Senate Asks Disability Insurers to Turn Over Information About How They Handle LTD Claims

The New York Times is reporting today that Sen. Charles Grassley (R-IA), the senior Republican on the Senate Finance Committee, has sent information requests to 9 Disability Insurance companies requesting information about how they handle Long Term Disability ("LTD") Insurance claims. The 9 companies are Aetna, Cigna, Hartford, Lincoln (who recently bought Jefferson Pilot), MetLife, Prudential, Reliance Standard, Standard Insurance Company, and UNUM. The Senate is apparently investigating the common practice of having all LTD insurance applicants apply for Social Security, even though many do not qualify for Social Security Disability benefits.

Often, LTD insurance policies pay disability benefits when people cannot perform their own occupation, even if they can work in another type of job. This is commonly called "own occupation" coverage. However, Social Security requires that a person show they cannot work in other jobs too. Their system is based upon age, education and work experience, and for many that apply for Social Security Disability, they must prove there is no job they can perform. LTD insurance companies make people apply for Social Security Disability because their insurance policies usually allow they to deduct the amount Social Security pays from the LTD benefit they pay to their insured.

In my experience, each of the insurers which Senator Grassley is investigating have made people apply for Social Security, many of whom would never qualify. The Senator's investigation is geared toward determining whether these insurers are helping to create the huge backlog of cases at Social Security. What is worse, many people get Social Security Disability, and the insurance companies still deny their claims!


Copyright (c) 2008 by John V. Tucker and Tucker & Ludin, P.A. All rights reserved. Any content borrowed or referenced from another source is referenced by citation to the original source as noted in the text above.

Your Earnings - Being "Insured" for Social Security Disability and Why You Don't Want to Work Under the Table

Yesterday, a man called me to discuss his denial from Social Security. He had applied for Disability Benefits, but was turned down because he was not "insured." That means that he had no paid enough into the Social Security system to be covered. Unfortunately, he had too much in assets to qualify for Supplement Security Income ("SSI" - Social Security's indigent program). It turns out that he had worked "under the table" for several years, and never reported his earnings by filing taxes. I had to explain that I could not help him.

Social Security Disability ("SSD") payments are based on what you have paid in taxes. The government gives you credits when you work. Each year, you can earn up to 4 credits (one for each quarter of the year). You earn credits based upon how much money you earn. For example, in 2008, a worker will earn one credit for every $1,050 they earn and report as wages on their taxes. To get 4 credits for 2008, you will have to report $4,200 in earnings for the year. You can earn all of that money in just 1 or 2 months of the year, and still get all 4 credits; you do not have to actually work in each quarter.

The government views SSD as a form of disability insurance. To be eligible to apply for and receive SSD payments, you have to be "fully insured." There is no partially insured status. You either are or you are not. To get fully insured, you must have reported earnings on your taxes to the IRS and have earned at least 20 credits within the last ten years, i.e. the last 40 quarters. Young people in their late teens and twenties may be able to qualify with less than 20 quarters. Essentially, you have to have earned credits for half of the last 10 years to be insured today. Another way to say that is that you are "insured for disability purposes" if you earned 20 credits during the 10 years before you stop working due to your disability.

That means that a person who works 5 years in a row (earning all 4 credits in each of those years) will be insured for 5 more years, even if they stop working. They would have earned 20 quarters and could not work for 20 more quarters, but still be insured.

Here is a chart of explaining how much money you need to report in taxes each year to earn credits for this year and the previous 10 years:

2008 - To earn 1 quarter = $1,050; To earn all 4 quarters = $4,200
2007 - To earn 1 quarter =$1,000; To earn all 4 quarters = $4,000
2006 - To earn 1 quarter =$970; To earn all 4 quarters = $3,880
2005 - To earn 1 quarter =$920; To earn all 4 quarters = $3,860
2004 - To earn 1 quarter =$900; To earn all 4 quarters = $3,600
2003 - To earn 1 quarter =$890; To earn all 4 quarters = $3,560
2002 - To earn 1 quarter =$870; To earn all 4 quarters = $3,480
2001 - To earn 1 quarter =$830; To earn all 4 quarters = $3,320
2000 - To earn 1 quarter =$780; To earn all 4 quarters = $3,120
1999 - To earn 1 quarter = $740; To earn all 4 quarters = $2,960
1998 - To earn 1 quarter =$700; To earn all 4 quarters = $2,800
1997 - To earn 1 quarter =$670; To earn all 4 quarters = $2,680

I mentioned above that you have to report your earnings by paying taxes. That is how the Social Security Administration gets your eanings information. Each person has a Social Security account under their Social Security number, and the IRS shares your tax data with Social Security. You get credits as you work and pay taxes. People that earn more money get higher disability payments. Similarly, higher wage earners get a higher retirement benefit if they never become disabled, because Social Security uses your earnings over your lifetime to determine how much you get when you retire. However, people that "work under the table" who do not report their earnings on taxes, never get any credits.

You may think you are fooling Uncle Sam by not reporting your earnings, but in the end you are just fooling yourself. Bad things can happen to good people. If you become sick or injured to the point where you cannot work, all those years of working under the table may leave you destitute with no income. Along with Social Security Disability comes Medicare after a period of time. Those that don't pay taxes lose not only Disability Benefits, but also Medicare insurance.


Copyright (c) 2008 by John V. Tucker and Tucker & Ludin, P.A. All rights reserved. Any content borrowed or referenced from another source is referenced by citation to the original source as noted in the text above.

Apply for Social Security Disability....Online!

Did you know that you can apply for Social Security Disability benefits online? Yes, you can. It's easy. Simply go to the Social Security Website at http://ssa.gov/applyfordisability/, and follow the steps from there. It may take you some time to complete, but you can stop and start the application up to 3 times before you have to start over.

Copyright (c) 2008 by John V. Tucker and Tucker & Ludin, P.A. All rights reserved. Any content borrowed or referenced from another source is referenced by citation to the original source as noted in the text above.

Insurers Faulted as Overloading Social Security

The following is a story quoted From the New York Times:
By MARY WILLIAMS WALSH

Published: April 1, 2008

The Social Security system is choking on paperwork and spending millions of dollars a year screening dubious applications for disability benefits, according to lawsuits filed by whistle-blowers.

Jessica Ortiz of San Diego said her disability insurer called more than 10 times after she was hurt in a car crash, insisting that she apply for Social Security. She was denied, as she had expected.

Insurance companies are the source of the problem, the lawsuits say. The insurers are forcing many people who file disability claims with them to also apply to Social Security — even people who clearly do not qualify for the government program.

The Social Security Administration defines “disabled” much more stringently than the insurers generally do, so it rejects most of the applications, at least initially. Often, the insurers then tell their claimants to appeal, the lawsuits say, raising the cost.

The insurers say that requiring a Social Security assessment is a standard practice and that there is nothing wrong with it.

The policies they sell allow them to coordinate their benefit payments with others to make sure no one is paid twice. Thus, if a disabled person can get benefits from somewhere else — like workers’ compensation, a disability pension or Social Security — the insurance company can reduce the benefit check by that amount.

The flood of referrals, however, is making it hard for Social Security to respond to people who are truly disabled, said Kenneth D. Nibali, the former top administrator of the Social Security disability program.

“Anybody who is forced to come into this system, and who doesn’t need to be there, is affecting someone else,” said Mr. Nibali, who retired in 2002 and is serving as an expert witness for the plaintiffs. “They’re holding up cases for the people who have been waiting for months and years, who in many cases are much worse off.”

Already, the disability program is in much worse shape financially than the old-age portion of Social Security. It is projected to run out of money in 2026, 16 years ahead of the old-age trust fund.

The disability caseload is also expected to grow as the work force ages, since recovery time increases with age. The number of people waiting for hearings on their claims by an administrative law judge has more than doubled since 2000, and the average wait has grown to 512 days in that time, from 258 days.

The Social Security Administration is not an active participant in the lawsuits and declined to comment on them. A spokesman, Mark Lassiter, said Social Security does not keep track of how many of its roughly 2.5 million annual applicants for disability are referred by insurance companies. But he cited academic research showing that 18 percent acknowledged privately that they were unqualified, because they could still work. “It is probable that many of these claimants were required to apply,” Mr. Lassiter said.

Jessica Ortiz, a 27-year-old gas station attendant in San Diego, said that was what happened to her. Her disability insurer, the Unum Group, called more than 10 times after she was hurt in a car crash, insisting that she apply for Social Security and asking repeatedly where her application stood. Unum was paying her only $50 a month under her policy, she said, which seemed a small amount to merit so much attention.

She did not need or want money from Social Security, and did not think she was entitled to it. Her doctors had told her she would recover, and Social Security is limited to people whose disabilities are total and permanent. But she applied because Unum insisted, she said.

Ten months after her accident, Ms. Ortiz returned to work. Social Security turned her down, as she had expected. People who can work are by definition unqualified for disability pay from the government. But when she told the Unum representative what had happened, he told her she could still appeal.

“If I were the government, I’d be pretty upset,” she said. “No wonder the pot could run out of money.”

When the circumstances of Ms. Ortiz’s case were described, a spokesman for Unum said he could not comment without reviewing her case file. The spokesman, Jim Sabourin, said the company believed that it always had valid reasons for telling people to apply for Social Security.

Forcing people who are injured to apply for Social Security before paying their claims appears to bolster insurers’ profits in several ways. If claimants refuse to apply, the insurers can simply stop paying their benefits, said Dawn Barrett, an employee of the Cigna Corporation, who grew frustrated sending people to Social Security and who is now a plaintiff in one of the lawsuits. More typically, she said, people apply for Social Security when an insurer tells them to. That allows the insurer to reduce its claim reserves, money that is kept in conservative investments for benefit payments. And in the insurance industry, smaller reserves mean bigger profits.

“It’s all about the numbers,” Ms. Barrett said.

Finally, disability insurers tell many of their claimants to appeal Social Security’s rejections again and again, until some are finally accepted. Then the insurers can take those people off their rolls, shifting the cost to the government.

Whistle-blowers have filed lawsuits against the Unum Group, America’s largest disability insurer, and Cigna, another large one, though there is no dispute that the Social Security requirement is an industrywide practice. Unum, with revenue of $10.5 billion, paid disability claims of $4 billion last year.

Both companies said their claims practices were fair, legal and consumer-friendly.

“Our goal is to ensure that each member receives all of the benefits to which he or she is entitled,” said Jill Roman, a spokeswoman for Cigna.

The lawsuits do not fault the idea of coordinating benefits with Social Security and workers’ compensation. Instead, they contend that insurers are recklessly dumping people on Social Security’s doorstep, without properly screening them to make sure they have a chance of qualifying.

The typical long-term disability policy says workers can collect when they are unable to do their own jobs for some period, usually more than five months. Social Security, by contrast, will pay only those people who are so badly disabled they cannot do any job at all. The disability must be one that will last more than 12 months or that will lead to death within that time.

Mr. Sabourin, the spokesman for Unum, denies the suits’ accusations and says that his company does screen people. He said Unum considered it in the best interests of its claimants to try for Social Security, because the federal program offers advantages over private insurance. Even though the federal requirements are tough, he said, Social Security has certain exceptions and trial programs that Unum’s claimants might qualify for.

Unum is also concerned that the lawsuits might lead to changes in federal rules that require Social Security to vet all applications thoroughly. Any changes might drive up the cost of disability insurance premiums, Mr. Sabourin added. Unum plans to file a motion for a summary judgment in its lawsuit, which is in Federal District Court in Boston. The case is to be heard this fall.

Both whistle-blower lawsuits cite the federal False Claims Act, a law that allows affected government programs to recover triple damages. The lawsuits were brought by people contending that the insurers were knowingly committing fraud.

Mr. Nibali, the retired Social Security administrator, says the disability program has “an open-door policy” and is required to seriously consider all applications, even those that might seem improbable. While deciding whether a 65-year-old should get retirement benefits is relatively quick and easy; deciding whether someone should get disability benefits is not. The Social Security Administration compiles detailed medical records, sends applicants to doctors for examinations and tests, reviews their work histories and sometimes interviews their friends and relatives.

Rejections can be appealed again and again.

“A person can come in and file a disability claim with us as many times as they want to,” Mr. Nibali said.

Linda Simmond, a 41-year-old mother in Atlanta, has been at it for four years. She worked as the supervisor of 10 Little Caesars pizza shops in Detroit but had to stop when she was found to have carpal tunnel syndrome, a wrist injury, from rolling out pizza dough. Surgery did not help.

Little Caesar Enterprises was insured through Unum, which started paying Ms. Simmond disability benefits of about $1,780 a month, but told her she had to apply for Social Security. She did so, and was rejected. Ms. Simmond thought that was correct.

“I’m not totally disabled,” she said. “I’ve seen people with one hand, no legs, working, so I know I can do something.”

Unum told her to appeal. She refused. Unum stopped sending her checks. After several months with no income, Ms. Simmond relented and filed the appeal. Unum then resumed her payments — but before long, Social Security rejected her again, and the whole cycle began anew.

Unum is now paying Ms. Simmond her benefits, but warning her that if she does not apply for Social Security again, it will stop her checks a third time, she said. “I need my benefits,” she said. “I have two children. I have a lot of debts. I’m going to have to do it, but I don’t believe in it.”

When Ms. Simmond’s situation was described to him, Mr. Sabourin said he could not comment on it without reviewing her case file.

Mr. Nibali has calculated that it costs $1,180, on average, to process a single Social Security disability application to the first decision, usually a rejection. If the applicant persists through the first three levels — the initial review, a reconsideration and a hearing by an administrative law judge — the case will cost the system an average of $4,759, he found. It is possible to appeal even higher, adding further to the cost. Lawyers from the firm Phillips & Cohen, in Washington, who are representing the plaintiffs, have been working with statistical samples. Their numbers suggest that the industry has been sending tens of thousands of dubious claims to Social Security, costing the system hundreds of millions of dollars over the last decade.

Mr. Nibali said he believed that Cigna, Unum and other disability insurers had enough data on their claimants to weed out many meritless applications before sending so many people to Social Security. That would help the program’s finances, he said. “We’re not here to give money away.”

Quoted from http://www.nytimes.com/2008/04/01/business/01disabled.html?_r=1&hp=&oref=slogin&pagewanted=all

UNUM Group to Pay $5.55 Million in Fines Over Hidden Fees

Fran Lysiak of Zibb.com reported that "Disability insurer Unum Group has agreed to pay $5.55 million in fines and penalties to the federal government for failing to disclose hidden fees it paid to a broker, the U.S. Attorney's Office for the Southern District of California said. The fees were required to be reported as called for under the Employee Retirement Income Security Act of 1974, prosecutors said." To read the full article, go to: http://www.zibb.com/article/3486232/Unum+Group+to+Pay+555+Million+in+Fines+Over+Hidden+Fees+to+Broker

ERISA is the law that regulates employee benefit plans offered by private companies in the United States. By agreeing to such a huge fine, UNUM provides us even more evidence of its disregard for the the U.S. Department of Labor's ERISA regulations. The U.S. Attorney's office found that UNUM was actively concealing the fees paid by UNUM for insurance commissions and disclosures related to group benefit plans. As the U.S. Attorney was quoted as saying, the regulations requiring disclosure, exist "to promote transparency." So much for transparency when the biggest disability insurance company simply ignores the rules and will only follow them when the government threatens prosecution.

To read more about ERISA, visit the ERISA law FAQ tuckerludin.com.


Copyright (c) 2008 by John V. Tucker and Tucker & Ludin, P.A. All rights reserved. Any content borrowed or referenced from another source is referenced by citation to the original source as noted in the text above.

Insurance Company Rules

If you would like a little humor on this Monday morning, check out this video about "Insurance Company Rules:" http://www.youtube.com/watch?v=bVpX5fUvPlg

Disability Benefit Tip of the Week: Medical Records

Before you apply for either Social Security Disability or Long Term Disability through your insurance company, it is a good idea to speak to your doctor about your symptoms. One of the main reasons a person gets denied his disability benefit, is due to lack of documentation in his medical records. When you apply for disability benefits, the Social Security Administration and your insurance company will request copies of your medical records from your doctors. They will make a determination about your eligibility based on the evidence in your medical records. Ask your doctor if all of your symptoms have been recorded in your records. Make a list of your symptoms before you go to your doctors' appointments so that you will not forget any while you are there. Be sure to bring up even minor complaints so that nothing gets left out.

REMEMBER: BEFORE APPLYING FOR DISABILITY BENEFITS, MAKE SURE YOUR DOCTORS ARE WRITING ALL OF YOUR SYMPTOMS IN YOUR MEDICAL RECORDS.

Tucker & Ludin - The Disability Law Firm - launches new ERISA Benefits Law page

Tucker & Ludin's website upgrade continues. ERISA Attorney John Tucker offers more information about ERISA - the Employee Retirement Income Security Act - at the site's new ERISA Benefits page. ERISA is the federal law that regulates any employee benefit plan offered through private employers. For example, group Long Term Disability and Short Term Disability insurance offered through work is usually covered by ERISA.

Be sure to visit Tucker & Ludin's ERISA Disability Benefits page and ERISA FAQ also.

Please feel free to send Disability Lawyer John Tucker your questions or any feedback on our site. You can reach us on our "Contact" page on the website.