The case for government-run disability insurance

There’s a lot of debate in this country about health insurance. On the one side, there are those who think it should be a complete choice for each individual, on the other, there are those who think it should be a government-run program that covers everyone. The compromise in the middle, Obamacare, seems to make no one happy, which is why there’s so much tension about the law even up to today, almost a decade after it passed.

Health insurance is not the only kind of insurance where the country should be debating this issue. Another kind is long-term disability.

Why long-term disability as opposed to, say, dental insurance or home or renter’s insurance?

The answer is two-fold.

First, long-term disability insurance is extremely expensive due to the nature of it. Payouts are very high when they do occur, and so the rates are prohibitive to many businesses, particularly those where accidents are more likely to occur.

The second point relates to the first. Because payouts are high, the insurance companies work very hard to avoid paying out as often as they can. That can mean a company pays its expensive insurance, but when an employee is injured the insurance company still works to deny the claim, even when everything is in order.

This problem can proceed into a ridiculous process, in which the injured person must hire a lawyer to plead their case in order to get the insurance company to simply pay out what they have guaranteed they would pay, and for which they have received insurance payments, perhaps for a number of years.

Because of this reticence to pay, paperwork must be handled with absolute care, and everything must be documented up to and including the minutest details. This is a strain on employers and employees, injured and not, and is sure to slow down business efficiency.

The obvious answer to this is to remove the profit-motive from long-term disability insurance. If it were run by the government, cases could be decided based solely on merits and not on which cases are likely to cost the most for the company.

In order to pay for this, the government could institute any number of small taxes or fines. These might follow along with the lines of the Obamacare taxes and fines, in which those who do not buy into the system are fined. That way, all businesses pay in something and therefore fund the insurance.

There are sure to be problems with this admittedly rudimentary scheme, but the proposal itself is solid. With government-run long-term insurance, the burden of accidents would fall much less on those who have been injured and on the employers. More certainty could be established that claims would be looked at fairly and with fewer negative motives. Finally, the cost of new taxes and fees may even be lower, and so less of a burden, than the cost of the insurance at the present moment, thus creating cost savings for businesses.