Disability Insurance Works When You Can’t
By Geri Layne Craddock, CLU
Vice President at Seabury & Smith, Washington, DC
[Digest, Summer 2001]
Have you ever stopped to consider how you would maintain your income if you were to suffer a disabling accident or illness? Many people believe that Social Security would be enough to protect them if they could not work. In fact, Social Security contains a very narrow definition of disability under which many situations are not covered. Additionally, Social Security benefits often are considerably less than private or group insurance benefits.
Workers’ compensation insurance should not be confused with disability insurance: workers’ compensation covers only disabilities that occur on the job. Disability plans offered by employers vary considerably in coverage length and percentage of salary that is covered. Many employers do offer disability insurance, but often it’s short-term coverage-generally one to five years-and may be grossly inadequate for those who suffer a long-term disability, such as paralysis or back injury.
At first glance, the cost of disability insurance might seem high. But it is important to remember that this is basic and essential insurance protection for people who rely on their regular income. According to the U.S. Census Bureau, one in five Americans were disabled in 1997.1 The American Council of Life Insurers maintains that a 35-year-old is six times more likely to become disabled than to die before he or she reaches age 65.2 Clearly, disability insurance may be even more essential than life insurance.
If you are interested in securing disability insurance, shop around and compare plans. Remember to weigh the cost against the potential benefits you would receive if you were unable to work for two, five, or twenty years. Examine these key elements as you compare policies:
Definition of “total disability.” This could be the most critical feature of your policy. Under many policies, you must be unable to perform any job for which you are qualified. One way to protect the educational investment you’ve made in your career is with own occupation coverage. Own occupation policies pay benefits if you are unable to engage in your own occupation even if you are able to return to work at a lower paying job that is not in your field. Some policies even consider a recognized medical specialty, such as ophthalmology, to be your occupation.
Length of benefits. Ideally, you should look for long-term coverage that protects you until age 65 even if you have to opt for lower benefits to keep the premiums more affordable.
Amount of coverage. To ensure that you have incentive to return to work, most plans set limits on the percentage of income you can insure, usually 50% to 60% of your total gross annual earnings. If you have an employer-provided plan that provides only limited coverage, consider purchasing supplemental coverage from another source.
Waiting period. The elimination or waiting period is the amount of time you must be disabled before your benefits begin-the shorter the waiting period, the higher the premiums.
Taxation of benefits. Benefits may be tax-free if you pay the premiums out-of-pocket, so check with your tax advisor.
Residual benefits. After a serious disability, many people return to work on a part-time basis for part-time pay. Residual or partial benefits can allow you to receive a combination of income and disability benefits until you fully recover. Without this feature, your benefits would most likely stop as soon as you return to work.
Financial strength of the insurance company. Find out as much as you can about the insurer. High ratings from A.M. Best Company, Standard & Poor’s, Moody’s Investors Service, or Fitch Ratings are good indicators of financial strength. Each of these independent rating companies have web sites where you can access information about various insurance companies.
Portable coverage. Having your own policy outside of your employee benefits allows you to move from practice to practice without fear of losing your coverage. Association-sponsored insurance is an excellent resource for that reason.
A valuable benefit of your Academy membership is your access to its many sponsored insurance programs, which have been individually tailored to meet the specific needs of ophthalmologists.
If you would like an information kit sent to you on the Academy’s Group Disability Income Plan,3 including plan features, cost, eligibility, renewability, limitations, and exclusions, call Seabury & Smith, the Academy’s life and health insurance administrator, at (888) 424-2308.
Notes:
- Taken from www.census.gov.
- Taken from www.insure.com/health/longtermdisability.html.
- Underwritten by New York Life Insurance Company, 51 Madison Avenue, New York, NY 10010.
New Coverage for HIPAA Proceedings
By Kimberly Wittchow, JD
Digest, Fall 2001
On January 1, 2002, OMIC will add patient privacy regulatory proceedings coverage to its fraud and abuse insurance program. This is because, hot on the heels of the government’s Medicare/Medicaid fraud and abuse initiative, another potential regulatory nightmare for ophthalmologists looms. The Health Insurance Portability and Accountability Act (HIPAA), one of the federal laws invoked in anti-fraud cases, contains new patient information privacy regulations enforceable beginning April 2003. This complex set of rules sets stringent standards for maintaining the privacy of individually identifiable health information.
Clarifications and guidelines already have been published to further elucidate the HIPAA statutes, with more to follow as health care providers try to make sense of HIPAA in relation to state privacy laws and their current practices. Simply stated, the law provides that a health care provider may not use or disclose protected health care information (PHI) except as required or permitted. Health care providers will need to provide patients with new blanket consent and specific authorization forms for the use of patient PHI. Ophthalmologists and anyone they share PHI with (such as companies providing accounting, billing, accreditation, or legal services) must enter into business associate agreements stating they will take appropriate safeguards in the transmission and use of PHI. When PHI is disclosed, providers may be require to de-identify the PHI or make reasonable efforts to disclose only the minimum information necessary to accomplish the intended purpose.
Under the new regulations, patients will have many affirmative rights that providers must facilitate. For example, patients can request restrictions on the use of their PHI; inspect, copy, and amend their PHI; and request an accounting of disclosures that providers have made of their PHI. In addition, health care providers must comply with certain administrative requirements, including: documenting their policies and procedures; appointing a privacy official; implementing privacy training; and creating administrative, technical, and physical safeguards to protect PHI.
HHS Encourage Cooperation
While much of this seems daunting, the U.S. Health & Human Services Department is encouraging cooperation and assistance to help providers achieve compliance – unlike the witch-hunt tactics of anti-fraud forces. Further, when assessing a practice’s reasonable compliance, the government will take into consideration a provider’s size and type of activities related to PHI. Punitive enforcement, at this point, is not a priority. However, civil fines, lawsuits, criminal fines, and imprisonment are tools the government can imply if it chooses to aggressively ferret out non-compliers.
What does this mean to OMIC insureds? First, it is essential that ophthalmologists understand the law and how it applies to their practice. Second, they must discern what steps to take to be compliant come spring 2003. Third, practitioners need to implement a protocol and then follow through on prescribed compliance procedures. Fourth, ophthalmologists should ensure that, as part of their insurance package, they are covered in the event the government targets their practice for violation of HIPAA regulations.
In light of the quickly approaching April 2003 deadline, OMIC is taking measures to protect and educate insureds. Risk management seminars will cover HIPAA privacy rules, and in early 2002, OMIC will make a HIPAA compliance program planning tool available to help insureds further understand the law and implement protocols to protect patient health care information.
Coverage for HIPAA Proceedings
Also in 2002, OMIC is expanding its fraud and abuse insurance program to cover HIPAA proceedings. OMIC’s Fraud & Abuse/HIPAA Privacy insurance will cover legal expenses civil proceedings instituted against the insured by a government entity alleging violations of HIPAA privacy regulations. OMIC’sComprehensive Fraud & Abuse/HIPAA Privacy insurance will cover legal expenses for proceedings instituted by a government entity alleging HIPAA privacy violations and resulting in administrative fines and penalties.
This HIPAA privacy coverage is in addition to both policies’ coverage of billing errors proceedings instituted by a government entity, third party payor, or qui tam (whistleblower) plaintiff under the False Claims Act. OMIC will provide a Fraud & Abuse/HIPAA Privacy policy free to its professional liability insureds $25,000 limits ($50,000 effective Jan 1, 2011). Higher limits to $100,000 are available for additional premium. OMIC offers American Academy of Ophthalmology members who are not OMIC professional liability insureds the opportunity to purchase this legal expense coverage as well. OMIC insureds and other Academy members also are eligible to purchase the Comprehensive Fraud & Abuse/HIPAA Privacy policy with limits ranging from $250,000 to $1,000,000. A $1,000 deductible applies to both policies.
For further information regarding OMIC’s new Fraud & Abuse/HIPAA Privacy program, please call the Sales Department at (800) 562-6642, ext. 654.
Underwriting Life, Health & Disability
| By Geri Layne Craddock, CLU Vice President at Marsh Affinity Group Services, a service of Seabury & Smith |
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[Digest, Winter, 2002] Insurance companies rely on experienced reviewers, called underwriters, to evaluate and classify risk. When a life, health, or disability underwriter receives an application, he or she verifies the application information, collects omitted data, and gathers additional input. If a medical exam or test is required to evaluate health risks, the underwriter will arrange for it and review the results. The underwriter might contact the applicant’s doctor to check medical records, call to verify employment status, or review motor vehicle records. In some cases, insurance companies turn to a third party verification service, such as the Medical Information Bureau (MIB). The Medical Information Bureau MIB reports may include, among other things, data on height, weight, lab tests and blood pressure readings, but only if these factors are considered to be significant to an applicant’s longevity or health. Some nonmedical information, such as an adverse driving record, participation in a dangerous sport, or how often someone has applied to other member insurance companies for coverage, also may be reported by the MIB through its insurance activity index. All of this information is highly confidential and tightly controlled. Entire medical records are not on MIB reports. Rather, conditions (“risk factors”) that show up on medical records, not specific numbers, are coded on MIB reports. These codes serve as “flags” to underwriters, who can pursue further investigation if they deem it necessary. According to industry standards, an underwriter cannot base a decision solely on MIB data. Insurance companies must conduct their own investigations, using MIB reports only as verification. The Applicant’s Role After receiving a life, health, or disability application, the underwriter may call the applicant to collect more data. The sooner the applicant provides the information, the faster the process will go. The insurance company may return an application if additional information is needed. Once all the necessary information is collected, the underwriter evaluates this information against the insurance company’s accepted underwriting policies. These confidential guidelines vary, but generally include age, income, morbidity rates (likelihood of becoming ill), occupation, and height and weight charts. It can take from several weeks up to a few months to underwrite an application, depending on the company, the type of insurance sought, the complexity of the applicant’s medical history, and the response time to the underwriter’s requests for information. Unfortunately, insurance companies sometimes have to decline applications. In cases where the applicant believes he or she has been declined mistakenly, the insurance company usually allows the applicant to appeal the denial. Some companies allow reapplication for coverage after a certain amount of time has elapsed. In instances where a policy expires, the insured may have to repeat the underwriting process, depending on the clauses of the policy. Some policies allow insureds to automatically renew their coverage without repeating underwriting, even if conditions (such as health) have changed. Other policies require insureds to reapply for insurance and undergo what is known as post-selection underwriting in which the carrier decides whether or not to grant continued coverage. Members of the American Academy of Ophthalmology can participate in high quality, reasonably priced, members-only insurance plans, including life, disability, and office overhead expense coverage.2 For more information, please call (888) 424-2308. Notes:
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Options for Long Term Care
| By Diane Brown Long Term Care Researcher for Seabury & Smith, Inc. |
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| [Digest, Winter, 2003]
Finding the right long term care insurance policy now could mean substantial savings for you and your family later. But what’s the right long term care insurance plan? Everyone’s needs differ. That’s why it’s important to understand long term care insurance and what different policies offer. Long term care is designed to help a person perform routine daily activities, such as eating, bathing, and dressing, in a nursing home, assisted living facility, Alzheimer’s facility, or at home. Traditionally, long term care was provided in the home by a family member. Today’s families tend to be smaller and family members often live hundreds or thousands of miles apart, making it more important than ever to plan for your own long term care needs as well as those of your spouse, parents, and parents-in-law. Chances are relatives will not be available to help provide long term care and you will find it necessary to hire professional in home or facility care. Plan Ahead Recent studies show the national average cost of a year in a nursing home is $54,900, while the average cost of home health care is $36,000 a year.1 Medicare and private health insurance do not fully cover these costs. According to the Health Care Financing Administration, Medicare pays limited benefits for long term care: only the first 20 days in a skilled nursing facility. For the next 80 days, Medicare requires a daily copayment of more than $100. What’s worse, Medicare doesn’t cover custodial care at all, yet it’s the kind of care most people in nursing facilities need. That means individuals are left to pay the remaining costs. In fact, approximately 30% of elderly long term care expenses are paid out-of-pocket.2 Regardless of whether the coverage is for you, your spouse, parents, or parents-in-law, planning ahead makes a substantial difference in cost and availability. The longer you wait to purchase long term care insurance, the higher your premium will be. Also, your likelihood of developing a health problem increases, hurting your chances of being approved for long term care protection. Choose Carefully Keep these key long term care features in mind as you shop and compare:
The American Academy of Ophthalmology offers comprehensive long term care plans for active members and their spouses, parents, and parents-in-law ages 40-84. Academy plans pay 100% of the maximum daily home health care benefit and 100% of the maximum daily facility care benefit. There is a choice of benefit and waiting periods as well as optional simple and compound inflation protection. In addition, members may qualify for rate discounts of 10% to 25%. To learn more about these plans, call (800) 906-7607 and request ## 014905-1-1-1 for a confidential review of your long term care needs. A licensed, noncommissioned Long Term Care Insurance Representative will customize a plan to fit your lifestyle, budget, and individual needs. Notes
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Limits of Liability
By Kimberly Wittchow, JD, OMIC Staff Attorney
Digest, Spring 2004
Press coverage of the industrywide rise in medical malpractice claims frequency and severity is abundant. This has many insureds questioning whether their current limits of liability are adequate for the increasingly litigious environment in which they practice. To help insureds assess their coverage limits and needs, this article will address what is meant by limits of liability, how to select limits, and how changing limits affects coverage if a claim arises.
Your limits of liability are the maximum dollar amounts of indemnity OMIC will pay on your behalf as a result of covered claims. Indemnity is the amount of damages awarded in a lawsuit or agreed to in a settlement between the parties. OMIC will pay your reasonable defense costs in addition to your liability limits.
All OMIC insureds have two separate limits: the per claim, or “medical incident,” limit and the aggregate limit. The per claim limit is the maximum amount of indemnity OMIC will pay per insured for all damages caused by any one medical incident, or by any series of related medical incidents involving any one patient, regardless of the number of injuries, claimants or litigants, or the number of claims (notices, demands, lawsuits) that result. The aggregate limit, on the other hand, is the maximum amount OMIC will pay per insured for all claims made and reported during the policy period.
How to Select Limits
There are several factors to consider when selecting limits of liability. The limits you require may vary with changes in your state’s malpractice liability climate, the procedures you perform, and the makeup of your practice. Therefore, you should continually assess your current needs and corresponding coverage.
First, review the claims statistics for ophthalmologists. For example, as of February 2004, OMIC’s average indemnity payment was $130,166 and its largest indemnity payment was $1.8 million.
Second, consider your state’s risk relativity. When OMIC looks at risk relativity, it compares the number of insureds, the number of total claims, and the average indemnity paid per claim in each state. Under this analysis, due to the fact that OMIC has a large number of insureds in these states, OMIC’s highest claims activity is currently in California, Texas, and Illinois. For selecting limits, however, a better way to look at risk relativity might be to compare the average rate of claims per insured per state. OMIC insureds in Louisiana and Michigan currently experience the highest claims frequency.
Third, find out what liability limits your peers are carrying. The majority of OMIC insureds (65%) carry $1 million per claim/$3 million aggregate limits. Higher limits of $2 million per claim/and either $4 million or $6 million aggregate limits are selected by 21% of insureds. OMIC’s lowest offered limits of $500,000/$1.5 million are carried by 6% of insureds, while 4% select the highest limits OMIC offers, $5 million/$10 million. The remaining 4% of insureds carry other combinations of limits, including lower limits available exclusively to physicians who participate in their state’s patient compensation fund.
Fourth, consider the risks related specifically to your practice. Is your subspecialty one in which there is high claims frequency (e.g., cataract surgery) or large damage awards (e.g., neonatal care)? Do you share your coverage and limits with any ancillary employees or your sole shareholder corporation? On the other hand, have you ceased performing most surgical procedures or limited your practice to part time?
Fifth, assess your level of risk aversion. Would higher limits make you feel more secure because of the large indemnity cushion or less secure because of the “deep pockets” potentially discoverable by the plaintiff?
Finally, check with your hospital and state licensing board because they may specify the minimum amount of coverage you must carry. Also note that OMIC generally requires all OMIC-insured physiciansin practice together to carry the same liability limits. The practice’s legal entity cannot be insured at higher limits than those of the physicians.
Which Limits Apply to a Claim?
You should consider how changing your limits will affect the amount of indemnity available to you if a claim should arise. The limits of liability that apply to a claim are those limits that are in effect as of the date the claim is first made against you and first reported in writing to OMIC. In other words, if you increase or decrease your coverage after you’ve reported a claim made against you to OMIC, the limits that you carried when you reported the claim, not the new limits, will be applied to the claim.
Subject to underwriting review and approval, you may increase or decrease your limits of liability at any time during the policy period (although OMIC typically does not consider requests to change policy limits while a claim is pending). If you are in group practice, discuss this desired change with your practice administrator and partners. Your OMIC underwriter can provide you with the most recent OMIC data to help you determine which limits are appropriate for you. However, OMIC representatives are not in a position to offer you advice. If you need further assistance, please consult your personal attorney.
