Avoiding the Pitfall – Social Security Disability and Long Term Disability Benefits
Many workers are provided Long Term Disability (LTD) benefit coverage as an employee benefit. These benefits protect the worker who becomes disabled as a result of an illness or injury that is determined to be permanently and totally disabled. In most cases, the claimant becomes entitled to monthly benefits equal to 66% of pre-injury earnings until age 65.
Most of the LTD policies have provisions that allow for reduction of those monthly benefits if the individual becomes entitled to Social Security disability benefits. The insurance company saves a significant amount of money when one of their disabled clients obtains Social Security disability. As a result of this the insurance companies encourage the claimants to apply for benefits. Many times, the insurance company will offer to provide representation to assist the insured in obtaining benefits.
While most of the time this interest in the claimants entitlement to the federal benefit does not adversely affect the individual, there are some instances when a conflict between the individual and the insurance company occurs
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Effect of Denial of Social Security Disability on Eligibility for LTD
It is not unusual for a Long Term Disability claim to be approved before the disabled worker applies or receives a decision from SSA on an application for disability benefits. Since the LTD insurance company has a financial interest in the individual’s entitlement to SSA disability benefits, the claimant is required to provide the results of the SSA claim. If the decision from SSA finds the claimant not disabled, the LTD carrier may attempt to suspend benefits by reviewing the claim. SSA denies a majority of the applications for disability benefits. Only 38% of the applications for disability were approved in 2007 according to SSA. Most insurance carriers are cognizant of this. SSA figures also establish that approximately 75% of the disability claims that are appealed to the hearing level are approved. The insurance companies encourage their LTD recipients to appeal the denial of benefits through the hearing level. Many times the insurance company will refer the claimant to an attorney or company that specializes in representing individual before SSA on disability denials. The insurance company will often offer to pay the fee for representation.
While in most cases there is no conflict of interest between the insurance company and the attorney or representation firm, some claimants have concerns that information collected by the referred representative may be shared with the insurance company. If that information does not support the disability claim, it may result in a termination of the LTD benefits. This situation can be a real concern, however, the LTD companies always have the claimant sign an authorization form that allows release of any information from the SSA claim file. If the SSA claim file contains medical documentation that can be the basis for a termination of the LTD benefits, it is available to the insurance company based on the authorization form required by the insurance company. It is not unusual for the SSA claim file to contain medical information or medical assessment that is contrary to the claim for disability. In order to avoid problems, efforts should be made to keep the information provided to the insurance limited to the status of the claim and copies of the decisions.
The claimant does not have an obligation to choose the attorney or company referred to them for representation. The insurance company may indicate that fees associated with the referral will be paid at their expense. The fact is that the insurance company must deduct any fee paid to a representative of the claimant’s choice from the overpayment that occurs SSA pays retroactive benefits. The fees are covered by the insurance company even if the individual chooses a representative other than the one referred.
Impact of Findings by SSA on LTD Benefits
If SSA disability eligibility is based on a mental impairment the LTD carrier may reduce the time period the individual is entitled to LTD. Many LTD policies limit the length of time an individual can collect benefits for mental impairments to 24 months as opposed to benefits payable to age 65. Many people become disabled as a result of a combination of physical and mental conditions. If SSA places too much emphasis on the claimant’s mental impairment when evaluating the evidence in the claim file, the LTD carrier may notify the individual that benefits will end after 24 months. Unless the main contributing factor to the disability is psychological, the decision from SSA should not result in a reduction in the duration of benefits from the LTD insurance company. Problems occur when the decision from SSA is vague and there is a psychological impairment listed as one of a combination of conditions that cause disability. Even effort should be made to emphasize the physical impairments as the main contributing factor leading to disability when a Long Term Disability claim is involved.
The relationship between Social Security disability and Long Term Disability benefits can result in problems for the disabled worker. It is advantageous, however, for the disabled worker to obtain Social Security disability when they are eligible for LTD. The reduction of LTD benefits includes the amount of monthly benefits initially payable to the claimant. The insurance company cannot reduce the LTD benefit for yearly cost of living adjustments. This means that every year the claimant receives an SSA increase their LTD stays the same.
The relationship can be complicated. There are sources that can help with questions concerning Social Security disability and long term disability benefits. One such source is a support group called Disinissues (Disability Insurance Issues). The website address is http://groups.yahoo.com/group/Disinissues/.
Paul Proto
http://ssa-disability.tripod.com
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