“Rational” Discrimination in the Health Insurance Market


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.

Marta Russell can be

reached at [email protected]



Leave a comment