Sunday, February 07, 1999
Deals before death grow
Terminally ill get benefits early
BY PATRICK CROWLEY
The Cincinnati Enquirer
COVINGTON — Dave Wheeler is having the time of his life. At least what is left of it.
The 48-year-old Cincinnati man has AIDS. Eventually, the disease is expected to kill him. But he wants to make the most of the days he has left.
So Mr. Wheeler did what thousands of AIDS patients and others with terminal diseases have done in recent years. He sold his life insurance policies to an investor for cash under what is known as a viatical settlement.
And he did it against his doctor's advice.
“I understand why people enter viatical agreements,” Dr. Alan Cohen said. “And I can see why people would invest in them.
“But I don't like them. I think companies that arrange (viatical agreements) prey on people's fears and circumstances,” said Dr. Cohen, an infectious disease specialist who practices and lives in Crestview Hills.
Viatical settlements first surfaced in the late 1980s. The National Viatical Association (NVA) says that by 1990 fewer than 10 companies were buying and brokering insurance policies for the terminally ill.
This decade the business has grown from about $50 million in policies to more than half a billion dollars this year, according to the NVA.
“A viatical settlement may not be for everybody facing my circumstances,” Mr. Wheeler said while waiting for a plain cheeseburger at a Covington restaurant. “But for me, it was a great deal.”
Mr. Wheeler is one of about 20 AIDS patients Dr. Cohen sees and is among several who have cashed insurance policies under viatical settlements.
A part-time controller for a Cincinnati industrial firm, Mr. Wheeler sold two life insurance policies to investors under a viatical settlement for close to $100,000, or about 65 percent of the combined death benefit of both policies. When he dies, the death benefits will go to the investors, people he has never met.
“I was diagnosed 10 years ago, and I had it five years before that,” said Mr. Wheeler, a slight man who moves slowly and looks more than a bit worn. “So it's not like a surprise or a great shock that sooner or later it will catch up with me.”
For Mr. Wheeler, enjoying the time he has left means traveling, fixing up his west side home, paying off bills, buying nice Christmas presents and handing out money to some family and friends.
“What we provide is an avenue of financial relief for people with life-threatening diseases,” said Jay Sumner, a client services representative with The Medical Escrow Society, the central Florida company that arranged Mr. Wheeler's viatical agreement.
Such companies are basically brokers that, for a commission, do nothing more than link together buyers and sellers of insurance policies.
Mr. Sumner talks of how the money can change a person's lifestyle and help them, financially and emotionally, through a very difficult time.
A viatical settlement company ad in the September issue of HIV Plus magazine offers: “We help people diagnosed with a terminal illness achieve a higher quality of life.”
It is one of five such ads in the magazine, which publishes articles on treating and coping with HIV and AIDS. Viatical settlement companies often advertise in AIDS-related and gay lifestyle magazines, Mr. Wheeler said.
Betting on death
Cincinnati attorney Scott Knox, who does volunteer legal work for AVOC, or Aids Volunteers of Cincinnati, learned about viatical settlements several years ago when a salesman for one of the companies asked him out to lunch.
“I thought we were going to talk about AIDS patients and setting up (viatical) agreements,” Mr. Knox said. “But he asked if I wanted to invest in them.”
The offer made him uncomfortable. He refused not only because of his work with AVOC but also because it would have made it felt like he was betting on somebody's life.
“It's a very hard judgment to make if the money makes somebody's life better.”
Mr. Wheeler heard about viatical settlements a few years ago and sold his two policies earlier this year.
“I had these policies with nobody to really leave the money to,” he said over lunch. “I don't have much family, and my lover and I broke up a while ago.”
With his payout, Mr. Wheeler bought some furniture and appliances for his home and also did remodeling. He paid off some debts and spent most of December in Florida, riding speedboats and even parasailing.
“I always wanted to spend time in Florida when it was cold up here,” he said.
But he didn't spend all the money on himself.
He gave out money as Christmas presents; left some money for his former lover, who he still counts as a friend; donated some money to charity; bought a computer for his cousin's son; and even invested some of the cash.
“It's made me feel so much better,” Mr. Wheeler said. “When you have AIDS, it's easy to get down physically but it can also really affect your attitude and your mood. Well, I'm in a better mood and I've been feeling better. ...”
Like most AIDS patients Mr. Wheeler is being treated with a concoction of three drugs, including AZT, known as a “cocktail.”
Though he has spent some time in the hospital in the last year Mr. Wheeler is relatively healthy now thanks to the drugs.
“Cocktails and these new treatments have revolutionized the treatment of AIDS,” Dr. Cohen said. “Patients used to be in three to five times a year. And now it has reduced it once a year in general except in terminal cases.”
"Desperate and scared'
Dr. Cohen does not begrudge Mr. Wheeler, or anybody else, wanting to spend their money before they die.
But he feels companies that broker viatical agreements take advantage of people by offering 60 to 80 percent of an insurance policy's death benefit.
“People aren't getting all the money entitled to them,” he argued. “These companies go to people who are desperate and scared, many of whom have exhausted all their financial resources on medical care. I can see how they could be hard to resist.”
Dr. Cohen has suggested that AIDS patients try to borrow money from a bank using their insurance policy as security. He believes a bank would lend more money than a viatical broker, possibly as much as 90 percent of a policy's death benefit.
Don't spend too fast
Two Northern Kentucky bank executives, one of whom asked not to be named, said they had never heard of viatical agreements.
Both also said it is not uncommon for banks to ask small business owners to take out an insurance policy and make the bank the beneficiary after a loan is made.
“We have made loans to individuals secured by life insurance policies,” said James Simpson, president of the Citizens Bank of Campbell County.
“But we've never dealt with a (viatical) situation. I can't say we would make one, but I wouldn't rule it out either,” Mr. Simpson said.
Kathleen Laurin, a Park Hills resident and certified financial planner and life insurance salesperson, said viatical agreements can be a good deal for the insured.
“People have to be sure they don't use up the money too quickly, and they have to believe they are getting a fair settlement,” she said. “But these policies ... can be very good for people who need or want their money.”
But some AIDS activists say viatical settlements are not a panacea nor opportunity for everyone with the disease.
Kathryn Thompson of Fort Thomas, AVOC's education coordinator, said 15 or so years ago most AIDS patients were young, middle class gay men, and most had life insurance policies.
“But today we're seeing a big rise in the number of minority women and even younger people who don't the opportunities of the middle class, and many don't have insurance,” she said.
Ms. Thompson said payouts could diminish in the future since with new drugs and treatments AIDS patients are living longer than they were just a few years ago.
And she cautions people who do sell policies to make sure the money they receive won't reduce or eliminate their health care insurance, since some coverage is based on a person's income or financial situation.
Quick information
Dr. Cohen said he is also troubled about how quickly viatical settlement companies find out about people diagnosed with AIDS. He said viatical companies have called him. He hasn't returned the calls.
Mr. Sumner said the Medical Escrow Society gets most of its clients from advertising or from word of mouth among people who have AIDS or other terminal illnesses.
There were 253 active cases of AIDS as of June in Boone, Kenton, Campbell, Gallatin, Grant, Pendleton and Owen countes, and another 129 people with the HIV virus, often the precursor to full-blown AIDS, according to the Northern Kentucky Health Department.
In Hamilton County, there were 131 newly diagnosed AIDS cases in 1996. Last year, there were 79.
Dr. Cohen said he will continue to advise his AIDS patients to seek another route than entering viatical settlements.
“It might be a lost cause,” he said. “They don't want to hear about other options. They want me to fill out the necessary medical papers and then send them express mail or even fax them to the (viatical company) as soon as possible.
“They don't want to listen to me. They want their cash.”
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