Disability Payments Up, But Fewer Workers Covered


By Stephen Miller, CEBS July 2, 2014

Musculoskeletal system and connective tissue disorders remain the leading cause of new disability claims in the U.S., followed by cancer, injuries, cardiovascular/circulatory disorders and mental disorders, according to the nonprofit Council for Disability Awareness (CDA) in its ninth annual Long-Term Disability Claims Review.

The analysis studied long-term disability claims data and trends for 2013 from 19 of America’s largest disability insurance companies.

Disability claims payments in 2013 totaled $9.8 billion, a 1.6 percent increase over 2012. Moreover, an additional 214,000 employers offered long-term disability benefit plans in 2013 compared with 2012, according to the CDA, yet the number of individuals covered by long-term disability insurance providing supplemental income fell roughly 1.5 percent to 32.1 million—a decrease that may reflect the trend toward more voluntary/employee-paid disability benefit plans in which not all eligible employees enroll.

“It is a concern that while more employers offered long-term disability benefit plans in 2013, fewer workers are actually protected,” CDA President Barry Lundquist told SHRM Online. “More employees are becoming responsible for making their own benefit decisions, so it’s critical to educate them about their risk of an income-interrupting illness or injury and the consequences of losing their paycheck. If our education efforts in this area are ineffective, we can expect declining numbers of employees with protected incomes in the years to come.”

Other findings from the study include:

The improving economy is positively impacting claims. Most reporting companies now believe disability claims have stabilized and that claims will remain at about the same level over the next one to two years. But many companies also believe that the future performance of the economy, including an increased availability of jobs for recovered claimants, could reduce time spent on disability.

The average claimant age exceeded 50 for the first time ever. Claims for those age 50 and older, mostly driven by claimants over age 60, have been consistently increasing as a percentage of the total, reflecting the aging of America’s working population. Fifty-nine percent of new claims approved during 2013 were for individuals age 50 or older, and the average age of new claimants was just over 50. Nevertheless, more than four in 10 new claimants were in their 40s or younger.

Women make up the majority of new claimants. More than half (56 percent) of new disability claims in 2013 were for women.

“Despite increased consumer confidence, many employers and wage-earners seem to have adopted a wait-and-see attitude toward benefit expenditures, a possible result of economic uncertainty and the fear of continually rising health care costs,” Lundquist said. “Nevertheless, the need for workers to protect their most valuable financial resource—their paycheck—remains as important as ever.”

Disability Insurance: By the Numbers

Disability insurance provides income replacement for an employee whose illness or injury causes absence from work longer than the number of days covered by paid sick leave. Short-term disability usually starts after a one- to two-week absence, and long-term disability usually goes into effect after 6 to 12 weeks.

While paid sick leave usually covers an employee’s entire salary, short-term and long-term disability may cover only a portion of the employee’s salary.

According to the Society for Human Resource Management’s (SHRM’s) 2014 Employee Benefits report, based on an annual survey of SHRM members conducted in the first part of the year:

Long-term disability insurance was offered by 74 percent of organizations in 2014, down from 77 percent in 2013 and 80 percent in 2012.

Short-term disability insurance was offered by 70 percent of organizations, down from 76 percent in both 2013 and 2012.

SHRM’s long-term disability finding differs somewhat from the CDA’s, which showed a slight uptick in organizations offering coverage in 2013, although fewer employees opted to pay for this benefit when provided on a voluntary basis.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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