There is an interesting post at http://www.bostonerisalaw.com/, the blog of Steven D. Rosenberg of the McCormack Firm in Boston relevant to reviews of claims decisions by benefit plan administrators. Those of us who do not subscribe should thank Mr. Rosenberg.
The post refers to a New York Times article that says, essentially, that some people who receive disability benefits don't go back to work when they could. No professional who has worked with plans that offer disability benefits, including LTD, STD, subsididized disability benefits under defined benefit plans or vesting up defined contribution account balances on disability, is surprised by this statement. Nor is any worker's compensation lawyer on either side. All one really has to do is notice (1) that the word "lie" exists and is frequently used, and (2) the statement that "Money is the root of all evil."
A disproportionate number of cases on reveiw standards under ERISA relate to subjective, non-verifiable symptoms, and particularly reported pain. Insurance companies are used to people who lie, but many of the cases appear to we cynics to, in essence, find some reason to reduce the deference given to the plan administrator, ignore the possibility that the, e.g., reviewing physician simply thought the claimant was lying, and take the claimant's word.
The response to this is (1) to be explicit when credibility affects a decision, and (2) to use experts and/or research to remind the court that the concept of moral hazard has always been a core component of insurance economics, not a novel way of arguing for deference to plan administrators under ERISA.
Tuesday, August 1, 2006
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Doesn't moral hazard go both ways here? Doesn't the insurance company/employer have an economic incentive to act badly? Why then should the fact that the employee is also acting under moral hazard be justification for giving the insurer/employer deferential authority?
ReplyDeleteThere may be reasons for giving the employer deferential authority, but the existence of moral hazard for the employee is not one of them.
I absolutely agree with your first two sentences. My point was that courts are ready to chew over the employer/insurer's financial interest every single time, but not the claimant's.
ReplyDeleteBoth sides need to be viewed with suspicion, because both want the money. The payer, at least, has to pay some benefits, to keep selling insurance or keep getting new employees. That's not a strong argument if you look at one claim, but insurers create standards and policies that apply to many claims, so it ought to have some weight.
Disability benefits are the hardest to deal with. Claimants lie, particlarly about pain. On the flip side, my brother was cut off from $2800 a month in LTD benefits because his pain actually allowed him to think clearly for 3-4 hours a day. (Yes, I got them back with a nasty letter about what "each and every" means and some highlights from his pain doctor's file, particularly a list of his 22 meds.)
The basic point I'm trying to make is that everybody in the process ought to be explicit about what they're doing. And, that courts ought to acknowledge the claimant's motivation to lie, not just the insurer's desire to hang on to the money.
Read the write-up at http://www.erisaontheweb.com/erisa-litigation-erisa-claimant-scores-victory-in-11th-circuit.html
of Tippett v. Reliance Standard Life Ins. Co. for an excellent example of how courts can, and should, operate.
Read Burroughs v. BellSouth, cited at http://www.erisa-claims.com/blog/index.cfm?id=237 for the most extreme anti-employer rhetoric I have seen yet in a judicial decision. By the way, I have only seen Burroughs at Brian King's excellent web site, and have told him I think the case, essentially, ingnores or guts Firestone.