by William Michael Day
In March 2017, William Michael Day was denied life insurance because of his PTSD diagnosis. He began asking his friends if they've had similar experiences, and he took it upon himself to research the situation to examine the legality and consequences of when veterans like himself are denied life insurance because of PTSD or other diagnoses. The result is a thoughtful exploration of how mental health and insurance intersect, and the real-life consequences of those intersections for veterans and their families.
I am not a life insurance expert and cannot therefore comprehensively discuss the intricacies of a highly complex industry that offers different products at different rates for different reasons. Equally problematic is the fact that people are, at this moment, involved in a highly contestable debate about the efficacy of the product itself. Additionally, not being an insurance expert prevents me from providing information about the differentiation between divergent tiers of life insurance or the differences between term life insurance, whole life insurance, and all products offered across all companies that offer life insurance. This includes employee plans for veterans currently working. With all of the aforementioned information in hand, it should be apparent that this article is not a condemnation of specific companies or an indictment of the life insurance industry as a whole. The simple reason for refraining from doing such is to avoid the pitfall that most arguments of this nature run into, namely anecdotal accounts of those who do and those who do not receive denials.
Yes, some people with Post Traumatic Stress Disorder (PTSD) have qualified for term or whole life insurance coverage. Yes, there are plenty of companies out there offering high-risk policies for exorbitant rates. The focus of this piece is on those being denied.
This article should serve as a starting point for an in-depth discussion about how using mental illness as a justification for the denial of a life insurance policy affects lives, the extent of the denial rate, and how companies are able to legally deny veterans, or anyone, with PTSD. My story is anecdotal. So is that of Jennie Fisher, a fellow NYC Veterans Alliance member, who was denied a life insurance policy by USAA. We should all be wary of anecdotal stories masquerading as empirically supported statements about broader social issues however, the denial of one veteran is enough to warrant an inquiry into life insurance practices.
In this article we will look at the legality of such a denial and I will highlight some of the data surrounding this issue. The pragmatic approach to correcting this blight on the veteran community is one best handled by those with policy and legal expertise and a sound understanding of the insurance industry, how the insurance market functions, and what practical policy initiatives could be brought forth to help resolve this problem. So what is the extent of this problem?
Before diving into the legality of such rejections and rates of denial it is important to understand the impact that a denial might have. The primary focus of this article is veterans with PTSD because I am a member of an organization called the NYC Veterans Alliance that is attempting to resolve other veteran issues through lobbying, drafting legislation, and preparing potential candidates to run for office. It is in the spirit of their proactive advocacy on veteran issues that I found need to explore life insurance denial for veterans with PTSD. It is critical to note that holding a PTSD diagnosis affects a large number of people in United States. It does not only affect those who served in the military.
To comprehend how a denial affects a person it is important to discuss two primary things:
1) the impact a denial has on both the loved ones or family members of a veteran and the individual receiving the denial that would have benefited from having the security that life insurance affords people; and
2) the effect that the denial has on the exacerbation of stigma that surrounds those with PTSD.
Unfortunately, there is a void in research concerning both of the questions that prevented me from providing empirical data, either quantitative and qualitative, on either question. In this scenario we must look to logic. I did not expect to find data on how denials affect stigma, but I was surprised about the lack of data concerning the impact that the lack of life insurance has on both veterans and civilians. We don’t need data to know that a person afflicted with PTSD will suffer further trauma if they believe stigma affected their ability to obtain life insurance. Similarly, we need only know that the absence of life insurance creates financial instability for those denied.
What then allows for a veteran with PTSD to be denied?
There is a misconception that the Americans with Disabilities Act (ADA) is an all-encompassing piece of legislation that protects those with disabilities universally across both the public and private sector in all aspects of life. How does the ADA specifically help veterans with PTSD, bi-polar, or major depressive disorder?
Veterans with PTSD, as well as non-veterans with PTSD, bi-polar disorder, or major depressive disorder are certainly covered under the ADA as individuals with legitimate disabilities, but when a company elects to use a mental health condition as a qualifier for not selling a product, the ADA is of little utility.
The ADA, through the lens of understanding veterans with PTSD, primarily focuses on protections in the workplace. The other areas of focus highlighted in the legislation do not specifically address interactions between those with PTSD and private companies when purchasing products. There certainly is crossover between the public and private when people with disabilities are discriminated against in school, the work place, and at private companies. It appears however, that the effects of the legislation do not extend to every aspect of a disabled person’s life. So, if the ADA does not protect veterans with PTSD from being denied life insurance, what, if anything, does?
The regulation of insurance markets is handled by each respective state. According to the National Association of Insurance Commissioners (NAIC) “The Financial Modernization Act of 1999--also called Gramm-Leach-Bliley--established a comprehensive framework to permit affiliations among banks, securities firms and insurance companies. Gramm-Leach-Bliley once again acknowledged that states should regulate the business of insurance.” The NAIC acts as a central network for communication across all states. The NAIC also states “State legislatures set broad policy for the regulation of insurance. They establish and oversee state insurance departments, regularly review and revise state insurance laws, and approve regulatory budgets.”
At this point you might be curious about federal oversight of state run insurance marketplaces and the NAIC. There is, but the office responsible for ensuring fair practices is limited in their capacity, citing on their website “The Federal Insurance Office (FIO) was established by Title V of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). The FIO is housed within the U.S. Department of the Treasury and is headed by a director who is appointed by the secretary of the Treasury. While the FIO serves an important role by providing necessary expertise and advice regarding insurance matters to the Treasury Department and other federal agencies, it is not a regulatory agency and its authorities do not displace the time-tested robust state insurance regulatory regime.”
As you can see, this starts to become increasingly complex when discussing veterans with PTSD obtaining insurance in each of the 50 states. As a resident of New York State, I contacted the New York State Department of Financial Services Office and posed a simple question; “What New York State law allows for veterans with PTSD to be denied life insurance policies? I am looking at your regulations page that lists all of the insurance regulations for the state. Can you direct me to the appropriate regulation or law?” I was told that the information could not be disclosed over the phone. I am not an attorney, nor am I am policy wonk, so my research found nothing that allows for the denial of a life insurance policy (term or whole), based on New York State regulations. I will be following up with an e-mail and was informed that, if a regulation does exist, I would be provided with it. You can contact someone about life insurance in New York state at email@example.com.
Frustrated with an inability to get a definitive answer from anyone at multiple levels of government, I contacted Mass Mutual Financial Group and picked the brain of an insurance broker. The CUNA denial shown in the photo at the beginning of the article was the result of a simple application over the phone and a brief questionnaire mailed to me. The questions from CUNA were similar to those asked by Mass Mutual. This is not to suggest that the ways life insurance companies collect information is universal across all companies.
I explained that I was recently received a life insurance policy denial from CUNA and that the only reason given was my PTSD diagnosis. The broker did not provide any feedback when I told him about the denial. He attempted to console me by thanking me for my service and gave me frank feedback about my questions. The broker began by asking for demographic information. He then asked the following questions: 1) what are your symptoms, 2) what medications are you on, 3) were you hospitalized, 4) how long was the hospitalization 5) do you have any suicidal ideations and 6) have you acted on a suicidal ideation? Immediately I felt the pang of stigma over the phone, regardless of the cordial demeanor of the broker. He explained that the questions needed to be asked because I could fall into one of three risk pools: a) mild, b) moderate, or c) severe. “Mild” would constitute no hospitalizations; “moderate” would mean that there were no suicide attempts; and “severe” is self-explanatory.
The broker informed me that the worst rating one could receive is called Table J. The rates were fair but I still did not have an explanation for why someone with PTSD would be denied a policy. It also raised another question. Why does suicide factor into the decision? It’s my understanding that payouts do not occur if the policyholder committed suicide. This means the company could collect premiums until the day the person takes their life and not have to pay anything out. This, of course, is a separate issue in and of itself and the regulations across all life insurance providers would have to be explored to see if people are really denied for suicidal attempts of ideations related to PTSD. I decided to try my luck with Mass Mutual and am awaiting a decision. I knew that I could not be the only one who was dealing with a denial so I reached out to other veterans.
My dear friend and fellow NYC Alliance member Jennie Fisher had this to say about her USAA life insurance denial:
I was denied life insurance by USAA for having PTSD. The denial had to have happened sometime in the last four years. This affects my family because I contribute a large portion of my income towards family expenses such as the mortgage. If I were to die, my husband would become the sole party responsible for providing a stable and healthy living environment for himself and our daughter. USAA advertises their commitment to the military community. Many veterans suffer from PTSD. PTSD is a cause for anxiety over the past; now a ‘military friendly’ company is a cause for anxiety over the future.
The consequences for Jennie are real. Now you have two examples of veterans with PTSD being denied life insurance policies by two large American companies. Remember though, these anecdotal accounts are shocking but, not conclusively representative of the veteran life insurance application experience. For that we need solid numbers to measure the extent of PTSD denial rates. Before moving on it is worth noting that insurance through private companies is not the only option for veterans with PTSD.
The Department of Veterans Affairs does offer life insurance. Servicemembers Group Life Insurance (SGLI) coverage is available in $50,000 increments up to the maximum of $400,000. Covered members receive 120 days of free coverage from their date of separation. Coverage can be extended for up to two years if the Servicemember is totally disabled at separation. Part-time coverage is also provided to Reserve members who do not qualify for full-time coverage (members covered part-time do not receive 120 days of free coverage).
If you are totally disabled at the time of separation (unable to work), you can apply for the SGLI Disability Extension, which provides free coverage for up to two years from the date of separation. At the end of the extension period, you automatically become eligible for VGLI, subject to premium payments.
Additionally, if a veteran misses the 120-window and is not fully disabled at the time of separation, they can apply for Service-Disabled Veterans Insurance. It has a max $10,000 payout cap. A problem with the VA policies, aside from the dismally small $10,000 cap on SDVI, is the well-respected assertion that the Department of Veteran Affairs does a deplorable job in relaying information about VA programs to veterans. It is unclear how many veterans have insurance under these federal life insurance programs. I was unable to find data.
Following my call to Mass Mutual, I began to research: a) rates of life insurance policy denials amongst veterans; and b) measures of impact that such a denial may have on the family members or loved ones of the deceased. I spent hours researching such questions and, admittedly unsurprisingly, came up with nothing. Of course, the absence of information gives rise to boundless opportunities for research. I leave that to the savvy researcher, the inquisitive person in academia, and the folks reading this that are perturbed that the gap of information is so overwhelming. I can make assumptions about why the information is not readily available, but that would be negligent.
The results of my inquiry into why veterans with PTSD are denied life insurance showed an infuriating lack of data surrounding the issue. Life insurance products are complex. So is the industry. To provide a definitive reason why a veteran would be denied life insurance based on a PTSD diagnosis is elusive. Historically, as Americans, we have learned that the resolution of problems is not always crafted with the necessary information at our disposal yet, we find ways to address the policy through intelligent policy making and avocacy.
Though disheartening, exploring this issue should be seen as potentially transformative through a policy lens and ripe with opportunities for research and advocacy. Not doing so jeopardizes the lives of veterans and their family members. This is literally a life and death matter.