GRMF20-02: Filling in the Gap: The Role of Employer-provided DI

Abstract

The risk of disability for workers is not trivial. While many workers rely on public disability programs such as the Social Security Disability Insurance (SSDI) to protect them against disability risk, these programs do not provide complete insurance. For example, SSDI does not cover short-term disabilities. This paper explores the use of employer-provided disability insurance (DI) among Wisconsin state public employees. The paper describes these disability benefits and how they provide a safety net for workers who have a debilitating medical condition. Generally, low income workers are less likely to be covered by employer-provided DI although they tend to need and claim DI at a higher rate. Next, the paper examines the use of short-term DI and worker’s trajectories before and after claiming short-term DI. A large majority (64 percent) of claimants return to work. Another 24 percent transition to long-term DI while the rest quit their jobs (7 percent) or retire (5 percent). Short-term DI claimants are able to maintain their earnings and hours worked up to the year of claim. Afterwards, their earnings and hours worked drop even for those who return to work. Moreover, workers who eventually claim short-term DI use a lot of sick leave even in the years prior to claiming.