Let’s start the new year off right with another “educational” article concerning the differences between managing STD vs. LTD.
In the past, most insurers considered STD a mere “shoo-in” and really didn’t investigate all that much. However, in recent years, the table turned from “almost no investigation” to “heavy investigation” using a process that is even more burdensome for those least likely to keep up with it.
STD can be either self-insured, or fully insured. “Self-insured” means the employer is paying the cost of the STD, but has hired a TPA, or third-party administrator to investigate claims and make ATP, Advice to Pay (or not pay) claims. Fully-insured STD means the employer purchased a separate Plan from a group insurer who manages the claim independently from the employer. STD is usually paid for 12, or 26 weeks, but can go longer according to some employer employee-benefit Plans.
To make matters even more confusing, employers will manage FMLA (Family Medical Leave Act) consecutive to STD for a period of 12 weeks. FMLA, a federal law, protects jobs and paid benefits for a period of 12 weeks. FMLA is UNPAID leave.
STD claims very rarely requires the use of surveillance since the total liability for 26 weeks of benefits does not support the cost of investigative resources, nor does field interviews for that matter. STD claims do not involve a great deal of “investigation”, but only cumbersome collection and communication of medical notes that can go round and round, “we didn’t get it…..we didn’t get it……”
Insurers today have a basic philosophy: “Deny claims sooner rather than later.” This means that if STD claims can be denied as they come in the door, the better it is to avoid the high cost of LTD reserves. Despite, the new aggressive management of STD, insurers devote very few resources in terms of trained personnel, resulting in claims handlers who basically don’t know what they are doing, an/or can’t keep up with it.
As a result, STD can be a very challenging time in addition to a process that is cumbersome, burdensome to claimants, and inefficient. First, I describe STD as a “hop skip” type of process. Insurers will go out for patient notes every two weeks and then pay for two weeks. They then, go after notes at relatively short intervals and will only pay for a few weeks at a time. STD claimants must visit their treating physicians every few weeks so that patient notes are available to insure payment of benefits.
This requires claimants to be on top of the sending of patient notes every few weeks. STD claims handlers rarely have the time to notify you, but will stop sending payments if patient notes are not received on a frequent basis. This process continues for 26 weeks until the claim is finally transited to LTD.
LTD is by far the largest total liability to group insurers. As a result, insurers investigate LTD, almost to a fault. Thankfully, ERISA sets decision timelines at a maximum of 90 days, but then again, no one’s watching or overseeing these requirements and they are frequently violated.
LTD pays once a month, and although insurers can request “proof of claim” every 30 days, they rarely do so. Most updates are requested quarterly to begin with. LTD claims handlers request tax returns, payroll records, job descriptions, Employer’s Statements and other information before paying the claims. Some insurers won’t pay until absolutely every patient note is received from all treating physicians.
LTD is “risk managed” meaning every resource the company has, from surveillance, field interview requests, to IMEs will most likely be utilized at some point during the claim. These resources are expensive and cost/benefit is also considered by management.
Once LTD is approved, benefits are paid once a month, with periodic updates.
Transitioning from STD to LTD
Some insurers seamlessly transition STD to LTD, but others require a completely different set of paperwork. Therefore, it is important to find out whether you need to complete new paperwork for LTD or not. Most often, there can be a payment “gap” between STD and LTD that claimants should be prepared for.
In conclusion, STD is a process claimants need to stay on top of every few weeks. LTD, on the other hand is intensively investigated before benefits are approved. Risk management resources are used along the way to attempt to deny claims prior to maximum duration of either age 65 or 67.
The STD claims process is a “hop skip” type of process and requires the frequent submission of patient notes. Claims will not get paid if notes are not received. LTD requests for patient notes are much more reasonable, namely 30-45 days.