Long Term Disability Claims Review
Since 2005, the Council for Disability Awareness (CDA) has conducted an exclusive annual review of long term disability claims among the U.S. working population. The 2014 CDA Long Term Disability Claims Review summarizes quantitative and qualitative long term disability insurance claims data from 2009 through 2013, 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 more than 75 percent of the commercial disability insurance marketplace, contributed disability claim data for this year's study, making this edition of the review the largest and most comprehensive to date.
Executive Summary of CDA Survey Findings
- Disability claim payments in 2013 totaled $9.8 billion. This represents a 1.6 percent increase in total long term disability claim payments by participating CDA member companies over payments made in 2012.
- More employers offered long term disability insurance benefit plans. Participating companies reported slightly more than 214,000 employers offering long term disability plans to their employees in 2013. This represented a slight increase for the second year in a row, after declines in 2009-2011.
- Fewer employees were insured by long term disability insurance benefit plans. Participants report the aggregate number of insured employees declined roughly 1.5 percent to 32.1 million last year, reversing the slight increase seen in 2012. Since the number of companies offering disability benefit plans increased between 2012 and 2013, the decline in insured individuals may reflect the trend toward more disability plans offered on a voluntary basis in which not all eligible employees participate.
- The improving economy is positively impacting claims. In recent disability claims reviews, CDA has probed the impact of the 2007-2009 recession, unemployment levels and the post-recession economy on private long term disability claims. Most reporting companies now believe disability claims have stabilized, and that claim incidence will remain at about the same level over the next one to two years. But many of the participating companies also believe that the future performance of the economy, including availability of jobs for recovered claimants, will have an impact on disability claim incidence.
- The rate of Social Security Disability Insurance (SSDI) claimant growth is slowing. The total number of disabled workers who were receiving SSDI payments in 2013 increased by 1.3 percent - its slowest growth rate in over a decade - to more than 8.9 million. The growth in covered workers, the source of SSDI's revenue, was a modest 0.2 percent. On a positive note, new SSDI benefit applications and new SSDI benefit awards have declined for the third year in a row following a rapid increase from 2008 through 2010. In its 2013 annual report, the Social Security Board of Trustees projected that the SSDI trust fund reserves will be depleted by 2016. This implies that corrective actions are soon needed to reverse the SSDI trust fund's depletion, or benefits to current and future disabled workers may have to be reduced.
- The economy and health care reform concern employers and employees alike. Consumer confidence has increased since bottoming out in 2008. The unemployment rate has drifted lower, but it's been widely reported that 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 seem to leave U.S. employers and workers with a persistent sense of economic risk and vulnerability. Many seem to have adopted a wait-and-see attitude toward new benefit expenditures.
Detailed CDA Survey Findings
The CDA Long Term Disability Claims Review examines new claims approved during 2013, as well as existing or ongoing disability claims that were approved in prior years. The information below captures key findings.
Existing Long Term Disability Claims
- The number of claimants fell slightly. Approximately 653,000 individuals received long term disability insurance payments from CDA-surveyed companies in 2013, a 3 percent decrease from 2012. The number of long term disability claims also declined in 2012, following the previous four straight years of increases.
- Total claim payments increased. Long term disability insurance claim payments by CDA-surveyed companies grew 1.6 percent to $9.8 billion in 2013.
- Work-related claims remain below 5 percent of total. Fewer than 5 percent of CDA member company disability claimants were also receiving workers' compensation payments in each of the years from 2009 through 2013.
- Percentage of SSDI-eligible claimants remains steady. Seventy-two percent of individuals receiving group long term disability insurance payments from CDA member companies in 2013 also qualified for SSDI payments. The percentage of claims with SSDI offsets has remained at about 72 percent over the five years of the survey.
New Long Term Disability Claims
- New claims declined from 2012 to 2013. Approximately 150,000 newly disabled individuals were approved for long term disability insurance benefits by CDA member companies in 2013, a decrease of 5.7 percent from 2012. New disability claims decreased for the second year in a row after increases in 2010 and 2011. The primary reason for the decline in new approved claims appears to be a decline in claim applications received by the companies. The improving economy seems to be playing a positive role.
- Claimant ages are trending higher. Claims for those age 50 and older, mostly driven by claimants over age 60, have been consistently increasing as a percentage of the total, reflecting the aging of America's working population. Fifty-nine percent of the new claims approved during 2013 were for individuals age 50 or older. The average age of new claimants in 2013 was just over 50.
- Women make up the majority of new claimants. Fifty-six percent of new disability claims approved during 2013 were for women and 44 percent were for men. The percentage of claims for men increased in both 2012 and 2013 after claims for women increased in 2010 and 2011.
Causes of Disability Claims
The CDA Long Term Disability Claims Review 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 that were approved in prior years.
- Musculoskeletal system and connective tissue disorders remain the leading cause of new and ongoing disability claims - by a large margin. Nearly 29 percent of new disability claims fall into this category. However, ongoing claims resulting from musculoskeleta-related conditions decreased to 28.7 percent of total claims in 2013, down from 30.8 percent in 2012.
- Cancer increased as a cause of new and ongoing disability claims in 2013. It remains the second-leading cause of new disability claims and the fourth-leading cause of ongoing claims.
- Disabling mental disorders decreased as a cause of new disability claims for the second year in a row.
- New long term disability claims due to disorders of the nervous system and sense organs, circulatory system and respiratory system all increased between 2012 and 2013.
- New long term disability claims resulting from pregnancy and childbirth represented 10.6 percent of new long term disability claims for women in 2012 and 2013.
- The four most common causes of existing long term disability claims in 2013 were diseases of the musculoskeletal system and connective tissue (28.7 percent of all existing claims), diseases of the nervous system and sense organs (15.2 percent), diseases of the circulatory system (12.4 percent) and cancer (9.1 percent). These are the same top four causes as in the three prior years.
Summary of CDA Member Company Responses to Qualitative Questions
As part of the 2014 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 responses.
Long Term Disability Claim Trends
- Forty percent of reporting companies said long term disability claim incidence decreased in 2013, compared to 35 percent that said claim incidence increased, and 25 percent that reported no change in long term disability claim incidence. A number of reporting companies have attributed the recent gradual lowering of claim incidence to the improving economy.
- The factors most cited by reporting companies as likely to impact future claim incidence are the state of the economy, the aging American workforce and the trend toward more voluntary disability benefit programs.
- Most companies reported no observed trends in disability claim diagnoses. One notable exception was four companies that observed reduced claims due to mental and nervous conditions, an outcome that was also reflected in the quantitative data.
- Fifty percent of companies reported increased claim termination rates in 2013, with 13 percent reporting decreases. Some companies cited the improving economy as a positive factor affecting claim terminations. In the past year, 17 percent of companies have reported that claims are lasting longer, while 25 percent report that the duration of long term disability claims has shortened compared to past years.
- The number of employees insured for group long term disability insurance has declined in the transportation, utilities and retail trade business segments, and has increased in the personal services business segment.
- Group long term disability claims per 1,000 insured employees increased in the health services business segment and decreased in the financial services, personal services and public sector business segments.
- The number of individual disability policies in force for the business management and administration, physicians and dental professional occupational categories has increased, while in-force policies for sales and marketing professionals have decreased.
- Individual disability claims per 1,000 policies, based on a small sample size, have increased for the business management and administration occupational segment and have decreased for the physicians occupational segment.
Long Term Disability Claim Observations and Future Predictions
- More than 80 percent of reporting companies expect claim trends to remain constant or gradually improve in the future. Factors that companies expect to impact future claims include an improving economy, the mix of business, the trend toward voluntary disability products, the aging workforce, packaging, the increasing popularity of multi-life individual disability plans, and the impact of the Affordable Care Act on certain business segments and on employer and employee behavior.
- Companies were asked about their concerns for the future. The most frequently mentioned concerns were:
- The impact of the Affordable Care Act.
- The low interest rate environment.
- Worries over SSDI delays, financial challenges and potential changes required to put the program on a sound financial footing.
- Concerns over the performance of the economy and its impact on claims.
- Building and maintaining a sufficient population of disability claim professionals.
Social Security Disability Insurance (SSDI) Data and Trends
- 151 million workers were covered for disability insurance under the SSDI program at the conclusion of 2013, a 0.2 percent increase over 2012.
- Covered male workers outnumber covered females by a ratio of 52 percent to 48 percent, but the covered female worker population continues to grow faster. The percentage of female workers grew 0.6 percent from 2012 to 2013, compared to a 0.1 percent decline for male workers over the same period.
- The Social Security Administration paid in excess of $130 billion to disabled workers for the first time ever in 2013, with aggregate payments growing by 2.6 percent since 2012.
- A record number of workers were receiving SSDI benefits at the conclusion of 2013. Approximately 8.9 million workers, more than 5 percent of the U.S. workforce, were receiving payments.
- The disabled worker population continues to grow steadily. The number of disabled workers receiving SSDI claim payments increased 1.3 percent from 2012 to 2013, outpacing the 0.2 percent growth in the covered worker population. The aging population, growth in the percentage of female workers, slow overall job growth and continued economic uncertainty all impacted the increase in SSDI claimants.
- Nearly 2.5 million workers under age 50 were receiving SSDI payments at the end of 2013, accounting for 28 percent of all workers receiving SSDI payments.
- Musculoskeletal and connective tissue disorders lead SSDI claims, with back pain, degenerated disk, arthritis, osteoporosis and rheumatism among 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 2013 decreased sharply, falling to just over 2.6 million - a 6.4 percent decrease from 2012 to 2013. It marks the third-straight year of declines since new applications peaked at their highest level ever (2.9 million) in 2010.
- The number of new SSDI benefit awards also fell sharply in 2013 to 885,000. New awards had exceeded 1 million annually in both 2010 and 2011, dropped to 980,000 in 2012 and declined by nearly 10 percent in 2013.
- New SSDI awards exceeded terminations by 15 percent in 2013, a ratio that has declined steadily for the past three years. Awards exceeded terminations by 63 percent in 2010, 56 percent in 2011 and by 35 percent in 2012. While this is a very positive trend, new disabled workers receiving benefits are still 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 have been increasing for the last decade, while the number of new awards has recently been decreasing, so the trend continues to improve.
- The SSDI disability rate fell again in 2013. There were 5.9 SSDI awards approved per 1,000 covered workers in 2013. This follows the 6.5 awards approved per 1,000 covered workers in 2012, the 6.9 awards per 1,000 covered workers in 2011 and the 7.1 awards per 1,000 covered workers (the highest rate in history) approved in 2010.
- The ratio of new SSDI awards to applications received decreased from 34.7 percent in 2012 to 33.5 percent in 2012. In 2013, this ratio was at the lowest point since 1982.
- The average SSDI monthly benefit increased to $1,146 at the end of 2013. For males, it averaged $1,271, and for females, it was $1,011. The average benefit increased by 1.4 percent over 2012. The average benefit for males rose 1.2 percent, while the average benefit for females increased by 1.9 percent.
- A significant number of SSDI claimants received less than $1,000 per month, with approximately 35 percent of disabled men and 56 percent of disabled women falling below that threshold in 2013. Only 11.5 percent of disabled men and 3.3 percent of disabled women workers received $2,000 or more in SSDI monthly benefits in 2013.
- Average SSDI benefits for older workers are higher.
Ten-Year Social Security Disability Insurance Trends
- The number of covered workers has increased 6 percent to 151 million in 2013, up from 142 million in 2003.
- The population of female covered workers has grown faster than that of males over the past decade. The number of covered female workers grew by 9 percent, compared with 4 percent growth in the number of covered males.
- The SSDI-covered worker population has aged significantly. In 2003, 26 percent of covered workers were age 50 and over. In 2013, 34 percent were 50 and over. The table below illustrates this trend:
- The annual number of applications for new SSDI benefits has risen by 29 percent over the past 10 years, from 1.9 million in 2003 to 2.6 million in 2013.
- The 885,000 workers approved for SSDI payments in 2013 is 14 percent more than the 778,000 workers approved in 2003. Impacting this decade-long increase is the 9.7 percent year-over-year decrease in new awards in 2013, which marked the third straight year of decreases. Prior to that, new awards had increased rapidly during 2007-2010. In the past three years, the improving economy, consumer confidence and a more upbeat job outlook seem 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 41 percent in 2003 and 33.5 percent in 2013.
- The final award rate for disabled-worker applicants has varied over time, according to the Social Security Administration, averaging 41 percent for claims filed from 2002 through 2010, the last year for which this data is currently available. The percentage of applicants awarded benefits at the initial claims level averaged 26 percent over the same period and ranged from a high of 31 percent to a low of 24 percent. The percentage of applicants awarded benefits at the reconsideration and hearing levels are averaging 3 percent and 13 percent, respectively. Denied disability claims have averaged 58 percent.
- The number of disabled workers receiving SSDI benefits has grown by 52 percent, from 5.9 million to 8.9 million, during the period 2003 to 2013. The rate of increase of workers in "current pay status" has slowed, and should continue to slow in future years, reflecting the decreasing number of new applications and new awards in 2011-2013 combined with increasing terminations.
- The number of women receiving SSDI benefits has increased by 62 percent from 2003 to 2013, compared with a 44 percent increase among males. During the same period, the number of female covered workers increased by 9 percent, while the number of male covered workers increased by just 4 percent.
- The overall rate of disability has increased among both men and women workers. In 2003, the ratio of disabled workers to covered workers was 4.1 percent. In 2013, that ratio was 5.9 percent. Factors behind this dramatic rise include the aging of the U.S. workforce, and the economic turbulence and high unemployment of the past several years.
- The disability rate has been increasing more rapidly for women. Approximately 5.9 percent of covered female workers were receiving SSDI payments in 2013. That's about 49 percent higher than the 4 percent of covered females receiving benefits in 2003. During that same period, the percentage of covered male workers receiving SSDI payments grew to 5.9 percent, a 39 percent increase from the 4.3 percent receiving benefits in 2003.
- The average monthly SSDI benefit has increased 33 percent in the past 10 years. The average award for females (a 38 percent increase) has increased faster than for males (a 32 percent increase). This gender benefit gap has narrowed for younger disabled workers, reflecting progress toward pay equality.
- Total SSDI payments to disabled workers have nearly doubled in the past 10 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 represent fewer than 5 percent of diagnoses for new SSDI awards, even though they're typically perceived as the cause of many disabilities.
Social Security Disability Insurance Trends from 1960 to Present
- Over several generations, from 1960-2012, circulatory system diagnoses have fallen 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 1960-2012 historical period, the percentage of musculoskeletal awards more than quadrupled from 8 percent to 35 percent of all new SSDI awards. The percentage of mental disorder-related new SSDI awards more than doubled from 8 percent to 18 percent of the total.
- The 2014 CDA Long Term Disability Claims Survey*
- Social Security Administration Disability Insurance fact sheets and actuarial publications; www.socialsecurity.gov
*2014 survey participants included:
AIG Benefit Solutions
Assurant Employee Benefits
Lincoln Financial Group
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 more than 75 percent of the commercial disability insurance marketplace. Companies participating in this 2014 study provide long term disability insurance protection to more than 32 million workers - 30.5 million who are covered through more than 214,000 employer-sponsored benefit plans, and 1.5 million who are insured through individually purchased disability policies. Fifteen 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 previously reported prior years' data when reporting results in the current year's report. For this reason, while year-over-year comparisons from 2009-2013 within this 2014 claims review are valid, comparing data from within the 2014 report to data reported in prior years' reports may not be valid.
- All 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 organization dedicated to educating the American public about the risk and consequences of experiencing an income-interrupting illness or injury. The CDA engages in research, communications and educational activities that provide information and helpful resources to wage earners, employers, financial advisors, consultants and others who are concerned about the personal and financial impact a disability can have on wage earners and their families. If you have comments, questions or suggestions for future studies, please contact the Council for Disability Awareness at firstname.lastname@example.org.