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M&M Group Benefits

Disability Insurance Info

The Basics of Disability Insurance

The basics of short-term disability insurance

If you were to become sick or disabled tomorrow and were unable to work for two or three months, would you have enough savings to cover your living expenses during that time?

The basics of long-term disability insurance

While some people can get by without working for a few months by tapping into their savings, few people can afford to stop working altogether for an extended period of time. That's where long term disability insurance can help you.

How to Buy Disability Insurance Wisely

Group long-term disability vs. individual disability insurance

Should you enroll in a group disability plan or buy disability coverage on your own?

Buyout disability and life insurance for your business

Insurance to deal with premature death and disability while you're running a business.

Protecting your business in case of a disability

Business overhead expense insurance pays fixed business costs if you can't work.

Disability insurance glossary

Understand the common language of STD and LTD policies.

Early intervention cuts disability costs, makes workers happier

Employers who intervene soon after employees are first disabled can help them return to work faster and make them happier, while cutting disability-related costs.

Disability Insurance Information

The Basics of Short-Term Disability Insurance

If you were to become disabled tomorrow and couldn't work for two or three months, would you have enough savings to cover your living expenses during that time? If not, you may want to consider short-term disability insurance.

According to the Council for Disability Awareness, three in 10 people entering the work force today will become disabled before retiring. Also, one in seven people can expect to be disabled for five years or more before retirement. Statistics like that make should make short-term disability insurance a vital piece of your overall financial plan.

What is STD?

Short term disability (STD) pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation insurance). A typical STD policy provides you with a weekly portion of your salary - usually 50, 60, or 66 2/3 percent for 13 to 52 weeks, according to the "Short Term Disability Guide" issued by the Epic Life Insurance Co. Most STD policies have a "cap," meaning you receive a maximum benefit amount per month.

STD policies have a cap on the amount of time you can receive benefits - up to two years, according to the Insurance Information Institute (III).

Causes of STD Claims

• Pregnancy (normal): 21 percent

• Injuries (excluding back): 10 percent

• Digestive/intestinal diseases: 7 percent

• Back injuries: 6 percent

Source: Unum Group

The average premium in 2017 for a group STD policy was $197 per year, according to Drew King, president of JHA, a subsidiary of General Re Life Corp. STD insurance, which is most often purchased as part of a group at work, can be paid by either the employer or the employee. Group STD policies are "guaranteed issue," meaning you do not have to take a medical exam to buy coverage.

On the average, you can start receiving money from your STD policy within one to 14 days after becoming sick or disabled, according to JHA. The actual time for coverage to kick in depends on whether you suffer an illness or injury. If you suffer an injury, your benefits will be paid immediately. If you suffer an illness, it may take longer because there needs to be enough time to show that the illness is grave enough to be disabling.

For example, if you severely injure yourself by falling off a ladder at your house, your benefits would kick in immediately. However, if you suffer from a serious illness and can't go to work, your insurance may not kick in until eight days after you became ill. Also, your employer may have additional restrictions as to when your STD policy kicks in. For example, your employer may require you to use all of your sick days before you begin receiving payments from your STD policy.

You also may receive retroactive benefits if you have a condition that worsens over time. For example, let's say you have a cold and you took three sick days at work. If your cold evolves into pneumonia and you need to be hospitalized for three weeks, you would receive disability pay retroactive to your first sick day.

Who should buy short-term disability?

Individual STD policies are available only on a limited basis. Your best bet is to buy STD coverage through your workpace. Some insurers sell "accident policies" that will pay you money each month for a year if you are injured in an accident.

If you have enough in savings to last until you go to work again, you probably don't need to buy STD or an individual accident policy. However, if you do not have much in savings or any other income to fall back on if you were to become disabled, an individual STD policy is a wise option.

Top 10 short-term disability insurance companies, ranked by earned premium

Rank
Insurance Company
2017 Sales (in Millions)
1
Hartford Life
$102.6
2
Lincoln Financial Group
$61.4
3
Unum
$60.7
4
Aetna
$42.6
5
Sun Life Financial
$41.7
6
MetLife
$40.9
7
CIGNA
$37.6
8
Reliance Standard
$36.8
9
Standard
$34.3
10
Prudential
$30.1
Source: JHA
Disability Insurance Information

Group Long-Term Disability vs. Individual Disability Insurance

Key points to look at when comparing group and individual plans

Is the benefit taxable to me during a claim?

Is the premium guaranteed level to age 65?

Is a mental and nervous claim paid to age 65 or limited to two years?

Does the policy cover me in my own occupation, and for how long?

Will the policy pay me if I can not work in my occupation but am working in another field?

Does the policy offer inflation protection and the ability to add benefit to my policy as my income increases?

Can the policy be cancelled by the insurance company?

You may be asking yourself, "Should I enroll in my group disability plan or purchase my own individual disability plan?" The pros and cons of both need to be considered thoughtfully before deciding what is best for you. There are three likely outcomes from this analysis: You will enroll in the group plan, you will buy an individual plan, or you will buy a group plan and layer a small individual policy on top of the group plan.

There is no universal right or wrong solution. Every person's situation is unique and will demand its own review.

In general, if your group plan is paid for by your company, you are required to participate. Should you ever have to file a claim, the benefit is taxable income to you in the year it is received. In this case, you would want to buy a small individual disability insurance policy to layer on top of the taxable group plan to get your disability payout closer to your pre-disability net take home pay.

If you have a group plan offered through your employer, and you have the option to enroll in the plan, look closely at the coverage offered and the cost associated with the plan. Then compare that to what you may be able to secure on your own with an individually owned policy. It is imperative to thoroughly understand all the terms and conditions of the group and individual disability insurance plan options and how they might impact you. Consult a disability professional to help you understand the options and offer a side-by-side comparison to help you understand what is best for you.

If you do not have a group plan offered through work, your only option is to secure an individual disability insurance policy for yourself. Again, consult a disability insurance professional to tailor a plan that best meets your needs and budget.

Buyout Disability and Life Insurance for Your Business

Every business owner who has partners involved in the business must take a break from the daily grind of running their business to plan for certain possibilities. Among these are premature death and disability while still running your business.

If we do not have a plan - a funded plan - to deal with both of these possibilities, there would be a huge burden placed on everyone involved: partners, family and self (if disabled).

If you die and the value of your share in the business is $500,000, how is your partner going to pay your family for your share? Or, if you become disabled and can never work or contribute to the company and your share of the business is $500,000, how is your partner going to pay you for your share of the business? It is important to plan for these possibilities.

Disability Insurance Information

In the event of a premature death while you're still working, life insurance is the best way to protect your interest in the company.

In the event of a premature death while you're still working, life insurance is the best way to protect your interest in the company. You can leverage the company assets by paying for life insurance that will pay your family for their share of the business. This is the most efficient way to pay for a death buyout. You can use Life or permanent life insurance. If you only need the pure death benefit for a defined period of time, not to exceed 30 years, for instance, Life is the best fit for you. However, if you want the life insurance to extend past a defined number of years, perhaps even after your interest in the company has ceased, a permanent plan may be the best fit.

The permanent insurance can also be used to enhance benefits to the owners and leverage premiums in a very tax-efficient manner. The business can fund the plan and simply add the premiums to the partner's gross income. The net cost effect to the partner is the tax due on the premium amount paid by the company. The tax-advantaged cash value that builds up in the permanent policy can be used in the future for almost anything the partner wants: a car, college funding, a second home, retirement, etc. If done correctly, there would be no tax or penalty due on the amount withdrawn from the plan.

In the event of a disability, the company would need to buyout the disabled partner for his or her share of the company. This would usually take place after the partner has been disabled for a long time and is rather certain the disability is permanent - the period of time before the policy and buyout would kick in is usually a minimum of one year.

Disability Insurance Information

A disability buy-out policy is a great way to leverage the company dollar.

Some companies opt for an 18-or 24-month waiting period. Just as with life insurance, the disability buy-out is a great way to leverage the company dollar. If you became disabled and the partners were going to buy you out and you share of the company was worth $500,000, where would the money come from? The most efficient way to fund this is through the disability policy, using pennies on the dollar to fund the obligation. The buyout can be paid in a lump sum or monthly over a certain period of time, such as five years.

It is also very important to have a buy-sell agreement drafted by a professional that spells out valuation for the business and all other details of a buyout in the event of death, disability, termination or voluntary departure.

There are real dangers to a business if the disability or life buyout agreement is not done well. Imagine a scenario where your corporate buyout agreement agrees to a valuation of the business, you fund the current agreement with life and disability insurance for the buyouts, and six years later the value of the business is 10 times what it was when you agreed to the formula.

The agreement is underfunded by insurance, and now imagine one of the partners becomes disabled. When you signed the agreement you would have owed $250,000 to a partner who became permanently disabled. Now you owe $1.5 million and have only $250,000 of insurance. This scenario is too common, and one reason why it is very important to work with specialists for disability and life buyout agreements in partnerships.

Consult your business advisers, accountant and attorney on all these issues.

Disability Insurance Information

Protecting Your Business in Case of a Disability

Being a business owner can be very rewarding. If you are disabled, though, it can be devastating. Not only is your personal income threatened, but also your business. Some types of businesses would continue without you easily. However, if your business depends on you to generate revenue, you need to own "business overhead expense insurance" to make sure your business remains viable during a period of disability.

The monthly expenses of your business won't disappear just because you can't work. You still have an obligation to pay certain expenses such as rent, real estate taxes, interest on debts, installment loan costs for furniture and equipment and other fixed expenses. And what about employee payroll, electricity, telephone or heat? In addition, while these expenses continue, revenue may be decreasing as clients or patients leave.

The solution is a type of business insurance called "business overhead expense insurance." This coverage pays for all of the deductible overhead expenses of your business on a reimbursement basis, while you are disabled, for up to 24 months. This gives you the ability to keep your business running while you get better. If you are not able to return to work within 24 months, at least the fixed expenses are paid.

Top reasons for business overhead expense insurance

  1. Keep your business viable until you return to work.
  2. Provide you with resources until you sell your business (if it's going to be a longer-term disability).

Most insurance companies will cover up to $30,000 of fixed monthly expenses. Since these types of policies are "reimbursement policies," the benefits may extend past the maximum benefit period. For example, let's say you purchase $20,000 a month of benefits for 24 months. If you only use $10,000 per month for 24 months, you would still have $240,000 available to use.

One of the unique features of business overhead expense insurance is the tax-deductibility. While most individual disability insurance policies are not deductible, business overhead expense insurance is. The benefits that you receive are taxable, but because they are used to pay deductible expenses, it is essentially a wash. Ask your tax advisor for more details.

Most insurance companies offer an option that allows you to pay most or all of the salary of a member of your profession to perform the duties previously performed by you. This is especially important for highly skilled business owners such as physicians, dentists lawyers, etc. If you are unable to work and don't have someone in your profession perform your duties, your business could collapse.

Being disabled can be one of the most trying times in life. Having to worry about the expenses of running your business can be avoided.

The Basics of Long-Term Disability Insurance

You may not realize the potential danger of becoming disabled. The U.S. Census Bureau estimates that you have a one in five chance of becoming disabled. Also, the average long-term disability (LTD) absence from work lasts 2.5 years, according to the Council for Disability Awareness. That's a long time to survive without a steady income.

Cancer continues to be the No. 1 cause of long term disability, according to Unum Group. In 2017, cancer led to more than 12 percent of LTD claims, followed closely by pregnancy complications and back injuries.

Causes of LTD Claims in 2018

• Cancer: 12.2 percent

• Pregnancy complications: 12.1 percent

• Back injuries: 11 percent

• Other: 9.3 percent

Source: Unum

Becoming disabled can have devastating financial implications by stripping you of your ability to make a living. While some people can get by without working for a few months by tapping into their savings, few people can afford to stop working altogether for an extended period of time.

That's where LTD insurance can help you. LTD policies provide you with income for a long period of time, such as two years, five years or until you retire. Most people who have LTD insurance get it through their employers, although you can buy individual LTD insurance on your own.

LTD in a nutshell

LTD picks up where short-term disability (STD) leaves off. Once your STD benefits expire (generally after three to six months), the LTD policy pays you a percentage of your salary (usually 50,60, or 66 2/3 percent). Depending on your policy, you will then receive benefits for two years, five years or until you turn 65.

The average annual premium for a new group LTD policy in 2017 was $234 per person, according Drew King, president of JHA, a subsidiary of General Re Life Corp.

If you pay your own premiums with after-tax dollars, your disability benefits will be tax-free. If your employer pays for the policy, most likely with pre-tax dollars, your disability benefits will be taxable.

Most disability insurers will work with employers to help you return to work as quickly and safely as possible. While disability insurers want to see people healthy, rehabilitated and back to work, they also save significant dollars if a claimant quickly returns to work.

"Disability insurance should be a part of everyone's financial plan, but when faced with a disability, the ideal situation for people is really to get well and return to work so they can continue earning the salary they were getting before they became ill or injured and maintain their standard of living," says Diane Russell, assistant vice president of marketing and product development at CIGNA Group Insurance.

What to look for in an individual long-term disability insurance policy.

Definition of disability. Some policies pay benefits only if you are unable to perform the duties of your normal occupation, while others will pay only if you cannot work in any job at all.

Payment trigger date. Some policies will allow you to decide when the payments begin. You can choose a waiting period at the time of your application.

Extent of disability. Some policies require that you be totally disabled before payments begin. Other policies pay out for partial disability for a limited time, but most often only if the partial disability follows a period of total disability for the same cause.

"Residual" benefits. Residual benefits can help make up the difference in your income if you are able to work but are limited in your duties due to your disability.

Presumptive disability. Some policies will pay benefits if you are still able to work but still have loss of sight, speech, hearing, or use of limbs.

Length of coverage. Generally, coverage will pay you for two years, five years or until you turn 65. The longer you elect, the more your premium will be.

Keeping pace with inflation. You can purchase a cost-of-living adjustment (COLA) to add to your basic disability insurance policy. This provision generally increases payouts by 4 to 10 percent each year.

Waiver of premium. Most policies contain a "waiver of premium" provision so that you do not have to pay premiums if you are disabled for 90 days or longer.

You'll most likely find your disability insurer "managing the claim" if you are "partially disabled" - meaning you can still work, but in a job that pays substantially less. LTD will pay you additional money if you decide to take a lower-paying salary, as outlined in the following example.

Let's say you worked in a warehouse lifting crates making $40,000 annually. You then hurt your back at home and are forced to take a desk job that pays $20,000 annually. If your LTD policy was paying you 60 percent of your original $40,000 salary, it will now pay you 60 percent of what you are making in the lesser job. So now instead of staying at home and collecting $24,000 from your LTD policy only, you work at the lower paying job and make $32,000 (in addition to the $20,000 salary, you also get $12,000 in disability benefits, which is 60 percent of $20,000).

Monica Burnett, an account executive for MetLife, says that some insurers will also reimburse the employee for child care expenses if the employee's spouse must go back to work as a result of the disability. "A lot of times, that's a huge factor in whether or not a person can return to work," she says.

King says that some disability insurers give employers an incentive to have workers return to work on a part-time basis. He says it's common for insurers to give employers a premium reduction on the group policy if they allow a partially disabled person to come back to work on a part-time basis.

"In the old days, they never used to do that," he adds.

If you become disabled and begin receiving benefits, you will no longer have to pay premiums. Most policies contain a "waiver of premium" provision that states you can stop paying premiums if you are disabled for 90 days or longer.

Buying individual disability insurance

If your employer does not offer group disability insurance, or if you feel your existing group policy does not provide adequate coverage, you may want to consider buying an individual LTD policy. According to the Council for Disability Awareness, one in seven people can expect to be disabled for five years or more before retirement. If you do not have individual LTD, going five years without working could be fmancially devastating.

You can buy this through financial planners or the same agents who sell you life insurance or annuities, or sometimes through your mortgage company. If you choose to buy it individually, King estimates that the average premium could cost more than five to 10 times as much as a group policy, depending on your age, occupation and annual income.

"It could cost up to $2,000 a year, depending on how much you buy," King says.

You must take a medical exam to prove your insurability.

Individual disability pays you a flat amount each month, and most often you will not be paid more than 80 percent of your current salary. Your occupation, income and other sources of insurance will help the insurance company determine if it wants to insure you and helps set your premium. After it sets your rate, the insurance company places you in a rating class with people who have similar characteristics such as age, occupation, medical condition and income.

Most policies are sold on a "non-cancelable" or a "guaranteed renewable" basis. With a non-cancelable policy (which requires an initial medical exam), the insurer cannot cancel the coverage or raise your premiums. If you buy a policy on a guaranteed renewable basis, the insurer cannot cancel the coverage as long as you pay premiums, but it can raise rates. However, the insurer cannot raise rates on an individual basis. Rather, it will raise rates for the whole group if you are part of an insured group that has experienced a very high number of claims.

Most individual policies also have features that allow benefits to keep pace with inflation or gradual salary increases, such as a cost of living adjustment (COLA), which adds a percentage to your coverage each year.

Though disability insurance can be costly if you buy it on your own, King says it is an essential part of a person's financial plan. "Everybody should have some kind of disability insurance protection," King says. "Since you're much more likely to become disabled than you are to die, you can make a coherent argument that you need disability insurance more than you need life insurance."

Top 10 long-term disability insurance companies, ranked by earned premium

Rank
Insurance Company
2017 Sales (in Millions)
1
Hartford Life
$189.2
2
MetLife
$183.7
3
Standard
$168.7
4
Unum
$157.1
5
CIGNA
$135.7
6
Reliance Standard
$95.0
7
Aetna
$90.6
8
Sun Life Financial
$84.3
9
Prudential
$83.9
10
Lincoln Financial Group
$82.3
Source: JHA
Disability Insurance Information

Disability Insurance Glossary

The following are terms that can be found in most long term disability (LTD) and short term disability (STD) policies. While many of these terms apply only to group insurance, some are also applicable to individual disability insurance policies. The terms were provided by Hartford Life.

Active, Full-time Employee. An individual must work for the employer on a regular basis in the usual course of the employer's business to be considered an active, full-time employee and eligible for coverage. Usually, a minimum number of hours of regular work is specified.

Benefit Percentage. The benefit payable is usually determined as a percentage of the insured's pre-disability income up to an overall maximum benefit amount.

Conversion Privilege. If included, this option allows employees who are terminating employment to continue some or all of their LTD coverage at their own expense without submitting evidence of insurability.

Definition of Total Disability. Probably the most important provision in a disability contract is the definition of disability that will be used to determine an employee's eligibility for benefits.

  • Own Occupation (Own Occ): Under this definition, an insured will be considered disabled only if he/she is unable to perform the duties of his /her occupation.
  • Any Occupation (Any Occ): Under this definition, an insured will be considered disabled only if he/she is unable to work in any occupation for which he/she is qualified by education, training, or experience. This is somewhat similar to the definition that the Social Security Administration uses in determining disability.

Definition of Partial/Residual Disability. This further definition of disability applies when an insured is able to return to work part-time or even full-time (with a loss of earnings). If the employee is working in this limited capacity and is earning less than a certain level of income, he/she will still be eligible for limited benefits under the plan. Not all disability insurance carriers use this terminology to describe a "part-time" work situation, but most provide some type of benefit to encourage return to work.

Elimination Period. This is the period of time between the date the disability commences and the beginning of the benefit payment period. It is the period during which an employee must be disabled before payment of benefits begins. It is sometimes referred to as the Qualifying Period.

Evidence of Insurability. Group disability coverage is generally sold as "guaranteed issue" which means that evidence of insurability is not required. However, under certain circumstances (e.g., late enrollment or a high benefit maximum), an employee must provide medical or financial information as proof to the insurance company that he/she is insurable.

Exclusions. There are specific provisions included in group disability plans which exclude coverage in certain situations. Typically, a plan will not pay benefits for disabilities arising from war, participation in a riot, commission of a felony, or selfinflicted injury.

Family Care Expenses. A disabled employee who has family care responsibilities may need extra help when trying to return to work. This type of benefit provides an incentive to the employee who is taking part in a rehabilitation program by allowing credit or partial reimbursement for gertain expenses incurred for family care. This is generally an optional benefit under most long term disability policies.

Indexing. Indexing is designed to provide some protection against inflation. After the first year of disability, a disabled employee's pre-disability earnings are usually increased (or indexed) by a certain percentage on an annual basis for purposes of determining any disability benefit payable.

Limitations. There may be specific provisions included in group disability plans that limit coverage in certain situations. Often only limited benefits are payable for specific conditions or under specific circumstances (e.g., mental illness and pre-existing conditions). See also Mental Illness Limitations and Pre-Existing Limitations below.

"Mandatory" Rehabilitation. Based on the premise that most people want to work in order to lead active, productive lives, a "mandatory" rehabilitation provision encourages disabled employees to participate in rehabilitation efforts whenever appropriate. Such a provision allows for termination of benefits if the employee refuses to cooperate or participate with a rehabilitation plan.

Maximum Benefit Period (Benefit Duration). This is the maximum length of time for which benefits are payable under the plan as long as the employee remains continuously disabled.

Maximum Monthly Benefit. This is the highest dollar amount a disabled employee can receive on a monthly basis under the LTD plan.

Mental Illness and Substance Abuse Limitations. When a disability is caused by a psychological/behavioral/emotional disorder, or by alcoholism or the non-medical use of narcotics, sedatives, and so on, benefits provided under group disability policies are usually limited to a period of 12 or 24 months unless the employee is confined to a hospital. Individual disability policies generally do not contain this limitation.

Minimum Monthly Benefit. There is usually a minimum amount paid as a monthly benefit after reductions for Other Income Benefits.

Other Income Benefits (Benefit Integration). While disabled, an insured may be eligible for benefits from other sources. Benefits payable under the group LTD plan may be offset (reduced) by other sources of disability income such as Social Security, workers compensation, or disability benefits received from other employer-sponsored plans.

Pre-Disability Earnings. This is the amount of an employee's wages or salary that was in effect and covered by the plan on the day before the disability began.

Pre-Existing Condition Limitations. When an insured has a physical or mental condition that existed prior to the effective date of his or her insurance coverage, it is considered a pre-existing condition. Most plans exclude or reduce disability benefits for any illness or injury for which an employee received medical treatment or consultation within a specified time period before becoming covered under the plan.

Recurrent Disability. The recurrent disability provision is designed to protect an employee who tries to return to work but becomes disabled again from the same or a related cause. If this happens within a certain period of time, the employee will be considered disabled from the original disability, and will not be subject to a new elimination period. This encourages an employee to return to work without fear of losing benefits if he or she continues to be disabled.

Rehabilitation. Rehabilitation means the restoration of or improvement in an employee's health and functionality. It usually involves a program of clinical and vocational services with the goal of returning a disabled employee to an active, productive life, and a meaningful occupation if possible.

Return to Work Provision. To encourage employees to return to work as soon as they become physically able, an additional incentive is usually provided for a certain period of time, and is called a return to work provision. Under this provision, the employee can receive up to 100 percent of pre-disability earnings based on a combination of disability benefits and return-to-work earnings.

Survivor Benefit. The survivor benefit is a lump sum payment that will provide benefits to the insured's eligible survivors in the event the insured dies while receiving disability payments. This is an optional benefit in most policies.

Waiting Period. In order to become eligible for coverage under the policy, an individual must satisfy a certain number of continuous days of service as an active, full-time employee. This is known as the waiting period. (In addition, a waiting period can also be the time period between when a disability occurs and when payments from the disability insurance policy begin - what we have discussed as an "elimination period.")

Waiver of Premium. When an individual becomes disabled and eligible for benefits, no further disability premium payments are required as long as benefits are being paid out.

Workplace Modification or Accommodation. This benefit is designed to provide assistance to an employer when a disabled employee requires modification of the workplace or special adaptive equipment in order to return to work. The employer will usually be reimbursed up to a set amount for the cost of such modifications.

Disability Insurance Information

Early Intervention Cuts Disability Costs, Makes Workers Happier

Employers who intervene soon after employees are first disabled can help them return to work faster and make them happier, while cutting disability-related costs, says Sun Life Financial, an international wealth management and insurance company, and the Integrated Benefits Institute (IBI), a nonprofit benefits research organization located in San Francisco.

Disability Insurance Information

Employers who move quickly to communicate with and accommodate their disabled workers can help them return to work 20 percent faster.

Employers who move quickly to communicate with and accommodate their disabled workers can help them return to work 20 percent faster, according to Sun Life's study, "Early Intervention Programs Can Speed Disabled Employees Back to Work." And IBI's 2001 study of Steelcase, a Michigan manufacturer of office furniture, showed that worker satisfaction shot up 48 percent from 1997 to 2001 after the company introduced a disability management program that integrated aspects of workers compensation, short and long term disability, and the federal Family Medical Leave Act.

IBI says Steelcase decided to launch an integrated disability management program that features an early return-to-work component because its "employees were confused by traditional, disjointed employee benefits, didn't know who to call and didn't feel they were getting very good service."

Sun Life's return-to-work study

Sun Life's study tracked the outcomes of nearly 1,000 non-maternity short term disability claims. These claims were divided into two groups - those who received early intervention disability services and those who did not. Available services included:

  • Claimant and physician coaching about return-to-work expectations.
  • Employer education on disability issues.
  • Identification of viable job alternatives, including light duty positions.
  • Job site modifications to accommodate disabled workers.
  • Medical intervention to ensure the employee was receiving appropriate medical care.
  • Three-way coordination and communication between the employer, employee, and physician.
  • Vocational counseling.

Percentage of 830 major companies with formal return-to-work programs

Type of disability program
Yes
No
Workers Comp
53%
37%
STD/LTD
37%
55%

Source: Unum Group

Disabled employees in the group that received early intervention worked with their employers and physicians to develop return-to-work plans and set expected return-to-work dates. This date was the earliest recovery date as determined by either the treating physician or the plan's medical disability advisor. Then the outcomes in both groups were compared, including the date the employee actually returned to work, whether the return was full-or part-time, and if the claim transitioned into the long term disability stage.

The study showed that the early intervention services yielded a high success rate in returning disabled employees to work. Among the findings:

  • On average, employees receiving early intervention services returned to work 2.7 weeks sooner, saving the employer approximately $810 per claim.
  • 47 percent more employees returned to work during the short term disability stage with early intervention.
  • 33 percent fewer claims extended into the long term disability stage with early intervention.

Services make all the difference

Disability Insurance Information

"Usually it isn't the disability that prevents them from returning to work, but all kinds of extraneous job issues."

Sun Life's findings don't surprise Cheryl Jensen, the director of disability review services for John Hewitt & Associates Inc., a disability risk management and consulting firm with headquarters in Portland, Maine. Nine times out of 10, she says, disabled workers stay out on disability longer than they have to or don't return at all due to employment problems rather than their medical problems.

"Usually it isn't the disability that prevents them from returning to work, but all kinds of extraneous job issues," Jensen says. "Maybe the company has just been sold, or the worker just got a new boss, or the worker's duties are changing and the employer hasn't put any kind of support mechanism in place. If the employer doesn't recognize that the disabled worker has value and communicate this idea directly to the worker, then the employer risks losing that employee."

Sun Life concluded that early intervention in short term disability cases can overcome two main barriers:

  • Psychological: The disabled employee hasn't mentally adjusted to not working and his or her new lifestyle without work.
  • Work: A close relationship still exists between the employer and employee, and everyone remains focused on recovery and return to work. Before long, an employee can quickly become "out of sight, out of mind."

Real Savings

Employers that don't pay attention to the potential rewards of return-to-work programs may pay a high price, says Sun Life. "Employers who ignore the importance of early intervention risk higher absenteeism, higher staffing costs, and lower productivity."

Conversely, employers that implement early intervention programs can reap real savings. According to Sun Life's study, if a large company has 10,000 employees, that company can expect 600 employees to receive short term disability benefits in an average year. Even if 10 percent, or 60, of these employees receive early intervention services, that can mean $48,000 in annual savings based on a $300 weekly short term disability benefit payment multiplied by the shorter average disability duration of 2.7 weeks.

These findings complement those discovered by Watson-Wyatt Worldwide and the Washington Business Group on Health in their fourth annual survey report for 1999/2000 called "Staying@Work." The study examined 178 major companies with an average of 13,500 workers and found that those companies that implemented short term disability claim management activities - such as independent medical exams, behavioral health interventions, case management, and transitional return-to-work programs - reported savings between 18 percent and 19 percent.

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