By Jim Jacobsen, Vice President of Product, CIGNA
Nearly 1 in 5 people in the United States will be disabled for a year or more during their working years, according to the Life and Health Insurance Foundation for Education. That’s why it’s so important to have the income protection of a disability insurance plan. In today’s economy, though, many employers are faced with tight benefits budgets and may not be able to fund, or fully fund, a disability insurance program for their employees.
For most people, the easiest way to get disability coverage is through the benefits package their employer provides. Luckily, voluntary plans offer employers the funding flexibility they may need to make these benefits available to their employees. For disability plans, employers can provide options such as a:
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traditional voluntary plan, where employees pay for the entire coverage, and
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durational core buy-up plan where employees pay a portion of their disability coverage.
Options to Consider
When faced with an unexpected illness or injury, people are often out of work for several weeks, or in some cases, months. According to the American Payroll Association’s 2007 Getting Paid in America survey, 67% of respondents would find it difficult to meet their current financial obligations if their paycheck was delayed just 1 week. Disability insurance provides important income protection to meet everyday living expenses.
Short-term (STD) and/or long-term (LTD) disability coverage can and should fill important protection needs. Since disability coverage is critical for people, offering it on a voluntary basis can be an affordable solution for both employers and employees. Here are alternative options:
- Voluntary mid-term disability (MTD) coverage: This flexible option helps protect income until the employee becomes eligible for Social Security Disability Insurance (SSDI) benefits. It is a distinct blend of a longer waiting period than STD, and a shorter coverage period than LTD. MTD also provides proactive assistance to help employees secure SSDI benefits, while protecting retirement savings.
- Durational core buy-up plan: This option maintains disability coverage but relies on employees to share in the costs. Employers fund a basic level of disability coverage—or core benefit—at a reasonable cost for the duration the employers choose, for example, 3 years. Employees then have the ability to purchase extended benefit duration, for example, up to age 65. This is a cost-saving option for employers and an attractive benefit for employees, too. It is most suitable for blue and gray collar groups, such as those in plumbing, heating, or roofing, which might have low buying power for their employee benefit programs.
Employers can make this benefit more attractive to employees by offering them the ability to purchase the additional buy-up coverage with post-tax dollars as opposed to pre-tax dollars like most benefit plans. This means that if and when an employee is faced with a disability, he or she will not be taxed on the income they receive.
5 Features Employers Should Look For
- It’s very important for employees to understand why they need disability coverage and what their disability plans offer. Employers should look for plans that provide pre-enrollment communications.
- Employees also appreciate an easy enrollment process, secure online enrollment, automatic payroll deduction, and telephonic support throughout the enrollment period.
- Administrative ease is often top of mind for any employer considering a voluntary disability plan. Look for online benefits administration and billing, such as online bill submission and review of coverage and underwriting status, plan details, directories, reports, manuals and forms, and updated status on individual employees.
- Post-enrollment follow-up, such as delivering confirmations to employees with additional information about the products in which they enrolled and access to knowledgeable specialists through toll-free customer service.
- A carrier that offers a comprehensive product portfolio so your organization can expand its benefits program easily and add additional coverages, such as dental or vision, to meet employee needs as they evolve.
By making disability coverage available through employer or employee-paid plans, employers can offer a comprehensive suite of products, manage their budgets, and demonstrate their commitment to their employees’ needs.
Jim Jacobsen has more than 20 years experience in the group insurance industry and is responsible for product development initiatives for the group vision, life, accident, and disability plans at CIGNA. He is located in Philadelphia and can be reached at james.jacobsen[at]cigna.com or 215.761.1277.