By Scott B. Elkind, Esq.

As you are aware, disability insurers employ sophisticated actuarial data to determine the population’s risk of becoming disabled and calculate premiums accordingly. That is only the tip of the iceberg when it comes to how insurer’s rig the disability benefit system to reduce payment of disability claims.

One of the main tool utilized by disability insurers to limit disability claims (second only to their outright denial of claims) is the use of various offsets to monthly benefit payments. Once you are determined to be disabled by a private insurer, they will require you to apply for Social Security Disability benefits. They will go so far as to offer you assistance from their own vendors to provide such representation. Further coercion by some companies includes automatic reduction for your estimated benefit should you not comply with their filing and repayment promise requirements.

Why such insistence on claimants pursing Social Security Disability benefits? Under the disability plan, the insurer deducts your acquired Social Security benefits on a dollar-for-dollar basis from the monthly disability benefit. This represents a considerable savings. This savings is magnified when you learn that any dependent benefits achieved from a Social Security disability will also be offset although the insurer never paid a single extra cent toward assisting your children during the pendency of the claim. Not fair? Doesn’t matter. The plan is the plan is the plan. Only then are you starting to learn about the real “plan” the insurer had for you.

The representatives referred to by the insurers are not to be trusted. These companies only exist by acquiring cases from the insurance companies. The companies are their real client, NOT YOU. If the vendor acquires any information which can be utilized against you to deny your private disability claim, they will offer it to the insurer immediately so your benefits can be denied. Afterwards, the vendor will drop your case like a bad habit. It is shameful that this inherent conflict of interest is allowed to occur.

Should you proceed with the vendor and be successful in your case, then the vendor will coerce you to pay back your overpayment in full immediately. Do Not Listen To Them! Although you are required to pay back the benefits, doing so in full places you at risk of having your benefits denied and the insurer keeping your money. At this point, you must subscribe to the Second Golden Rule: “He who has the gold makes the rules.” You will instruct the insurer to take the overpayment from your future benefits. Better for you to budget yourself from funds in savings than to hope for payment each month from a greedy insurer who can deny your claim at will with little recourse to it.

For these reasons, there is no benefit to using the vendors referred to by the insurance companies. Do not hesitate to hire outside counsel to represent you in a Social Security case. There is no penalty for changing counsel and the vendors are required under the law to relinquish your case upon your request. There is only one attorney fee paid under the Social Security Regulations so you will not be charged twice for the same work. In most cases, the disability insurer will reimburse the attorney fee paid to a private counsel for their successful assistance in

your Social Security claim and creating an offset for the insurer. When you consider that you can hire a local attorney who knows the local judges as opposed to a vendor representative (usually not an attorney and not familiar with the requirements of your local administrative law judges), why would you continue to be represented by such companies?

But, hold on, as this is only the beginning to the offset traps set by the insurers in advance of your filing your disability case. The disability plan will also offset for other seemingly unrelated benefits. These include any other government disability plan (Railroad Retirement, State Disability, Civil Service, etc.), workers’ compensation benefits, retirement pensions (Social Security as well as private), third party recoveries from personal injury actions, among others. Each of these offsets presents yet another opportunity for the insurer to crawl back in your pocket and take back the money which you believed you were entitled to. As always, the big print giveth, the small print taketh away in these private disability plans.

As the insurance premiums are calculated based on the generation of offsets, the right to offsets have been upheld in the courts (Or, as the insurance industry touts, “ premiums are made more affordable by virtue of the offset provisions”). There have been very few instances when offsets have been disallowed (most notably, Veterans Benefits).

The lesson is clear: You need to be aware of the coordination of benefits in order to by fully cognizant of all offsets during the course of your disability claim. Obviously, the assistance of an experienced counsel would aid in this somewhat complicated process.