Rehabilitation benefits - the unsung heroes of income protection insurance

Rehabilitation benefits are the unsung heroes of income protection insurance, explains Col Fullagar.

When it comes to the benefits insured under an income protection policy, the total and partial disability benefits are clearly seminal. Without them, the contract would have little meaning.

These benefits undertake to achieve the primary purpose of this type of insurance – ie, to assist with the maintenance of the lifestyle of the insured and the family of the insured if the former is unable to work as a result of a sickness or an injury.

Once past these two benefits, agreement on the awarding of merit certificates for the seemingly endless array of ancillary benefits is more open to debate.

If the criteria were value for money and client relevance, some might vote for the crisis benefit which pays a guaranteed six months benefit if an insured event occurs. Yet this largely duplicates in part what trauma insurance does as a whole.

Others might push for the scheduled injury benefit, but this is primarily designed to simply pay in advance that which is likely to be payable on a monthly basis.

And so the debate could continue until some income protection quiet achievers were considered.

These benefits do not financially compensate the insured or their family by way of direct benefit payment. Instead, they underpin the not always appreciated but nonetheless important secondary purpose of income protection insurance – ie, to assist the insured to return to work.

These unsung heroes are, of course, the various rehabilitation benefits within the policy.

Rehabilitation benefits

The more common types of rehabilitation benefits that can be found are:

Expenses reimbursement benefits

These provide for a payment in reimbursement of the expenses incurred as a result of the insured engaging in a rehabilitation course. 

Examples may be listed in the policy, however, the types of expenses that may be covered include:

• The cost of initial assessment in order to identify a suitable course;
• The cost of the course itself; and
• The cost of equipment such as wheelchairs, walkers, prosthetic devices, etc.

An upper limit is usually set at around 6 times the monthly benefit amount.

Workplace modification expenses benefits

These are designed to encourage the employer to rehabilitate a disabled employee (the insured) back into their previous role or a new role within the workplace.

The benefit provides for the reimbursement of expenses incurred as a result of changes being made to the employee’s work environment.

Examples might include:

• A specially designed desk and chair;
• Ergonomic keyboards, mouse, etc, for office workers; and
• The cost of a therapist who can consider in detail how work is undertaken and suggest alternatives such as more frequent rest breaks, different ways to hold tools or other work related equipment. 

Upper limits with these benefits tend to be lower at around three times the monthly benefit.

Encouragement payments 

These benefits provide the insured with a direct financial incentive to participate in a rehabilitation program – for example, an additional 50 per cent of the monthly benefit amount might be payable.

Upper limits are usually that the additional payment is made for up to 12 months or until the insured returns to work.

Conditions of benefit payment

The purpose of making available these benefits is two-fold:

• To assist the insured’s ability to return to gainful employment; the desire and need to be back to work is fundamental to many; and
• To reduce the duration and amount of benefit payments, there is nothing wrong with an insurer appropriately pursuing this goal.

The design of the various rehabilitation benefits is an important part of how well these purposes are achieved:

• One criteria is generally that the insurer reserves the right, not unreasonably, to give prior approval for the rehabilitation program or expenditure;
• An additional criteria is again, not inappropriately, that the program must be designed to return the insured to some form of gainful occupation, either their own or another;
• Payment may be contingent on the insured ‘actively’ participating in the program; and
• Reimbursement received from other sources would generally be deducted.

Statistics clearly show that the sooner rehabilitation starts – in line with medical advice of course – the greater the chance of its success.

Recognising this, well-designed policies provide for the activation of benefits within the waiting period rather than requiring the waiting period to expire.

When the total pool of funds available to the insured by virtue of the various rehabilitation benefits is added up, the amount involved is not inconsequential.

Thus, for example, if the three benefits listed above existed in a policy with a monthly benefit amount of $10,000, $90,000 could be made available by way of expense reimbursement and a further $60,000 by way of encouragement payments.

What is rehabilitation?

A Google search will reveal many different types of rehabilitation under various headings – for example, criminal, alcohol, drugs and substance abuse, degradation of land, and so on.

The main ones, however, associated with income protection insurance are rehabilitation subsequent to surgery, illness or injury and psychological rehabilitation.

A complexity involved in the practical application of rehabilitation benefits is identifying what is in fact a rehabilitation expense as distinct from a medical expense.

The simplified position is:

• Medical expenses are those which have as their primary focus the maintenance of the patient’s health, the returning of them to good health or the slowing of their medical decline, whereas; 
• Rehabilitation expenses are those which have as their primary focus the restoration of or compensation for the patient’s functional ability, lost as a result of an illness, injury, surgery, etc.

While grey areas of overlap can exist, one practical way of separating the two is to implement the provisions of the National Health Act, which prohibit a life insurer from directly paying for medical treatment that would otherwise be payable under Medicare – for example, surgery, hospital costs and physiotherapy.

Rehabilitation seeks to address a patient’s physical, psychological and environmental needs.

The main types of rehabilitation are:

Physical therapy

This assists in the restoration of the patient’s muscles, bones and nervous system by the use of heat, cold, massage, water, ultrasound, exercise (either with or without equipment), etc.

Occupational therapy

This assists the patient in regaining the ability to undertake the normal day-to-day tasks of either their home or work life.

The focus may be the restoration of old skills or the teaching of new skills.

Therapy may involve:

• The use of adaptive equipment at home to assist in tasks such as turning taps, taking a shower, etc;
• Orthotics – for example, orthopaedic braces to support the limbs or torso; or 
• Modification of the home or work environment – for example, the installation of boards, lifts and bars (ie, those that assist walking as distinct from those that make it more difficult). 

While not immediately apparent, adaptation of the home environment may be an integral part of a return to work program as it will assist the overall ability of the insured to cope with their changed circumstances – for example, making it easier to shower and dress are important components of being able to work.

Speech therapy

This assists the patient to correct residual speech disorders by way of strengthening the muscles involved in speaking – for example, saying words, opening and closing the mouth, sticking out the tongue, etc.

The cost of rehabilitation

The costs of rehabilitation can be considerable, with the main ones being the costs associated with the course itself and travel to and from the course.

While accurate numbers are difficult to obtain, enquiries through insurers reveal average costs approaching $5,000, with total costs in some instances being upwards of $50,000.

The duration of rehabilitation can be from several months to, in some cases, several years.

Rehabilitation challenges

The rehabilitation road within income protection insurance is not without its challenges.

Some advisers and clients may take a position of “the policy is there to pay me if I cannot work – nothing more, nothing less”.

This attitude may arise out of a lack of trust of the insurer’s motives – for example, a concern the insurer is trying to ‘force’ the insured back to work. 

The issue of trust will not be helped when some polices include not too obvious clauses to the effect the insured ‘must’ undergo rehabilitation if it could assist a return to work. Insureds and advisers unaware of these clauses may well push back when they are confronted with them at the time of a claim.

While prudent scepticism may be healthy, any decision concerning whether or not to apply for rehabilitation assistance should be made by the insured in conjunction with the treating doctor.

Notwithstanding this decision, it should be made on an informed basis with the assistance of the adviser.

Other concerns might include, if the insured rehabilitates to a different occupation, will that (at some point) be deemed the insured’s ‘own occupation’ for the future assessment of the claim.

For the insurer, issues such as the likelihood of success and the sustainability of that success are relevant; thus, there may be a tendency to favour as eligible for assistance the young, city claimant over the older, rural one.

Factors generally hindering rehabilitation success include:

• Time from disability to implementation of rehabilitation;
• Age of the insured;
• Duration on claim;
• Availability of suitable part-time or full-time work; and
• Geographical factors.

Setting and achieving realistic outcomes is important for all parties. It may be that the expenditure of thousands of dollars to facilitate a partial return to work represents a sound investment for the insurer and a great outcome for the insured.

An important challenge is the knowledge that assistance is available and appropriate, and in this regard all parties play a role: the insured, the adviser, the insurer and the treating doctor. 

The ultimate challenge is, of course, the attitude of the client; rehabilitation has little chance of success if the insured does not put genuine physical and psychological effort into it. The encouragement of the adviser before, during and after may be an important component of success.

Rehabilitation statistics

Obtaining accurate information concerning the level of take-up of the various rehabilitation benefits proved difficult.

However, optimistically, it seemed less than 20 per cent of income protection claimants utilised the rehabilitation facilities built into their policies.

Another interesting aspect of rehabilitation benefits is their premium cost.

While most ancillary benefits have a ‘cost’ associated with their inclusion in the policy, rehabilitation benefits are considered by some as essentially cost neutral – ie, their gross cost is countered by the savings they create by way of lower or shorter benefit payments – a genuine win-win for the insured and the insurer.

The bottom line

It is, of course, the case that some clients will view their income protection insurance policy as one-dimensional “the policy is there to enable me to access a monthly benefit payment; I am not interested in returning to work”.

It is similarly the case that some insurers, while offering benefit payments with easy eligibility criteria, will on the other hand seek to force rehabilitation and a return to work on the insured.

It is also the case, however, that some clients and insurers seek a balanced and collaborative approach, where the client genuinely wants to return to work and is grateful for any assistance provided and the insurer approaches the matter of rehabilitation with an attitude best typified by a rehabilitation manager from one insurer:

“I look at income protection insurance as a product that, in part, can assist the insured to get back on their feet and return to work. I approach my work and the insured with respect and dignity and I am genuinely passionate about what can be and has been achieved.”

Once again, the pivotal role of the adviser is to identify the most appropriate solution for their client – which means that part of the basis for an income protection insurance recommendation might be the availability of well designed rehabilitation benefits within the contract, supported by a team of committed and capable rehabilitation specialists within the personnel of the insurer.

Col Fullagar is principal of Integrity Resolutions Pty Ltd.

Note: This article was written with the assistance of George Trippis, rehabilitation team leader, claims and underwriting at Asteron Life.