LTD STD

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For disability eligibility, can you discriminate by "class" of employee?: Yes
Common Types of eligibility are:: - Job Grade - Type of work
- Title - # of hours
- Some other employment designation
(ex: Class I - union ee's
Class II - nonunion working over 30hrs/wk)
STD Eligibility: All full time ee's regularly working a minimum of 30 hrs/wk
The 2 purposes of waiting periods:: 1. Guard against individuals who elect coverage
2. Protect the rest of the group against adverse experience that this could cause
Employees who do not sign up when they become eligible pose risk of ______.: Adverse selection and medical underwriting may be required
Common eligibility waiting periods are:: 30,60,90, and 120 days (180 days = Best cost management)
________ means the salary or wage earned for the work performed for the employer in effect just prior to the date the disability begins; does not include bonuses, overtime, extra compensation or commissions unless specifically requested: Covered Earnings
Common options for defining covered earnings are:: - Wages including bonus & commissions
- W-2 reported earnings
- Teachers or Partners Pay which annualizes comp to reasonable levels
Typical definition of disability is based on 2 things:: 1. one's ability to perform the duties of one's regular occupation or any occupation after a period of time and/or
2. The loss of a substantial portion (commonly 20%) of one's income directly resulting from an injury or illness
_______ policies carry one definition of disability: STD(own occupation)
_______ policies carry 2 definitions of disability: LTD (own occ and any occ)
CIGNA and other carriers may offer a qualified alternative definition of disability: You are disabled because of injury or sickness, you are unable to perform all the material duties of your 1. regular occupation or 2. qualified alternative or 3. solely due to injury or sickness you are unable to earn more than (80%) of Indexed Covered Earnings
Typical Qualified Alternative(must meet all):: 1. Material duties which employee can perform based on education, training and experience
2. same geographic area
3. job must be available to offer to ee
4. Wage, inc. bonus and commission, = (80%) of Indexed Covered Earnings
Any occupation definition of disability: - After disability benefits have been payable for (24)
1. unable to perform any occupation and/or
2. unable to earn (80%) of Indexed Covered Earnings
Standard own occupation limit:: 24 months(standard) options, 12, 36, 60
-some employers want own occupation to age 65
Definition of disability: Earnings Loss Bracketing:: - CIGNA was 80% for any and own occ
- Some carriers 80% any + 60% own occ or 60/60 and 50/50
Specialty Occupation Definition: Eligibility definition to cover highly specialized occupations (ex: legal, medical, etc.)
What is STD?: Short term disability (STD) pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation insurance). A typical STD policy provides you with a weekly portion of your salary, usually 50, 60, or 66 2/3 percent for 13 to 26 weeks
Common causes of STD claims: Pregnancy (normal): 20 percent
Pregnancy (complications): 9 percent
Injuries (excluding back): 9 percent
Back injuries: 8 percent
Digestive/Intestinal: 8 percent
Top 10 short term disability insurance companies, ranked by earned premium: UnumProvident Corp. $252.9 25.4%
Hartford Life Insurance Co. $108 10.8%
Metropolitan Life Insurance Co. $79.8 8.0%
Prudential Insurance Co. of America $64 6.4%
Guardian Life Insurance Co. $48.6 4.9%
CIGNA Corp. $47.9 4.8%
Standard Insurance Co. $47.1 4.7%
Fortis Benefits Insurance Co. $44.3 4.4%
CNA Financial Corp. $40.5 4.1%
Liberty Mutual Group $33.5 3.4%
Source: John Hewitt & Associates
Active, Full-time Employee: An individual must work for the employer on a regular basis in the usual course of the employer's business to be considered an active, full-time employee and eligible for coverage. Usually, a minimum number of hours of regular work is specified
Benefit Percentage: The benefit payable is usually determined as a percentage of the insured's pre-disability income up to an overall maximum benefit amount
Conversion Privilege: If included, this option allows employees who are terminating employment to continue some or all of their LTD coverage at their own expense without submitting evidence of insurability
2 definitions of total disability: Own Occupation (Own Occ): Under this definition, an insured will be considered disabled only if he or she is unable to perform the duties of his or her occupation.

Any Occupation (Any Occ): Under this definition, an insured will be considered disabled only if he/she is unable to work in any occupation for which he/she is qualified by education, training, or experience. This is closely related to the definition that the Social Security Administration uses in determining disability
Elimination Period: Elimination Period(aka Benefit Waiting Period) is the period of time following the disabling incident for which the individual must remain diabled to qualify for benefits under a plan
Family Care Expenses: A disabled employee who has family care responsibilities may need extra help when trying to return to work. This type of benefit provides an incentive to the employee who is taking part in a rehabilitation program by allowing credit or partial reimbursement for certain expenses incurred for family care. This is generally an optional benefit under most long term disability policies
Indexing: Indexing is designed to provide some protection against inflation. After the first year of disability, a disabled employee's pre-disability earnings are usually increased (or indexed) by a certain percentage on an annual basis
"Mandatory" Rehabilitation: Based on the premise that most people want to work in order to lead active, productive lives, a "mandatory" rehabilitation provision encourages disabled employees to participate in rehabilitation efforts whenever appropriate. Such a provision allows for termination of benefits if the employee refuses to cooperate or participate with a rehabilitation plan
Maximum Benefit Period (Benefit Duration).: This is the maximum length of time for which benefits are payable under the plan as long as the employee remains continuously disabled
Maximum Monthly Benefit: This is the highest dollar amount a disabled employee can receive on a monthly basis under the LTD plan
Mental Illness and Substance Abuse Limitations: When a disability is caused by a psychological/behavioral/emotional disorder, or by alcoholism or the non-medical use of narcotics, sedatives, and so on, benefits are usually limited to a period of 12 or 24 months unless the employee is confined to a hospital
Other Income Benefits (Benefit Integration): While disabled, an insured may be eligible for benefits from other sources. Benefits payable under the LTD plan may be offset (reduced) by other sources of disability income such as Social Security, workers compensation, or disability benefits received from other employer-sponsored plans
Pre-Disability Earnings: This is the amount of an employee's wages or salary that was in effect and covered by the plan on the day before the disability began
Pre-Existing Condition Limitations: When an insured has a physical or mental condition that existed prior to the effective date of his or her insurance coverage, it is considered a pre-existing condition. Most plans exclude or reduce disability benefits for any illness or injury for which an employee received medical treatment or consultation within a specified time period before becoming covered under the plan
Recurrent Disability: The recurrent disability provision is designed to protect an employee who tries to return to work but becomes disabled again from the same or a related cause. If this happens within a certain period of time, the employee will be considered disabled from the original disability, and will not be subject to a new elimination period. This encourages an employee to return to work without fear of losing benefits
Rehabilitation: Rehabilitation means the restoration of or improvement in an employee's health and functionality. It usually involves a program of clinical and vocational services with the goal of returning a disabled employee to an active, productive life, and a meaningful occupation if poss
Return to Work Provision: To encourage employees to return to work as soon as they become physically able, an additional incentive is usually provided for a certain period of time, and is called a return to work provision. Under this provision, the employee can receive up to 100 percent of pre-disability earnings based on a combination of disability benefits and return-to-work earnings
Survivor Benefit: The survivor benefit is a lump sum payment that will provide benefits to the insured's eligible survivors in the event the insured dies while receiving disability payments. This is an optional benefit in most pol
Waiver of Premium: When an individual becomes disabled and eligible for benefits, no further disability premium payments are required as long as benefits are being paid out
Workplace Modification or Accommodation: This benefit is designed to provide assistance to an employer when a disabled employee requires modification of the workplace or special adaptive equipment in order to return to work. The employer will usually be reimbursed up to a set amount for the cost of such modifications
Common causes of LTD: Cancer: 13 percent
Pregnancy complications: 12 percent
Back injuries: 11 percent
Cardiovascular: 9 percent
Depression: 5 percent
What is the Elimination Period and how is it satisfied?: The Elimination Period begins on the day You become Disabled. It is a period of continuous Disability which must be satisfied before You are eligible to receive benefits from Us. You must be continuously Disabled through Your Elimination Period. If You temporarily recover and return to work, We will treat Your Disability as continuous if You return to work for a period of less than one-half the Elimination Period as shown in the Schedule of Benefits not to exceed 45 days. The days that You are not Disabled will not count toward Your Elimination Period. Any increases You receive in Monthly Earnings during Your return to work period will not be taken into consideration when calculating Your LTD Monthly Benefit. If You return to work for a period greater than one-half the Elimination Period, or 90 days, whichever is less, and become Disabled again, You will have to begin a new Elimination Period
Specific Loss: means, with respect to hand or foot, the actual, complete and permanent severance through or above the wrist or ankle joint; with respect to eye, the irrecoverable loss of the entire sight thereof; and with respect to thumb and index finger, the actual, complete and permanent severance through or above the metacarpophalangeal joints
Gainful Employment or Gainfully Employed: means the performance of any occupation for wages, remuneration or profit, for which You are qualified by education, training or experience on a full-time or part-time basis, and which We approve and for which We reserve the right to modify approval in the future
Maximum Medical Improvement: is the level at which, based on reasonable medical probability, further material recovery from, or lasting improvement to, an Injury or Sickness can no longer be reasonably anticipated.
Regular Occupation: means the occupation that You are performing for income or wages on Your Date of Disability. It is not limited to the specific position You held with Your Employer
Key Elements of a disability program:: 1. Who covered - Eligibility definitions and waiting periods
2. What covered - covered earnings definition
3. When/How qualified for Benefits - Definition of disability
_________ determines amt of benefit, when you qualify. How it is calculated and how frequently paid.: Benefit Formula
"The plan pays (wkly/mthly) benefits equal to the lesser of (60%) of wkly/mthly) covered earnings or max benefit reduced by other Inc. Benefit" is an example of: Benefit formula or "60% formula"
Why is 60%, 66 2/3% used more frequently?: 1. Want to prevent person from making more on disability than while working
2. LTD is usually not taxed so it is true replacement
Benefit Formula Options: -40%,45%,50%,60%,66 2/3%,70% of covered earnings subject to benefit max and benefit min.
Typical Benefit Max & Benefit Min: Max = $1000 - 30k/mo
Min = $100 - 250/mo
Common offsets from other income benefits:: - Social Security or Canadian/Quebec Program
- State and Federal disability or retirement plans(ie. Jones Act, Workers Comp or Public employee retirement)
- Earnings from work performed while disabled
- Employer sick leave or salary continuance program
- Proceeds from other coverages(group plans, etc.)
- Employer paid retirement, auto policies, in some states where a 3rd party liability/settlement is involved
IME: Independent Medical Review
___is designed to provide safety-net of replacement income when someone suffers an ILLNESS OR ACCIDENT that prevents them from earning an income: LTD
The contract balances the potential liability of its promise to pay by strictly defining these 7 things:: 1. Eligibility
2. Defn of Disability
3. Limitations
4. Exclusions
5. Covered Earnings
6. Benefit Formula
7. Benefit Period
What are the 3 types of Disability contracts?: 1. Individual
2. Group
3. Quasi-Group
What are the disadvantages of Group Disability contracts?: 1. All members of the same class have the same plan benefits, which may not meet the income needs of high-wage earners
2. Benefits are reduced by other disability or work related income
3 Advantages of Individual Insurance Poloies are:: 1. Benefit Levels can be well above Group Plans
2. Contract can be "non-cancellable" or "Guaranteed Renewable"
3. Non-Offset plans are available
A Hybrid of True Group and Individual Policies is called:: Quasi-Group Disability Contract
3 Characteristics of Quasi Group Contracts are:: 1. Like true group they have different classes within 1 contract
2. Like Ind. plans, coverage can be sold to people sharing formal or informal relationships
3. Frequently Type II Groups(Credit unions, Church, Veterans Groups) or personal interest groups(AAA)
Insurers developed Disability insurance contracts to cover_____income levels to individuals disabled due to______events.: Reasonable Replacement

Fotuitous (unforseen)
_____Provisions reduce the amount of the disability plan benefits by the amount of disability related income the person may receive (eg social security) or other work related earnings.: Offset
Group disability provides insurance to individuals who are members in a common group. The 3 groups types are:: 1. True Employer/Employee groups.

2. Labor Unions

3. Multiple Employer Trusts (multiple groups having similar characteristics--20 auto dealers)
2 Disadvantages of Individual Insurance policies are:: 1. Medical underwriting for individuals that may limit or refuse the policy
2. More costly
____ is designed to provide safety-net of replacement income when someone suffers ILLNESS OR ACCIDENT that prevents them from earning an income: LTD
Insurers developed Disability insurance contracts to cover __________ income levels to individuals disabled due to _____events.: Reasonable Replacement

Fortuitous (unforeseen
The contract balances the potential liability of its promise to pay by strictly defining: List of 7 things: 1. Eligibility
2. Defn of Disability
3. Limitations
4. Exclusions
5. Covered Earnings
6. Benefit Formula
7. Benefit Period
____ Provisions reduce the amount of the disability plan benefits by the amount of disability related income the person may receive (eg social security) or other work related earnings.: Offset
3 Advantages of Individual Insurance policies are:: 1. Benefit levels can be well above Group plans
2. Contracts can be Â“non-CancelableÂ” or Â“Guaranteed RenewableÂ”
3. Non-Offset plans are available
Group disability provides insurance to individuals who are members in a common group. The 3 groups types are: ____, ____, _____.: 1. True Employer/Employee groups.
2. Labor Unions
3. Multiple Employer Trusts(multiple groups having similar characteristicsÂ—20 auto dealers)
A Hybrid of True Group and Individual policies is called: _______: Quasi-Group Disability Contract
This is designed to help provide Individuals who are unable to work or disabled with TEMPORARY income: STD
The 4 Primary Designs of Disability insurance are:: 1. Short Term Disability (STD)
2. Long Term Disability (LTD)
3. Integrated Disability (STD/LTD)
4. WorkerÂ’s Compensation (WC)
In 1956, Social Security was expanded to Cover LTD with this defn:: Â“unable to work in ANY substantially gainful activity, & impairment must be expected to endure for at least 12 months or result in death.Â”
4 Advantages of Integrated Disability (STD/LTD) include:: 1. 1 Filing for disability claim LTD & STD
2. easier admin-1 bill Â–1 policy
3. lower cost Â–process efficiency
4. carriers can mange a longer term claim earlier in the process
Typical state mandates for no-fault WC include the following 3 coverages:: 1. Cash for disabilities or physical impairment where there is wage loss
2. Med benefits for work related injury or illness
3. Med and vocational rehab to assist eeÂ’s return to work
2 Disadvantages of Integrated Disability are:: 1. Employers frequently differ disability policies from one ee group to anotherÂ—STD/LTD did not line up
2. Significant plan changes reqÂ’d to match qualification parameters or defn
Typical states disability WC benefit is what?: 66 2/3 of weekly income to max of $400-$500 for up to 18 months. Ers give up right to contest ee claims for limit on eeÂ’s right to sue for work-site related injury or death
2 Disadvantages of Quasi Group Contracts are:: 1. Often Medical Underwriting is involved
2. Plan benefits are limited by class to get to the levels available in the appropriate class to which the person belongs
Characteristics of STD include:: 1. 13,26 or 52 week weekly benefit duration-corresponds to waiting period for LTD or Soc Sec.
2. Accident or Sickness
3. Non occ only, OR occ and non occ
4. mostly group contracts
Characteristics of LTD include:: 1. Provide income benefits for periods of 2,5, 10 years or even until retirement (age 65)
2. Addressed disability defn based on personÂ’s ability to perform OWN OCCUPATION
Another source of income replacement is:: No-fault Automobile Insurance. Many states have disability benefit mandate in modified private auto policies ( does Texas??)
Employer Contribution variations include:: 1. Fully Employer paid (Non contributory)
2. Voluntary (full contributory)
3. Basic/Supplemental-Core Buy-up
4. Cafeteria Plans
3 Funding options for Disability are:: 1. ASO or Self Funded
2. Fully Insured
3. Stop Loss Plans (Â“Flexi-fundedÂ” or Â“Minimum PremiumÂ”)
What is Â“Split Definition of Disability?Â”: Having OWN OCC for set period, then changing the defn of disability to ANY OCC
COI: Cost of Insurance = GUL plans include an insurance and a cash accumulation feature, payments for both of which are considered premium. The portion of prem. dedicated to paying the insurance piece of the plan are separately designated as "Cost of Insurance"(to distiquish them from the overall plan costs.
Fortuitous Event: An unanticipated, or unforseen event or act(used to determine if a disability/accident or other condition qualifies for benefits.
Qualified Alternative: A specific work opportunity offered by a claimant's employer, matching required criteria. Some carriers may require that a claimants inability to perform a Qualified Alternative is one test needed to satisfy the defn. of disability

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