Investigation: Disabled Workers Face Difficulty Fighting Claims Denials
Disability insurance providers frequently deny or terminate benefits to people who have limited recourse to appeal the insurers' decision, according to a recent investigation conducted by the Los Angeles Daily Journal.
For the investigation, the Daily Journal reviewed 576 lawsuits filed in California federal court against the seven largest disability insurers. The investigation found that disability insurers often:
- End coverage for people who have been found disabled by federal Social Security administrators;
- Hire contract doctors who frequently disregard the opinion of treating physicians without examining the patient; and
- Provide incentives for employees to reject and terminate disability claims (George, Los Angeles Daily Journal, 10/12).
Disability insurers maintain that they conduct fair reviews and strive to prevent workers from filing false claims (George, Los Angeles Daily Journal, 10/13).
The Daily Journal also found that no regulatory agency currently oversees the practices of disability insurers.
Officials with the California Department of Insurance say they do not investigate complaints against disability plans because the federal Employee Retirement Income Security Act governs employer-sponsored worker benefits.
The department often refers individuals who file complaints to the federal Department of Labor. However, federal officials say they do not investigate disability benefit plans either.
Seeking Help From Federal Courts
Because neither state nor federal agencies regulate disability insurers, individuals seeking to appeal a claims rejection must bring their complaint to federal court.
Of the cases filed, very few reach trial. More than 80% of the cases reviewed by the Daily Journal settled out of court.
For cases that reach trial, a federal judge uses the insurer's own records to determine whether the company acted reasonably.
In about 45% of cases, judges ruled that the insurers wrongly denied benefits, the Daily Journal found.
Lt. Gov. John Garamendi (D) has said California's current administration could do more to investigate complaints against disability insurers. Garamendi said the state could work to strengthen the enforcement of the consumer protection laws he helped to broker.Other officials suggest that state regulators should do more to investigate disability insurers in the same way that they regulate HMOs (Los Angeles Daily Journal, 10/12). This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.