In all of the uncertainty around preparing for and adapting to the new world of the Patient Protection and Affordable Care Act (PPACA), a very basic need and opportunity may be missed by many agents and brokers: ensuring that physicians and providers have adequate disability coverage.
The same kinds of concerns should affect how agents and brokers think about many different kinds of protection arrangements, including life and long-term care planning arrangements, but the need to insure physicians’ ability to earn an income is especially urgent. There was a time when disability coverage was something physicians only thought of out of medical school or when they started a new job.
Even today, many physicians and practice administrators view insurance purchases as commodities — often making the decision solely based on price. In today’s market, that’s not a sound business strategy.
First, consider the fact that statistically, more than 40 percent of physicians who are now 40 years old will suffer an injury or illness that will impair their ability to work for at least three months by the time they turn 65.
Second, who knows how the ACA will affect physicians’ ability to return to doing the kind of work they want to do? If you are currently working with physicians or other providers, here are some important points to understand about group disability coverage options for physicians in today’s rapidly evolving ACA marketplace.
1. Don’t be tempted by today’s soft market.
We are in the midst of a historically soft market. Pricing is lower and competition higher than ever before. But what happens when that now 50-year-old physician suffers an injury 10 years from now and the low-priced carrier is no longer in business? That’s a real possibility in today’s marketplace.
See also: Forgotten something?
Consider this scenario: When a carrier signs a long-term disability policy for a doctor, there is about $3.4 million of potential liability (assuming a 40-year-old doctor who becomes disabled and is subsequently paid $15,000 a month for 25 years).
Multiply this sum by potentially hundreds or even thousands of claims, and it’s clear that the carrier must have considerable financial strength for you to bet your client’s future economic well-being on them. And, when ticking off the boxes for a good carrier, also make sure it has specific experience and the reputation for fairly and quickly settling claims in the physician disability marketplace.
2. The definition of disability is the cornerstone of a good policy.
While it seems simple enough, when it comes to disability insurance, one of the biggest problems is a lack of clear definition as to what constitutes a disability and when the coverage will kick in.
There are significant differences in job duties and responsibilities among specialists and subspecialists, such as a urology surgeon or a kidney transplant surgeon. As an example, a kidney transplant surgeon suffering a hand injury may become unable to perform surgery.
An insurance policy with an “own occupation” definition of disability may view the surgeon as still able to practice family or internal medicine, meaning no disability coverage would be forthcoming. That hurts the physician and the group. Be sure you find a policy that covers the physician’s specialty or sub-specialty. Additionally, how a policy defines this surgeon’s material (job) duties is critical.
Some group disability policies that include a specialty definition may also include ‘national economy’ language. This language means that the carrier can assume a physician’s duties are the same as those performed by a physician in a similar practice anywhere in the country. This is very subjective, which is bad news at claim time.
Be sure you select a policy that defines material duties as the actual duties a physician performs in their specific practice. Brokers can play an important consulting role by reviewing existing coverage language and providing counsel to their clients as to where and how the language should be revised.
3. Avoid managed disability language.
Some policies include language that allows the carrier, not the attending physician, to determine whether a claimant is trying hard enough to return to work. This, of course, can be very subjective. Other policies limit benefits for any self-reported condition, such as fibromyalgia or Epstein-Barr. If anybody were capable of self-diagnosing, wouldn’t it be a physician?
Some policies assume a 40-hour workweek is full-time, even if the physician had been working 70+ hours per week. Once the physician is able to work 40 hours, they are no longer considered disabled and the benefit is canceled. Each of these policy limitations or “loop holes” are categorized as “managed disability” provisions in a policy. Be sure the policy you find for your physicians does not include any of this language.
Building a successful disability program for physicians today requires coordination, communication and careful review upfront – before a contract is every signed. The good news is that many of the potential disability contract language pitfalls can be removed without causing the cost of coverage to escalate.
The key is to understand and review contract language carefully, discuss the contract carefully with your physician clients, and to work with carriers and program managers who are committed to helping you create a strong program for all your clients for today – and tomorrow.