AIDS Project Director's Update
Seventh Circuit Refuses to Apply ADA to Health Insurance Policies
Lambda and ALCC Warn Ruling Undermines ADA Protections
June 3, 1999
In a decision with implications for many health insurance policies, a divided federal appeals court overturned a ruling that had struck down drastic restrictions on coverage for two Chicago men with HIV, despite a mountain of evidence showing there is no need for such discriminatory caps.
Lambda Legal and AIDS Legal Council of Chicago (ALCC) expressed disappointment over the decision, which severely undermines the anti-discrimination protections of the Americans with Disabilities Act (ADA). Lambda and ALCC filed the case on behalf of the men.
A panel of the United States Court of Appeals for the Seventh Circuit ruled 2-1 late Wednesday in Doe and Smith v. Mutual of Omaha that the ADA does not apply to the content of insurance policies, even if those policies are discriminatory. The majority interpreted the ADA as prohibiting businesses from excluding altogether people with disabilities, but not from offering them inferior services.
Heather C. Sawyer, staff attorney at Lambda's Midwest Regional Office who argued the case before the Seventh Circuit in March, said, "Insurance policies place all sorts of across-the-board limitations on coverage to reduce costs. However, singling out a disability and refusing to cover expenses from it is unprecedented. Discrimination is the only possible explanation for such cruel limits." She added, "Mutual conceded that its caps lack any sound actuarial justification whatsoever, and that HIV-related medical care is not costlier than that for other diseases."
ALCC Executive Director Ann Fisher said, "This tortured interpretation of the ADA will affect all policy holders. The ruling gives the entire insurance industry broad license to institute coverage caps on any health problem it chooses, regardless of the real costs of care. For people with AIDS, it legalizes irrational discrimination by health insurers."
In his dissent from the majority, Judge Terence T. Evans wrote, "[W]e are being asked to decide whether an insurer can discriminate against people with AIDS, refusing to pay for them the same expenses it would pay if they did not have AIDS. The ADA assigns to the courts the task of passing judgment on such conduct. And to me, the Mutual of Omaha policies at issue violate the Act."
Mutual of Omaha issued the health insurance policies for the two men, identified as "John Doe" and "Richard Smith" in court papers, but put a lifetime ceiling for HIV-related coverage at $100,000 and $25,000, respectively. These artificially low restrictions have forced Doe and Smith to consider foregoing state-of-the-art therapies that could prolong their lives.
The insurance giant, however, does not put such restrictions on coverage for a host of other serious illnesses, which are insured by the company for up to $1 million. Mutual reinstates an additional $1 million in coverage for policyholders who make no new claims after two years.
Wednesday's appeals court ruling opens the door for Mutual to restore the caps in Doe's and Smith's policies, which the company agreed to remove under a December 1998 order by U.S. District Judge Suzanne B. Conlon.
(Doe v. Mutual of Omaha, No. 98-4112)
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