Most of you know that I am a pro-business, conservative kind of guy. But an ongoing experience with a powerful and wealthy insurance company opened my eyes to a practice that makes a mockery of the free market and is readily used by companies that don’t really need any breaks at the public expense.

Back when I was working, I was enrolled in a long-term disability insurance plan (LTD) as a fringe benefit of my job. I also elected to purchase more coverage on my own.  Many workers are enrolled in such plans, never expecting to use them, until they get sick or hurt or an old injury finally needs attention.  When spinal stenosis made getting around and doing the ordinary activities of living impossible without pain, I elected to get a spinal laminectomy and fusion. Because I had been previously disabled by a rotator cuff repair and had not worked because of the stenosis pain for six months, I was eligible for long term disability insurance at the time of the surgery.  This six month waiting period also coincides with Social Security’s six month waiting period.

So I applied. The carrier took their time in getting my first payment to me, as in five months. yes Sirree folks, 5 months. Fortunately we had savings, a working spouse to bring in income and the house was paid for. I also had to apply, per the contract stipulation, for Social Security Disability Income (SSDI). Time goes by. I get money more or less regularly, The benefit is “integrated” with any SSDI I might receive. I elected to have a reduced benefit, reflecting that I would get money, or might get money, from Social Security.

As is Social Security’s practice, they denied my application for SSDI. I appealed. They denied on appeal. Bear in mind, applying for SSDI requires filing out forms, not just by me, but by physicians, surgeons, and physical therapists. And if somebody has to fill out a form, somebody (or somebodies) else has to look at them. Understand this process ain’t cheap. Finally, in April 2018, I get a hearing.  I tell my story to an Administrative Law Judge. An expert witness in rehabilitation offers testimony about my condition.  Two years and ten months after my surgery, my claim for SSDI is approved and I get some money from the government,  covering a period from the date of surgery to the day I start receiving my Social Security Retirement Benefit at age 66.

Now, remember how my private insurance was integrated with whatever money I would get from Uncle Sam? That means I would have to send some of the money from Social Security to the private insurance carrier. That would represent the  “overpayment” the private carrier made to me, even though I elected to receive a reduced benefit. So by the insurance company’s calculation, they “overpaid” me by about one half of the settlement I received from Social Security. 

After my rage subsided and I realized 1) what was taking place was perfectly legal (and totally sleazy!),  2) I was merely functioning as an intermediary between the government and the insurance company, and 3) it was never really my money in the first place, I will write them the check.

Insurance is all about transferring risk and assuming of risk by another party. So the insurance company assumes the risk of financial loss by me pursuant to my disability, then transfers that assumed risk to the Social Security Administration (SSA).  What they paid out of their multi-billion  dollar  reserves was only about 21% of the actual claim. Uncle Sam via Social Security paid the rest.  Pretty slick, huh?

I suppose if Social Security didn’t have long term viability and solvency issues, this wouldn’t bother me. Or that there is an entire group of insurers, called reinsurance, where insurance companies can mitigate their loss potential, that these primary insurers could use. But then, again why should they, when they can legally sell an “integrated” plan, that enables SSA and the taxpayers to assume the risk?  Back when Social Security’s standards for disability were higher, this disability award would have been a rarity. But shrewd people have learned how to overcome the barriers to the money and to exploit the system. An integrated plan, that might have been acceptable decades ago, now is a burden to Social Security and to the taxpayer (that means you).