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April 19, 2024

2023 Department of Labor Advisory Council Report on Long-Term Disability Benefits and Mental Health Disparity

Mayoung Nham and Mark DeBofsky

The Mental Health Parity and Addiction Equity Act (“MHPAEA”) requires equivalent coverage for medical/surgical and mental health and substance use disorder (“MH/SUD”) conditions. However, MHPAEA does not apply to long-term disability (“LTD”) benefits. LTD benefits provide protection to workers in the event sickness or injury precludes them from working for an extended period of time. Generally, as long as an individual remains disabled, LTD benefits will continue to be paid until the individual reaches age 65 or the normal retirement age as determined by the Social Security Administration. A nearly ubiquitous exception to the duration limitation is for LTD benefits payable due to a disability caused by a MH/SUD condition. LTD benefits are commonly provided to individuals through insurance policies purchased by their employers, with the majority of such policies limiting the duration of benefits for disabilities caused by MH/SUD conditions to 24 months.

In 2023, the Department of Labor’s Advisory Council on Employee Welfare and Pension Benefit Plans, known informally as the ERISA Advisory Council (“Council”) examined the scope and impact of duration limitations on LTD benefits for disabilities caused by MH/SUD conditions. While disability insurance is regulated by state insurance departments and not the Department of Labor, the Council anticipated that its report may assist the Department in determining whether there is a need for measures to address LTD benefit duration limitations for MH/SUD conditions.

The Council gathered data, received written statements, and heard testimony from a variety of witnesses, including representatives from the Social Security Administration, insurance industry representatives and experts, actuaries, medical experts, and mental health advocates. The Council noted that only 1% of group LTD policies sold in the U.S. do not include a 24-month benefit duration limit for MH/SUD conditions.

The Council heard testimony that, since at least the 1960s, insurers applied duration limits for MH/SUD disabilities due to concerns regarding the risk of fraud and abuse. Several witnesses, particularly the medical experts, noted that since the 1960s, psychiatry and claims administration had developed significantly. The Council heard testimony that there was now a high degree of confidence in testing used to evaluate disabilities caused by a mental illness, and that treatments for MH/SUD had also improved such that the duration of work absences due to a MH/SUD condition had decreased considerably. These witnesses observed that many of the concerns regarding fraud that were used to justify duration limits were no longer reasonable considering the advancements to the diagnosis and treatment of MH/SUD conditions.

Several witnesses testified that the duration limit was discriminatory and reinforced the stigma against those who suffer from MH/SUD conditions, while others asserted that eliminating the limit was simply “the right thing to do.”  Mental health advocates testified regarding the devastating impact of LTD benefit duration limits on individuals and their families. Further witness testimony called attempts to distinguish between mental health and physical health “unscientific.”  Former Congressman Patrick Kennedy, who founded the Kennedy Forum, a mental health advocacy organization focused on mental health parity, emphasized that “the brain [is] part of the body” and asked why illnesses impacting the brain are subject to LTD benefit duration limits, while illnesses impacting other parts of the body are not.

By contrast, some witnesses expressed their concern that removing duration limits would increase the cost of LTD benefits and that employers might be less likely to offer such benefits at all if they became cost prohibitive. The Council heard testimony that the rarity of plans with no MH/SUD duration limit makes it difficult for carriers to assess the value of the limit or the premium increase to remove it, with some insurance companies estimating a 20% premium adjustment to remove the limitation. However, witnesses who testified before the Council were unable to identify an ongoing actuarial basis for maintaining the limitations; nor was there any actuarial certainty as to what, if any, premium increases would result if the limitations were removed.

The Council also heard testimony regarding unlimited LTD benefits for MH/SUD conditions. Individuals may qualify for Social Security Disability Insurance without a duration limit due to a mental health condition, but not a substance use disorder condition (although a substance use disorder condition will not disqualify an individual for disability benefits if they have a qualifying mental health or physical disability in addition to an SUD). Social Security Administration representatives provided valuable statistical data regarding Social Security disability benefits for mental health conditions. The Council heard testimony that, even after Vermont changed its state law to require parity in disability insurance for MH/SUD conditions, premiums remained stable. The Council heard testimony about Canada’s human rights and anti-discrimination laws that mandate mental health parity for disability benefits, unlike the U.S. where courts have found the Americans with Disabilities Act does not impact the content of insurance policies.

Based on the testimony and data it received, the Council concluded that testing and other tools used by insurers to evaluate claims were sufficiently advanced to mitigate the potential risk of fraud that was previously associated with providing unlimited LTD benefits for MH/SUD conditions. Ultimately, the Council offered four recommendations to the Department regarding LTD benefits and MH/SUD conditions:

  1. Encourage Congress to adopt LTD insurance parity requirements consistent with the spirit of MHPAEA mandates for MH/SUD and physical conditions, and strongly encourage employers to consider whether exclusions and MH/SUD limitations are necessary in the current environment.
  2. Commission research of LTD insurance to address unknown actuarial and cost implications of removing the duration limits and to identify the underlying rationale for these limitations.
  3. Urge the insurance industry to present plan sponsors with coverage options without duration limits for MH/SUD conditions.
  4. Provide education to LTD plan sponsors on impact of duration limitations in LTD policies.

The Council’s rationales for its recommendations included an acknowledgement that there was well-established public policy in favor of mental health parity in health care. The Council’s report noted that witnesses expressed concern that, unless all insurers adopted coverage without duration limits, no insurer would unilaterally eliminate duration limits due to adverse selection concerns. The Council’s report further noted that many plan sponsors were unaware that their policies included such limitations or that they even had an option to provide coverage without duration limits for disabilities caused by MH/SUD conditions.

The Council’s findings and recommendations were presented to the Department of Labor and were subject to public comment during their meeting held on December 11-12, 2023. The final report was submitted to the Secretary of Labor following the meeting. A copy of the Council’s final report (and all prior Council reports) can be found on the Department of Labor’s website.

The day after the Council issued its recommendations, Sun Life U.S., a leading disability insurer, released a statement endorsing the Council’s recommendations in calling for legislation to mandate mental health parity in disability insurance.

Mayoung Nham

Slevin & Hart, P.C.

Mayoung Nham is a Principal with Slevin & Hart, P.C. in Washington, D.C. She is a member of the Council (2023-2025) and was the Issue Vice Chair for the Council’s report on LTD benefits. She is currently serving as the Chair of the Council.

Mark DeBofsky

DeBofsky Law Ltd.

Mark DeBofsky is a Principal with DeBofsky Law Ltd. in Chicago, IL. He is a member of the Council (2023-2025) and served on the drafting team for the Council’s report on LTD benefits. He previously served on a task force selected by Illinois Governor J.B. Pritzker to study mental health parity issues in disability insurance.

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