I represent a 60 year old former institutional cook whose Social Security Disability (“SSD”) application was approved today, but not before IMA Disability Associates (“IMA”) sent over a half dozen letters insisting that he must attend a consultative examination (“CE”). My client did not.
On October 22, 2015 and October 23, 2016, the State agency sent letters stating that the claimant “must” attend a CE because it was “necessary” for him to be examined by IMA. Both letters were received on October 26, 2015. That day, I faxed the State agency a detailed seven page letter explaining the reasons why scheduling a CE with IMA was improper. My letter specified that the claimant was not refusing to attend a CE, but asked the State agency to address the questions raised in my letter raised first.
On November 5, 2015, the State agency refused to address the issues raised in my October 26, 2015, and said that this was the claimant’s last chance to attend a CE. The State agency then send another notice on November 10, 2015, reiterating that the claimant “must” attend a CE because it was “necessary” for him to be examined by IMA. On November 12, 2015, I replied that the claimant would attend the CE as soon as the State agency responded to the matters raised in my October 26, 2015 letter.
The State agency continued to refuse to cooperate, and instead, on November 16, 2015, sent yet another CE notice stating that the claimant “must” attend a CE on November 16, 2015, because it was “necessary” for him to be examined by IMA. On November 18, 2015, I faxed the State agency we received their letter on November 17, 2015, the day after the CE was scheduled. Moreover, I advised the State agency that I sent them a detailed report from the claimant’s pain management specialist, together with a lumbar spine MRI, which obviated any supposed need for the CE. I added that if they believed otherwise, then respond to each of the matters raised in my October 26, 2015 letter.
The State agency never attempted to address any of the issues raised in my October 26, 2015 letter, and it did finally approve SSD benefits, but the claimant never went to IMA for a CE. The question is, why does the State agency keep telling claimants that claimants “must” attend IMA CEs when that is not true.
Saturday, January 16, 2016
SSA Self Policing
“Letting a fox guard the henhouse” illustrates the foolishness of placing a person in charge of something when they have a conflict of interest. When you assign somebody a duty that places that person into a position where he can exploit the situation for his own benefit, then you are letting the proverbial fox guard the henhouse. That is the situation created by allowing the Social Security Administration (“SSA”) to decide the propriety of Freedom of Information Act (“FOIA”) requests.
We represent a claimant for Social Security Disability ("SSD") benefits. Despite the fact we had submitted supporting evidence from his treating doctors, the SSA scheduled a Consultative Exam ("CE") for him. The client went to the CE, even though he was in a lot of pain, but when he arrived IMA said the CE doctor was out that day. No one from the SSA, State agency, or IMA ever tried to reach the claimant to tell him the CE doctor would not in that day.
To prove that the DDS/IMA were committing fraud, we filed a FOIA request. Our request included: 1. The number of other patients the CE doctor was scheduled to see that same day, May 8, 2015, at the IMA offices in Hempstead, NY. 2. A copy of all the other patients' medical reports (with the names and Social Security numbers redacted) from May 8, 2015, who were examined by the same doctor that was scheduled to examine our client on that date. 3. The time records for all exams performed by the Hempstead IMA doctors on May 8, 2015.
In response to our FOIA request, Mary Ann Zimmerman, Acting Privacy Officer, claimed that she did not have our client’s Social Security number, even though it was right at the top of the FOIA request. Yes, Zimmerman claimed that she could not see the Social Security number, which was the very subject of the FOIA request. Then, to make matters even worse, Zimmerman claimed that she did not have proof that we are the claimant's Appointed Representative, even though the SSA had already acknowledged receiving the proof.
Zimmerman then claimed that she needed the written consent of the claimant whose records were requested. However, we never asked for any personally identifiable information. In fact, we specifically asked for "a copy of all the other patients' medical reports (with the names and Social Security numbers redacted) who were examined on May 8, 2015. In other words, Zimmerman’s response was nonsensical at best as there cannot be a need for the written consent of people when no personally identifiable information was requested. Since we explicitly stated that no personally identifiable information was requested, it is not possible for the FOIA request to constitute an invasion of anyone's personal privacy or violation of the Privacy Act.
Not surprisingly, the SSA’s Glenn Sklar upheld the decision to deny the FOIA request by citing boilerplate language about the FOIA. Sklar’s only individualized claim was that releasing generic information about the number of exams and their duration performed by IMA doctors would somehow lead to the disclosure of personally identifiable information. Sklar knows that rationalization is a lie because it is impossible to identify a claimant who went for an IMA exam by providing the number of IMA exams and their duration. That is the type of opprobrious misconduct that occurs when you allow the SSA to police itself.
We represent a claimant for Social Security Disability ("SSD") benefits. Despite the fact we had submitted supporting evidence from his treating doctors, the SSA scheduled a Consultative Exam ("CE") for him. The client went to the CE, even though he was in a lot of pain, but when he arrived IMA said the CE doctor was out that day. No one from the SSA, State agency, or IMA ever tried to reach the claimant to tell him the CE doctor would not in that day.
To prove that the DDS/IMA were committing fraud, we filed a FOIA request. Our request included: 1. The number of other patients the CE doctor was scheduled to see that same day, May 8, 2015, at the IMA offices in Hempstead, NY. 2. A copy of all the other patients' medical reports (with the names and Social Security numbers redacted) from May 8, 2015, who were examined by the same doctor that was scheduled to examine our client on that date. 3. The time records for all exams performed by the Hempstead IMA doctors on May 8, 2015.
In response to our FOIA request, Mary Ann Zimmerman, Acting Privacy Officer, claimed that she did not have our client’s Social Security number, even though it was right at the top of the FOIA request. Yes, Zimmerman claimed that she could not see the Social Security number, which was the very subject of the FOIA request. Then, to make matters even worse, Zimmerman claimed that she did not have proof that we are the claimant's Appointed Representative, even though the SSA had already acknowledged receiving the proof.
Zimmerman then claimed that she needed the written consent of the claimant whose records were requested. However, we never asked for any personally identifiable information. In fact, we specifically asked for "a copy of all the other patients' medical reports (with the names and Social Security numbers redacted) who were examined on May 8, 2015. In other words, Zimmerman’s response was nonsensical at best as there cannot be a need for the written consent of people when no personally identifiable information was requested. Since we explicitly stated that no personally identifiable information was requested, it is not possible for the FOIA request to constitute an invasion of anyone's personal privacy or violation of the Privacy Act.
Not surprisingly, the SSA’s Glenn Sklar upheld the decision to deny the FOIA request by citing boilerplate language about the FOIA. Sklar’s only individualized claim was that releasing generic information about the number of exams and their duration performed by IMA doctors would somehow lead to the disclosure of personally identifiable information. Sklar knows that rationalization is a lie because it is impossible to identify a claimant who went for an IMA exam by providing the number of IMA exams and their duration. That is the type of opprobrious misconduct that occurs when you allow the SSA to police itself.
Thursday, January 7, 2016
State Agency Fraud
I represent a 60 year old with orthopedic and cardiovascular problems who worked for 46 years, including over three decades as a media salesperson, where he earned a large six figure income. His application for Social Security Disability (“SSD”) benefits was initially denied by the State agency.
Common sense dictates that a claimant does not misrepresent or exaggerate his disability in order to trick the government into paying SSD benefits that are a tenth of his past income. Nonetheless, despite having submitted Residual Functional Capacity (“RFC”) assessments from his orthopedist, cardiologist, and internist, the claimant was compelled to attend a hearing before his SSD benefits were approved today. Compelling a hearing was particularly appalling in light of fraudulent misrepresentations that the State agency in connection with a report that DDS Disability Adjudicator/Examiner V. Kumar prepared in connection with the claimant’s application.
Kumar wrote that the claimant’s doctors refused to perform a consultative examination (“CE”) for the state approved vendor fee. Neither Kumar nor anybody else from the DDS ever spoke with any of the claimant’s doctors to ask them if they would perform a CE, let alone ask them if they would perform a CE for any particular fee. The official Social Security folder showed that the DDS never even contacted any of the claimant’s doctors by mail about anything.
What made Kumar’s fraudulent misrepresentation especially appalling is that I had sent a letter that stated:
"the treating physicians are ready, willing, and able to perform a CE, but you have not asked them to perform a CE. I have spoken with the claimant who has agreed to pay any difference between what you are willing to pay and the amount the treating doctor would charge. Therefore, do not falsely claim that a treating source refused to do the CE because of the fee involved."
The second fraudulent assertion that Kumar made was that the CE was needed because there was insufficient evidence to evaluate the claim. The file contained over a hundred pages of treatment records, functionality opinions, and diagnostic testing. Proof that the evidence was sufficient is that the judge only asked a couple of questions at the hearing. Moreover, I had sent a detailed seven page single spaced letter to the DDS, asking them to identify any additional medical evidence that they claimed was needed to evaluate the claim. As always, instead of specifying a single piece of medical evidence they purportedly needed, the DDS simply sent a second CE notice, despite my having sent them that detailed letter, which among other things stated:
"In order for me to have the chance to obtain the information that you claim you need, you need to clarify precisely what information you are seeking. Simply resending a notice with a new CE date fails to fulfill your responsibility to develop the record, and shows that you lack any valid reason for the CE."
Kumar’s third fraudulent misrepresentation was that stating “No RFC /MRFC assessments are associated with this claim.” As discussed above, the folder contained three RFC assessments. In fact, the RFC from the claimant’s orthopedist appears in the eFolder twice. It was impossible for Kumar to have missed all three reports when reviewing the claimant’s file. Nonetheless, Kumar stated in no uncertain terms that no such RFC assessment existed in the folder.
The most egregious fraud committed was Kumar’s writing that the claimant missed two CE appointments. The claim folder included a form DDD-4184, entitled CE Appointment Notice History. The form DDD-4184 stated that the claimant did not keep the appointment for the CE. Whoever prepared the form DDD-4184 committed fraud because the claimant has photographs of him entering the IMA offices for the CE. The claimant also videotaped him inside the IMA offices, and being told to leave by IMA.
Although I asked the judge what steps he would take to address the fraudulent misconduct by the State agency and/or IMA, I never received a response.
Common sense dictates that a claimant does not misrepresent or exaggerate his disability in order to trick the government into paying SSD benefits that are a tenth of his past income. Nonetheless, despite having submitted Residual Functional Capacity (“RFC”) assessments from his orthopedist, cardiologist, and internist, the claimant was compelled to attend a hearing before his SSD benefits were approved today. Compelling a hearing was particularly appalling in light of fraudulent misrepresentations that the State agency in connection with a report that DDS Disability Adjudicator/Examiner V. Kumar prepared in connection with the claimant’s application.
Kumar wrote that the claimant’s doctors refused to perform a consultative examination (“CE”) for the state approved vendor fee. Neither Kumar nor anybody else from the DDS ever spoke with any of the claimant’s doctors to ask them if they would perform a CE, let alone ask them if they would perform a CE for any particular fee. The official Social Security folder showed that the DDS never even contacted any of the claimant’s doctors by mail about anything.
What made Kumar’s fraudulent misrepresentation especially appalling is that I had sent a letter that stated:
"the treating physicians are ready, willing, and able to perform a CE, but you have not asked them to perform a CE. I have spoken with the claimant who has agreed to pay any difference between what you are willing to pay and the amount the treating doctor would charge. Therefore, do not falsely claim that a treating source refused to do the CE because of the fee involved."
The second fraudulent assertion that Kumar made was that the CE was needed because there was insufficient evidence to evaluate the claim. The file contained over a hundred pages of treatment records, functionality opinions, and diagnostic testing. Proof that the evidence was sufficient is that the judge only asked a couple of questions at the hearing. Moreover, I had sent a detailed seven page single spaced letter to the DDS, asking them to identify any additional medical evidence that they claimed was needed to evaluate the claim. As always, instead of specifying a single piece of medical evidence they purportedly needed, the DDS simply sent a second CE notice, despite my having sent them that detailed letter, which among other things stated:
"In order for me to have the chance to obtain the information that you claim you need, you need to clarify precisely what information you are seeking. Simply resending a notice with a new CE date fails to fulfill your responsibility to develop the record, and shows that you lack any valid reason for the CE."
Kumar’s third fraudulent misrepresentation was that stating “No RFC /MRFC assessments are associated with this claim.” As discussed above, the folder contained three RFC assessments. In fact, the RFC from the claimant’s orthopedist appears in the eFolder twice. It was impossible for Kumar to have missed all three reports when reviewing the claimant’s file. Nonetheless, Kumar stated in no uncertain terms that no such RFC assessment existed in the folder.
The most egregious fraud committed was Kumar’s writing that the claimant missed two CE appointments. The claim folder included a form DDD-4184, entitled CE Appointment Notice History. The form DDD-4184 stated that the claimant did not keep the appointment for the CE. Whoever prepared the form DDD-4184 committed fraud because the claimant has photographs of him entering the IMA offices for the CE. The claimant also videotaped him inside the IMA offices, and being told to leave by IMA.
Although I asked the judge what steps he would take to address the fraudulent misconduct by the State agency and/or IMA, I never received a response.
Saturday, December 19, 2015
Sun Life Reverses Denial
A 56 year old former account executive with hypertrophic cardiomyopathy asked me to represent her after Sun Life denied her application for long term disability (“LTD”) benefits, even though Sun Life had approved her application for short term disability (“STD”) benefits. The only thing that had changed was that a Sun Life nurse said the claimant could work because she had 5 METS on a stress test.
I argued that Sun Life made diametrically opposed decisions without being able to identify any difference in the requirements for evaluating disability under the STD and LTD claims. Similarly, I pointed out that Sun Life made diametrically opposed decisions without being able to identify a single piece of medical evidence that showed the claimant's medical condition had changed, let alone improved. To make sure there was no misinterpretation of the medical evidence, I obtained a report from the claimant’s cardiologist explaining how the objective medical evidence had not changed, and that there was no basis for equating 5 METS with the ability to work.
Unlike Reliance, CIGNA and Unum regularly do, particularly at this time of the year, Sun Life made the decision to overturn its denial without insisting on extensions. Claims handlers frequently delay approvals as a means of manipulating reserves to meet financial goals. Last month, when Sun Life wrote that it had the right to “toll” the time to render a decision, I responded by sending a letter that quoted the ERISA regulatory deadlines. Sun Life verbally approved the LTD claim before the deadline expired.
I argued that Sun Life made diametrically opposed decisions without being able to identify any difference in the requirements for evaluating disability under the STD and LTD claims. Similarly, I pointed out that Sun Life made diametrically opposed decisions without being able to identify a single piece of medical evidence that showed the claimant's medical condition had changed, let alone improved. To make sure there was no misinterpretation of the medical evidence, I obtained a report from the claimant’s cardiologist explaining how the objective medical evidence had not changed, and that there was no basis for equating 5 METS with the ability to work.
Unlike Reliance, CIGNA and Unum regularly do, particularly at this time of the year, Sun Life made the decision to overturn its denial without insisting on extensions. Claims handlers frequently delay approvals as a means of manipulating reserves to meet financial goals. Last month, when Sun Life wrote that it had the right to “toll” the time to render a decision, I responded by sending a letter that quoted the ERISA regulatory deadlines. Sun Life verbally approved the LTD claim before the deadline expired.
Tuesday, November 24, 2015
DDS Continues to Purge Evidence
The State agency, also known as Disability Determination Services (“DDS”), which makes the initial decisions on Social Security Disability (“SSD”) applications, has a history of purging records from claimants’ files that support the disability claim. The problem is that you only learn about the purging after the DDS denies the application.
After the DDS denies an SSD application, the claim is transferred to the hearing office of the Social Security Administration (“SSA”). At that point, the file becomes accessible, but the file does not get completely “processed” for many months after that time.
Twice more within the last week I learned that the DDS purged supporting records. The DDS omitted records of a Nassau County claimant’s doctors, and in the other incident, the DDS omitted records from a Queen’s claimant’s doctors. The DDS’s pattern has continued where each time a submission is missing, it is always a report in which the treating physician provides a residual functional capacity assessment that precludes work.
The Nassau County claimant has severe physical and mental conditions. I submitted reports from three doctors that precluded her from being able to work, and records from a fourth. The Queens claimant has severe mental conditions. I submitted reports from her two doctors that precluded her from being able to work. Because these DDS purges have become routine, I kept copies of the Electronic Records Express receipt showing that the DDS have received all of the reports and records, which I included when I resubmitted the medical reports and records.
Do not assume that your medical evidence will be in the file just because you mailed in an SSA return envelope or have a fax confirmation. It is no accident that when the DDS excludes medical evidence those documents have always included functional assessments that preclude work. Always check, and then regularly recheck, the claim file to ensure that all submitted records have found their way into the official claim file.
After the DDS denies an SSD application, the claim is transferred to the hearing office of the Social Security Administration (“SSA”). At that point, the file becomes accessible, but the file does not get completely “processed” for many months after that time.
Twice more within the last week I learned that the DDS purged supporting records. The DDS omitted records of a Nassau County claimant’s doctors, and in the other incident, the DDS omitted records from a Queen’s claimant’s doctors. The DDS’s pattern has continued where each time a submission is missing, it is always a report in which the treating physician provides a residual functional capacity assessment that precludes work.
The Nassau County claimant has severe physical and mental conditions. I submitted reports from three doctors that precluded her from being able to work, and records from a fourth. The Queens claimant has severe mental conditions. I submitted reports from her two doctors that precluded her from being able to work. Because these DDS purges have become routine, I kept copies of the Electronic Records Express receipt showing that the DDS have received all of the reports and records, which I included when I resubmitted the medical reports and records.
Do not assume that your medical evidence will be in the file just because you mailed in an SSA return envelope or have a fax confirmation. It is no accident that when the DDS excludes medical evidence those documents have always included functional assessments that preclude work. Always check, and then regularly recheck, the claim file to ensure that all submitted records have found their way into the official claim file.
Thursday, November 19, 2015
Proposed LTD Regulations
I represent disabled claimants seeking benefits under group and individual disability insurance policies, and am writing in support of the proposed regulations by the Employee Benefits Security Administration to revise and strengthen the current rules for claims procedure for Plans providing Disability Benefits.
I am unaware of any rampant or systemic abuse by insurance companies reviewing claims under individual disability insurance policies. On the other hand, rampant and systemic abuse by insurance companies reviewing claims under group disability insurance policies is the rule. Ironically, ERISA, which was intended to benefit employees, has led to the disparate treatment. The primary culprit is discretionary clauses that grant an insurance company or administrator the unrestricted authority to determine eligibility for benefits and to interpret terms and provisions of the policy, contract or certificate.
Discretionary clauses place the employee at a disadvantage in any disagreement over the meaning of the insurance contract, usurp the role of the courts in deciding a matter of law, that is, the meaning of the contract, and exacerbate the insurer’s inherent conflict of interests in being both the entity that pays and decides what does or does not need to be paid. In other words, the insurance company profits increase when it denies and terminates claims. As noted by the Supreme Court in Metlife v. Glenn, 554 U.S. 105, 128 S.Ct. 2343 (2008), where an insurer both determines whether an employee is eligible for benefits and pays those benefits out of its own pocket, there is a conflict of interest. This conflict would be greatly mitigated by prohibiting discretionary clauses.
Discretionary clauses are unjust and contrary State laws because the deferential standard of review is opposed to the common law doctrine that ambiguities in insurance contracts are to be construed in favor of the insured. Moreover, discretionary clauses in insurance contracts are also misleading because policyholders may not understand from reading these clauses that they are giving up the right to a neutral, merits-based review of the insurer’s decisions and the meaning of the policy, and that the insurer as a practical matter could proceed with essentially absolute discretion as to what the policy means.
A disability or health insurance policy is a contract. The interpretation of a contract is a matter of law and ordinarily questions of law are for the judiciary to decide. In a court action on a contract, such as when an insured sues an insurer, a court looks at the question of law de novo, i.e., without regard for how the contract might have been initially interpreted by the insurer. However, when a discretionary clause is present, it largely usurps the role of the courts because they are required to give strong deference to the insurer’s interpretation of the contract and will only overturn the insurer’s view if the court finds the insurer’s decision was arbitrary and capricious. This leads insurers to deny and terminate claims that they know should be approved.
Insurance companies’ widespread abuse due to discretionary clauses prompted regulatory authorities to take action. In 2002, the National Association of Insurance Commissioners (the “NAIC”) issued a model act entitled “Prohibition on the Use of Discretionary Clauses” (the “Model Act”). When an insurance company issues a group disability policy, a discretionary clause grants the insurer or administrator the authority to determine eligibility for benefits and to interpret terms and provisions of the policy. The purpose of the Model Act is to prohibit clauses that purport to reserve discretion to the insurer to interpret the terms of a disability insurance policy.
The abuse of discretionary authority by the insurance industry became so widespread that the media covered the issue. On October 13, 2002, NBC Dateline did an expose called “Benefit of the Doubt”. The story described how Unum Provident, the largest disability insurance provider, had systematically manipulated and created evidence in order to create excuses to deny and terminate disability claims. On November 20, 2002, CBS 60 Minutes also did an expose on Unum called “Did Insurer Cheat Disabled Clients?” The 60 Minutes piece detailed how Unum forced doctors to manufacture evidence as a means to deny and terminate disability claims. The abuses by Unum resulted in the U.S. Department of Labor and 49 State Insurance Departments bringing an action against Unum that resulted in a regulatory settlement agreement. Among other things, Unum was forced to reassess hundreds of thousands of disability claims that it had denied or terminated. Since that time, a blind eye has been turned to the continued abuses by insurers of group disability policies subject to ERISA.
In what is already a contract of adhesion, i.e., one that a consumer has no choice but to accept, discretionary clauses skew the balance of power even further in favor of the insurer. In other words, the subscriber is at a severe disadvantage in any contest over questions of coverage, eligibility and interpretations and applications of the provisions of the contract for the simple reason that the insurer included a discretionary clause in the contract. However, if discretionary clauses are prohibited, then the courts apply the de novo standard of review, and are free to substitute their own judgment for that of the insurer. If a matter comes to court, the consumer faces a more level playing field, and is better protected.
What is perhaps most affected by the differing standards of review is the mindset of the insurers. Under the “arbitrary and capricious” standard of review, insurers believe that they can refuse to pay benefits regardless of the evidence employees submit, as long as the insurers pay their doctors to manufacture contradictory evidence. Insurers cannot do so if de novo standard of review applies, where a court determines which side’s conflicting evidence is better. In other words, simply requiring a level playing field would end most of the insurance industry’s abuse of disabled employees. My experience has shown that whenever a court rules that a de novo standard of review applies, the insurer immediately seeks to settle the case, which is a tacit admission that the insurer knew its decision was wrong.
The proposed regulations should be implemented, but an outright ban on discretionary clauses is needed.
I am unaware of any rampant or systemic abuse by insurance companies reviewing claims under individual disability insurance policies. On the other hand, rampant and systemic abuse by insurance companies reviewing claims under group disability insurance policies is the rule. Ironically, ERISA, which was intended to benefit employees, has led to the disparate treatment. The primary culprit is discretionary clauses that grant an insurance company or administrator the unrestricted authority to determine eligibility for benefits and to interpret terms and provisions of the policy, contract or certificate.
Discretionary clauses place the employee at a disadvantage in any disagreement over the meaning of the insurance contract, usurp the role of the courts in deciding a matter of law, that is, the meaning of the contract, and exacerbate the insurer’s inherent conflict of interests in being both the entity that pays and decides what does or does not need to be paid. In other words, the insurance company profits increase when it denies and terminates claims. As noted by the Supreme Court in Metlife v. Glenn, 554 U.S. 105, 128 S.Ct. 2343 (2008), where an insurer both determines whether an employee is eligible for benefits and pays those benefits out of its own pocket, there is a conflict of interest. This conflict would be greatly mitigated by prohibiting discretionary clauses.
Discretionary clauses are unjust and contrary State laws because the deferential standard of review is opposed to the common law doctrine that ambiguities in insurance contracts are to be construed in favor of the insured. Moreover, discretionary clauses in insurance contracts are also misleading because policyholders may not understand from reading these clauses that they are giving up the right to a neutral, merits-based review of the insurer’s decisions and the meaning of the policy, and that the insurer as a practical matter could proceed with essentially absolute discretion as to what the policy means.
A disability or health insurance policy is a contract. The interpretation of a contract is a matter of law and ordinarily questions of law are for the judiciary to decide. In a court action on a contract, such as when an insured sues an insurer, a court looks at the question of law de novo, i.e., without regard for how the contract might have been initially interpreted by the insurer. However, when a discretionary clause is present, it largely usurps the role of the courts because they are required to give strong deference to the insurer’s interpretation of the contract and will only overturn the insurer’s view if the court finds the insurer’s decision was arbitrary and capricious. This leads insurers to deny and terminate claims that they know should be approved.
Insurance companies’ widespread abuse due to discretionary clauses prompted regulatory authorities to take action. In 2002, the National Association of Insurance Commissioners (the “NAIC”) issued a model act entitled “Prohibition on the Use of Discretionary Clauses” (the “Model Act”). When an insurance company issues a group disability policy, a discretionary clause grants the insurer or administrator the authority to determine eligibility for benefits and to interpret terms and provisions of the policy. The purpose of the Model Act is to prohibit clauses that purport to reserve discretion to the insurer to interpret the terms of a disability insurance policy.
The abuse of discretionary authority by the insurance industry became so widespread that the media covered the issue. On October 13, 2002, NBC Dateline did an expose called “Benefit of the Doubt”. The story described how Unum Provident, the largest disability insurance provider, had systematically manipulated and created evidence in order to create excuses to deny and terminate disability claims. On November 20, 2002, CBS 60 Minutes also did an expose on Unum called “Did Insurer Cheat Disabled Clients?” The 60 Minutes piece detailed how Unum forced doctors to manufacture evidence as a means to deny and terminate disability claims. The abuses by Unum resulted in the U.S. Department of Labor and 49 State Insurance Departments bringing an action against Unum that resulted in a regulatory settlement agreement. Among other things, Unum was forced to reassess hundreds of thousands of disability claims that it had denied or terminated. Since that time, a blind eye has been turned to the continued abuses by insurers of group disability policies subject to ERISA.
In what is already a contract of adhesion, i.e., one that a consumer has no choice but to accept, discretionary clauses skew the balance of power even further in favor of the insurer. In other words, the subscriber is at a severe disadvantage in any contest over questions of coverage, eligibility and interpretations and applications of the provisions of the contract for the simple reason that the insurer included a discretionary clause in the contract. However, if discretionary clauses are prohibited, then the courts apply the de novo standard of review, and are free to substitute their own judgment for that of the insurer. If a matter comes to court, the consumer faces a more level playing field, and is better protected.
What is perhaps most affected by the differing standards of review is the mindset of the insurers. Under the “arbitrary and capricious” standard of review, insurers believe that they can refuse to pay benefits regardless of the evidence employees submit, as long as the insurers pay their doctors to manufacture contradictory evidence. Insurers cannot do so if de novo standard of review applies, where a court determines which side’s conflicting evidence is better. In other words, simply requiring a level playing field would end most of the insurance industry’s abuse of disabled employees. My experience has shown that whenever a court rules that a de novo standard of review applies, the insurer immediately seeks to settle the case, which is a tacit admission that the insurer knew its decision was wrong.
The proposed regulations should be implemented, but an outright ban on discretionary clauses is needed.
Tuesday, November 17, 2015
Reliance Approves LTD After Deadline
I represent a 59 year old financial broker that Reliance found disabled under a group long term disability (“LTD”) policy today, which is governed by ERISA. The application was filed on September 16, 2015. Under ERISA, the insurer has 45 days to render a decision, which would have been October 31, 2015.
On November 2, 2015, when I notified Reliance about the deadline elapsing, Reliance claimed that the deadline had not passed because the unit making the decision said it did not receive the application until October 16, 2015. After I responded that I had a fax confirmation that Reliance received the application on September 16, 2015, Reliance advised me that it would make its decision that week. At week’s end, I was told the claim had been recommended for approval, which a manager had to accept. That acceptance came today.
I doubt that the decision would have been received by today if I had not raised the ERISA deadline, which can adversely affect the claim fiduciary. For example, in New York, if an appeal deadline is ignored, a claimant could deem the decision to be denied, which ultimately can lead to a more favorable standard of review being applied. Claims handlers usually have caseloads that are too heavy to manage properly, which results in delays. Claims handlers are also frequently told by managers to delay approvals as a means of manipulating reserves to meet financial goals. Letting a claim handler know that you are aware of the ERISA deadlines may help focus attention on your claim in order to receive a timely decision.
On November 2, 2015, when I notified Reliance about the deadline elapsing, Reliance claimed that the deadline had not passed because the unit making the decision said it did not receive the application until October 16, 2015. After I responded that I had a fax confirmation that Reliance received the application on September 16, 2015, Reliance advised me that it would make its decision that week. At week’s end, I was told the claim had been recommended for approval, which a manager had to accept. That acceptance came today.
I doubt that the decision would have been received by today if I had not raised the ERISA deadline, which can adversely affect the claim fiduciary. For example, in New York, if an appeal deadline is ignored, a claimant could deem the decision to be denied, which ultimately can lead to a more favorable standard of review being applied. Claims handlers usually have caseloads that are too heavy to manage properly, which results in delays. Claims handlers are also frequently told by managers to delay approvals as a means of manipulating reserves to meet financial goals. Letting a claim handler know that you are aware of the ERISA deadlines may help focus attention on your claim in order to receive a timely decision.
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