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Court Ruling: Insurance Companies Can’t Cap Benefits For AIDS Patients

October 18, 1994

BOSTON (AP) _ A landmark ruling by a federal appeals court could prohibit health insurance companies from putting caps on benefits for people with disabilities, including AIDS.

Monday’s ruling was the first by such a court saying that insurers, in some cases, can be classified as employers of people who are covered by their policies. That puts them under the 1990 Americans With Disabilities Act, which prohibits discrimination against the disabled.

Civil rights attorneys were elated by the decision, but insurance lawyers were stunned.

″It guarantees that when you’re being discriminated against in health insurance, you have a remedy. You can go into court and if you can prove it, you can stop it,″ said Michael Elovitz of the American Civil Liberties Union’s National AIDS Project. Marc L. Zaken of the American Bar Association’s insurance practice section called the ruling bizarre.

″This case is just so wild, because the broadening of the definition of employer is just such a far-reaching stretch of what the law intended,″ he said.

The case started in 1990 when Ronald Senter, the owner of Carparts Distribution Center in Plaistow, N.H., sued his health insurance provider.

Senter had AIDS. And he claimed that after he contracted the disease, Automotive Wholesalers of New England Health Benefits Plan, of Peterborough, N.H., capped his benefits for AIDS-related illnesses at $25,000. Treatment for any other disease continued to be capped at $1 million.

Under the Americans With Disabilities Act, anyone who feels discriminated against at work because of a disability would usually sue their employer.

Since Senter was his own boss, he sued his insurance carrier.

The U.S. District Court for New Hampshire dismissed the case in 1993 - after Senter’s death - ruling that the insurance plan was not subject to the Americans with Disabilities Act because it wasn’t Senter’s employer.

The appeals court, however, ruled Monday that an insurance company could be considered Senter’s employer under the act if it ″exercised significant control over an important aspect of his employment.″

An example of ″significant control″ would be if a health care provider acted on behalf of an employer by controlling and administering health care, said Zaken, who represents insurance companies and employers for his firm in Stamford, Conn.

The ADA makes an important distinction between employers and insurers, said Zaken. It allows an insurance company to cap medical benefits by assessing the risk of carrying someone with certain diseases.

But employers are only allowed to cap the cost of medical treatments that are not specific to a disease or disability.

For example, an employer could not cap the benefits for someone with AIDS, cancer or a brain tumor, but it could cap the money allotted for blood transfusions.

Zaken said the appeals court ruling was bizarre because it also said insurance companies can be classified as a public accommodation, under the ADA.

The ADA lists public accommodations such as movie theatre, banks and shopping malls that must be accessible to people with disabilities.

The court ruled that insurance companies are a public service and therefore must also be accessible under the public accommodation section of the ADA.

″Ninety-nine percent of the people who thought they understood the ADA thought the statue was about physical barriers. This is what’s really bizarre. This case says public accessibility does not have to be a place with physical boundaries,″ said Zaken.

Elovitz said the ruling ″tells everyone that offers goods and services that they cannot discriminate. If you buy something off a home shopping network, if you order goods through the mail, you can’t be discriminated against.″

Elovitz said this was the first ADA insurance case to reach the federal appeals level because most insurance companies settle out of court. He also said it was the first federal ruling on insurance and AIDS because most AIDS victims are too poor to sue or die before their case goes to trial.

Senter’s case was pursued after his death by his mother, Shirley Senter and his business, Carparts. The appeals court ruling covers only the New England region, but could be cited as a precedent in legal cases in other regions.

The case now returns for trial to the district court in New Hampshire.

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