Chris Bosh Status and Insurance

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Chris Bosh is facing an uncertain future. That the Miami Heat could receive salary cap relief in the unlikely event that he does not return to play and it is determined that continuing to play would constitute a medically unacceptable risk is now widely known (and is described in detail in this post). There is also a separate, but related, concept at play which I offer because I have no seen it detailed anywhere else: insurance.

I do have one request. I try to write posts which I believe are unique, in depth and insightful. I hope you agree that this details an idea that you haven’t seen covered elsewhere. I therefore ask that you please not simply copy my work without providing proper credit. It feels rather awful to see it being exploited. If just you ask, I am more than willing to help out anyone and everyone in any way I can.

The NBA has secured league-wide temporary total disability insurance coverage for the benefit of its member teams. Every team in the league is required to participate in the program, which covers approximately 150 players per season.

That the league-wide program is mandatory is done for a key reason: Doing so allows the insurance provider to mitigate its risk, more accurately project potential claims, feel confident it is not being asked to provide coverage for only the most injury-prone players and, ultimately, reduce the cost of coverage and make it more affordable.

Such a program is possible only in a highly regulated environment like that in the NBA, where individual payouts are limited by maximum salary rules and teams are required to spend at least 90 percent of the salary cap each season on player salaries.

Under the terms of the NBA’s insurance program, each team is required to submit for underwriting consideration five players, each of whom must be among the team’s five highest-paid players based on either the current season or total remaining salary. Teams may submit for consideration more than five players if they so choose. 

Among the five contracts required to be submitted per team, the insurance provider has the right to exclude from coverage 14 per season (such as when it considers a player with a very large remaining contract to be a medical risk) and well as in limited circumstances to offer coverage to players with exclusions for pre-existing conditions. However, once a player is covered, the carrier can’t exclude the player for the remainder of his current contract.

As with any insurance, there is a premium that must be paid in order to have the coverage in place. Those amounts are customized to each player, and generally cost about 4 percent of a player’s salary.

With top NBA players often earning well above $20 million per season, teams are spending millions of dollars in premiums each season alone.

As with most insurance, teams have both deductibles and maximum payouts with which to contend.

The standard deductible is 41 regular season games (i.e., half the season).

After the 41-game waiting period, which can span multiple seasons, the insurance company pays 80 percent of the guaranteed portion of the player’s remaining base salary, up to a $175,000 per game maximum.

When he signed his five-year, $118.7 million contract in the summer of 2014, the Miami Heat’s Chris Bosh was a model of health spanning the entirety of his 11-year career.

Unfortunately, he went on to suffer a blood clot in the deep vein of his calf (called a deep vein thrombosis, or DVT). Pieces of the clot then broke off from the wall of the vessel, traveled via the bloodstream up the body, through the right side of his heart, and lodged in an artery of his lung, blocking blood flow through the lung – a very serious, even life-threatening, condition known as a pulmonary embolism (PE).

Bosh thankfully avoided a life-threatening situation. After treatment with blood thinning medication, he returned to play start the 2015-16 season. He indicated upon his return that, according to testing, he was not aware of any hereditary issues he may have that would increase the risk for recurring episodes, leading to optimism that he could resume his career without further incident.

Unfortunately, that was not to be. Just a year after his first incident, Bosh was diagnosed with a second deep vein thrombosis in his calf in February 2016. The good news for Bosh was that the second clot was significantly smaller, was caught early, and did not travel to his lungs. He was placed back on blood thinners while the clot resolved itself, and missed the remainder of the 2015-16 season during his recovery.

(For a detailed description of DVTs and Bosh’s prognosis, read this post.)

The unfortunate question for Bosh, his family, his doctors, and the Heat organization now becomes: What is causing Bosh’s blood clots, what lifestyle modifications may be necessary to avoid them in the future, and could those modifications include a potential extended stay away from the NBA or possibly even an end to his career?

The big issue here is Bosh’s health, but there are also basketball concerns for the Heat.

The team has now had two seasons derailed by Bosh’s medical condition. They also have $75.9 million in salary and salary-cap space tied to Bosh over the next three seasons.

If they feel he has suffered a career-ending situation, the Heat can apply to clear his contract from its salary-cap ledger on or after Feb. 9, 2017, the one-year anniversary of his last game played.

But the Heat would be required to pay out the remainder of his salary whether or not his situation is ultimately career-ending. His payouts could, however, be offset by insurance money if he continues to miss time.

Given his consistent health at the time his current contract was executed in July 2014, there is little reason to assume that Bosh would have been selected as one of the 14 excluded from coverage that summer, or that his coverage was subject to any pre-existing condition exclusions. Bosh is therefore presumably covered under the league’s insurance policy.

The Heat can therefore begin to offset his salary obligations after he misses 41 regular season games. He missed the final 29 games of the 2015-16 regular season. If he misses more than 12 games to start the 2016-17 season, the Heat would start to collect insurance to offset his salary for every game he misses thereafter.

Bosh’s salary for next season is $23.7 million, or $289,525 per regular season game. Eighty percent of that figure is $231,620, which is greater than the $175,000 per game maximum payout. The Heat would therefore be obligated to pay his salary in full for the first 12 games missed, but would be eligible to receive a $175,000 per game offset for each regular season game missed thereafter.

If Bosh were to miss the entire 2016-17 NBA season, the Heat would collect a maximum of $12.25 million in insurance payouts, and owe just the remaining $11.5 million of his $23.7 million salary.

(Bosh’s contract calls for him to be paid $4.8 million (20 percent) of his $23.7 million salary for the coming season on September 1st and another $4.8 million (20 percent) on October 1st, each before the season starts. That, however, would not impact insurance reimbursements).

If Bosh were forced to retire for medical reasons, insurance would cover $175,000 of his salary for each of the 82 regular season games in the 2017-18 and 2018-19 NBA seasons as well, or $14.35 million per season. The Heat, in turn, would be obligated to pay only the remainder of his salary — $10.9 million of his $25.3 million salary for 2017-18, and $12.5 million of his $25.8 million salary for 2018-19.

Add that all up and you get this:

Season                     Insurance                               Heat                                      Total  
2016-17                   $12.3 million (51.6%)           $11.5 million (48.4%)          $23.7 million
2017-18                   $14.4 million (56.7%)           $10.9 million (43.3%)          $25.3 million
2018-19                   $14.4 million (53.5%)           $12.5 million (46.5%)          $26.8 million
Total                         $41.0 million (54.0%)           $34.9 million (46.0%)         $75.9 million

***

If Bosh is forced to retire for medical reasons, as confirmed by an independent doctor jointly selected by the league and players association, the Heat would therefore be in position to: (i) collect insurance for up to $41.0 million of his remaining $75.9 million salary, and (ii) clear the entire amount off the books as early as February 2017.

The hope, however, is that Bosh can return to play to start the 2016-17 season, and complete the remainder of his NBA career without further incident.

Notes:

Chris Bosh is (according to everything I know, which admittedly isn’t too much) a great human being, a great teammate, one the best players at his position in the NBA, and a perfect floor-spacing complement to Hassan Whiteside in the Miami Heat frontcourt. I hope that everyone hopes that he is able to resume his career without further incident. 

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