Frederick Kurtzman's career appears washed up. The Tampa gynecologist says he has suffered from back pain since disc surgery in July 1995. Soon after his operation, moreover, Kurtzman developed ulnar nerve entrapment of the right arm. A tremor in his right hand leaves him unable to perform surgery, he says.

Luckily, Kurtzman, 49, had the foresight to purchase disability insurance in 1986. The non-cancelable policy from Provident Companies, of Chattanooga, Tenn., was to provide a lifetime monthly benefit of $12,000, a little more than half his 1986 practice income. The annual premium, after an initial lower rate, was $6,296.

Kurtzman began receiving benefits in October 1995, after a 90-day waiting period. End of story? Hardly. In January 1996, the insurer hired an investigator to do video surveillance of Kurtzman. In July, Provident asked the doctor to undergo an independent medical examination (lME). In August, the carrier stopped his benefits, saying the IME showed Kurtzman had recovered and was able to work.

In the IME report, neurosurgeon Robert Mozingo of Lakeland, Fla., wrote that the exam yielded "no objective findings" and that Kurtzman's pain was "subjective." That contradicted Kurtzman's doctor, neurologist Robert Martinez of Tampa, who reportedly found the gynecologist totally disabled. Kurtzman claims that he can stand or walk for only five to 10 minutes at a time. His right foot becomes numb when he drives. He can't bend. (Neither Mozingo nor Martinez returned calls from Medical Economics.)

In January 1997, Kurtzman sued Provident for breach of contract and fraud. He also filed a claim against Provident and Mozingo for conspiracy to defraud.

While the court has yet to decide the case, this face-off already offers lessons for doctors. The dispute sheds light on recent turmoil in the disability insurance business, how its fall-out affects the coverage available, and problems you may run into when making a claim. It also raises ethical questions.

Doctors are no longer prized disability customers.

Several factors are working against Kurtzman. First, his problem is partially back-related. Insurers regard such complaints as they do psychiatric disorders: They're difficult to prove and, therefore, suspect.

Second, the timing of Kurtzman's misfortune couldn't have been worse. It happened as insurers saw profits from the disability business, a one-time cash cow, get hammered by astronomical claims by doctors. For example, UNUM, a major disability writer, found that claims by

physicians with benefits of $5,000-plus a month rose 60 percent in the first half of 1994

compared with the same period a year earlier. The claim rate plateaued at that level, says Susan Lloyd-Rees, director of product development, individual disability, for UNUM, in Portland, Maine.

In the early 1990s, insurers say, most physician claims came from certain specialties, such as anesthesiology, orthopedic surgery, and neurosurgery. Then primary-care doctors, OBGs, and general surgeons began following suit, says Donald Boggs, senior vice president and deputy

risk manager for Worcester, Mass.-based Paul Revere, which Provident recently acquired.

The insurance companies were shocked. They'd always competed fiercely to win the business of doctors-low-risk types who'd paid handsome premiums but rarely collected benefits. Now, many physicians, demoralized by managed-care hassles, aren't enjoying medicine as much, and insurers say that has translated into higher claim rates. "We know they haven't developed more physical problems, but their motivation has changed," says Boggs. Furthermore, doctors are staying on disability longer, says Lloyd-Rees. "We're looking at those claims more closely."

Insurers also point out that because some doctors' incomes have stagnated, they can do nearly as well collecting benefits as they can working. Most policies replace only about 60 percent of income, but that's based on what the policyholder was earning at the time he took out the coverage. See "Have doctors lost their work ethic?," Feb. 27, 1995.

Another strike against Kurtzman is that he practiced in Florida, where managed care rules, and rates of disability claims from doctors have been among the highest in the nation. Some insurers will no longer sell policies to physicians in Florida or California.

To recoup lost profits, the insurance industry has, in the last few years, revamped its disability business. The result: less-generous benefits, most likely at higher cost.

Physicians have been demoted from the elite, low-risk category to normal risk, which can push their premiums as much as 30 percent higher. Enticements are gone or severely trimmed. Prized non-cancelable policies are hard to find and cost more. Lifetime benefits are all but extinct. "Own-occupation" coverage-which pays benefits as long as you can't perform your original

job-often expires in two years. Some companies don't offer it at all, preferring instead to replace earnings you've lost due to a disability. For instance, if you can earn 50 percent of your salary, your benefit will cover the other half. Says UNUM's Lloyd-Rees: "In the past, we were preserving lifestyles or, in some cases, actually enhancing them. That was very expensive."

And monthly benefits are capped. Paul Revere policies, for example, have a $7,500 maximum for neurosurgeons and some other specialties. The top benefit for other doctors is $10,000.

Using red flags and hot lines to weed out the fakers.

To further stem their losses, in recent years insurers have begun to aggressively fight illegitimate claims. They're not. however, targeting doctors specifically, they say.

Insurance companies have enlarged in-house investigative units, promoted fraud awareness

among employees, and stepped up use of video surveillance and IMEs. (Nine states require

insurers to set up anti-fraud programs.) Some insurers have toll-free hot lines so consumers can report suspected fraud. UNUM, for example, pays $500 for a tip that leads to the discovery and denial of a fraudulent claim.

Since 1994, UNUM has almost doubled the number of its investigators and field reps, to more

than 40. "They're our eyes and ears," says Andrew Bernstein, senior vice president for disability benefits at UNUM. "They visit, interview, and conduct surveillance on people whose claims we're suspicious about, and try to verify the disability."

UNUM has also trained its in-house claims-handling staff to recognize more than 40 tip-offs

that could indicate fraud. "If a policyholder with a bad back says he's completely house-bound,

but he's never home when we call, that's a red flag," Bernstein says. "Or we might get

information from our database searches that suggest a person is running a business when he

says he can't work."

Once suspicions are aroused, the insurer may do a credit check to investigate, for instance, whether a supposedly house-bound claimant has charged airline tickets and hotel stays. Or it may resort to other-sometimes more controversial-tactics.

Video surveillance is a favorite strategy of investigators, says Frank Darras, a Claremont, California attorney who has represented plaintiffs in about 5,500 disability cases. "They hope to find the person performing an activity inconsistent with the disability," he says. For example, if a claimant says he can't bend, lift, or stoop, they'll try to catch him lifting a gallon of milk off a grocery-store shelf.

Videotaping is usually done over a few days so that, when confronted, a claimant can't say he was having "a good day".

"Videotape can be damning," Darras says. "I advise my clients that although their doctors may

urge them to get out and try to exercise, they may be better off staying in. Such evidence may be difficult to overcome when you have a jury whose individual average income is less than

$40,000 a year looking at the insured, who is making $10,000 a month, tax-free, especially if that person doesn't look or act sick or injured."

And it may be difficult to overcome some investigators' questionable tactics. Frank Verderame, a Phoenix attorney, says that sometimes investigators splice together brief tapes taken on different days, to show the person performing an activity inconsistent with his disability for longer than he actually was. "The level of ruthlessness in the disability field is at an all-time high," Verderame says.

How independent is the independent medical exam?

Insurers who question a disability may have a claimant examined by an independent physician of its choice. But how qualified are such doctors, and how independent are the exams?

Kurtzman, in his court-filed complaint, says that Provident "falsely and fraudulently... with the intent to deceive" told him that his IME would be done by a board-certified neurologist. It turns out that Mozingo was a board-certified neurosurgeon.

While the misrepresentation might have been an error (Provident officials declined to comment), Kurtzman's claim raises questions about what kinds of doctors should examine patients with certain conditions-and about some doctors who do IMEs. While it's not unusual for any doctor to be asked to do such an exam, some appear to rely on this work for a sizable chunk of their income. Since that income flows from insurers, there could be a conflict of interest.

According to Kurtzman's complaint, he told Provident he wasn't happy with its choice of doctor, having heard "Dr. Mozingo would be predisposed to give 'Provident whatever Provident needed' to terminate his benefits."

He further charged that the insurer told him "with the intent to deceive and defraud," that Mozingo "was not an 'insurance doctor’". In his report on Kurtzman, Mozingo himself says he has performed "conservatively hundreds of IMEs". According to court filings, Provident declined to answer the plaintiff's questions as to whether and how often it has asked Mozingo to perform IMEs.

Marion McNally, manager of medical operations at UNUM, acknowledges that "there are doctors who do this for a bigger part of their livelihood". McNally says her staff tries not to use the same doctors repeatedly for IMEs. "That's dangerous," she says. Physicians who work only or mostly for insurers "might be tempted to give opinions that favor the insurance companies. We want to make sure our assessments are objective," McNally says.

UNUM finds board-certified and licensed doctors for IMEs from an in-house database of 6,000 physicians and from directories. "We try to select randomly and use a broad range of doctors. We may have to use someone more than once if he's the only qualified doctor in the area," McNally says.

Perhaps Provident chose Mozingo because he's based in Lakeland, so Kurtzman, who lives in Tampa, would be less likely to know him. There are, however, six neurologists and two other neurosurgeons in Lakeland. And there are eight neurologists and six neurosurgeons in Sarasota, a similar distance from Tampa.

The half-a-Ioaf offer that some can't turn down.

An insurer will sometimes offer a disability claimant a lump-sum settlement, also called a policy buyback. How often this happens is unclear. Michael Norton, a UNUM spokesperson, says it's rare. He declined to discuss circumstances that would lead to an offer, saying they were specific to each claim.

Tom Wildsmith, an actuary for the Health Insurance Association of America, says a settlement may be offered if a person has been on disability for four or five years and appears to be permanently disabled. The amount, typically, is equal to or less than the reserve set aside to cover the claim, he says. The reserve, based on an actuarial calculation, is smaller than the amount a person might expect to collect over time but generates investment income to cover the benefit.

Buyback offers are becoming common, Verderame says. "I used to see a case like this every six months to a year. Now I get two to three calls a week," he says. He has seen offers for as little as 10 cents on the dollar.

Verderame says insurers offer settlements when they find themselves committed to huge payouts, not to mention the hassle of keeping a case on the books for years. A $12,000-a-month, lifetime benefit for a policyholder in his or her 40s, like Kurtzman, adds up to nearly $2.9 million over just 20 years. (A reserve of somewhat less than $1.45 million, invested at 8 percent, would generate the monthly benefit.) And the person could live a lot longer.

Of course, the claimant could also die young, and the insurer would be off the hook. That's the gamble both took when the policy was issued. .

Since a lump-sum settlement seems to be a better deal for the insurer, why would the claimant agree to it?

Such an offer might appeal to a disabled person whose spouse wants to start or expand a small business that the payoff might fund, Wildsmith says. And Verderame adds that some policyholders believe they don't have a choice. An insurer might initially deny a claim and, when the policyholder protests, offer to settle. Or the company might tell the claimant that video surveillance shows he's not as disabled as he says.

"They put you on the defensive and try to muscle you into a settlement, with the idea that half a loaf is better than no loaf," Verderame says. "They're doing it to everyone. They've gotten very aggressive".

But if an insurer really has evidence that a claim is fraudulent, why not just deny it? Why even offer a settlement? Unless, of course, it hopes the videotaped and investigated claimant will be

intimidated into accepting less than the promised top-drawer benefits.

Insurers can't be faulted for flushing out cheaters. But one byproduct seems likely: Benefits for legitimate claims may be delayed or denied.

The tactics that attorney Verderame calls "ruthless," insurance companies call "good business". Whatever you call them, they mean you'll likely pay more these days for weaker policies, and that if you ever file a claim, you can expect to be questioned, probed, and challenged every step of the way.

How to make a claim stick

Legitimate disability insurance claims should be honored. But you can count on the carriers to scrutinize your claim papers and insurance application for loopholes. Here's how to protect yourself when going through the claims process:

The insurer may ask to see your income-tax returns to assess your loss, says Frank Darras, an attorney in Claremont, Calif. "This is irrelevant if you're filing for total disability. All that matters is the monthly benefit stated in your policy." The insurer may ask you to complete and sign IRS Form 4506, which would grant it access to your tax returns. Don't do it, says Darras.

still get a good deal

When listing the "material and substantial" duties of your occupation on your claim form, be specific. "If you're an OBG, the list might include delivering babies and performing hysterectomies and C-sections," says Frank Verderame, a Phoenix attorney. Many doctors err in listing administrative work, which an office manager handles, says Darras. If you make this mistake, the insurer may deem you not totally disabled and deny or cut your benefits, even if you're unable to treat patients.

A field representative may want to visit you at home. Arrange to meet elsewhere, such as a coffee shop. Darras advises. Besides verifying your disability, the rep wants to evaluate your lifestyle-and, perhaps, check how best to videotape your activities unnoticed.

Be sure to tape record, visibly, any meetings you have with field representatives, Darras cautions. One Florida doctor got his first inkling that he might have trouble with his claim when an insurance rep. commenting on his luxury cars, told him that the insurer wanted to "make an example" of him, presumably to other doctors who might be thinking of filing for disability. Such comments could hardly help the insurer in a lawsuit.

If your claim is denied, don't stop paying your premiums while you appeal, or the insurance company could cancel your policy for non-payment. Write on the checks, "Contested premium. Should be on waiver."

An insurer may offer to buy back your policy, alleging that you supplied incorrect medical or financial information when you applied for it. But if you bought the policy from a licensed and appointed agent (as opposed to a broker, who technically works for you), the insurer is responsible for the agent's errors or negligence in taking down information. (Obtain the agent's license number and verify his or her credentials with your state insurance department.) If your income has slipped since you took out the policy, the insurer may argue that you're making more money by staying home on disability than you would at work. Remind the rep that when you applied for coverage, it was the insurer that decided, what benefit you qualified for and the premium.

And, Darras urges, during the IME exam and throughout the claims process, avoid making statements such as, "I don't like practice any more," or "I'm earning less with the HMOs." This may give the impression that you're using your disability to get away from medicine or for financial gain.

You can still get a good deal

Insurers are working hard to offer individual disability policies that are attractive to purchasers but won't drain profits. UNUM, for example, has a disability policy that converts into long-term-care insurance. And Mass Mutual, Springfield. Mass., has introduced a disability-income trust that would replace funds that would have gone into a retirement fund if the person had remained employed.

Still, premiums in general are climbing. And insurers are now charging women more, too, claiming they're bigger risks. Nonetheless, you can get a policy that will meet your needs and won't cost a small fortune. Some shopping tips:

If you’re just starting out in practice, suggests Atlanta insurance broker Robert Littell, keep premium costs down by buying a "step-rate" policy. Rates rise over time, and then level out.

Lengthen the time you'd wait to receive benefits. Ninety days is typical, but wait six or 12 months for benefits, if you can live off savings in the meantime.

Consider excluding a recurring medical problem, such as tennis elbow or knee difficulties, if that will lower your premium.

Skip the cost-of-living rider, urges Timothy Chase, a Towson, MD., financial planner. This kicks in one year after you start collecting benefits and will add only about 5 percent more per year to your benefit, but could raise your premium as much as 40 percent annually, Chase says.

If you're in practice with other doctors who are also buying individual coverage, ask for "list billing". You'll get a discount of about 10 to 20 percent, says Littell. Also, women in a practice with men may not be charged higher premiums if they get a list billing rate.

Copyright [c] 1997 by Medical Economics Publishing.

Reproduced by permission from Medical Economics magazine.

Medical Economics Web Site is: www.medec.com