LTD Carriers Choking Social Security?

From the New York Times:

The Social Security system is choking on paperwork and spending millions of dollars a year screening dubious applications for disability benefits, according to lawsuits filed by whistle-blowers.

Insurance companies are the source of the problem, the lawsuits say. The insurers are forcing many people who file disability claims with them to also apply to Social Security — even people who clearly do not qualify for the government program. ...

The policies they sell allow them to coordinate their benefit payments with others to make sure no one is paid twice. Thus, if a disabled person can get benefits from somewhere else — like workers’ compensation, a disability pension or Social Security — the insurance company can reduce the benefit check by that amount.

The flood of referrals, however, is making it hard for Social Security to respond to people who are truly disabled, said Kenneth D. Nibali, the former top administrator of the Social Security disability program.

“Anybody who is forced to come into this system, and who doesn’t need to be there, is affecting someone else,” said Mr. Nibali, who retired in 2002 and is serving as an expert witness for the plaintiffs. “They’re holding up cases for the people who have been waiting for months and years, who in many cases are much worse off.” ...

The Social Security Administration is not an active participant in the lawsuits and declined to comment on them. A spokesman, Mark Lassiter, said Social Security does not keep track of how many of its roughly 2.5 million annual applicants for disability are referred by insurance companies. But he cited academic research showing that 18 percent acknowledged privately that they were unqualified, because they could still work. “It is probable that many of these claimants were required to apply,” Mr. Lassiter said. ...

Forcing people who are injured to apply for Social Security before paying their claims appears to bolster insurers’ profits in several ways. If claimants refuse to apply, the insurers can simply stop paying their benefits, said Dawn Barrett, an employee of the Cigna Corporation, who grew frustrated sending people to Social Security and who is now a plaintiff in one of the lawsuits. More typically, she said, people apply for Social Security when an insurer tells them to. That allows the insurer to reduce its claim reserves, money that is kept in conservative investments for benefit payments. And in the insurance industry, smaller reserves mean bigger profits. ...

Mr. Nibali has calculated that it costs $1,180, on average, to process a single Social Security disability application to the first decision, usually a rejection. If the applicant persists through the first three levels — the initial review, a reconsideration and a hearing by an administrative law judge — the case will cost the system an average of $4,759, he found.

I am quite ready to criticize Unum and other Long Term Disability (LTD) insurers because I have a low opinion of them, but I do not understand the cause of action here, that is the basis for this lawsuit, nor am I buying the theory that LTD insurers are a cause of Social Security's backlogs. While there may be occasional cases where LTD carriers waste everyone's time with Social Security disability claims that have no chance of being approved, I have seen no sign that this is any real problem. There are plenty of hopeless claims filed by people who have no LTD involvement. In the main, insurers have good reason to recommend that LTD recipients file claims for Social Security disability benefits and pursue those claims aggressively. This benefits the insurance company, but it also benefits the claimants. My experience is that disability claims filed by LTD recipients have a high chance of success. Unless there is something to this lawsuit that I do not understand, I see nothing abusive about LTD insurers pressing LTD recipients to file Social Security disability claims. I think it is absurd to suggest that LTD insurers are in any real way responsible for the backlogs at Social Security. The only blame I would assign to LTD insurers is that they have done almost no lobbying to get the Social Security Administration a larger budget so it can process its cases.