Podcast: Play in new window | Download (Duration: 1:00:46 — 139.1MB) | Embed
Subscribe Apple Podcasts | Spotify | RSS | More
A high earner with a managed medical condition takes a better job and enrolls in the new employer’s long-term disability plan on the first day. That plan will very likely refuse to pay if the same condition stops her from working during her first year there. The reason sits in a pre-existing condition exclusion that looks back at the three or six months of medical care before her start date, and it resets every time she changes employers.
Private disability insurance behaves differently. A policy the professional owns is underwritten once, at purchase, and it restarts nothing when the job changes.
Michelle L. Roberts has spent 20 years watching that first year decide outcomes. She is the principal of Roberts Disability Law in the San Francisco Bay Area, and she has represented disability claimants, and only claimants, since 2005, first in plaintiff-side litigation and then as a partner at Kantor and Kantor.
Her practice runs on ERISA, the federal law that governs the benefit plans private employers provide. On the Income Protection Journal Podcast I ran her experience in reverse, walking back from the day an insurance company decides whether to pay, to the decisions a buyer makes years earlier, when nobody is worried yet.
Group Long-Term Disability Coverage Opens With a 12-Month Test
Enrolling on day one does not put an existing condition beyond reach. A group long-term disability pre-existing condition exclusion typically runs for the first 12 months of coverage, and during that year the carrier can look back at the medical care an employee received in the three or six months before the job started. Roberts walks professionals through that structure before they make a move, not after.
“In most cases, when you start working for an employer and you become covered under their group policy, there’s going to be about a 12 month pre existing condition exclusion. So if you become disabled within the first 12 months of coverage, they are going to look back to see what kind of care and treatment were you getting in either the three month or the six month period right before you started working.”
Michelle L. Roberts, principal of Roberts Disability Law in the San Francisco Bay Area, who has represented disability claimants and only claimants since 2005
The provision has a defensible purpose. Carriers wrote it so that someone who already knows they are leaving the workforce cannot take a job, enroll in the benefits and go straight out. The people it catches are usually the ones who had no such plan.
The clock is just as exact in the other direction, Roberts explained. Once a worker completes 12 months plus a single day under the new plan, the exclusion no longer reaches the condition.
That arithmetic changes what a job offer is worth. A physician with a treated autoimmune condition, an associate managing depression or anxiety, an executive whose spine has been imaged twice this spring, each one is trading a plan that already cleared its exclusion for a plan that starts a fresh one.
Roberts said the rule does not care what the diagnosis is. If a condition caused or contributed to a disability inside that first year, it is likely excluded, and she has watched carriers argue that a documented depression diagnosis contributed to an anxiety claim filed months into a new job.
“If right now you have a disability and you might be able to get covered under your current employer’s policy, you really have to weigh, you know, what you would potentially be giving up if you leave that employer and you go to another employer.”
Michelle L. Roberts, a claimant-side benefits attorney who has spent more than 20 years reading employer plan documents for a living
Nobody negotiates that document. The terms arrive fixed inside a benefits package, and as Roberts pointed out, professionals who do not own the company have no standing to ask a carrier for anything. Reading the new plan before signing is a candidate’s only real say.
Buying Up Employer Disability Coverage Reopens the Pre-Existing Condition Window
The second place the 12-month clock resets is the one people start themselves. Many employers provide a base benefit, often around 50 percent of pay up to a cap, and sell an election to buy up to a higher amount. Roberts described what she sees when a young professional passes on that election and reconsiders a few years later.
“And then down the line, let’s say they do try to add it, but then they become disabled within the first year of increasing that coverage… they’re not going to you know honor that buyup because your disability occurred within 12 months of you doing that.”
Michelle L. Roberts, a former partner at Kantor and Kantor who now runs her own employee benefits practice in Northern California
The election is almost never declined on the merits. It is a checkbox in an open enrollment portal, priced in dollars a paycheck, considered for a minute by somebody who feels fine. The year it starts to feel necessary is the year the increase carries a fresh lookback of its own.
Timing runs against that same first year twice over. Most group long-term disability plans pay nothing until 90 or 180 days of disability have passed, and Roberts has seen elimination periods stretch to a full year where an employer short term disability plan or a state program covers the front end.
In states with a substantial public short term disability benefit, that public payment offsets the private one. In her example, a worker earning $100,000 with a 60 percent benefit is owed about $5,000 a month, collects roughly $7,000 from the state, and sees little or nothing from the private plan for a year.
Employer coverage can be worth almost nothing in year one and everything in year two, which is exactly the stretch the exclusion polices.
Individual Disability Insurance Travels With the Professional, Not the Job
Roberts put the share of people who reach her office with nothing but employer coverage at 75 percent. She qualified the figure in the same breath, noting that she advertises herself as an ERISA attorney, so the number could reflect self-selection.
Her explanation for it was blunter than the statistic. Group coverage costs little or nothing and arrives through payroll, individual policies cost real money, and a young professional carrying Bay Area rent rarely treats the difference as a necessity.
When I place private disability insurance for someone about to leave a large employer, the pre-existing condition question is the first one I ask, because the answer decides whether the coverage is being bought in time or a year too late. Underwriting examines the same history a group carrier looks back at, before anything is issued rather than after a claim arrives.
The professionals with the most exposure often look the most successful. Roberts sees engineers and executives leave large technology employers, whose plans she describes as written more favorably than most, for startups that frequently provide no group plan at all, and when they do it tends not to insure actual earnings.
Founders compound it. In my practice the pattern is someone who walks away from a large compensation package, reinvests everything into the new company and has no provable income for two or three years, the exact stretch when a carrier wants tax returns.
“Now’s the time to get that insurance because I’ve seen way too many problems with the group policies and problems that I don’t think would exist if someone had an individual policy.”
Michelle L. Roberts, an attorney who has handled employee benefits and disability cases for professionals across the country since 2005
A policy an individual owns restarts nothing when the job changes. Its definition, its benefit amount and its underwriting decision were settled the day it was issued, not the day a new employer’s plan takes over. Roberts makes that argument from the far end of the story, having seen what the other 25 percent had that the 75 percent did not.
The full conversation is on the Income Protection Journal Podcast, including the single policy feature she would refuse to give up on coverage of her own, the earnings definition one surgeon’s plan carried for years before anyone compared it to how his practice actually paid him, and the free life insurance benefit most professionals surrender with the job without ever knowing it existed. What stays with me is that almost everything a plan will or will not do was settled long before anyone needed it, back when nobody was worried yet.