PROFITS AND GOOD PR?
Operating on patients with HIV, the virus that causes AIDS, is routine for the 50 doctors in the University of Wisconsin Hospital's surgery wing. And while Surgical Administrator Kevin McMahon can't assure the doctors that they won't be infected with HIV, he has found a way to lower their stress level. Last year, he arranged for the hospital to purchase a disability insurance policy targeted to health-care workers at risk of catching HIV. If doctors can no longer see patients because they've been infected with the virus, the policy will, for a time, make up for their loss of income. Says McMahon: "It gives them some peace of mind."
For years, insurers shied away from offering explicit AIDS coverage, though the disease is included in many umbrella disability policies. To insurers, the risks seemed both large and difficult to quantify. Now, after years of prodding by regulators, insurers are finally entering the market. At least two dozen have recently unveiled or are developing disability policies aimed at health-care workers at risk of being infected with HIV.
WARM WELCOME. Insurers aren't simply responding to pressure: The AIDS market could be very lucrative. While AIDS disability policies pay benefits even if the virus isn't transmitted at work, the incidence of health-care workers being infected with AIDS, on or off the job, is very low. Insurers also hope the new product will give them an inside track on offering other policies to the ever burgeoning number of health-care workers. And if the policies are profitable, insurers hope to sell them to other at-risk groups, such as police officers or firefighters.
The new policies are getting a warm welcome. Although it has just begun to market a policy underwritten by UNUM Life Insurance Co. in Portland, Me., the American Hospital Assn.'s insurance unit says 1,000 hospitals have expressed interest. Later this year, the Health Insurance Assn. is expected to recommend a basic AIDS disability policy for its members to sell. Rather than criticizing insurers for preying on workers' fears, consumer advocates and regulators endorse the coverage. AIDS policies could encourage infected workers to come forward earlier, says Connecticut Insurance Commissioner Robert R. Googins.
Statistics point to a market with a lot of profit potential. Of the estimated 1.5 million residents in the U.S. infected with HIV, only 36 are health-care employees who were infected at work. And out of 5.6 million health-care workers in the country, just 8,000 have caught the virus. Insurers think the statistics will get even better, because of new Occupational Safety & Health Administration guidelines that require new safety precautions in health care.
Insurers are surprised and encouraged by the low claims level. UNUM, a leading provider of disability insurance, found that costs didn't rise as quickly as it had expected. Because of that, the company decreased reserves for AIDS claims by $4.4 million during the last three months of 1992.
Such coverage is not without risk for insurers. The level of claims is "still a big unknown, and actuaries don't like unknowns," says Don Ainge, executive vice-president of Medical Group Insurance Services Inc. in San Jose, Calif., which offers the policies. Others point to $1.3 billion in payments from life- and health-insurance coverage in 1991 as a result of AIDS cases. That brought total benefits paid since 1986 to $4.9 billion. AIDS disability coverage could ring up similar numbers, some insurers argue.
AIDS policies, though, limit insurers' potential exposure. Policies from ITT Hartford Life Insurance Co. call for a six-month wait before enrollees can receive benefits. "We did not want to get a lot of small groups with known claims essentially buying a policy to get benefits," says John D. Wiggin, an assistant vice-president overseeing ITT Hartford's AIDS disability coverage. Connecticut Mutual Life Insurance Co.'s policy limits benefits to two years after a worker tests positive.
After years of dragging their feet, insurers may find that AIDS policies could be an alluring double play: good public relations--and even better profits.WHY INSURERS ARE TARGETING
SUBSTANTIAL PROFIT POTENTIAL Risks seem low relative to premiums. Of the
estimated 1.5 million cases of AIDS in the U.S., only 36 are health-care
workers infected at work, says the Centers for Disease Control.
OPPORTUNITY TO CROSS-SELL Selling AIDS disability coverage gives insurers a
chance to sell such other products as life insurance to predominantly
white-collar medical workers, an attractive market. Policies could also be
offered to other workers with exposure to HIV--police officers or firefighters,
GOOD PUBLIC RELATIONS Companies are seen as helping doctors, nurses, and other
health-care workers. Consumer advocates say the coverage may also encourage
workers with policies who develop AIDS to tell employers sooner.
Chris Roush in Hartford