The New York Times - April 1, 2008

Are Insurers Clogging Social Security System?
By MARY WILLIAMS WALSH

The Social Security system is choking on paperwork and spending millions of dollars a year screening dubious applications for disability benefits, according to lawsuits filed by whistle-blowers. Insurance companies are the source of the problem, the lawsuits say. The insurers are forcing many people who file disability claims with them to also apply to Social Security — even people who clearly do not qualify for the government program.

The Social Security Administration defines "disabled" much more stringently than the insurers generally do, so it rejects most of the applications, at least initially. Often, the insurers then tell their claimants to appeal, the lawsuits say, raising the cost. Insurers say that requiring a Social Security assessment is a standard practice and that there is nothing wrong with it. The policies they sell allow them to coordinate their benefit payments with others to make sure no one is paid twice. Thus, if a disabled person can get benefits from somewhere else — such as workers’ compensation, a disability pension or Social Security — the insurance company can reduce the benefit check by that amount.

The flood of referrals, however, is making it hard for Social Security to respond to people who are truly disabled, said Kenneth Nibali, the former top administrator of the Social Security disability program. "Anybody who is forced to come into this system, and who doesn’t need to be there, is affecting someone else," said Nibali, who retired in 2002 and is serving as an expert witness for the plaintiffs. "They’re holding up cases for the people who have been waiting for months and years, who in many cases are much worse off."

Already, the disability program is in much worse shape financially than the old-age portion of Social Security. It is projected to run out of money in 2026, 16 years ahead of the old-age trust fund. The disability caseload is also expected to grow as the work force ages, because recovery time increases with age. The number of people waiting for hearings on their claims by an administrative-law judge has more than doubled since 2000, and the average wait has grown to 512 days in that time, from 258 days.

Finally, disability insurers tell many claimants to appeal Social Security’s rejections again and again, until some are finally accepted. Then the insurers can take those people off their rolls, shifting the cost to the government.

Whistle-blowers have filed lawsuits against Unum Group, America’s largest disability insurer, and Cigna, another large one. Both companies said their claims practices were fair, legal and consumer-friendly. The Social Security Administration is not an active participant in the lawsuits and declined to comment.