Employees may need to look out for their own interests as employers transition away from traditional long-term disability (LTD) plans.
In a recent article in a pensions and benefits industry publication, a representative of insurance company Wawanesa explained how its new “hybrid disability” plan could cut the cost of LTD premiums by as much as a third compared to a standard LTD policy. But savings like these typically come with their own cost in terms of the coverage available to insured workers.
As a lawyer practising in LTD claims, I expect to see more of these policy innovations as sponsors seek to control costs. However, I worry that employees are losing out as the rules of the game are changed without them even knowing.
Here are a few questions employees should be asking about their LTD policies.
How does coverage work under a traditional LTD plan?
It’s important to remember that the wording and terms of each LTD policy will differ, but for many insured people — especially those covered by group policies — the test for LTD coverage in the first two years after an accident requires that workers are totally disabled from performing the essential tasks of their “own occupation” to receive benefits.
Beyond the two-year mark, the policy wording usually requires an insured person to be totally disabled from “gainful employment” in “any occupation.” Some policies will spell out a definition for other kinds of suitable work, but in general, this includes jobs for which a person is qualified, or may become qualified, based on their training, education and experience.
In the clearest of cases — those involving catastrophic injuries and seriously debilitating or life-shortening conditions — the switch to the stricter “any occupation” test makes no difference to eligibility.
For LTD insurers, the bulk of their costs are incurred defending terminations in the grey-area cases involving less serious ailments, where arguments and assessments — both medical and vocational — focus on the ability of the insured person to do any kind of work in the coming years.
Injured workers also have an underlying duty to mitigate their damages, which they can meet by seeking appropriate medical treatment, abiding by the recommendations of their treating practitioners and by making reasonable efforts to return to work in an appropriate setting.
How does a hybrid plan differ?
Based on the description offered in the industry publication I mentioned earlier, Wawanesa’s hybrid policy behaves the same as a traditional LTD plan for the first two years of coverage.
However, once the switch is made to the “any occupation” test, further coverage is only available to workers diagnosed with one of 33 defined conditions listed by the insurer.
A closer look at the list reveals why the premiums for the hybrid policy are so much cheaper — for the most part, these specified conditions — including Alzheimer’s disease, cancer, heart attack or stroke, Parkinson’s, hip or knee replacement surgery and loss of limbs — are ones that we would typically see in at play in the “clearest cases” I mentioned earlier, where there is little doubt about the worker’s inability to work again.
By narrowing coverage to a defined list of conditions, insurers can cut costs due to greater certainty about when they will need to pay out benefits. However, the savings come at the expense of employees with any other medical problem that prevents them from working, including conditions such as depression, anxiety or chronic pain.
What should I do when my LTD plan changes?
No matter how many similarities exist between LTD policies, your relationship with your insurer is ultimately governed by your individual policy and the specific terms outlined in that contract.
To know exactly where you stand, you need to read and comprehend the terms of your policy. Having read more than my fair share, I know that’s easier said than done — especially for someone without a law degree.
If your plan sponsor has changed insurance providers or has adopted a new, cheaper policy, you may wish to investigate further to find out what has changed and how it will impact any claim you make.
Some employees may even consider purchasing additional coverage to fill in any gaps left by the switch to a new policy.
If your LTD benefits have been terminated or you just need help understanding your rights under a new or existing LTD policy, feel free to contact me or another member of the team at Edwards Pollard for a consultation with a long term disability lawyer.
