COVID-19 Update: Impact on Long Term Disability/ERISA Claims

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Often employees are offered individual disability policies at a discounted rate if purchased with other employees. The employee may deal directly with a broker or the insurance company to purchase the policy, with the only employer connection a payroll deduction for premiums. The employees expect they have purchased an individual disability policy that is not part of an employer benefit plan. Only when their claim is denied or they are forced into litigation against the insurer due to a denial of benefits does the employee learn that the litigation may be governed under ERISA and not state law.

The recent case of McCann v. Unum Provident, 2013 U.S. Dist. LEXIS 13132 (D.N.J. Jan. 31, 2013), illustrates this situation, and how courts in the Third Circuit apply the safe harbor provision of ERISA. In McCann, a medical fellow purchased a policy that was offered to him at a discount through his employment. McCann paid the premiums directly. The policy took effect when his fellowship had ended. Benefits were denied and Unum argued that ERISA applied. The court ultimately agreed with Unum and held that the policy in question fell under ERISA and the “safe harbor provision” did not apply.

The safe harbor provision of ERISA removes a disability insurance plan from ERISA coverage if:

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In December 2012, we posted a blog regarding laws protecting Long Term Care Insurance consumers. Long Term Care is becoming an increasingly important area of focus as our population ages. However, the data inescapably indicates that LTCI is far more of a women’s issue than a men’s issue.

The New York Times recently published an article highlighting the special issues that women face as LTCI consumers. From a financial perspective, the Long Term Care Insurance market has been shrinking–with many carriers ceasing to sell policies altogether and others raising premiums by significant amounts–as the aging American population has increasingly come to call on benefits and insurers realize the true cost of the policies to their bottom lines. This issue is magnified in the case of women, who statistically live longer than men and consequently cost insurers the majority of money in LTCI benefits. Genworth Financial, the top LTCI carrier in the country, has announced that it will be raising premiums by up to 40% for single women applying for coverage. This “gender-distinct” pricing is legal in 48 states, including New Jersey. Statistics cited in favor of such pricing increases center around the fact that women have, on average, longer life spans than men. They are therefore more likely to be widowed and living alone by the time they are elderly, or to reside in nursing homes whose costs are covered by LTCI. These difficulties are in addition to increasing stringencies in the underwriting process, including home visits rather than telephone interviews, reduced inflation protection, and longer elimination (waiting) periods. More cynical speculators opine that the true reason is lower interest rates set by the Federal Reserve, which reduces insurers’ returns on invested premiums.

Despite the intensified shift toward gender-distinct pricing and stricter underwriting, insurers in New Jersey are bound by the terms of the New Jersey Long Term Care Insurance Act, which regulates the underwriting and pricing schedules of LTCI policies.

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The issue of whether a claimant with a relapsing and remitting condition is entitled to benefits arises fairly frequently in the disability context. Insurance companies often justify a denial of benefits on the fact that a claimant is in remission, or on the fact that a claimant’s variable symptoms have abated for a period of time.

In Colby v. Union Security Insurance Company & Management Company for Merrimack Anesthesia Associates Long Term Disability Plan, the First Circuit affirmed the District Court’s ruling that Colby, who suffered from opioid dependence, was entitled to LTD benefits due to her risk of relapse. Colby was an anesthesiologist whose practice allowed her ready access to opioids. Both her own doctors and several of the insurance company’s physicians had concluded that she was at a severe risk of relapse and that her returning to work would exacerbate this risk due to her occupation as an anesthesiologist and her comorbid back pain and mental health conditions. These opinions were supported by Colby’s continued struggle with addiction after leaving a treatment facility. The court concluded that, since the disability policy in question did not contain an exclusion for risk of relapse and that such a risk was a presently disabling condition, the District Court acted properly in awarding her benefits.

The risk of relapse is an issue in cases based on physical illnesses as well, particularly in cardiac cases where the stress of one’s occupation threatens to precipitate another cardiac event. See Dimsdale, “Psychological Stress and Cardiovascular Disease.” The Third Circuit addressed this issue in Lasser v. Reliance Standard Life Ins. Co., where Lasser, an orthopedic surgeon, had a diagnosis of coronary artery disease and had suffered a heart attack. Lasser argued that the stress of his occupation, including on-call and emergency duties would put him at risk for another heart attack. The Court agreed, finding that Lasser’s risk of relapse was a present disability under his policy based on his treating doctors’ opinions on the gravity of the risk.

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Fibromyalgia remains an enigmatic condition, as its symptoms are entirely self-reported and there is no objective testing that can confirm the presence of the disease. See MD Guidelines. This often makes it extremely difficult for claimants with fibromyalgia to get their disability carriers to pay their claims.

Fortunately, the Social Security Administration came out with a ruling this summer that provides guidance in determining whether a claimant is functionally impaired due to fibromyalgia. See SSA Ruling of July 25, 2012. Instead of the objective testing–such as x-rays and lab reports–which can substantiate other diagnoses, the SSA will here focus on the quality of the evidence documented by a claimant’s treating physicians. The SSA has provided that proofs may come in the form of medical records, so long as the physician conducts a physical exam and documents symptoms of fibromyalgia as prescribed by the American College of Rheumatology including pain, tender points, and the absence of any other objectively diagnosable disorder. The SSA will then look to see whether the pattern of the symptoms the physicians document is consistent with a diagnosis of fibromyalgia.

The SSA’s emphasis on the importance of treating physician’s opinions and documentation in fibromyalgia disability cases buttresses the holdings of many federal courts in ERISA cases who have maintained that an insistence on objective symptoms and the rejection of consistently documented subjective symptoms is an inappropriate basis on which to deny a fibromyalgia claim. See Brown v. Continental Casualty Co., 348 F. Supp. 2d 358, 369-70(E.D. Pa. 2004) (even if an ERISA administrator may sometimes impose a requirement for “objective” medical evidence that does not appear explicitly in a plan’s terms, it would be unreasonable to do so here . . . Such a requirement would effectively preclude any fibromyalgia patient from qualifying as totally disabled on the basis of the disease . . . Such a requirement would merit reversal here even if CNA’s administrative decisions were entitled to deference); Duperry v. Life Ins. Co. of North America, 2009 U.S. Dist. LEXIS 83532, *40-1 (E.D.N.C. Aug. 10 2009), aff’d at 632 F. 3d 860 (4th Cir. 2011) (finding the administrator’s denial arbitrary and capricious where it relied on the report of a physician who “recognize[d] plaintiff’s diagnoses of rheumatoid arthritis and fibromyalgia…[but went] on in each report to summarily state that pain associated with plaintiff’s fibromyalgia is not disabling”).

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On November 27, 2012, the Supreme Court of the United States heard oral argument in the matter of U.S. Airways, Inc. v. McCutchen. The question is simple — can an insurer require an ERISA beneficiary to reimburse it for health coverage payments made if the individual recovers money from the responsible party? In the usual circumstance, the individual is “made whole” by a recovery from the tortfeasor for his injuries and has enough to pay back the health insurer for the medical payments. But that does not always occur. If the injured person does not fully recover for his damages, must he still turn over money to the insurer who is contractually liable to pay for other benefits, such as medical coverage or disability benefits?

McCutchen was catastrophically injured in a car accident, but paid only a small sum from the case since the tortfeasor carried meager insurance. Despite the small settlement which did not fully compensate him for his damages, U.S. Airways claimed reimbursement out of the settlement proceeds for the full amount that it had paid on McCutchen’s behalf. It relied on the plan’s subrogation reimbursement provision which required reimbursement for any amounts recovered from a third-party tortfeasor. U.S. Airways also refused to pay its share of attorney fees associated with obtaining the resolution of the underlying case. See the Third Circuit’s Opinion at 663 F. 3d 671 (3d. Cir. 2011).

The Third Circuit overturned the District Court’s ruling based on equitable principles. Even though the plan gave U.S.Airways the contractual right to collect every dollar it had spent regardless of whether McCutchen or his attorney received a dime, the Court held that “appropriate equitable relief” under Section 502(a)(3) necessarily meant that any equitable remedy of reimbursement available to the insurer “must, absent other indication, be deemed to contain the limitations upon its availability that equity typically imposes.” The Third Circuit found that it would be unjust to require McCutchen to reimburse the full cost of his medical bills because it would leave him without full compensation for his medical expenses and would provide a windfall to the Plan.

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According to the National Institute on Aging and Alzheimer’s, early identification of Alzheimer’s may lead to earlier medical treatment. This is due in part to two things: 1) medical advances allowing a better understanding of cognitive decline due to age versus Alzheimer’s and 2) new criteria from expert panels of the National Institute on Aging and Alzheimer’s, for clinical diagnosis of mild cognitive impairment due to Alzheimer’s. The new criteria helps identify people who are in the symptomatic predementia phase of Alzheimer’s, known as mild cognitive impairment. The new diagnostic guidelines replaces previous techniques for identifying early stages of Alzheimer’s, and provide medical professionals with a new tool to assess their patient’s cognitive impairments. This evolved criteria for diagnosing mild cognitive impairment is crucial as early stages of the disease can only be determined by a clinician. The criteria used will allow a medical provider to differentiate between cognitive issues from age, other causes, and that of Alzheimer’s.

The Alzheimer’s Association predicts that by the year 2050, the presence of Alzheimer’s will triple, affecting more than 13.6 million people in the U.S. The rise is estimated to create medical costs up to $1.1 trillion by that time. With early detection techniques, health care providers can implement critical treatment to provide important options to those in need.

We at Bonny G. Rafel have worked with many people suffering from Alzheimer’s to help them receive disability benefits that they are entitled to. If you have been diagnosed with Alzheimer’s and are unable to continue working, we can help you apply for the disability benefits you deserve.

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The American Psychiatric Association has recently approved the Fifth Edition of the Diagnostic and Statistical Manual of Mental Disorders, or DSMV. The New York Times reports that after an extensive debate, the Association compiled a manual that provides new criteria for addressing some of the most common and controversial mental disorders. In certain instances, new definitions may alter, limit, or enhance insurance coverage for mental disorders previously considered behavioral or biological.

Notably, the authors of the DMSV have devised a more inclusive definition of depression. The Fourth edition of the DSM contained a “bereavement exclusion,” which held that grieving a person’s passing did not qualify as a mental disorder. The DSMV eliminates that exclusion; thus, individuals who exhibit the symptoms of depression due to the grieving process will qualify for the diagnosis. This is controversial because it places a potentially stigmatic label on the bereaved. From a disability perspective, however, those rendered unable to work following the traumatic experience of loss will now have a diagnostic basis for claiming benefits.

The committee working on Autism also re-structured the way the disorder is characterized, which is a development we discussed in February 2012. While Autism and related syndromes have previously been broken down into categories including Asperger’s and pervasive developmental disorder not otherwise specified, all of the categories will now come under the unified heading of “autism spectrum disorder.” However, criteria for this new category are predicted to exclude some of those who previously would have qualified for a diagnosis. This raises concerns regarding disability resource availability–including private insurance and social security benefits–for those who no longer fall under the definition of autism.

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With the American population aging and the future of the already-limited Medicare and Medicaid programs uncertain, private Long Term Care Insurance may be the best remedy for ensuring that elderly and chronically ill citizens receive suitable care to fit their medical and quality-of-life needs. However, the cost of LTCI remains out of reach for many middle-income families, and policyholders remain subject to unfavorable terms in their policies.

The Massachusetts State Legislature recently passed a Bill entitled “An Act Establishing Standards for Long-Term Care Insurance” in order to better protect LTCI consumers. Massachusetts has pioneered a Long-Term Care exemption, which allows Medicaid recipients with private Long Term Care Insurance policies to insulate their homes from Medicaid liens, and the new act enhances consumer protection under that law. Another protection that the Massachusetts law provides is the adoption of the National Association of Insurance Commissioners’ Long-Term Care Insurance Model Act, which provides various protections including prohibitions on deceptive sales practices and the cancellation of policies due to age or medical deterioration, disclosure requirements, and limitations on pre-existing condition exclusions. 46 other states, including New Jersey, have already passed legislation adopting all or part of the Model Act. New Jersey has incorporated the Act in its own Act on Long Term Care Insurance, N.J.S.A. § 17B:27E-1, et. seq., which regulates issues such as sales of policies, rescission, and grounds for denial.

Unlike Massachusetts, New Jersey has not passed a law exempting individuals with long term care policies from Medicaid Liens. New Jersey citizens applying for Medicaid cannot own more than $2,000 worth of assets in order to qualify for benefits. Passage of a law such as the Massachusetts Act would serve the simultaneous and worthwhile goals of preserving state resources with regard to long term care and providing incentives for seniors to remain in their homes to obtain care for as long as possible.

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The government has implemented a mandatory program to shift the health industry into the digital age. The Health Information Technology for Economic and Clinical Health Act enacted under Title XIII of the American Recovery and Reinvestment Act of 2009, provides incentives to physician practices and hospitals. But for those who do not meet the electronic medical records deadline for implementation, the government has laid out a series of penalties which include a reduction on medicare reimbursements which increases each year. The incentives provided by the government is intended to help defray some of the costs of transferring medical records to EMR and incorporating a comprehensive software program in the medical practice.

The overall purpose of the program is to centralize all medical records so that your doctors can access your medical history at the touch of a keystroke. This modernizing medical record collection and access is a terrific medical advance which will improve the quality of care and definitely save lives. It will allow for a more comprehensive approach to your medical problems since your doctors records will all be in one place.

Yet, the electronic file system and the good it will do, is still far off. Since medical doctors do not have to use a uniform software program, a cottage industry has emerged with dozens of tech companies offering their own version of a software program which complies with federal regulations. Many doctors are stumbling with the software and having problems uploading all of their patient information.

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Breast cancer strikes far too many women every year. However, new research has identified four different types of breast cancer, leading researchers to investigate how treatments may be specifically geared toward each type of cancer to make therapy more effective. Women become unable to work during cancer treatment including chemotherapy, which often causes cognitive challenges and fatigue, among other symptoms.

The New York Times reports on the research of the Cancer Genome Atlas, which has been working to discover and catalogue the various genetic mutations responsible for causing cancer. The study identified four different types of breast cancers that develop in the milk ducts. For example, basal cell cancer more resembles ovarian cancer than other forms of breast cancer in terms of its makeup, which may justify using ovarian cancer treatment for this form of breast cancer. Luminal cancer, which grows in the lining of the milk ducts, comes in two forms, A and B. As luminal A cancers generally have a better prognosis than luminal B cancers, researchers are investigating whether it might be more appropriate to treat type A with hormone therapy and reserve chemotherapy only for type B patients. The fourth type of cancer identified is known as HER2-enriched which contains an extra copy of a gene which causes it to grow. While scientists had previously prescribed the drug Herceptin to “block” the HER2 gene in all cancers containing an excessive amount of the gene, it appears as though the drug may in fact only be effective on those who have diagnosable HER2 cancers. Clinical trials will reveal the effectiveness of the proposed forms of treatment on the different types of breast cancer.

While new research looks promising, we remain keenly aware of the effect that cancer treatment can have on a woman’s life and her ability to work. Bonny G. Rafel is experienced in counseling breast cancer patients through the disability process, and will continue to approach each case with compassion and the unique attention that each deserves.

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