Two whistleblower lawsuits have been filed recently against insurers, faulting them for requiring unnecessary and repeated disability applications with Social Security before they’ll pay out any benefits. One person says her disability insurer, the Unum Group—which was only paying her $50 a month for a temporary injury she was almost certain to recover from—called her 10 times to ask her about her Social Security disability application. The woman told the New York Times “she did not need or want money from Social Security, and did not think she was entitled to it. Her doctors had told her she would recover, and Social Security is limited to people whose disabilities are total and permanent.”
Even if you are rejected by Social Security, you can apply for benefits again and again, which is what both lawsuits claim insurers are taking advantage of to avoid paying benefits. The suits cite the federal False Claims Act and contend “that the insurers were knowingly committing fraud.”
The insurers have claimed this is just business as usual and it’s their policy to require everyone to apply—a Cigna spokesperson disingenuously says, “Our goal is to ensure that each member receives all of the benefits to which he or she is entitled.” But a former Gigna employee who’s now a plaintiff in one of the suits says insurers abuse the practice by routing everyone to Social Security even when it’s obvious they’ll never qualify.
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.
Check out the article for another story of a woman who has been forced to apply for disability three times in order to keep receiving her insurance benefits, even though it’s self-evident her injury isn’t permanent or life-threatening. According to a former Social Security administration, each time she has to re-apply for disability, it costs the administration an average of $1,180.
“Insurers Faulted as Overloading Social Security” [New York Times]