No. 5 – What every medical professional needs to know about ERISA.
It is important that medical professionals understand their long-term disability policy so they can prevent the disaster of being disabled and being unable to recover the benefits they deserve.
Did you know that there are three types of disability policies? Do you know which kind you have?
The first is an individual disability policy, which you may have purchased directly from a carrier and which provides you long-term disability benefits in the event of sickness or injury.
Do you know that there are two types of individual policies? The first is a general policy that insures you against being disabled and being able to perform all work, while an “occupational” policy provides you disability benefits if you can’t perform the material and substantial duties of your own occupation. Obviously, an occupational policy will provide greater coverage to a medical professional who would be entitled to these benefits even if they were able to engage in another occupation.
The second type of long-term disability policy is a group policy which is made payable to the participants of professional associations or medical practices. Group policies provide benefits based on a percentage of your base salary. These benefits normally pay 50-75 percent of the base salary and limit the maximum amount of benefits you are entitled to per month, regardless of your base income. It is not uncommon for these group policies to reduce benefits when you receive income from other sources such as Social Security Disability, Workers’ Compensation, or even a 401K distribution.
Employer sponsored disability policies are typically the least expensive policies and provide employees with disability insurance based upon a percentage of the base salary as part of the employer’s overall benefit package.
Unfortunately, group and employer sponsored policies are governed by the Employer Retirement Income Security Act of 1974 (ERISA). For a lot of ERISA attorneys, that acronym is named: “Everything Ridiculous Since Adam.” ERISA deprives medical professionals the right to a trial by jury, the possibility of punitive damages, and it significantly affects your administrative and litigation rights.
The most an aggrieved medical professional can recover in an ERISA lawsuit is the amount of the benefits due, the interest cost and a discretionary award of fees.
There have been rulings by the court that disability claims brought by business partners or even sole shareholders of organizations who purchased individual insurance coverage, the owner of the business is covered by ERISA.
Unfortunately, at the time disability policies are sold to organizations, one of the primary factors is whether the applicant is interested in tax savings or coverage. Unfortunately, most organizations will opt for the least expensive policy that is taxable rather than for expanded coverage.
ERISA policies have a number of disadvantages. These will require you to have an administrative appeal before you can sue. If the plan provides the administrator with the discretion to determine the claim, courts generally overturn that decision if the administrator has acted arbitrarily and capriciously. So long as the record reflects a rational basis for the decision despite overwhelming evidence, the court will uphold the decision.
Unfortunately, the court is limited to reviewing the evidence that was in the file at the time the administrator made the decision. As a result, you can’t offer additional documentation or even testify in front of a judge.
Despite these disadvantages, medical professionals are not doomed to having their claims denied. It is important that a medical professional consult with an attorney before filing a claim so that you understand the definition of disability, or if what is covered under base earnings can provide you with an opportunity to get your medical and financial house in order, develop supporting medical evidence before you file your claim for disability benefits.
Disability insurance companies do target high-end policies issued to medical professionals for denial or termination with the hope that ERISA will limit their exposure.
Don’t make yourself a target for claims denial. Contact the law office of Cavey & Barrett to assist you in reviewing your disability policy, to assist you in your pre-claim filing preparation, and to assist you in reversing denials of disability claims.
Answering these broad-based questions isn’t easy. Help is a phone call away. You can contact Nancy Cavey, an experienced long-term disability attorney at 727-894-3188.