Yes! with a Caveat…

Change is coming to mental health parity in disability insurance, and about time. The question isn’t if, but when, and more importantly, will we be ready to handle mental health claims better? Because business as usual is not an option.

 On December 12, Dan Fishbein, MD, President of Sun Life US, wrote a strong article supporting the ERISA Advisory Council’s recommendation that Congress legislate a requirement that mental health be treated on par with physical health in private disability contracts (you can read the article here). Mental health parity would put disability insurance on the same footing as health insurance, where parity between mental health and physical health is already required. Mental health is health. I commend Dr. Fishbein for writing the article and taking this stand, and I agree with him; it’s time to make this change in the industry.

I have caveats, and despite my thinking it’s a good idea and about time, I have concerns that I think need addressing if we are to make the change successfully and without unintended negative consequences. Nevertheless, I’m convinced it’s fundamentally the right direction.

What’s the Big Deal?

Not everyone knows why this even needs to be said. Don’t disability policies already cover mental illness under their contracts? The answer is yes, but not on a par with physical conditions. The details will vary depending on the carrier and the specific contract, but in general, benefits for mental health conditions will be limited to two years, after which no more benefits are payable, even if the disability continues. Most policies will have an exception for those conditions that are known to have a strong genetic component and tend to have a long, chronic course, such as schizophrenia and bipolar I disorder. But for the great majority of the most common conditions, depressive disorders, anxiety disorders, stress- and trauma-related disorders, the benefit period is limited.

From my perspective as a mental health professional with expertise in disability medicine and workplace mental health, the problem is not the two-year limit per se. Mental health conditions are mostly very responsive to good quality care, and it’s rarely necessary for someone with a mental health condition to be out of work for long periods of time. If we’re doing things right, most people who require time away from work to help them recover from a mental health crisis should, and will, return to work long before they hit what’s known as the “mental and nervous limit.”

The problem is that the two-year limit on benefits comes with a great many assumptions that are by far the bigger problem. For example, we tend to look at mental health conditions with a higher degree of suspicion, not as a matter of policy but because of the same biases about mental health that are rife in society. It’s harder to “prove” a disability due to a depressive disorder than for a disability due to a fractured hip. It’s harder to measure functional loss for a mental condition than for many physical conditions, and so it’s harder to adjudicate contracts. These problems don’t arise from bad intentions. Instead they are a natural consequence of thinking differently about mental health vis a vis physical health. Only by putting mental and physical conditions on a par are we likely to change these features of the process.

The Arguments for Making the Change

In addition to the above, Dr. Fishbein lays out the arguments for parity in his article, and I won’t reiterate them all here. Suffice it to say that there is a true mental health crisis in this country, and we must do better. We must find ways to improve access to better care for more people, and we must reduce the stigma associated with seeking help for mental health. Moreover, it’s important to recognize that, at least for some, mental health conditions can be every bit as debilitating as physical injuries and illnesses, and there is simply no good reason we should refuse to support people who are struggling with mental illness to such an extent that they are temporarily unable to work. The simple answer is that we should do it because it’s the right thing to do and it helps us deal with the underlying mental health crisis.

There is one more important benefit, which is that it will encourage disability and workers’ compensation carriers to better understand that mental health plays a role in many, perhaps even most, lost-time claims. Being out of work has negative health consequences, takes us out of our routines and away from our social contacts, and can leave us feeling less capable and less able to contribute. Mental health deteriorates when we are out of work, and this can become its own barrier to recovery. Moreover, anxiety about returning to work can be a barrier to recovery even when it’s not a diagnoseable or compensable condition. The simple facts are that we deal with mental health as a factor in disability claims all the time, whether we know it or not and whether we want to or not. Parity just brings these facts into the open.

But What About the Costs?

I have heard that underwriters are concerned that group disability policies will become more expensive and that, as a result, employers may balk at the additional cost. There are concerns that employers will refuse to pay the higher costs and that fewer people will be covered by disability benefits. It’s not an unreasonable concern, but I think it’s misplaced.

As a counterpoint, I note that the US is an outlier regarding parity in disability coverage, and we have a ready comparison for costs and coverage rates in our nearest neighbor to the north, Canada. Canadian insurers already treat these conditions on parity, and Dr. Fishbein – it’s worth noting that Dr. Fishbein is an executive in a company that does substantial business in both Canada and the US and is therefore in a position to know – has said that it turns out that parity isn’t hugely expensive.

But we don’t have to take his word for it. Disability coverage is already a huge bargain with outsized ROI. According to the December 15, 2023, news release from the Bureau of Labor Statistics (BLS), on Employer Compensation Costs as of September 2023, disability benefits comprise 0.1 to 0.2 percent of employee compensation. Compare that to health coverage, which is 50 times greater at between 7 and 8 percent, and no one worries about whether employers will cover health insurance. Even doubling the cost of disability coverage would barely move the needle on compensation costs, and there’s no reason to believe that the increase will be that large.

Moreover, according to the best and most recent data I can find from the BLS, only 35% of US workers currently have LTD coverage, and 2021 data from LIMRA pegged the number at 14%; the numbers for STD coverage are only modestly higher. By contrast, 48-55% (some say more) of Canadian workers are covered by employer-sponsored disability benefits. This suggests that whatever is discouraging US employers from providing disability benefits, it’s unlikely to be the costs attributable to mental health parity.

Canadian insurers know how to manage the issues involved, they know how it impacts their financials and the costs to employers, and they are doing fine financially. All the numbers support Dr. Fishbein’s argument. So, it’s the right thing to do and it isn’t going to break the bank or drive employers out of the market; what’s not to like?

The Caveats

Which brings me to my concerns, and my hesitations about supporting the change – they are not trivial. As I mentioned above, and as I have been teaching for the past 25 years of my career, the negative health consequences, both physical and mental, of being out of work are, in a word, terrible. Morbidity increases as we are out of work longer, and so does mortality: those who are unable to work die sooner from all causes, and this effect extends beyond sampling bias. There is a reasonable argument to be made that the negative health effects of workplace absence are worse than smoking. The late Gordon Waddell, a giant in the world of disability medicine, once wrote that if the “sick note” were a drug with the same side effects as being out of work, we would consider it malpractice to prescribe it.

Unfortunately, most health providers don’t understand the dangers of keeping someone out of work longer than necessary, and don’t understand how important it is to help employees return to work as soon as it is safe to do so. Sadly, mental health professionals, my professional peers, are among those who seem not to understand that keeping someone out of work because they find work stressful or anxiety-provoking, may be doing their patients a huge disservice. Moreover, the longer people are out of work, the less likely they are to ever return to the workforce, further compounding the associated negative effects. Unless we do a better job of making sure that we stay focused on education and facilitating return to work, mental health parity could have the unintended consequence of increasing the iatrogenic, unnecessary long-term disabling of even more patients. That would be a tragedy.

To make matters worse, we aren’t good at predicting, assessing, measuring, and mitigating functional loss due to mental health challenges. I said above that this can happen out of bias, and I stand by that. But even when we remove the biased – and erroneous – notion that mental health conditions are less “real” than physical conditions, the problems with assessing functional loss remain. To effectively manage disability durations and to properly assess when someone does, or does not, qualify for benefits, we need to be better at making those determinations. Employers, too, need to be better at determining if, and under what circumstances, an employee with a mental health condition can and should be at work. All this requires better resources and education for treating providers, better guidance for employers, and better training for the claims professionals who will be charged with managing mental health claims. The magnitude of the problem, and the need to correct it, only increases as we institute parity and we could be looking at permanent, but unnecessary, disability. Sadly, legislative solutions as recommended by the Advisory Council don’t have a good track record of dealing with the nuanced issues involved. The change will have to come from within the disability insurers and the systems that support them.

The Bottom Line

In the end, I agree with the ERISA Advisory Council’s recommendation for mental health parity in disability insurance, and I applaud Dr. Fishbein’s support of it. I hope he and the other leaders in the world of disability insurance get behind the change. From my perspective, just like the rapidly expanding legalization of cannabis use despite the challenges and uncertainties, mental health parity is inevitable; it will come, and ultimately the only question is whether we will be ready for it. Better to lead the change than to be overrun by it.

But my support comes with this important caveat: it cannot be business as usual. If we are to have mental health parity in disability insurance, then we must get better at understanding, predicting, managing, and mitigating impairment from mental health conditions. If we can do that, establishing parity will be a boon to insurers, to employers, and most importantly, to those experiencing mental health challenges. However, absent a deep dive into how we can do better, we will simply make matters worse. In the end, that deep dive must come from those of us in the industry who care; legislation is not going to do it for us.

Dr. Les Kertay is a clinical and consulting psychologist with extensive experience in workplace mental health, impairment medicine, disability insurance, and workers’ compensation. He is an industry consultant with current roles that include Chief Psychologist for The Claim Lab.