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Life Health > Health Insurance

'Cents'ible Disability Product Solutions For Small Businesses

By James Jacobsen

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Offering solid disability benefits can help small businesses improve recruiting and retention.

The case managers at a well-run disability insurer can even help improve a small business’s productivity by suggesting support programs and workplace accommodations that can expedite disability claimants’ return to work.

But producers who advise small businesses have a challenging role: designing disability insurance solutions that meet the needs of clients and clients’ employees, are easy to implement and administer, and fit within the clients’ budgets.

How can a producer help employers provide valuable income insurance protection while containing costs? One place to start is by considering certain key features of a disability contract.

Advances in medical technology and treatments have improved the health care system’s ability to rehabilitate disabled employees and return those employees to work. A disability plan that is constructed based on this premise can help make disability plans more affordable for the small employer.

For example, suppose a policy uses a “24-month own-occupation” definition of disability that includes an earnings test and the Social Security normal retirement age, with the assumption that benefits will be cut off if the claimant is able to enter any occupation after 24 months. That definition takes into account the possibility that medical breakthroughs will help many disabled employees get back to work faster. Disabled employees who are totally disabled after two years are likely to qualify for Social Security Disability Insurance. Use of this benefit period may reduce plan premiums.

Like many other types of benefit offerings, one size does not fit all when it comes to disability benefit programs. Employers have different needs and face unique challenges. Some organizations may be local, regional or national. They have different work force population sizes and different demographic mixes of employees. Different features in a plan may be more important to employers in certain industries.

A disability contract should provide the flexible plan design options to accommodate clients’ desires and price points.

One example is the option to combine limited disability benefit durations. That feature offers clients value by allowing for more stable pricing. A policy could, for example, provide a combined total lifetime limitation of 24 months for mental or nervous conditions, neuromusculoskeletal and soft tissue conditions, chronic fatigue, and conditions related to use of drugs and alcohol.

An important consideration for small employers is return-to-work/stay-at-work strategies.

Whether an insurance carrier has a robust return-to-work program that builds back-to-work incentives into the contract is noteworthy.

Consider how, on average, 10% of an employer’s work force will file for short-term disability benefits in a given year. This reinforces the need for a program that transitions employees back into the work force.

An effective return-to-work program helps shorten time away from work and helps control plan costs. Because small businesses have limited people resources, maintaining a high-performing work force is critical.

Below are some additional suggestions to look for in a disability contract for a small business:

Work incentive benefit: Encourages part-time return to work following the elimination period by allowing replacement of up to 100% of indexed pre-disability earnings (benefits plus earnings) for up to a specified number of months.

Rehabilitation program incentive: Increases the disability income benefit when the employee is participating in a rehabilitation program approved by the carrier and the employee’s physician.

Family care incentive: Provides reimbursement up to a maximum dollar amount and specified time frame for eligible expenses (e.g., child care, elder care) during initial periods of disability while the employee is complying with a rehabilitation program approved by the carrier and the employee’s physician.

Moving expense incentive: Reimburses employees for moving expenses associated with a new residence if recommended as part of the carrier’s rehabilitation program.

Economic and demographic trends are increasing the important role that disability income insurance plays. One such trend is the aging of the American work force. Accompanying the natural aging process is an increase in frequency and duration of many types of disabilities. Another trend is the increasing use of “consumerism” in the marketplace for health care and other benefits. As employees assume more responsibility for their benefits decisions and funding, it is more important than ever for them to have a strong financial safety net to rely on.

For many people, their most important asset is their income. Helping employers easily and cost-effectively provide their employees with the ability to protect that asset can benefit all stakeholders.

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