How Do ERISA STD and LTD Benefits Work?

By Scott E. Davis, Disability Attorney

If you work for a company you may have employee benefits such as disability, health, life insurance, 401K, and paid time off.  One benefit that people often do not understand, is their short and long term disability policies.  Typically, your employer will pay some or all of the premiums to provide this benefit for you.

 Let’s talk about short term disability benefits first.  Short term disability benefits are exactly what they suggest.  If you have a medical condition that is disabling and preventing you from doing your job, benefits will generally begin after a waiting period (i.e. generally 7 days).  The maximum period for benefits may vary, but it is generally 180 days.  Although the definition of disability in the policy may vary, at a minimum, you need to prove that you are unable to work in your prior occupation for your claim to be approved. Depending upon the policy, short term disability usually covers a percentage of your salary which could be anywhere from 60-100%.  Because there is a shorter time frame that benefits are paid, insurance companies often approve claims much easier than they do if it is a long term disability claim where the company may be undertaking significantly more liability in monetary terms.  It is also generally easier to get your short term disability claim approved because there are not as many exclusions and limitations which would prevent your claim from being paid as there are in a long term disability policy.  Most short term disability policies will cover every type of medical condition that is documented by your physicians to be disabling and preventing you from work, including issues which may arise during pregnancy.

Make sure you know the time frames, otherwise your claim could be denied.  In other words, don’t wait 30 days after your disability begins to first notify the insurance company.

It is important for you to obtain a copy of your short term disability policy from your employer before your planned leave so you understand the specific requirements.  Most policies require that you provide notice to the insurance company, known as a proof of loss, within a specific time frame of when your disability began, this time frame could be as short as 7 days after your first day of missed work.  Make sure you know the time frames, otherwise your claim could be denied.  In other words, don’t wait 30 days after your disability begins to first notify the insurance company.  You will need to file an application with the insurance company and there will be various forms that will need to be completed which usually always includes an Attending Physician statement which your doctor will need to complete to support your claim.  Although it is possible your claim could be approved without your doctor completing this form, it is unlikely, and most companies will want all of their requirements met in order to pay your claim.  You will need to plan on a period of time that will elapse, before you begin receiving benefits; thus, your claim will likely not be paid within several days to a week of your leaving work.  It will likely take longer than that.

If you are unable to work for an extended period of time, generally more than 180 days, you will have a claim for long term disability if your company provides that benefit.  It is important to note that there are several distinctions between short and long term disability policies and, most importantly, how the insurance company will scrutinize your long term disability claim.  Many people make the mistake of assuming that since it is the same insurance company insuring both policies, and because their short term disability claim was approved for the maximum period, that their long term disability claim will be easily approved as well.  This reasoning makes sense, since it is the same company, and generally the same definition of disability (i.e. you are unable to do your occupation).  But the value of the claims, potentially, are significant, and insurance companies are significant.  The definition of disability in the long term disability policy for the first 12, or most likely 24 months, is very similar to the short term disability policy.  You simply need to prove that you are unable to do your prior work for your employer.  However, that is where the similarities tend to end, because long term disability benefits can potentially pay you until the age of 65, or your normal social security retirement age.  Because of the potentially long period of time, you may be unable to work, many claims may expose the disability company to hundreds of thousands of dollars in liability over that timeframe.  As a result, they scrutinize long term disability cases much more closely and claims are often denied when the same insurance, using the same definition of disability, just paid you all of your short term disability benefits.

Insurance companies are well aware of this change in definition and they will always review a claim during those time frames and, very often, it is the excuse they use to terminate benefits. So, beware.

Many long term disability policies also have limitations and exclusions that give insurance companies a way out of paying the claim.  For example, in every policy the definition of disability will change from an easier “own occupation” definition to a much more stringent “any occupation” definition after you have received benefits for 12 or 24 months.  For the first 12 or 24 months, depending upon the policy, you need to prove that you are unable to do your prior job (similar to the short term definition).  However, after 12 or 24 months, the definition of disability will change and you will need to prove to be unable to do any occupation that may exist within the national economy.  Insurance companies are well aware of this change in definition and they will always review a claim during those time frames and, very often, it is the excuse they use to terminate benefits. So, beware.

Other limitations include filing a long term disability claim based on a medical condition that is called “pre-existing.”  This limitation saves insurance companies a lot of money every year.  It works the following way: if you file a disability claim within the first 12 months of having disability coverage, the company will review your claim for the medical conditions you say are disabling for the 3 month period of time before you became covered by the policy.  The policy is written very broadly so that it excludes coverage for any medical conditions that you complained of symptoms of, took medication for, treated with a doctor for, had any procedures or tests for, or that a reasonable person should have known that they needed to consult with a doctor.

More and more policies are adding a requirement to limit liability that you provide objective medical evidence of your diagnosis, and the limitations that those conditions cause.  This limitation also saves insurance companies an enormous amount of money every year by not paying legitimate claims that unfortunately are not documented with objective medical findings.    It is critical that you get a copy of the long term disability policy before you file your claim to understand the specific limitations and exclusions so that you can provide that information at the beginning of your claim and hopefully avoid a denial.

Yes, it is legal for an insurance company to limit specific medical conditions.

Many long term disability policies also limit benefits for certain medical conditions such as psychological disorders, fibromyalgia, chronic fatigue syndrome, multiple chemical sensitivity, or any medical condition where you complain of pain or fatigue but there is not a clear explanation for those symptoms.  Yes, it is legal for an insurance company to limit specific medical conditions.

In summary, the first step in obtaining your short and/or long term disability benefits is to obtain a copy of the policy so you understand the requirements and what you must prove.  Many people find the policies complex, lengthy, and difficult to understand.  If you find yourself in this position, you are not alone.  Please call our office at(800) 588-1710 to consult with us, even before you file your claims, so that we can give you specific information related to your claim which will help you avoid common mistakes and problems that may lead to your claim being denied.

© 2015  Scott E. Davis, Disability Attorney