Long-Term Disability Claims Review
Since 2005, the Council for Disability Awareness (CDA) has conducted a proprietary annual review of long term disability claims among the U.S. working population. The 2013 CDA Long Term Disability Claims Review summarizes quantitative and qualitative long term disability insurance claims data from 2008 to 2012, gathered from the annual CDA member Long Term Disability Claims Survey. The report identifies continuing or emerging trends for the purposes of education, evaluation and use by interested audiences. Also included is selected worker disability data from the Social Security Disability Insurance (SSDI) program. Nineteen CDA Member Companies, representing over 75 percent of the commercial disability insurance marketplace, contributed disability claim data for this year's survey, making this edition of the review the largest and most comprehensive to date.
CDA Survey Findings: Summary of Key Findings from Proprietary CDA Member Company Data
- Disability claim payments increased slightly to $9.4 billion. This represents a 0.4 percent increase over 2011 in total long term disability claim payments by CDA member companies.
- Fewer companies report disability claim incidence increases. Twenty-seven percent of reporting companies said long term disability claim incidence increased in 2012. By comparison, 43 percent of participating companies reported increasing incidence in 2011, and 56 percent said incidence had increased in the 2010 data. Most companies continue to believe the economic environment remains a factor in the growth of claims.
- Improving economy is having a beneficial impact on claims. In this year's review, as well as the previous four, CDA has studied the impact of the 2007-2008 recession and the post-recession economy on private long term disability claims. Most reporting companies believe the economy has impacted both claims and the number of employees insured. Many attribute improved 2012 results to a gradually improving economy and declining unemployment rates. Efforts to help recovering claimants return to work continue to be hampered by limited appropriate employment opportunities, however.
- Number of companies offering long term disability coverage remains steady. The number of employers offering group long term disability insurance programs remained nearly identical in 2012, compared with the prior year, according to insurers surveyed by CDA. The number of employers offering long term disability insurance plans had previously decreased in 2011, 2010 and 2009.
- Number of insured lives has gone up. Insured lives increased by 1 percent to 32.3 million last year, the first such increase in several years. Insured lives had previously declined 2 percent in both 2011 and 2010, and 3 percent in 2009.
- Social Security Disability Insurance (SSDI) claimant rolls grow. The total number of disabled workers currently receiving SSDI payments continues to increase while the growth in covered workers, the source of SSDI's revenue, remains modest. On a positive note, new SSDI benefit applications and new SSDI benefit awards declined modestly in both 2012 and 2011 after expanding rapidly from 2008 through 2010. In its 2012 annual report, the Social Security Board of Trustees projected that the SSDI trust fund will run out of money by 2016, two years earlier than the projection the same group made in 2011. The implication is that, without reforms, benefits to disabled workers will have to be reduced.
- Wage earners remain uneasy about the economy. Despite a gradual improvement in the economy, uncertainty still permeates the thinking of many American wage earners. Consumer confidence has increased just incrementally since bottoming out at an all-time low in 2008, and lingers closer to historical lows than highs. Unemployment remains stubbornly high, and many workers have given up looking for work. The growing deficit, rising health care costs, concerns over the solvency of the Social Security Disability Insurance (SSDI) system, and gridlock in Washington, D.C., all weigh heavily on U.S. workers. A persistent sense of economic vulnerability has made workers more aware of financial risk and has led many to recognize the importance of taking personal responsibility for planning for the potential of an income-limiting disability.
Detailed CDA Survey Findings
The CDA Long Term Disability Claims Review examines new claims approved during the current year as well as existing or ongoing disability claims which were approved in prior years. The information below captures key findings.
Existing Long Term Disability Claims
- The number of claimants fell slightly. Approximately 662,000 disabled individuals received long term disability insurance payments from CDA-surveyed companies last year-a 2 percent decrease from 2011. The number of long term disability claims increased in each of the previous years from 2008 through 2011.
- Total claim payments grew slightly. Long term disability insurance claim payments by CDA-surveyed companies climbed slightly to $9.4 billion. It was the fifth straight year of growth in the cost of claims.
- Work-related claims were minimal. Fewer than five percent of CDA member company disability claims were work-related in each of the years spanning 2008 through 2012.
- Percentage of SSDI-eligible claimants fell slightly. Seventy-one percent of individuals receiving group long term disability insurance payments from CDA member companies in 2012 also qualified for SSDI payments, slightly fewer than in 2011.
New Long Term Disability Claims
- New claims declined from 2011-2012. Approximately 154,000 new disabled individuals were approved for long term disability insurance benefits by CDA member companies in 2012, a decrease of 2.9 percent from 2011. In 2011, new approved claims increased by 3.5 percent over 2010. Newly approved long term disability claims resulted in payments of $1.4 billion during 2012.
- Claimant ages are trending higher. Forty-three percent of the new claims approved during 2012 were for individuals younger than 50, and 57 percent went to individuals age 50 or older. Claims for those age 50 and older, mostly driven by those age 60 and older, have been increasing as a percentage of the total, which reflects an aging working population.
- Women make up majority of new claims, continuing a trend. Fifty-four percent of the new disability claims approved during 2012 were for women, and 46 percent were for men, the same as in 2011. The percentage of claims for women has trended up compared to men in the past three years, after the percentage of disability claims for men jumped up in 2009, in the aftermath of the economic meltdown.
Causes of Disability Claims
Some Key Findings About the Causes of Long Term Disability Claims
The CDA Long Term Disability Claim Study examines and reports causes of long term disability claims-including causes of new claims approved during the current year as well as existing or ongoing disability claims which were approved in prior years.
- Nearly three in 10 new long term disability claims in 2012 were caused by musculoskeletal system and connective tissue disorders, which continue to be the leading cause of new disability claims by a large margin.
- New long term disability claims resulting from pregnancy and childbirth increased sharply by 24 percent in 2012 following a smaller increase in 2011. Pregnancy and childbirth caused 12.3 percent of new long term disability claims for female wage earners in 2012, compared to 9.6 percent in 2011.
- Cancer increased as a cause of new disability claims in 2012. It remains the second leading cause of new disability claims and the fourth leading cause of ongoing claims.
- Disabling mental disorders decreased from 2011 to 2012, reversing a two-year trend.
- Disability claims due to disorders of the nervous system and sense organs, circulatory system and respiratory system all decreased from 2011 to 2012.
- The four most common causes of existing long term disability claims in 2012 were diseases of the musculoskeletal system and connective tissue (30.7 percent of all existing claims), diseases of the nervous system and sense organs (14.2 percent), diseases of the circulatory system (12.1 percent) and cancer (9.0 percent). These are the same top four causes as in 2010 and 2011.
2013 CDA Long Term Disability Claims Survey Disability Claims by Diagnosis
See appendix for a description and examples of each diagnosis.
CDA Survey Findings: Observations from CDA Member Company Responses to Qualitative Questions
As part of the 2013 CDA Claims Survey, member company experts answered a series of qualitative questions about long term disability insurance claim trends over past years. They were also asked to make observations and predictions for the future. The following is a summary of their combined responses. Long Term Disability Insurance Claim Trends
Long Term Disability Insurance Claim Trends
- Twenty-seven percent of reporting companies said long term disability claim incidence increased in 2012. In addition, 50 percent of reporting companies reported no change in claim incidence from 2011 to 2012, and 18 percent reported lower incidence rates from 2011 to 2012. By comparison, 43 percent of participating companies reported an increased incidence in 2011, and 56 percent reported an increase in 2010. Most companies continue to believe the weak economic environment remains a factor.
- Seventy-seven percent of reporting companies observed no unusual trends among the diagnoses causing long term disability claims in 2012.
- Forty-five percent of companies reported no change in claim termination rates, with 35 percent reporting increases and 20 percent reporting decreases. Some companies cited poor economic conditions as a negative factor, and others cited the improving economy as a positive factor affecting those trends. In the past year, most companies have reported that claims are lasting longer (30 percent) or the same (50 percent) compared to past years.
- The manufacturing, transportation, retail trade and financial services industries all saw their claims trend down as a percentage of the total from 2008 and 2012.
- The health services, education services and public sectors all saw their claims trend up as a percentage of the total between 2008 and 2012.
- Looking back on the economic conditions during the past five years, 67 percent of the reporting companies said the economy has moderately impacted claims, while 29 percent said the economy made little or no impact.
Long Term Disability Claims Observations and Future Predictions
- Most companies expect claim trends to improve gradually. Companies are evenly split on the question of whether claim patterns will eventually return to pre-recession levels, or whether there will be a "new normal" with claims stabilizing at higher levels than existed prior to 2007.
- The most frequently mentioned concerns for the future were:
- Low interest rate environment.
- Low claim recovery rates.
- Increased claim incidence.
- Difficulty finding appropriate job opportunities for recovering claimants to return to.
- Uncertainty over the residual impact of health care reform on health care occupations and the disability insurance marketplace.
- Worries over SSDI delays, financial challenges and potential changes.
Social Security Disability Insurance (SSDI) Data and Trends
- 152 million workers were covered for disability insurance under the SSDI program at the conclusion of 2012, a 0.5 percent increase over 2011.
- Covered male workers (52 percent of total) outnumber covered females (48 percent of total), but the covered female worker population continues to grow faster. The percentage of female workers grew 0.8 percent from 2011 to 2012, compared to 0.2 percent growth for male workers over the same period.
- The Social Security Administration paid in excess of $120 billion to disabled workers for the first time ever in 2012.
- A record 8.8 million workers-over 5 percent of the U.S. workforce-were receiving SSDI benefits at the conclusion of 2012.
- The disabled worker population continues to grow steadily: The number of disabled workers receiving SSDI claim payments increased 2.9 percent from 2011 to 2012, outpacing the 0.8 percent growth in the overall covered worker population. The aging population, growth in the percentage of female workers, lack of substantial job growth and continued economic uncertainty all impacted the growth in SSDI claimants.
- Over 2.5 million workers in their 20s, 30s and 40s were receiving SSDI payments at the end of 2012. This accounts for roughly 29 percent of all workers receiving SSDI payments.
- Musculoskeletal and connective tissue disorders such as back pain, degenerated disk, arthritis, osteoporosis and rheumatism are the most frequent diagnoses for new SSDI awards. They are followed by mental disorders, circulatory system disorders, cancers and tumors, and nervous system and sense organ disorders.
- New SSDI benefit applications in 2012 decreased for the second year in a row. Applications for SSDI benefits declined by 2 percent from 2011 to 2012, to just over 2.8 million. New applications had previously declined by 1.9 percent from 2010 to 2011. New SSDI applications had reached their highest level ever in 2010.
- The number of new SSDI benefit awards in 2012 fell to 980,000. New awards had exceeded 1 million annually in both 2010 and 2011.
- New SSDI awards exceeded terminations by 35 percent. New disabled workers receiving benefits are exceeding SSDI beneficiaries who leave the rolls for any reason, resulting in continued growth in the ranks of disabled employees in "current pay status" (i.e., on SSDI claim). It should be noted that SSDI claim terminations increased 11 percent in 2012 while the number of new awards decreased, so the trend improved. In 2011, new awards had exceeded terminations by 56 percent.
- The SSDI disability rate fell again in 2012. There were 6.4 SSDI awards approved per 1,000 covered workers in 2012. This follows the 6.8 awards approved per 1,000 covered workers in 2011, and the 7 percent of covered workers (highest rate in history) approved in 2010. In 2009, 6.6 awards per 1,000 covered workers were granted.
- The ratio of new SSDI awards to applications received decreased slightly from 35.6 percent in 2011 to 34.7 percent in 2012. In 2012, this ratio was at the lowest point since 1982.
- The average SSDI monthly benefit was $1,130 at the end of 2012. For males, it averaged $1,256, and for females it was $993. The average benefit increased by 1.7 percent over 2011. The average male benefit rose 1.6 percent while the average female benefit increased by 2.1 percent.
- Approximately 36 percent of disabled men and 58 percent of disabled women in 2012 received SSDI benefits of less than $1,000 per month. Only 10.5 percent of disabled men and 2.8 percent of disabled women workers received $2,000 or more in SSDI monthly benefits in 2012.
- Older workers' SSDI benefits are higher on average.
Ten-Year Social Security Disability Insurance Trends
- Covered workers increased 8 percent from 141 million in 2002 to 152 million in 2012.
- The population of female covered workers has grown faster than that of males over the past decade; females grew by 11 percent compared to 6 percent growth in covered males.
- The SSDI-covered worker population has aged significantly. In 2002, 25 percent of covered workers were age 50 and over. In 2013, 33 percent were 50 and over. The table below illustrates this trend:
- The number of applications for new SSDI benefits rose by 68 percent over the past 10 years, from 1.7 million in 2002 to 2.8 million in 2012.
- The 979,973 workers approved for SSDI payments in 2012 are 31 percent more than the 750,964 workers approved in 2002. The 4.4 percent decrease in new awards in 2012 was the second straight year of decreased awards. New awards had increased rapidly during 2007 to 2010. The slowly improving job picture seems to be having a positive impact.
- The ratio of new SSDI awards to new SSDI applications has steadily decreased since the late 1990s. The ratio was 44.6 percent in 2002 and 34.7 percent in 2012.
- According to the Social Security Administration, the final award rate for disabledworker applicants has varied over time, averaging nearly 45 percent for claims filed from 2001 through 2010 (as of the date of this report, this is the last year for which this data is available). The percentage of applicants awarded benefits at the initial claims level averaged 28 percent over the same period and ranged from a high of 37 percent to a low of 26 percent. The percentage of applicants awarded at the reconsideration and hearing levels is averaging 3 percent and 13 percent, respectively. Denied disability claims have averaged nearly 53 percent.
- The total number of disabled workers receiving SSDI claim payments grew by 59 percent, from 5.5 million to 8.8 million, during the period 2002 to 2012. The rate of increase of workers in "current pay status" should slow in future years, reflecting the decreasing number of new applications and new awards in 2011 and 2012.
- The number of women receiving SSDI claim payments increased by 71 percent from 2002 to 2012, compared to a 50 percent increase among males. During the same time period, the number of female covered workers increased by 11 percent while male covered workers increased by 6 percent.
- The overall rate of disability increased among both men and women workers. In 2002, the ratio of disabled workers to covered workers was 3.9 percent; in 2012, that ratio was 5.8 percent. Factors behind this dramatic rise include the aging of the U.S. workforce, the Great Recession and continued economic uncertainty.
- The disability rate is increasing more rapidly for women. Approximately 5.8 percent of covered female workers were receiving SSDI payments in 2012. That's 54 percent higher than the 3.7 percent of covered females receiving benefits in 2002. During that same period, the percentage of covered male workers receiving SSDI grew to 5.8 percent, a 42 percent increase from the 4.1 percent receiving benefits in 2002.
- The average monthly SSDI benefit amount has increased by 35 percent in the past 10 years. The average for females (40 percent) has increased faster than for males (34 percent). This gender "benefit gap" has narrowed at the younger ages.
- Total SSDI payments to disabled workers have more than doubled in the past ten years and have increased every year since the first SSDI payments were made in 1957.
- New SSDI awards for musculoskeletal and connective tissue disorders have been increasing over time, while awards for circulatory system disorders such as heart disease and stroke have been decreasing.
- New SSDI awards for mental disorders have been rapidly decreasing since 2003.
- Injuries, typically perceived as the cause of many disabilities, represent less than five percent of diagnoses for new SSDI awards.
- Over several generations, from 1960-2011, circulatory system diagnoses have been reduced from 27 percent to 11 percent of SSDI claims awards. Similarly, respiratory system diagnoses fell from 8 percent to 4 percent of the total.
- During the same period, musculoskeletal awards more than quadrupled from 8 percent to 34 percent of all new SSDI awards. Mental disorder-related new SSDI awards more than doubled from 8 percent to 19 percent of the total.
- The 2013 CDA Long Term Disability Claims Survey*
- Social Security Administration Disability Insurance fact sheets and actuarial publications; www.socialsecurity.gov
*2013 survey participants included:
AIG Benefit Solutions
Assurant Employee Benefits
Lincoln Financial Group
MassMutual Financial Group
Mutual of Omaha
Sun Life Financial
- CDA thanks the member companies named above for their contributions of proprietary data which have made this survey possible.
- CDA member companies represent over 75 percent of the commercial disability insurance marketplace. Companies participating in this 2013 study provide long term disability insurance protection to more than 32 million workers-30.7 million who are covered through over 207,000 employer-sponsored benefit plans, and 1.6 million who are insured through individually purchased disability policies. Sixteen of the participating companies are among the leading group long term disability companies, and nine are among the top individual disability insurance companies. Berkshire Life has reported under the Guardian name since the 2012 study.
- Please note: The companies participating in CDA's annual claims studies may vary from year to year. Some companies adjust prior years' data when reporting results. For this reason, while year-over-year comparisons within this 2013 claims review are valid, comparing data from within the 2013 report to data reported in prior years' reports may not be valid. All prior CDA Long Term Disability Claims Reviews may be viewed by clicking the research tab on the Council for Disability Awareness home page. Please contact CDA for questions or clarifications.
About the Council for Disability Awareness (CDA)
The Council for Disability Awareness (CDA) is a nonprofit group dedicated to helping the American workforce become aware of the likelihood of disability and its financial consequences. The CDA engages in communications, research and educational activities that provide information and helpful resources to wage earners, their families, the media, employers, financial advisors, consultants and others who are concerned about disability and the impact it can have on wage earners and their families.