Most of us have received requests for medical records from insurance companies when one of our patients applies for life or disability insurance. What actually happens during the application process? I asked Rick Matzker, insurance advisor for the American Psychoanalytic Foundation's insurance program for APsaA members, to demystify the concept of underwriting. He supplied much of the information in this article and introduced me to two senior insurance underwriters, who were very helpful in explaining the implications of specific psychiatric diagnoses.
Underwriting is the term used by insurance companies to describe the process of evaluating a prospective client. The goal of underwriting is to obtain as much information as possible to determine if the client is an appropriate risk for the type of policy being sold. As part of the original application, the applicant must fill out a medical questionnaire, listing all medical problems and all physicians seen in the last ten years. The applicant also signs a blanket release, allowing the insurance company to obtain all medical records. Any errors or omissions on the medical questionnaire will void the policy, if the problem is discovered in the first two years after the policy is written.
Depending on the amount of insurance being purchased, a nurse or doctor sees the applicant for a physical, and blood tests are done. The data are then reviewed by the underwriter, who assesses the degree of financial risk the applicant poses for the insurance company. If there are no problems, the level of risk is deemed “standard.” If there are some problems indicating a higher risk — meaning that the insurance company has a higher than standard risk of having to pay out significant disbursements — the insurance company will offer the same amount of insurance at a higher premium. In the language of the insurance industry, the applicant has been “rated.”
If the application is denied, all information about the applicant is usually sent to the Medical Information Bureau in Boston. Records at the MIB are then available to nearly any insurance company. In a future article, I will discuss in more detail the MIB and the confidentiality of records within the insurance industry.
Since information about a rejected application goes to the MIB and may reside there forever, I advise my patients that it is common and acceptable to have their insurance agent present their case anonymously to the underwriter. If the application is be significantly rated or rejected, the underwriter will often describe circumstances that would change the evaluation, such as a depression-free interval of several years, and another application can be made in the future.
“Psychiatric diagnoses can trigger everything from denial of insurance to no insurance rating at all. Underwriters want to look at the whole person, including moral character, job history, and driving record.”
Alternatively, the agent may find another company with a more favorable underwriting policy. Underwriting is as much art as science, and different insurance companies will have different philosophies, based on their market strategy and their pricing. Underwriters fully understand that an applicant's therapist may be pulled in the direction of trying to help a patient to get the insurance. Underwriters also evaluate the credibility of the medical information. For this reason, skimpy documentation in an effort to protect the patient can result in a rejection.
Underwriters do not need or want process notes or sensitive personal information. They want to know about the degree of the anxiety and/or depression, the duration and course of symptoms, the medications involved (if any), the amount of functional impairment, details of hospitalizations, suicidal assessment, the presence or history of psychosis, and substance abuse history. I usually write a brief treatment summary, which I share with the patient before anything is sent to the insurance company. I've had patients who take this summary to their insurance agent to become part of an anonymous evaluation.
Psychiatric diagnoses can trigger everything from denial to no rating at all. Underwriters want to look at the whole person, including moral character, job history, and driving record. There is a somewhat new concept in this field called “clinical underwriting,” which emphasizes that old standards of risk assessment can be overly critical. This means that some underwriters will look at each person more individually. Underwriters traditionally relied on the predictions of risk, which are calculated by actuaries, using data that the insurance industry has collected. Underwriters know that these predictions are always based on data that is likely to be out of date.
In a very general sense, underwriters divide psychiatric problems into three risk categories. The first is mild to moderate anxiety, where there is little functional impairment at work, mild medication if any, and often a clear situational precipitant. Applicants in this group usually do not get rated.
The second level of risk involves moderate depression, characterized by a longer duration of symptoms, use of “stronger” medications, and an absence of suicidal risk. People in this group will be rated one or two levels above standard.
The third group involves the rest of DSM-IV Axis I diagnoses and will usually result in rejection. However, good underwriters will look beyond DSM-IV. For example, a patient with a history of hospitalization for a suicidal gesture who has been euthymic and functioning well for five years may be only slightly rated. A patient with bipolar disorder, in remission for years, may not get rated at all.
The rating of psychiatric conditions is an area of ongoing concern to the Committee on Insurance. Our hope is that clinicians' full understanding of the underwriting process will help them with patients in the sometimes difficult process of obtaining life insurance.
Through Abrams, Gavin, and Vogel (800-968-1401), APsaA members can purchase life, disability, health, and long-term care insurance, often at very favorable rates. AGV provides personalized consultations about insurance and places the policies with solid companies.
R. Lawrence S. Clair, M.D., chairs the Committee on Insurance. He is on the faculty of PINE and has a private practice in Boston.