Beware Of And Avoid This Disability Policy Trap!

By Scott E. Davis, Disability Attorney

The title of this article could also be named, “how to avoid the psychological benefit limitation” that is likely lurking in your company’s disability policy.

When people are unable to work and their short and/or long term disability claim is approved, whenever it can, the disability insurance company often uses a psychological diagnosis as the basis for paying the claim regardless of any physical diagnoses which you may believe are disabling.  Indeed, even if you filed your disability claim based on a physical diagnosis, if you also have much smaller psychological issues such as depression or anxiety as a result of your inability to work, the insurance company can say that it is approving your claim based on the psychological diagnosis.

You are not alone if this does not make sense – it does if you follow the money.  So, why would an insurance company do this?  It is about saving a lot of money.

The money part comes in because the insurance company can limit your receipt of benefits to usually 24 months (and much less often 12 months), based on its reasoning that with proper treatment and care, psychological disorders do not remain at a disabling level for many years.

If your disability insurance is provided by your employer, regardless of the company which issued it, the policy will contain a “mental/nervous” limitation, also known as a psychological benefit limitation.  The limitation applies if the insurance company determines your inability to work is primarily due to a psychological diagnosis.  The money part comes in because the insurance company can limit your receipt of benefits to usually 24 months (and much less often 12 months), based on its reasoning that with proper treatment and care, psychological disorders do not remain at a disabling level for many years.  If it does remain disabling after 24 months of benefits, that is your financial problem, not your insurance company’s.

However, the limitation can be a trap for many unsuspecting people who are disabled due to primarily physical diagnoses with secondary psychological issues.

Armed with the “psychological” or “mental/nervous” policy limitation, the insurance company has a very real financial incentive to “cram” as many claims as possible into the limitation.

Armed with the “psychological” or “mental/nervous” policy limitation, the insurance company has a very real financial incentive to “cram” as many claims as possible into the limitation.  This is true even though you and your doctors may believe you are unable to work due to a physical diagnosis and have told the insurance company the same.  Many people do not realize that the physical diagnosis you use to apply for benefits and that your doctors agree is disabling can be ignored by their insurance company ignored in favor of an approval based on a psychological disorder.

The fact is that at some point, after suffering from chronic physical problems for years, folks become depressed or anxious about their livelihood and future.  When you are unable to work, have no income to live on and are stressed out, it is easy to understand why you may also be under care for depression and/or anxiety.  Physical and psychological diagnoses frequently co- exist and cause disability.

As a result, insurance companies often have 2 avenues to use to approve your claim and not surprisingly, given that they operate under a financial conflict of interest (remember, they make the decision on whether you are disabled and due to what medical condition and they lose money when they approve it) will choose the cheaper route if it can limit your benefits.

Most physical diagnoses do not have a limitation on benefits and potentially pay to the maximum policy date (i.e. 65 or your normal retirement age at Social Security) if you are unable to work for that duration.

To be sure, a disability claim based on a physical diagnosis is often worth hundreds of thousands of dollars while a psychological claim may only be worth tens of thousands of dollars!  If you were the insurance company what would you do – particularly if you knew that the person filing the claim had no idea there was a limitation for a psychological diagnoses.

Let me provide an example.  Let’s say you have a medical condition which causes chronic pain and that is what is disabling and why you stopped working.  In addition, as a result of dealing with chronic pain for several years, you also are being treated for depression and taking medications for it but this would not prevent you from working.  However, it is clear that your depression is contributing in some manner to why you are unable to work but it is not the primary reason you are unable to work.

If the insurance company approves your claim on the diagnosis(es) causing the chronic pain, it may be paying you for many, many years – to age 65.  It does not want to do that if it can avoid it.  So, if it approves your claim based on your depression, it can terminate your benefits after what is usually 24 months of benefits and make you appeal the decision.  Self-serving?  Of course.  But remember insurance companies usually answer to a higher power – not you, but rather, their shareholders who are more interested in their quarterly financial results than whether you get your claim paid.

If your disability claim is based primarily on a psychological disorder, and that comprises the majority of your treatment, it is understandable that an insurance company can and should apply the limitation.

Simply put, you and your doctors need to be very clear that your primary disabling diagnosis(es) are physical and not psychological; this is true even if you are receiving treatment and taking medication for your psychological diagnosis(es).

However, if you and your doctors believe you are unable to work primarily due to a physical diagnosis(es), then how you complete the forms related to your short and/or long term disability claim is critical in terms of how you present the medical diagnosis(ses) in your claim.  The claim application and other forms such as your doctor’s forms and medical records must present the case in a manner so that it is clear that you are disabled due to a physical diagnosis(es) in order to do everything you can to avoid the “psychological” or “mental/nervous” limitation.  Simply put, you and your doctors need to be very clear that your primary disabling diagnosis(es) are physical and not psychological; this is true even if you are receiving treatment and taking medication for your psychological diagnosis(es).

In conclusion, understand that you will not be able to dictate to your insurance company what diagnosis(es) that it uses to approve your claim.  However, by being aware of the limitation and carefully presenting your disability claim as being based on a physical diagnosis, you will have a much stronger basis to show that the psychological limitation lurking in your disability policy does not apply.  Call us at (800) 588-1710, for a free consultation if your claim has been denied so that we can help you establish a game plan to prove your case to your insurance company.

© 2015  Scott E. Davis, Disability Attorney