Four Common Disability Insurance Provisions and Why They Matter

As with most insurance cases, disputes over disability insurance coverage or benefits frequently turn on the specific insurance policy language at issue.  Insurance policy fine print can often be read in ways that are counterintuitive.  Below are four common policy provisions that are often key to the outcome of disability insurance disputes.

1.     The Definition of “Disabled”

Disability insurance policies can define “disabled” in different ways.  Some policies define disability in terms of the insured’s employment qualifications.  Such a policy might provide: “you are unable to perform the duties of any gainful occupation for which you are reasonably fitted by education, training or experience.”  Other policies define disability in terms of the insured’s existing occupation, defining disability as: “you are unable to perform the material and substantial duties of your regular occupation, or you have a 20% or more loss in your monthly earnings.”  Further, some insurance policies change the definition of disability once the insured has been disabled for a certain time period, typically tightening the standard.

For insureds, the definition of disability is the key to claiming benefits.  Many disability insurance disputes focus on whether the insured meets the definition of disability.  That’s key because insurers sometimes deny claims under the wrong standard of disability.  Denying claims under an erroneous standard could result in denying benefits where the insured is otherwise entitled to them.

The definition of disability also establishes the specific medical evidence needed to establish the insured is disabled.  That’s key because doctors typically do not write medical records with the insurer’s definition of disability in mind; they focus on the medical information relevant to the patient’s diagnosis treatment.  Accordingly, insurers often claim the insured’s medical records don’t prove the insured is disabled because the doctor’s notes don’t precisely match up with the definition in the policy.

2.     Mental Health Limits

Many disability policies contain special provisions restricting coverage where the insured’s disability relates to their mental health.  Although the federal Mental Health Parity Act generally prohibits health insurers from disfavoring mental health coverage, disability insurers are still often free to do so.

An example of a common mental health limitation in a disability policy: “Disabilities which are due in whole or part to mental illness have a limited pay period during your lifetime.  The limited pay period for mental illness is 24 months during your lifetime.”

Mental health limitations can be critical to disability insurance disputes.  The insured may have both physical and mental health symptoms.  Sometimes, the physical ailments cause the mental health symptoms directly, for example, in the case of a traumatic brain injury which manifests with difficulty concentrating or focusing.  Or, the mental health symptoms may be ancillary to the physical injury; for instance, people suffering a physical disability often seek mental health treatment after becoming depressed and anxious about their inability to work, engage in hobbies or socialize because of their physical disability.  Sometimes the mental and physical symptoms may be completely unrelated, for instance, when a person who has been treated for anxiety for many years sustains a physical disability following an injury.

In these circumstances, insurers often conflate the physical and mental health symptoms to justify limiting benefits under the mental health limitation.  Insurers may ignore the physical ailments that prevent the insured from working and focus on ancillary mental health symptoms that were well-managed prior to the onset of physical symptoms.  Or, the insurer may incorrectly determine that any physical limitations are caused solely by mental health conditions, for instance, by characterizing migraine headaches as a symptom of anxiety.

To avoid this, it’s critical to present the insurer with medical records and statements from treating providers that clearly differentiate mental health conditions from physical ailments, and indicate whether the physical ailments alone render the insured disabled.

3.     “Objective” Evidence Requirements

Similar to mental health, many disability insurance policies limit coverage for so-called “self-reported symptoms,” defined as symptoms that cannot be proven through “objective” testing.

Many disabling conditions are, by their nature, not readily provable through “objective” testing.  Chronic migraines, fibromyalgia, or Chronic Fatigue Syndrome are common examples.  These conditions sometimes result in disabling symptoms, but are difficult to objectively measured through things like MRIs or X-Rays.  Consequently, many insureds have coverage denied for conditions that render them disabled but cannot be identified on objective tests.

Overcoming “objective” evidence requirements often entails establishing that the condition is one that is known in the medical community to resist proof by objective means.  Many courts have recognized the medical consensus that conditions like fibromyalgia do not show up on MRIs, and, consequently, do not allow insurers to deny such conditions for lack of “objective” testing that, by definition, cannot exist.

4.     ERISA

Disability policies issued through an employer are typically subject to a federal law called the Employee Retirement Income Security Act (“ERISA”).  If ERISA applies, it imposes important deadlines and procedural rules insureds must follow in order to contest a disability insurance denial.  For instance, insureds must appeal a denied claim within specific time periods (usually measured in days).  Moreover, the appeal must include all information the insured relies on in claiming benefits; information absent from the appeal often cannot be considered in a lawsuit disputing the denial.

Aetna Fined Over Autism And Substance Abuse Coverage

State regulators in Pennsylvania fined health insurer Aetna  this week, for violating rules on coverage of drug and alcohol abuse treatment and coverage of autism spectrum disorder.

A federal law called the Mental Health Parity and Addiction Equity Act generally forbids health carriers from discriminating against coverage for mental health conditions or substance abuse disorders.  These laws are important because health insurers are often incentivized to deny coverage for mental health and substance abuse conditions, as they often require costly inpatient therapy.  Fighting such denials is hard because unlike conditions like a broken bone or the flu, mental health and addiction disorders can be harder to objectively document. Many states have similar rules.

Pennsylvania regulators found Aetna violated these rules.  The state identified “confusing policy language which could have led consumers to inaccurately believe they did not have coverage for certain substance use disorder services.”

Aetna also imposed improper copays, coinsurance, and visit limits, as well as illegally requiring prior authorization for treatment.

Happy New Year – Washington Health Insurers Are Now Required to Expand Contraceptive Coverage

In 2019, Washington health insurers are required to expand contraceptive coverage. Any health plan in Washington issued or renewed on or after Jan. 1 must now provide coverage for the following:

  • All FDA-approved contraceptives, including drugs and devices; and
  • Voluntary sterilization procedures.

The new law also requires coverage for consultations, examinations and procedures necessary to obtain contraceptives or voluntary sterilization.  Importantly, most health insurers are now prohibited from imposing copayments, deductables, or other cost sharing on contraceptive coverage.

The law also broadly prohibits insurers from limiting insureds’ access to contraceptives.  For instance, insurers may no longer deny contraceptive coverage because the insured changed contraceptives recently.

Washington’s legislature enacted the expanded coverage requirements in order to guarantee equal access to reproductive health benefits and services.  The new law notes:

Neither a woman’s income level nor her type of insurance should prevent her from having access to a full range of reproductive health care, including contraception and abortion services;…Restrictions and barriers to health coverage for reproductive health care have a disproportionate impact on low-income women, women of color, immigrant women, and young women, and these women are often already disadvantaged in their access to the resources, information, and services necessary to prevent an unintended pregnancy or to carry a healthy pregnancy to term;…Existing state and federal law should be enhanced to ensure greater contraceptive coverage and timely access for all individuals covered by health plans in Washington to all methods of contraception approved by the federal food and drug administration;…

Court Ruling Emphasizes Common Sense Reading of Insurance Policy in Win for Policyholder

The Washington Court of Appeals recently decided Poole v. State Farm Fire and Casualty Company, a case about fine print in a homeowner’s policy.  After the Pooles’ home burned down, State Farm denied coverage under a technical reading of the words “similar construction.”  Washington’s Court of Appeals disagreed with State Farm and emphasized the traditional principal that insurance policies are interpreted based on their ordinary and common meaning as a reasonable policyholder would understand them.

The Pooles had a State Farm homeowner’s policy covering their home.  Their home also contained a shop the Pooles used as a business.  The shop was in the same building as the home. After the structure containing the home and shop burned down, the Pooles made a claim under their State Farm policy.  State Farm agreed the policy covered the loss and agreed to pay to rebuild the structure.

The dispute arose when the Pooles decided to rebuild the shop as a separate building from the home, rather than rebuilding both in the same building as they had been originally.  State Farm refused to pay to rebuild the shop in a separate building, claiming the policy only provided coverage if the Pooles rebuilt the shop in the same building as the home.

State Farm relied on language limiting coverage to the Pooles’ “dwelling” and allowing reconstruction only for “similar construction.”  Since the shop was only covered as an attachment to the Pooles’ home, State Farm argued rebuilding the shop in a detached structure wasn’t “similar construction.”

The court disagreed, applying the ordinary and common meaning of the term “similar construction.”  The court noted that the limitation on coverage to the Pooles’ “dwelling” limited only coverage, and did not limit the Pooles’ reconstruction options.  Regarding whether the detached shop was “similar construction,” the court found reasonable the Pooles’ argument that the detached shop featured the same style, quality and building materials, and was used for the same purpose, as the original shop.  The court also noted State Farm’s representative admitted “reasonable people could disagree” about whether the policy covered reconstruction of the shop in a detached structure.

Because the Pooles’ interpretation was reasonable, the court applied the traditional insurance law principle that policy language capable of more than one meaning must be given the meaning that favors the insured.  Accordingly, the court found in favor of the Pooles.

The Poole case is an important reminder that technical terms in insurance policies matter, and that insureds are entitled to have ambiguous insurance policy language interpreted in favor of coverage.

Texas Judge Strikes Down Affordable Care Act

A federal judge in Texas has ruled the Affordable Care Act (a/k/a “Obamacare”) can no longer be enforced.  The judge determined the Act cannot function without its individual mandate requiring virtually all Americans to carry minimum health coverage.  Congress repealed the ACA’s individual mandate at the end of 2017.

If the ruling becomes the law of the land, it will have serious implications for health insurance coverage.  Among other things, the ruling eliminates the ACA’s minimum coverage requirements including guaranteed coverage for people with pre-existing health conditions, emergency medical treatment, maternity and newborn care, mental health and substance abuse treatment, prescription drugs and pediatric care.

The ruling has the potential to eliminate health coverage for about 17 million Americans  — including millions who gained coverage through the ACA’s expansion of Medicaid.   Policyholders with pre-existing conditions could see significant premium increases once the ACA’s prohibition against increased charges for pre-existing conditions become void.

For the time being, the ruling has little practical impact for insureds.  The federal Centers for Medicare and Medicaid Services emphasized “There will be no impact to enrollees’ current coverage or their coverage in a 2019 plan.”  For now, the biggest concern is that the ruling will confuse insureds into failing to purchase coverage during open enrollment,  which CMS states will proceed normally.