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Why are fewer employers offering group disability insurance?

Fewer businesses are offering their employees long-term disability insurance as part of their employer-paid benefit packages. Many are still offering employees disability insurance plans, but workers have to pay for the plan themselves. That means that fewer Americans have long-term disability insurance, leaving them at risk for financial disaster if they become ill or injured.

The number of employers offering disability insurance dropped from 220,000 to 214,000 between 2009 and 2013, according to the survey by the Council for Disability Awareness. The group represents disability insurance providers. During that same time period, the number of employees with long-term disability insurance dropped from 34 million to 32.1 million. That drop is even more significant when you consider that the number of American workers increased by 6.6 million between December 2009 and December 2013.

According to insurance providers, one reason for the decrease in employer-provided insurance is the uncertainty surrounding how their health benefit costs will change as the result of the Affordable Care Act. Because businesses don’t know what to expect, “disability insurance is an easy target,” according to a senior account executive for one insurance company.

The move toward defined benefit plans is mentioned as another reason for the drop. These plans provide money for employees to spend on all insurance coverage. However, disability insurance is usually not included in those. Some states, but not many, require businesses to provide disability insurance. These are California, Hawaii, New York, Rhode Island and Wisconsin.

Another contributor to the decrease in employees getting disability insurance may be concern that it they need to use it, their claims may be denied. That perception hasn’t been helped by the thousands of lawsuits over the past ten years in which policy holders alleged that their claims were wrongfully denied.

Disability insurance is too important to go without. It protects one of your most significant assets — your income — if you become ill or injured. That’s something that can happen to anyone at any age. Employees should not forgo this protection for themselves and their family and risk financial ruin simply out of concern that the insurance company will not pay a claim. Insurance companies can and should be held legally responsible for paying valid policy holder claims.

Source:  Portland Press Herald, “Employers dropping long-term disability insurance” J. Craig Anderson, Jul. 17, 2014

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