Alphabet Soup: Forms of Disability Coverage and What you Need to Know
By Jamie R. Hall, Esquire
Jamie R. Hall, founder of the Law Office of Jamie R. Hall, is an attorney admitted to practice in Pennsylvania, New York and New Jersey. He is a regular speaker for the multiple sclerosis community on disability issues, and has provided disability seminars at numerous facilities in eastern Pennsylvania and upstate New York. Mr. Hall can be reached for questions or assistance at (610)570-5253 or firstname.lastname@example.org, and further information can be found at jrhlegal.com.
As a disability attorney, the most common question that I am asked by multiple sclerosis patients who are planning for the future is ‘What is disability coverage?’ Generally speaking, there are four types of ‘disability insurance’ that impact most individuals. Two of these forms of coverage are private – Long Term Disability (LTD) and Short Term Disability (STD) – and two of these forms of coverage are government-based – Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI).
Just as a well-prepared retiree knows the basics of his or her 401K, pension and/or savings, a well prepared multiple sclerosis patient knows the basics of his or her disability plans, including a basic understanding of each of these forms of coverage and the interplay between them. The basics of each type of coverage are noted below.
Long Term Disability Insurance (or LTD)
Long Term Disability insurance (hereinafter LTD) is private insurance purchased by an individual or his/her employer. For a person diagnosed with multiple sclerosis, maintaining this coverage should be a priority. This coverage is contract-based, meaning that the terms of the insurance contract specify what coverage exists, the requirements to obtain disability benefits, and the amount of the benefits. Nevertheless, there are some characteristics that most LTD plans share.
Typically, LTD benefits begin a certain number of weeks after the claimant last worked. As the name suggests, Long Term disability benefits cover injuries that last a long period of time, possibly until a claimant turns 65 (the cutoff/retirement date under many plans). These benefits include monthly payments, which are based upon replacing a portion – but not all – of a claimant’s pre-disability income.
To obtain LTD benefits, claimants must initially show that they can no longer complete the duties of their last position. This standard applies for the first 24 months of LTD benefits, often referred to as the ‘own-occupation’ or ‘own-occ’ period. After 24 months have passed, the standard changes and the claimant must show that they cannot do any job which (1) fits their education, (2) fits their disability and (3) pays a specified percentage of their pre-disability earnings.
For example, an individual who last worked as a history professor earning $100,000 per year must initially show that he or she cannot work as a history professor to qualify for LTD benefits. After 24 months, the history professor must show that he cannot find any work paying him a portion of his pre-disability salary (for example, 60% or $60,000), based on his education and limitations. Even if the professor could now work as a department store greeter, the greeter salary would likely be insufficient to disqualify him from LTD benefits. Conversely, a lower wage fast-food worker who can work as a greeter would likely be disqualified from collecting under a LTD plan after 24 months.
A person who is collecting LTD benefits must keep the LTD insurer advised of his treatment and work status. Periodically, the LTD insurer is likely to review the claimant’s status to confirm that continued benefits remain appropriate. Oftentimes, claimants are denied benefits following their initial application or after one of these periodic reviews. In the event of a denial, it is strongly recommended that claimants promptly seek the assistance of counsel. In theory, an LTD claimant with a long term degenerative condition – such as multiple sclerosis – could collect long term disability until he or she turns 65.
Short-Term Disability Insurance (or STD)
Short-Term Disability (hereinafter STD) Insurance is a close relative of LTD insurance, and is typically paid for by individuals or their employers. Generally, STD is intended to cover the initial period after a person becomes disabled and before the waiting period for the LTD plan has expired. A person does not collect LTD and STD at the same time. While LTD is often used for long-term illnesses that prevent a return to work, STD plans may simply act as a bridge during recuperation. It is noteworthy, however, that a person may have LTD coverage without STD coverage, and vice versa.
Much like in the ‘own-occ’ period of LTD coverage (described above), Short Term Disability plans typically require a claimant to show that they cannot do their pre-disability position to qualify for benefits. If this is shown, the claimant will be paid a portion of their lost wages. Again, the insurer may review the claim during the coverage period, and claimants are required to keep their insurers apprised of their treatment and any return to work.
Social Security Disability Insurance (SSDI)
Social Security Disability Insurance (hereinafter SSDI) is a federal program funded through Social Security taxes. Individuals who have worked for a substantial portion of their adult lives – and now find themselves disabled from employment – qualify for this coverage. In prior articles, I described the SSDI system in general.
An individual can collect SSDI at the same time he or she collects LTD or STD benefits. In fact, many LTD plans require that claimants apply for SSDI benefits. Unfortunately, a person who is approved for both LTD/STD benefits and SSDI benefits will not be paid the combined amount of these plans. Instead, the LTD/STD benefits will be reduced by the amount of the SSDI benefits. Nevertheless, because SSDI benefits are less likely to be challenged than LTD or STD benefits and may be accompanied by Medicare eligibility, SSDI is a valuable resource for disabled individuals.
Supplemental Security Income (SSI)
Supplemental Security Income (hereinafter SSI) is a sister program to SSDI, as both provide government assistance for individuals unable to remain in the workforce. In fact, many individuals apply for SSDI and SSI benefits at the same time and in limited circumstances may qualify for both benefits. Unlike SSDI, SSI does not require an applicant to have a work history, but does limit a claimant’s assets to a total of several thousand dollars. Monthly benefits under SSI are also notably lower than those typically awarded under SSDI. A person collecting benefits under SSI has access to Medicaid instead of Medicare.
LTD plans usually require claimants to apply for SSI when they apply for SSDI, and the same offsets occur when claimants receive both SSI and LTD benefits as when they receive both SSDI and LTD benefits.
Individuals afflicted with multiple sclerosis often – over time – lose their ability to remain in the workforce. Fortunately, multiple sclerosis patients are usually afforded the luxury of time to allow some financial and disability planning to occur. The above is intended to provide a basic and general understanding of some primary forms of disability coverage and the interplay between them. It is meant to supplement, not replace, the advice of an attorney with knowledge of an individual’s specific plans and circumstances.