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“COVID-Proof” Your Clients’ Group Disability Insurance

By Keith Mangrum 2:02 pm MDT 12/1/2020

COVID-19 has been especially troublesome for healthcare workers, many of whom are on the front lines doing battle with a life-threatening disease. As the calendar turns toward the spring months, and as the COVID-19 vaccine rollout has not yet halted the pandemic, these professionals need to be protected against a loss of income in the event they are infected, affected, and possibly disabled.

Here are a few reminders to help your clients “COVID-proof” their group short-term disability (STD) and long-term disability (LTD) insurance coverages.

Update the pre-disability earnings definition (PDE) in the policy.

Pre-disability earnings determine how much the STD or LTD policy pays out when a claim is submitted. Most disability policies define PDE by using the prior year’s taxable income. However, many medical practices experienced significantly reduced patient traffic in 2020. This resulted in lower-than-normal income levels for some doctors. If one of those doctors then became disabled in 2021, the PDE used to calculate benefit payments would be based on 2020 income and significantly lower than in prior years.

Until the pandemic subsides and income levels stabilize, brokers should try to make adjustments to the policy language to remedy this shortfall for their clients. Consider requesting that the carrier change the definition of PDE to the average of the past two years’ taxable income instead of only the prior year.

Check STD policies for changes to COVID-related coverage.

Most COVID-19 cases will result in, at the very least, a short time out of work. Many STD policies will cover a coronavirus-related illness if it leaves the healthcare professional unable to work due to virus symptoms or a medical self-quarantine. However, some STD policies do not include quarantine as a covered disability unless the beneficiary is symptomatic. In these instances, the definition of disability is restricted to include only those professionals who are prevented from doing their job by symptomatic illness.

Check with your STD carriers to see what adjustments they have made on the issue of quarantine. Some carriers have updated their policies to include a positive COVID-19 test as a covered disability, regardless of how the illness manifests, while others have not. Note that if the healthcare worker is a frontline worker and is infected while at work, they may be eligible for workers compensation (WC) benefits for any related disability. Check with their WC carrier for more details.

Be sure MNDA coverage is adequate for COVID-related stress.

A policy’s Mental & Nervous and Drug & Alcohol (MNDA) coverage should be written in a way that covers healthcare professionals if they experience repeated episodes of COVID-related work stress that result in a long-term disability. The most important parts of the policy to check include:

  • Language that specifies “per occurrence” coverage for MNDA claims. Without this specific language, the policy will not pay benefits if the healthcare professional suffers a stress-related relapse in their disability during the pandemic.
  • Language that specifies no cap on benefits. Many LTD policies cap benefits at 24 months, which may be insufficient to cover stress-related health impacts if the pandemic continues into 2022.
  • Language that specifies no preexisting condition exclusions. COVID-related stress could be attributed by insurers to preexisting anxiety and depression if there are preexisting condition exclusions, and therefore not covered by the policy.

A more “COVID-proof” LTD policy would allow for 24 months of benefits, and if the claimant returns to full duties for 6 months or longer before suffering a relapse, it would provide another 24-month benefit duration. Check your clients’ policies to see how they pay benefits if stress becomes a disabling condition.

Know that policy riders for contagious diseases do not apply.

Your clients may think they’re covered for a COVID-19 disability because they have a rider specifically for infectious or contagious diseases. But in most cases, the rider will not provide protection for healthcare workers infected by COVID-19. Here’s why:

  • Riders for infectious or contagious diseases are traditionally sold only on LTD policies. Most coronavirus infections do not last long enough to trigger a transition from STD benefits to LTD benefits. For the rider to apply, the virus would have to still be present for at least 90 days while also causing a loss of income. This scenario is rare.
  • Riders normally specify the diseases that are covered and generally do not include COVID-19. You can check your clients’ policies to see if the definition allows for any life-threatening infectious and contagious disease, as categorized by the Centers for Disease Control and Prevention.
  • COVID-19 is so new that some insurers will not cover long-term health impacts as a disability. The science on COVID-19, as with most new diseases, is not yet strong enough to adequately support claimants seeking LTD benefits for ongoing symptoms (like fatigue, breathing problems, or heart problems) that impact their ability to work. Insurers may be quick to dismiss these claims as exaggerated or unrelated to the original disease and therefore not covered – either through the LTD policy language or through the rider.
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