Disability Insurer Oversight: Just Ducky?
Last month we blogged the emerging scandal involving the Long Island Railroad, where over 90 percent of employees (management included) retire on disability. Walt Bodanich and Duff Wilson of the New York Times have a follow up article that goes into some of the deails. It's not surprising to find that workers were coached in the best way to apply for disability, including a select list of doctors and paying for their disability exams in cash.
One detail of the new report caught the Insider's eye. Two private sector insurers wrote coverage for railroad workers: Transamerica and Aflac. Transamerica has walked away from the (unprofitable) business. Aflac, on the other hand, has approached the scandal in a rather circumspect and casual manner.
Wlliam Capps, manager of Aflac's special investigations unit, testified at a hearing convened by New York AG Andrew Cuomo that since 2003 his company had paid out $4.1 million to LIRR employees holding short-term disability policies. He says that Aflac did not realize anything was amiss until this year. (Perhaps they read about it in the papers while enjoying their morning commute?).
Capps's investigation focused on three areas: the close proximity betweeen retirement and the submission of claims; the similarity of ailments; and the use of the same three doctors by most of the employees. Under questioning, Capps said that about a quarter of LIRR policyholders had cashed in on the coverage.
Twenty five percent! In this era of data mining and performance management, you would think that such a high level of disability claims would raise a few red flags. Private insurers are accountable for results on a quarterly/annual basis. There is no way they could make money on a disability program with such a high percentage of those covered drawing down benefits. You have to wonder whether the Aflac sales department ever gets feedback from claims, or whether anyone actual reads the performance data.
I can just see Aflac's ubiquitous duck in a new ad campaign: the duck is strapped across a railroad tie, with the LIRR commuter train heading straight for it. The duck quacks in alarm and scatters feathers in a desparate effort to escape. That's more than can be said for Aflac itself, which lay down on the tracks, closed its eyes and took a nap, while the 5:02 hurtled down the track on its scheduled rounds.