Keep that insurer from blocking your disability claim

Doctors who bought coverage a few decades ago, when insurers made extravagant promises, may find obstacles when they try to collect. Protect yourself against these stalling tactics.

By Doreen Mangan

Several months after 50-year-old anesthesiologist Sidney A. Smith suffered a severe hand injury in October 1996, it became obvious, he says, that he could no longer place arterial lines, perform lumbar punctures, or handle other duties of his specialty.

Surgery to repair severed tendons in the right index and middle fingers was only partially successful, the Texas City, TX, doctor notes, and he's never recovered full function of his fine motor skills. He's unable to completely straighten the fingers or make a fist. His diagnosis is reflex sympathetic dystrophy.

After the injury, bills, including a $5,000 monthly mortgage payment, began piling up. Luckily, Smith figured, he'd be covered by two disability policies purchased in the 1980s. He filed claims on both.

The doctor expected to fill out forms, talk to claims people, and receive his benefits. He didn't expect a battle. In fact, Smith has been receiving $5,000 a month since March 1997 through one policy, purchased through his state medical association. The other insurer, Provident Life, began paying a monthly benefit of $9,850 in May 1997.

Five months later, however, the physician discovered he was under surveillance during his daily three-mile walk. After a Provident-ordered functional capacity test in December 1997 and an independent medical exam in June 1998, Provident cut off his benefits, saying he'd failed "to meet the criteria needed to qualify."

Smith sued Provident for breach of contract, fraud, and bad faith. In May 2000, almost four years after his injury, Provident settled with Smith for $750,000.

Damage control: Clamping down on claims

There's little doubt that disability insurers have gotten tougher on claims in recent years. One reason is that, in their haste to compete for premium dollars during the 1980s, many carriers offered policies rich with extras—they couldn't be canceled, premiums would never increase, and own-occupation clauses would pay fixed benefits not linked to loss of income. If a surgeon, for example, could no longer operate, he might collect benefits no matter what he might continue to earn in medicine or elsewhere.

Underwriting was lax. "A lot of people got a lot more coverage than they should have or were qualified for," says Frank N. Darras, a Claremont, CA, attorney who represents plaintiffs in disability suits.

Those policies were actuarial time bombs that exploded in the '90s, when claims from physicians—who'd bought a lot of the insurance—suddenly soared. Insurers suspected that doctors, demoralized by managed care and possibly earning less, were no longer as motivated to work through illnesses and disabilities. Many companies found themselves in financial trouble. In 1993, for instance, Provident (UnumProvident since a merger in 1999) took an earnings hit when it had to set aside an additional $423 million to cover anticipated disability claims.

So insurers started looking more closely at claims, using questionable strategies, some observers charge. A former high-level executive with Provident said in deposition that the company was looking for ways to "disprove the credibility of . . . claimants" and deny benefits. A memo to Provident CEO J. Harold Chandler from one of his executives estimated savings of $30 million to $60 million annually as a result of "claim improvement initiatives."

In time, the company's stock soared. But lengthy delays in benefit payment, denials of new claims, and terminations of established claims sent some policyholders to their lawyers, who accused the company of breach of contract and bad faith.

UnumProvident isn't alone in its legal troubles. Currently, there are "hundreds and hundreds" of individual suits against disability insurers, says Darras. Some class-action suits have also been filed.

In fact, the proliferation of legal actions against disability insurers has spawned something of a cottage industry of attorneys specializing in this field. Mealey's, the legal publisher, launched a twice-monthly publication devoted to the topic in June 2000. And since 1999, American Conference Institute, in New York City, has held annual conferences on litigating disability claims. They attract virtually sold-out crowds of both plaintiffs' and defense attorneys.

General American Life Insurance was hit with the largest decision to date—a $58 million punitive-damages award, reduced to $18 million, which went to Ronald Diamond, a Phoenix dentist, in 1998. Diamond, who suffers from carpal tunnel syndrome, sued the insurer when, in 1991, it stopped the benefits it had been paying him since late 1988. The company claimed, incorrectly, that his benefits had expired.

Pretrial discovery uncovered documents indicating that General American had put together a "hit list" of 58 high-benefit claimants, including physicians, who were subjected to hardball tactics designed to end their benefits. Those included threatening or berating them, sending them for multiple independent medical exams, increasing paperwork requirements, and offering buyouts for a fraction of a policy's value. Nearly half of those on the list lost their benefits within about 18 months, says Diamond's attorney, Charles J. Surrano III of Phoenix. The company lauded its director of claims in performance reviews for "aggressive claims handling" that "saved literally millions of dollars."

Are insurers fighting fraud, or denying claims unfairly?

What happened to Sidney Smith and Ronald Diamond wasn't unusual, says Art Fries, a disability claims consultant in Newport Beach, CA. After paying benefits for a while, a company may ask the claimant to submit to an independent medical exam and, soon afterward, stop payment, saying the person is no longer disabled. "This is a strategy to see if the claimant will meekly accept the conclusion and go away, or complain, or hire an attorney," Fries notes. "Many times it becomes a game to see who can move the most paper and whether the claimant can be worn down."

Insurers say, however, that they pay most claims without a problem. "We sell a promise to pay; we are here to pay claims," comments Todd Gish, a disability executive with Massachusetts Mutual Life.

UnumProvident strives to resolve claims "in a timely fashion," says Vice President Jeff McCall. Christopher Collins, another UnumProvident executive, notes that the company pays $3 billion annually in disability claims. Of that, $700 million a year goes to physicians. Currently UnumProvident has about 12,000 open physician claims and about 250,000 policies on doctors, says Collins. The insurer says Sidney Smith's case is an exception. "The number of cases that end up in litigation is a micropercentage of claims that are paid," notes Mark Davenport, a Dallas attorney who represents UnumProvident and many other insurers in claims litigation.

Whether insurers are just aggressively protecting themselves against fraud or are unfairly denying claims is debatable. But either way, for policyholders, the result is the same: If you become disabled, your right to receive benefits may be challenged. You might, for example, find yourself charged with making a claim not because you're truly disabled but because you're tired of long hours, stress, or managed care.

In fact, Robert Coddington, a physician who reviews claims for UnumProvident on a consulting basis, had raised the question of whether there was a managed care issue in Smith's case, because the doctor had resigned from his anesthesia position about a month before he injured his hand. "There are a lot of crazy things going on in medicine these days with hospitals opening and closing, managed care organizations starting, stopping, going bankrupt," Coddington said in a deposition for Smith's lawsuit.

So what's a doctor to do?

"When you file a claim, the burden is on you to prove your disability," says Bonny Rafel, a Florham Park, NJ, attorney. The key to making a claim stick is submitting the right medical, occupational, and financial information in a timely manner.

State regulations spell out time limits for approvals, denials, and paying benefits, and for levels of proof required. By the end of your policy's waiting period, typically 90 days, the insurer is required, based on the proof you've supplied, to start paying benefits immediately. Don't count on that happening, though. "I've seen claimants haggling for six months or longer before their checks start coming," Surrano says.

Delays aren't always the company's fault. "We often experience long waits for statements and medical records from attending physicians," says Ray Kowalczyk, a senior claims official at Union Central Life Insurance.

But even if your physicians send in all the paperwork promptly, you might experience roadblocks such as the ones that follow. Here's a game plan to help you get around them and collect what you're entitled to.

Two ways an insurer may disqualify your claim

Your disability policy contains more than one potential escape hatch for your insurer. For instance, when you file a claim, you may find yourself facing:

The dual-occupation charge. An insurer may try to nullify your own-occupation clause by claiming that when your disability began, you were doing something different or had two occupations. For example, if you were handling administrative aspects of your practice, the insurer might say that treating patients wasn't your only occupation.

That's what happened several years ago, when a New York dentist developed a progressive skeletal illness and was no longer able to treat patients. He filed a disability claim with Berkshire Life, which refused to pay full benefits because the dentist could still do administrative work. The dentist sued, and trial and appeal courts agreed that Berkshire was guilty of breach of contract, saying that in New York a claimant is totally disabled when he is no longer able to perform his job's "material" and "substantial" responsibilities. The dentist had spent most of his time treating patients. His gross revenues hadn't suffered severely, since he'd hired another dentist to take his place, but the court noted that disability policies in New York protect against "loss of capacity to work, not against loss of income."

How to protect yourself: Don't limit yourself to the claim form's small spaces, which imply that short answers such as "physician" or "back injury" will suffice. "Such answers become the sword of the carrier in defining your occupation and disability," says Rafel. She advises appending complete answers to the form, to demonstrate the seriousness of your case.

Include details of how you spent your average workday before the disability, then list what duties of your occupation the disability prevents you from performing. State how many hours a week you normally worked, and how the disability affects that. Advises Rafel: "Share this information, in writing, with your physician so that he's prepared to respond to the insurer's queries. Inform the insurance company that your staff runs your office. Describe the staff. Avoid the typical doctor's mistake of saying you 'run the practice.' Otherwise, the company may decide you have a dual occupation and don't qualify for benefits because you can still do administrative work at your practice. Remember, you got the insurance to protect your ability to perform medical procedures, not schedule patients, tally bills, or handle office politics."

Says Darras, "If you think you might be heading for a disability claim, give up your medical directorship well before you file. Or if you're shedding duties because of impairment, be careful you don't fall into the role of office administrator or business owner."

The pre-existing-condition charge. Typically, policies exclude coverage for a pre-existing condition if an incident related to that condition occurs within two years of the date you bought the policy. So expect the insurer to look for symptoms of your current condition that may have surfaced before the policy began. "If your injury or illness bears the slightest resemblance to, or shares even one symptom with, a condition you had before your policy began, the insurer may insist that your claim resulted from a pre-existing condition," says Darras.

How to protect yourself: Make sure the doctors treating you give detailed descriptions of your disability, treatments, and test results, and how the condition restricts your work. They should be clear about when the condition began.

Another favorite approach: Second-guessing your doctor

Policies specify that insurers may ask claimants to be examined by doctors the companies select. That's because many disabilities are short term, and the independent medical exam (IME) "can be an appropriate means of determining whether a disability persists," says UnumProvident's Christopher Collins. The problem, critics say, is that insurers sometimes send you to doctor after doctor until one agrees that you're no longer disabled.

"When there is strong objective evidence that a condition exists, multiple IMEs don't occur," responds Howard Rosen, a Union Central executive. "But we're getting more and more subjective or self-reported claims, especially from doctors who have self-treated." Adds Union Central's Ray Kowalczyk, "When there are several diagnoses, we'd get several specialists. For example, if someone has a cervical/back injury, we'd send him to both a neurologist and an orthopedist. If depression was involved, we'd include a psychiatrist."

Claimants and their attorneys also say insurers lean toward IME doctors known to favor insurers. Attorney Darras cites a case where an insurer's written request for an IME of a man who was claiming total disability bore the notation, "This one will be difficult. Basically, I need someone to indicate [he] is capable of doing something."

Doctors who do IMEs can also be financially motivated to give insurers the opinions they want. "They can make $400,000 to $600,000 a year just doing IMEs part time," says Richard J. Quadrino, a Garden City, NY, attorney. "They wouldn't keep getting work if they found the claimants to be disabled."

Union Central's Kowalczyk disagrees, saying his company wouldn't use a doctor whose IME reports heavily favored the insurer. In fact, Kowalczyk says, roughly half of his company's IME reports favor claimants. Union Central uses an outside service that arranges IMEs and finds board-certified doctors to perform them. So does Massachusetts Mutual. UnumProvident selects IMEs themselves and leans toward board-certified doctors in a university setting, because "it's likely they'll be current on the condition they're evaluating," says McCall.

No matter how well-intentioned an insurer might be, though, sometimes the IME falls short. Attorney Rafel tells about a radiologist who suffered from premacular gliosis and malignant myopia and could no longer distinguish shades of gray. The insurer denied benefits after its independent medical examiner had him read an eye chart and declared him not disabled.

In response, Rafel set up a meeting with her client and another radiologist who brought in 10 X-rays. Her client misdiagnosed seven. Rafel taped the session and sent the tape to the insurer. Her client got his benefits.

Related to the independent medical exam is the functional capacity evaluation (FCE), a test designed to measure limitations. It simulates the demands on a person's body by requiring him to perform physically demanding, repetitive, and stressful activities such as weight-pulling and ladder-climbing. Insurers say the test helps expose false or exaggerated claims.

"An FCE puts the claimant in a no-win situation," says Quadrino. "If you say, 'Ouch, I can't do it,' the therapist will say you're exaggerating your injuries. If you fight through the pain and do the task, they'll say you're not disabled." And Surrano points out that even though you might be able to perform a task once, you probably can't do it repetitively if you're disabled, as you might need to do in your work.

In a deposition for Smith's lawsuit, Robert Coddington, the physician who did the claim review for Provident, admitted that he didn't believe a therapist conducting an FCE could judge whether a person being tested for fine motor skills, as Smith was, has the appropriate degree of "feel and touch." He also admitted that without the "proper feel and dexterity," an anesthesiologist could cause a permanent or even fatal injury to a patient.

Attorneys say that disability contracts don't specify that FCEs be performed. Insurers say they do, under the independent medical exam stipulation.

How to protect yourself: If you know there's a problem with the IME doctor the insurer wants to send you to—a license problem, for instance, or malpractice history, or a pro-insurer bias—you should inform the company before the exam and ask for a new examiner, Darras says. Quadrino says he has occasionally suggested that his client's physician and the insurer's in-house physician agree on a doctor for the IME. "A couple of times, they did," Quadrino says. But you can't count on that kind of cooperation.

No matter what physician performs the IME, keep a careful record of what transpires. "Tape record the entire exam and offer to share the tape with the insurer," advises Darras. "There shouldn't be any objection to that, and it eliminates the he-said, she-said aspect." After the exam, make a note of the tests that were ordered and those that weren't, and of what questions should have been asked but weren't. This information could be useful even if your claim is accepted, because you might eventually face another IME.

Alternatively, Andrew L. Miller, an attorney in Bala Cynwyd, PA, always sends a nurse or physician's assistant with a client to an IME, to witness the exam. If the IME doctor objects, Miller asks the insurer to assign another.

The insurer isn't obliged to share IME results with you or your doctor, but it may agree to. "If you're denying a claim based on an IME exam and you don't share the results, you have something to hide," Darras says. In Diamond's case, the insurer's IME had, in fact, found him totally disabled. But General American hadn't shared this information with Diamond; instead, it cut off his benefits.

Kowalczyk says Union Central will share results with an attending physician, at the claimant's request. Gish says that if a claims decision is based on the result of an IME, "Massachusetts Mutual will definitely contact the attending physician before making the decision."

Make sure you're not your own worst enemy

In certain situations, the insurer can use your own actions against you. Two examples:

You on videotape. Insurers use video surveillance when they suspect a supposedly disabled person is doing things such as golfing or gardening, or other things he shouldn't be able to do if he were disabled. "We use it in less than 1 percent of cases," says Jeff McCall of UnumProvident. Union Central sometimes does surveillance of claimants whose work involves strenuous physical activity, "or if we've been tipped off that someone is faking," says Kowalczyk. But anesthesiologist Sidney Smith couldn't figure out what an insurer could learn about his disabled hand by videotaping his daily walk. "Some people take a daily walk to a business they have on the side," says Kowalczyk.

How to protect yourself: Should you find yourself starring in such a production, all is not lost. To begin with, Darras points out, total disability, according to many insurance policies, "is not a state of helplessness, but the inability to perform the duties of your occupation with reasonable continuity in the usual way," regardless of whether you can pick up a child or a bag of groceries. Furthermore, you may have done this activity under heavy medication, or perhaps paid a price by suffering excruciating pain for hours or days afterward.

Although you might be able to explain the activity if you saw the tapes, the insurer isn't obliged to share them; typically, the tapes aren't produced until a courtroom showdown. Your treating physician might be able to get them, though, Darras suggests, by saying something like, "If he's not being truthful, I don't want him as a patient."

Darras adds that relying on videotape to deny coverage means that the insurer might be ignoring objective evidence such as MRIs, X-rays, and treating physicians' notes. This violates the duty to evaluate claims fairly and to consider all the evidence. In one case, the judge said that if an insurer "seeks to discover only the evidence that defeats the claim, it holds its own interest above that of its insured."

The ERISA charge. Did you pay the premiums for your disability coverage, or did your practice? If you file a lawsuit against your insurer, that's the first thing the insurer will look at, says Darras. If your employer or corporation paid the premiums, the suit may be litigated under the Employee Retirement Income Security Act (ERISA). Legal remedies are limited to benefits owed and, sometimes, attorney's fees. Typically, no awards are made for emotional distress or punitive damages. The case is heard by a federal judge, but no jury. The judge looks only at the evidence in the administrative record.

How to protect yourself: If you're covered by a group policy, arrange to pay the premiums yourself, Darras suggests. If you can't, he advises, take out an additional individual policy. In the meantime, the laws are changing. Some courts recently ruled that ERISA could be pre-empted when someone covered by a group policy has filed a bad-faith lawsuit.

Your own claim may well encounter none of these obstacles, but preparing for the worst seems advisable. Says anesthesiologist Sidney Smith, "I felt that the claims process had absolutely no protection for the policyholder, and only the threat of court, the skill of my lawyers, and the weakness of the insurer's case eventually made them pay attention to me."

The author is a former Senior Editor of Medical Economics.

Claim-filing tips

Filing a disability claim? These tips will help assure you don't hit the snags described in the accompanying article:

• File as soon as you become disabled and no later than a year after the elimination period ends. In fact, waiting that long "will really raise questions about the credibility of your claim," says Todd Gish of Massachusetts Mutual.

Filing early is especially important if your policy has a residual clause. This compensates you for lost earnings if you're partially disabled but can do some work for fewer hours than normal. Be careful about what work you do, however. If you switch to teaching before filing for disability and your income drops as a result, for example, you could cheat yourself of residual benefits. That's because you insured your ability to treat patients, not teach.

• Be polite but discreet with claims reps. They may sound cordial and concerned in phone conversations, but they still represent the insurer, warns Rafel. To help ensure that nothing you say is misconstrued, some attorneys suggest you ask permission to tape the conversation and offer a transcript. However, Darras says that taping a claim examiner this early on might cause your case to be scrutinized more closely. Instead, he advises that you keep calls brief and take careful notes of what was said.

The insurer, citing customer-service needs, will tape the conversation. "If you sound angry, use foul language, or make disparaging remarks, it can be used against you," Darras says. "Avoid complaining about the long hours you worked, how much you hate managed care, how little you earned. Remember, the claim file in litigation is the insurance company's letter to the jury. When you write or speak to the insurance company, you should use words you'd want to be judged on in court." So be courteous, Darras says. "If it's a simple question, provide the information. Otherwise, say you'll answer in writing."

• Be wary of visits from a claims adjuster or field rep. "One might call, saying he's nearby and wants to drop in," says Darras. "The visit is an opportunity to size up the neighborhood and your lifestyle, as well as to case the area for videotape surveillance." Offer to meet at a coffee shop or restaurant. You're not required to meet these reps in your home.

 

Doreen Mangan. Keep that insurer from blocking your disability claim. Medical Economics 2001;15:57.