What to Do If Your Claim for Long-Term Disability Insurance is Denied

Long-Term Disability Insurance (or sometimes called long-term care insurance, “LTC”) is a form of disability insurance that provides supplemental coveragefor services not covered by health insurance, Medicaid, and Medicare. It is a critical form of support for individuals who are severely injured which leaves them unable to work or even care for themselves. LTC insurance covers injuries that occur outside of work (workplace injuries are generally covered by workers’ compensation).

This post will go over what LTC is, specifically, what the policies provide and how they are activated. It will go over the pros and cons of LTC for different workers and whether it is an economically sound investment. It will next review the laws that govern LTCs and the standards that to which insurance companies must adhere. Finally, it will go over the legal issues you face if your insurer refuses your claim for LTC and what you can do about it.

What is Long-Term Care Insurance?

LTC is an insurance product that provides supplemental care for services not provided for by Medicaid, Medicare, and health insurance. In general, individuals who rely on long-term care are not sick or injured in a normal sense –i.e. they are unlikely to recover. Specifically, long-term care is used to support individuals who are unable to perform two of the six “activities of daily living”:

  1. Walking;

  2. Bathing;

  3. Dressing;

  4. Toileting;

  5. Continence (the ability to go to the bathroom at will);

  6. Eating; and

  7. Transferring (getting in and out of chairs or beds).

Long-term care covers a broad range of services including:

  • Assisted living: care provided to individuals who stay in their own homes. It is provided by a traveling nurse or attendant who visits the individual and helps them nutritionally and in daily living.

  • Home care: similar to assisted living, except the living assistant resides with the individual on a part-time basis.

  • Adult daycare: non-residential facilities that support the social, nutritional and daily needs of adults in group settings. Adult daycare is often for individuals who are recovering after being discharged from a hospital or in some other rehabilitation.

  • Hospice care: care for individuals who are terminally and chronically ill. It is round-the-clock care in a professional setting and usually includes some medical support.

  • Respite care: temporary care to the caregivers of adults or children. It is used to relieve caregivers and give them a chance to recover after being the primary caregiver for someone who is dependent on them.

  • Nursing home care: residential care facilities for individuals who need assistance in daily living but aren’t in need as much as assistance as those in hospice care.

  • Home modifications: are home remodels and modifications to help individuals with disabilities more safely navigate their home and live with their disabilities. For example, installing bars in bathtubs, loud alarms on stoves and ovens, changing door handles, and other fixes.

Long-term care can also provide financial assistance which can cover the cost of medications and medical procedures, living expenses, and other costs. Long-term financial coverage is a critical lifeline to many individuals who would quickly deplete their retirement and savings absorbing all of these costs. Furthermore, long-term care premiums (unlike other forms of insurance –like disability) are tax deductible, moreover, the benefits paid are often tax deductible. Therefore, LTC is an attractive insurance product to help individuals who suffer from severe disabilities and are unable to care for themselves.

Who Receives Long-Term Care?

Long-term care is usually associated with older individuals, people who are age 65 and older. According to a recent study, about 70 percent of people who are over 65 years of age will need some form of long-term care as they age. However, individuals who LTC are not all over the age of 65, about 40 percent of LTC recipients are between 18 and 64 years of age. In short, people of all ages receive LTC. The primary issue is when people purchase LTC insurance policies. If an individual has already presented with an illness, injury, or disability – they are unlikely to qualify for an LTC policy. Therefore, individuals born with these issues are unable to access LTC benefits. In fact, whether an individual disclosed all potential issues when they applied for an LTC insurance policy is one of the frequently cited grounds to deny coverage – more on that below.

What Types of Long-Term Care Policies Are Available?

There are two basic types of LTC insurance: traditional and hybrid. Traditional policies operate like any other type of insurance, you pay a premium (monthly or some other way) and continue to pay until you activate the policy. If you never file a claim on your policy, your premiums are never returned. Some traditional policies have a “return of premium” rider which pays out the premiums paid as a death benefitto your beneficiary upon your death. Hybrid policies combine traditional policies with life insurance. There are many varieties of these policies but in essence you get long-term care services and also have an option to provide life insurance to your beneficiaries.

As the policies relate to tax benefits there are two types: tax-qualified and non-tax qualified. You guessed it, tax-qualified plans offer non-taxable benefits but must comply with several requirements including (1) requiring care for longer than 90 days and (2) unable to perform two or more of the daily living activities (see above) or (3) need care for longer than 90 days for severe cognitive impairment. Conversely, non-tax qualified plans only require individuals to be unable to perform one daily activity which must be confirmed by their doctor and an investigator from the insurance company. Essentially, individuals need only show that it is “medically necessary” they receive the care.

Why Do You Need Long-Term Care Insurance?

LTC insurance, like any form of insurance, is protection against possible future outcomes that are bad for you or your family. For example, no one thinks they are going to get into an automobile accident but you should (and are required) to get insurance anyway because accidents happen, whether they are your fault or not and when they do, you will need insurance to help get you out of the financial hole caused by that accident.

Long-term care insurance is similar. No one thinks they will suffer a life-altering injury or suffer from a serious illness but that is why long-term care exists. LTC provides financial assistance to individuals who are unable to work and for whom Medicare, Medicaid, and health insurance are insufficient. For example, Medicaid does provide living assistance (see the list above) but it usually requires you to exhaust all of your other funding sources before turning to Medicaid. Basically, you must impoverish yourself paying for your care before Medicaid will step in and provide assistance. Medicare covers medical procedures and provides some assistance for longer-term care but not to the same degree as Medicaid and not indefinitely. Finally, health insurance will cover the expense of procedures, medication, and outpatient recovery but it does not providebenefits beyond that narrow scope. So, long-term care insurance fills the gaps left by Medicare, Medicaid, and health insurance.

How Do You Get Long-Term Care Insurance?

There are two ways to get long-term care insurance: through your job and on the open market. Your employer likely offers a suite of insurance packages including disability and a type of LTC insurance. These policies are usually of shorter-term than policies acquired on your own on the open market. Occupationally-obtained policies are also tied to your job, so premiums are paid out of your paycheck directly by the company and coverage ends if you change jobs (unless you pay out a premium, then it will continue until your term is up). Conversely, policies acquired on the open market follow you wherever you go and provide longer terms of care. However, they are likely more expensive and you are required to ensure the policy premiums remain paid through.

The marquee difference between insurance through your job and insurance on your own is how the policy is activated. Your employment policy will activate if you are unable to perform essential functions are your job (which can include performing daily activities). Conversely, your own policy can cover any time that you are unable to engage in profit-driven work. The likelihood of these two situations not overlapping is small but it can and does happen.

How Do You Activate A Claim?

  1. The names of the parties;

  2. The insured interest (for long-term care it is you and your ability to work and live daily);

  3. The risks;

  4. The term during whichthe policy is to remain active; and

  5. The premium and how the premium is calculated and, if applicable, procedures to increase the premium.

You may file a claim to activate your LTC once an “insurable event” has occurred. The insurable event is defined in your policy and can be any of the events described above. You are unable to perform one or more daily activities or your doctor has determined you must receive long-term care because it is medically necessary.

The insurance company investigates your claim and determines if an insurable event has occurred, the extent of the coverage, and timelines for disbursing the funds. In a perfect world, your claim is investigated and you receive a letter detailing why your insurer thinks or doesn’t think your coverage is activated. The letter allows you to either accept or challenge the insurer’s conclusions and to provide additional information if necessary.

The Insurance Company Isn’t Your Friend

However, this world isn’t perfect and insurance companies aren’t your friends. The agent that sold you your policy is probably very nice. The adjuster who you have worked with is likely also very nice. They aren’t sent to conferences on how to be mean to their policyholders. However, these individuals do not control your fate,it is underwriters and lawyers who work for the insurance company who do.

The insurance industry, even the long-term care industry, is driven by profit. These companies offer these products because they are profitable. The way the company earns a profit on these policies is by signing up as many healthy people as it can, limiting the number of sick people through an onerous application process, limit the amount of funds distributed that are valid, and deny claims are often as possible. Your insurer wants the process to be opaque and difficult to understand because if you give up or let something go, that make them more money.

So, it hires friendly agents and adjusters to put a nice face to the company but it works behind those individuals backs to limit theamount of money you can receive from your policy. Your insurer is entitled to investigate your claim but, if there is even a chance that your injury could be covered, it must provide funds as it works to resolve the ambiguity.

California Rules Governing Interpretation of Policies

LTC policies, like any insurance policy, is complex, long, and full of legalese. Insurance companies aren’t forced into this position because of the law –they embrace these ambiguities because it is confusing and discourages people who may otherwise challenge its conclusions. Insurance contracts are governed by the same rules of interpretation as any other contract. In general, policies must be interpreted to give effect to the mutual intent of both parties and in their entirety.Coverage policies must be interpreted broadly to give the broadest possible effect of coverage to individuals and exclusionary or limiting language is interpreted narrowly against the insurer. You probably noticed that your coverage statement is a short, crisp paragraph of a few sentences while the exclusions can go on for pages and pages. The insurance company does this on purpose to expressly remove certain types of coverage. However, in California, the rules of interpretation favor policyholders. Furthermore, if there are ambiguities in the policy, these ambiguities are construed against the insurance company.

Actions for Bad Faith Against Insurer

Long-term care insurance companies are required to interpret their policies and disburse funds in good faithand fairly to their policyholders. The duty of good faith and fair dealing requires them to place the interests of their policyholders either equal to or greater than the interest of the insurance company. If an insurance company places its own interests above that of its policyholders, it has acted in bad faith.

There are two actions you can take against insurance companies: breach of the duty of good faith and fair dealing and bad faith. Breach of the duty of good faith and fair dealing basically means that the insurance company wrongly denied your claim for long-term care insurance. For example, if the insurance company doesn’t have proper cause to limit or deny your claim, it is in breach of its duty to you and is liable for damages.

The duty of good faith and fair dealing doesn’t obligate the insurance company to pay every claim. Rather, it requires the insurance company to faithfully investigate claims, pay those that are valid, and deny those that are not. Moreover, if it denies a claim, it must statethe reasons why it is denying the claim in no uncertain terms.

If the insurance company intentionally denies valid claims, it could be subject to a bad faith action. An action for bad faith means the insurance company intentionally placed its own interests above that of its policyholders and acted with their fraud, oppression, or malice. An action for bad faith could subject the insurance company to punitive damages. Punitive damages are damages designed to punish bad behavior and are often expressed as a multiple of the base damages.

Help Finding an Insurance Appeal Denial Lawyer Near Me

If you need help finding a professional to assist you with appealing an insurance coverage denial, contact Stop Health Insurance Denial at 310-695-5241 for assistance.Stop Health Insurance Denial is a plaintiff’s firm that represents residents throughout Los Angeles County and Southern California. If you or a loved one needs representation, call Stop Health Insurance Denial now.