Can Your Disability Insurance Company Dictate The Medical Treatment You Must Receive To Collect Benefits? Part 1
Imagine that you are a dentist suffering from cervical degenerative disc disease. You can no longer perform clinical work without experiencing excruciating pain. You have been going to physical therapy and taking muscle relaxers prescribed by your primary care doctor, and you feel that these conservative treatments are helping. Like most dentists, you probably have an “own occupation” disability insurance policy. You are certain that if you file your disability claim, your insurer will approve your claim and pay you the disability benefits you need to replace your lost income and cover the costs of the medical treatment that has provided you with relief from your pain and improved your quality of life.
You file your disability claim, submit the forms and paperwork requested by the insurer, and wait for a response. To your dismay, your disability insurer informs you that its in-house physician has determined that the treatment prescribed by your doctor was inadequate. Your insurer then tells you that you should have been receiving steroid injections into your cervical spine, and tells you that if you do not submit to this unwanted, invasive medical procedure, your disability claim could be denied under the “medical care” provision in your policy.
You were not aware that such a provision existed, but, sure enough, when you review your policy more carefully, you realize that there is a provision requiring you to receive “appropriate medical care” in order to collect disability benefits. You think that your insurer is going too far by dictating what procedures you should or should not be receiving, but you are afraid that if you don’t comply with their demands, you will lose your disability benefits, which you desperately need.
This is precisely the sort of scenario presented to Richard Van Gemert, an oral surgeon who lost the vision in his left eye due to a cataract and chronic inflammation. Dr. Van Gemert’s disability insurance policies required that he receive care by a physician which is “appropriate for the condition causing the disability.” After years of resisting pressure from his insurers to undergo surgery, Dr. Van Gemert finally capitulated. Once Dr. Van Gemert received the surgery, you might expect that his insurer would pay his claim without further complaint. Instead, Dr. Van Gemert’s insurer promptly sued him to recover the years of disability benefits it had paid to him since it first asserted that he was required to undergo the surgery.[1]
Unfortunately, “appropriate care” provisions, like the provision in Dr. Van Gemert’s policy, are becoming more and more common. The language in such provisions has also evolved over time, and not for the better. In the 1980s and 1990s, the simple “regular care” standard was commonplace. In the late 1990s and into the 2000s, insurers began using the more restrictive “appropriate care” standard. And, if you were to purchase a policy today, you would find that many contain a very stringent “most appropriate care” standard.
These increasingly onerous standards have been carefully crafted to provide disability insurers with more leverage to dictate policyholders’ medical care. However, there are several reasons why your insurance company should not be the one making your medical decisions. To begin, if you undergo a surgical procedure, it is you—and not the insurance company—who is bearing both the physical risk and the financial cost of the procedure. Perhaps you have co-morbid conditions that would make an otherwise safe and routine surgical procedure extremely risky. Perhaps there are multiple treatment options that are reasonable under the circumstances. Perhaps you believe conservative treatment provides better relief for your condition than surgery would. These are decisions that you have a right to make about your own body, regardless of what your disability insurer may be telling you.
In the remaining posts in this series, we will be looking at the different types of care provisions in more detail, and how far insurance companies can go in dictating your care in exchange for the payment of your disability benefits. We will also provide you with useful information that you can use when choosing a disability insurance policy or reviewing the policy you have in place. In the next post we will be discussing the “regular care” standard found in most policies issued in the 1980s and early 1990s.
[1] See Provident Life and Accident Insurance Co. v. Van Gemert, 262 F.Supp.2d 1047 (2003).
The Devil Is In the Details: Long Term Disability Policies and Benefit Offsets
In a previous post, we discussed a feature of long-term disability insurance policies that is easily overlooked and frequently leaves policyholders feeling cheated and deceived by their insurer: the benefit offset provision. When a person signs up for a disability insurance policy, he or she expects to pay a certain premium in exchange for the assurance that the insurance company will provide the agreed-upon monthly benefit listed in the policy, should they ever become disabled. What many people do not realize is that some disability insurance policies contain language that permits the insurer to reduce the amount of monthly disability benefits it is required to pay if the policyholder receives other benefits from another source.
Worker’s compensation, supplementary disability insurance policies, state disability benefits, and social security are some of the most common “other sources” from which policyholders may unexpectedly find their disability insurance benefits subject to an offset. The frequency of offset provisions varies by policy type. They are more likely to appear in group policies and employer-sponsored ERISA policies, and are rarely found in individual disability insurance policies.
Benefit offset provisions can have significant and often unforeseen financial repercussions, as illustrated by the recent account of a couple from Fremont, Nebraska. As reported by WOWT Channel 6 News, Mike Rydel and his wife Carla were receiving monthly benefits under Mr. Rydel’s disability insurance policy with Cigna. Mr. Rydel had suffered a stroke in the fall of 2015 that had left him incapacitated and unable to work. The Rydels’ financial situation was made even more dire by Mr. Rydel’s need for 24-hour care, which prevented Mrs. Rydel from working as well.
In an effort to supplement his family’s income, Mr. Rydel applied for Social Security disability benefits. When his claim was approved, the Rydels expected a much needed boost to their monthly income. Unfortunately, due to an offset provision in Mr. Rydel’s policy, his monthly disability benefits under the Cigna policy were reduced as a result of the approved Social Security claim, and his family did not realize any increase in income.
The Rydels were understandably shocked when they were informed by Cigna that Mr. Rydel’s monthly disability insurance benefits would be reduced by the amount he was now receiving from Social Security, and that Cigna would be pocketing the difference. Perversely, the only party that benefited from Mr. Rydel’s SSDI benefits was Cigna, which was off the hook for a portion of Mr. Rydel’s monthly benefits. In response to an inquiry from WOWT, Cigna simply asserted that “coordination” of private insurance benefits and government benefits was a long-standing practice – an assurance that likely provided no solace to the Rydels.
The Rydels’ story highlights the importance of carefully reviewing every aspect of your disability insurance policy before signing. Benefit offsets, policy riders, occupational definitions, and appropriate care standards in your policy can significantly impact your ability to collect full benefits if you become disabled. You should review your disability insurance policy carefully to determine if it contains any offset provisions that may affect your benefits. If it does, you will need to take them into account when estimating your monthly benefits.
References:
http://www.wowt.com/content/news/Stroke-Victim-Suffers-Disability-Insurance-Set-Back-385758411.html
Unum Study Shows an Increase in Musculoskeletal Disability Claims Over the Past Decade
As we have discussed in previous posts, musculoskeletal disorders are very common among dentists due to the repetitive movements and awkward static positions required to perform dental procedures. Unum, one of the largest private disability insurers in the United States, recently released statistics showing an increase in the filing of musculoskeletal disability claims over the past 10 years.
According to Unum’s internal statistics, long term disability claims related to musculoskeletal issues have risen approximately 33% over the past ten years, and long term disability claims related to joint disorders have risen approximately 22%. In that same period of time, short term disability claims for musculoskeletal issues have increased by 14%, and short term disability claims for joint disorders have risen 26%.
This trend may lead to Unum directing a greater degree of attention towards musculoskeletal claims as the volume of these claims continues to increase. Musculoskeletal claims are often targeted by insurance companies for denial or termination because they are easy to undercut—primarily due to the limitations of medical testing in this area. For instance, it can be difficult to definitively link a patient’s particular subjective symptoms to specific results on an MRI, and other tests, such as EMGs, are not always reliable indicators of the symptoms that a patient is actually experiencing. Insurers also typically conduct surveillance on individuals with neck and back problems in an effort to collect footage they can use to deny or terminate the claim. While such footage is usually taken out of context, it can be very difficult to convince the insurance company (or a jury) to reverse a claim denial once the insurer has obtained photos or videos of activities that appear inconsistent with the insured’s disability.
As we have noted in a previous post, Unum no longer sells individual disability insurance policies, so its disability insurance related income is now limited to the premiums being collected on existing policies. Because benefit denials and termination are the primary ways insurers like Unum can continue to profit from a closed block of business, and musculoskeletal claims are on the rise, Unum may begin subjecting this type of claim to even higher scrutiny.
References:
http://www.businesswire.com/news/home/20160505006009/en/Aging-obesity-tip-scales-10-year-review-Unum
Dealing with the Demands of Dentistry: It’s Ok to Ask for Help
Dentistry is not an easy profession. The clinical aspects of dentistry are physically and emotionally demanding. Performing repetitive procedures and holding static postures for prolonged periods of time can leave dentists feeling mentally drained, sore and fatigued. And given the frequent exposure to patient anxiety and the need for precision when performing dental procedures, it is not uncommon for dentists themselves to develop anxiety about causing pain to patients or making a mistake when performing a procedure.
The other aspects of dentistry are no less challenging. Many dentists work long hours, which makes balancing work, family, and other responsibilities difficult. Other stressors include difficult and uncooperative patients, dissatisfied patients, finances, business problems, collecting payments, paperwork/bureaucracy, time pressure, cancellations, no-shows—the list goes on and on. And that is not even taking into consideration major stressors, such as staff issues, board complaints, audits, and malpractice lawsuits.
When presented with these difficulties, dentists can become anxious and depressed. Some even seek out mood altering drugs and/or begin to abuse alcohol, in an effort to alleviate the stress.
Thankfully, there are resources available where dentists can turn to for help. Most dental associations have a subcommittee or group designed to provide confidential help to dentists struggling with emotional, mental and/or substance abuse issues.
For example, the Arizona Dental Association (AzDA) has a group called the Dentists Concerned for Dentist Committee (DCD). The DCD is a group of fellow dentists who work with other dentists to help them with substance abuse problems, with an emphasis on “cure and return to practice.” When the DCD is contacted, everything remains strictly confidential, and the State Board is not notified. As explained by the DCD, “[t]here should be no grief or shame in seeking help.” Accordingly, DCD records are “sealed and cannot be accessed by anyone.”
If you are a dentist in Arizona struggling with substance abuse, or you know a dentist who is, consider contacting the AzDA so that a referral can be made to the DCD. You can find the contact information for the AzDA here.
If you live outside Arizona, consider contacting your local dental association to see if it has a similar program.
Remember, it’s ok to ask for help.
References:
“When Life Feels Just Too Hard,” INSCRIPTIONS, Vol. 30, No. 8 (August 2016) at p. 24.
Thinking About a Policy Buyout?
How Lump Sum Settlements Work: Part 2
In this two-part series we are addressing the two most common scenarios in which insurance companies pursue lump sum buyouts. In Part 1, we talked about buyouts for individuals who are totally and permanently disabled and have been on claim for several years. In Part 2, we will address the other scenario in which buyouts occur: after a lawsuit has been filed.
In the context of an individual disability insurance policy, a lawsuit is generally filed in one of two common scenarios: (1) a person on claim with a legitimate disability has their benefits terminated; or, (2) a person with a legitimate disability has their claim denied. A lawsuit is typically considered to be the last line of defense in the disability claims process. By the time a lawsuit has been filed, the claimant’s attorney has likely exhausted every available means to resolve the claim without legal action. Litigation is costly, time-consuming, and can drag on for years.
If an insurance company offers a lump sum buyout during litigation, it will typically be at one of three stages in the case: (1) after the Complaint and Answer are filed; (2) after all stages of pretrial litigation and discovery are complete; or (3) after the claimant/plaintiff wins at trial.
The first stage of any lawsuit is the filing of the Complaint. This is a document the plaintiff files with the court outlining all of the claims and allegations against the defendant. After receiving a copy of the Complaint, the defendant then has a specified period of time in which to file an Answer responding to the plaintiff’s allegations.
Prior to the filing of a lawsuit, a contested claim has likely been reviewed only by the insurance company’s in-house attorneys. However, once litigation begins, the insurance company will retain a law firm experienced in insurance litigation to handle the case. After the filing of the Complaint, the insurance company’s outside counsel will have the opportunity to evaluate the strength of the case and the claim. Viewing the case through the prism of their experience, the insurer’s litigation team may recommend offering a buyout to avoid the risk, costs, and time associated with the lawsuit.
The second point of a lawsuit at which a buyout may occur is after all stages of pretrial litigation are complete. Once the parties have had the opportunity to conduct discovery and litigate any pretrial motions, they will have a full picture of the case and their prospects at trial. Through discovery both sides will be able to obtain all documents and interview all witnesses the other side intends to use at trial. Through the filing of pretrial motions the parties can attempt to prevent or limit the use of certain evidence or witnesses at trial.
At this juncture, the insurance company may seek to avoid the risks of trial and settle the claim before the first juror is ever impaneled. The disability insurance company’s incentive to resolve the case at this point – even after both sides have invested substantial resources in the litigation – is the financial exposure and bad publicity it faces with a loss at trial. Additionally, a bad result at trial for the insurance company could create undesirable legal precedent for future cases.
If a jury (or a judge, depending on the case) determines that the insurance company has unlawfully denied or terminated a legitimate disability claim, the insurer will not only be required to pay the disability benefits the claimant/plaintiff is entitled to, but may also be liable for damages and other costs. The disability insurer may be required to pay back benefits, plaintiff’s attorneys’ fees and costs, consequential damages, and punitive damages.
In the context of a disability insurance lawsuit, consequential damages come in the form of any financial harm to the claimant/plaintiff resulting from the insurer’s denial or termination of benefits. For example, if the insurer’s termination of benefits led to the claimant/plaintiff losing their house in foreclosure, the insurer could be liable for consequential damages. Punitive damages are designed to deter the insurer from denying legitimate disability claims in the future, and can be multiplied several times over if the insurer is found to have acted in bad faith. Additionally, some states allow acceleration of benefits – in which the courts can order the insurer to immediately pay future benefits that would owed to the claimant/plaintiff over the full life of the policy.
The final stage at which a lump sum buyout may be offered is after a victory at trial by the claimant/plaintiff. You may be wondering why anybody would entertain a settlement offer right after a being awarded back benefits, damages, and costs at trial – why accept anything less? The answer is simple: appeals. The insurance company can tie up a trial court victory in the court of appeals for years, which they can use as leverage to offer a settlement smaller than the trial award.
Though these three stages of litigation are the most common points at which a buyout may occur, buyouts themselves are uncommon during litigation. Depending on the situation, the specter of a long, drawn out legal battle can either provide the insurance company with the incentive to settle the lawsuit early with a buyout or harden its resolve to fight the claim to the bitter end. You cannot count on simply filing a lawsuit and expecting the insurance company to be eager to settle. Some insurance companies want to settle early and avoid the financial risks and bad publicity of a defeat at trial, while others take a hard line and use their nearly limitless resources to fight a war of attrition. Ultimately, whether or not a disability insurer offers a lump sum buyout in the midst of litigation depends largely on the individual facts of the case, the risks at trial, and the parties and attorneys involved.
Thinking About A Policy Buyout?
How Lump Sum Settlements Work: Part 1
Lump sum buyouts are a frequent source of questions from our clients and potential clients. With that in mind, the next few posts will address different aspects of the buyout process.
Buyouts typically occur in one of two situations: 1) after you’ve been on claim for several years, or 2) after a lawsuit has been filed. This blog post will focus on the first scenario.
Lump sum buyouts that occur outside of litigation normally won’t occur unless and until the insurance company decides that you are totally and permanently disabled under the policy definition. Typically, the disability insurer won’t consider whether this is the case until you’ve been on claim for at least two years. If the insurer determines that you’re totally and permanently disabled, it will then determine whether it makes sense financially for the company to offer you a percentage of your total future benefits rather than keep paying your monthly benefits for the entire duration of your claim.
To understand how the insurance company calculates whether a buyout is in its financial interest, you should understand how insurance company reserves work. The purpose of reserves is to ensure that the insurance company has the resources to fulfill its obligations to policyholders even if the company has financial difficulties. Thus, disability insurers are required by state regulators to keep a certain amount of money set aside, or “reserved,” to pay future claims. Any money required to be kept in a reserve is money that the insurer can’t spend on other things or pay out in dividends. The amounts required to be kept in the reserve are determined by the state, depending on factors like how much the monthly benefit is and how long the claim is expected to last.
For a disability insurance claim, a graph of the required reserve amount over time looks like a Bell curve: low at the beginning, highest in the middle, and low again towards the end of the benefit period. The ideal time for a settlement, from an insurance company’s perspective, is at or just before the high middle point–typically about five to seven years into the claim, depending on the claimant’s age and the duration of the benefit period. At this point, the company is having to set aside the highest amount of money in the reserve.
If the insurance company can pay you a percentage of your total future benefits, it can not only save money in the long run, but it can release the money in the reserve. The disability insurer can then use those funds for other purposes, including providing dividends for its investors. In addition, the insurance company will save all of the administrative expenses it was putting towards monitoring your disability claim.
In the next post, we’ll address how and why buyouts occur after a lawsuit has been filed.
Should Women Pay More for Disability Insurance? Part 2
In a previous post, we discussed how a woman with the same age, job and health history as a man can end up paying an average of 25% (and in some cases, 60%) more for the same level of disability insurance protection. We also discussed how some insurance companies raise premiums based on conditions unique to one’s sex, such as pregnancy.
When we first addressed this issue, the Massachusetts legislature was considering a bill that prohibited insurers from charging higher rates to women than to men. At the time, Massachusetts law prohibited insurance companies from using race and religion as rating factors when determining the cost of insurance, but there was no law against using gender as a rating factor.
Recently, the Massachusetts Senate voted to approve a budget amendment adding gender to other rating factors that insurance companies are not allowed to consider when determining the cost of premiums. The bill passed by a wide margin: 32 senators in favor of the amendment, and only 6 senators voting against the amendment.
It will be interesting to see if, in the future, other states follow suit and start to pass laws requiring insurance companies to give men and women the same premium rates for the same level of disability coverage.
References:
http://www.masslive.com/politics/index.ssf/2016/05/senate_votes_to_exclude_gender.html
Long Term Disability by Diagnosis
In previous posts, we have been looking at the findings from the most recent study on long term disability claims conducted by the Council for Disability Awareness. In this post we will be looking at the types of diagnoses associated with long term disability claims, and which types of claims are most common.
As you can see from the chart above, the most common type of both new and existing long term disability is musculoskeletal disorders—a category which includes neck and back pain caused by degenerative disc disease and similar spine and joint disorders.
This is particularly noteworthy because physicians and dentists, who often have to maintain uncomfortable static postures for several hours each day, are very susceptible to musculoskeletal disorders. In addition, claims involving musculoskeletal disorders can be challenging, because oftentimes there is little objective evidence to verify the pain. If you suffer from degenerative disc disease or a similar disorder, an experienced disability insurance attorney can explain how to properly document your disability claim to the insurance company.
References:
http://www.disabilitycanhappen.org/research/CDA_LTD_Claims_Survey_2014.asp
Case Study: Factual Disability v. Legal Disability – Part 3
In the last post, we discussed the facts of the court case Massachusetts Mutual Life Insurance Company v. Jefferson[1]. In that case, the court was asked to determine whether a clinical psychologist whose license had been suspended was entitled to disability benefits. In this post, we will discuss how the court ultimately ruled, and go over some takeaways from this case.
The Court’s Ruling
As explained in the last post, the key question was whether Dr. Jefferson’s legal disability (i.e. the suspension of his license to practice psychology) happened before the onset of Dr. Jefferson’s factual disability (i.e. his depression). In the end, the court determined that Dr. Jefferson was not entitled to disability benefits for the following reasons:
- Dr. Jefferson’s claim form stated that he was not disabled until April 29, 1990, which was two days after the licensing board revoked his license.
- Although Dr. Jefferson later claimed that his depression went as far back as May 1989, the court determined that such claims were inconsistent with:
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- Jefferson’s representations to the licensing board that he was a “highly qualified and competent psychologist”;
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- The fact that Dr. Jefferson had been consistently seeing patients up until the day his license was revoked; and
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- The fact that Dr. Jefferson had scheduled patients during the month following the licensing board’s hearing.
Thus, under the circumstances, the evidence showed that Dr. Jefferson’s was not entitled to benefits because his legal disability preceded his factual disability.
Takeaways
Dr. Jefferson’s case provides a good example of the challenges that can arise in a disability claim if the claimant has lost his or her license. Here are some of the major takeaways from this case:
Be Precise When Filling Out Claim Forms. The date you list as the starting date of your disability can be very significant. Take your time when filling out claim forms, and make sure that the date you provide is accurate and consistent with the other information you are submitting with your claim forms. It is always a good idea to double check everything on the form at least once after you have completed it, to make sure that you did not make a mistake.
Recognize that Your Claim Will Not Be Evaluated in a Vacuum. Other proceedings—such as board hearings—can directly impact your disability claim. You should always assume that anything you say in such a proceeding will at some point end up in front of the insurance company. This is particularly problematic when, as in Dr. Jefferson’s case, the goals of the other proceeding are inconstant with the goals of the disability claim. In such a situation, you may have to decide which goal is more important to you. An experienced disability insurance attorney can help you assess the strengths and weaknesses of each available option so that you can make an informed decision.
Do NOT Engage in Activities that Place Your License in Jeopardy. Losing a license that you worked hard for several years to obtain is not only emotionally devastating, it can severely limit your options going forward. Even if you have a disability policy, it is very difficult to successfully collect on a disability claim if your license has been revoked or suspended. Once again, if you find yourself in Dr. Jefferson’s position, you should talk with an experienced attorney who can help you determine what your available options are, if any.
[1] 104 S.W.3d 13, 18 (Tenn. Ct. App. 2002).
Case Study: Factual Disability v. Legal Disability – Part 2
In the last post, we discussed the distinction between “factual” and “legal” disability and why that distinction matters. In this post, we will begin looking at a court case involving “factual” and “legal” disability. Specifically, in this post we will begin looking at the facts of the case and the test that the court applied. In Part 3, we will see how the court ultimately ruled.
The Facts
In the case of Massachusetts Mutual Life Insurance Company v. Jefferson[1], the court assessed whether Dr. Jefferson—a clinical psychologist—was entitled to disability benefits. Here are the key facts of the case:
- From October 1987 to February 1989, Dr. Jefferson had an affair with a former patient.
- When Dr. Jefferson’s wife found out about the affair, she filed a complaint with Dr. Jefferson’s licensing board.
- During the hearings in front of the licensing board, Dr. Jefferson argued that he was a competent psychologist, and that he should be permitted to continue to see patients.
- On April 27, 1990, the licensing board permanently revoked Dr. Jefferson’s license to practice psychology, effective as of May 15, 1990. On appeal, a chancery court reduced the permanent revocation to an eight year suspension ending on May 15, 1998.
- Up until the day his license was revoked, Dr. Jefferson continued to see patients and schedule future patients.
- On October 1, 1990, Dr. Jefferson filed a claim under his disability policy, claiming that he was disabled due to “major depression.”
- On his claim form, Dr. Jefferson listed the beginning date of his disability as April 29, 1990. Later on, Dr. Jefferson attempted to submit evidence that he had been depressed as early as May 1989.
The Court’s Test
As a threshold matter, the Court determined that the suspension of Dr. Jefferson’s license was a “legal disability” and assumed for the sake of argument that Dr. Jefferson’s “major depression” was a “factual disability.” As explained in Part 1 of this post, courts generally hold that disability policies only cover factual disabilities, not legal disabilities. However, the court’s decision becomes more difficult when a claimant like Dr. Jefferson has both a legal disability and a factual disability.
Although different courts approach this situation in different ways, here is the test that the court came up with in Dr. Jefferson’s case:
- Step 1: Determine which disability occurred first.
- Step 2: Apply the following rules:
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- Rule # 1: If the legal disability occurred first, the claimant is not entitled to benefits.
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- Rule # 2: If the factual disability occurred first, the claimant is entitled to benefits, if the claimant can prove the following three things:
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- The factual disability has medical support.
- The onset of the factual disability occurred before the legal disability.
- The factual disability actually prevented or hindered the claimant from engaging in his or her profession or occupation.
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In the next post, we will discuss how the court decided this case. In the meantime, now that you have the key facts and the court’s test, see if you can guess how the court ultimately ruled.
[1] 104 S.W.3d 13, 18 (Tenn. Ct. App. 2002).
Case Study: Factual Disability v. Legal Disability – Part 1
In the next few posts we will be looking at the distinction between “factual” and “legal” disability. In Part 1, we will discuss the difference between a factual and a legal disability, and why that distinction matters. In Parts 2 and 3, we will look at an actual court case involving “factual” and “legal” disability.
What is “Factual Disability”?
Factual disability refers to incapacity caused by illness or injury that prevents a person from being physically or mentally able to engage in his or her occupation. This is the type of disability that most people think of in connection with a disability claim.
What is “Legal Disability”?
Legal disability is a broad term used to encompass all circumstances in which the law does not permit a person to engage in his or her profession, even though he or she may be physically and mentally able to do so. Here are some examples:
- Incarceration;
- Revocation or suspension of a professional license;
- Surrendering a professional license as part of a plea agreement or to avoid disciplinary action; and
- Practice restrictions imposed by a licensing board.
Why the Distinction Matters
In sum, someone with a “factual disability” is mentally or physically unable to engage in their profession. In contrast, someone with a “legal disability” is not allowed to engage in their profession. Courts have repeatedly held that disability insurance policies provide coverage for factual disabilities, but not for legal disabilities.
If a claimant has both a factual and legal disability, things become more complicated. In the next few posts, we will look at an example of how one court determined whether someone with both a factual and legal disability was entitled to benefits.
Online Underwriting – Tips to Avoid Potential Pitfalls
Recently, several disability insurers have started to introduce new online applications in an effort to make purchasing disability insurance more convenient. Some of them even offer automated underwriting and instant approval of your application. In connection with the online applications, insurers are also providing more flexible options regarding benefit amounts and benefit periods.
While online applications will likely make purchasing disability insurance more convenient, here are some tips to keep in mind and some pitfalls to avoid.
- Don’t neglect to shop around. While it will certainly take less time to just apply to the first website you come across, you should always look at what multiple companies are offering before you apply for disability benefits. While it may not seem like it at the time, the decision to purchase disability insurance may be one of the most important decisions in your life if you end up becoming disabled. So make sure to take the time to research what your options are, so that you can be sure to get the best disability insurance policy you are able to.
- Do the research. If you are merely interacting with a computer screen, you will not be able to ask questions about particular policy provisions. Consequently, you should take the time to do outside research so that you know exactly what to look for and what to avoid in a disability insurance policy.
- Don’t sacrifice important provisions for convenience or affordability. There are certain provisions that every doctor and dentist should have in their policy, such as an own occupation provision. If the online policy does not offer the provisions you need, don’t settle for the sake of convenience or affordability. Remember, if you end up becoming disabled, you will not just want any disability policy—you will want the best disability policy.
- Take your time when you are filling out your application. Most disability insurance policies contain language that allows the insurer to void the policy if you make material misstatements in your application. Many people tend to rush through online applications, particularly if their priority is convenience. Make sure that you double check your answers before you submit the application, to ensure that everything you are submitting is accurate.
- Periodically reevaluate your coverage. If your initial goal is affordability, make sure that you periodically reevaluate your coverage to ensure that it is still sufficient for your needs. Many people initially apply for low benefit policies and neglect to increase their benefits amounts later on when they can afford to pay higher premiums. Consequently, if they become disabled, their benefit amount ends up covering only a small fraction of their prior income.
These tips are particularly important for physicians and dentists to remember when applying for disability insurance, because insurance companies are particularly aggressive towards disability claims filed by doctors and dentists. Additionally, many doctors and dentists are accustomed to a high level of income. Physicians and dentists who do not purchase enough disability coverage and later become disabled can find themselves unable to meet their obligations and care for their family, even if their disability claim is approved. Additionally, as we have discussed in previous posts, in some cases, a single word in a disability insurance policy can determine whether you receive benefits.
So remember, purchasing disability insurance is not something that should be taken lightly. Take your time, and get the best policy you can.
What is a Pain Journal and Why Are They Important?
In previous posts, we have discussed the importance of properly documenting your disability. In this post we are going to discuss one way you can document your disability—pain journals.
A pain journal is exactly what is sounds like—a journal in which you document your pain levels and symptoms each day. Creating this sort of record will not only provide you with documentation when filing your disability claim, but will also allow you to effectively communicate with your treatment providers regarding your symptoms, so that they can provide you with appropriate care. Oftentimes, depending on your disability, you will go several days or weeks without speaking to your treatment providers. A pain journal can help you easily recall and communicate to your treatment provider everything that has happened since you last met with them.
Tips for Creating a Pain Journal
When creating a pain journal, you want to be as specific as possible so that your record is complete. You also want to make sure that you describe your plain clearly, so that you will be able to understand what you meant when you refer back to your journal.
Here are a few things you might consider documenting in your journal:
- The location of the pain.
- The level of the pain (if you use a numeric scale, be sure to also describe the scale).
- The duration of the pain.
- Any triggers to the pain.
- Any medications you are taking.
- Whether the medications you are taking are effective or have any adverse side effects.
- Any other symptoms in addition to the pain.
When filling out your pain journal, you may have a hard time coming up with a description that fits the type of pain you are experiencing, since all pain is not the same. However, you should avoid the temptation to document your pain in a generic way. The type of pain you are experiencing is just as important as your pain levels, and it is something that your disability insurer will likely ask you to describe.
To that end, here is a list of adjectives that are commonly used to describe pain:
Cutting; Burning; Cramps; Knots; Deep; Pulsing; Sharp; Shooting; Tender; Tight; Surface; Throbbing; Acute; Agonizing; Chronic; Dull; Gnawing; Inflamed; Raw; Severe; Stabbing; Stiff; Stinging
Sample Pain Journals:
American Pain Foundation Form:
American Cancer Society Form:
Peace Health Medical Group Form:
The Four Functions of Insurance
In this post, we are going to discuss the four functions of an insurance company.
Introduction – The Promise
Insurance is not like any other business. Rather than selling a tangible product that you receive immediately upon paying for it, insurance companies are selling an important promise—a promise of protection, security and peace of mind if something goes wrong.
When you buy a car, you give someone money and you take a car home. When you buy groceries, you pay money and get your groceries. Insurance is different. With insurance, you give them money and trust, and hope and pray that you never have to collect.
The Four Functions of Insurance
The activities of an insurance company can be divided into four major functions:
1. Actuarial
The actuarial department is concerned with what kind of promise the company is going to sell and how much the promise should cost. Essentially, the actuaries’ role is to analyze the financial consequences of risk and price the company’s product in a way that will allow the company to make a profit. For example, an actuary working for a car insurance company might calculate the risk that potential customers will be in a car accident, and then adjust premium amounts to account for that risk so that the insurer can pay accident claims and still make money.
2. Marketing
The marketing department is concerned with how to get people to buy the promise being sold. They design ads and employ sales people. Basically, this department’s goal is to get people interested in buying the promise.
3. Underwriting
The underwriting department determines who the company should sell the promise to. Underwriters review applications and assess whether the company should allow applicants to purchase the promise. For example, the underwriting department of a life insurance company might review health questionnaires submitted by applicants to assess whether the level of risk is low enough to provide life insurance to the applicant.
4. Claims
The claims department’s role is to process and pay legitimate claims. While the first three departments are very much concerned about profitability, the claims department is not supposed to consider company profitability when adjusting a claim. If the actuaries made a mistake and sold a product that is costing the company too much money, the product was not marketed correctly, or if underwriting was too lax, the company is supposed to pay legitimate claims and bear the loss.
Conclusion
As we have discussed in previous posts, an insurance company has a legal obligation to treat its customers fairly and deal with its customers in good faith. Ideally, the disability insurance claim process should be simple. You should inform the company that you meet the standards of the contract, provide certification from a doctor of that fact, and collect your disability benefits. It is not supposed to be an adversarial process.
Unfortunately, in instances where one or all of the first three departments mess up, some insurance companies improperly shift the burden of making a profit onto the claims department. This, in turn, transforms the claims process into an adversarial process.
If you have an experienced disability attorney involved from the outset of your disability claim, your attorney can monitor the insurance company to make sure that they are complying with their legal obligations. If you have already filed a disability claim, but believe that your insurer is not properly processing your claim, an experienced attorney can review the insurer’s conduct and determine whether the disability insurer is acting in bad faith.
Deciphering Mental Disorders and Substance Abuse Policy Exclusions – Part 2
In Part 1, we looked at how disability insurance companies broadly define mental disorders and substance abuse. In this post, we will be looking at a sample mental disorder and substance abuse limitation provision.
What Does a Mental Disorder and Substance Abuse Limitation Look Like?
Here is a sample limitation provision from an actual disability policy (this provision is taken from the same policy containing the definition of “mental disorders and/or substance abuse disorders” discussed in Part 1):
maximum indemnity period means the maximum length of time for which benefits are to be paid during any period of total disability (see the Policy Schedule on Page 1). Benefits will not be paid beyond the policy anniversary that falls on or most nearly after your sixty-seventh birthday, or for 24 months, if longer, except as provided by this policy. In addition to any limitations described above, the maximum indemnity period for a disability due to a mental disorder and/or substance abuse disorder is also subject to the following limitations: (a) The lifetime maximum indemnity period is 24 months; (b) the 24-month limitation also applies to all supplementary benefits payable by virtue of your disability due to a mental disorder and/or substance abuse disorder; (c) any month in which benefits are paid for a mental disorder and/or substance abuse disorder (regardless of whether paid under the base policy any supplementary benefits or both) shall count toward the 24-month limitation; (d) this limitation applies to this policy and all supplementary benefits under this policy.
Note that this provision is not entitled “mental disorder limitation” or “substance abuse limitation.” Instead, it is entitled “maximum indemnity period.” In fact, this provision is actually part of the policy’s definition section, and not the main part of the policy—highlighting the importance of carefully reviewing the definitions in your disability insurance policy.
Note also that this particular provision provides that any month in which disability benefits are paid counts against the 24 month limit. So, for example, if you received disability benefits for a period of 12 months in connection with a substance abuse related disability, and subsequently returned to work, the next time you needed to file a claim related to a mental disorder or substance abuse, you could only receive a maximum of 12 months of disability benefits.
Conclusion
When purchasing a disability policy, watch out for mental disorder and substance abuse exclusions and limitations. Always be sure to ready your policy carefully so that you understand the scope of the protection you are purchasing. If you already have a disability policy, an experienced disability insurance attorney can review your policy and determine whether it contains any mental disorder or substance abuse limitations that might limit your ability to collect disability benefits under your policy.
Deciphering Mental Disorders and Substance Abuse Exclusions – Part 1
In previous posts, we have discussed how many disability policies contain mental disorder and/or substance abuse exclusions that either prevent claimants from collecting disability benefits under their policies, or severely limit claimants’ right to collect—usually to 24 months or less.
Sometimes, it can be hard to tell if your disability insurance policy contains such an exclusion. Policy language can be difficult to decipher, and it becomes even more difficult in cases where the terms of the exclusion are contained within multiple provisions of the disability policy.
In the next few posts, we are going to discuss mental disorder and substance abuse exclusions. In Part 1, we will look at an example of how insurance companies define mental disorders and substance abuse. In Part 2, we will look at an example of a mental disorder and substance abuse limitation provision.
How Do Insurance Company’s Define Mental Disorders and Substance Abuse?
Each policy’s definition varies, depending on the insurance company. Here is a sample definition taken from an actual insurance policy:
mental disorders and/or substance abuse disorders mean any of the disorders classified in the most current edition of the Diagnostic and Statistical Manual of Mental Disorders published by the American Psychiatric Association (APA). Such disorders include, but are not limited to, psychotic, emotional, or behavioral disorders, or disorders relatable to stress or to substance abuse or dependency. If the Manual is discontinued, we will use the replacement chosen by the APA, or by an organization which succeeds it.
As you can see, this definition is quite broad and could potentially encompass quite a few disabling conditions. Since the policy provision does not actually list out specific disorders, at best you would need to consult the APA manual, in addition to your disability policy, to find out what this provision actually means. And if your particular disorder does not fit neatly within the APA’s framework, you will likely have to go to court to determine whether your disorder falls within the policy’s definition of mental disorders and/or substance abuse disorders.
Also, because the definition is based upon the “most current edition” of the Diagnostic and Statistical Manual of Mental Disorders published by the APA, the types of disorders covered by the limitation will change each time the APA publishes a new manual.
These are just a few of the reasons why disability claims involving mental disorders and substance abuse disorders can be particularly tricky. In the next post, we will look at an example of what a mental disorder/substance abuse disorder limitation provision looks like.
MetLife to Exit Individual Disability Insurance Market
MetLife, Inc. the fourth largest provider of long-term disability insurance by market share[1], is suspending sales of its individual disability insurance policies. In an internal memorandum to producers, MetLife Client Solutions Senior Vice President Kieran Mullins announced that the company would be suspending the individual disability insurance block of business effective September 1, 2016. In the memo, Mr. Mullins cites the goal of creating a new U.S. Retail organization for its insurance products and the “difficult, but strategic” decisions that led to the shutdown of their individual disability insurance product:
This was not an easy decision to make, given the growth and strength of our IDI business. However, we believe it is the best course of action for the immediate future. While there is tremendous opportunity in this market, the suspension provides us with the time and resources needed to properly separate the U.S. Retail business from MetLife. There is a significant amount of work to be done to retool existing systems – and implement new systems – that will ultimately provide the most value to our customers and sales partners in the years to come.
Insurance news websites are already speculating that the shutdown could put pressure on the remaining thirty-one companies selling individual disability insurance to raise premiums. Because MetLife controls such a substantial share of the individual disability insurance market, their departure effectively reduces the size of the pool in which the risk can be spread. Cyril Tuohy, writing for Insurancenewsnet.com, points to the move as an opportunity for the remaining companies in the market to innovate and attract the business MetLife will be leaving behind. The company’s departure will favor the insurers whose individual disability policies cater to physicians, dentists, and other high-income professionals, such as Guardian, Principal, The Standard, Ameritas and Northwestern Mutual.[2]
In an accompanying FAQ, MetLife assured producers that existing policies would not be affected by the change, and that they would continue to support policy increases by the terms of the Guaranteed Insurability Option, Automatic Increase Benefit, and Life Event riders. The memo also noted that MetLife would continue sales of its group, voluntary, and worksite disability products.
It is important to remember that even though MetLife must continue to service its existing policies, shutting down sales of new policies can still affect current policyholders. Absent the need to sell new policies, an insurer may have less incentive to provide customer service or avoid a complaint from the state insurance board. Additionally, once a block of business closes, the easiest way to maintain profitability of that product is through claims management. In real terms that is typically accomplished through claims denial and benefits termination. We discussed these very tactics in a 2012 blog post about Unum’s management of its closed block of individual disability insurance products.
If you have a MetLife individual disability insurance policy, pay close attention as the business focus shifts away from selling new policies and toward the management of existing policies. If you have a question or concern regarding your MetLife policy, contact our office.
[1]http://www.statista.com/statistics/216499/leading-long-term-disability-insurance-carriers-in-the-us/
[2]“Will MetLife’s Suspension Send DI Prices Soaring?” Cyril Tuohy, insurancenewsnet.com. http://insurancenewsnet.com/innarticle/agents-split-di-pricing-wake-metlife-suspension
Study Shows Increase in Long Term Disability Claim Denials
The most recent study conducted by the Council for Disability Awareness shows that long term disability claim approvals have declined in recent years:
In addition, 50% of the companies surveyed reported increased claim termination rates.
The companies surveyed included:
- Aetna
- AIG Benefit Solutions
- American Fidelity
- Ameritas
- Assurant Employee Benefits
- Disability RMS
- Guardian
- The Hartford
- Illinois Mutual
- Lincoln Financial Group
- MassMutual Financial Group
- MetLife
- Ohio National
- Principal Financial
- Prudential
- The Standard
- Sun Life Financial
- UnitedHealthcare
- Unum
References:
http://www.disabilitycanhappen.org/research/CDA_LTD_Claims_Survey_2014.asp
