Court AIDS Ruling Seen Not Affecting School Employees

By Mark Walsh — November 18, 1992 3 min read

WASHINGTON--The U.S. Supreme Court’s refusal to hear a case in which a Texas company reduced its health-insurance coverage for AIDS after a worker contracted the disease is unlikely to lead to similar cuts in school employees’ benefits, experts in education law and worker benefits said last week.

The High Court’s denial of the appeal last week, which let stand lower-court rulings allowing the company to curtail its coverage, prompted fears in many quarters that more employers will take steps to scale back medical benefits covering costly long-term conditions.

But local governmental bodies such as school districts are not covered by the federal law at issue in the case, and public school workers’ health benefits are commonly governed by collective-bargaining agreements, experts pointed out.

In addition, many legal experts argue that the Americans with Disabilities Act, which does cover schools, bars reductions in benefits for workers with conditions such as AIDS.

Firm Became Self-Insured

Greenberg v. H & H Music Company (Case No. 91-1283) involved John McGann, an employee of a music company in Houston who learned in 1987 that he had contracted acquired immune deficiency syndrome. After he began filing for reimbursement of medical expenses, H & H Music dropped its private insurance plan and became self-insured. The company then reduced the lifetime benefits available to Mr. McGann from $1 million under the old plan to $5,000 for the treatment of AIDS.

As a self-insured employer, the company became exempt from state insurance taxes and regulation, falling instead under the federal Employee Retirement Income Security Act, or ERISA.

Mr. McGann sued his employer under a section of ERISA that bars discrimination against employees who seek to exercise their rights under a pension or benefit plan. A federal district judge dismissed his suit, ruling that the company acted to save money and insure the future existence of its health plan. The U.S. Court of Appeals for the Fifth Circuit affirmed the ruling.

Mr. McGann died in 1991, but his estate appealed to the Supreme Court, which on Nov. 9 voted 7 to 2 against reviewing the case.

Effects of A.D.A.

August W. Steinhilber, the general counsel for the National School Boards Association, noted that public school districts are not covered by ERISA. Most districts, he said, use commercial companies for health insurance and thus would be subject to state laws and regulations governing changes in benefits.

He also noted that any district whose benefits are set by collective bargaining would likely face strong union opposition to cuts in benefits.

John Dunlop, the director of collective bargaining and compensation for the National Education Association, agreed that “the general issue of denying benefits once promised would cause a problem.’'

Mr. Steinhilber, Mr. Dunlop, and Suzanne Goldberg, a lawyer with the Lambda Legal Defense and Education Fund, a legal group that deals with gay-rights and AIDS issues, all said they knew of no instance in which a district had reduced benefits along the lines of the Texas case.

James Kaull, the director of business services for the National Association of Independent Schools, said he knew of no member school that is self-insured and thus subject to ERISA. Most independent schools are covered by commercial health-insurance policies, he said, although some schools have banded together to form larger pools to reduce costs.

The Justice Department, in its brief urging the High Court not to review the Texas case, noted that the new Americans with Disabilities Act may bar changes in benefit plans if they discriminate against people with AIDS or other diseases.

Mr. Steinhilber said that even under the A.D.A., school districts should still be able to limit the kinds of illnesses covered under a health plan.

“This will probably be litigated under the A.D.A.,’' he said, “but is it discrimination based on a handicap [to reduce benefits], or do you have to cover all illnesses, or can you limit your exposure?’'

A version of this article appeared in the November 18, 1992 edition of Education Week as Court AIDS Ruling Seen Not Affecting School Employees