Disability Insurance for Physicians: Time for a Check-up

Medical school was certainly a simpler time compared to the uncertainty of the healthcare marketplace today. One decision that may have seemed easy at the time was the purchase of disability coverage. Likely a broker or insurance carrier came to campus, made a presentation, and you purchased a policy - simple.

But, have you looked at your disability coverage lately? If you are more than 10 years or even five years into your practice, chances are a lot has changed. You are doing more, making more, and have more responsibilities. It’s time to take a fresh look at your disability policy - a mini check-up as it were. Putting it off could put you at serious risk for underpayment when you need it most.

Here are some of the most common issues I see . . . and what you can do to address them.

1. Make sure the contract clearly defines disability so that your medical specialty is protected.

While it seems simple enough, one of the biggest problems I see is lack of clear definition in what constitutes a disability and when the insurance coverage will kick in. Be sure your insurance policy considers you disabled if you are unable to perform the duties of your medical specialty. This is important for a number of reasons. For example, an orthopedist may suffer a hand injury and become unable to perform surgeries. However, the insurance policy may view her as still able to practice family or internal medicine, meaning no disability coverage would be forthcoming.

For a physician or practice accustomed to the income of an orthopedist, this can represent a significant blow. Under many disability policies, your occupation is defined merely as “physician” - those in the industry recognize there are vast areas of differentiation within the profession. Read the definition of disability carefully and make sure it protects your specialty.

2. Ensure coverage includes partial disability.

My firm manages claims for about 300,000 physicians and their employees nationwide. So we see a lot of disability claims. About three-fourths of the claims we see are for partial disability. Many policies don’t fully cover the reality of physicians wanting to come back and do something, even if it is a subset of their previous duties. If you are in a small or mid-sized group and become disabled, that could have a significant impact on the practice. You want your insurance policy to help bridge the gap between your usual income and your new, lower income as a result of a partial disability. It’s not only about how you will survive, but how the practice will as well. As a revenue producer, you have to protect your whole practice, not just your own income.

Once again, make sure your policy covers partial disability and read the language carefully. Also ask your broker or carrier about business interruption insurance, which can provide important additional protection as well.

3. Look at how the carrier defines your income.

In today’s marketplace, most physicians are paid through a combination of incentives, business structures, bonuses, and other compensation. One problem many physicians run into after filing a disability claim is that their carrier uses only their W2 to define income. For many physicians, W2 salary represents only 20 percent of their income. Clearly, defining income on the narrow parameters of a W2 is not fair to the disabled physician and will not adequately cover their needs. So, read that part of the contract carefully and ensure the coverage includes all sources of revenue.

Other steps to consider:

Those are always my top three recommendations to physicians when it comes to their disability coverage. There are other things to consider as well.

• If you are a specialist, consider a policy that defines the duties of your medical specialty by your actual billing patterns - your CPT and ICD-9 or ICD-10 codes. You can’t get more accurate than that. And believe it or not, there are policies that offer this kind of accuracy.

• Look for policies that clearly bridge the gap between your pre- and post-disability income. This is important for you and your group. As noted, business interruption policies or other riders can accomplish this goal.

• Use an experienced broker. Disability insurance for a physician is much different than it is for other professions. Make sure your broker understands your business, the best insurers for physicians, and all the coverage options available to you.

The Importance of Group Coverage

Lastly, and I can’t stress this enough to doctors, be sure to explore group coverage. If you have an individual policy, make sure to fully research group options. Put simply, you can get more coverage for a better price with group disability, and it should not offset with your individual policy. This doesn’t mean you need to choose between the two. You can and should maintain individual and then add group coverage. And take note: with group coverage you may not need to pass medical underwriting. The insurer will often provide “guarantee issue,” meaning everyone in the group receives at least a certain level of coverage. There are usually options to purchase more.

So what’s your experience been with disability coverage? Have you ever had a claim covered at less than the amount you needed or expected?