Group Disability Insurance Claims (LTD)
If a person obtains disability insurance through a group plan at work, they can have Short-Term Disability (STD) and/or Long-Term Disability (LTD) insurance. STD is intended to cover a person’s initial period of disability, usually 90 to 180 days. If a person has both STD and LTD benefits, the claim will transition to LTD after STD benefits have been exhausted.
LTD typically replaces about 60% of a person’s pre-disability income when they are not able to work because of a disability. Unlike Worker’s Compensation, LTD insurance pays benefits whether or not the injury or illness is related to a person’s job.
If LTD insurance is obtained through a group plan at work, the claim will most likely be governed by a federal statute called the Employee Retirement Income Security Act (ERISA). It is important to be aware that when a claim is governed by ERISA, a denied claim must be appealed within 180 days from receipt of the denial letter. Failure to submit a timely appeal will result in the claimed being barred.
Why Do Long-Term Disability Claims Get Denied?
Insurance companies and/or third-party claim administrators that review disability claims presented under a group plan deny these claims for a variety of reasons. While not an exhaustive list, some of the most prevalent reasons are as follows:
- Insufficient Medical Evidence and Documentation: The insurance company will request that the person making the claim sign a HIPPA compliant medical authorization so that medical records can be requested, and/or they will rely on the person making the claim to submit their medical records. The insurance company will usually ask treating doctors to fill out an Attending Physician Statement. If the doctor’s office is nonresponsive, or slow to respond, or if the person making the claim does not provide medical records from their treating doctors that supports disability, this can result in an initial claim denial. Group policies usually make it the responsibility onmake it the responsibility of the person making the claim to produce evidence supporting disabilities.
- Not Continuously Disabled Throughout the “Elimination Period”: A person presenting a long-term disability claim must satisfy the “elimination period.” This is the number of consecutive days that a person must be disabled before benefits are payable. The elimination period is usually 90 days or 180 days. The evidence submitted must demonstrate that a person was continuously disabled throughout the elimination period to be eligible to receive disability benefits. If the person presenting a claim returns to work unsuccessfully during the elimination period, that could extend the duration of the elimination period.
- Pre-Existing Condition Exclusion: Pre-existing condition exclusions in are permissible in group disability insurance policies. If a person enrolls in group disability insurance through their employer and then becomes disabled within 12 months of the effective date of coverage, this will trigger a pre-existing condition investigation. The insurance company or third-party administrator will conduct an investigation to determine if the person presenting the disability claim consulted with a doctor, received medical treatment, had any diagnostic testing, or was prescribed medicine related to the disabling condition during the “look back” period (usually three to six months prior to the effective date of coverage). If the medical records establish that any of these things happened related to the medical condition(s) that are the basis of the disability claim, the claim will be denied, regardless of the extent of the person’s disabling impairment. If a person has more than one disabling medical condition, and the medical records indicate that less than all of the conditions are “pre-existing”, the claim can continue with the conditions that are not excluded as “pre-existing”.
- Not “Actively at Work “at the Time of Disability: Most disability insurance policies require that a person be “actively at work” at the time their disability arises. Most policies also state that coverage will continue even if the disability arises on a holiday, weekend, or regularly scheduled vacation. Confusion can arise, however, when a person is let go by their company, but their salary is paid for a period into the future. If the person claiming disability physically stopped working because the company downsized, but they wait until after their salary continuation exhausts to submit a disability claim, they will not be considered to be “Actively at Work” at the time their disability claim is presented. This is true even if a person continues to pay premiums and the coverage itself does not lapse.
- Disability Definition Changes From “Own” to “Any” Occupation: Most group policies of disability insurance have a two-tiered definition of disability. Disability for the first 24-months is subject to an “own occupation” definition of “disability,” followed by an “any occupation” standard. The latter definition requires that a person be unable to perform any occupation for which they are qualified based upon their education, training, and work experience. For example, if a person was employed as an airplane mechanic which is considered a “Heavy” physical demand level occupation, they will no longer qualify for disability benefits after two years unless they can establish the inability to perform some other occupation that involves less physically demanding activities (i.e., “Light” duty and “Sedentary” duty occupations). Some policies will require that any alternative occupation identified by the insurance company meet a gainful occupation threshold of 60% to 70%. This means that if the insurance company finds other jobs that it believes the person can perform on a full-time basis (given their physical limitations and restrictions), the alternative occupations must provide a salary that is at least 60% to 70% of the person’s indexed pre-disability earnings. If a person was a high wage earner before becoming disabled, the insurance company cannot find low wage occupation that it believes the disabled person can perform.
- 24-Month Limitation on Mental Health Conditions: Most LTD policies have a 24-month limitation for claims that involve disabilities based on mental health conditions. If a person is receiving LTD benefits due to a mental health condition such as depression, obsessive-compulsive disorder, post-traumatic stress disorder, generalized anxiety disorder, or another mental emotional illness, their claim could be limited to 24 months. However, depending on the terms of the policy, if the person is in an inpatient facility at the expiration of their benefits, benefits may be extended until the person is released. There are often exceptions to the mental health limitation when the claim is based upon dementia or organic brain disease. The 24-month limitation also will not apply when a person’s disability is linked to a physical medical condition.
The Administrative Appeal Process
It is important to be prompt with an appeal, but it is also important to be thorough. The administrative appeal process is a person’s opportunity to address the insurance company’s (or third-party administrator’s) basis for denying the claim. The appeal presents an opportunity to provide evidence that supports disability, and to address any inaccuracies and mistakes that the insurance company or third part administrator relied upon when denying the claim. Therefore, it is important to consult an attorney regarding preparation of the appeal. Law Offices of Kevin M. Zietz represents individuals at the administrative appeal stage, and has successfully assisted countless numbers of individuals to get their denied LTD claim overturned at the appeal stage.
What Happens if the Administrative Appeal is Denied?
If the appeal is unsuccessful, then the next step will be to file a lawsuit against the insurance company and/or LTD plan in federal court. If the case proceeds to trial, the case will be resolved by way of a bench trial, which means a federal court judge will decide the case. There will be no jury trial, and typically no witnesses. None of the doctors that treat the claimant, and none of the doctors hired by the insurance company, will testify at the time of trial. The court reviews the case on the administrative record (the insurance company’s file as it existed at the time of final denial).
LTD disability claims governed by ERISA proceed by a set of rules that are unlike the typical civil lawsuits that people are accustomed to seeing. The Law Offices of Kevin M. Zietz provides free consultations to review claims that have been denied claim, whether before or after the appeal has been completed.
