Every Bad Idea For Social Security That The GOP Has Ever Had, In One Document

    Republicans in the House of Representatives have put forth their plan for what that they hope to extort from the President by threatening to put the U.S. government into default on its debts. Here's what their plan would do to Social Security retirement benefits (begins at page 80):

• Implement a new minimum benefit of 15% of the average wage index;
• "Modernize" the Social Security benefit formula, which is a euphemism for reducing future benefits for those now 54 and younger;
• Increase Full Retirement Age to 70 between now and 2040;
• Eliminate the retirement earnings test for those who are under Full Retirement Age;
• Eliminate auxiliary benefits for high wage earners.
  

    The plan also includes changes in disability benefits (begins at page 74):

• Enact a benefits offset experiment that would reduce disability benefits by $1 for every $2 earned (they must not know that this experiment is underway already);
• Allow FICA reductions for employers with high rates of employee retention, which is supposed to help handicapped people stay employed (which would disadvantage manufacturers);
• Require employment in six of the last ten years, instead of five;
• Time limited disability benefits for some recipients; 
• "Update" the grid regulations;
• Make disability benefits contingent on medical improvement (I don't think they meant to say that but that's what they said);
• Prevent those drawing unemployment benefits from drawing disability benefits;
• Eliminate withholding of attorney fees for representing claimants (at least I think that's what they're saying but they only thing clear about it is that they bear a lot of ill will towards attorneys);
• Close the record "after a reasonable period of time";
• Require Social Security to conduct periodic reviews of ALJ decisions, particularly those of "outlier" judges;
• Prohibit reapplications within 12 months of a denial;
• Increase the waiting period for Medicare from 24 months to 60 months;
• Eliminate the ability to apply for both early retirement and disability benefits at the same time;
• Allow employers and employees a reduced FICA rate if the employer provides long term disability benefits.

To Add To The Mystery

     The biggest mystery in the Social Security world is what is happening with the rate at which claims for Social Security disability benefits are being filed. There was a big run-up between about 2008 and  2010 followed by a prolonged decline. Various theories have been propounded but no one has a good handle on this. No, declines in unemployment cannot be the only explanation. If that were the case, the decline would have ended some time ago.

     Jeffrey Schuh and Richard Leavitt gave a presentation to the Technical Panel on Assumptions and Methods of the Social Security Advisory Board on Disability Insurance: The Private Sector. It included the table shown below. LTD means Long Term Disability, that is private insurance, mostly an employee benefit. It's not stated in the presentation but I think EP stands for Elimination Period, that is the length of time after disability begins before LTD payments begin. EP-90 is a 90 day elimination period and EP-180 is a 180 day elimination period.

    

     Note that this table would not include anyone laid off since they would not be eligible for LTD as an employee benefit. These would mostly be white collar jobs since blue collar employees aren't  often covered by LTD, unless they're union workers and maybe not then.

     This table shows a very significant decline in disability claims in a group that was little affected by unemployment rates and which was unaffected by circumstances at Social Security, at least in the rate at which they filed LTD claims. This is a table of the incidence rate per one thousand so birth rates in the 1960s are irrelevant. In general, this table just adds to the mystery.

LTD Industry Take On Social Security Subcommittee Hearing

     People like me who represent disability claimants may think that we're the only ones interested in how the Social Security Administration handles appeals of disability claims but that's not right. Some non-profits are interested but so are insurance companies handling long term disability (LTD) benefits.  LTD is generally reduced because of Social Security disability benefits received giving the LTD insurers a huge interest in the adjudication of Social Security disability claims. The more claims get approved, the less their liability.

     Allison Bell has written an article summarizing what took place at this week's hearing before the Social Security Subcommittee, apparently for people in the LTD industry.

GAO Report Pans Idea Of Mandating Increased Private Disability Insurance

     Some right wing "think tanks" have been promoting the notion that mandatory private disability benefits could somehow substitute for or augment Social Security disability benefits. I wouldn't call the ideas even half baked. It's been more like vague notions. The proponents of these ideas got Senator Orrin Hatch to ask the Government Accountability Office (GAO) to do a report on their ideas, to the extent that GAO could even identify what the ideas were. Predictably, the GAO report wasn't encouraging for these reasons:

• Insurers told GAO that is was unclear how expanding PDI [Private Disability Insurance] would affect PDI premiums and the impact this would have on enrollment.
• Employers told GAO they were concerned about potential additional requirements or administrative burdens that would be placed on them if PDI were expanded.
• Employee and disability advocacy groups told GAO they were concerned about whether PDI expansion would provide standard services or employee protections currently available under SSDI, especially with respect to PDI expansion proposals that would replace SSDI for 2 year.

     One enormous problem is that long term disability insurance (LTD) as we know it is reduced by the amount that Social Security pays. That means that LTD just pays the full rate until a claimant is approved by Social Security and then supplements the Social Security disability benefits thereafter. There's only a handful of LTD recipients who never get approved for Social Security disability benefits and continue to receive the full unreduced LTD payment indefinitely. Making LTD the primary payor would completely change the insurance product and make it much, much more expensive. It's never been clear to me whether the think tank proponents of private disability insurance understand just how different what they're asking for would be from any product that exists now. The LTD carriers might like to get big contracts for helping Social Security administer its disability benefits programs but I've never seen evidence that the LTD carriers actually want to be the insurers. Apparently, that's what GAO heard directly from the insurance companies.

Allsup Gets Sued For Breach Of Fiduciary Duty

     A lawsuit has been filed in St. Clair County, Illinois against Allsup, a large non-attorney group that represents Social Security disability claimants, as well as Aetna Life Insurance Company. The lawsuit alleges "breach of fiduciary duty, fraudulent misrepresentation and concealment—failing to disclose conflicts of interest and material facts, and striving to reduce or eliminate the plaintiff’s bargaining power, as well as failing to refund" money owed the plaintiff.
     Allsup does most of its work for Social Security disability claimants at the behest of large insurance companies like Aetna. These companies write Long Term Disability (LTD) insurance policies which are mostly provided as part of an employee benefits program. LTD policies always contain an offset for Social Security disability benefits. This gives a big incentive for LTD insurers to demand that LTD recipients file Social Security disability claims and pursue them aggressively with representation, with providers such as Allsup.
     If a claimant who has been drawing LTD is approved for retroactive Social Security disability benefits, the claimant's LTD is reduced not just for the future but also retroactively. The LTD insurer wants to recoup some or all of the money it has already paid the claimant.
     The insurance company has a problem in collecting money out of the claimant's retroactive Social Security disability benefits. The Social Security Act forbids attachment of Social Security benefits for this reason. Allsup came up with a plan to get around this obstacle. They would use their representational relationship to cajole claimants into allowing their back benefits to be deposited into a bank account. In theory, it was a joint account but as a practical matter Allsup has complete control over the account. Allsup would quickly siphon off the money owed to the LTD insurer as soon as the deposit came in from Social Security. Allsup is so proud of this scheme that they patented the idea! Social Security has acquiesced in this dubious practice even though the Federal Deposit Insurance Company (FDIC) has found that a bank which participated in a similar scheme was engaging in an "unsafe and unsound bank practice." It's not hard to figure out why LTD insurers like Allsup far more than law firms. Law firms wouldn't engage in this sort of behavior. At least, I hope they wouldn't!
     Michael Garavalia of Flynn, Guymon & Garavalia in Belleville, IL is representing the plaintiff.

Insurance Companies Monitoring Social Security Disability Debate

     Companies which write Long Term Disability (LTD) insurance policies are paying attention to the debate over what to do about the impending shortfall in Social Security's Disability Insurance Trust Fund. LTD benefits are reduced, or offset, by the amount of Disability Insurance Benefits. Anything that reduces the Disability Insurance Benefits increases the amount paid by LTD insurance companies. The companies are making sure that the language in their policies protects them should there by any major change in Social Security disability benefits. Some insurance companies would like to make LTD insurance mandatory or, at least, make it an "opt out" for employees. Some companies would like to take over claims adjudication for Social Security.

It Must Be Obama's Fault!

     From Bloomberg:

The cost of long-term disability claims rose for at least a fifth straight year as expenses tied to the aging workforce drove payments higher for insurance companies. ...

“On average, older people have higher wages and it’s harder for them to get back to work,” [Council for Disability Awareness] CDA President Barry Lundquist said in a phone interview. “When you think about the baby boomers and how old they are now, they have a much higher chance of becoming disabled -- maybe a four or five times higher chance in a given year than someone that’s in their twenties or thirties.”

      Why would private insurance companies be unable to hold down their long term disability costs? I thought that was just a problem for the Social Security Administration. How do Republicans spin this as being Obama's fault?

Partial Layoffs At Allsup

     From the Belleville News-Democrat:

Belleville-based Allsup Inc. [which represents Social Security disability claimants, mostly at the behest of long term disability insurance companies] will reduce the number of hours some of its employees work as the Social Security Administration is witnessing fewer disability claims reviews, a spokeswoman said.

In a statement released Monday, Rebecca Ray, the company's director of corporate public relations, said the move will not mean layoffs and all employees will continue to receive health insurance benefits and retirement. But some employees' work weeks will be cut to fewer than 40 hours.

The number of hours cut will be specific to an individual's job and work load and may not be the same across the board.

Ray said the hours reduction will go into effect next month. She could not comment on how many of the company's 700 employees will be affected.

Read more here: http://www.bnd.com/2014/01/27/3025748/allsup-cutting-some-employees.html#storylink=cpy

Demographics Affect Private Long Term Disability Insurance Companies In The Same Way As Social Security

From a press release:

The Council for Disability Awareness (CDA) today announced that the number of long term disability claims [mostly as a part of employer pension plans] continued to increase year over year, while the number of wage earners protected by private disability income insurance declined in 2011 for the third consecutive year. ...

The age group that experienced the largest increase in the number of new approved claims over the past four years was individuals over age 60, in part, reflecting the aging of the baby boomer generation. ...

"When you look at the Social Security Disability Insurance program, the number of workers receiving payments increased to 8.6 million by the end of 2011, its highest level ever," [the President of CDA] continued. "Given the current trends, analysts predict that the SSDI trust fund will be depleted within five years. However, the silver lining is that applications and new SSDI claim approvals declined during 2011 after several years of increased applications and approvals." ...

By a large margin, diseases of the musculoskeletal system and connective tissue - such as arthritis, spine disorders, back pain, sciatica and osteoporosis - continue to be the leading cause of disability claims (representing 30.5 percent of all 2011 claims).

      Notice that it's not just Social Security that's experiencing an increase in disability claims. Private insurance companies are experiencing the same increase and it's for the same demographic reasons and that musculoskeletal problems are the leading cause of disability for both. Notice also that this increase is leveling out as the number of baby boomers entering their most disability prone years is being balanced out by the number entering their retirement years.

Insurance Companies Worry About Social Security's Operating Budget

     From LifeHealthPro, an insurance industry website:

Michael Astrue, commissioner of the Social Security Administrator (SSA), is begging Congress to give the agency at least as much funding as it has requested for fiscal year 2013.

The new fiscal year starts Oct. 1.

SSA has asked Congress to provide $11.9 billion in budget authority for 2013, up from $11.6 billion for 2012.

For private disability insurers, the statue (sic) of SSA's Social Disability Insurance (SSDI) program is a high priority

     It's a high priority for them since long term disability benefits paid by insurers is reduced by Social Security disability benefits. Slowdowns in processing and paying Social Security disability claims cost these insurance companies money. Perhaps it happens and I don't see it but I've never seen any sign that the insurance companies lobby for increased appropriations for Social Security. 

Does This Make Sense To You?

     Is there some tension, or perhaps self-contradiction, in this section of Social Security's manual?

Section 207 of the Social Security Act (42 U.S.C 407) states: “The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the monies paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”...

Any arrangement in which the claimant shares control of the funds from his or her benefit with a person or entity that has an interest in charging or collecting money from the claimant is an assignment-like situation that violates SSA’s policy.  ...

Some representatives are authorized by third parties to ensure that debts beneficiaries owe to the third parties are repaid immediately after the beneficiary starts to receive benefits. There is no assignment-like situation if:

• The representative has no financial interest in the beneficiary’s direct deposit account (i.e.., he is not named on the account and/or has no authority to direct the money in the account); and
• The representative is not charging the beneficiary a fee; and
• The beneficiary pre-authorizes (according to his financial institution’s policy) a withdrawal of funds from his account to repay a debt to a third party; but
• The representative did not obtain the pre-authorization from the beneficiary through deceit, coercion, or intimidation; and
• The representative gets confirmation from the beneficiary (oral or written) of the pre-authorization to withdraw the money from the account after the funds are deposited into the beneficiary’s account and before a transfer of funds is made to pay the third party debt. This confirmation is necessary because a beneficiary may have signed the pre-authorization before learning whether he will receive benefits and the amount of past-due benefits he will receive (i.e., authorizing the representative to take benefit funds before the beneficiary has had any chance to exercise control over the funds). The beneficiary also may have signed the pre-authorization without specifying the amount of money that the representative will withdraw from the account. This circumstance is different than other pre-authorizations (e.g., mortgage payments, loan repayments, investments, nursing home fees, etc.) because, in most cases involving pre-authorizations, the beneficiary has an ongoing relationship with the organization that is making pre-authorized withdrawals, the beneficiary knows the amount of money they are pre-authorizing, and those pre-authorizations occur continuously after the beneficiary is receiving regular benefits.

     Right. Assignments are forbidden unless there is an ongoing relationship with the entity to which you are making the assignment and the assignments continue after you start receiving benefits.
     In my opinion, this is indefensible. This was a Bush era policy that should have never happened and which should be undone as soon as possible. If Long Term Disability insurers want this section of the statute amended, they need to lobby Congress.

GENEX Gets Into PR Game

     For years Allsup has been using public relations to promote their business of representing Social Security disability claimant. The efforts often take the form of getting a newspaper or television station to run a story about a Social Security disability claimant who has had a long struggle getting on Social Security disability benefits and finally won with Allsup's help. Two can play that game. GENEX has just gotten the "I-team" at WBAL in Baltimore to run a story promoting GENEX's services.

     Both Allsup and GENEX are primarily involved in working for large insurance companies who administer long term disability (LTD) plans. The LTD plans have an offset for Social Security disability benefits so the insurers have a big interest in getting the LTD recipients on Social Security disability. They employ Allsup or GENEX to "represent" their LTD recipients before Social Security. I put "represent" in quotes since there are reports that Allsup and Genex are quite willing to sell out the claimants they "represent" by providing the insurance companies with any medical evidence that comes into their possession that could be used to cut off the LTD benefits of the people "represented." I do not know whether anyone else thinks that is a problem but attorneys think that is an unconscionable conflict of interest. 

     Allsup and GENEX are also interested in the retail trade which is why they get into PR, apparently figuring that it is cheaper than advertising. It must have been working for Allsup since they have been doing it for years. 

     By the way, Allsup's website boasts of a 98% success rate. Assuming that number is not a complete fabrication, that tells me that Allsup really hates to fly someone in to represent a Social Security disability claimant at a hearing. They mostly have to fly someone in since they are nowhere near big enough to have offices all over the country. They won't fly someone in for a merely gold-plated case. It have to be solid 24 carat gold. The good thing about that, as far as I am concerned, is that it dramatically limits their potential for expansion into the retail business.

A Little Light On LTD Carriers And The Companies They Hire To Represent Social Security Claimants

See the decision in Kisor v. Advantage 2000 Consultants, No. 10-1045-WEB (D. Kan. June 30, 2011), concerning a non-attorney group (Advantage 2000) hired by an administrator of a long term disability insurance (LTD) carrier (CIGNA) to represent a disabled person before Social Security and also to collect money from that disabled person if he was approved for disability benefits by Social Security. The Plaintiff's case was based upon provisions of the Kansas Consumer Protection Act. The Court held that the lawsuit was barred by federal pre-emption but that the Plaintiff could amend his complaint.  It is unclear what the effect of that amendment would be.

There is some interesting information in the order about the relationship between the insurer, CIGNA and Advantage 2000:

CIGNA pays A2K a flat fee for its social security representation services, and a contingency fee equal to an undisclosed percentage of the actual dollar amount repaid by A2K’s Social Security clients to CIGNA as a result of A2K’s COR services. A2K and CIGNA agreed that A2K would not disclose to its Social Security clients any information about how A2K is paid. ...

A2K’s Benefit Coordinator bonus program (“Bonus Program”) pays commissions to A2 Benefit Coordinators based upon the recovery of money from A2K’s Social Security clients for A2K’s LTD clients.

STD And LTD Coverage Plummets

From a press release:

According to new research¹ from The Hartford, 49 percent of U.S. workers have short-term disability insurance [STD] and 44 percent have long-term disability insurance [LTD]. This represents a drop of 6 percent and 3 percent, respectively, over last year’s survey in the number of Americans with the coverage that provides an income if one cannot work due to an illness or non-work related injury.

Officially Sanctioned

From a press release:

After proudly serving the long-term disability insurance industry for 15 years, Attorneys Ann Marie Beaudoin and Victor Arruda, Managing Partners of The Social Security Law Group (SSLG) are pleased to announce that, effective January 1, 2011, SSLG became the captive affiliate of Social Security Advocates for the Disabled®, LLC (SSAD). ...

Social Security Advocates for the Disabled® is a service provider for disabled people with a primary focus of advocacy and overpayment collection services on behalf of clients in their pursuit of Social Security Disability Insurance benefits. The company has a nationwide presence with offices in Atlanta, Dallas, Denver, Los Angeles and headquarters in Norwell (Boston), Massachusetts.

Through our trademarked Consolidated Overpayment Recovery Service (CORS®), we assist claimants in repaying LTD insurers, and help insurers recover SS overpayments in a mutually-agreed upon, stress-free manner. Our CORS® program is officially sanctioned by the SSA Office of Income and Security Programs.

Senate Hearing On LTD

The Senate Finance Committee has scheduled a hearing for September 28 to investigate the question Do Private Long-Term Disability Policies Provide the Protection They Promise? David Rust, Social Security's Deputy Commissioner for Retirement and Disability Policy is scheduled to testify. Mary DeBofsky, a Chicago attorney who represents long term disability claimants will also testify.

New Trial Ordered In UNUM Suit

That qui tam (or whistle blower) lawsuit claiming that UNUM , an insurance company which writes Long Term Disability (LTD) insurance and administers LTD plans for employers, was doing something abusive by forcing the people to whom it was paying LTD to file claims for Social Security disability benefits has been remanded by the First Circuit Court of Appeals. A new trial was ordered because the District Court had excluded evidence that the Federal Employees Retirement System (FERS) does essentially the same thing as UNUM.

By the way, retired Supreme Court Justice David Souter sat on the panel hearing this case. I hope he was more alert than retired Supreme Court Justice Lewis Powell was when I had him on a panel hearing a Social Security case I had appealed to the Fourth Circuit Court of Appeals many years ago.

What The LTD Carriers Think

From a press release:

The 2010 Long-Term Disability Claims Review, conducted by the Council for Disability Awareness (CDA) [an organization of companies involved in writing or administering long term disability or LTD policies mostly as part of employee benefits plans], reveals that CDA member companies paid more than $8 billion in ongoing disability insurance payments to individuals during 2009. ...

Despite the record number of people receiving disability payments, the 2010 CDA Claims Review reports that roughly 100 million workers have no private income protection insurance. In addition to the decline in the number of insured, fewer employers provided group long-term disability programs in 2009.

New claim applications submitted to the Social Security Disability Insurance (SSDI) program continued to surge in 2009. More workers are applying for SSDI claim payments than at any time in history, with new applications totaling 2.8 million in 2009 — an increase of 21 percent, and by far the most ever. New SSDI claims are projected to continue to rise dramatically in 2010. Over 5 percent of the workforce, or 7.8 million workers, were receiving SSDI at the conclusion of 2009.

At the same time, the approval rate for initial SSDI claims continued to decline. The approval rate fell to 35 percent in 2009, representing a continued steady decline from 52 percent 10 years ago. The CDA Claims Review found that 31 percent of individuals receiving private group long-term disability insurance benefits did not qualify for SSDI assistance ...

For a copy of The 2010 Long-Term Disability Claims Review, please visit http://www.disabilitycanhappen.org. ...

Note that insurance companies, which are notoriously tight fisted when it comes to paying LTD, are vastly more likely to approve a disability claim than the Social Security Administration. Note also that these insurance companies are saying that it has become more difficult to get LTD recipients on Social Security disability benefits. These insurance companies are concerned with getting their LTD recipients on Social Security disability since they reduce the LTD benefits by Social Security disability benefits.

New Forum For Social Security Disability Claimants

Allsup, which represents Social Security disability claimants mostly on behalf of long term disability insurers but which is also seeking individual cases, has just started a web forum for Social Security disability claimants.

One Down

From EM-09078 issued by Social Security last Friday:

Republic Bank and Trust (RBT) has notified SSA that it is discontinuing its Currency Connection Direct Deposit program. The program solicited SSA beneficiaries to have their payments deposited into an RBT master account, then distributed to various sub-accounts (check cashing services or other businesses). SSA has approximately 50,000 Title II and Title XVI beneficiaries that need to make alternative payment arrangements based on this change.

Now, if we could get rid of Allsup's ability to "Withdraw overpayment funds directly from claimant’s bank account using our patented electronic process."