Social Security Administration Announces Cost of Living Increases

For the first time since 2009, Social Security beneficiaries will receive a cost of living adjustment (COLA) increase to their benefit amount. Starting in January 2012, SS benefits will be upped by 3.6%, for an average increase of $39 per month for recipients of SS disability and retirement benefits. The annual COLA provision of Social Security is tied to certain inflation indices, but because inflation ran low in 20010 and 2011, there were no COLA increases for SS beneficiaries in those years.

Group Long Term Disability policies typically reduce (“offset”) the LTD benefit amount payable by the amount of Social Security disability benefits the insured receives. However, LTD policies do not offset for amounts received as a result of COLA increases.

The down side for SS recipients, though, is that Medicare is expected to announce increases in Medicare B premiums shortly. Those premiums are deducted automatically from monthly SS checks.

NY Pre-Existing Conditions Provisions

The New York Insurance Department sent shock waves through the LTD industry in 2007 with Circular Letter 14, which followed close on the heels of the New York Court of Appeals decision in the “Benesowitz” case. The circular letter advised that pre-existing conditions provisions in LTD policies were not a permanent bar to payment of any benefits for disability caused by a pre-existing condition during the limitation period (i.e. most often the 1st 12 or 24 months of a person’s coverage), but should instead serve to merely delay or “toll” the time until which benefits for that pre-existing condition should be payable. This interpretation was at odds with the prevailing approach to pre-existing conditions provisions in the LTD industry and resulted in many carriers adjusting rates accordingly, passing along to employers the increased cost associated with the NY directive.

Now comes news that the NY state senate has passed S. 2557, a legislative proposal that would require insurers to offer employers the industry standard, pre-Benesowitz version of the pre-ex provision alongside the version that was mandated by Circular Letter 14. We have been watching this bill for some time, but had given it little chance of moving ahead in the legislature. It will be interesting to see if the proposal picks up any steam in the coming weeks.