Tuesday, June 24, 2014

Three things to add to Market Intelligence Center’s Guide to Understanding Long-Term Disability Insurance

Joseph Favorito, a Certified Financial Planner, has an article up over at Market Intelligence Center entitled A guide to understanding long-term disability insurance. I think it's a quite decent overview, and Mr. Favorito certainly does touch on the obstacles ERISA imposes on folks who are trying to secure long-term disability benefits under a group plan with their employer. There are, however, a few things to add in order to make the story complete.

First, Mr. Favorito indicates "a large number of employers provide LTD insurance for free as a benefit for their employees." If you ask me, no employer anywhere provides anything to any employee free; everything you get from your employer, from wages to fringe benefits to insurance coverage to haircuts is something you earn with your labor. None of this stuff falls out of the sky for "free"; it is provided only after you contribute your own blood, sweat and tears to maximize your employer’s profits. There's absolutely nothing wrong with that, but it is simply inaccurate to say that LTD insurance, or any other benefit of employment, is provided for "free." And, because these are things you have earned, the courts should not treat LTD these benefits as some sort of windfall.

Apropos of that, Mr. Favorito also provides a generally accurate account of what you have to go through once an ERISA "insurer" denies your claim; he discusses the fact you have 180 days to file an internal appeal with the same insurance company who just denied your claim, so that they can determine whether they want to pay benefits, and thus reduce their profits (spoiler alert unnecessary). And he indicates the insurance company can then wait another 90 days to respond, and while this process plays out, "you are potentially without income as you are unable to work." This apparent 90-day time limit supposedly imposed on these "insurers," however, is most often a completely toothless requirement: they can blow through that deadline with no meaningful consequence whatsoever. You, on the other hand, who are given 180 days to submit this "appeal," are going to be held to very strict compliance, to the point where if you are so much as one day late your claim is foreclosed for all time. On top of that, the information you submit along with this "appeal" is, in all likelihood, the only information a court would ever consider if you end up in litigation over your claim. Most folks do not realize, and the "insurance" companies certainly do not go out of their way to tell them, that when they are submitting an informal, internal “appeal,” they are actually assembling all the evidence they will ever be able to admit in court – and all too often without the assistance of a knowledgeable attorney.

Finally, Mr. Favorito notes accurately that a long-term disability plan is not the only potential source of benefits. As he says, you can certainly apply for Social Security Disability Insurance (SSDI) benefits, and see if you can get a claim (eventually) approved that way. Mr. Favorito notes that "should you qualify for SSDI, you can be almost assured that your claim against a long-term disability policy will be approved."

Would that it were true. While the law has changed favorably in recent years, and ERISA "insurance" carriers are generally required to pretend to consider what the Social Security Administration might have had to say about a claimant’s disability, the fact remains they are in no sense required to follow the determination by the Social Security Administration, and in a great many cases choose simply to ignore it (more about the impact of SSDI decisions on ERISA claims here soon, so you have that going for you). And, of course, in cases where ERISA applies, they all too often get away with it.

None of this is intended to criticize Mr. Favorito’s article, which provides a quite accurate overview of the issues surrounding long-term disability insurance and the impact ERISA has on your rights. As with all things pertaining to ERISA, however, what might appear to be the case on the surface very often obscures the ugly truth hidden underneath  this most unjust of laws.


1 comment:

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    Employee Benefits

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