The Social Security system is choking on paperwork and spending millions of dollars a year screening dubious applications for disability benefits, according to lawsuits filed by whistleblowers.
The lawsuits say insurance companies are the source of the problem, forcing many people who file disability claims with them to also apply to Social Security, even those who clearly do not qualify for the government program.
The Social Security Administration defines disabled much more stringently than the insurers generally do, so it rejects most of the applications, at least initially. Often, the insurers then tell their claimants to appeal, the lawsuits say, raising the cost.
The insurers say that requiring a Social Security assessment is a standard practice and that there is nothing wrong with it. The policies they sell allow them to coordinate their benefit payments with others to make sure no one is paid twice. Thus, if a disabled person can get benefits from somewhere else - such as workers' compensation, a disability pension or Social Security - the insurance company can reduce the benefit check by that amount.
The flood of referrals makes it hard for Social Security to respond to people who are truly disabled, said Kenneth D. Nibali, the former top administrator of the Social Security disability program.
"Anybody who is forced to come into this system and who doesn't need to be there is affecting someone else," said Nibali, who retired in 2002 and is an expert witness for the plaintiffs. "They're holding up cases for the people who have been waiting for months and years, who in many cases are much worse off."
The disability program is in much worse shape financially than the old-age portion of Social Security. It is projected to run out of money in 2026, 16 years before the old-age trust fund reaches that point.
The disability caseload is expected to grow as the work force ages, because recovery time increases with age. The number of people waiting for hearings on their claims by an administrative law judge has more than doubled since 2000, and the average wait has grown to 512 days in that time, from 258 days.
Social Security is based in Woodlawn, where the agency has more than 6,300 employees. It has 12,000 employees in Maryland.
The Social Security Administration is not an active participant in the lawsuits and declined to comment on them. A spokesman, Mark Lassiter, said Social Security does not keep track of how many of its approximately 2.5 million annual applicants for disability are referred by insurance companies. But he cited academic research showing that 18 percent acknowledged privately that they were unqualified because they could still work.
"It is probable that many of these claimants were required to apply," Lassiter said.
Jessica Ortiz, a 27-year-old gas station attendant in San Diego, said that happened to her. Her disability insurer, Unum Group, called more than 10 times after she was hurt in a car crash, insisting that she apply for Social Security and asking repeatedly where her application stood. Unum was paying her $50 a month under her policy, she said, which seemed a small amount to merit so much attention.
She did not need or want money from Social Security and did not think she was entitled to it. Her doctors had told her she would recover, and Social Security is limited to people whose disabilities are total and permanent. But she applied because Unum insisted, she said.
Ten months after her accident, Ortiz returned to work. Social Security turned her down, as she had expected. People who can work are by definition unqualified for disability pay from the government. But when she told the Unum representative what had happened, he told her she could still appeal.
"If I were the government, I'd be pretty upset," she said. "No wonder the pot could run out of money."
When the circumstances of Ortiz's case were described, Unum spokesman Jim Sabourin said he could not comment without reviewing her case file. The company believes it always has valid reasons for telling people to apply for Social Security, he said.
Forcing people who are injured to apply for Social Security before paying their claims appears to bolster insurers' profits in several ways. If claimants refuse to apply, the insurers can stop paying their benefits, said Dawn Barrett, an employee of Cigna Corp. who grew frustrated sending people to Social Security and is a plaintiff in one of the lawsuits.
More typically, she said, people apply for Social Security when an insurer tells them to. That allows the insurer to reduce its claim reserves, money that is kept in conservative investments for benefit payments. In the insurance industry, smaller reserves mean bigger profits.
Finally, disability insurers tell many of their claimants to appeal Social Security's rejections again and again, until some are finally accepted. Then the insurers can take those people off their rolls, shifting the cost to the government.
Whistleblowers have filed lawsuits against Unum Group, the nation's largest disability insurer, and Cigna, another large one, though there is no dispute that the Social Security requirement is an industrywide practice. Unum, with revenues of $10.5 billion, paid disability claims of $4 billion last year.
Both companies said their claims practices are fair, legal and advantageous for consumers.
"Our goal is to ensure that each member receives all of the benefits to which he or she is entitled," said Jill Roman, a spokeswoman for Cigna.
The lawsuits do not fault the idea of coordinating benefits with Social Security and workers' compensation. Instead, they contend that insurers are recklessly dumping people on Social Security's doorstep without properly screening them to make sure they have a chance of qualifying.
The typical long-term disability policy says workers can collect when they are unable to do their own jobs for some period, usually more than five months. Social Security, by contrast, will pay only those who are so badly disabled that they cannot perform any job at all.