Wednesday, January 7, 2009

Disability Challenges Ahead in 2009

Employers in planning cycles have good cause to strongly consider both their plan design along with the competency of the vendors who administer their FMLA, short and long term disability programs given the current business and compliance environment.

With reduced employment the incidence of disability will increase as people who work with a disability seek disability benefits out of fears their job may be eliminated. There are many Americans with Disabilities who get up and go to work everyday with conditions which could disable them. Take away their job and they pursue disability benefits.

Those on disability will also find it difficult to find employment which is consistent with their functional capacity leading to longer claim durations. Many Long Term Disability contracts contain provisions where the definition of disability changes from the inability to perform your own occupation to the inability to perform any occupation for which you are suited by education training or experience which would pay 60-80% of pre-disability earnings. A 24 month own occupation period is the most common point for the change in definition. Insurers use a transferable skills analysis and a local labor market assessment and when they find a position which meets the earnings requirement, 60% or 80% being the most common earnings thresholds, they terminate LTD benefits. Of course with skilled jobs being scarce it is more difficult to find positions which meet the earnings requirement so claims remain open that would have closed in a better economy.

Employers also need to consider that The Americans With Disabilities Act (ADA) has been expanded as of January 1, 2009 (Nice summary is available here form Chicago Tribune ) to consider episodic chronic conditions covered disabilities. To qualify as a covered disability the ADA has also expanded the definition of a major life activity to include such tasks as concentrating, thinking, communicating, working, bending, lifting, standing, reading, performing manual tasks and caring for oneself.

Amended FMLA Regs become effective 1/16/2009 and there is a nice summary located on Ohio Employers Law Blog. It is now an even better idea to have an independent 3rd party handle the medical certification of an FMLA Leave.
Insurance markets for disability harden in a recession and acquisition pricing strategys go away.

Now would be an opportune time to evaluate the plan design and disability claim capabilities of existing disability vendors in order mitigate the harsh reality employers face from the economy along with FMLA & ADA compliance.
  1. More Disability Claims will Occur
  2. Claims will last longer
  3. ADA has been expanded and increased litigation will result.
  4. FMLA regulations have been amended but your FMLA process must be ready to combat fraud.
  5. If your claims experience factors into your rates are you ready?

Add this to the agenda for planning this year and be sure to retain a qualified consultant, like me for instance, who has deep experience in these matters to assist you as you will need the right plan design and the right vendors. Employers who act now will not be facing massive premium and claim increases two to three years down the road or answering hard questions from management.

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