Serious medical issues that prevent individuals from working for an extended time can cause grave financial strain. To alleviate the impact of lost wages resulting from illness or injury, many employers offer short-term and long-term disability insurance (STDI and LTDI) policies. These policies are intended to replace a portion – commonly 60 or 66 percent – of employees’ income while out of work because of a medical condition. As such, STDI and LTDI benefits can provide much-needed monetary support during an already stressful time.

However, approval of a claim for STDI or LTDI benefits, or continuation of those benefits for the duration of an employee’s absence, is by no means guaranteed. This article briefly explains the ins-and-outs of the STDI and LTDI application and appeal process for lawyers with clients facing disabling medical conditions.

Preliminary Questions

Before submitting a claim for STDI or LTDI benefits, consider a few preliminary and potentially dispositive questions:

• Does the employee have STDI or LTDI coverage or both? Sometimes, an employer offers only STDI coverage, which often lasts either 12 or 26 weeks. If the employer does offer disability insurance policies, make sure the employee is actually enrolled.

• Does the policy cover the disabling medical condition? Some policies exclude certain illnesses and preexisting conditions, which are defined by the policy.

• Does the Employee Retirement Income Security Act (ERISA) govern the policy? ERISA governs most private employer-sponsored STDI and LTDI policies but does not govern most public employees’ policies. Whether ERISA governs the policy is important because its regulations control the timelines and procedures for applications and appeals. This article focuses on the process for ERISA claims, given their ubiquity, but the process is often similar for non-ERISA claims.

Applying for Benefits

Assuming an employee has both STDI and LTDI coverage, it is first important to identify who administers the policies. Some employers self-administer the STDI policy but have an insurance company administer the LTDI policy; others use two different insurance companies to administer STDI and LTDI; and still others use the same insurance company for both STDI and LTDI. Depending on the situation, an employee may have to complete one application for STDI benefits and then another for LTDI benefits. Or an employee may automatically transition from receiving STDI benefits to receiving LTDI benefits.

Regardless of the entity to which it is being submitted, an application for disability benefits typically consists of three forms: 1) a statement by the employee about his or her medical issues, daily activities, and physical or mental abilities; 2) a statement by the employer about the employee’s job duties, income, and employment history; and 3) a statement by the employee’s physician about the relevant diagnoses and restrictions. Beyond these basics, employees and their representatives can take a few steps to improve their claim for disability benefits.

1) Talk to doctors early and often. A supportive opinion from the employee’s doctor(s) is central to a successful claim for disability benefits. Ideally before stopping work due to a disability, and definitely before applying for benefits, the employee should talk to his or her doctors to make sure that they recommend or approve a medical leave of absence due to the disabling condition(s).

Doctors will be required to describe the employee’s diagnoses, symptoms, and restrictions on the insurance company’s forms. The insurance company may also contact them by phone to discuss the employee’s disability. It is crucial to have treating providers who agree that the employee’s medical conditions preclude working and who are ready to offer supporting medical evidence.

A supportive opinion from the employee's doctor(s) is central to a successful claim for disability benefits.

2) Describe living (and trying to work) with the medical condition. In addition to completing the application forms, the employee can submit supplemental personal statements to provide context for the need to stop working that might not be captured in doctors’ reports. For example, how do symptoms interfere with specific job duties, household chores, or previous hobbies and activities? Does the disabling condition result in “good” days and “bad” days, and what does each look like?

Close family members and friends can also write statements to provide firsthand accounts of this information. In short, these narratives should thoroughly communicate how an employee’s medical condition affects his or her life and work. Avoid hyperbole and present a realistic week in the life with the disabling condition.

Getting a Decision on a Claim for Benefits

After submitting the claim, the waiting game begins. The insurance company must decide whether to approve or deny benefits within a maximum of 105 days.¹ However, there are additional deadlines within this timeframe:

• First, within 45 days after receipt of the claim, the insurance company must notify the employee of either its decision on the claim or its need for an extension of up to 30 days.²

• The insurance company may invoke another 30-day extension (for a total of 105 days) so long as it follows these procedures before the first extension expires.³

• The employee must agree to any further extensions. The employee may refuse a further extension, but doing so comes with the risk that the insurance company will deny the claim on the basis that it did not have all of the necessary information to approve it.

What are acceptable reasons for the insurance company to invoke an extension? The reason must be beyond the insurance company’s control and be explained in writing.⁴ Typically, insurance companies invoke extensions to gather medical records, have a physician or nurse consultant review the evidence provided, or conduct an independent medical examination. When an insurance company invokes an extension to gather additional information, it may also state that the review period is tolled from the date it asks for additional information and the date the employee responds to that request.⁵

Sometimesinsurance companies make several requests for information a few weeks apart, which maximizes the delay in deciding the claim. Respond to any requests for information as soon as possible to avoid delay and ensure the insurance company has a legitimate basis for tolling the review period.⁶

Appealing a Denial of Benefits

If the insurance company denies the claim for STDI or LTDI benefits, the employee has the right to appeal. ERISA gives an employee 180 days from the adverse decision to submit the appeal.⁷ The denial letter must inform the employee about the specific reasons for the denial, the plan provisions on which it was based, and any additional material or information that the employee should include with the appeal.⁸ Importantly, the denial letter must also explain why the insurance company disagreed with the employee’s doctors.⁹

The first step after receiving an adverse decision is to request the employee’s entire insurance file, including the policy document, the hired consultants’ reports, and any notes or correspondence regarding the employee’s claim for benefits.¹⁰ Review this information closely to verify that the insurance company applied the standard of disability as defined in the policy and to assess the credibility of the evidence on which it relied in denying benefits.

Next, consider what evidence is required to rebut the insurance company’s assertions in the denial letter. In addition to any information requested in the denial letter, several categories of evidence should be included with the appeal.

These narratives should thoroughly communicate how an employee's medical condition affects his or her life and work.

Medical Evidence. An employee should tell his or her doctors about the denial and ask them to respond specifically to any disagreements they have with the insurance company’s medical consultants. As with the initial claim for benefits, an employee appealing an adverse decision should gather as much medical documentation as possible from his or her doctors indicating that the disabling medical condition precludes working. Such evidence includes not only the medical records themselves but also narrative statements or restrictions forms from the doctors.

Functional Capacity Evidence. Though functional capacity evaluations (FCEs) are not free, an employee suffering from a physical condition may benefit from undergoing an FCE if the insurance company argues that there was a lack of objective evidence of physical restrictions.

Vocational Evidence. As with FCEs, obtaining a vocational expert report is not inexpensive. However, if the insurance company relies on a vocational opinion to assert that the employee is not disabled as defined by the policy, a vocational expert is best suited to address those claims and to opine whether the employee can actually maintain full-time employment in light of his or her medical evidence, physicians’ restrictions, and employment history.

Personal Statements. Even if included with the initial application, the employee can also submit a personal statement reiterating how the employee’s disabling conditions and symptoms interfere with the ability to work and further explaining why the denial decision was incorrect.

If the insurance company denies an employee's appeal and he or she files a lawsuit to recover the benefits, the employee often cannot introduce any additional evidence of disability beyond that included with the initial application and appeal.

Social Security Disability Benefits. If the Social Security Administration (SSA) has determined that an employee is disabled under a similar standard applicable to the LTDI policy, reference the SSA’s determination and include the relevant portions of the SSA’s file with the appeal.

Legal Arguments. In addition to the medical, functional, and vocational evidence, discuss any legal arguments about why a court would overturn the decision to deny benefits if the insurance company upholds that decision on appeal. Such arguments are drawn from ERISA case law and can include:

1) the failure to provide a reasoned explanation for the adverse decision;

2) the failure to address the employees’ doctors’ opinions;

3) the failure to consider functional capacity and vocational evidence included with the appeal; and

4) selective reliance on snippets of the medical record or exclusively on paid consultants.

It is crucial to submit a comprehensive appeal with as much supportive evidence as possible, not least because the “administrative record” created during the internal appeals process most likely “freezes” if and when the insurance company upholds the denial and the employee has exhausted all administrative remedies. In other words, if the insurance company denies an employee’s appeal and he or she files a lawsuit to recover the benefits, the employee often cannot introduce any additional evidence of disability beyond that included with the initial application and appeal.

Getting a Decision on an Appeal of a Denial of Benefits

When waiting for a decision on a benefits appeal (as opposed to an initial claim), the insurance company has the same initial 45-day window within which it must provide a decision or invoke an extension.¹¹ After that, the insurance company can only invoke one more 45-day extension.¹² An employee must agree to any extension beyond 90 days from submission of the appeal. However, as a practical matter, insurance companies commonly take longer than 90 days to render a decision by tolling the review period between requesting and receiving evidence from the employee.¹³

If an insurance company fails to render a decision within the time permitted, the lawyer should send a written demand for a decision. If the insurance company continues to withhold a decision despite these follow-ups, the employee may consider filing a lawsuit in federal court and alleging that the failure to timely render a decision should be deemed a denial of benefits.¹⁴

Conclusion

Assisting clients with STDI or LTDI claims and appeals can go a long way toward helping them obtain much-needed funds when serious medical conditions prevent them from working. To improve the claim and appeal, submit detailed documentation from doctors, medical records, functional capacity evidence, vocational evidence, SSDI benefit information, and legal support. This evidence, it is hoped, will convince the insurance company to approve the claim or reverse the denial of benefits. If not, the court will be reviewing a compelling administrative record.

Endnotes

¹ 29 C.F.R. § 2650.503-1(f)(3).

² Id.

³ Id.

⁴ Id.

⁵ See 29 C.F.R. § 2650.503-1(f)(4).

⁶ Id.

⁷ 29 C.F.R. § 2650.503-1(h)(4).

⁸ 29 C.F.R. § 2650.503-1(g)(1)(i), (ii), (iii).

⁹ 29 C.F.R. § 2650.503-1(g)(1)(viii).

¹⁰ 29 C.F.R. § 2650.503-1(h)(2)(iii), (h)(4).

¹¹ 29 C.F.R. § 2650.503-1(i)(3).

¹² Id.

¹³ See 29 C.F.R. § 2650.503-1(f)(4).

¹⁴ See 29 C.F.R. § 2650.503-1(l)(2)(i).