Disability: A Financial Hardship For Working Americans
According to a report published by The Urban Institute, poverty rates double for Americans when they become disabled. Although a variety of public programs exist including Social Security disability, Workers’ Compensation, Supplemental Security Income and Veterans’ disability, presumably as a safety net, these programs have missed the mark for many disabled Americans struggling to maintain even a moderate standard of living.
The Urban Institute found that of the adults disabled between the ages of 51 and 64, the poverty level increases from 7.4 percent before becoming disabled, to 15.5 percent after becoming disabled. That number increases to 20.6 percent for two-fifths of adults who are single and cannot rely on a spouse’s earnings to contribute to basic living expenses.
Part of the problem has to do with the waiting period – the time between the disability application to approval or rejection typically can range from three months to 18 months or longer. During this time, many disabled workers who have no other safety net in place are left without any income at all pushing them further into debt or poverty. The report by The Urban Institute focuses mainly on those workers who rely solely on public programs. However, even those workers who believe they are adequately covered under an employer-provided plan may get caught behind the eight ball.
Employer-provided disability plans are governed under a federal law known as ERISA (Employee Retirement Income Security Act of 1974). Originally created to protect employee pensions, ERISA law does little or nothing to protect workers when they experience a disability that prevents them from working in their chosen occupations. And, too often people are caught by surprise when they need their disability benefits and realize the serious limitations of their employer-provided plans. First, most of the time, the decision of whether to pay disability benefits rests solely on the insurance carrier’s discretion. Most carriers have absolutely no incentive to approve a claim, and typically make it very difficult to obtain benefits. In fact, most are encouraged to deny claims whether they are legitimate or not. Second, employer-provided disability benefits are significantly less than the disabled employee realizes. Usually, these benefits equal 60% of the employee’s pre-disability income including any other benefits the employee receives. So, if the disabled employee was earning $2,000 per month, her 60% benefit would be, for example, $1,200 per month. If she gets $900 from Social Security, her employer-provided disability benefit most likely will drop to $300 per month. If she also receives $150 per week from Workers’ Compensation, her benefit could drop to $0.
Therefore, an individual who is disabled and already struggling to survive may have far less disability coverage than she thinks. Further, if other disability benefits are retroactively awarded after she has been receiving ERISA benefits for any length of time, she may end up having to pay thousands of dollars to the insurance company.
What Can You Do About This?
We always advise people to take stock of what disability benefits they have available before a crisis; that is, before they ever become disabled. That means finding out what benefits they can apply for and how much these benefits pay. That might also mean trying to save more, if possible, making life style adjustments, and perhaps looking into a private disability policy, making sure to have a knowledgeable financial planner or attorney review it before making a commitment.
What Should Be Done About This?
The Urban Institute observes that with an increasingly aging population, lawmakers should recognize the limitations of public programs. They recommend, “The only way to significantly reduce poverty among adults who cannot work, however, is to increase benefits.” Although, they note this probably would raise the cost of the programs. The long-term results of “guaranteeing a subsistence-level cash benefit to one of the nation’s most vulnerable groups would far outweigh the costs.”
In terms of employer-provided disability plans, governed by ERISA, many suggest returning the oversight power to state governments (as it stands now, these employer-provided plans are nearly unregulated) would help to level the playing field significantly.
Under ERISA, the federal courts have determined that: (a) the claimant is not entitled to a jury; (b) the courts most often restrict their review to the insurance company’s claim file; and (c) the review of the insurance company’s decision is very deferential. Essentially, the disabled claimant is required to prove that the insurance company’s decision lacks a rational basis, and most often must prove this using only the insurance carrier’s own claim file.
When you think about the fact that the insurance company actually created that claim file and controls what documentation goes into it, you begin to realize how unfair this process is. The insurance carrier is a for-profit corporation which is subject to strict regulation by all 50 states of every single action it takes – outside the ERISA context (in other words, except when it comes to employer-provided disability claims). Under ERISA, the insurance carrier does not have an obligation to “develop the record,” so its focus is on denying claims rather than fairly evaluating them. The courts have found that a doctor who merely reviews select medical records of a claimant can provide a reliable enough medical opinion to justify the insurance carrier’s denial of benefits – even if all of the treating physicians (many of whom are specialists) find that claimant to be disabled.
If the claimant is able to overcome these virtually insurmountable obstacles, what does she get? She gets her retroactive benefits with interest – which in a federal lawsuit may only be one to three percent (in a New York State lawsuit, the interest rate would be nine percent). If she is really lucky, she may get some of her legal fees paid by the carrier. Meanwhile, the insurance company was able to hold onto her benefits for months, if not years, and earned substantially more interest on her money. In other words, under ERISA, the insurance company has every incentive to deny a claim regardless of its merits, and virtually no incentive to “do the right thing” and live up to their contractual obligations. It is truly ironic that the courts classify ERISA relief as “equitable relief.” Relief for insurance carriers, maybe.
FERS/CSRS Disability: The Necessary Forms
For disabled federal employees, one of the biggest sources of stress is the actual filing process. To begin with, a disabled employee is given a package of application instructions and a pamphlet explaining the numerous steps to obtaining disability benefits.
The package includes Standard Form 311A, Applicant’s Statement of Disability. This form must be completed by the disabled employee, and requires answers to detailed questions on the nature of the disability as well as a complete list of all treating physicians and the dates of treatment.
Standard Form 3112B is the Supervisor’s Statement. This form should be completed by the employee’s supervisor, and requires the employee’s supervisor to answer questions about work performance, attendance and conduct. Standard Form 3112C, Physician’s Statement, (and there may need to be more than one, depending upon how many treating physicians an individual is seeing), must be completed by treating physician(s). Standard Form 3112D, Agency Certification of Reassignment and Accommodation Efforts, and Standard Form 3112E, Disability Retirement Application Checklist should be completed by the employing agency. In addition, Form 31207, Application for Immediate Retirement, must be submitted concurrently.
The sheer amount of paperwork, alone, is enough to make a healthy person uncomfortable. Just imagine how overwhelming it must be for someone who is physically or psychologically disabled to deal with.
At DeHaan Busse, we handle FERS disability claims from application to resolution. In cases where a claimant is denied, our attorneys handle the appeals process. Our firm also works with our FERS clients to arrange payment plans. We believe our clients should focus on recovering.
Updates on Health Care Reform
For the last year (or since the election of President Obama), Congress has been discussing and debating health care reform. The arguments range from “no reform needed – keep government away from my Medicare,” to “single-payer required.” and everything in between.
This week, President Obama unveiled his own plan and is bringing it around the country. What follows is an overview of the President’s health care proposal.
The President’s proposal puts American families and small business owners in control of their own health care.
- It makes insurance more affordable by providing the largest middle class tax cut for health care in history; reducing premium costs of tens of millions of families and small business owners who are priced out of coverage today. This helps over 31 million Americans afford health care who do not get it today – and makes coverage more affordable for many more.
- It sets up a new competitive health care insurance market giving tens of millions of Americans the exact same insurance choices that members of Congress will have.
- It brings greater accountability to health care by laying out commonsense rules of the road to keep premiums down and prevent insurance industry abuses and denial of care.
- It will end discrimination against Americans with pre-existing conditions.
- It puts our budget and economy on a more stable path by reducing the deficit by $100 billion over the next ten years (that number increased to $138 billion according to CBO report) and about $1 trillion over the second decade – by cutting government overspending and reining in waste, fraud and abuse.
The President’s proposal bridges the gap between the House and Senate bills and includes new provisions to crack down on waste, fraud and abuse.
It includes a targeted set of changes to the Patient Protection and Affordable Care Act, the Senate-passed health insurance reform bill. The President’s proposal reflects policies from the House-passed bill and the President’s priorities. Key changes include:
- Eliminating the Nebraska FMAP provision and providing significant additional Federal financing to all States for the expansion of Medicaid;
- Closing the Medicare prescription drug “donut hole” coverage gap;
- Strengthening the provisions to fight fraud, waste and abuse in Medicare and Medicaid;
- Increasing the threshold for the excise tax on the most expensive health plans from $23,000 for a family plan to $27,500 and starting it in 2018 for all plans;
- Improving insurance protections for consumers and creating a new Health Insurance Rate Authority to provide Federal Assistance and oversight to States in conducting reviews of unreasonable rate increases and other unfair practices of insurance plans.
Legislative News . . .
Source: akaka.sentate.gov
Akaka Continues Focus On The Invisible Wounds Of War
March 3, 2010, Washington, D.C. – U.S. Senator Daniel K. Akaka (D-HI), Chairman of the Veterans’ Affairs Committee, held on an oversight hearing today on veteran suicide and mental health issues. Akaka, who has championed a number of veterans’ mental health and suicide prevention bills which are now law, sought to hear from veterans and VA leadership on the implementation of these measures.
PTSD and other mental health issues are major wounds of the current conflicts. Veterans in Hawaii and across the nation count on VA to receive treatment and care for service-related mental health issues. Over 1,700 veterans in Hawaii receive disability compensation for service-related mental health issues. From fiscal year 2002 to the fourth quarter of 2009, VA facilities in Hawaii identified 911 veterans of Operations Enduring Freedom and Iraqi Freedom with PTSD.
“Just as we must provide our troops with the equipment and tools they need when they are sent to battle, we must do more to help veterans battle with the enemy of mental illness,” said Akaka. “VA has made important improvements in recent years, but we must continue to work until what now seems impossible becomes a reality; that no veteran who returns from service is lost to suicide.”