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GAO Skeptical About Private Disability Insurance as an SSDI Fix

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Some Republicans in Congress are asking whether expanding use of private disability insurance could be a way to shore up the federal government’s ailing Social Security Disability Insurance  (SSDI) program.

Analysts at the U.S. Government Accountability Office (GAO), a congressional watchdog agency, say the promoters of the three major private disability insurance expansion proposals have provided too little information for the GAO to know how the proposals might really work.

Elizabeth Curda, a GAO director, summarized the analysts’ concerns in a report posted here.

(Related: Trump’s Team to Let Major Disability Claim Regs Take Effect)

A GAO team studied the private disability insurance expansion proposals at the request of Sen. Orrin Hatch, R-Utah, and  Sen. Mike Lee, R-Utah.

The team looked these proposals:

1. David Babbel and Mark Meyer, of Charles River Associates: They have proposed having the federal government do more to educate employers about the value of providing voluntary, employee-paid disability insurance programs. They want to encourage employers to offer voluntary disability plans on an “opt out” basis . In an opt-out program, the employer puts everyone in a voluntary program automatically, then requires employees who want out to take to active steps to get out of the plan.

2. Rachel Greszler, of the Heritage Foundation: Greszler has proposed using a tax credit to encourage employers to provide private disability insurance coverage. The employer-sponsored coverage would take the place of at least two to three years of SSDI benefits. Social Security Disability Insurance would provide benefits only after a disabled employee had used up the employer-sponsored disability coverage.

3. David Autor and Mark Duggan: These authors have proposed requiring employers to provide at least two years of private disability insurance for all workers.  The employees themselves would pay at least 40% of the premiums. Social Security Disability Insurance would provide catastrophic disability coverage after the two years of private disability coverage was used up.

Curda says in her summary that GAO analysts need more information to analyze the proposals.

One challenge is that the types of workers who now have private disability coverage tend to be different from the kinds of workers who reply exclusively in the SSDI program, Curda says.

Another challenge is that the proposal developers have provided few details about matters such as how any new program would improve rehabilitation services or workplace accommodations for workers with disabilities.

Babbel and Meyer tried to estimate how much their proposal would save, but the authors used different non-comparable numbers in the calculations, and that means the results are not reliable, Cuda writes.

Employee and advocacy groups, meanwhile, wondered how well any new programs would pay claims.

Insurer groups wondered whether any private disability insurance expansion requirements or automatic enrollment effort would lead to more red tape for private insurers.

“One employer association we worked with was concerned about the potential administrative burdens associated with expanding [private disability insurance], particularly for small employers,” Curda writes. “They noted that administering any benefit requires financial resources to provide, monitor, and maintain the benefit, stating that once employers provide a benefit to employees, they are generally reluctant to take it away.

— Read Social Security Disability Appeals Piling Up Due to Lack of Funding: Senators on ThinkAdvisor.

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