"Rational" Discrimination in the Health Insurance Market

Russell

If you have a disability, chances are you have a hard time getting inexpensive insurance (or any private insurance) and a job.

As someone actively involved in disability rights, I regularly hear from disabled people who have been discriminated against by insurance companies.

The Rev. Clyde Shideler, who is blind, wrote me, "I have been denied insurance and given rates so high that I could not possibly afford to pay them."

Bruce Robb wrote, "I have been told by some employers that their insurance will be terminated if they were to hire persons with certain types of disabling conditions."

Another person wrote, "I'm in the process of buying a house with my partner. We applied for income protection insurance and because of my epilepsy my premiums are twice as high as my partner's."

Disabled persons bear the brunt of an insurance market that often offers them an inferior or exorbitantly priced policy compared to what nondisabled persons can buy. This, in turn, could exclude them from a job because insurance often comes through one's employment. Any condition which makes one appear to be a risk to the insurance industry also makes them a risk for the employer.

Over the last couple of years, disabled persons have been challenging insurance underwriting practices in court.

In February 2000, Howard Chabner, a lawyer who uses a wheelchair, brought a case against United of Omaha Life Insurance for charging him nearly double the standard life insurance premium. Chabner asked the 9th U.S. Circuit Court of Appeals to rule that charging a disabled man an arbitrarily high life insurance premium violates federal and state laws on equal access to public accommodations under the Americans with Disabilities Act (ADA).

The court found that United "irrationally" discriminated against Chabner because it did not rely on experience or data when determining the premium to charge him. If United were to come up with sound actuarial data, theoretically it could charge Chabner more, and this would not be irrational discrimination. It would be "rational" discrimination based on the insurers' need to make profits.

Now comes a lawsuit filed by Californians for Disability Rights along similar lines. Attorneys filed suit under the state's "unfair business practices" violation code. They allege that Bank of America advertises free life insurance of up to $1,000 to customers who pass the bank's "Good Health Statement." But to qualify, customers must verify that they haven not been treated by a doctor in the last five years for a host of conditions to be eligible for the plan.

The plaintiffs allege that the insurance industry is falsely linking low life expectancies with those who have certain disabilities. They rightly claim if one had polio as a child, that does not equate with death at an early age.  However this argument poses problems since a number of disabled persons will still be excluded from insurance protection by actuarial data.

Does everyone need life insurance? Maybe not, but "rational" discrimination spills over into other vital insurance markets like health care and can have dire life consequences. Insurance corporations have found ways to eliminate segments of the disabled population from the insurance pool by making terms unaffordable or insufficient to meet one's needs.

The 2nd U.S. Circuit Court of Appeals has held that disabled persons are guaranteed equal access to insurers' goods and services. This bars underwriters from refusing entirely to issue a policy to a disabled person, but does not prevent them from issuing inferior goods.

The ADA does not forbid disability benefit plans that provide more generous coverage for physical injuries than for mental disabilities, seven federal courts of appeals found. Employers are free to exercise disparate treatment of mental and physical conditions. Insurers could limit benefits and restrict coverage. They could also cap policies and sell disabled persons a limited selection of a product.

Some courts merged these findings into the general rule that the ADA regulates access to, but not the content of, insurance policies.

It seems that insurance litigation has led us to a stand-off. Those persons with disabilities that provide no basis for "rational" discrimination could be treated on par with nondisabled persons, but those whose impairments do generate higher risk will just be out of luck.

The crux of the problem is relying on the insurance market to produce a just outcome when insurance markets exercise "rational" discrimination and exclude some disabled Americans from the protections afforded others.

Today, thousands and thousands of disabled persons have to fend for themselves in the workplace. They do not have a fair shot at getting a job or adequate insurance.  Such unsatisfactory outcomes call for a universal guarantee to health care, one that does not depend on degree of disability or ability to work. 

Recent reports indicate that health insurance premiums will likely "surge" at double-digit rates next year for all insured persons. USA Today reports increased costs for prescription drugs, hospital care and doctors will likely force health insurers to raise premiums next year by13%, 20%, even 50%.  Rising medical costs may force employers and employees to  "make tough and costly choices."  This will most likely translate into higher employee costs, more co-pays, and less coverage. 

As adequate private insurance becomes less available through employment, there is an opportunity revive the largely forgotten principle of social justice in health care -- now absent in the bourgeois U.S. "rational" for profit system.  We need to make sure that disability issues are included in any radical analysis.

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Marta Russell can be reached at ap888@lafn.org http://disweb.org/