Capping AIDS benefits: does Title III of the ADA regulate the content of insurance policies?

I. INTRODUCTION A. McNEIL Y. TIME INSURANCE Co.1 In the spring of 1994, Michael McNeil purchased a self-funded life and health insurance policy for his small business from Time Insurance Company (Time).2 The policy contained a $10,000 cap on treatment of illnesses related to Acquired Immune Deficiency Syndrome (AIDS).3 Time had no actuarial basis or past experience to justify this cap; the company could not establish that its cap was not arbitrary or discriminatory.4 In September of 1994, McNeil was diagnosed with AIDS.5 Time paid only the first $10,000 of McNeil's AIDS-related bills that eventually exceeded $400,000 before McNeil died on March 1, 1995.6 Prior to his death, McNeil sued Time in Texas state court.7 After McNeil's death his father took over the suit, asserting "numerous common law causes of action: breach of contract, breach of duty of good faith and fair dealing, negligent misrepresentation, common law discrimination, waiver, estoppel, and ratification."8 He also charged that Time violated numerous state and federal statutes, including the Americans with Disabilities Act (ADA).9 Time removed the case to federal district court in Texas based on diversity and preemption under the Employee Retirement Income Security Act (ERISA).10 IMAGE FORMULA5 The district court dismissed all of the claims.11 The court found that the ADA claim failed because Time's provision of insurance was not a "public accommodation."12 The court also found that ERISA preempted the state law claims.13 The Fifth Circuit affirmed, agreeing that Title III of the ADA did not apply to the policy.14 It relied on the ADA's plain language, reasoning that Title III does not regulate the content of goods and services offered by a public accommodation.15 The court also affirmed the lower court's ERISA finding. 16 B. IMPLICATIONS OF McNEIL McNeil affirms a growing line of Circuit Court decisions holding that the ADA does not apply to the content of an insurance policy.17 The decisions suggest that, under the ADA, an insurance company is free to discriminate by capping benefits for AIDS-related illnesses at levels clearly insufficient for adequate coverage. Under McNeil, an insurer need not justify its decision to cap benefits with either actuarial data or past experience showing that providing full insurance coverage benefits for AIDS treatment would financially burden the company. Thus, in many states, an insurer may freely discriminate in its coverage of AIDS patients. It may continue to cap benefits for AIDS treatment at a level much lower than for treatment of other costly diseases, such as cancer, heart disease or liver failure.18 In many states, the law prohibits such discrimination by insurance companies.19 As Judge Richard Posner, Chief Judge of the Seventh Circuit Court of Appeals, says in the Doe opinion, "If in fact the AIDS caps in the defendant's policies are not consistent with state law and sound actuarial practices, the plaintiffs can obtain all the relief to which they are entitled from the state commissioners who regulate the insurance business."20 Unfortunately, the solution is not that simple. ERISA preempts state law claims against self-funded insurance plans such as McNeil's.21 About forty percent of Americans with group coverage are in self-funded plans.22 Thus, without federal protection, AIDS patients under self-funded plans have no protection when their insurance plans arbitrarily refuse to cover them adequately. If courts continue to hold that Title III does not apply to insurance policies' content, several negative consequences will result. First, courts will disregard the IMAGE FORMULA8ADA's purpose as it relates to discrimination against AIDS patients.23 Second, AIDS patients will become sicker more quickly and die earlier when unable to access the expensive, early treatment that is accepted as most effective. …