Disability insurers sued for robbing Social Security

A tip of the hat to Tort Burger – Hold the Reform for this story, which is but another chapter in the age-old saga of private insurance companies using a pool of public money as their own private slush fund.

You’re a careful and responsible person, so to protect yourself and your family you buy disability insurance. You pay an insurance company, say, $150 per month (from your own bank account or through payroll deductions) in exchange for the company’s promise to pay you a set amount of benefits per month, say $1,000, in the event you become “disabled” as the policy defines that term.

You’re involved in a car crash. Your injuries aren’t permanent or especially severe, thankfully enough, and the doctors confidently predict a full recovery. But you’ll be off work for six months or so, and after your two weeks vacation pay is exhausted you’re outta luck income-wise.

Thank goodness you have that disability insurance! The $150 you’ve been paying every month for the last ten years adds up to a substantial chunk o’ change, but dammit, you now need the coverage and you have it!

You submit the necessary claim forms and medical documentation to the insurance company, receive notice that your first benefits check is on the way, and all it right with the world. Shortly thereafter, though, you get a phone call from some jagoff at the insurance company. The conversation might go something like this:

Insurance Company Jagoff: “Have you applied for Social Security disability benefits?”

You: “No.”

ICJ: “When do you plan on applying?”

You: “I don’t.”

ICJ: “Why not?”

You: “Well, I thought about that soon after my accident and talked it over with a lawyer. He said that filing a Social Security claim would be a waste of time, effort and money. Seems I don’t meet the agency’s rather stringent criteria for disability benefits, and in any event I’ll probably be back to work long before the agency rules on my claim. The money I’m getting under my disability policy will do me just fine until I’m back on the job.”

ICJ: “We disagree.”

You: “‘Scuse me?”

ICJ: “We disagree. We’ve reviewed your medical records and feel you have a good chance of getting Social Security benefits.”

You: “I apologize in advance for saying this, but you’re a bean-counting cubicle jockey at an insurance company. The guy I talked to is a lawyer who’s limited his practice to Social Security disability claims for, like, twenty years. Who am I supposed to believe?”

ICJ: “Never mind that. File the Social Security claim.”

You: “Huh? Why?”

ICJ: “Haven’t you read your policy? If we tell you file a Social Security claim, you have to do it.”

You: “Oh. I didn’t know that.”

ICJ: “Well, now you do. When are you going to file?”

You: “Can’t you make an exception? I mean, it’s pointless. The lawyer says I have no chance of success.”

ICJ: “File the claim.”

You: “In fact, it’s worse than pointless. It’s affirmatively harmful. People are always yammering on about how the Social Security system is heading for a complete meltdown. Won’t it needlessly cost the agency money to process my worthless claim?”

ICJ: “File the claim.”

You: “But . . .”

ICJ: “File the goddamn claim.”

You: “You’re a douchebag, dude.”

ICJ: “So’s your momma. File the claim.”

So what do you do? If you file the claim, you’re boned. You’ll expend time and effort on a futile exercise to no good end. You’re going to lose.

And there’s no benefit to you even if you win. A provision in your disability policy says that your benefits get reduced by any amount you get from Social Security. The policy’s coordination-of-benefits provision ensures that no extra money reaches your pocket. Thus, the insurer is the sole beneficiary of a successful claim.

If you don’t file the Social Security claim, you’re standing-directly- in-the-path-of-a-speeding-goddamn-bus boned. You’re in breach of the policy provision requiring you to pursue a Social Security disability claim upon the insurance company’s request. As a result, the insurance company has a contractual right to terminate your benefits payments. No Kraft American Singles for you and the family for the next few months.

As the New York Times details here, disability insurers do this all the time. As a result, the Social Security system is clogged with insurance company referral claims that have little or no merit, and people with righteous disability claims can’t get their benefits. The average wait time for a hearing on a Social Security disability claim has skyrocketed from 258 days in 2000 to 512 days now. It costs taxpayers about $1,100 to process a Social Security disability claim to an initial decision. If the claimant loses, and he most always does, the insurance company will insist that he appeal. Refuse to appeal, lose your policy benefits. At the end of the initial determination and the first two levels of intra-agency “appellate” review, we’ve spent about $4,800 on the claim.

The benefits of this aggravated and egregious fraud to insurers are pretty extensive. As noted above, an insurer can lawfully refuse to pay if the insured doesn’t file a Social Security claim, and in the event of a successful claim the insurer gets a setoff.

The big payoff shows up in the reserve system. Insurers are required to set a “reserve”, or estimated payout amount, for each claim. Insurance companies make their money not through collecting premiums but rather through investments. Funds in “reserve” can be invested only in very low-risk, low-return ways. The idea, then, is to keep the reserves as low as possible to free up more capital for high-return investment. Sending EVERY CLAIMANT to the Social Security Administration facilitates that by allowing insurers to reduce their reserve by the amount of the “anticipated” Social Security recovery. I josh you not.

Anyhoo, a group of private citizens have filed lawsuits against UNUM Group and CIGNA, two of the big guns in disability insurance. The lawsuit is based on the federal False Claims Act (“FCA”), 31 U.S.C. § 3729 et seq. FCA’s civil remedy provision — a variant on the ancient common law writ of qui tam — authorizes regular folks to file suit against and recover damages from persons who defraud the government. By and large, any money recovered in such a lawsuit belongs to the government. The hook that encourages private enforcement is that plaintiff gets a cut, ranging from fifteen to thirty percent. A successful plaintiff also gets attorney fees, and the statute includes a treble damages provision. Nummy nummy num!

One of the statutory bases for liability is “knowingly present[ing], or caus[ing] to be presented, to an officer or employee of the United States Government . . . a false or fraudulent claim for payment or approval[.]” 31 U.S.C. § 3729(a)(1) (emphasis added). UNUM and CIGNA are outraged — OUTRAGED — at the suggestion that they knowingly require their insureds to submit bogus claims to the Social Security Administration. But the lawyers representing the plaintiffs say they’ve crunched the numbers and can show that the defendants have sent tens of thousands of groundless claims to the Social Security Administration over the past ten years, costing the agency (and us) hundreds of millions of bucks.

We here at Subject to Complete Defeasance — all one of us — will be following these cases closely. Here’s hoping that UNUM and CIGNA get force-fed a big, fat, astronomically costly shitburger.

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  • An-Observer  On April 4, 2008 at 5:07 pm

    The very same UNUM Corporation appears to have severely misrepresented its “corporate expertise” and managed to “convince” some in current UK Government that this company is qualified to manage and control [directly or indirectly] the rapid reduction of incapacitated state welfare claimants, as well as “help” reform the NHS…

    Based on UNUM’s corporate history, this is totally unbelievable but sadly true. It gets even more interesting:-

    UNUM has been paid millions of pounds already to “help” the UK Government “reform welfare” and boasts it was the “initiator” of the “Welfare Reform” initiative, as well as the infamous “Pathways to Work” program.

    In addition, UNUM gets to sell exclusive training and certification of “health care assessors” to act as modern day “SS Officers” to “evaluate” British citizen’s eligibility to claim fundamental state welfare benefits, baseline financial support, in times of critical need due to accidental injury or serious illness.

    UNUM clearly supports the total demise of the British NHS in order to allow it to sell even more private insurance policies.

    According to UNUM Professors disease does not exist, it is all in the mind and work is really good for you. This is a relatively unchallenged new non-medical “bio-psycho-social” model/theory invented by Dr. Mansel Aylward [An ex Government DWP employee] now a Director of UNUM UK but a theory purchased and fully accepted by the current UK Government.

    Perhaps another huge UNUM fraudulent nightmare is about to happen.

    First UNUM scammed the American public on mass [Fined millions of dollars fr getting caught cheating and Court ordered to re-assess almost 300,000 unfair American denied claims]. Now UK citizens are about to learn of the ruthless, immoral, unethical UNUM Corporation, first hand! Anything goes to make a buck…

    When will the US legal system actually prosecute the UNUM Corporation under the RICO ACT and jail the corporate criminals???

    A world without the UNUM Corporation would be a much safer and better place for all…and if “disease does not exist” and disability and/or chronic illness is “all in the mind” why on earth would any intelligent person need to buy a short/long term disability or Income Protection insurance policy from the UNUM Corporation in the first place?

    Orwell would be very proud..

    What a classic example of “doublespeak”, which by all historical UNUM accounts will lead to additional corporate fraud committed on another grand scale in order to boost its very troubled corporate profit and all done at the expense of deceived “policyholders” and their innocent families who blindly trusted in the UNUM Corporation for “insurance coverage”.

    Take Heed – Let no man deceive you!

  • Alliteration  On April 9, 2008 at 11:09 am

    CIGNA has got to be the worst health insurance company I’ve ever dealt with, and that’s saying a lot.

  • genghishitler  On April 9, 2008 at 11:40 am

    Yep, CIGNA’s pretty damned abominable.

  • Tomasz Stasiuk  On April 11, 2008 at 9:07 am

    Yup. The reason why many Long Term Disability (LTD) insurance companies make you file for disability is that the language of the policy often states, that if you get for every dollar you get from Social Security, that is a dollar the LTD carrier does not have to pay.

    So, even though you paid the insurance company to cover you, the insurance company may end up paying nothing if you get your Social Security benefits.

    Also, if you are paid LTD benefits while you are waiting for your Social Security case to be decided, and you later win, you may have to pay back the LTD insurer for the money they paid you.

    Keep in mind that all insurance policies are “creatures of contract.” That is, while there may be some regulation regarding what the policy says, it is difficult to generalize about policies. You have to read the policy to know what it says. You cannot just assume it says one thing or another.

  • genghishitler  On April 11, 2008 at 9:26 am

    Thanks much for your comment, Counselor Stasiuk! Please feel free to stop by any time.

  • Steve  On June 24, 2008 at 10:17 pm

    Often the insurance policy allows the insurance company to reduce the amount of benefits the SSA pays to the insured. Thus, it is in the insurance companies’ best interest for you to get Social Security.
    Maybe this will help someone–thanks in advance for your info!!
    Often the SSA makes its claim determination long after the insurance company has paid benefits. The policies usually allow the insurance companies to offset retroactively the Social Security benefits. Paying the LTD benefits before the Social Security benefit is determined results in an overpayment. Since the insurance policy requires the claimants to repay the overpayment the insurance companies want to recover the money. However, the United States Supreme Court in Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708 (2002) (See PDF page 391), issued a ruling that made it extremely difficult to sue a claimant who did not repay the overpayment.

  • Lois D. Michael  On December 28, 2008 at 8:14 pm

    This last paragraph is what happened to my husband. He received insurance from the insurance co through his job starting Dec. 20, 05 for about 1 year. He returned to work in Feb of 07. After he returned to work, the insurance comp. told him to apply for SSI and he won, the disability lawyers were lawyers they suggested. Now we are reading that the the award that he received has to be sent back to the insurance company. We feel that this is an unfair practice of the insurance companies, just to recoup monies they paid out to the insured. I feel that they are causing the insured to file false claims. What can de done about this. Just like the person in the last paragraph Steve, We feel that we should not have to give the award back to the insurance company.

    What can we do.

    I can be reached at

  • Linda  On April 17, 2009 at 9:40 am

    I’m in the same boat with Aetna. Feb 2006 I had recurrent cancer and started receiving LTD from my former employer through Aetna. They (Aetna) referred me to ALLSUP to start the SSDI process. Two weeks ago I was awarded my disability retroactive to Aug 06. ALLSUP called and wants all but 1000.00 of the money back. I knew I had to pay the offset back which I calculated to be around 13,000. I had no idea they were going to hit me up for almost the entire award. Can I refuse to pay it back?? I’m feeling totally abused and lied to by Aetna and ALLSUP. I only figured on paying back the difference between what Aetna paid me and what SS is going to pay me!!! Can they sue me?

  • Vee  On July 25, 2009 at 3:35 am

    I too had a disagreement with Aetna about my LTD–for one thing, after about 8 months on disability, one of their little desk jockeys 3000 miles away decided without consulting me or my doctors that I was no longer sick and stopped my LTD payments! That was my only source of income as SSD had not started yet, it can take up to a year to get SSD payments. Then I had no income for 5 months while I appealed to Aetna–lost my house, lost my car, my belongings, and my mental health over that episode. Aetna even sent me to one of their own doctors to agree with them, he did not, he said that Aetna was wrong and had made me even sicker by pulling the financial rug out from under me. So Aetna started paying me again. I was able to, despite being even sicker by then, find a new place to live and move and find a new car, very, VERY rough time. And then SSD kicked in with a lump sum which I kept, because Aetna had cost me my house and $15K down payment, my $10K car and assorted other things that they had not offered to pay me back over despite what their doctor told them.
    Well, their answer to that was to stop payments to me all together—that is what they do if you don’t give them the SSD money back, they quit paying you, it has been 6 years that I figure they owe me at least $900 a month, I had to move again, away from family/friends, lost my new car, and have been carless, plus, I fully believe I could have gotten better due to having more money for better care and been back to work several years ago if Aetna had not treated me so badly. And, forget getting an attny to help you, if you don’t have $$$$$ to pay them, you are tough outta luck in this country, and companies like Aetna COUNT on that that people on SSD have no money and are not in good enough health to sue them!
    I have written Obama several times about this problem with Aetna and the LTD insurance companies, I suggest you all do the same, as many of us could have had much better medical care and been back to work without being a drain on the system if these companies had lived up to what they promised us when we started paying them for LTD in the first place! I will continue this until they pay me what they owe me! And a bit more for pain/suffering I have lived the past 6 years at being forced to live on just SSD money.

  • Dennis  On March 3, 2010 at 11:37 pm

    It seems that Workmans Compensation has been left out here! All LTD Policies will also take your injured on the job Workmans Comp! They will stop your payments if you recieve a LUMP SUM! Not only will your LTD Company do this, SSI will also deduct your Wrokmans Comp. from your back award! So, once you get hurt on the job, you have to go on LTD. Then your LTD company forces you to file for SSI. Then you file for Workmans Comp. and have to wait years for just that hearing. Your LTD Company is just frothing from tha MOUTH waiting for you to get ANY MONEY, that they can claim!

  • scott  On March 4, 2010 at 10:30 pm

    why should Unum get the offset dollars Should nt the Govermnent be getting the money

  • Feery  On June 27, 2010 at 7:29 pm

    UNUM should not be allowed to offset for SSDI benefits when they were paid for by a toltally different premium, by me. I should be entitled to both the SSDI and the 70% LTD that I paid for.

  • bill james  On January 24, 2012 at 6:44 pm

    since aug. ive been fighting with cigna over LTD, they keep dening me benefits. jan. 2012 IM said to be disabled ( by social security) . cigna told me jan. 26 get a lawyer and sue us they were not paying. (2012). what is up? is there any kind of gov. control over these rat~ bastards, im going crazy.

  • B slay  On May 27, 2012 at 12:00 pm

    I too already had signed up but they made me show proof or no benefits. As soon as I got benefits I had to pay back a very large portion. They have had investigators spy on me more than once. Of course after I paid them the money they stopped my payments. They are no good and the company I worked for had them. The company knew how they worked or they wouldn’t have used them. These companies can ruin a person for life. They have more dirt on you than you could ever imagine. They will check all of your social sights. My wife has been followed. They spend lots of money on this. I can not say how much about how they will violate you.


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