There are a lot of subtle misperceptions about long-term disability coverage that we need to clear up
By: Bill Zolis
One of the things I’ve never really been able to figure out is why so many of the best-and-brightest workplaces – especially start-ups in the tech, creative, or financial services space – just don’t seem to get it when it comes to long-term disability (LTD) coverage.
They tend to focus, as one would expect, on drug plans and dental coverage and nice-to-haves like gym memberships and health spending accounts, they have no problem with progressive ideas like on-line counseling, and they’re generally committed to the idea of the well workplace. And yet they all too often overlook long-term disability coverage.
There really is a problem here, particularly in that start-up space. I see numbers like less that 30 percent offering LTD. Why? It’s hard to say for sure, but I think it’s a matter of perception – both on the part of the often young entrepreneurs driving the start-up process, and on the part of the talent they are trying to recruit.
Those perceptions tend to be fairly subtle.
– Employees in the start-up space tend to be young and are still thinking in terms of “it could never happen to me.”
– Many tend to see the value of LTD as hypothetical, and not something they ever want or expect to have to use.
– They look at LTD as a long-term thing that becomes relevant as they get older, but they don’t expect to be with any given employer for many years.
– Long-term disability is seen in terms of physical injury or chronic disease, and not necessarily the mental wellness issues that are the fastest growing causes of long-term disability.
– There is a subtle – or not so subtle – undercurrent of belief that “we’re all highly motivated, high earners who are not likely ever to want to go on any kind of disability.”
– LTD is seen as an expense rather than a benefit, since it shows up as a deduction on their pay slips for non-taxable plans.
When I talk to clients about their benefit plans in general, and about LTD in particular, it’s often these assumptions and attitudes that I find I need to address. And I find that, when you do have that conversation, it’s really not that hard to make the case: anyone, at any time might suddenly need to rely on their LTD coverage; and when you do suddenly need that LTD, the fact that your coverage is there is almost always life-altering in a very positive way.
One way to help clients understand the importance – and the relevance – of LTD coverage is just to run down some of the things that may be covered by most LTD plans.
– Musculoskeletal problems, such as back injury, degenerative disk issues, carpal tunnel syndrome, fibromyalgia, arthritis and so on.
– Accidental injuries, such as vehicle collisions, sporting injuries, slips and falls, brain trauma.
– Mental health issues, such as depression, bipolar disorder, anxiety, post traumatic stress disorder (PTSD), schizophrenia, etc.
– Cardiovascular conditions, such as heart attack, stroke, coronary artery disease, etc.
– Chronic pain, back pain, irritable bowel syndrome (IBS), nerve pain and so on.
– Neurological disorders, such as Parkinson’s disease, multiple sclerosis, ALS, or epilepsy.
– Respiratory conditions, such as chronic obstructive pulmonary disease (COPD), lung disease, asthma.
– Cancer (and, often, the extended time off required for treatment and recovery).
The question left hanging in the air after you run down this list of types of claims that are regularly covered by long-term disability with clients is, “Which of these issues do you think could never happen to the people in your demographic, to you team… or to you?”
I also like to talk about LTD coverage in terms of building the well workplace, and the role of LTD as a kind of backstop for issues of mental wellness in the workplace.
According to Sun Life – backed up by figures I’ve seen across the industry – mental illness claims are by far the fastest-growing area of LTD claims in general. According to Sun Life’s figures, mental-health LTD claims rose by 70% between 2014 and 2020. They now represent 32% of all new claims. A big part of this, of course, is a major generational change in attitudes toward mental health. It’s okay to talk about it now – and to do something about it.
I find that most start-ups “get it” when it comes to the concept of the well workplace, with building a safe and supportive space for employees, of offering programs such as employee assistance plans and on-line mental health counseling. LTD is just the natural extension of these programs – where to turn when the situation becomes critical.
Then there is what I think of as the “ripple effect.” When a team member turns to LTD in a crisis situation, it is immensely reassuring to the other members of the team to know that their colleague is being taken care of.
Finally, there is that issue of the deduction on your pay slip for certain benefits, including non-taxable LTD, that so many plan members don’t fully understand.
It’s very important for plan sponsors to explain to members that, no, we’re not being ungenerous by not covering the whole cost of LTD coverage. First of all, the plan sponsor offers the coverage, takes care of administration and gets you a deal on coverage that would cost far more on an individual basis – not to mention medicals and pre-existing conditions. But second, and more important, there’s the tax rules: if you pay through the plan, any benefits you would be paid in the event of a claim are tax free. If the employer were to pay, your benefits would be taxed. So, yes, in this case, it really is for our own good.
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I really appreciate comments, ideas, suggestions or just observations about the blog or any other topics in benefits management. I always look forward to hearing from readers. If there’s anything you want to share, please email me at bill@penmorebenefits.com.
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