Talking to clients about COVID-19’s impact on disability insurance

Your clients who are providing long-term disability (LTD) insurance plans to their workers are probably so grateful to have that safeguard right now. With more than 30 million Americans unemployed, disability benefits are now some families’ only hope, particularly for those with a family member who decided not to immediately apply for disability benefits.

There are a number of reasons why someone might delay applying to receive disability benefits. The process isn’t easy, and some families may have crunched numbers and initially determined that they could make do on a single income. But the point is that it’s never been more clear why these protections are so important.

This is something benefits advisors should keep in mind when talking with clients who don’t yet have LTD plans in their offerings. Clearly, the timing may be incredibly important for employers to take a closer look now.

It’s also a smart thing to do in light of the novel coronavirus. No one knows what kind of long-term health complications COVID-19 could cause. Plus, with many nonemergency health care services still postponed, a large swath of people will be getting diagnosed with health conditions on a delay, such as degenerative diseases and cancers in more advanced stages than if their screening had gone on as scheduled.

As more Americans come to terms with these possibilities, they are going to start paying more attention to ways that they can plan ahead and protect themselves, employer-provided disability insurance among them. It’s reasonable to believe, then, that prospective employee demand for employer-provided disability insurance will increase.

For those who already have disability insurance plans, benefits advisors can help inform them about these potential developments for health care and disability insurance. As so often happens during times of economic struggle, carriers are about to see a significant increase in claims, not only because of higher disability rates, but also because individuals might not have felt the need to file a claim for those benefits until now.

While LTD carriers experience those claim increases, it may be difficult to detect important trends. There will be an effect on the disability insurance industry in general, including private short-term disability insurance and the Social Security Disability Insurance (SSDI) program.

For benefits advisors not as familiar with the SSDI program, this can be vital supplemental coverage for their clients’ workers. SSDI is a federal benefit working Americans have paid for through their FICA payroll taxes, and this federal insurance also is typically offset with LTD plans. In other words, LTD plans are designed to coordinate with the federal SSDI program and they typically have provisions requiring individuals to apply for SSDI if they are eligible.

Connecting individuals with disabilities to SSDI is critical so that the burden on LTD carriers is lessened, the quality of their work maintained, and so that Americans can quickly access this essential lifeline. In addition to monthly income, SSDI includes Medicare and return to work assistance, for example.

Quickly accessing SSDI is key and, unfortunately, something that can be very difficult to do without some assistance. Many people don’t know whether they are eligible for SSDI, don’t know how to get started with their disability application, nor do they understand the scope of documentation and data required by the Social Security Administration (SSA) to receive this important benefit.

Rather than coordinate all these aspects of the SSDI program, many employers and LTD carriers partner with third-party providers who are experts in the SSDI space. The support for employees/beneficiaries includes helping them successfully go through the SSDI application and appeals process. If someone applies by themselves, there is a greater risk for technical errors and problems leading to denial of their claim. This is true for two-thirds of SSDI applicants, and it might require them months, if not years to be approved by the SSA.

To put it simply, here are some steps benefits advisors can take to provide clients with even more value during this challenging time: 1) talk with them about the importance of considering offering LTD coverage if they haven’t already; 2) share possible trends in the area of disability insurance as a result of COVID-19; and  3) highlight the value of SSDI and the role of third-party service providers as a solution for helping workers access SSDI benefits for their long-term disability. Supporting employees through this unprecedented time of economic change will benefit everyone, especially the employees most directly affected.

Steve Perrigo, J.D., is a former manager for the Social Security Administration and Vice President for Allsup.