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I. Introduction
America’s Health Insurance Plans
(AHIP) is the national association representing approximately 1,300 health
insurance plans that provide coverage to more than 200 million Americans. Our members
offer a broad range of products, including private disability income insurance
to help consumers replace lost income in the event that a disabling condition
forces them to leave the workforce for an extended period of time.
We appreciate the committee’s
interest in reducing the backlog of pending claims for Social Security
Disability Insurance (SSDI) benefits and ensuring that this important federal
program is meeting the needs of Americans with disabilities in a timely manner.
As the committee reviews these issues, we believe it is important to keep in
mind the important role that private disability insurers play in offering
products that protect consumers against the financial risk of a disabling
illness or injury that prevents an individual from working for an extended
period of time. Our statement provides an overview of private disability
insurance, while also discussing the value this coverage offers to
policyholders and a national education campaign we have launched to increase
awareness about the importance of disability income protection. The statement
also includes a brief description of steps that AHIP and our disability insurer
members have undertaken to help the Social Security Administration (SSA) speed
and improve SSDI claim adjudication.
II. Overview of Disability Income Insurance
Private disability income insurance
provides tens of millions of Americans with protection that complements the
safety net provided by the SSDI program. Approximately 38 percent of U.S. workers in private industry are covered by employer-sponsored short-term disability
coverage, while 30 percent receive long-term disability insurance through their
employers[1].
In addition to extending benefits to many persons who are not eligible for
SSDI, or during the time the SSA is adjudicating an SSDI claim, this coverage
provides a level of disability income benefits that spares many Americans from
financial hardship.
Short-term disability coverage typically
pays benefits for 13 to 26 weeks based on a specified percentage of the
employee’s pre-disability income – typically 60 percent – after sick leave has
been exhausted. Circumstances that may trigger the payment of short-term
disability benefits include temporary musculoskeletal or
connective tissue conditions, pregnancies, and other illnesses or conditions
that are resolved within a relatively short timeframe, thus allowing the
employee to return to work before benefits are exhausted.
The valuable protection offered by
short-term disability coverage can be purchased at a reasonable price – an
average of $174 annually, according to one study based on 2001-2003 data, when
purchased as group coverage by employers[2].
This short-term protection can be purchased in combination with long-term
disability coverage as part of a seamless package, with the short-term and
long-term benefits coordinated to ensure that disabled workers can meet their
daily expenses and avoid financial hardship.
Additional protection is offered by
long-term disability coverage that begins to pay benefits when an individual’s sick
leave and short-term benefits are exhausted. These long-term disability benefits
continue anywhere from five years to the remainder of an individual’s life. Long-term
disability insurance allows policyholders to sustain themselves financially if
a catastrophic illness, injury, or disability takes them out of the workplace
for an extended period of time.
III. Value for Consumers
In 2006, more than 500,000
individuals received long-term disability payments from private insurers. One-third
of these individuals did not qualify for SSDI. Moreover, 95 percent of
reported disabilities were not work-related and, therefore, not eligible for
coverage under workers compensation[3].
Private disability insurers resolve
claims within 30 days or less for approximately 75 to 80 percent of claimants,
thus ensuring that benefits can be paid promptly to replace an eligible
claimant’s lost wages. Our members’ track record exceeds the requirements set
by federal regulations, which establish a 45-day timeframe for the initial
resolution of private disability claims and allow an extension – of up to a
total of 105 days – if, for reasons beyond the control of the insurer, more
time is required to gather information.
In addition to replacing lost
income for claimants in a timely fashion, private disability insurers play a
key role in restoring disabled workers to financial self-sufficiency and
maintaining productivity for America’s businesses. By investing in
rehabilitation and return-to-work programs, private disability insurers are
actively engaged in helping workers with disabilities return to the workforce.
In fact, a survey by Milliman, Inc. found that private disability insurers
spent an average of $3,200 in 2005 on each disabled employee receiving
rehabilitation and return-to-work services[4].
These innovative programs include a
wide range of strategies in recognition of the fact that persons with
disabilities are highly diverse and face varying circumstances. Services
offered by rehabilitation and return-to-work programs include medical case
management, vocational and employment assessment, worksite modification,
purchase of adaptive equipment, business and financial planning, retraining for
a new occupation, and education expenses. The Milliman survey found that
annual budgets for these programs, which vary by size of company, range from
$450,000 to more than $10 million.
Additionally, private disability
insurers have been very proactive in designing policies that help claimants return
to work. As a result, persons receiving private disability payments often have
access to work incentive benefits, rehabilitation benefits, workplace
accommodation benefits, and child or dependent care benefits during
rehabilitation. These innovative benefits reflect our members’ strong
commitment to promoting employment and self-sufficiency among persons with
disabilities.
Disability insurers also help
consumers exercise their rights under the Social Security program.
Specifically, disability insurers provide assistance in the application process
to beneficiaries who may be eligible to apply for SSDI benefits. Claimants
with expected long-term disabilities are encouraged to apply for SSDI benefits
and, according to one study, two-thirds of individuals receiving private
long-term disability income benefits also qualify for SSDI benefits.[5]
By encouraging and assisting
claimants in pursuing SSDI benefits, disability insurers help them gain access
to benefits beyond disability income payments. This includes additional
benefits for a spouse and/or dependents, access to vocational assistance and
other support from the SSA, and eligibility for Medicare benefits after a
period of 24 months.
A similar approach is taken by the
Federal Employee Retirement System, which requires disabled beneficiaries to
file for SSDI benefits. A requirement to apply for SSDI benefits is also part
of many states’ workers’ compensation systems, as well as public employee
retirement systems.
IV. National Education Campaign
AHIP has launched a national
education campaign to promote awareness about the importance of disability
income protection and to highlight the value disability insurance provides for
workers, employers, and taxpayers.
Recognizing that more than 100 million
Americans lack private disability income protection, our campaign has created a
Web site – www.yourincomeatrisk.org
– focused on educating consumers about a wide range of disability-related
issues. The need for such education is highlighted by survey findings showing
that many American workers have misunderstandings about their likelihood of
experiencing a disability.
AHIP released survey findings in
March 2008 indicating that most baby boomers underestimate their risk of
suffering a disability that would cause them to miss work for an extended
period of time. The survey, conducted by Harris Interactive on behalf of AHIP,
found that just over a third of baby boomers think the chances of becoming disabled
due to illness or injury is 5 percent or less, a slight majority think the
chances are 10 percent or less, and two-thirds think the chances are 20 percent
or less. In reality, a worker has a 30 percent chance of suffering a disabling
injury or illness causing him or her to miss three or more months of work
before reaching retirement, according to the SSA.
The survey also found that 47
percent of baby boomers say they are not too concerned about their chances of
suffering a disabling illness or injury. One of the reasons baby boomers
underestimate their risk is because they are unaware of the most common causes
of disability, mistakenly believing that injuries cause more disabilities than
illnesses. According to the survey, baby boomers believe the most common
causes of disability are back, muscle, or joint problems (26%), injuries on the
job (18%), and injuries off the job (16%). In actuality, research shows that
the most common causes of disability are illnesses such as cancer, heart
disease, and diabetes.
In the coming months, AHIP will be
taking additional steps to continue our national education campaign. These
steps include a retooling of our “Your Income At Risk” Web site, an updated
consumer guide on disability income insurance, a new publication for
policymakers and the media, and additional research on key disability issues.
V. Private
Disability Insurers Partnering with SSA to Help Speed SSDI
Claim Adjudication
AHIP and its disability insurer
members are well aware of the challenges facing SSA and the SSDI program, and
believe that the Agency needs more resources. Applications for SSDI benefits
have increased steeply in recent years – and now arrive at the rate of more
than 2.5 million each year. The increased SSDI workload also comes at a time
of very serious limits on the Agency’s budget for administering its retirement
income security and disability income security programs; attrition of the
Agency workforce; and the addition of new responsibilities supporting the
Medicare program and homeland security efforts.
Congress has recognized SSA’s need
for additional resources, and took steps last year to increase the Agency’s
administrative funding. The Commissioner and his staff are also moving
aggressively to reduce SSDI claim delays and backlogs through steps such as
hiring additional Administrative Law Judges.
AHIP and its private disability
insurer members are also reaching out to offer assistance to help SSA speed and
improve SSDI claim adjudication. For privately-covered workers who become
short-term disability and/or long-term disability claimants, private disability
insurers compile extensive disability claim information that is also of
significant potential relevance and value to the SSDI claim adjudication
process. SSA and a group of AHIP’s private disability insurer members are
currently working to test new procedures that will facilitate SSA access to key
claim information that will help SSA speed and improve the adjudication of
private claimants who apply for SSDI. The test is initially focused on
providing the Agency with objective medical evidence, such as attending
physician statements and lab and test results, for claims expedited based on
presumptive diagnoses and/or terminal prognosis.
By providing the SSA with quality
medical evidence already resident in private disability claim files, we can
begin to demonstrate the benefits of enhanced cooperation between private
disability insurers and the nation’s primary public disability income
assistance program. These steps can lead to even more robust information
sharing and other enhanced public-private cooperation in the future.
VI. Conclusion
AHIP and our members look forward
to maintaining a dialogue with committee members about the challenges facing
the SSDI program and the role of private disability insurance in providing
consumers with financial protection against the high costs associated with
disability.
[1]
National Compensation Survey: Employee Benefits in Private Industry in the United States, 2006, U.S. Department of Labor, Bureau of Labor Statistics
[2]
An Employer’s Guide to Disability Income Insurance, AHIP
[3]
2006 Council for Disability Awareness Claims Review
[4]
Survey of Rehabilitation and Return-to-Work Practices Among U.S. Disability
Carriers, Milliman, Inc., May 2007
[5] Council for Disability Awareness, 2006
Long-Term Disability Claims Review
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