Insurers oppose catastrophic-illness reform bills; measures would prohibit 'unfair' denial of benefits.

Health insurance companies are currently lobbying against legislation in Sacramento which would protect people with AIDS and other catastrophic illnesses from arbitrary termination of insurance and would allow victims of canceled policies to sue their insurers.

Two identical bills, AB 1100, authored by Assembly Speaker Willie Brown, D-San Francisco, and SB 590, authored by Sen. Art Torres, D-Los Angeles, were introduced this year to battle insurance abuses documented in a report by the Department of Insurance's Task Force on AIDS/HIV Insurance Issues.

Notably the bills would:

* Prohibit post-claims underwriting, the practice by insurers of rescinding or denying benefits based on minor or alleged misrepresentations on application forms after the policyholder files a claim.

* Allow an individual who is injured because an insurance company engages in unfair or deceptive practices to sue the insurer. Existing law limits enforcement of policies exclusively to the State Insurance Commissioner.

"Discrimination in health insurance -- especially towards people with AIDS -- is flagrant and widespread," said Torres, who is chairman of the Senate Insurance Committee. That committee held hearings last December on discrimination in health insurance.

Meanwhile, Assembly Speaker Brown said that insurance discrimination is not only a health issue, but a civil rights issue, and the legislation would protect people who are in no condition to protect themselves.

"People suffering from AIDS and other long-term illnesses deserve the medical coverage they have paid for," Brown said. "Although most insurance companies operate fairly, this legislation requires that all companies uphold the same standard."

But Anne Eowan, lobbyist for the Association of California Life Insurance Cos., an association which includes many of the largest health insurers in the state, said the legislation is not needed.

"We don't think there is discrimination" by insurance companies against people with AIDS, Eowan said.

She added that the provision which allows policyholders to sue will drive up the costs of premiums. "There are a number of groups who would use this in a harassment mode...to get something," Eowan said.

Eowan further said that the association is talking to representatives of both Brown's and Torres' offices to rewrite certain portions of the bills. "We're willing to sit down and talk to them," she said.

Richard Robinson, a Sacramento lobbyist, said he was recently retained by Hartford Conn.-based Aetna Life and Casualty Co. to negotiate some amendments to the bills. "My instructions from Aetna are to work with the authors to try to resolve the differences (between Aetna's position and the current provisions of the bills) so that we can support the bills," Robinson said.

Robinson declined to say what the differences were, saying he would not "negotiate in the press." Robinson said that if amendments are made, Aetna would be willing to support the legislation, adding, "We consider ourselves a socially responsible, progressive company."

Robinson added that Aetna considers the bills "a very serious endeavor" with good chances of being passed since they are authored by the powerful Speaker of the Assembly and the chairman of the Senate Insurance Committee.

Brown's bill was on the floor of the Assembly last week, after being passed by the Assembly Ways and Means Committee and the Assembly Health Committee, said Bob Fredenburg, an aide to Torres.

Torres' bill last week was before the Senate Appropriations Committee after being passed out of the Senate Insurance Committee, Fredenburg said. As of last week, the bill was expected to be passed out of the Appropriations Committee any day, at which point it would go to the Senate floor.

It is anticipated that the legislation will be passed and sent to Gov. Pete Wilson to sign by August, Fredenburg said.

The purpose of introducing two identical bills from the Senate and the Assembly is so both can move through both houses of the Legislature simultaneously and "gather steam," Fredenburg said. Of the 2,500 to 3,500 pieces of legislation introduced in the Legislature each year, the cases in which two bills are introduced simultaneously total only about a dozen a year, Fredenburg estimated.

Fredenburg said the authors of the bills may be able to negotiate some amendments to quell the opposition of insurers without destroying "the guts" of the bills.

Fredenburg said that AIDS group lobbyists are sitting in on negotiations with insurance lobbyists, and there are many "technical issues" that insurers have raised which can be agreed upon without changing the substance of the bill.

The negotiations may not "get them to say, yeah this is a great bill," but could "get insurance companies to substantially lessen their level of concern," Fredenburg said.

Fredenburg noted the insurance industry is one of the most powerful lobbies in Sacramento. "Do they have the power to kill a proposal? We hope we don't have to find that out."

Most offensive to insurers is the provision that allows a policyholder to sue, Fredenburg said. "Anytime you open up the avenues for litigation against an insurance company, the insurance companies really hate it," he said.

Jacques Chambers, benefits program manager at AIDS Project Los Angeles and author of the task force report that led to the two bills being introduced, said the provision to sue is needed.

"It is my understanding that right now only the Department of Insurance has the right of action," Chambers said. "And right now they're overworked. We want to make it so the individual has the same right of action."

Chambers added that the provision to stop insurers from canceling policies due to minor or alleged misrepresentations on applications is also much needed.

"In the law right now there is nothing to stop an insurance carrier from issuing a policy in two days, but when a claim is filed, starting an investigation (against the policyholder) that lasts nine months," Chambers said.

AIDS support organizations hear and document many incidents in which people with AIDS or HIV have their insurance policies canceled after they test positive for the virus, Chambers said.

For example, Chambers said he knows of a man with AIDS whose policy was canceled because the man neglected to include on his insurance policy application form that he was told in an emergency room 10 years prior to buying the policy that his blood pressure was high that day.

After the man contracted AIDS, the insurance company got the emergency room records and the man's insurance was canceled. "He died in "County,'" Chambers said, referring to Los Angeles County+USC Medical Center, which takes care of the medically indigent.

Eowan of the insurance association, however, said that AIDS activists' claims that discrimination against people with AIDS is widespread has not been backed up with empirical studies and statistics.

"They're screaming discrimination based on some anecdotal stories and very little evidence," she said.

Chambers conceded that he did not have any statistics on how big the problem is. "Which insurance company is going to let me have access to their files so I can collect the evidence?" Chambers asked rhetorically.

Fredenburg said that Torres' office also does not have empirical studies to back up claims of discrimination.

"We don't know how many people with catastrophic illnesses are being denied coverage by their insurance companies," Fredenburg said. But, he added, "We get letters every day."