What’s Race, Gender, or Sexual Orientation Got to Do with It? The Link Between Diverse Policyholders and Allegations of Insurance Coverage Discrimination

Co-Author: Niya T. McCray

Recent insurance discrimination allegations stemming from the pre-exposure prophylaxis drug protocols reinforce that underwriting decisions should have roots in the latest data and science and solid underwriting principles.

A lawsuit making its way through federal court in Massachusetts could have ramifications for life, health, disability, and long-term care insurers nationwide. At issue in the case is a drug protocol called pre-exposure prophylaxis (or PrEP). PrEP was approved by the U.S. Food and Drug Administration (FDA) in 2012 as a means for those at high risk of exposure to HIV to lower their chances of becoming infected with the virus. The protocol consists of two, HIV medications working together in one pill to prevent the HIV virus from replicating in the human body. The pill, which had previously been approved by the FDA as an HIV treatment in 2004, is marketed as Truvada. As the name of the protocol indicates, PrEP is meant to be taken before [pre] exposure [coming in contact with the virus] as a means of preventing HIV infection [pro-phylaxis]. Based on U.S. Department of Health and Human Services guidelines, certain gay men fall within one of the categories of people who are most likely to benefit from PrEP.

With the advent of this newly approved drug protocol, insurers have been faced with the question: what effect, if any, will Truvada usage have on the underwriting and issuance of certain insurance policies? The decisions that have been made by insurers on this question are increasingly under scrutiny because it is being alleged with some frequency that gay men have been discriminated against when insurers have determined that Truvada users should not be offered certain insurance coverage.

While the specific type of discrimination allegation related to Truvada usage may be novel, insurance companies, whether in the context of pricing, benefits, claims-handling procedures, or policy issuance, have faced a variety of allegations of discrimination for decades. One need only examine headlines over the years to know that the threat of litigation, regulatory action, or simply bad publicity as a result of any discrimination allegation is germane to insurers and must be considered when they conduct all aspects of their business operations. Whether the allegations are based in fact or not, no category of insurer is immune from allegations of discrimination.

Life Insurance

In the late 1990s and early 2000s, some insurers were forced to defend themselves when African-American insureds alleged discriminatory sales practices regarding life insurance policies that were said to contain substantially limited benefits at purportedly unfair rates. The plaintiffs in those lawsuits charged that the actions of the insurers were rooted in the biases of Jim Crow and that the insurers’ actions were tantamount to racial discrimination. Although many of the practices that were complained about had already been stopped by the insurers before the lawsuits were filed, without admitting liability for their past actions, most of these cases were settled out of court.

Health Insurance

Health insurers have likewise seen charges of discrimination levied against them. Specifically, women have alleged historical discrepancies in their total out-of-pocket health-care expenses because it was perceived that health insurers had covered fewer services for women than they did for men. A primary example of this controversial difference in cost based on gender relates to the coverage for reproductive care and medicine for women compared with coverage for men’s treatment for erectile dysfunction. The 1998 introduction of Viagra to the American market reinvigorated the debate over coverage for women’s reproductive care. At that time, most health insurers did not provide coverage for birth control pills or reproductive devices or services for women despite providing coverage for Viagra to male policyholders. In response to the controversy, a spokesman for the Health Insurance Association of America—which later became part of AHIP— discussed the distinction but did little to squelch the controversy when he described Viagra as a cure for a medical condition, while at the same time categorizing contraception as a nonmedically necessary “lifestyle drug.” Debra Baker, Viagra Spawns Birth Control Issue, ABA Journal, Aug. 1998, at 36. The enactment of the Affordable Care Act (ACA) in 2010 quieted some of the controversy by implementing mandates on coverage must be provided related to women’s reproductive care; however, with some of the ACA’s mandates challenged and nullified in court, and with the uncertainty over the future of the ACA, this battle-of-the-sexes debate in regard to health insurance coverage may arise again.

Automobile Insurance

As recently as 2017, allegations surfaced that some automobile insurers have used discriminatory rating methodologies to establish pricing on automobile liability policies. The allegations rest on the belief that some carriers discriminate against racial minorities by charging higher premiums to those who live in largely minority neighborhoods. Allegedly, those same carriers charge less for identical coverage to policyholders who live in predominately white neighborhoods, despite data showing that the level of risk that exists in both types of neighborhoods is equal. Insurers have denied the allegations but at least one state Department of Insurance has opened an investigation into the claims.

Each of these historical examples of contestable claims of discrimination, whether they are claims of bias based on gender, race, or ethnicity, reflect some of the hot-button social issues that existed at those times. It is axiomatic that by examining contentious social issues currently in the headlines that we might be able to glean the types of discrimination claims that will be prevalent in the near future, both generally and more specifically, against insurance companies.

Sexual-Orientation Insurance Discrimination

Some of the most hotly debated social issues over the past decade have revolved around the rights of lesbian, gay, bisexual, transgender, and queer individuals. (The authors acknowledge that the term “queer” is considered pejorative to some but also note that the term has been reclaimed by many to encompass all who fall within the lesbian, gay, bisexual, and transgender community; therefore, the authors likewise use the term consciously in this regard and will recognize the community as “LGBTQ” here.) The issues of same-sex marriage, LGBTQ employment protection, and transgender military service and bathroom rights have all been in the news, the subject of debate in the political arena, and in the courts over the past few years. Arguments related to these hot-button issues are inextricably intertwined with assertions of discrimination and demands for protection of civil liberties.

Now, the issue of HIV prevention, an issue that is seen by many to affect the LGBTQ community disproportionately, more specifically gay men, has found its way into the discussion of civil liberties in the context of insurance by way of the Massachusetts lawsuit regarding PrEP. As a backdrop to any discussion of HIV and insurance, a retrospective on the effect of HIV/AIDS on the insurance industry and the industry’s actions to deal with the onset of the epidemic should be considered.

In the 1980s, as HIV/AIDS spread without a cure, what since has been described as “AIDS panic” arose and was mostly directed toward the LGBTQ community because many of the early victims of AIDS were gay men. In fact, AIDS was dubbed the “Gay-related immune deficiency” (GRID) in a 1982 New York Times article; while the term did not take root in scientific literature, the association of the LGBTQ community with the “Gay plague” persisted.

Faced with a new and rapidly growing epidemic, some health insurers feared that their solvency was at risk because of the costs associated with the health-care for covered AIDS patients. Judith Berman, AIDS Antibody Testing and Health Insurance Underwriting: A Paradigmatic Inquiry, 49 Ohio St. L. J. 49 (1989). In-depth actuarial analyses done at that time indicated that enhanced underwriting could play a vital role in mitigating the risk of the epidemic to life and health carriers. See The Impact of AIDS on Life and Health Insurance Companies: A Guide for Practicing Actuaries, Transactions of Society of Actuaries 1988 Vol. 40. pt. 2. Therefore, as a means of addressing the specter of out of control costs, collapsing blocks of business, and future insolvency, many life and health insurers began crafting exclusions to be included in their policies for AIDS and AIDS-based coverage; some of the same carriers also began using HIV testing as a means of determining insurability. Karen A. Clifford; Russel P. Iuculano, AIDS and Insurance: The Rationale for AIDS-Related Testing, 100 Harv. L. Rev. 1806 (1987).

Seemingly rejecting the assertions by insurers that the exclusions and testing were necessary to allow them to underwrite and price the insurance policies so as to remain financially viable, some states began enacting legislation or enforcing already-existing regulations in such a way so as to preclude some of the insurers’ actions. Ultimately, some of the restrictions on the insurers that had been enacted were later repealed. The result was a patchwork of ever-changing rules and regulations that were prohibitive to both insurers and HIV/AIDS patients.

As medical research provided a growing understanding of the disease, and as treatment protocols improved, meaning that HIV was no longer an automatic death sentence, the “AIDS panic” began to subside. Likewise, concerns over health insurer insolvency because of HIV/AIDS also faded from discussion, and most group health insurance policies began to provide coverage for HIV treatment that was designed to prevent the onset of full-blown AIDS. But even with the passage of decades, up to the time that the ACA became law in 2010, some HIV-infected persons still faced limited access to health coverage because HIV may have been considered a preexisting condition or because private, individual insurance was cost prohibitive.

Looking back to the worst days of the AIDS crisis in America, two distinct points of view can be seen. From the insurers’ perspective, many companies feared that HIV/AIDS would affect their ability to price, underwrite and issue policies properly, and accordingly, this would affect their viability. Insurers steadfastly maintained that their decisions related to HIV/AIDS were warranted, were not targeted at just gay men, and were no different than their consideration of any other health condition or disease. As a counterbalance to the insurers’ view, some in the LGBTQ community held the belief that the insurers’ response to the AIDS crisis was further indicia that insurers had a bias against gay men. This belief may have been fueled by the notion, based on anecdotal accounts, that even before the epidemic, single men of a certain age who lived in certain locations or who worked in stereotypically “gay” careers had routinely been denied insurance based on suspected homosexuality. This festering distrust may have played a role in the animosity against insurers that evolved because of what was seen as a discriminatory response to the epidemic. These countervailing perceptions—customary business practices versus perceived discrimination—form an interesting backdrop for today’s litigation regarding the HIV-prevention protocol and how it relates to the issuance of certain types of insurance policies.

PrEP: An Insurance Case Study

The lawsuit bringing the issues of HIV and insurance together once again is a case that was filed by a gay man and that is currently pending in a Massachusetts federal court. The case is poised to test the boundaries of Massachusetts’ laws precluding “discrimination in access to a place of public accommodation.” John Doe v. Mutual of Omaha Insurance Co., No. 1:16:-cv-11381-GAO (D. Mass. 2016). Specifically at issue in the lawsuit is whether the insurer discriminated unlawfully against the plaintiff and violated Massachusetts law by denying him “public accommodation” in the form of insurance. Even though the lawsuit relates specifically to long-term care insurance, the outcome could have much broader implications for other types of policies and how insurers consider PrEP in their underwriting process.

From the information available in the public court records, it is clear that the lawsuit is not a typical insurance case. The allegations do not relate to a denial of benefits under an already-existing policy of insurance; instead, they center on an application for long-term care insurance and a 2015 decision by Mutual of Omaha not to issue the policy. While some of the facts in the lawsuit may not be in dispute, the parties have taken very different positions on how those facts relate to the law.

Plaintiff Doe is a gay man who is using the PrEP drug Truvada. He submitted an application for long-term care insurance to Mutual of Omaha (Mutual), in late 2014. Plaintiff Doe filled out a medical questionnaire, answered questions about his medical history in a telephone interview, and provided authorization for Mutual to obtain his medical records. After considering the information that it had gathered as part of its underwriting process, Mutual denied the application for long-term care insurance in early 2015. In its letter of denial to Doe, the insurer noted that the reason for declining the application was because the plaintiff was taking Truvada, “as it is on our uninsurable list of medications.” Id. (Doc. 111-1). In response to the denial, Doe submitted an appeal and included a letter from his physician, stating, “John Doe is taking Truvada for HIV prevention. Truvada is an extraordinarily safe and effective medication. He maintains a healthy lifestyle and remains in good health.” Id. (Doc. 97). Subsequent to the appeal, Doe received a letter from the insurer in which the denial of coverage was upheld, on this basis: “We do not offer coverage to anyone who takes the medication Truvada, regardless of whether it is prescribed to treat HIV infection, or is used for pre-exposure prophylaxis. This is in accordance with our underwriting guidelines.” Id. (Doc. 111-1). After the denial of Doe’s insurance appeal, he submitted a Complaint for Discrimination with the Massachusetts Commission Against Discrimination and then ultimately filed the lawsuit.

Doe contends that by denying him long-term care insurance, the defendant has violated Massachusetts discrimination laws. Specifically, Doe alleges that Mutual is considered to be a “place of public accommodation” and that by denying him access to the long-term care insurance based on a perceived “disability,” the insurer has unlawfully discriminated against him. See Mass. Gen. Law Chap. 272, Sec. 92A. Plaintiff Doe claims that because “approximately 80 percent of PrEP users are gay men,” any blanket denial of coverage for all PrEP users creates a “disparate impact on gay men” because they are “disproportionately disadvantaged by such policy.” Doe v. Mutual, No. 1:16:-cv-11381-GAO (D. Mass. 2016) (Doc. 97). Doe in essence challenges Mutual’s blanket policy to deny coverage to all who use Truvada as PrEP as discriminatory.

Mutual denies any wrongdoing or liability, asserting a variety of defenses, including that it is not a “place of public accommodation” and that Doe is not disabled under Massachusetts law. Those defenses asserted by the insurer address specific, state statute allegations. But Mutual also defends itself more broadly and strongly maintains that its business practices are not discriminatory. Mutual asserts that its decisions regarding denials for all Truvada users are “based on legitimate underwriting business considerations” and that the court should not restrict its “classification of Truvada use as an uninsurable risk.” Id. (Doc. 104)

Two Sides of the Coin

Not wholly unlike the situation that existed during the AIDS crisis when gay men believed that they were being unfairly targeted by actions that insurers maintained were necessary business practices, the viewpoints of the insurer and the insured, or as here, a potential insured, in the lawsuit are starkly different. From Mutual’s perspective, the lawsuit appears to be an insurance-coverage issuance case, and its denial of coverage is not based on bias against gay men; instead it is based on legitimate underwriting concerns. In fact, the letter sent to the plaintiff upholding the denial notes that coverage is unavailable to anyone who takes Truvada, not just gay men. On the other hand, from the plaintiff’s perspective, the lawsuit is much broader than the plaintiff alone. Doe’s allegations are rooted in the concept of bias-related discrimination, which if true, would not only affect him but could also have a disparate impact on all gay men who are denied insurance coverage who use Truvada as PrEP.

The court must determine, under Massachusetts law, whether Doe’s claims are even cognizable, and if so, whether Mutual’s decision was in violation of the law. Insurers generally maintain their underwriting guidelines as proprietary, and all of the rationales that Mutual relied on in making its determination regarding Doe have not been publicly disclosed. But Doe, in the lawsuit, making this a broader case than just about Doe, attempts to make an issue of at least two possible factors that could have influenced the underwriting decision to deny coverage. These possible factors that may have had an effect on underwriting include broad concerns about Truvada as PrEP that have been discussed since it was approved in 2012. For instance, in 2015, Munich Re articulated various issues related to Truvada as PrEP for consideration in underwriting applications for life and disability policies, including these two: (1) “Use of TruvadaPrEP indicates some real or perceived increased risk of acquiring HIV infection”; and (2) “Truvada has not been around for very long[,] thus possible effects of prolonged use for pre-exposure prophylaxis are unknown.” Underwriting Considerations for Pre-Exposure Prophylaxis against HIV Infection with Truvada(2015).

One of the concerns that could affect underwriting for insurers is that when someone uses Truvada, it could indicate the person (1) has HIV, or (2) has an increased risk of acquiring HIV. Excluding those who are HIV-positive, and considering only those who are HIV-negative and are taking PrEP (such as the plaintiff in the lawsuit), at first glance this reasoning for any blanket exclusion may seem counterintuitive given that PrEP is designed to prevent HIV infection. However, the actual concern here has been discussed more broadly than just the insurance industry and relates directly to whether people on PrEP will take the drug as mandated to maintain its efficacy long term. Health authorities, including those with the Centers for Disease Control and Prevention, advocate that “people who use PrEP must commit to taking the drug every day.” Pre-Exposure Prophylaxis (PrEP), Ctrs. for Disease Control & Prevent., available at https://www.cdc.gov. If someone does not take the medication faithfully each day, he or she leaves him- or herself vulnerable to HIV infection because only those who are already at high risk of HIV will even be taking Truvada as PrEP. To follow this reasoning further, someone taking Truvada as PrEP, even though not doing so as advised, may still feel protected from infection, and therefore, the might be lulled into a false sense of security and they might more likely to engage in risky behavior. Following the reasoning to conclusion, engaging in risky behavior, such as promiscuous sex or drug use, while not fully protected by PrEP, increases the risk of becoming HIV infected. As a counterargument to this possible reasoning, the plaintiff could assert that it is still discriminatory and flawed because it advances a biased stereotype that gay men engage in risky behavior.

The second concern that could affect underwriting and prompt a blanket exclusion by insurers of coverage for all Truvada as PrEP users might relate to the uncertainty of the potential long-term effects that the drug could have on the body. It should be noted that although Truvada was first approved by the FDA in 2004, that approval was for HIV treatment and not as a preventative measure. Truvada as PrEP, for long-term prevention of HIV, was not approved until 2012. The timeframe at issue in the lawsuit is 2014–2015, when the application for insurance and the appeal were denied. To the extent that any concern about the long-term health effect of Truvada was even a factor for Mutual, the question is, was there sufficient information available in 2014–2015 for the company to evaluate the effect that long-term use of the drug as PrEP would have on a potential insured? Certainly a strong argument can be made that the short period between FDA approval in 2012 and the policy application and appeal denial in 2014–2015 would have been insufficient time to establish an answer to that question as it relates to evaluating the underwriting risk. The plaintiff in the lawsuit, however, attempts to thwart this argument and posits by way expert opinion that there is no basis for a blanket exclusion for Truvada users because there is no scientific data showing adverse health risk for those who use Truvada long term as HIV treatment (as approved in 2004), or for those who use Truvada long term for HIV prevention (as approved in 2012). The plaintiff also contends that it would not be proper for a company to treat Truvada differently than it does other recently FDA-approved drugs that are also without long-term safety data, such as recently approved diabetes or high blood pressure medications. Finally, the plaintiff argues that Truvada is as safe as or safer than certain drugs that do not mandate a blanket exclusion of coverage, e.g., hormonal contraceptives and drugs used to treat depression and epilepsy. Doe contends that by not treating Truvada in the same manner as other drugs, an insurer would be unlawfully discriminating against and limiting access to public accommodation for gay men.

Regardless of why the decision was made to deny coverage in the lawsuit, the positions taken by the parties are likely to highlight the drastically opposite characterizations put on the case by each side. Ultimately, someone will decide whose theory of the case is right, Believable? True? Depending on the answers, the lawsuit could be an ordinary insurance coverage case affecting only the named parties, or it could have ramifications that affect many more than just Doe and Mutual.

Beyond the Lawsuit

The lawsuit is not the only arena in which this dispute is currently playing out. Other allegations of limitations placed on individuals who take PrEP have begun to surface. One such example is the account of Dr. Phillip J. Cheng, as reported by the New York Times. Based on that account, Dr. Cheng was taking Truvada as PrEP when he applied for a lifetime disability policy. Initially, he was denied lifetime coverage and offered only a five-year policy because of his Truvada usage. After Cheng discontinued the drug, he applied with another company and was given a lifetime disability policy. While there may be myriad reasons why his second submitted application, which he submitted while he was not taking Truvada, for a “better” policy was approved, this incident has only served to intensify the debate over insurance practices regarding individuals on PrEP. In response to this reporting, the New York Department of Financial Services opened an investigation into the issue. Superintendent Maria Vullo issued a statement on February 14, 2018, and she acknowledged the reports of persons taking HIV-prevention drugs receiving alleged disparate treatment. In the statement, Vullo noted that the reports raised “serious concerns” for the department and added that insurers cannot deny coverage based on discriminatory reasons. Specifically mentioning life, disability, and long-term care insurance, she elaborated further in regard to Truvada specifically and noted that “[t]here is absolutely no legal justification for denying or limiting insurance coverage simply because an individual takes pre-exposure prophylaxis (PrEP)…. This is tantamount to penalizing applicants based on sexual orientation.” Maria T. Vullo, Superintendent, N.Y. Dept. Financial Servc., Statement (Feb. 14, 2018).

Following the lead of Superintendent Vullo, on February 15, 2018, California Insurance Commissioner Dave Jones opened an investigation into alleged denials of life, disability, or long-term care insurance policies to gay men taking HIV/AIDS prevention medications and encouraged Californians to report suspected discrimination. Dave Jones, Commissioner, Cal. Dept. of Insurance, Statement (Feb. 15, 2018). News reports have followed that include at least anecdotal accounts of other individuals who claim to have been discriminated against and who may seek redress. Whether other states will join New York and California and whether more litigation will ensue are unclear. Certainly while the issue of alleged discrimination based on sexual orientation in the context denials of insurance coverage for PrEP users may have started with Doe’s case against Mutual in Massachusetts, it is not likely to end there.

The Future

As of now, there is no clear answer about whether there is any consistency to how carriers consider PrEP usage when underwriting insurance policies. Media outlets have reported several insurance companies stating on the record that they do not decline coverage based on PrEP alone. For those carriers that do deny coverage based on PrEP, advocates seem prepared to fight, asserting that Truvada is a drug meant to prevent a horrific, public health condition and making the dispute much more than a coverage issue.

To date, notwithstanding that the current PrEP case is being fought in only one state, practitioners in states with statutes comparable to Massachusetts’ Public Accommodation Law—California, Colorado, Connecticut, Delaware, New York and others—should keep a keen eye on the outcome of the Massachusetts litigation; it is reasonable to conclude that the progression of that case may open the gate for similar cases in other jurisdictions. Of course, plaintiffs in future cases may not limit their actions to just the same type of public accommodation laws at issue in Massachusetts and may instead seek redress under state insurance statues or regulations, unfair trade practices acts, or common law claims.

As with any new or developing medical condition, procedure, or drug, insurers must adapt and evolve. The importance for insurers to make certain that their underwriting decisions regarding PrEP are based on the latest data and science and that any denial of coverage is rooted in solid underwriting principles becomes even more acute when allegations of systemic discrimination are being levied. Diligence is imperative because unfortunately even the appearance of wrongdoing can sometimes be more damning than the wrong itself. Gary L. Howard, a partner in Bradley Arant Boult Cummings LLP’s Birmingham, Alabama, office, has more than 25 years of experience representing clients on a national and regional basis in bad-faith, fraud, and other tort actions; class actions; contract and coverage disputes; and commercial litigation. Mr. Howard is active in the DRI Life, Health and Disability/ERISA Law Committee and is the DRI Alabama State Membership chair. He serves on the DRI Diversity and Inclusion Committee Steering Committee and as the 2018 DRI Diversity Expo chair. Niya T. McCray, CIPP/US, is an associate with Bradley Arant Boult Cummings LLP, where she practices business litigation and cybersecurity and data privacy law. Ms. McCray is a member of the DRI Young Lawyers Committee Publication Subcommittee, as well as the DRI Cybersecurity and Data Privacy Seminar Planning Committee.

Republished with permission. This article first appeared in the August 2018 issue of For the Defense.