TOM MAYO

What happened to Jack McGann could have happened only in America.

Jack McGann was a music company employee in Houston who was diagnosed with acquired immune deficiency syndrome in 1987. At the time, his employer maintained a group health insurance plan with a $1 million lifetime limit for all employees. Four months after Mr. McGann began submitting AIDS-related claims, the company terminated the group health policy and replaced it with a self-insured plan with a $5,000 lifetime limit on AIDS-related care and a $1 million limit for all other care.

Under Texas insurance law, the exclusion of Mr. McGann's care would have been illegal. But under the federal Employees Retirement Income Security Act, self-insured plans are exempt from state insurance laws.

Mr. McGann challenged the reduction in AIDS benefits, claiming that it violated the Employees Retirement Income Security Act, which prohibits discrimination against an employee "for exercising any right to which he is entitled under the provisions of an employee benefit plan.' A federal appeals court said continued coverage at the earlier $1 million level was not "a right to which he is entitled.' The Supreme Court recently declined to review this decision, so the appeals court' s opinion is the last word in Jack McGann's case.

Mr. McGann's employer has been criticized for turning the whole concept of insurance on its head. It placed its bets when it purchased the first plan for all of its employees. When it looked like it was going to lose that bet, however, the company reneged. This criticism is not quite fair. Small and medium-size companies frequently are faced with increasing health insurance premiums because of the claims submitted by severely ill patients like Jack McGann.

Whether they relate to AIDS or cancer or any other serious illness, catastrophic claims can lead in turn to the possibility that companies eventually will not be able to offer health insurance benefits for any of their employees.

Mr. McGann's story illustrates that access to health care in the United States usually is a question of access to health insurance. In nearly all developed nations, access to health insurance is universal. The United States has so far chosen a different path, a patchwork of private insurance (usually offered through an employer) and public programs such as Medicare, Medicaid and CHAMPUS.

Increasingly, private insurers find ways to exclude high-cost insureds like Jack McGann. The insurance companies push the principles of underwriting to their limit by ever closer cost- and risk-matching and shrinking risk pools. Pre-existing condition clauses deny coverage to seriously ill employees when they switch jobs and, after the McGann case, when their employers switch plans.

Employers caught in an inflationary spiral of shrinking risk pools and state-mandated coverage requirements go to self-insured plans to avoid the state mandates. From 1988 to 1991, the percentage of employers with 100 to 500 employees who offered self-insured health plans increased from 26 percent to 41 percent. For employers with fewer than 100 employees, the number nearly tripled from 8 percent in 1988 to 22 percent in 1991.

The new Americans With Disabilities Act might help prevent what happened to Jack McGann. The act says employers cannot discriminate against employees with AIDS by changing "terms, conditions and privileges of employment.'

This does not solve the problem. It is far from clear that federal courts will read the disabilities law to forbid what the music company did. Moreover, any victory in the court will take years of litigation. And a victory for employees would mean that small or medium-size employers will be saddled with increasingly unmanageable health care obligations that ultimately threaten the health care benefits of all employees.

Maybe the Supreme Court has shown us the doorway that leads from crisis, as C. Everett Koop would say, to chaos. Once through that door, perhaps we will be ready for a system that combines universal access with sensible limits on care.

Tom Mayo is an associate dean of the Southern Methodist University School of Law, and is of counsel with the law firm of Haynes and Boone.

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