Jessica Oritz is a 27-year-old gas station attendant from San Diego. After she suffered an injury in a car accident, Unum Group started paying out $50 per month in benefits, according to the provisions in her disability policy.
As Oritz tells it, she felt that the request was unwarranted. First, the payout at $50 per month was minimal. Second, Social Security is limited to individuals whose injuries and disabilities are considered complete, and permanent. In Oritz' case, doctors suggested to her that she would make a full recovery.
Still, Unum insisted she apply for Social Security, in an effort to get that monthly $50 payout off their rolls. Oritz claims a representative from Unum called her 10 times, before she finally applied.
Oritz finally relented and applied, but was turned downï¿½as she expected. When Oritz told her Unum Group representative about the denial, she was told that she could appeal.
"If I were the government, I would be pretty upset," said Oritz in comments published in the New York Times last month. "No wonder the pot could run out of money."
It is widely believed that the government-backed Social Security fund for disability payouts will be completely exhausted by 2026, thanks in part to insurance companies like Unum allegedly insisting their disability clients apply to Social Security for long-term disability funding.
All but the most deserving cases are properly denied, according to a spokesperson with Social Security. The problem however, says Kenneth Nibali, the retired chief administrator of the Social Security disability program, are the costs associated with the application process. On average, it costs the system $1,180 to process a single Social Security disability application. Assuming the applicant persists -- or is made to persist -- through the first three levels, which includes the review, a reconsideration on appeal followed by a hearing by an administration judge, the application will cost the system $4,759. Should the applicant carry on further to higher levels of appeal, the application could get even more expensive.
This is exactly what Unum lobbied Oritz to do, allegedly to save $50 a month.
A whistleblower lawsuit has been filed against Unum Group and one other insurer, alleging false claims. The company maintains its claims practices are fair, legal and consumer-friendly.
However, tell that to Linda Simmond of Atlanta. The 41-year old mother of two was forced from her job at Little Caesar's in Detroit after she developed carpel tunnel syndrome from rolling out pizza dough. After surgery didn't fix the problem, she turned to Little Caesar's group benefit insurer, Unum Group, for temporary disability help.
She says temporary, because in her view she is not completely or permanently disabled. "I've seen people with one hand, no legs, working..." Simmond said in comments appearing in a New York Times story last month. "I know I can do something."
Unum Group commenced monthly payments of $1,780 per month, but also insisted she apply for Social Security benefits. The application was duly made and properly rejected, according to Simmond, who agreed with the initial position of Social Security.
However, that wasn't good enough for Unum. They instructed her to appeal, and when she refused, Unum stopped her payments. Facing several months without income, Simmond deferred and appealed, and Unum resumed payment while the appeal was being processed. Simmond was rejected on appeal. Unum allegedly urged Simmond to keep going, and stopped her payments a second time.
The checks are coming again, but Simmond has been told if she fails to apply for Social Security benefits again, they will stop her payments a third time. "I need my benefits," Simmond told the New York Times. "I have two children. I have a lot of debts. I'm going to have to do it, but I don't believe in it."
A spokesperson for Unum Group was reported as saying he could not comment on either case, without first consulting the individual's file.
Lawsuits against Unum and one other insurance provider do not fault the companies for the practice of benefits coordination with other entities, such as Social Security or Workman's Compensation. This issue, rather, is the allegation that the industry as a whole and the two companies in particularï¿½one of whom is Unumï¿½have been recklessly pushing every claimant towards Social Security in an effort to minimize the amounts the companies have to pay out in claims.
That's a win-win for the companies, which get away with having to keep fewer funds in reserve for payouts, translating to a healthier overall profit.
While there are no statistical data showing the percentage of the thousands of claims to Social Security each year that are deemed unnecessary and inappropriate, academic research has revealed that roughly 18 percent of applicants to Social Security admit that they were still capable of working. This flies in the face of the Social Security mandate, which holds that only those with a permanent disability, who cannot work or do any job at all, will be supported.
Thus, is the assumption that insurance companies are forcing clients to apply regardless of need, under the threat that their benefits from their insurer would stop unless they complied.
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It should be noted that every Social Security disability claim is heard and processed, regardless of merit. The end result, officials say, is that a spate of needless applications is choking the system and delaying meritorious applicationsï¿½sometimes for years, and costing the system millions of dollars in the process.
The whistleblower lawsuits cite the False Claims Act, which would allow the government to recover triple damages. That would come in handy for a system running out of money, and it appears the insurance companies can afford it.
It has been reported that Unum paid out $4 billion last year, against revenue of $10.5 billion.