Being employed guarantees you a regular income month after month. However, employed persons are vulnerable to unforeseen events in life. The events can result in income loss. Some common events that result in income loss include injuries and illnesses.
Luckily though, employed workers can purchase disability insurance to protect them against such events. While disability insurance is common in most countries, it doesn’t fully address the challenges faced by disabled or injured workers in the labor market.
Many intergovernmental organizations have called on countries to reform their disability programs to address this sad reality. For instance, the Dutch government carried disability insurance reforms to address the plight of disabled or injured workers.
Such reforms have changed the consequences of health shocks on employment and income among disabled or injured workers.
What are the Challenges Facing Disability Coverage
Disability insurance has some flaws that necessitate its reform. Generally, most of the challenges have to do with the eligibility criteria and getting approval for claims.
In order, to change what the DI covers, how its defined has to change. For instance, a policy that offers benefits to the claimant if they are unable to perform their current job is much better than one that provides a claim on the condition that the claimant is unable to do any job.
Besides, it’s estimated that slightly half of the people who apply for disability insurance get approved. What happens to the huge percentage whose application gets denied? If an employee has to count on the coverage, the figures should give hope. That calls for enacting reforms that offer greater benefits, cut down the wait time, and offer options to the self-employed and unemployed group.
However, that doesn’t mean making DI eligibility criteria less stringent. The reforms should focus on streamlining the process and making it less stressful for the employees.
Here is a comprehensive look at the long-term implications of disability insurance reforms.
Impacts of Disability Insurance Reforms
Major Improvements In the Labor Market
Disability insurance reforms have led to a tremendous improvement in the labor market among disabled workers. The labor market has historically exposed these workers to a health shock from the start of their disability.
Employed workers are more likely to get benefits associated with disability insurance, courtesy of the reforms. Moreover, they are likely to keep their jobs after experiencing injuries. Also, self-employed disability insurance has become more affordable for self-employed workers.
Offers An Alternative Compensation For Unemployed and Self-Employed Persons
Disability and injuries can happen to anyone, whether unemployed or employed. Disability insurance reforms don’t just cater to employed persons who are eligible for disability insurance. There is self-employed disability insurance to cater for the self-employed and an alternative compensation for the unemployed as well.
This group can apply for unemployment insurance since they aren’t eligible for disability insurance. Still, they can apply for social assistance if they aren’t suitable for compensation under any unemployment insurance program. However, social service pays lower benefits than other disability compensation programs.
Enhanced Employer Incentives
There are still several proposed reforms to improve the welfare of disabled workers. Nonetheless, disability insurance reforms have successfully enhanced employer incentives. They have compelled employers to pay benefits to their injured employees for the duration they are unable to work owing to their injuries.
These benefits aren’t just monetary; they are also anchored on the need to monitor employers. More importantly, the reforms make it difficult for employers to terminate employees with disabilities or health problems.
They Make Disability Insurance Mandatory
The reforms don’t just seek to reform the existing disability programs; they also seek to make disability insurance mandatory. They appreciate the need to cover workers against possible income losses resulting from injuries, disability, and impairments they sustained on their jobs. Disability insurance won’t be optional but rather mandatory following the reforms.
Different disability programs have different waiting periods. Some programs can have 29 monthly waiting period, while others may have a lower waiting period depending on their provisions. Disability insurance reforms seek to reduce the waiting period.
They envision an instance where workers will get compensation for their disability as soon as it occurs. This aspect particularly favors workers with long-term disability or injuries and thus have to stay longer without working. By lowering the waiting period, they won’t have to suffer long as they wait for compensation.
Greater Protection of Disabled Workers
Overall, disability insurance reforms have emphasized workers who already had a job before their disability. The reforms ensure such workers don’t risk losing their job, resulting in them losing their income.
It is important to implement more sustainable and effective disability programs. Furthermore, it prompts employees to protect the long-term financial interests of their injured employees. Without such reforms, employers could be firing their employees when they get disabled, even in the line of work.
Significant Impact On Employment Opportunities
Disability insurance reforms are likely to affect employment opportunities depending on how individuals are vulnerable to a health shock. Simply put, the reforms are likely to affect employment opportunities when the probability of a health shock is high.
Furthermore, the effect of a health shock tends to vary by age. Older people are more vulnerable to serious health deterioration than younger persons. Also, older people are accorded fewer incentives to encourage them to resume work because they have fewer working years remaining than their younger counterparts. Disability insurance reforms will thus affect employment opportunities among disabled older people more than younger people.
An Increase In Disability Applications
The reforms are likely to encourage disability applications. More workers will consider getting disability insurance coverage for unexpected happenings that can potentially disable or injure them. Total disability applications will increase as more people purchase disability insurance. Moreover, the eligibility for compensation will be stricter. The overall threshold for compensation will be much higher compared to previous years. Some applications will be denied if they don’t meet this threshold.
The reforms in disability insurance will greatly impact health shocks on both income and employment among sick, injured, and disabled workers. It is expected that the reforms will take disability insurance a notch higher.