I, Insurance Rates, Equality and.
Edited By: Kermit L. Hall, James W. Ely Jr., Joel B. Grossman
Edited By: Kermit L. Hall
A multibillion-dollar industry insures Americans’ lives, health, homes, and property against risks such as injury, illness, and death. Insurees make regular payments, called “premiums,” to insurers. When an event that is insured against—hospitalization, theft, fire, a car accident—occurs, the insured submits a claim to the insurance company. After reviewing the claim, the company pays the expenses if it determines that the policy applies to the situation. Individuals may buy private insurance policies (most property insurance is bought in this way) or they may belong to group life, health, and retirement plans, usually through their employers. Group plans may be funded by a combination of employee and employer contributions.
The insurance industry is subject to government regulation, mostly by the states, but it is a private enterprise. The insurer, therefore, sets the amount of both premiums and benefits. It is at this point that questions about equality arise. Group insurance plans do not permit close assessment of individual risks, so better risks always subsidize poorer risks: for example, an employee with two dependents pays the same for health insurance as does an employee with seven dependents.
Private insurance policies generally determine premiums on the basis of assessments of the risks presented by the individual buying the policy and the property being insured. For example, young, single men typically pay higher automobile insurance premiums than do other car owners because they represent the segment of the population most often involved in automobile accidents. Redlining, the practice of refusing to insure property in neighborhoods the companies considered unsafe, was once common. Redlining gave rise to suspicions of race discrimination when the neighborhoods involved were predominantly African-American or Latino (see housing discrimination). Retirement plans have often discriminated on the basis of sex. Since women, on the average, live longer than men, insurers anticipated that the interval between retirement and death would be longer for women, obligating them to pay out more money to their female insurees than to males. Companies developed two ways of dealing with this predictable expense. The first was to charge women higher premiums; the second, to pay them lower benefits.
Is it fair to discriminate against individuals on the basis of statistically accurate generalizations about groups to which they belong? The courts’ answer to that question has depended on the affected group. Courts have viewed age discrimination as presenting few, if any, difficulties. A Pennsylvania case sustained the practice of charging young, single men higher auto-insurance rates against an *equal protection challenge. The practice of redlining has become less common because of the increasing publicity given to its racial overtones. Sex discrimination has been the subject of several court cases and of efforts, so far unsuccessful, to enact federal legislation prohibiting it.
The U.S. Supreme Court has never ruled that discriminatory insurance laws are unconstitutional per se. It has never needed to reach that question, since Title VII of the *Civil Rights Act of 1964 prohibits sex discrimination in employment. It is not surprising, therefore, that two cases have rendered sex discrimination illegal. What may be surprising is that the decisions were neither unanimous nor retroactive.
Los Angeles Department of Water and Power v. Manhart (1978) invalidated a group plan requiring women to pay higher premiums; Arizona Governing Committee v. Norris (1983) did the same for lower benefits for women. Since the pension plan invalidated in Manhart was funded partly from employee contributions, a male employee’s take-home pay was higher than that of a woman earning the same salary. Chief Justice Warren *Burger and Justice William H. *Rehnquist agreed with the city’s justification for the plan: that longevity was a factor justifying the different treatment of male and female workers. The other seven justices, however, disagreed. “Even a true generalization about the class,” wrote Justice John Paul *Stevens, could not justify a policy that treats “individuals as simply components of a racial, religious, sexual, or national class” (p. 708).
The dissenters picked up an additional vote in Norris, but not because of the difference between forcing women to make higher contributions while they were working and paying them lower benefits when they retired. Instead, Justice Harry *Blackman joined Burger and Rehnquist in dissent because Arizona, unlike Los Angeles, allowed its retirees to buy private insurance with state funds. The majority, however, insisted that the state had simply “offered a range of discriminatory benefits, rather than only one, [which] provides no basis whatever for distinguishing Manhart” (p. 708).
Judith A. Baer, Equality under the Constitution: Reclaiming the Fourteenth Amendment (1991). Claire Sherman Thomas, Sex Discrimination and the Law (1982).
Judith A. Baer