The Shame of Disability Insurance

One of the oldest human worries is what a person will do if he or she becomes too sick to work.  In another time, in a different place, the social community supported those who were injured or ill.  In our time and place, many people must instead rely on a more formal arrangement — disability insurance.

Many of the large insurance companies sell disability insurance, which should provide basic financial security for people who become unable to work.  The benefit paid under such policies is not great – typically 60% of what a person made before becoming disabled, and that money is often subject to income tax.  (That alone disproves the myth that people “choose” the “easy” path of seeking disability benefits – that and the fact that most people want to work and derive a great deal of their sense of self from doing so.)

Disability insurance is a fine and honorable undertaking.  A group of people each contribute a little something to a collective pot of money, and if any one member of that group becomes too ill or injured to work, he or she receives a regular and reliable (if modest) benefit.  The role of insurance companies is to administer this system, pay disability benefits to those who need them, and retain enough of the premiums to pay their own employees.

Sadly, many of the large disability insurers have failed to uphold their part of this arrangement.  Although the law requires these companies to act as “fiduciaries” – to act in the utmost good faith toward their insureds – they ignore that obligation.  They act in their own interest, rather than in the interest of the people who agreed to the social contract of disability insurance.  Every claim denied is more profit.

To enhance the bottom line of their ledgers by paying as few claims as possible, insurance companies often purchase a “peer review,” performed by a purportedly independent doctor, who reads the medical records and then issues a report.  But these “independent” doctors are managed and paid by companies whose interests are aligned with the disability insurers they serve.  If one looks closely at the vendors that provide peer reviews to the large disability insurers, one sees that many of their officers and owners came out of top positions with . . . disability insurance companies.

Rather than being independent, neutral assessments of a person’s medical condition, peer reviews far too often are biased position pieces, written with one purpose – to provide the disability insurer a plausible basis to deny claims.

The world of private disability insurance has become a world of broken promises.  The original idea – the simple promise that if you become too sick to work, you will have a small but reliable income to keep the wolf from the door – is regularly broken, as insurance companies violate their fiduciary duty and put their own interest in sky-high profit above the interests of their insureds.  There is a word to describe that: shameful.  The same word applies to doctors who violate their most fundamental duty – the duty to do no harm – and willingly help insurers by providing biased and sham peer reviews.