United We Stand, Divided We Fall

After a good night’s sleep, I remembered that the private market for physician long term disability insurance changed dramatically in the 1990’s.  The physicians before the 1990’s were considered the best risk in this marketplace.  As a consequence, the physicians were rewarded by the insurance companies with low premiums, lax underwriting, and generous policy provisions.   However, during the 1990’s and subsequently,  the number of claims rose dramatically.   Some have suggested it was caused by an attitude change among the physicians.  Others suggested it was a consequence of the  pressures put on the physicians by third party payers (Medicare, Medicaid, Blue Cross-Blue Shield, etc.).  These third parties cut physician reimbursements dramatically, increased their paperwork burden, and subjected physicians to intense audit scrutiny with criminal and civil penalties if found wanting.  As a consequence of the major increase in physician long term disability claims, the physician long term disability marketplace changed radically.  Premiums increased dramatically, underwriting became very intense, and the policy provisions became much less generous.

Was the social security experience the same as the physician experience; i.e., was there a dramatic increase in disability claims starting in the 1990’s?  The social security experience, on the other hand, might have been more linear or it might have accelerated dramatically at other times.   Let’s look at the data from 1960 to 2010 in 5 year intervals.

Fiscal Year	Disability
	Payments
	(in $millions)
1960	560
1965	1,498
1970	2,954
1975	7,982
1980	15,332
1985	19,372
1990	25,230
1995	41,380
2000	56,046
2005	86,468
2010	126,423

Graphing the data, there appears to be 2 recent points of acceleration, starting in 1990 to 2000 and then another acceleration starting in 2000 thru 2010.  The data is different than the physician data.  It would be interesting to know from the actuaries of the Social Security Administration if these accelerations were from just the number of claims or a combination of the number of claims and the size of the claims.  I will ask.

Harry Pukay-Martin