Ask any doctor – having your own practice is a lot of work. Not only seeing patients, but all the paperwork, employee problems, and hundreds of other nagging issues involved in running a business.
If you become disabled, the process of filing a claim for benefits isn’t much easier. Disability insurance companies see doctors as a fantastic market to sell more insurance and generate new premiums while at the same coming up with defense tactics to deny their claims. A common tactic is to discretely change a claim from total disability to residual disability. Most insureds have little idea of the downsides of this change until it’s too late! It’s important to recognize how and why insurance companies use these claim denying strategies so insureds – especially medical professionals – can be prepared on how to respond to these insurance company tactics.
Different companies have different language in their policies. There are differences between “own occ” and “any occ.” Different terms can be used, such as residual, partial or proportionate. Occupational duties can be defined as “material and substantial” or “important.” Some policies only cover total disability – if the insurance company can prove you’re residually disabled, then the claim is over and no benefits are due. To simplify the discussion in this blog post, I’m going to focus on residual claims with “own occ” coverage. Also for simplicity’s sake, I’m not going to include the “in the same manner” language that could affect claims in California.
So what’s the difference between a total disability claim and a residual disability claim?
The main difference is usually the simple between some versus all of the material and substantial job duties. If insureds can perform none of the material and substantial duties of their occupations, they can qualify for total disability. If they can perform some but not all of the material and substantial duties of their occupations, the claims are often paid under the residual disability clause. With residual claims, the insurance company will consider an insured’s income and pay a percentage of the monthly disability benefits based on the difference between the pre-disability and post-disability income. For many doctors, this consideration could mean no disability benefits at all if their practices continue to make money.
How are the material and substantial duties of the insured determined, and who proves them?
After the insurance company receives the initial claim forms from the doctor, the claims examiner usually asks for large amounts of information and documents that will pertain to the duties of the claimed occupational and the insured’s income. Insurance companies usually require much more information, paperwork, and correspondence for residual claims. These requirements will also continue for each and every month. These documents include items such as personal and business tax returns, financial statements (Quicken, QuickBooks, etc.) and reports of CPT codes for the insured and the practice. Each of these items has a specific use in proving that a disability claim is residual rather than total.
The insurance company is going to be looking to dilute the material and substantial duties by linking the insured to different types of duties before the claimed disability, duties that may not have been impacted by the disability, which can change a total disability into a residual claim.
Some of the most important information for insurance companies are reports of your CPT code charges. These reports are used as a measure of how much and which types of the practice work was performed by the insured as opposed to other members of the practice. One of the goals is to skew the data on these reports to show the lack of a relationship between the claimed disability and the procedures performed by the insured. Likewise, if the insurance company can prove an insured was doing more than just treating patients, i.e., was actively involved in managing and operating the practice, then those administrative duties can be used to turn a total disability into a residual disability claim. Insurance companies hire their own doctors and medical practice management consultants to give expert opinions about an insured’s “actual” duties.
An example of this skew is a dermatologist who has a medical condition whose symptoms include hand tremors that prevent him from performing laser surgery. Looking solely at the absolute numbers of laser surgical procedures on the CPT reports may “prove” that only a small fraction of the doctor’s time was spent performing laser surgeries. So the insurance company then insisted that the claim is only a residual disability. But what was ignored on these reports is that the laser procedures were heavily marketed, and many other charges were related to laser surgeries as well. All of these would have been lost because of the disability and indicated a total disability.
The insurance company can pursue the opposite relationship as well. For example, if a temporary or replacement doctor is brought in to replace the production of a disabled doctor, the CPT codes may not indicate a reduction in charges – and the insurance company can insist that the insured is not totally disabled.
It is important to make sure that the CPT reports run from the medical practice management system accurately reflect the duties of the insured, both before and after the date of disability.
The insurance company will examine the insured’s personal tax returns, looking for the amounts and sources of income reported by the insured to gauge the relationship with the insured’s reported occupational duties. They are many different ways income can be reported on a tax return (wages, corporate income, etc.) and each tax return is unique. This issue starts to get into technical differences between earnings and unearned income as well as spouse’s income earned from the practice. Most insurance companies hire forensic accountants to go through the returns in great detail. One insurance company even combines the incomes of a husband and wife if they both work in the same practice, regardless of their actual reported income or who was actually doing what.
The insurance company will also go through the tax returns and financial statements of the insured’s practice, assessing the amounts of revenues and types and amounts of expenses to gauge the relationship with the insured’s reported occupation. For example, a multi-provider practice with several locations will be quite different from a sole doctor working in a single office. Again, the insurance company will be looking to find different types of occupational duties before the claimed disability, usually related to administrative or managerial duties instead of the doctor’s occupation, duties that may not stop after the disability, which can switch a total disability to a residual claim.
Once an insurance company can change a total disability into a residual claim, then they can go through the financials of the practice to come up with reasons other than the disability that may have reduced the insured’s income. These other reasons can then be used to reduce the disability benefits. If the insured’s practice is continuing to generate any income, this can be used to reduce the disability benefits as well. A key point to remember: income levels are irrelevant and don’t matter in most total disability claims – they only matter in residual disability claims.
How do I make sure all of this information accurately represents the material and substantial duties of my occupation?
All of this information has to pass through the hands of the insured before it goes to the insurance company. It’s generated either by the practice or by companies hired by the practice. The insurance company can request, but doesn’t have to be provided, certain information in a pre-determined format if that information or format is not available. Many of these reports can be run in different formats depending on the purpose, so while it’s important to provide the information requested by the insurance company, take enough time and care to provide the information in formats that accurately and clearly reflects how the disability has affected the practice, the occupation, the duties, and the income of the insured.
Insurance companies are asserting that, as the owner of a practice, doctors are more business managers and not simply physicians, that their material and substantial duties include managing their business rather than just performing procedures. Often referred to as having a “dual occupation,” doctors are having their material and substantial duties relabeled to help the insurance company either reduce or deny their disability claim.
That’s why it is so important to provide supporting documentation that clarifies the actual material and substantial duties of the insured. The first and most important step of this process is an accurate, detailed, and complete job description (the top tip on my last blog!) That’s critical to the success of a total disability claim. Insureds must prove that they can no longer perform any of the material and substantial duties of their occupation in order to be considered totally disabled. With the insurance company trying to prove that the insured still performs some duties, it is important to prove that those duties either were not performed by the insured before the disability or that those duties are not “material and substantial” to “your occupation.”
For example, a surgeon can no longer perform surgery because of back pain and is unable to stand for more than 30 minutes at a time. The CPT code reports suggest that most of the surgeon’s time was spent doing patient consultations and paperwork in his office, and all of his income has not stopped since his disability, so the insurance company may try to label his claim as a residual disability. What the insured needs to show is that his occupation was that of a surgeon, not a doctor seeing patients in his office and doing paperwork. His material and substantial duties would pertain to his surgeries. Furthermore, if the surgeon cannot perform surgery, he would have no pre- or post-op consultations for his patients. While he may see patients for other surgeons in his practice, that should demonstrate a different occupation.
Recharacterizing total disability claims to residual disability claims is a common way for insurance companies to reduce or deny claims. They know that many insureds don’t have the background or experience to understand and fight this change. Some insureds are misled by well-intentioned but misinformed people who say that a residual claim is just as good as a total disability claim. Many doctors may not realize that they should be considered totally disabled and will just accept the insurance company’s assertion that they’re only residually disabled.
It’s important for doctors to understand that income from their practice does not automatically disqualify them from being totally disabled. Income doesn’t even come into play in most total disability claims, which is why insurance companies try to change total claims into residual claims so often. The first and foremost focus should be proving that an insured cannot perform any of the material and substantial duties of his or her own occupation.
If you have any personal experience with residual disability claims or the massive amounts of information and documents that are demanded on a monthly basis for residual claims, please comment below. If your insurance company is trying to recharacterize your total disability claim to a residual disability claim and you want help, please do not hesitate to call our offices at (855)828-4100 or contact us via our website for a free consultation.