Tag Archives: disability insurance

Budget proposal may effect Social Security Disability Insurance

President Donald Trump’s 2018 budget proposal includes potential changes to several Social Security Disability Insurance (SSDI) programs. If approved, these changes could affect claimants, state agencies, insurance companies, and/or employers. The Milliman Insight article “President Trump’s budget proposal calls for disability changes” by Jennifer Fleck explores the financial and administrative implications related to the proposed changes for each of these groups.

Here is an excerpt:

It is not yet clear which of the proposed changes are likely to proceed nor which can be considered benefit cuts as opposed to administrative changes intended to manage the existing program more closely. However, the potential impact is significant for many different constituencies.

• Current claimants or applicants now waiting for their claim decisions could be affected through reduced retroactive payments, increased opportunities for rehabilitation, or potential shifting of the payer of their benefits.
• State agencies should pay close attention to the proposed changes as they could require additional services be performed at the state level.
• Insurance carriers could be required to pay additional benefits to private insurance claimants as costs are shifted. Currently, group insurers offset their payments for SSDI benefits, so reduced SSDI benefits will result in higher payments from insurance companies. This has the additional impact of raising premium rates for everyone who has group disability insurance.
• Employers could be affected by cost shifting of workers’ compensation benefit offsets or by being required to accommodate more employees returning to work from disability. Employers could also face the higher premium payments mentioned above or could have higher benefit costs directly if they self-insure. This could discourage employers from offering coverage, cause a shifting of the cost to the employees, or encourage them to offer lower benefit amounts. A benefit to employers could be a larger potential workforce to draw from.

Health exchanges pose opportunities and challenges for group life and disability products

The expansion of private and public health exchanges into more diverse insurance markets presents both opportunity and risk to group life and disability insurers. Exchanges promise insurers potential growth opportunities through new forms of distribution. Still, there is uncertainty as to how new business will evolve under these models.

Milliman’s Paul Correia authored a recent article in Best’s Review discussing strategies that group life and disability carriers should consider in marketing products on the exchanges. Here is an excerpt:

Pricing on Exchanges
Many group life and disability insurance companies are still developing their exchange strategies. Those that are considering participating in exchanges are giving serious thought to the inherent pricing challenges.

The lack of historical experience in this market segment poses obvious challenges. First, the demographics and risk characteristics of future insured populations are unknown. Some insurers speculate that exchanges may be popular among cost-conscious employers and first-time buyers of ancillary products, for example, but there are many unknowns, such as variations by employer size or location.

Second, future participation levels are unknown. Most voluntary group life and disability insurance products have minimum participation requirements to mitigate anti-selection risk. But it may be difficult to enforce these requirements in exchange markets.

One-on-one sessions with employees and group meetings at the work site have been effective for boosting participation, but these initiatives likely will not be integrated with exchange enrollment platforms. Insurers may be reluctant to refuse coverage to a case that fails to meet a minimum participation requirement on an exchange. They may also be pressured to dispense with minimum participation requirements entirely.

Finally, there are concerns over allowing plans to be split among multiple insurers. Disability and life insurers typically have been immune to this issue, although it is not uncommon in the large-group medical insurance market. The primary concern is that allowing employees to choose from among multiple insurers’ plans will exacerbate anti-selection risk. The consensus, however, seems to be that exchanges will not split disability and life insurance plans among multiple insurers in the near term, although this could be a subsequent development.

Enrollment and Administration
Group life and disability insurers understand that exchanges can provide valuable enrollment platforms for tapping into new markets. It is likely, however, that some exchanges will be better than others at providing enrollment and distribution support, and some may be able to provide administrative services that others cannot provide.

These insurers should pay close attention to capabilities such as the ability of an exchange to efficiently process changes in employee earnings, or the ability to effectively administer open enrollments of new hires. Exchanges that have solid front- and back-end capabilities should appeal most to group life and disability insurers.

Some group life and disability insurers have not invested in voluntary products and are now faced with the decision of whether to invest in these products and potentially participate in exchanges or not. Insurers that already operate in voluntary markets need to decide what types of products should be offered through exchanges.

Designing products that are attractive to employers is critical. Equally important is the ability to market these products on exchange platforms. Insurers are considering marketing strategies that take advantage of exchange formats. For example, insurers may see opportunities for distributing less-prevalent ancillary products, such as accident indemnity and critical illness insurance, traditionally sold through work site distribution channels. Because exchanges fundamentally facilitate sales of voluntary products, they could prove to be effective at bolstering enrollment and participation in these types of products.

To read the entire article, click here.

New definition of disability

A new Client Action Bulletin looks at the final rule from the Equal Employment Opportunity Commission (EEOC) that provides an expansive definition of “disability.” The final rule, which covers only the Americans with Disabilities Act’s employment-based requirements enforced by the EEOC, is effective May 24. Read the Bulletin here.