Written by Gina Schreiber, SVP, Account Management & Aevo Insurance Services
In September 2019, the Stop the Wait Act was introduced in the House by U.S. Senator Bob Casey (D-PA), Ranking Member of the Senate Special Committee on Aging, along with U.S. Representative Lloyd Doggett (D-TX-35), Chair of the House Ways and Means Health Subcommittee and House Budget Committee Member, and U.S. Representative Brian Fitzpatrick (R-PA-01). The Stop the Wait Act is aimed at accomplishing the following things as it is currently constructed:
- Requiring Social Security Disability (SSDI) to begin payment immediately and eliminating the typical five-month wait time.
- Phase out the 24-month waiting period for Medicare disability benefits.
- Directing the National Academy of Medicine to monitor and ensure the elimination of waiting periods.
This legislation is supported by a number of patient advocacy groups and other organizations as noted in this article. In 2020, there was no meaningful traction relative to this legislation; the bill has been referred to subcommittees but did not make it out of the committees for a vote on the floor.
There has been recent speculation as to the likelihood of this legislation being enacted — up to and including incorporating this legislation in the upcoming stimulus package proposals. Many of our industry contacts have indicated there is support for approval, while others feel the funding levels and conflicting priorities in Congress will make it hard to secure the needed votes. What is clear, however, is that if the five-month waiting period is eliminated, it would have an immediate and significant impact for you and your claimants.
Implications of approved legislation to eliminate the waiting period
Once the Social Security Administration (SSA) approves a valid claim, this change would mean that a beneficiary would be entitled to past due benefits that go back five months earlier, to his or her disability onset date. Here’s how that might impact a claimant, or the integration with private disability policies:
- Private long-term disability (LTD) plans that pay benefits at the end of a 90-day elimination period, for example, would now have an additional two months of offsets to include in an overpayment calculation. This could also apply to short-term disability (STD) plans that are in place from onset.
- A claimant may be more incented to apply for SSDI benefits to obtain benefits payable back to the original onset date that pre-date the start of private disability benefits. Those months of benefits would not be included in any overpayment calculation (assuming no STD plan is in place). For 180-day elimination plans, that would create five additional months of income replacement benefits.
- Past due benefits back to the original onset date would mean that private STD plans would overlap with SSDI benefits in a meaningful way. Currently, carriers generally only pursue SSDI benefits on STD plans with a longer duration, or when there is a high likelihood of transitioning to LTD. That may shift if there is a significant offset opportunity for the entire duration of a paid STD claim.
SSDI and Short-Term Disability
There are a significant number of factors to address when considering extending a proactive SSDI advocacy, offset, and recovery program on an STD block. The list below is a start, covering topics from contracts to claimant communications.
- Does your current STD policy language support an SSDI offset?
In our review, we have found that policy language often includes SSDI as “Other Income.” However, it may not allow for estimating offsets or require eligible claimants to apply.
- Do you have a process in place to identify valid SSDI opportunities in your STD block?
This may be an area where an SSDI advocacy partner can assist, but some carriers choose to manage the referral process with internal resources and would need to make a specific choice on an STD referral strategy. Does your reporting technology allow you to easily filter out certain claims (e.g., maternity claims)?
- What might SSDI referral volumes look like on STD claims?
In addition to the variation between STD and LTD claim incidence rates, there are significantly more employers that offer STD benefit programs than offer LTD benefit programs, meaning the potential volume of SSDI opportunities on STD programs could be significant. Would all potential claims be referred or only those that are more significant diagnoses? Only after a certain timeframe?
- How would you manage claimant communications?
It can be hard enough to navigate the messaging of potential return to work options and SSDI applications on LTD plans when the claimant has been out of work for over a hundred days. Moving that conversation up to the STD benefit period requires careful planning and thoughtful messaging.
- What tools and resources do you have in place to recover overpayments on STD claims?
Overpayment recovery is a standard practice for LTD claims where retroactive SSDI benefits are awarded, but many of those claims are still in pay status, and we do typically see a lower recovery rate for claims that are terminated prior to their SSDI awarded. With SSA’s longer decision times, it is very likely that a high percentage of SSDI claims referred at STD would not be decided until after the STD benefit period ended. For claimants transitioning to an LTD policy that means a smaller LTD overpayment (if any), but for claimants who are only covered under an STD policy, it would mean trying to recover overpayments on closed claims. While challenging work, you would realize a significant financial benefit – even at a lower recovery rate than you typically see with LTD.
Brown & Brown Absence Services Group is prepared to support customers as we move through this uncertainty, providing up to date and accurate information on developments in real time, and working with customers to create an action plan, and implement that plan if the change is approved.