attorney with the Lambda Legal Defense and Education Fund, which represents gays and lesbians in civil-rights cases, said the group has consistently lost cases involving AIDS-benefit caps. He noted, as did Judge Garwood, that the federal benefits law was enacted to give employers maximum flexibility in creating, altering or terminating health-insurance plans. Such coverage, after all, has been considered a fringe benefit.

But the federal law was passed 17 years ago, when health-insurance costs were stable and low enough for all businesses to absorb large health claims by any single employee. Today, with individual and small-group coverage practically unaffordable, people have come to view their employment-based health insurance as a necessity. The new willingness of beleaguered labor unions to strike when companies try to change their health plans illustrates this profound change in thinking.

The ultimate result of businesses continuing to shun employees with the largest health claims may be that the very reason people want insurance is undermined. "What is the logic of a health-care system that will be there for you unless you really get sick?" Mr. Wolfson said.

As more companies become desperate for solutions to extricate themselves from the health-cost squeeze, this argument is likely to find resonance with an increasingly anxious public.


Michael L. Rose covers health care and labor for Thomson, Inc., a publisher of newspapers and newsletters.