Why Do Some Doctors Get Declined for Disability Insurance?

 

When it comes to disability insurance, there is not much worse than a surprise decline (except a disability, I suppose). These happen way more often than they should. For many years, I blamed the insurance agents. I figured they didn’t take the time to really talk to the applicant or to shop them around informally or to encourage them to first apply for an available Guaranteed Standard Issue (GSI) policy. While there’s probably plenty of blame to go around, I now think this is mostly an applicant problem. Here are some recent examples:

Bạn đang xem: Why Do Some Doctors Get Declined for Disability Insurance?

 

Example #1

“I am an incoming resident this summer and I recently applied for long term individual disability insurance. Unfortunately, today I got some bad news that, due to something in my history, my application has been declined. I will be meeting with the insurance agent next week to clarify the issue and plan next steps. I haven’t found a whole lot on how to navigate this so I thought it would make a great blog post.”

That made me curious, so I dove in for more details.

“Yes, I am working with [one of your recommended agents] and was denied for a Guardian policy based on a genetic disease that is a relatively new diagnosis (I’m a carrier). It was unexpected because while I have a slightly low lab value and a carrier gene, the rest of my work up has not shown any significant abnormality. The agent is currently talking to other companies and pushing back on the denial for reconsideration . . . I think the offer was made in an initial email exchange, but I didn’t believe it was necessary since my specific phenotype isn’t strongly associated with disease. I didn’t think denial was likely at all and didn’t understand you could informally shop around.”

Travis Christy, the insurance guru here at WCI, contacted the agent the resident had been working with and learned this:

“The client didn’t disclose to the agent his pre-existing genetic condition, but the client also didn’t think it was something to be concerned about. The agent did ask pre-screen questions, though.”

 

Example #2 

“I wanted to let you know about a disappointing experience I had with one of your recommended disability insurance agents. My spouse, a resident, recently worked with [one of your recommended agents] to find an individual, own occupation disability insurance policy. Regrettably, her application for a policy from MassMutual was declined on the basis of her medical records. I don’t know whether poor communication between my wife and [the agent] or between [the agent] and MassMutual is to blame. But either way, the experience didn’t meet the (admittedly very high) expectations I had for [the agent] based on your recommendation.

In the aftermath, my wife and I discovered that her program provides access to a pretty good GSI policy (which she is no longer eligible for), and that such policies are increasingly common among major residency programs and a good option for doctors with less than perfect health histories. Obviously, we wish we had known to look out for a GSI policy sooner.

I recognize that GSI policies are not widely advertised or accessible to all agents, that medically underwritten policies can often be stronger and/or cheaper, and that no agent can guarantee approval for a policy that requires medical underwriting. Bad outcomes happen sometimes, even when knowledgeable agents do their best to provide good service . . . I also recognize that hindsight is 20/20. Looking for alternatives seems very obvious after being declined. And I know that my spouse and I ultimately bear responsibility for getting appropriate insurance in place. It was in our power to thoroughly research our other options before submitting an application and we chose not to. Nevertheless, I thought you would want to know about our experience . . . I’d bet that my spouse’s experience is the exception rather than the rule. But if no one ever reports the exceptions, you’ll never know if they become the rule.”

I had Travis dive into this one with the agent, too. Guess what? Similar story.

“I spoke with [the agent] about this case. The agent worked with the client’s spouse to get DI. According to the agent, the spouse was really pushing to get the DI in place and the agent did the pre-screen questionnaire. The spouse said the client didn’t have any major medical concerns and it was determined they’d go through full underwriting . . . The agent did the pre-screen and was told there wasn’t a health history to worry about. This is a case of the client not disclosing information before submitting an application.”

 

Example #3 

“I wanted to share my story because I DO NOT want someone else to do what I did. I am now a PGY1. Last March, I pursued getting a DI policy before I started residency. I used your website to understand the appropriate policy, riders, etc . . . and used your DI references on your website.

I had a general idea of the process but never thought ahead on how my past medical history would be seen by the underwriters. Or what underwriters would even think of my case. Not to go too in depth w/PMH, however, I have idiopathic neuropathic symptoms (pressure, tingling, numbness) that are localized to my right axilla that had insidious onset when I was 20 years old. I’ve visited many doctors for this condition without a clear answer on ddx/definitive treatment. It’s just been something that I live with, not allowing a lower quality of health to diminish my goals and future plans. Besides this, I consider myself very healthy. I applied through [a WCI recommended agent]. I did a short phone call with an agent; he sent some policies that had everything that I wanted. I was eager to just get this done and check this off the list before starting residency. I put all my medical history (thinking that my condition was really benign) and didn’t receive any other guidance from the agent. A few weeks later, I got an email from the agent saying I had been denied. A week after that, I found out my program offers a GSI plan that I no longer qualify for. I definitely screwed up, but I am still disappointed in the agent and even WCI. I heard about the need for DI quite often, but did not see much education for those with obscure PMhx e.g., chronic fatigue syndrome, burnout, etc., which I think is more common for physicians these days than what society would think.”

We looked into this case as well. It turns out the applicant disclosed one medical problem to the agent in that phone call (which wasn’t a big deal). The one noted above was disclosed to the insurance company during the underwriting process, but not to the agent BEFORE the underwriting process began. Also, interestingly, the agent did check to see if the program the applicant was going to start soon had a GSI policy, but it unfortunately was not yet listed in the consulted database (which gets updated quarterly).

Xem thêm : California insurance crisis: Here are the carriers that have fled or reduced coverage in the state

More information here:

The Physician’s Guide to the Best Disability Insurance Companies

Can You Still Get Disability Insurance with Your Health History?

 

Lessons to Learn 

There are two important lessons that WCIers should learn from these frustratingly common disability insurance experiences.

 

#1 Disability Insurance Underwriters Care About Stuff Doctors Don’t Think They Should Care About

The first lesson is that there are medical conditions that you think aren’t a big deal, that you think are resolved, or that you think won’t lead to a disability. Guess what? The underwriters don’t agree with you. They think your little medical condition, genetic anomaly, cured cancer, weird paresthesias, or long-resolved history of back pain IS a big deal. Not only are they mad you tried to hide it from them, but they don’t even want to insure you at all. If you’re lucky, maybe they’ll just put an exclusion rider on your policy, meaning that if you get disabled from a recurrence of that testicular cancer or that back pain, the policy won’t pay. More likely, though, the insurance company will just decline you.

 

#2 Don’t Try to Hide Your Medical Problems from the Agent

I’m not sure what’s going through doctors’ heads, but I think it goes like this:

“If I tell the agent about this medical problem, the agent will be obligated to tell the insurance company and I’ll get a higher rate or an exclusion rider or won’t get insurance at all. But if I don’t tell the agent about this problem, no one is ever going to know. It was so many years ago and in another state, and it only lasted a month anyway.”

What’s the problem? When you go to fill out the application, you’re specifically asked about this issue and then you feel a sudden need for honesty and disclose it on the application. The agent is busy, doesn’t catch that you slipped in this little thing, and sends the application to the carrier. Voila! A decline. Or perhaps you don’t say anything on the application. Well, the underwriters have access to all kinds of databases you may not realize they have access to, such as prescription drug databases, medical record databases, and insurance databases. They find that 5-year-old prescription for 12 Skelaxin tablets and want to know what that was all about. Oh that? My back hurt for two days. Too bad. Exclusion rider.

However, if you manage to get away with hiding a pre-existing medical condition that should have been revealed to an agent and disability insurance carrier, it’s likely to lead to complications in the future. Some have encountered instances where individuals, such as doctors seeking additional coverage or those at disability claim time, have faced investigations by the insurance carrier because they failed to disclose their medical condition initially. While it’s understandable that people may forget to disclose such information, attempting to deceive the insurance carrier is unlikely to yield favorable outcomes. In many cases, successfully obtaining a policy could be considered fraud and result in the policy being rescinded even after the contestability period. Besides, what are you really willing to sell your integrity for?

 

The Problem with a Decline

The problem with a decline is that just about every application for individual disability insurance, including a GSI application, asks if you’ve ever been declined for an insurance policy. Many life insurance policies also ask about you being declined. Now, it is much harder, if it is possible at all, to get the insurance you need. In our second example above, it was particularly tragic. This doc was eligible for a GSI policy at the training institution that could have been put in place BEFORE applying for the fully underwritten policy. But after the decline? No dice. You’re just out of luck. Guaranteed Standard Issue policies are only guaranteed to be issued if you’ve never been declined for insurance. Let me say that again, just in case you missed it.

 

Guaranteed Standard Issue policies are only guaranteed to be issued if you’ve never been declined for insurance.

 

You don’t even have to be fully declined. If you get a “modified” offer (i.e. with an exclusion), that also prevents a GSI policy from being issued. In our third case above, it looks like the doc could get an underwritten policy from another insurance policy but with an exclusion, so hopefully that will work out.

 

Reducing Declines in Disability Insurance Applications

We’ve been working very hard with our recommended agents to reduce the risk of white coat investors being declined for disability insurance. This isn’t good for the WCIer, for the agent, or for us. It may not even be good for the insurance company. It’s a lose-lose-lose-lose situation if there ever was one. It’s just bad all around, especially if that doc later becomes disabled. We’re doing all we can to keep this from happening. Travis tells me that across the industry 20%-30% of applications result in declines. That is WAY too high. I want that number to be a single-digit number, and I hope that most of those are not surprise declines. I mean, it’s entirely possible that something comes up with your lab work and you find out you have kidney failure or diabetes or something at the time you apply for insurance. There’s never going to be anything the agent, you, or I can do to prevent that sort of thing from happening. Even if we did pre-application lab work somehow, you’d just have to disclose that to the company anyway.

Even a fully informed person might apply for insurance anyway, knowing there’s a very good chance of a decline, but at least that won’t be a surprise decline.

So, how do we get this decline percentage way lower?

The first step is to educate the agents and make sure they have an adequate screening process in place for medical issues and dangerous hobbies.

Xem thêm : Columbus Deal Activity: The pivotal role played by representations and warranties insurance

The second step is to educate you, the white coat investors, about the whole process. That includes the importance of paying attention to ALL of your past medical history in the process, no matter how trivial or resolved you think it might be.

Finally, we want to make sure that unless you have zero past medical history, you should apply for and obtain a GSI policy PRIOR to applying for a fully underwritten policy (assuming a GSI policy is available to you). That responsibility rests both with you and the agent. It would be wonderful if we could put it all on the agent, but let’s be honest about how this process works. In many situations, if an agent refers you for a GSI policy, they make less money or nothing at all on the policy you buy. I would hope they would still always do the right thing, but let’s just say the first law of economics is that people respond to incentives. Our ability to force agents to tell you about GSI policies is pretty much limited to throwing them off our recommended list if we get a lot of complaints from WCIers that they’re getting declines despite having available GSI policies.

There is something else that agents can do for you besides just making sure you get any available GSI policy before formally applying. They can shop you around informally to the insurance companies. That means they call up the underwriters at each company and say something like this:

“Let’s say I hypothetically had a client who had testicular cancer that was considered cured three years ago. He doesn’t even have to have any more follow-up scans. What are the odds he gets declined or an exclusion if he applies to your company?”

Maybe the underwriter says, “Our standards are that he has to be cancer-free for five years before we’ll give him a policy at all, and it’s always going to have an exclusion for cancer.” The agent then calls up the underwriter at another company and finds out they’re perfectly fine issuing a policy to this doc right now. Guess where the application should be submitted? This informal guidance doesn’t count as a decline, so the doc can apply to a different company, wait longer to apply, go look for a GSI or group disability policy, or make a change in their financial plan. Forewarned is forearmed.

Xem thêm : California insurance crisis: Here are the carriers that have fled or reduced coverage in the state

More information here:

How to Buy Disability Insurance

People Aren’t Buying Disability Insurance, But They Should

 

The Problems with GSI Policies

Guaranteed Standard Issue policies are primarily available only at large medical institutions. That means you probably need to get it before leaving training, and many docs procrastinate until it is too late. They just aren’t available to many doctors who are interested in getting a disability policy. That’s the main issue. Insurance companies may make them even less available in the future, too.

However, it shouldn’t be surprising to learn that sometimes a GSI policy is either more expensive (although these days many are actually cheaper) or (more likely) not quite as good of a policy as you can get with a fully underwritten policy. For example, they usually have a 24-month “mental/nervous/substance abuse” limitation on benefit payout. Given the prevalence of burnout and depression, that’s a risk that maybe should not be taken if it can be avoided.

There’s usually only one policy available at a given institution, and what are the odds that is the policy that would be best for you if you had your choice of five policies? Not that good. Nevertheless, the most important thing with disability insurance is to get SOMETHING in place if you, like most docs, have a need for the policy. While the fully underwritten policy is probably the best, a GSI policy is a close second. A group policy is better than a kick in the teeth, and at least it will cost a lot less, especially if the employer picks up part of the price.

But if you have ANYTHING in your past medical history or you share any hobbies with me (you know, things like scuba diving, rock climbing, mountaineering, flying, or skydiving), make sure you know about and obtain any available GSI policy at your institution before completing the standard application process.

 

What to Do If You Get Declined for Disability Insurance?

What happens if you get declined? Well, you’re mostly hosed, but all hope is not lost. First, remember that three bad things have to happen for you to really be hosed. First, you have to be declined for individual insurance. Second, you have to be unable to obtain a group policy or a policy from a different company with an exclusion. Third, you have to actually get disabled. If just the first one or two of those things happen and you never get disabled, no harm no foul.

The first thing to do if you’re declined is to see if you can get another policy—either a group policy through your employer (most likely) or a professional association or get an individual policy (probably with an exclusion) from another insurance company. While I’m not a huge fan of group policies, they’re better than nothing, and you will likely get paid something so long as your disability isn’t in a “gray area.” If a group policy is not an option, you may wish to change your financial plan in a way that minimizes the risk of exposure of disability to failure of the plan.

That usually means spending less and saving more to reach financial independence earlier.

What do you think? Have you been declined? Was it a surprise? What do you think can be done to further reduce the number of declines? Know somebody who could use this information? Make sure to share it with them.