Disability
An Unfair Choice
Undergoing an Elective Surgery or Facing a Denial of Benefits

by Gerald “Gerry” Katz, MSPA, RHU, ALHC, DABDA, FACFE

If you were selling individual or group disability insurance coverage back in the 1980s and early 1990s, you might remember how competitive the disability marketplace was. Some insurance carriers wrote up to $30,000 per month in personal disability coverage; underwriting guarantees were generous for multi-life cases; and commissions were extremely high for major insurance producers.

Profit margins on blocks of in-force disability insurance coverage began to plummet around 1985 and for the next 10 years. Many disability carriers got out of the business. The remaining companies made significant changes in their product offerings, reduced issue limits, reduced many of the optional benefits, increased blood requirements for underwriting purposes, reduced issue percentages of income, and raised premium rates when possible. Many companies also changed their policy design and contractual language to further reduce potential liability while continuing to write coverage.

These companies also responded with greatly enhanced claim scrutiny. They attempted to manage the risks they had underwritten during the claim process by growing their claim departments with medical specialists, vocational rehabilitation specialists, and CPAs. Independent medical exams, telephone interviews, and field visits became more frequent. With these changes came some questionable claim practices. One major disability carrier’s debacle resulted in a Regulatory Settlement Agreement with the States’ Attorney General.

As part of the effort to limit risk, many companies tightened policy language concerning “care and attendance of physician” provisions. -Previous language required the insured to be “under the regular and personal care of a physician” in addition to suffering a disabling condition, Many companies changed their wording to require that the insured be “receiving care by a physician that is -appropriate for the condition causing the disability” or words to that effect.

Recently, there has been an effort to expand this provision to require an insured to undergo a surgical procedure if their physician recommends it even if it’s an elective surgery, such as carpal tunnel surgery, for example. At least one company has pushed this concept to the point of denying claims if an insured doesn’t go under the knife. What’s more disturbing is that some courts, particularly in California, are buying into the concept of forcing a claimant to undergo an elective surgery to recover benefits if the physician feels the surgery would be appropriate for the condition. This concept is ludicrous in light of the purpose of such a provision.

As someone who has spoken to many actuaries, product design, underwriting, and claims personnel in several insurance companies, the new policy provision requiring “appropriate care” never meant compelling an insured to choose between an elective surgical procedure and a denial of benefits. Instead, companies simply wanted to ensure that a psychiatrist, rather than a family practitioner, was treating a schizophrenic patient or an orthopedist, rather than a psychiatrist, was treating someone for a broken arm. Never was it contemplated that an insured would have to choose between their financial future and a surgery that might do more harm than good.

Anytime we subject ourselves to surgical procedures, there are no guarantees the surgery is going to improve or cure the problems that are causing disability. In addition, some surgical procedures do more damage or end in the death of the patient due to adverse effects of anesthesia or a breakdown of a major organ in our bodies. For an insurance company to claim that “appropriate care” mandates surgery is not only absurd, but it is also an invasion of the most cherished of all our rights -- freedom itself. In fact, a doctor is never allowed to perform an invasive procedure without obtaining informed consent from a patient. The insurance industry now seeks to hold benefits hostage in order to compel that consent.
––––––––––
Gerald “Gerry” Katz, MSPA, RHU, ALHC, DABDA, FACFE is a disability claim consultant & expert witness. For more information, e-mail disability@disabilityconcepts.com or 877-776-3948 toll-free, or contact Gregory L. Denes, Esq. At greg@deneslaw.com or 561-694-9199.