“How to Get All Your Long Term Disability Benefits Transcript”
Brian: Greetings, everybody. It’s Brian Therrien here today with Jonathan. Jonathan, how are you today?
Jonathan: Great. How are you doing, Brian?
Brian: Doing great, doing great. We’re here today to talk about long-term disability policy, short-term disability policies, ERISA, all those great insurance policies of people get when they go out and get a job. And we’ve been working and helping folks out for around 18 years now, assisting people in getting their benefits commonly after they’ve been denied their claim but even more so in recent years, helping people from the very beginning making sure that they get all of their benefits.
So I know I have an audience that is just eager to hear what you’ve done and some of the tips you’re willing to share us. So thanks for coming out tonight.
Jonathan: You’re welcome, Brian. If you said I’ve been at this area of the law for about 18 years and I’ve been practicing law of other types since about 19…. It’s actually since late 1985. But, you know, I’m here today to try to provide in a cursory way some reasons and answers to questions that your audience has about short-term disability, long-term disability and that the general pitfalls of ERISA. So, ask away.
Brian: Yeah. Apparently there are some pitfalls. So let’s start with the basics, Jonathan. You know, a general review of a group policy somebody, you know, they go to work, you end up getting a long-term disability policy, typically, a little chunk of your income is taken out of your paycheck and you end up buying a policy from there. Now, let’s start with this.
There’s the two different types of long-term disability policies. And then there’s the, in general, to my understanding, and then there’s short-term disability.
Jonathan: Right, you’re right. Let’s just touch on short-term disability real quickly because it’s different. No state requires that anyone be provided with long-term disability. There are some states that require short-term disability but those are far and few between. For example, Rhode Island does in our neck of the woods and California requires some level of short-term disability. But the long-term in every state is voluntary.
And one thing I want to point out right off the bat is that those people working in the private sector, they get their benefits through their employer such as long-term disability. They’re all governed under this law called the Employment Retirement Income Security Act (ERISA). Those folks that are lucky enough to work for what are government such as, you know, the state, municipal or the federal government in terms of benefits, their benefit plans are all exempt from ERISA which turns out to be a huge advantage.
ERISA was passed in 1974 after a lot of studying, a lot of jockeying and negotiating through Congress with the purpose at least as the intent at that time was to protect employee benefits. And the quick history to that was after Studebaker Motors failed and I believe 1964 to tens of thousands of employees that were left without pensions. And Congress said and the public and unions and individuals said something needs to be done to protect these people. And after a lot of negotiation, ERISA came into effect on Labor Day in 1974. So that’s where it all began.
Brian: So how is it that government employees, which I know is a very small segment of our overall population, is exempt from the traditional–but I guess, more specifically, Jonathan, how are they exempt? What does it mean that they’re exempt from ERISA?
Jonathan: All right, I’ll answer that. Let me also point out that people that work for what are called Church Plan Organizations are exempt. Something to get your a real grip on would be like Catholic Archdiocese, if someone’s employed by an archdiocese. They could be employed by a church-affiliated hospital, those people are exempt.
But to answer your question directly, it’s in the ERISA statute that Congress said the statute does not apply to people who work for governments or church plans. And it also turns out in this day and age, generally, non-US citizens are not subject to an ERISA and that’s of some level of importance because in the global economy we’re in now, it’s not unusual to have someone whose a citizen of the United Kingdom that happens to work for an American company and there may be a disability plan that covers that person. But that person and the plan should be exempt from ERISA.
And in general, being exempt is good. The reason I say that is the person’s claim then is governed and controlled by state traditional insurance or contract laws which are much more favorable than ERISA.
Brian: I see, okay. So although ERISA was put in place, prior to ERISA, the environment for the long-term disability or short-term disability policy holder would have been more favorable, is that correct?
Jonathan: Yeah, it’s correct because they were traditionally just considered or the plans were just considered insurance contracts and those are governed under state laws which tend to be more favorable and there’s a long history in connection with interpreting insurance policies since they’re called contracts of adhesions. They’re basically take it or leave it. People don’t get to negotiate the terms through common law the courts said because people aren’t bargaining over the terms. Insurance companies have lots of smart people working there, lots of smart lawyers, they know how to draft these type of plans. And if it turns out something’s ambiguous, in general, there’s an exception in some states. But in virtually every state, anything that is ambiguous in the plan is going to be construed in favor of the person seeking coverage and against the insurance company. Plus, if there is a dispute over the policy and a person ends up in court against the insurance company, ultimately, they’re entitled to a jury trial. Just like any other breach of contract claim.
Under ERISA, the claims basically always end up in the federal court. There is no jury trial and the actual trial procedure is still a peculiar and that there’s really never any live witnesses and it tends to be a trial on a paper record. Very disadvantaged to the insured, very advantageous to the insurance company or the private employer if the plan turns out to be self-funded.
Brian: So the likely–the lobbyists from the insurance companies got the ERISA acted?
Jonathan: I can’t really say it was done by that. It was through a court decision. A lot of it happens to be with a, I believe 1987 Supreme Court decision involving a bad faith insurance claim that came out of Mississippi involving something called Pilot Life. And Justice O’Connor decided that we’lll say state laws in this area were all pre-empted and the right to jury trial and to we’ll just say traditional type of damages were all pre-empted by the enactment of ERISA. Let me explain that real quickly a little bit more.
Pre-emption has to do with when Congress passes a law and decides to, we’ll say in some sense, override all state laws because of the way the constitution is interpreted, federal laws are supreme. So in a very casual sense you could say ERISA wipes out virtually all state laws. There is a relatively jumbled perception that insurance regulations, for the most part, still apply to insurance plans. It’s somewhat complex. The reason I’m saying it’s complex is because the statute’s unclear and the courts have not done a great job in defining that level of clarity. But for the most part, things have been shifted heavily in favor of plans in insurance companies and it’s not really through lobbying although maybe it’s lobbying now that keeps those laws in place.
Brian: Okay, so for today’s information that we’re going to cover if somebody is employed by the government or by a church organization and has a policy, would any of the information that we’re going to cover today be a value to them?
Jonathan: Well, it would be a value to them in the sense that there are certain things that one needs to look out and to provide to the insurance company under either situation to do the best, not to do the best but to make sure one’s application goes through the insurance company and a person that deserves to get paid should be paid.
Brian: Okay.
Jonathan: So tongue-tied at the moment.
Brian: Okay. Don’t worry. So all right, that’s a good distinction. I was not aware of that. So okay, for short-term disability, can we go through the common process if somebody has a short-term disability policy, is it–that’s something that they would apply for first?
Jonathan: Absolutely. Yeah, usually, if someone has to be out of work from anything from a few days to maybe a week and the person either goes to the insurer, to their employer, fills out whatever needs to be done in the application and submits it and often that means obtaining, you know, appropriate medical documentation that is necessary to prove that the person is actually disabled.
Brian: Okay.
Jonathan:That process tends not to be as cumbersome as the long-term but it’s equally important because so many short-term plans typically pay 13 or 26 weeks of short-term disability and then they roll into long-term disability. And let me just say this. the premium cost for a lot of the long-term disability plans, they’re very inexpensive and for that reason, the insurers tend to carefully scrutinize certain claims that are coming in very early that may appear to be a chronic condition.
Brian: Okay. So with short-term disability, somebody’s out on, you know, for example, on FMLA leave and they don’t think they’re going to be able to go back, then, while they’re out in there FMLA leave, they should file for short-term, right?
Jonathan: Sure, assuming they meet the qualifications. Let me say this. No matter what the plan is, it is essential to get a copy of the plan, at least the summary, although the plan, it’s really is essential to have the plan and look at the definition of disability under the plan. It’s not uniform but in general, the plans tend to say, “You’re entitled to payment if you’re unable to do the material and substantial duties of your job.”
For example, someone could be out in FMLA leave because a family member is sick, that is probably not going to qualify the person for short-term or long-term disability.
Brian: Okay, got you.
Jonathan:So they don’t quite dovetail but–anyway, it’s something to keep in mind. But the key on much of this is getting a hold of the plan documents right away. The next question you might want to ask, “How do you do that?” You go to your Human Resources Department, if they’re not there, if your company’s small and doesn’t have that, at least your employer should tell you who the insurance carrier is. Write to your insurance carrier, write to your HR Department. Do it in a way that you know you can get a receipt, whether it’s by an email and asking your outlook to send a receipt or mail it and with a certified mail get that green card, do something to show you that you’ve actually made contact and asked for the appropriate documents.
Brian: Would the lingo, Jonathan, be as simple as saying, “I would like to have a copy of my short-term, long-term disability policy?”
Jonathan: Yes. That’s great. That’s really all that’s needed.
Brian: Okay. Okay, great. So there’s this term out there called ‘group policy.’
Jonathan: Group policy generally means–is used to distinguish between an individual disability policy.
Brian: Okay.
Jonathan:For example, Brian, if you go see your friendly local insurance broker, he or she may sell you an individual disability policy. The group policy tends to generally mean that it was bought through work or in some instances, it could be an organization. For example, the American Dental Association may provide a group long-term disability plan to members of the American Dental Association that happen to be dentists. Things are a little tricky there if those plans are actually controlled by ERISA. Sometimes they are and sometimes they’re not. But that–those are the main area–ways that most people get involved in group plans. It’s either work or through something called an association plan.
Brian: Okay, okay. You know the reason why we’re here today, as you probably know, is that a lot of these claims and it seems as though is that the trend is ticking upward, are getting denied. I mean is there any general reason for the increase that, you know, that we’re seeing on this side that you could point to and then maybe we can zero in on some things that we could do for people to help prevent that?
Jonathan:Sure. The most important thing is to, as I said, is to get a hold of the plan and read as much of it as possible before you apply. It’s sort of like a situation where one would rather go to their doctor for an annual physical rather than going to see–never going to the doctor for an annual physical and then developing some, you know, horrid condition and needing to see a surgeon to get to have the problem resolved.
Brian: Okay.
Jonathan: But to answer–go back to the other question–why is there an uptick? It’s probably, I can’t say I know this for a fact but having lived through a number of economic cycles, a lot of it is often correlated with the state of the economy. And let me explain what I mean.
When the economy is booming, employers tend to be much more accommodating. So for example, someone that might, you know, have a certain ailment, I don’t know. We’ll say a bad back disc problems. And say that person wants to be able to work from home, a lot of employers, while the economy is booming, are more accommodating. As the economy tightens up, people–employers aren’t necessarily so accommodating. So maybe that person that had a bad back before that person is laid off, puts in a claim for disability. There’s no doubt that in a downward economy, the incidents of claims goes up. Now, why aren’t they getting paid? My educated is that’s often tied to what’s going on in the stock and bond market. You know, the general model for insurers is or insurers are they take in dollars and premiums, they are pretty good at predicting over the long haul what the incidents of certain types of claims are. For example, like life insurance claims, insurers are quite good at it. Disability is a bit harder. But anyway, so insurers are taking dollars in, they’re investing the money but if the stock market craters, like it did in the–like it has over the past–how long now–14 months, 16 months, if insurer takes a dollar in and invest that dollar and the dollar is only now worth $0.95, there’s a $0.05 loss there on the dollar and the insurer had to use that money, 1, to pay its own bills and ultimately pay some claims. And when there’s a shortage of dollars in the pipeline, what I’ve seen over certain economic cycles, more claims tend to get denied. It just seems to be the reality of the markets. I can’t say I have a proof of that but I’ve seen this cycle happen before. That’s my educated guess.
Brian: Wow. That is really cool I mean its just–that’s a great explanation. It’s not one that people want to hear, that are going to this but at least, you know, makes some sense. So–
Jonathan: Good because think about it this way too. If the economy is booming, the stock market’s booming, the insurers are taking in a dollar, and with that dollar, they’re able to invest in, I don’t know, get back at $1.15 within a year, that leaves plenty of play for the insurer to make a profit. The insurer’s entitled to make a profit and needs to make a profit to stay in business and there’s more money around theoretically to pay claims. And the insurers, I think, during booming economic times, maybe are a little bit loose around their standards. On closer calls, they’re more likely to pay people. So that’s why at other times when things are going well, claims may get paid more easily.
Brian: Okay. Good explanation.
Jonathan: Thank you.
Brian: I’ve got a list of questions of, you know, some of our members have written in to cover.. I’m going to try and jump around a little bit. But let’s start with this. We go through the short-term disability policy process, Jonathan, and that’s pretty standard its a defined period of time then you apply for long-term disability.
Now, your long-term disability policy.. there’s different flavors of this. There are some policies, correct me if I’m wrong, that are for like a closed period of time and then there’s others that will last a lifetime, right?
Jonathan: I would say this. Conceptually, what you’re saying is correct but I’d define it a little differently. Most of the policies that I see across the board will pay usually for the first 24 months benefits if you’re unable to work in your own occupation. After 24 months, it’ll pay–the policy will pay based on any occupation and that doesn’t really mean any occupation. It usually means any occupation based on your education, training and experience. Those–and that period tends to run to age 65 or what is the person’s normal Social Security retirement age for those people born I think in 1960, that may be 66 and a half now and people that are a bit younger that period may run to age 67. And it’s rare I’ve never seen actually a group policy that’ll pay lifetime benefits.
In the private sector, the individual policies will pay lifetime benefits. And then on occasion there are some policies that will just pay for relatively short finite period of time which could be five years.
Brian: Okay. So there is–when somebody’s applying and going through this process, the Social Security Disability component of it is big. Let me direct my questions this way. If somebody is–files for long-term disability and they’re going to be out for longer than a period of time, I don’t know what that is, hopefully, you can guide me in that direction then aren’t they directed to file for their Social Security?
Jonathan: Most of the long-term disability carriers require, although they don’t say it, explicitly that the person files for Social Security Disability Income Benefits, depends on the company. Some companies do it across the board, others actually make an evaluation of the claim and say this person is likely to be chronically disabled or and/or this person is likely to qualify for Social Security Disability Income so they must apply. Now, some–once under some plans, the insurer actually tells the person they must apply. Under others, it’s a little bit looser. They say, “Well, you don’t have to apply. But if you don’t apply for long-term disability, well, I’m sorry, Social Security Disability Income Benefit, we are going to estimate those benefits and reduce the amount that we think you will be paid by the Social Security Administration from the monthly benefit. So the person’s really being forced to apply. And the reason there is this certifying distinction is because it happens too often, Social Security Administration awards benefits to someone and then an insurer either denies long-term disability benefits or terminates benefits and the insurer wants to be able to be in a position to say, “Well, the way we determine disability is different than Social Security Administration and even though we really asked you to go apply there and sort of made you do it, we don’t want to be bound by that decision.
Brian: Okay, that’s straight. You know, there’s a lot of areas of question and concern around the offsets in how the two are tied together. So, to make sure that I get it, most policies are going to ask that somebody, if they are on a long-term disability policy that they will file for Social Security Disability. The exception would be somebody that’s not going to be out for or does not have a chronic illness. Would that be