CIGNA Multistate Settlement

The insurance departments of CA, CT, MA, ME, and PA recently announced a settlement with the CIGNA companies that write disability business. The fines that were levied don’t amount to much; CA, MA and ME divvied up a total of $925,000. What is more concerning is the use of the terms of the 2005 agreement that UNUM entered into with 49 state insurance departments and the U.S. Department of Labor – terms that were themselves not included in any administrative code or regulations - as part of the standards used to evaluate CIGNA’s disability claim handling.

Insurers certainly need to be held accountable for their compliance with applicable state and federal laws regarding claims handling. But holding insurers accountable to arbitrary standards that are not a part of any duly enacted laws or regulations can begin to look like regulatory overreach. For this to occur with a major industry player for the second time in eight years seems to suggest a continuing trend whereby fundamental aspects of disability products are being dictated more by administrative bodies than by marketplace factors and forces.

Pushing the Envelope in CT

The CT legislature passed a law effective in 2012 requiring employers with 50 or more service workers to provide 1 hour of sick time for each 40 hours worked. While CA, HI, NY, NJ, PR, and RI all require employers to provide some type of short term disability benefits to their workers, the CT bill was the first “sick leave” measure of its kind to be implemented at the state level.

Another bill that now awaits the CT governor’s signature would create a task force to study how to set up a statewide short term disability benefits program that would also pay benefits for workers who take time off to care for family members. CA and NJ are the only other states with such programs – in CA, workers are taxed to pay for the state program, while in NJ, employers and employees share the cost (though employees pay the full cost of the paid family leave component).

Proposals like the current CT one point up the need for short term disability insurers to be pro-active in designing plans and developing administrative capabilities that anticipate benefit program changes and state requirements alike that push beyond the boundaries of traditional short term disability plans.