Disability Claims Rise, but Fewer Have Coverage

By Stephen Miller, CEBS September 18, 2012

The number of long-term disability claims in the U.S. continues to increase year over year, while the number of wage earners protected by private disability income insurance declined in 2011 for the third consecutive year, according to the 2012 Long-Term Disability Claims Review, issued by the Council for Disability Awareness (CDA), a nonprofit research and education organization sponsored by disability insurers.

"We continue to see an overall increase in long-term disability claims filed over time," Barry Lundquist, president of the CDA, told SHRM Online. "The aging workforce and a painfully slow jobs recovery are clearly having an impact. Also, the jobs environment continues to be an obstacle to returning recovering workers to productive employment."

At the same time, those covered by group long-term disability plans declined by 0.5 percent in 2011, reflecting the third straight year this number has dropped. Contributing factors include the poor economic and jobs climate as well as a gradual transfer of benefits costs from employers to employees.

Disability Coverage Trends

Lundquist pointed to a continuing trend away from 100 percent employer-paid disability coverage and toward disability insurance offered as a voluntary employee-paid benefit. "As health care costs go up, other benefits get squeezed," he noted. "If a company doesn't have a disability plan in place and is adding a new one, they are likely to add a voluntary plan."

In other instances, employers are shifting a portion of the cost of disability coverage to their employees, or reducing the percent of employee income replaced through disability coverage. "Employers might only cover 40 percent of pay and employees can purchase additional amounts, and that seems to be happening more now," Lundquist said.

Among other trends:

Older Baby Boomers (those over age 60) experienced the largest increase in the number of new approved claims over the past four years, in part reflecting the aging of that generation. New claims for those under age 40 and for individuals in their 50s remained steady, while claims for individuals between ages 40 and 50 declined over the past four years.

Women represented more than half (57 percent) of new disability claimants during 2011—a percentage that has slowly increased compared to the percentage of claims from men.

New disability claims resulting from complications of pregnancy and childbirth increased in 2011 and now account for more than 9 percent of new long-term disability claims for female wage earners.

Diseases of the musculoskeletal system and connective tissuesuch as arthritis, spine disorders, back pain, sciatica and osteoporosis—continue to be the leading cause of disability claims (representing 30.5 percent of all claims).

The average Social Security Disability Insurance monthly benefit in 2011 was $1,111. For the nearly one million disabled employees under the age of 40, the average benefit was $816.

Lundquist noted a study by researchers at Harvard University finding that medical problems and related income loss contributed to a large and increasing share of U.S. bankruptcies (at least 62 percent in 2007), and that three-quarters of medical debtors had health insurance.

"People understand health insurance, they understand life insurance, but when it gets down to disability, there's a perception, ‘That's not going to happen to me,' " Lundquist said.

New Interactive Educational Tools

In September 2012, the CDA launched a new Defend Your Income website, with interactive applications that demonstrate the consequences of disability and the importance of planning.

Individuals also can determine their own personal risk of becoming disabled using the CDA's disability calculator, the Personal Disability Quotient.

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related SHRM Video:

The Disability Divide. Barry Lundquist, president of the Council of Disability Awareness, says employees have misperceptions about the most likely causes of disabilities.

Related SHRM Articles:

Counter Shows Growing Number of Disabling Illnesses, Injuries, SHRM Online Benefits, May 2011

Single Employees Less Likely to Have Life, Disability CoverageSHRM Online Benefits, December 2010

Younger Workers Undervalue Life Insurance as a Benefit, SHRM Online Benefits, December 2010

'Calculator' Highlights Financial Risks of Disability for EmployeesSHRM Online Benefits, September 2010

Quick Links:

SHRM Online Benefits Topics & Strategy

SHRM Online Health Care Reform Resource Page

SHRM Online Workplace Flexibility Resource Page

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