26-year-old Michael Sizemore was training for a marathon and enjoying work at a nonprofit organization. Then, his life changed when he was out one night with his friends. Here’s his story:
The Social Security Administration says one in four of today's 20-year-olds will be out of work for 12 months or more for a variety of reasons before they retire. Many people think of disability in terms of total permanent disability, like amputation or hearing loss. In other words, something that completely changes your ability to work forever. And while that sometimes is the case, more often disability is related to an illness or injury that prevents you from working for three months or longer.
Consider this. How many people have you known who had to take off work for knee surgery? Or cancer? Or mental health recovery? How many women have you known who found themselves out of work due to complications in pregnancy?
The good news is, these Americans have an option to protect their income during those times. Private disability insurance allows people to receive a paycheck if they leave work to have a baby, recover from illness, or recover from injury, among other things. Still, 51 million American households do not have any private disability income insurance coverage.
Some policymakers have started to examine the role private disability insurance can play in helping workers continue to support themselves and their families while they recover. There are policies we can pursue to help Americans understand the options that are available to them. We’ve seen increased interest from employers too.
One is to allow employers to automatically enroll their employees into private disability insurance coverage, so long as the employee receives notice and can opt-out. This is similar to what employers are able to do with 401(k)s. The “nudge” that 401(k) autoenrollment provides has helped many people dramatically improve their financial cushion in retirement.
Making it easier for Americans to access private disability insurance also has another benefit. Many employees turn to a publicly provided benefit – Social Security Disability Insurance (SSDI) – if they face a disability. However, the SSDI trust fund is on course to run dry in 2028. Furthermore, it’s experiencing a severe backlog. Claimants can wait up to 730 days for a hearing. Even then, only one-in-three SSDI claimants ultimately have their applications approved. In 2017, the backlog of appeals cases totaled more than one million.
With the high hurdle of total disability to qualify for SSDI, private disability insurance makes sense for most workers. With more Americans enrolled in private disability insurance coverage, we’ll release the burden on SSDI – potentially saving the federal government as much as $25 billion over 10 years according to one study – and keep more families economically viable in the years to come.
Nancy Powers Perry is Legislative Director at the American Council of Life Insurers. She is responsible for industry federal advocacy on disability insurance, long-term care, and supplemental health benefits.