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On excluding the AIDS crisis.

DUE TO THE insidious nature of the H.I.V. virus, medical efforts to find a vaccine for the infection that causes AIDS are inching along. However, as researchers around the world work overtime to find a cure, whole populations, in some cases, are becoming infected with the virus at an alarming rate.

According to Tom Skinner, a spokesman for the Centers for Disease Control (CDC) in Atlanta, by the end of 1993, it is estimated that between 390,000 and 480,000 cases of AIDS will exist in the United States alone, and that approximately one million Americans will be infected with the H.I.V. virus. On a global scale, the problem is even-worse. According to recent World Health Organization estimates, by the year 2000, 40 million people are expected to be infected with H.I.V., with most of that exposure occurring in Africa, Asia, Latin America and the Caribbean.

According to U.S. Banker Magazine, the U.S. Public Health Service predicts the cost of caring for AIDS patients in the United States reached $16 billion by the end of 1991, accounting for 2.46 percent of the total personal health care cost expenditure, which is projected to be $650 billion.

Furthermore, according to Mark Doherty, director of reasearch at the Society of Actuaries, AIDS claims paid by U.S. insurers during 1990 can be divided into four groups with $283.9 million paid out for individual life insurance claims, $64.5 million for individual claims, $223.6 million in group life claims and $3 18.3 million in group health claims. Seven years ago the CDC estimated that AIDS had cost the U.S. economy about $5.6 billion in medical expense and lost income.

As the crisis wreaks havoc on corporate bottom lines everywhere, Mr. Doherty says that many employers are faced with a grim and dwindling set of options. "One choice is to reprice AIDS coverage, or in a worst-case scenario, discontinue offering the coverage altogether, "he says.

Indeed, many insurers are imposing restrictions on AIDS coverage during policy renewal in the form of outright exclusions or as caps on benefits levels. According to a recent AIDS survey conducted by William M. Mercer Companies Inc., this has, in turn, had repercussions on multinational pooling networks faced with the issue of whether to establish a worldwide policy on AIDS exclusions or follow the practice of local insurers. Consequently, multinational corporations may find that company promises are no longer backed by insurance in some countries.

The survey, which focused on the practices of local insurers, multinational pooling networks and multinational corporations, found, among other things, that AIDS-related illnesses are excluded from one or more of the overseas employee medical, disability and life insurance coverages of at least 23 percent of 135 large U.S. multinational corporations.

Conservative Estimates

"THE FINDINGS are conservative estimates," says Mercer Managing Director Giles Archibald. "Because such exclusions are a common practice in some countries, some insurance coverage may contain provisions of which the employees aren't aware."

Many of the survey companies that were aware of the AIDS exclusions expressed opposition to them, according to the survey, and 27 out of 31 affected companies have a policy of paying some AIDS-related claims not covered by insurers. Other companies reported negotiating waivers with the insurers.

Regarding the practice of insurers on a local level, Mercer surveyed practices in 38 countries around the world and found that some restrictions on AIDS coverage were reported in 23 of them. In Brazil, the Netherlands, the Philippines and the United Kingdom, insurers often impose AIDS exclusions in medical and disability contracts. In Australia, New Zealand and Taiwan, time-related limits are placed on the coverage for new members in life insurance policies. Another restriction is for insurers to limit coverage for high levels of insurance-for example, medical policies in Spain and life and disability contracts in Switzerland. Moreover, in most of the 15 countries where no exclusions were found, underwriting is becoming more strict.

Of the major multinational pooling networks, the survey found that only American International Group has implemented a network-wide policy of excluding AIDS in its coverages, except when prohibited by law, unless corporate policyholders agree to cover any excess claims due to AIDS.

However, while the other networks are not currently planning global AIDS policies, most note that some restrictions may apply, depending on local practice. Also, some form of applicant screening is common. In addition to AIG, CIGNA, Group Assurance International Network (GAIN) and International Group Program (IGP), a pooling network under the auspices of the John Hancock Co., report that exclusions may be waived under certain conditions. The survey reports that so far, only a few companies appear to have exercised this option.

According to the survey, only A/G, CIGNA, GAIN, Insurope and AREA, the European benefits network comprising the Allianz Leben, Royal Beige, Eagle Star and Amer Life Group of companies, have indicated what their AIDS-related claims experience has been to date, with AIG noting very poor experience in some countries. AIDS does not appear to be a major issue for the other networks right now. Consequently, no network-wide AIDS reserves have been established, although Aetna/General and GAIN indicate that they may be considered in some countries, with GAIN reporting local reserves in Australia and Sou th Africa.

Exclusion Waivers

TEN PERCENT OF multinational corporations surveyed by Mercer said they had negotiated waivers of exclusions, either unconditionally or subject to certain stipulations-for instance, payment of excess claims by the employer, increased premiums or restrictions on new hires. It appears most companies that were informed of AIDS exdusions in one or more of their pools were prepared to negotiate a removal of those exclusions.

In addition, 20 percent of the respondents reported that they pay AIDS-related claims not covered by insurers, either in all instances or on a case-by-case basis. This seems to imply that, of the companies whose non-U.S. risk coverages contain A/DS exclusions, most would be willing to incur significant costs in order to fulfill corporate promises. This interpretation is supported by the comments of the respondents, many of whom were opposed to exclusions imposed by insurers.

According to the survey, when considering long-term policies, only 10 percent of the respondents said they foresaw changes, depending on a continued review of the situation. Some indicated that they might consider self-insurance in order to provide unrestricted risk coverages in all locations.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:restrictions on insurance policies
Author:Johnson, Tom
Publication:Risk Management
Date:May 1, 1992
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