HIV AIDS Resource Guide/HIV-AIDS Resource Guide.iso/STAT/CASES/ACLI-DC.ASC

Text File | 1993-01-14 | 20KB | 396 lines

/* This case was reported in 645 F.Supp. 84 (D.D.C. 1986). Many
states have passed laws severely limiting the right of insurance
companies to request HIV examinations or disclosures. In this
1986 case, the Court finds that Washington D.C.'s statute which
at the time prohibited such testing was lawful.  */



AMERICAN COUNCIL OF LIFE INSURANCE, et al., Plaintiffs, v.

DISTRICT OF COLUMBIA, et al., Defendants.

United States District Court, District of Columbia.

Sept. 19, 1986.



MEMORANDUM OPINION AND ORDER

THOMAS F. HOGAN, District Judge.

American  Council  of  Life  Insurance (ACLI) filed this suit
seeking a declaratory judgment that the "Prohibition of
Discrimination in the Provision of Insurance Act of 1986" enacted
by the District of Columbia Council is unconstitutional under the
Fifth Amendment and violates the District of Columbia Self-
Government and Governmental Reorganization Act, D.C.  Code 1-204
and 1-233(a)(3) (1981).  Plaintiffs have moved for summary
judgment and for a preliminary injunction. Defendants have moved
to dismiss this action or in the alternative for summary
judgment.

Upon consideration of the oral arguments and the numerous
memoranda filed in this action, the Court finds the statute
constitutional and shall grant summary judgment for the
defendants.



Background

The "Prohibition of Discrimination in the Provision of Insurance
Act of 1986" (hereinafter "the Act" or "D.C. Act") prohibits
health, life and disability insurers from discriminating against
individuals on the basis of any test screening for AIDS, ARC, or
HTLV-III infection and from denying benefits because the
individual develops AIDS, ARC or HTLV-III infection.  D.C. Act 6
170.  Under the Act "an insurer may not deny, cancel, or refuse
to renew insurance coverage, or alter benefits covered or
expenses reimbursable, because an individual has tested positive
on any test to screen for the presence of any probable causative
agent of AIDS, ARC, or HTLV-III infection ... [nor] because an
individual has declined to take such a test."  D.C. Act 6170, 4.
Insurers, however, may exclude from coverage applicants diagnosed
as having AIDS (acquired immune deficiency syndrome).  D.C. Act
6170, 6.

The Act imposes a five year moratorium on the use of AIDS
screening tests for the purposes of adjusting rates, premiums,
dues or assessments. Five years from the date of the Act,
insurance companies may seek permission from the Superintendent
of Insurance to increase premiums and rates for individuals who
test positive for exposure to the probable causative agent of
AIDS.  D.C. Act 6170, 5(b)(1).  Be fore permission is granted,
the District of Columbia Commissioner of Public Health must first
determine that the test the insurance company proposes to use is
reliable and accurate.  D.C. Act 6170, 5(b)(2).  A report by the
D.C. Council states the premises on which the bill was based:

First, there is as yet no test of proven reliability and accuracy
for identifying exposure to the probable causative agent of AIDS.
And,

Second, assuming that a reliable and accurate test will be
developed at some point, there is no body of evidence to show its
value as a predictor of who will or will not develop AIDS....
D.C. Council Rpt. at 2 (April 22, 1986). During consideration of
this Act the D.C. Council heard from thirty witnesses
representing the insurance industry, medical profession and gay
community on the advisability and fallibility of passing this
law. Def. S.J. Motion Exhs. 1-7.

Insurance  companies,  for  example, presented evidence on the
reliability of the AIDS screening tests and predicted that large
increases in individual premiums would result if the bill were
passed.  Def. S.J. Motion Exh. 2. Doctors expressed concern that
without the protection of the Act many individuals in the at-risk
category would avoid AIDS tests and not seek counseling, both of
which are crucial to the AIDS Public Health Program.  Def. S.J.
Exh. 2.

The Act provides for criminal penalties and civil private causes
of action. D.C. Act 6170 9. The Congressional veto period ended
without reversal by Congress and the Act became effective on
August 7, 1986.



Summary Judgment

Summary judgment is appropriate when there are no genuine issues
of material fact, such that movant is entitled to judgment as a
matter of law.  Fed.R.Civ.P. 56(c).  The Supreme Court recently
clarified the role of summary judgment in litigation, stating:

Rule 56 must be construed with due regard not only for the rights
of persons asserting claims and defenses that are adequately
based in fact to have those claims and defenses tried to a jury,
but also for the rights of persons opposing such claims and
defenses to demonstrate in the manner provided by the Rule, prior
to trial, that the claims and defenses have no factual basis.
Celotex Corp. v. Catrett, - U.S. -, 106 S.Ct. 2548, 2555, 91
L.Ed.2d 265 (1986). Thus, courts must approach summary judgment
motions with an even hand, evaluating all concrete evidence
provided, and drawing all inferences in favor of the party
opposing the motion.



Fifth Amendment Due Process Claim

Judicial review of economic regulation begins with the premise
that "legislative Acts adjusting the burdens and benefits of
economic life come ... with a presumption of constitutionality,
and that the burden is on one complaining of a due process
violation to establish that the legislature has acted in an
arbitrary and irrational way. Usery v. Turner Elkhorn Mining Co.,
428 U.S. 1,15, 96 S.Ct. 2882, 2892, 49 L.Ed.2d 752 (1976). To
pass constitutional muster, the D.C. Act must rationally relate
to a legitimate government purpose.  See, e.g., Gray Panthers v.
Administrator, Health Care  Financing  Administration,  566
F.Supp. 889, 892 (D.D.C.1983).  As a preliminary matter, under
the rational basis test the D.C. Council clearly has a legitimate
interest in regulating the insurance industry. See e.g.
California Automobile State Asso. v. Maloney, 341 U.S. 105, 71
S.Ct. 601, 95 L.Ed. 788 (1951).  The D.C. Act moreover is
protected by the McCarran-Ferguson Act, 15 U.S.C. 1012(b), to
the extent that "the McCarran-Ferguson Act operates to assure
that the States are free to regulate insurance companies without
fear of Commerce Clause attack." Group Life & Health Insurance
Co. v. Royal Drug Co., 440 U.S. 205, 218 n. 18, 99 S.Ct. 1067,
1077 n. 18, 59 L.Ed.2d 261 (1979).  The dispute arises, however,
over whether the D.C. Council acted in an irrational and
arbitrary fashion in enacting a law prohibiting insurers from
screening applicants for exposure to AIDS and from raising rates
reasonably  commensurate with the increased insurance risks.

Plaintiffs argue that the goal of the D.C. Council is to prevent
discrimination against individuals who test positive for AIDS
virus but might not develop AIDS.  Plaintiffs contend that the
"use of the [screening] tests for standard insurance purposes" is
nondiscriminatory and, therefore, the statute "bear[s] no
rational relation to its purposes." Pltf. S.J. Mem. at 9. The
Act, according to the defendants, aims to prevent "unjustified
discrimination against citizens of the District of Columbia and
[to] fulfill the public need to promote the availability of broad
insurance coverage." Def. S.J. Mem. at 4. Defendants argue that
the AIDS tests are neither accurate nor reliable and that,
therefore, some individuals will be unjustly denied insurance.

Plaintiffs contend that insurance companies do not behave in a
discriminatory manner when they categorize individuals according
to group traits or characteristics. Insurance companies base
decisions on the risk and not the certainty that an illness or
death  will  occur.   Plaintiffs  analogize AIDS screening tests
to the tests routinely given by insurance companies to determine
if an individual suffers from high blood pressure or coronary
heart disease. Plaintiffs further note that statutory
prohibitions against sickle cell anemia differ from the D.C.
statute because sickle cell anemia does not significantly
increase risk of mortality. Individuals who test positive for the
AIDS virus, though, have a twenty-six times greater chance of
early death.

[1]  Plaintiffs offer persuasive evidence that the tests
accurately target a group of individuals with significantly
higher risks. Plaintiffs note, for example, that two ELISA tests
followed by a Western blot test are 99.9 percent reliable in
determining whether someone has been exposed to AIDS.
Plaintiffs, though, presented evidence to this Court that was not
available to the D.C. Council at the time the bill was under
consideration. The Centers for Disease Control, for example,
recently concluded that "[f]or public health purposes, patients
with repeatedly reactive screening tests for HTLV-III/LAV
antibody ... in whom antibody is also identified by the use of
supplemental tests ... should be considered both infected and
infective."  Morbidity and Mortality Weekly Report 305 (vol.
35/No. 20, May 23, 1986) (cited in Plaintiffs' Reply).  This
summer the Wisconsin State Epidemiologist concluded that two
positive ELISA tests followed by a Western blot test are
"medically significant and sufficiently reliable for the presence
of antibody to human T.lymphotropic virus type III." [footnote 1]

Plaintiffs argue that the Wisconsin report demonstrates that the
D.C. Council erred in enacting a complete ban on testing.

Although the Court agrees that in light of this evidence the D.C.
Council should be encouraged to reconsider its decision, this
report was not before the Council last spring and therefore
cannot prove the irrationality of the law.  Plaintiffs attempt to
further demonstrate the arbitrariness of the District of Columbia
law, however, by contrasting the Act to California and Maine
statutes.  California prohibits the use of certain blood tests to
determine AIDS susceptibility but does not prohibit insurers from
using T-Cell tests, unlike the District of Columbia law which
bans any test. Cal. H & 5 Code 199.21(f) (Deering 1986).  Maine's
statute merely prevents insurers from inquiring of the applicant
whether the individual has taken a test for the AIDS virus. Pub.
L. 711 (April 16, 1986). Although the District of Columbia
statute is far more comprehensive in the restrictions it imposes,
it cannot be deemed unconstitutional merely because the D.C.
Council chose to enact a stronger regulation.

The Court should look to the express language of the Act and to
the legislative history in determining whether any rational basis
exists.  This Circuit has held that A court should not assume
that the articulated objectives of a statute are its only
objectives.  If a classification cannot be sustained in light of
the statute's articulated purpose, a court may sustain the
classification if it rationally furthers other legitimate state
interests.

Dimond v. District of Columbia, 792 F.2d 179, 186 (D.C.Cir.1986).

While much of the testimony presented to the D.C. Council
questioned the accuracy and reliability of the tests, witnesses
also expressed concern about false test results, the exorbitant
costs of treating AIDS victims, and the need to ensure access to
care and treatment.  Physicians testified about potential
positive effects the law would have on the AIDS Public Health
Program.  This evidence considered by the D.C. Council leads to a
finding that there was a rational basis for the law.  The Court
finds the moratorium on rate increases, however, the most
troublesome aspect of the law.  Plaintiffs argue that insurance
premiums will increase dramatically to cover the costs of
insuring individuals exposed to the AIDS virus. [footnote 2] The
District of Columbia law appears to have the effect of shifting
the cost of AIDS to newly-issued individual insurance policies
and to the insurance companies as the statute forbids even
reasonable rate increases to reflect the increased risks
associated with exposure to AIDS.  Some insurers have already
ceased doing business in the District of Columbia.  The Wisconsin
legislature in enacting a similar law may have followed a wiser
course of action by providing an escape clause to allow rate
increases and by establishing a pool to help fund the health care
needs of AIDS victims, thereby shouldering some of the
responsibility. 1985 Wisc. Act 73, 4 and 6. The nature of the
rapidly changing landscape of AIDS research suggests that the
D.C. Council may have acted too hastily in imposing the five year
moratorium on rate increases. The D.C. Council, though,
considered and accepted the possibility that premiums would
increase, and that some of their constituents might therefore be
unable to obtain or afford insurance coverage.  [2]  Although
this Court questions the wisdom of the District of Columbia law
as drafted, it cannot find that a rational basis does not exist
to support it.  It is a basic principle of constitutional
analysis that "a belief that an Act ... may be inequitable or
unwise is of course an insufficient basis on which to conclude
that it is unconstitutional."  Schweiker v. Hogan, 457 U.S. 569,
589, 102 S.Ct. 2597, 2609, 73 L.Ed.2d 227 (1982).  Courts,
moreover, "are not empowered to second-guess the wisdom of state
policies" but must confine review "to the legitimacy of the
purpose."  Western and Southern Life Insurance Co. v. State Board
of Equalization of California, 451 U.S. 648, 670, 101 S.Ct.
2070, 2084, 68 L.Ed.2d 514 (1981) (citing Ferguson v. Skrupa, 372
U.S. 726, 729, 83 S.Ct. 1028, 1030, 10 L.Ed.2d 93 (1963)).  The
D.C. Council enacted this statute after extensive hearings on its
advisability and consequences. The D.C. Council intended to
address the serious problem of securing insurance coverage for
individuals susceptible to the AIDS virus. See Insurers' Action
Council,  Inc.  v.  Markman,  490 F.Supp. 921, 924-25
(D.Minn.1980) (insurance act's mandatory provision to offer major
medical coverage rationally related to "assuring the
availability  of adequate health care coverage to all
residents"). Given the evidence before the Council on the
reliability of the screening tests and the medical testimony
about the need to ensure access to care and treatment, this Court
finds that the D.C. Council had a rational basis for the law.
Although the Court agrees with plaintiffs that new evidence on
the accuracy of AIDS tests for insurance purposes and the
everchanging breakthroughs in AIDS research raise serious
questions about imposing a five year ban on screening applicants
for AIDS or increasing insurance rates of individuals testing
positive for exposure to AIDS, [footnote 3] the Court finds that
the District of Columbia statute is constitutional under the
Fifth Amendment.



Extraterritorial Reach

Plaintiffs argue that the insurance law regulates insurance
practices outside of the District of Columbia and therefore
violates the District of Columbia Self-Government and
Governmental  Reorganization  Act (hereinafter D.C.  Self-
Government Act). D.C.Code 1-204, 1-233(a)(3).  The D.C.  Self-
Government Act prohibits the District of Columbia government from
passing legislation whose "application is not restricted
exclusively to the District."  D.C. Code 1-233(a)(3).  The
insurance Act on its face could subject out-of-state insurance
companies doing business in the District of Columbia to penalties
if the companies discriminate against individuals exposed to
AIDS.

Defendants admit that the language of the Act is somewhat
ambiguous as to its reach but contend that under simple statutory
construction the Act applies "within"  the District of Columbia.
The legislative history indicates that the statute would only
apply when the company was doing business in the District of
Columbia. The D.C. Council's Report, Section-by-Section Analysis
states:

the definition [of insurer] is written broadly enough to
encompass all those engaged in the business of health, disability
and life insurance in the District, thus applying the
requirements of the act to all individual and group policies or
contracts issued, amended or renewed in the District.  (Emphasis
added) (April 22, 1986) at 14. In hearings before Congress, two
Council members stated that the Act was only meant to affect
insurance companies when doing business in the District of
Columbia. Plaintiffs admit that the legislative intent was that
the Act would have no extra-territorial application but argue
that under the plain meaning of the statute it is in violation of
the D.C. Self-Government Act.  Plaintiffs further argue that the
District of Columbia is attempting to regulate insurance
practices in other states in violation of the Fifth Amendment.
The Supreme Court held in Aetna Life Insurance Co. v. Dunken, 266
U.S. 389, 399, 45 S.Ct.  129,132, 69 L.Ed. 342 (1924), that a
Texas insurance statute was unconstitutional if it regulated
business outside of Texas and controlled contracts made by
citizens of other states.

[3]  Although the statutory language of the Act itself is broad,
the legislative history clearly indicates that the D.C. Council
intended the statute to apply only when insurance companies are
doing business in the District of Columbia. [footnote 4] This
Circuit has held that "in deciding among possible interpretations
of a statute, the court must select an interpretation that
appears to be consistent with the statute's constitutionality."
International Union, et al. v. National Right to Work Legal
Defense and Education Foundation, Inc., 590 F.2d 1139, 1148
(D.C.Cir.1979), affd 781 F.2d 928 (D.C.Cir.1986); see e.g. United
States Civil Service Commission v. National Association of Letter
Carriers, 413 U.S. 548, 93 S.Ct. 2880, 37 L.Ed.2d 796 (1973);
Ashwander v. Tennessee Valley Authority, 297 U.S. 288, 56 S.Ct.
466, 80 L.Ed. 688 (1936).  Therefore, to avoid reaching the
constitutional issue, this Court finds that the D.C. Act can be
read as applying only when insurance companies are doing business
in the District of Columbia. [footnote 5]



Accordingly, for the reasons set forth above, it is this 19th day
of September, 1986, ORDERED that plaintiffs' motion for summary
judgment is hereby denied; and it is FURTHER ORDERED that
defendants' motion for summary judgment is hereby granted,
judgment is hereby entered for defendants, and this matter is
hereby dismissed.



FOOTNOES:

1.   Serologic Tests for the Presence of Antibody to Human T-
Lymphotropic Virus Type III: Information Pursuant to the Purposes
of Wisconsin Statute S. 631.90 Regarding their Use in
Underwriting Individual Life. Accident and Health Insurance
Policies at 22 (July 28. 1986). The DC Council modeled its
statute after the Wisconsin law which permits insurance companies
to require testing for AIDS if the State Epidemiologist finds the
proposed test to be reliable.

2. Plaintiffs estimate that cost of AIDS is thirteen times
greater for a group of one hundred males aged thirty to thirty-
four who have tested positive for exposure to AIDS virus than a
group of one hundred standard rated males. Pltf. Complaint 19.

3. See Insurers' Action Council, Inc. v. Markman, 653 F.2d 344,
346 (8th Cir.1981) (upholding insurance law requiring each
insurer to offer major medical coverage to every applicant in
view that the "insurer is required only to offer the coverage and
... the insurer may apply its own underwriting standards,
charging a premium commensurate with the risk").

4.   If plaintiffs were before the Court because of an actual
extraterritorial application of the Act, that would raise
different issues and concerns.

5.   The Court deems it unnecessary to reach the preliminary
injunction motion raised by plaintiffs given the Court's holding
that the D.C. Act is constitutional.