DISABILITY INSURANCE
As “long COVID” lingers, disability
design plans are changing
By Len Strazewski
Early in the COVID-19 pandemic, patients packed hospitals and struggled to breathe, using oxygen systems and—in a worst case—ventilators. Many died and others survived but were disabled. Few had comprehensive disability insurance benefits, especially supplemental short-term disability benefits.
Even three years later, “long COVID” lingers, extending the period of disability beyond short-term disability benefits. In December, CNBC-TV reported that some long COVID victims could not get long-term disability benefits after they exhausted their short-term disability coverage. After a series of appeals, benefits were restored, but the appeals took months to resolve, indicating that disability benefits and the old plan designs were not up to the challenge of the pandemic.
Kaiser Health News also reported that as many as one million cases could be waiting for Social Security disability benefits, but progress is slow since the effects of long- and regular COVID vary by time and symptom.
However, insurers say that dis-ability plan designs are changing and evolving in ways that make them more responsive to COVID and other debilitating diseases. In the past three years, insurers say, they have developed new disability insurance products that provide broader protection to employees who fear the economic ravages of disease, regardless of the development of vaccines, and provide economic protection for families and individuals.
The awareness of the value in having disability insurance “may be one of the most positive developments of the pandemic era,” says Kara Hoogensen, senior vice president of specialty lines at Principal Financial Group in Des Moines, Iowa. “People are more aware of the need to protect themselves and their families and to engage or re-engage disability protection.”
Hoogensen says short- and long-term disability insurance is changing to meet the more variable problems posed by COVID and interact with government benefits and an expanding range of state-paid leave benefits.
Several states have enacted mandatory family leave laws that require employers to provide paid leaves that track with short- and long-term disability benefits and provide income protection in case of diseases like COVID and erratic symptoms of long COVID, she says. But they have been instituted by fewer than half of the states.
“People are more aware of the need to protect themselves and their families and to engage or re-engage disability protection.”
—Kara Hoogensen
Senior Vice President, Specialty Benefits
Principal Financial Group
According to Hoogensen, employee assistance programs (EAPs), are usually available as part of employee benefit programs and are available to support employees covered by disability insurance, recognizing the social and psychological issues that are part of long COVID and other complicated illnesses.
She says Principal is focused on the needs of small- and medium-sized employers and has an online tool to help employers understand these needs. The tool helps employers assess what competitors are offering for retirement and supplemental insurance products so they can better understand if and how their benefit program compares.
Disability insurance premiums are on the rise, industry researchers say, though slowly. According to LIMRA, the life insurance industry trade association, total workplace disability insurance new premium sales were $560 million in the third quarter, a year-over-year quarterly increase of 3%. Long-term disability insurance premium drove overall growth in the quarter, up 6%. Short-term disability premium was up 1% for the quarter. Overall, U.S. workplace disability new premium totaled $2.8 billion through September 2022, a year-over-year increase of 1%.
Insurers are adding features to supplemental disability insurance to make it more valuable in not only protecting family income but also protecting families in general. Some new disability policies are specifying payments for certain family expenses, such as mortgages and college tuition, which policyholders have had to try to pay from general disability payments.
Also, awareness is growing. During the pandemic, the Council for Disability Awareness (CDA) released new research on the need for disability awareness. The CDA 2019 Disability Awareness Survey analyzed why lower-to-moderate income consumers, individuals earning between $25,000 to $50,000, don’t have disability insurance.
Among the responses, the most significant reason was, “I can’t afford it.” And almost 40% of those consumers in the lowest income band reported their savings—if they had any—would last less than one month.
Bureau of Labor Statistics data from the CDA confirm that 63% of the highest income consumers in America have access to employer-paid short- (STD) and long-term disability (LTD) insurance benefits. However, only 18% of the lowest income consumers have access to STD and just 6% have LTD.
In the survey report, Fred Schott, CDA director of operations at the time, said, “Through our survey, we learned there is a much greater risk for lower-to-moderate income consumers to withstand the financial shock of not receiving a regular paycheck because of an injury, illness or pregnancy. These findings tell us that the challenge lower- to-moderate income consumers face is more than just a matter of disability-insurance access and affordability. It’s a matter of financial wellness.”
The CDA Disability Awareness Study surveyed more than 2,200 full-time employed consumers and was designed to understand the impact of income, gender, and other influencers on consumer financial preparedness for being out of work for a period of time, the organization says. Conducted in 2019 for the CDA by Greenwald Associates, it was sponsored by American Fidelity Assurance Company, The Guardian Life Insurance Company of America, Lincoln Financial Group, Massachusetts Mutual Life Insurance Company, and MetLife.
“Your ability to earn an income may be one of your most prized financial assets; however, there is no ‘requirement’ to secure insurance coverage for your income like you likely do with other prized financial possessions, like an automobile or home.”
—Paul LaPiana
Head of Product
MassMutual
In 2021, additional research from the CDA indicated that occupations with high remote work availability experienced lower rates of employee absence—not only during the pandemic but also over the five-year period leading up to it. The report is based on the CDA’s analysis of the U.S. Bureau of Labor Statistics data on work absences before and after the onset of the COVID-19 pandemic.
The CDA also found that while the overall sick-time rate for 2020 to 2021 shot up more than 50% from the pre- pandemic baseline, employees in high-telework occupations experienced lower-than-average increases.
“We’ve all seen research on the availability of remote work increasing work satisfaction for some people,” said Carol Harnett, CDA president, in the study releases. “What we haven’t seen surface before in any body of research is lower absentee rates for so many remote-work occupations.”
This research provides a benchmark for absences related to employee illnesses, injuries or medical conditions, both in the aggregate and by occupation group, which is an important measure for employers developing stay-at-work and return-to-work strategies as part of their health and productivity initiatives, she says.
“As many businesses bring employees back into the workplace on a full- or part-time basis, some may want to take a deeper look at the benefit of flexible work arrangements in terms of employee satisfaction and absentee costs to strengthen both their businesses as well as their competitive edge,” Harnett said in the release.
Paul LaPiana, head of product for MassMutual, headquartered in Spring- field, Massachusetts, says the pandemic did indeed have an effect on the disability insurance market, particularly supple-mental coverage.
“The COVID-19 pandemic forced many of us to think more about our health and financial vulnerabilities,” he notes. “Those who may have felt untouchable before were faced with some very realistic possibilities, for themselves and their loved ones, perhaps for the first time in their lives. They saw and perhaps experienced very real health and financial challenges which tested their level of preparedness for the unexpected and the residual consequences.
“This life-changing event for many has created a more receptive environment to putting one’s financial house in order, including learning more about ways to help protect themselves and their loved ones, including disability income and life insurance,” LaPiana says.
In terms of the market and how the product has evolved, he explains: “It is a highly competitive environment today, and people can benefit from perhaps the highest quality disability income insurance products that the industry has ever seen. Products continue to evolve, and the industry has done a solid job of finding ways to reach and cover more people.
“Your ability to earn an income may be one of your most prized financial assets; however, there is no ‘requirement’ to secure insurance coverage for your income like you likely do with other prized financial possessions, like an automobile or home. If you become disabled and do not have disability income insurance coverage, you may not be able to pay your household bills or the premium on other insurance coverage, exposing you to a higher degree of financial risk,” he concludes.
For more information:
MassMutual
www.massmutual.com
Principal Financial Group
www.principal.com
The author
Len Strazewski is a Chicago-based writer, editor and educator specializing in marketing, management and technology topics. In addition to contributing to Rough Notes, he has written on insurance for Business Insurance, Risk & Insurance, Chicago Tribune and Human Resource Executive, among other publications.
