Private insurance push for CPP disability benefits hurts sick, critics warn
Federal benefits often go to insurance companies to offset costs, while patients left with fewer funds
Some Calgarians are calling for changes to a long-standing and little-known arrangement between the Canada Pension Plan Disability Benefit and private insurance companies.
They claim it can also leave sick and dying patients owing thousands in back taxes — or getting hundreds of dollars less a month to survive on.
It could also mean that more than $1 billion a year from federal coffers is going to offset the costs of private insurance companies instead of into the pockets of those with long-term disabilities.
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Many people may not know that if they fall ill and end up on long-term disability, chances are their insurance company will eventually demand they apply for any other eligible benefits — including the Canada Pension Plan Disability Benefit, a federally funded disability program.
It's a complicated procedure that leaves the sick and sometimes dying mired in paperwork and, in some cases, further behind financially.
Patients speak out
"I don't think it's fair. I don't think it's fair at all," said Greg Blundon, who bears the scars of a battle that began 22 years ago with a brain cancer diagnosis underneath his long, gently greying hair.
After rounds of radiation, intricate surgery and ongoing medication, part of Blundon's tumour remained embedded in his brain. As the years passed, he struggled with cognitive degeneration and seizures. He eventually found himself unable to continue his work as an IT security analyst.
A year and a half ago, he went on long-term disability through his employer and soon found himself being hounded by his insurance company to apply for the federally funded CPP Disability benefit.
"I've been paying [into] LTD for 22 years, so I thought, 'That's it I'm covered.' But the letters came and they came," said Blundon, his words slow and laboured. "There was no choice, actually. I had to apply."
It's almost a form of trickery ... It's about them accessing a fund to help themselves out.- Charlotte Blundon
Blundon eventually submitted and the federal government cut him a retroactive lump-sum cheque for $13,000.
His wife of 23 years, Charlotte Blundon, says at first the couple thought it was a gesture of goodwill by the insurance company during some of their family's darkest times.
They soon realized that was not the case — the CPP Disability cheque was not theirs to keep and they would be taking a financial hit by applying.
How it works
Once you're approved for the federal benefit, your private insurer will claw back its portion of your monthly payout by the amount of your new CPP Disability contribution.
If you get a retroactive lump-sum payment, as in the Blundon's case, it must be given back to your insurance company. And because CPP is taxable — and many LTD programs are not — you will owe back taxes.
In addition, your monthly income from that point forward could drop because you are now taxed on the CPP portion of your disability income.
It's a burden because...every dollar counts.- Greg Blundon
"It's almost a form of trickery," said Charlotte. "And then in the end you realize that no, it's not about them caring and helping you access another fund to help you out. It's them accessing a fund to help themselves out."
Blundon is required to give the $13,000 in federal money to his insurance company. He owes back taxes and his monthly income has dropped by $300 because the new CPP portion of his benefits is taxable.
"It is a burden because ... every dollar counts," said Greg who still has one daughter living at home. "They're clawing back that money....The companies are benefiting from the government's portion."
A doctor's point of view
This is just one more hardship for some of our county's most sick and vulnerable, according to Calgary psychiatrist Dr. Norm Monkman.
He's watched with frustration as his cancer patients try to wade through the paperwork — and insurance company requirements that patients apply for CPP Disability — only to get further behind financially.
"Some of them are in their final days, trying to cope in this world," said Monkman. "To me it seems sad.... And it seems, in my opinion, unethical that the very people they're turning to to assist them ... are in fact undermining what little benefits they can get."
Insurance companies' tactics changing
"It's just one more area that they feel like they're drowning in," said Meghan Holub, money matters co-ordinator at Wellspring Calgary, who helps cancer patients deal with their finances.
She says more and more often patients are being forced to apply for any other benefits available, so that private insurers essentially become the second payer.
"I think the wording is stronger," Holub said of the insurance companies' tactics. "If the person is denied CPP, the insurance company also asks them to appeal."
According to Holub, the pressure comes in the form of letters, phone calls, even deadlines within which clients must submit paperwork for the federally funded disability program. If they don't apply, Holub says they're at risk of losing their private insurance benefits entirely.
$1B in federal funds
This arrangement affects thousands of Canadians from coast to coast. According to the federal government, 330,000 Canadians collected Canada Pension Plan Disability benefits last year at a cost of $4 billion.
Roughly one-third of them voluntarily self-identify as also collecting long-term disability benefits. That means, potentially, more than $1 billion a year from federal coffers is going to offset the costs of private insurance companies.
"There's nothing illegal about it, or immoral," said Calgary lawyer Bob Rivard, who specializes in long-term disability claims. "I've been doing this... for 25 years at least, and it's always been this way. But just because it's been that way doesn't mean it has to be in the future."
Rivard would like politicians, advocates, and even employers who hold contracts with insurance companies to start demanding the federally-funded CPP Disability benefit be provided in addition to the insurance payout rather than being deducted — a move he estimates could boost a person's monthly income by about a third.
"When you're on disability, you're hurting financially, hurting medically," said Rivard, who points out people on disability are only making a portion of their original income and many have significant drug costs that may not be covered.
"It would be nice to see ... an additional net provided to these people that are often in very dire straits financially."
According to Rivard, this would undoubtedly result in insurance companies charging higher rates — an additional cost he believes employers can afford to bear.