Surprisingly, only a small percentage of employers offer paid or voluntary disability programs for their employees, despite statistics that show nearly half of all personal bankruptcies are the direct result of a major illness or injury.
“Disability insurance is not as visible or as important to employers and employees as health insurance or dental insurance,” says Tina Antram, vice president, Hilb Rogal & Hobbs, Tampa. “They believe other things are going to protect them in the event they are disabled, and they are wrong.”
Smart Business recently spoke with Antram and Dawn Bowers-Card, Employee Benefits Practice leader, Hilb Rogal & Hobbs, Sarasota, about why disability insurance is an important but often untapped safety net that can help control costs and foster employee loyalty.
Why is disability insurance an important issue?
Antram: While many people think that injury is the leading cause of disability, the reality is it is illness. That fact is made more prevalent by two significant demographic factors: obesity and aging.
According to the Society of Actuaries, a 35-year-old person has a 50 percent chance of being unable to work for more than three months before the age of 65. In addition, the National Safety Council reported in 2004 that two-thirds of disabling injuries suffered by workers in 2003 occurred off the job.
Bowers-Card: Today’s advanced medical treatment promotes survival which increases the incidence of disability versus death. Think about cancer, heart attack or stroke; what used to kill us now disables us.
Financially, statistics show that people are not prepared to deal with a disability and the loss of income associated with it. According to an article in Health Affairs, 46 percent of bankruptcies in 2001 were caused by a major medical illness or injury.
Meanwhile, 53 percent to 79 percent of Americans live paycheck to paycheck and when coupled with the statistic that nearly one in three Americans will suffer a serious disability between ages 35 and 65, it becomes a staggering financial scenario. These facts clearly support the need for disability insurance, but the issue is overcoming resistance. Most people think they don’t need it and believe ‘it won’t happen to me.’
What makes disability insurance a good value for employees?
Antram: The cost is inexpensive compared to the value. According to a 2005 JHA market survey, the average cost for short-term disability was $192 per year and $228 per year for long-term disability coverage. These are averages and many variables apply in determining the actual cost of an individual’s coverage. However, it illustrates the relatively inexpensive nature of this type of insurance.
Bowers-Card: If an employer sponsors a group disability plan paid for either by the company or by the employee it is advantageous for the employee to purchase that policy. The employer-sponsored plan will offer group pricing and will not require evidence of good health or income verification. Individual policies are available but can be quite expensive and a person must be in excellent health and financially sound when applying for coverage to qualify.
The rising cost of health care puts pressure on ancillary lines of coverage like disability when employers decide what coverage to offer in their programs. There are not many people in the work force that could describe their income as ancillary and disability can be offered on a voluntary employee-pay-all basis. People tend to think they will fall back on Social Security Disability (SSDI) if they become disabled. The reality is that it is very hard to qualify for SSDI due to long elimination periods and a very strict definition for disability.
Why is disability insurance a good value for employers?
Antram: It can help attract and retain good employees even serve as a reward to long-term employees. It also demonstrates an employer’s concern about their employees’ well-being and financial security, which increases employee loyalty and has a positive impact on morale. In today’s tight labor market, this impact is something employers should not underestimate.
In addition, when someone is disabled, they generally want to return to work. Disability insurance has provisions and incentives, for both the employer and employee, to help them return to work. This can be a financial savings to the employer in the indirect costs related to disability that are estimated to be 8 percent of payroll.
Bowers-Card: It can also assist with presenteeism issues (when an employee is at work but unable to work at full capacity due to physical impairment or mental distraction) and the marginally disabled. With the security of a disability benefit, employees feel that they can take time off of work for treatment or rehabilitation and when they return they will be more productive.
Disability coverage may also potentially lower the incidence of some workers’ compensation claims because employees have appropriate coverage for off the job injuries resulting in their inability to work.
TINA ANTRAM, GBDS, is vice president, Hilb Rogal & Hobbs, Tampa. Reach her at (813) 261-7979 or firstname.lastname@example.org. DAWN BOWERS-CARD, GBDS, is Employee Benefits Practice leader, Hilb Rogal & Hobbs, Sarasota. Reach her at (941) 554-3130 or email@example.com.
Hilb Rogal & Hobbs, Sarasota