Why is it so hard to tell the truth about #disability #insurance? Work.Love.Play.Daily 60 #hr
Channel: Carol Harnett
Date: 11/07/2011

This video blog is a follow-up to my HR Executive (client) benefits column called, "Integrating Employee Benefits." - http://bit.ly/jDcU4V

In this column, I include a discussion around the integration of short-term and long-term disability (STD and LTD)  benefits - going from a time in the 1980's when STD benefits were paid by the health insurance claim examiner and LTD benefits were seen largely as a financial insurance benefit like retirement benefits.

When STD and LTD claim management was combined, the theory was that the duration of employee absences would decrease since there would be focused management of time away from work. - and, in turn, long-term disability claim incidence would go down.

It was a great hypothesis and make complete logical sense. Once in place, however, something unexpected happened, and continues to happen more than two decades later - LTD claim incidence goes up when the STD is managed by the same TPA or disability claim insurer.

Why? No one is 100 percent certain. There are a few theories and you can read about them in the column if you're interested. 

The more important question is, why don't disability insurers and third-party administrators openly discuss this result with employers and employee benefits brokers and consultants?

I think there are a number of reasons. Here are a few:

- It's hard to admit when you are wrong. When we're testing a theory, whether we're proven right or wrong, the information is still important. Yet, we are really uncomfortable in telling people that our hunch didn't pan out. Part of that has something to do with us and how we're made up. Part of that is our anticipated reaction from you - the receiver of the information. 

If you thought our hypothesis was solid and we come back with information that also proves your thinking as incorrect, you may blame us. You may think that we simply didn't do the research or the experiment correctly. And, in a business environment, you will move your business to a competitor who claims they can get a better outcome - even if they can't. 

- Which leads to the other reason why, sometimes, it's hard to tell the truth. I may lose business. And, I can't afford to do that. So, I hold back the information. I don't actually lie. I simply don't tell you everything I know. 

- A third reason I may not tell the truth is because I simply don't know the truth. I have no theories or hypotheses in place to test. I go about my business the way I always have and don't think about testing the logic or looking for a better way.

Now, this isn't the case with the relationship between STD and LTD claim management. Essentially, everyone within the insurance and TPA side knows this phenomenon is true. They just aren't sure why it's true. Maybe that's another reason why no one discusses it. Since we don't talk about it openly, it makes it hard to test other hypotheses.

Some disability insurance carriers are quietly testing the other approaches to claim management to see if they get different outcomes. One of these approaches is to have different contractual definitions of disability throughout the life of a single, combined disability plan. For example, instead of having STD and LTD, there is a single disability contract. The first six months of disability fall under the disabled for your "own job" definition; the following two years fall under the "own occupation" contractual definition of disability; and, after that, the definition changes again - this time, to "any occupation."  

In many ways, this is an interesting approach. The employee has one experience with one disability management company and should receive better service as a result (an untested theory, but one that makes some sense). And, the carrier has distinct points in the claim management process where it can evaluate the employee's disability claim under a new definition of disability.

The bottom line to all of this is a call to tell the truth. Be open and honest about what you know. It could lead to great discussions and the open testing of new theories so we can move forward faster.