There are many insureds today who seem to think they know enough about the disability claims review process to successfully defend their own Plans and policies. And, although I do get a few emails here and there from insureds telling me how well they’ve managed their claims, there are probably thousands of claimants and insureds who are not receiving the benefits they are entitled to just because “they didn’t know.”
There’s a lot involved in managing disability claims, that affects the outcome. It’s not just about filling out forms, staying in treatment and skillfully manipulating the claims specialist assigned to your claim.
Most insureds mistakenly believe “the claim” is about them, when it isn’t. Therefore, they manage the claim AS IF it is all about them. “Here’s my medical”, “I can’t do this or that”, “I sent you…” “My doctor said…” “Did you receive my paperwork?” “I need confirmation…” and on and on and on.
A disability claim is NEVER about the disabled person, and what’s more, insurance companies rarely if ever make decisions because of a person, what they are going through, what they say, or how much paperwork they receive, or didn’t receive. In fact, insurers deliberately hire “A-Type” personalities so “they won’t give away the farm.” If you ever thought your claims handler to be your friend, think again! YOU, the claimant or insured, never influence a decision on a disability claim. It’s not about YOU. So, let’s take a look at how claim decisions, (and when), are made.
The most important information associated with your claim is, your claim number, your social security number, and the financial reserve associated with your claim. The financial reserve for a disability claim is calculated as soon as it comes in the door. For those of you who haven’t been following me, a “financial reserve” is the “future value” of a disability claim, or in simple terms, a lump sum of money that would have to be paid to the insured if the claim went to maximum duration. The higher the monthly benefit, the higher the financial reserve.
Insurance companies must put away or “reserve” this lump sum for each claim; they may not spend the money. This might be too much information for you, but financial reserves are “liabilities” on the company’s Balance Sheet and reduce profit reporting and cash flow. Therefore, think about this, your claim comes in the door, a financial reserve is calculated in the financial system, a liability is created, the company can’t spend, cash flow is restricted. If you were the insurance company how likely would it be that it would do most anything to get rid of your claim? Now, we’re getting closer to what really matters when it comes to managing your claim.
Make no mistake, the process of reviewing your claim is centered on its financial reserve and how quickly it can be denied thereby reducing the financial reserve and removing the liability from the financial statements.
Now, your claim is sitting on my desk, paying $9,000/month with a financial reserve equal to approximately 1M. By the way, they don’t tell the claims handlers what the financial reserve is, but claims handlers aren’t dumb. The higher the benefit, the higher the reserve figure is. Knowing the philosophy of my company is “target the biggest bang for the buck” your claim is placed as a top priority investigative target, whether it’s surveillance, IME, or collection of massive amounts of medical paperwork. Claims worth >1M in financial reserve are always on the target list. The break is usually around $4,000/month when claims leave the target list.
Internally, claims managers are managing expected profit objectives (Unum calls it Shareholder Value to make it sound a positive thing) called the LARs, or Liability Acceptance Rates. In order to understand LARs you need to know that nearly all premium for disability claims is “costed”, or charged, at a 60% payout rate. If too many claims are presented for payment of benefit to exceed 60%, the company is in A NET LOSS SITUATION. This is the only time when I witnessed executive management lose their cool. “Tell them to deny more claims!”, they’d scream at the floor managers, dropping the “F” bomb. It’s not a nice place to work when managers are faced with not meeting financial goals.
Clearly, you can see that it does not matter who you are, that you are disabled, or what you’re going through. Now comes the totally horrible part.
All claims now become targeted not respective of benefit amount. Here you are with a $2,000/month benefit and your claim is suddenly identified as a target denial so that internal financial objectives can be met. This will continue until the LARs are once again at, or below 60% of payout. Let me once again identify what we’re talking about here. If more than 60% of total claims presented for payment are PAYABLE, the TARGET SWITCH is turned on for all claims.
“So what does this mean for me?,” you’re asking. I couldn’t possibly go into all of the egregious things claims handlers are asked to do when the LARS (payout rate) is above 60%, but it isn’t good. The key is knowing what is going on within the claims process and doing what is necessary TO GET YOUR NAME OFF THE TARTET LIST. How many insureds do you think really know about all of the above when they are still in the “this claim is all about me mode?”, and are just sending in more medical. How. much do you think attorneys know about internal processes? Really.
And, this is what worries me. What I’ve described here is really just the tip of the iceberg. I suppose I could write many more blogs like this one, but are people listening? I don’t know. But, the likelihood of an average claimant or insured managing a claim through the financial reserve process, or even worse, ERISA processes, causes me concern.
I hope this information has broadened your perspective when it comes to the know-how required to manage disability claims. And, I really haven’t even gotten started.
