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Disability Insurance Observer: Can SSDI Be Saved?

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The Social Security Disability Insurance (SSDI) can make it.

Steve Goss, the chief actuary for the Social Security Administration, gave that assessment today during an SSDI hearing organized by the House Ways and Means Committee Social Security subcommittee.

Rep. Sam Johnson, R-Texas, the subcommittee, said he hopes the hearing will be the first of a series of hearings on SSDI, which serves as a public income protection safety net program for U.S. workers.

Like Medicare and the Social Security retirement benefits program, SSDI faces solvency concerns, Goss testified, according to a written version of his remarks posted on the committee website.

Private disability insurers have a stake in the fate of SSDI because many coordinate the benefits they pay with SSDI benefits. Some private disability insurers make a point of helping claimants with the notoriously slow, difficult process of qualifying for SSDI benefits.

Congress created the SSDI program, and the program now is providing benefits for 8.5 million disabled workers and 2 million dependent spouses and children, committee staffers say in a background report.

The government imposes a 12.4% payroll tax on workers and their employers, and the revenue from 1.8 percentage points of that tax goes to the Social Security Disability Insurance Trust Fund. The program also gets funding from income taxes on SSDI benefits and interest earnings on program assets.

The trust fund trustees reported earlier this year that the SSDI trust fund could run dry as early as 2018, and that, at that point, revenue will cover only 86% of the promised benefits.   

Goss said the situation is better than it looks, because the imbalance is mainly the result of the aging of the baby boomers and can be addressed with a one-time program adjustment.

“Disability insurance is arguably the most difficult form of insurance to administer,” Goss said. “It is easy to determine whether an insured person has reached retirement age or has died. It is also easy to determine whether a car is wrecked or a house destroyed. It is even relatively easy to determine if health insurance should cover doctor and hospital bills. However, disability is by nature a very subjective concept.”

In spite of those difficulties, SSDI administrators make efficient use of the program’s funding, and only 2.5% of expenditures go toward administrative expenses, Goss said.

“Sustainable solvency can be restored for the disability insurance program with a 16% reduction in benefits, a 20% increase in revenue, or some combination of these changes,” Goss said.

Temporarily raising the disability insurance program’s share of the 12.4% payroll tax rate to 2.2 percentage points, from 1.8 percentage points, for 2012 through 2024 and to 2 percentage points for 2025 through 2029 would give the SSDI program the ability to make the scheduled benefits until 2036.

Once members of the baby boom generation retire, the number of workers per SSDI beneficiary is expected to be relatively stable, and that means that restoring long-term solvency will not require continual cuts in benefits or increases in taxes, Goss said.

“A one-time change to offset the drop in birth rate is all that is needed to sustain the [SSDI] program for the foreseeable future,” Goss said.


Standard Insurance Company, a unit of StanCorp Financial Group Inc., Portland, Ore. (NYSE:SFG), is trying to use a little inter-product-line rivalry to motivate employers to improve group disability insurance return-to-work (RTW) programs.

Many employers with great in-house workers’ comp RTW programs have no RTW programs at all for short-term disability (STD) insurance claimants, Standard says in a new commentary.

STD carriers rarely have the same kind of access to supervisors that a workers’ comp carrier has, and human resources may be reluctant to press supervisors to help with STD carriers’ RTW programs, the company adds.

The company suggests employers try combining 3 strategies for addressing the problem:

- Setting up on-site medical clinics, to help employees get care while minimizing time off the job.

- Offering light work duties, to help get STD claimants back to work quickly, before they begin to think of not working as a permanent thing.

- Using nurse case managers in STD programs.

Many insurers wait until workers are getting LTD benefits to bring in nurse case managers, but intervening more aggressively more quickly might help keep a worker from ever being in a position to need LTD benefits, Standard says.