Disability Insurance

by Fickewirth Benefit Advisors
Filed under: Benefits

Most worker disabilities are not caused by work-related incidents, so they are not covered by worker's compensation insurance. In fact, 91 percent of disabilities are caused by common illnesses or health conditions such as childbirth, surgery, stroke, muscle and bone disorders.

These days, disabilities are becoming more common. Recent statistics cite that one out of every three workers will be out of work for three months or more due to a disability at some point during his career. However, most Americans are living basically paycheck to paycheck. So much so that seven out of ten households report that they could not make ends meet if the primary income provider were unable to work for six months.

The two most common solutions for lost wages due to disability are Social Security Disability Income (SSDI) benefits and employer-sponsored disability insurance. Social Security Disability Insurance (SSDI) is the tax-funded government-administered program that provides benefits to qualified disabled Americans. Among SSDI Disabled-Worker Beneficiaries, the average monthly benefit was $1,165 in 2014. Clearly SSDI is not designed to sustain a lifestyle, but rather to prevent disabled beneficiaries from living in poverty.

California State Disability Insurance Program
In 1996, the state of California mandated that employers participate in the State Disability Insurance (SDI) Program, funded by worker payroll deductions. This program replaces a certain percentage of wages for a specified period of time for workers who must stop working due to a qualifying illness or injury.

The California State Disability Insurance (SDI) program provides two wage replacement benefits: Short-term Disability Insurance (DI) and Paid Family Leave (PFL).

Short-term Disability Insurance
Short-term benefits are available to workers who are unable to work due to non-work-related illness or injury, pregnancy, or childbirth. According to the state's qualifying criteria, the worker must:

• Be unable to do regular or customary work for at least eight consecutive days
• Be employed or actively looking for work at the time he or she becomes disabled
• Have lost wages because of disability or, if unemployed, have been actively looking for work
• Have earned at least $300 from which SDI deductions were withheld during the previous work period
• Be under the care and treatment of a licensed physician/practitioner or accredited religious practitioner during the first eight days of disability
• Remain under care and treatment to continue receiving benefits
• Complete and submit a claim form within 49 days of the initial date of disability
• Have a physician/practitioner complete a medical certification form for the disability

– A nurse practitioner may certify to a disability within his/her scope of practice, however, he/she must perform a physical examination and collaborate with a physician or surgeon
– A nurse practitioner, licensed midwife, or nurse-midwife may complete the medical certification for disabilities related to normal pregnancy or childbirth
– A religious practitioner may certify only if he or she has been accredited by the Employment Development Department

Note, too, that an independent medical examination to determine the worker's initial or continuing eligibility may be required. A worker may become ineligible for DI benefits if or when he is no longer suffering from a loss of wages, is claiming or receiving Unemployment Insurance (UI) or PFL benefits, or failed to have an independent medical examination when requested to do so.

DI Benefits
The first seven days of every claim is a non-payable waiting period. After that, the Employment Development Department (EDD) calculates the weekly benefit amount based on wages the worker was paid in the 5 to 18 months before the disability claim was filed.

A DI beneficiary may collect this partial replacement income for up to 52 weeks. This period may be extended if benefits are reduced because the worker returns to work on a part-time basis. Note that workers may be able to receive both short-term DI benefits in conjunction with long-term Social Security Disability benefits issued by the federal government. However, DI benefits may be reduced by the amount of Social Security benefits.

In some cases, a worker could receive up to 100 percent of his normal gross weekly wages for the benefit period through a combination of DI benefits and employer wages derived from sick leave, bereavement pay, or back pay. However, the worker should not receive more than 100 percent of his normal gross wages through these combined sources. The claimant should provide his Notice of Computation from the DI or PFL program to the employer to ensure the appropriate amount is deducted from the regular wages and to prevent any benefit overpayment. Note that employers must apply with the state EDD for approval to integrate/coordinate wages; once this application has been approved, it may apply for current and future employees.

If a fulltime worker returns to work only part-time, he may qualify for benefits equaling the amount of wages lost, but not more than his weekly benefit rate. To determine the part-time benefits rate, the EDD subtracts the part-time wages from what the claimant earned on a weekly basis before his claim began.

Addiction Disability
DI benefits may be available for up to 45 days to qualified beneficiaries who become a resident of an approved alcoholic or drug-free residential rehabilitation facility; longer (up to an additional 45 days) if he remains a resident and his physician/practitioner continues to certify to the disability. However, DI benefits are not paid for admission to a residential rehabilitation facility resulting from the conviction of a crime, even if it is part of a plea bargain to avoid jail time.

Pregnancy
The usual disability period for a normal pregnancy is up to four weeks before the expected delivery date and up to six weeks after the actual delivery. However, a physician/practitioner may certify to a longer period if the delivery is by Cesarean section, if there are medical complications, or if the worker is unable to perform regular job duties. A pregnant worker may qualify for partial or full disability insurance benefits if her doctor certifies that she must limit the number of hours worked or modify duties due to the pregnancy. Post-partum benefits are limited to the period the new mom is actually disabled and incapable of doing her customary work; they are not extended for extra time off to bond with the new baby. However, a new mother who already has an active DI claim for maternity leave will automatically receive the form to transition from DI to Paid Family Leave benefits for bonding with her new baby.

Paid Family Leave (PFL)
The California State Disability Insurance Program also provides Paid Family Leave benefits to eligible workers who need to take time off of work to care for a seriously ill child, parent, parent-in-law, grandparent, grandchild, sibling, spouse, or registered domestic partner, or to bond with a new child. According to the state's qualifying criteria, the worker must:

• Be unable to do regular or customary work for at least eight days due to the need to provide care or to bond with a new child (in connection with the adoption or foster care placement of the child)
• Be employed or actively looking for work at the time family leave begins
• Have lost wages due to this criteria
• Have earned at least $300 from which SDI deductions were withheld during his previous work period
• Submit a claim form within 49 days of the first day of family leave
• Have a medical certificate completed by the care recipient's physician/practitioner

To qualify for benefits, the serious health condition must be an illness, injury, impairment, or physical or mental condition of a patient that involves inpatient care in a hospital, hospice, or residential medical care facility. Qualifying conditions do not include cosmetic treatments, the common cold, influenza, earaches, upset stomach, minor ulcers, and headaches other than migraine, unless complications arise.

A worker may become ineligible for PFL benefits if or when he is no longer suffering from a loss of wages, is claiming or receiving UI or DI benefits, or is receiving workers' compensation benefits at a weekly rate equal to or greater than the PFL rate.

Employer Voluntary Plans (VP)
The California state law does allows an employer (or a majority of employees) to apply for approval of a Voluntary Plan (VP) for the payment of Disability Insurance and Paid Family Leave benefits in place of the mandatory State Disability Insurance coverage. However, coverage must provide all the benefits of SDI, at least one benefit that is better than SDI, and it cannot cost employees more than the state coverage plan. To be approved for a voluntary plan, the employer must post a security deposit with the EDD to guarantee that it meets all obligations.

According to a 2015 survey of more than 500 small businesses (10 to 99 workers), most benefits administrators believe that long-term disability (LTD) benefits serve the interests of both their company and their workers by reducing company costs and improving productivity by getting employees back to work faster. However, that same survey revealed that less than half (47 percent) offered long-term disability insurance in 2014.

In addition to California, there are presently only four other states (and Puerto Rico) that have state-mandated disability insurance requirements: Hawaii, New Jersey, New York and Rhode Island.

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