Privatizing Social Security Disability Insurance?

Kristi Khughes May 14, 2018

Can expanding private disability insurance (PDI) help save the fiscal condition of the Disability Insurance Trust Fund?  Senators Orrin Hatch and Mike Lee asked the Government Accountability Office (GAO) whether expanding PDI could result in potential savings to the Disability Insurance Trust Fund.


According to the GAO’s analysis of Bureau of Labor Statistics and SSA data, SSDI covers an estimated 96 percent of workers, while 33 percent of workers have PDI coverage through their employers. Notably, PDI is more prevalent among workers with relatively higher wages and in certain business sectors.  Some PDI policies may pay benefits for medical conditions that SSDI would not.  These PDI policies, however, may time limit payments for mental health and musculoskeletal disorders, while SSDI does not.  In addition, while both SSDI and PDI policies include features designed to help beneficiaries return to work, PDI policies may provide such supports more quickly than SSDI policies.


The GAO’s review identified three distinct proposals for expanding PDI, each intended to address SSDI’s fiscal challenges. Specifically, all three proposals suggest cost savings for the Disability Insurance Trust Fund could be expected by expanding PDI. According to the proposals, expanding PDI has the potential to provide workers earlier access to cash and employment supports, which the proposals suggest would reduce the number of SSDI claims or the length of time SDDI benefits are paid to claimants.


The GAO’s review, however, noted that none of the three proposals provided enough information to assess how SSDI enrollment and costs might be affected with an expansion of PDI. Therefore, it is unclear whether cost savings to the Disability Insurance Trust Fund would actually be realized. Moreover, stakeholders the GAO interviewed about these proposals raised a number of issues about PDI expansion that the proposals do not address. For example, insurers told the GAO it was unclear how expanding PDI would affect PDI premiums and the impact this would have on enrollment. Employers told the GAO they were concerned about potential additional requirements or administrative burdens that would be placed on them if PDI were expanded. Employee and disability advocates told the GAO they were concerned about whether PDI expansion would provide standard services or employee protections currently available under SSDI, especially with respect to PDI expansion proposals that would replace SSDI for two years.


GAO-18-248—Social Security Disability Insurance: Information on Potential Implications of Expanding Private Disability Insurance—was released April 10, 2018, and is available at https://www.gao.gov/assets/700/691187.pdf.

Thanks to Empire Justice Center’s Keith Jensen for digesting this report for us.