About WISHRM

A Look Under The Hood

Group disability coverage is often sold as a commodity. If you ask for a group long term disability (LTD) plan that has a 60% benefit to $5,000 monthly maximum with a 90 day wait,  that is often exactly what you get.

But group disability is a complex insurance product with definitions that may be used to make a disability contract payment more restrictive. And, not having the proper disability coverage for the members being insured can be financially devastating for them.

When looking at a group disability plan, you need to look at both the definition of disability as well as the definition of earnings. Having both of these defined properly in your plan gives the members you’re insuring the opportunity for the best financial outcome in the case of a disabling injury or illness.

Definition of Earnings
Most contracts include the definition base wage as default. But, if you have members whose earnings include commissions, overtime, or bonuses, their disability payment will be calculated on base wage only. For example, a sales person with an annual base salary of $24,000 but an earnings of $100,000, including commissions, would have to make significant changes in their life style if their disability contract had a base wage earnings definition. Similarly, if overtime and/or bonus is a regular form of compensation for some members.

Base wage doesn’t need to be your only definition. Some disability carriers allow you to include commissions, overtime, and bonus or a one or two year average of W2 in the definition of earnings. You will also want to make sure the carrier has a strong owner’s definition of earnings.

Definition of Disability
This is where using simple words like “and”, “or”, “some”, “a”, and “all” can have an effect on if a claim is considered eligible for payment.
Do you need a “functional and financial loss” or a “functional or financial loss” to qualify for disability benefits?

Is the definition based on one’s own occupation or any occupation? If it’s based on one’s own occupation, how long will the benefit be paid? Are materials duties defined by, “a”, “some” or “all”? What is the occupation definition after the own occupation period ends, any occupation?

If the definition is defined as any occupation, is it based on national economy? Do you see the words total, partial, or residual?

Be aware that contracts are not all the same, even with the same carrier. Whether you are considering coverage or reviewing the coverage you have, you need to go deep under the hood to make sure the group disability contract is appropriate for the member population you want to insure. 
 
Pat Kelly
Healthcare Reform Compliance Director
Hausmann-Johnson Insurance
Pat has been with Hausmann-Johnson Insurance since 2011, and has over 30 years of experience in employee benefits. He is passionate about building a relationship with clients beyond just being a product vendor. He forms client connections through honest communication, continuous education, and always doing what he says he is going to do.
 
Pat works with employers of all sizes, and with both fully insured and self-funded medical clients, including defined contribution, HRA, HSA, and FSA. He also works with clients on their disability, life, dental and vision needs.
 
Pat graduated from the University of Wisconsin – Madison with a B.S. in Recreational Resource Management. Pat was a UW Badger football player from 1976-1978, as well as a professional rugby league player in England and France from 1979-1980. He still loves being active year round and shares activities such as biking, skating, skiing and snowshoeing with his family.