Self-insured firms knock AIDS victims for a loop.

John Sullivan is still working as an operating room nurse in the AMI hospital in Irvine where he was treated last January for pneumocystic pneumonia, even though his employer, American Medical International Inc., will not pay the $55,000 in medical bills that Sullivan racked up while he was ill.

The reason: AMI says Sullivan must have known that he was HIV positive when he took the job several months before he became ill. AMI's self-insured plan doesn't cover treatment for medical conditions that existed 90 days previous to the effective date of joining the medical plan -- even if the person was not aware he or she had the condition.

Many health plans have pre-existing clauses, which decree a person cannot get reimbursed for treatments for a documented medical problem they had before they went on the plan, said Brent Nance, a Glendale-based insurance consultant representing Sullivan. What is unique in AMI's plan, he said, is that Sullivan is not covered for his medical problem even though he did not know he had AIDS, and was never diagnosed or treated for AIDS or HIV, before coming to work at AMI.

But because AMI is self-insured, the only way to force the company to change its policy is to sue in federal court, Nance said.

Self-insured plans are not subject to the state's insurance unfair practices laws, but rather are controlled by the federal government under the Employee Retirement Income Security Act of 1974, explained Don White, spokesman for the Health Insurance Association of America. AIDS activists say ERISA enforcement is lax, at best.

The California Department of Insurance's AIDS/HIV Task Force has asked state Insurance Commissioner John Garamendi to support federal legislation which would repeal ERISA's pre-emption of state law. The task force, in a July report, said self-insured company health plans fall into a "regulatory black hole, leaving victims of unfair practices with no meaningful remedy."

According to the HIAA, 85 percent of employers with more than 1,000 employees are self-insured, as are many labor unions.

"What good is insurance when they are fraudulently telling people they are covered?" Sullivan said. "I'm thinking, 'Are they (bill collectors) going to come after me through my automobile or my home?' I have my doctor calling, saying, 'I'm not going to carry you. . . . You owe me $3,500.'"

Sullivan said because he has been in a monogamous relationship for the last several years, he never was tested for AIDS. He first became aware that he had AIDS when he got sick in January.

Don Galletly, spokesman for Dallas-based AMI, said that a medical panel of experts made a determination that Sullivan had the condition before he came to work at AMI. Under the plan, AMI will pay Sullivan's medical bills after he has worked at AMI for 12 months, but AMI will not pay for the bills he's already incurred.

Nance, who specializes in AIDS-related insurance complaints and sits on the HIV/AIDS Task Force, said the same "horrendous" policy at AMI applies "if a person had a heart attack or a stroke or was diagnosed with cancer."

Although AMI's pre-existing clause has its unique feature, Nance and other local experts who deal with the insurance problems of HIV-positive individuals say companies that self-insure, in general, pose some of the biggest problems for AIDS patients.

For example, the Laborers Health and Welfare Trust for Southern California, a self-insured trust for 20,000 unionized construction workers and contractors, will pay medical bills for AIDS or AIDS-related illnesses only if a member of the plan contracted the disease through a blood transfusion or medical transfusion of blood products or if the child of a member contracted the disease, providing the child is under the age of 13.

Richard Boepsflug, administrator of the plan, said he does not know why members who contract AIDS or AIDS-related illnesses via sexual contact or through IV drug use are not covered under the plan.

"It was a policy decision that was made by the trustees years ago and there has been no change at this time," he said.

Asked if the limitation was placed on coverage for moral reasons, Boepsflug said, "I don't think that's the issue at all. I think it's one of costs."

He noted the health plan puts limits on coverage of other diseases. However, Boepsflug said he did not know of any other limit based on how a person gets a disease.

Ferd Eggan, executive director of Being Alive, a Los Angeles-based coalition for people with AIDS and people who are HIV infected, said such limitations do have a moral tone and they are common.

"What we've feared has happened in a number of incidents," Eggan said. "Large companies that are self-insured used the insurance policies as weapons to enforce moral standards. They in fact punish their employees who are infected with HIV because of sex transmission and leave them without funds to pay for their medical care."

Eggan and Jacques Chambers, insurance expert for AIDS Project Los Angeles, said one of the most common ways self-insured companies limit coverage for AIDS is by placing a cap on the amount they will pay for AIDS services.

In about 20 states across the country, it is illegal to place a cap on a specific disease or treatment, and other kinds of internal limits on health coverage, said White of the HIAA. Because large insurers sell across state lines, they do not place such "internal limits" on certain illnesses, White explained.

But self-insured plans operating solely in California are not subject to such laws, White said.

Centinela Hospital Medical Center in Inglewood decided in June to raise its cap on medical services for employees with AIDS from $50,000 to $200,000. Chris Kishida, a hospital spokeswoman, said the hospital decided the lower limit was "a tad outdated."

Chambers said the cost of treating an AIDS patient typically is about $85,000, although he has counseled AIDS patients with medical tabs totaling as high as $600,000.

Centinela Hospital also has lifetime limits of $10,000 each on treatment of mental illness and chemical dependency for employees, Kishida said.

"Unfortunately, people fall off the wagon, especially with chemical dependency," Kishida said. "I think it's possible (the caps) will make people take their treatment more seriously."

Chambers, who is also the author of the state insurance department's HIV/AIDS task force report, said he thinks companies that install such caps are doing it to punish AIDS victims. This is especially evident when they also place caps on the treatment of mental illness and chemical dependency, he said.

"I can hear them planning this one," Chambers said. "They said. 'We'll take care of the druggies, addicts and fruits.'"