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AIDS and Insurers

April 24, 1988

"The Fight of Their Lives" was both illuminating and forthright. I thought that most of the information was accurate: that the implications both for the public and the health care industry are enormous and all bad.

Simross and Johnston touched on two vicious lapses in the practice of insurance, permitted by law, that have needed to be changed for some time. The changes needed are not solely to combat abuses that can, do and will arise out of AIDS claims, but other illnesses as well.

In the story, what was described that brought about the recision of the policy is sometimes called "after-the-fact" underwriting. Most insurance companies do what is called "underwriting" when a case is applied for, making a decision at that time as to whether or not the proposed insured is qualified to be insured by the company. Obviously, in this case, the company waited until a claim was filed to check that which should have been checked months before.

This is done to save the cost of underwriting, which can be considerable. Usually, if no serious illness is reported for two years, the insurance company is absolutely wedded to the policy; if something happens before two years, they can do what was done with impugnity.

Legislation could stop this with very little hurt to the companies and much gain for the public.

Since there is no legal prohibition to this practice, the crime here is both ethnical and moral: The insured thinks he is insured, until after a financial obligation has been created, only to find out, retroactively, that the coverage never existed. The provider (in this case the hospital) is told that a valid policy is in force that covers the insured, extends mountains of credit to the patient, only to find out, retroactively, that the coverage never existed.

Our legislature needs to serve the public in the field of insurance by setting up some practical approaches to the control of abuses by insurance companies their agents and other sponsors of health care plans.

MARVIN SAHL

Palm Springs

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