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Disability Insurers Watch Boomers Come Straight At Them

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Disability insurers and brokers have an obvious financial interest in persuading employers to strengthen wellness programs and other programs that can improve boomers’ health.

Kenneth Mitchell, a return-to-work specialist at UnumProvident Corp., Chattanooga, Tenn., delivered that message at the annual disability seminar organized by JHA, Portland, Maine, a disability risk management and consulting firm.

The median age of all U.S. employees is 40.4 years, but the median is 43.8 years in public administration, 43.5 years in education and 43 years at transportation and utility companies, according to figures Mitchell obtained from the U.S. Department of Labor.

In a few years, “the dominant group in the work force is going to be over 50,” Mitchell said.

An increase of just one year in the median age of an employer’s employees can increase LTD claim costs 4% to 8%, according to UnumProvident figures.

Mitchell, who is a boomer himself, predicted the effects of the aging of boomers will be uneven.

“When I visit a manufacturer in Ohio or Michigan, I’m one of the guys,” Mitchell reported. “When I visit call centers in the South, I’m gramps.”

Unfortunately for disability insurers, the employers facing the biggest threat from the aging of the boomers–government agencies and schools–are the kinds of employers that already are especially vulnerable to high disability claim rates.

“They don’t manage disability,” Mitchell said. “They pay.”

Shaky retirement income sources and changes in attitudes about working past age 65 also could affect disability claims.

Boomers who want to retire may face pressure to treat disability insurance as an alternative retirement plan: Social Security is facing a demographic squeeze that could lead to a 25% cut in benefits for boomers starting about 2040.

Private defined benefit pension plans already are announcing benefits cuts: The day before Mitchell spoke, a large Midwestern manufacturer said it might be able to pay pension plan participants only about 25% of the benefits originally promised.

Meanwhile, especially if a shortage of skilled labor develops, many healthy, productive boomers who work past age 65 may demand the right to insure their income against disability, Mitchell said.

The good news is that disability insurers can spot likely future claimants years in advance: At all ages, employees who have five or more serious health risk factors, such as alcoholism and high blood pressure, are about six times as likely to file disability claims as employees the same age with two or fewer risk factors, according to a research team affiliated with the University of Michigan Health Management Research Center.

When employees who show up for work are much less productive than they should be, that “presenteeism” can be another, even clearer warning sign, Mitchell said.

UnumProvident has found employees who take leave time to care for aging relatives also face threats to their own health: About 10% of the caregivers who take leave file short-term disability claims within six months. That compares with an average STD claim rate of 4% for similar employees who have not had to act as full-time caregivers, Mitchell said.

What can insurers and employers do?

Here are some of Mitchell’s suggestions:

1. Increase marketing of voluntary long term care insurance programs for workers’ dependents to decrease the odds that workers will have to care for aging or disabled relatives without adequate support.

2. Develop medium-term disability insurance products aimed at workers over age 65 and look for ways to open existing disability plans up to older workers. “Underwriting decisions should be based on functional capacity, not just age.”

3. Persuade employers to make a serious effort to help employees return to work, by providing support for employees who may not yet be ready to take over 100% of the responsibilities of their old job.

Back in the 1990s, many employees had two years to return to work, but now employers tend to fire disabled employees after just six months, Mitchell said.

One UnumProvident study has found that the most important factor in determining which employees in the textile industry could return to work was the employer’s willingness to modify the employee’s job assignment, Mitchell said.

“Corporate policies are the No. 1 disabler of people,” Mitchell said.

4. Expand access to affordable health care.

5. Back programs can cure or help workers cope with chronic diseases and chronic pain.

6. Support wellness programs.

The University of Michigan health risk factor study found that moving moderate-risk and high-risk workers into the low-risk category could cut those workers’ health insurance claims in half, to about $2,700 to $3,200 per year, and cut the workers’ average number of disability days by about 40% to 60%, to about four to seven disability days.