Private Disability Insurance:

Employer-Sponsored Plans

HEHS-00-18R: Published: Nov 5, 1999. Publicly Released: Nov 5, 1999.

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Pursuant to a congressional request, GAO reported on private sector employer-sponsored disability insurance plans, focusing on the: (1) number of people in the private sector covered by short-term or long-term employer-sponsored disability insurance; (2) number of short- and long-term disability claims filed each year and the number of initial awards; and (3) average processing time for initial short- and long-term disability claims.

GAO noted that: (1) data on the number of people in the United States covered by employer-provided private disability insurance come from Bureau of Labor Statistics' (BLS) Employee Benefits Survey; (2) BLS data from 1996-1997 show that of the approximately 100 million employees who work in the private sector, about 36 million are covered by employer-sponsored short-term disability insurance, and 26 million have long-term coverage; (3) the percentages of employees covered in 1996-1997 by short-term or long-term disability insurance changed little from the percentages of employees covered in 1990-1991; (4) in regard to the data on disability claims, none of the sources GAO reviewed or contacted could provide industrywide information on either the number or processing time of such claims; (5) however, in a recent letter to Pension and Welfare Benefits Administration, the American Council of Life Insurance (ACLI) reported some limited information that addresses questions on long-term disability insurance claims; (6) in response to proposed regulations that would shorten timeframes for claims processing, ACLI conducted what it referred to as an informal survey of its members, who are leading writers of long-term disability insurance; (7) an ACLI staff person told GAO that ACLI sampled both large and small firms and that the response rate to the survey was 30 percent; (8) however, the staff person also noted that the companies that responded represented about 45 percent of the long-term disability insurance market as measured by premium income of the disability insurance in force; (9) ACLI reported that 78 percent of the long-term disability claims received in 1998 were initially approved and 22 percent were denied at initial application; and (10) ACLI reported that about half of the long-term disability claims received in 1998 were processed within 30 days and approximately 20 percent required more than 90 days to process.

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