By Katie Zayed, CPDM
State-mandated disability plans provide partial wage benefits for employees who are off work due to a non-occupational disability. They are regulated and overseen by state agencies. Currently, five states offer disability benefits for employees who are unable to work due to a qualifying health condition: California, Hawaii, New Jersey, New York, and Rhode Island. Puerto Rico also has mandatory insurance requirements.
For most employees, the availability of disability insurance is a positive benefit for recovery time and general well-being. In my own experience in leave management, employees who are uncompensated during a disability must often return to work (RTW) sooner than recommended by a doctor or traditional duration guidelines. This could cause setbacks resulting in longer and sometimes permanent disability or poor performance. Studies also show that “workers with unmet needs for leave may experience more stress, more work-family conflicts, and even worse health outcomes.”1
Also, for the employee who is truly unable to work, the financial hardships of leave can be unsustainable.1 The financial strain can also help cause comorbid mental health conditions, making it nearly impossible to predict disability duration or recovery times. This is a negative for both employees and employers. Beyond better employee health outcomes, paid leave may reduce employee turnover, which saves money for employers in the long run.2
However, as any human resources specialist knows, 10% of employees take up 90% of our time. The trouble with paid time off is that it reduces RTW incentives. In our experience as a multi-state employer, the states that mandate partial income replacement for disabled workers have higher leave and duration numbers compared to non-statutory disability states.
Two of the states have RTW incentives built into their statutory disability programs: Rhode Island and California. They cover partial wages if a recovering employee can RTW on a reduced schedule. States also can curb abuse by requiring an employee to attend an independent medical exam. This mandatory exam is required in order to continue to receive benefits; New Jersey, California, and Rhode Island have this, but they are much less likely to use this provision than an employer who is in a voluntary plan.
Another way to help prevent abuse and improve RTW results is to adopt a voluntary plan of self-insurance instead of participating in the state plan. The states place various requirements for employers that self-insure. All five states except New York require the employer to opt out if a private plan is going to be administered. And in Puerto Rico, an employer must administer the government plan for one year before establishing a private plan. In Hawaii, employers can begin a private plan immediately, but all benefits must be paid on Hawaiian soil. The Hawaiian Temporary Disability Insurance website provides a list of authorized carriers.3 New Jersey private plans can only be established on the first day of a calendar quarter, and employee consent is required when implementing a contributory private plan for the first time.
All self-insured employers in statutory disability states must meet qualifications for equal or better benefits than the state plan. However, once all compliance aspects are met for each state, there is more flexibility for self-administering. But qualifications for disability can be better regulated and thus yield better RTW results.
Choosing a voluntary plan over the state plan has pros and cons. The cons involve administrative complexity: a multi-state employer might need different short-term disability (STD) plans for different states. It also can be more expensive in the short-term because the state plans are either partially or completely employee-funded, so the company will have to pay nothing or a reduced wage rate for people who are receiving statutory disability benefits.
Despite administrative complexity, voluntary plans can reduce employer costs in different ways. If an employer decides to self-insure, STD programs have built-in tools, people, and departments that focus on RTW outcomes. Most STD and LTD programs will have integrated absence management programs, RTW incentives, and even help navigating the Americans with Disabilities Act (ADA) if needed. Using a vendor’s assets can help an employer navigate an employee’s RTW in a seamless way.
Besides voluntary plans, RTW prospects can improve when you work with all other aspects of leave. Statutory disability has significant interaction with the Family and Medical Leave Act (FMLA) and the ADA. An employee on leave could be involved with just one, two, or even all three of these.
Statutory disability benefits are built around compensation. FMLA has nothing to do with wages and everything to do with job protection: it is federally protected unpaid leave. The ADA is an interactive process involving accommodation for a disability. In this complex environment, constant communication with employees is vital. Instead of letting an employee slip through the cracks during a leave, make sure the employee remains accountable by requiring an updated FMLA certification or documentation with each office visit. Compliance with all FMLA requirements and state specific laws will keep the employee in the loop regarding their status with the company.
Constant verbal communication is critical to ensuring employees out on disability leave will maintain a close connection with their employer. A voice to go with the ink on the form letter notices will create a deeper tie to the employer while the employee is out of work and potentially make them feel that their return is important to the company. Any negative feelings that an employee has toward the employer will only increase the absence duration and create further challenges as the case progresses.
FMLA only provides 12 weeks of protected leave, whereas all of the statutory disability plans offer wage benefits well beyond that timeframe. This is where the ADA process can be helpful in picking up where FMLA left off. Sometimes, the interactive process cannot begin right after the 12 weeks of protected FMLA time. But as soon as the window opens, it is important to begin that conversation. By being upfront about FMLA and ADA from the beginning of a leave, the interactive process can be clear from the outset. Constant contact and deft leave management will make sure that this is completely seamless.
Workers’ compensation (WC) does not come into play until a WC claim is denied. When that happens, the employee can file for disability benefits. Throughout a WC claim and the transition to leave, it is important to keep on top of all of the same issues with FMLA and ADA: constant medical updates, open communication, and careful tracking of the leave. A WC claim that transfers to leave can get lost in the shuffle between carriers and departments. In many companies, the teams managing leave and WC claims are different, so interdepartmental communication and openness become critical. The employee’s transition from a carrier to a vendor can create a vacuum, so the employer can be a resource and a bridge between the employee and the carrier. This creates more of a feeling of the company watching out for a disabled employee.
As I briefly touched on earlier, vendors can also be helpful in the RTW process due to the tools and checkpoints they provide. Many vendors have RTW predictors and timelines to help guide the process, usually including goals for duration and curbing abuse. However, as many adjusters and case management professionals would agree, the caseload can create trouble in paying individualized attention to cases that need it the most. Tools and resources can help, but the employer should not rely solely on the vendor to accomplish these goals. With difficult cases, the employer representative and the adjuster can both use their resources to help facilitate the best outcome for returning to work.
Statutory disability is an evolving landscape. In 2016, we have seen paid family leave laws pass in municipalities such as San Francisco and states such as New York. The current climate is creating more opportunities for paid leave. Therefore, due to the greater potential for longer duration, higher frequency, or even abuse, it is important to begin the leave process with FMLA and ADA information and continue to keep that constant contact with the employee. For most employees, mandatory paid leave can be a positive influence on the employee’s situation, as well as on the company’s workforce as a whole. But with the potential for return-to-work challenges, it is important to create an open human resources climate that practices constant vigilance.
- Miller, Claire Cain. The economic benefits of paid parental leave. New York Times. January 30, 2015; retrieved at http://www.nytimes.com/2015/02/01/upshot/the-economic-benefits-of-paid-parental-leave.html