Short or Long Term Disability Benefits: Beware of Representatives Recommended By Your Insurance Co.

How is it that your disability insurance company can take your  Social Security back benefits from right under your nose?

The answer is, you let them by signing documents with a representative the insurance company recommended and that “recommended” representative had you sign documents allowing him/her to take your back benefit monies to pay your insurance company.

How is that possible? Because there are so many documents in the application process you may not be fully aware of this “loop hole” that allows insurance company to have their cake (your disability premiums) and eat it too (your Social Security back benefits for the amount paid to you). In other words the insurance company not only received those premiums you paid but now they get all the money back for the money paid on your claim. Wouldn’t you like to have the option of holding on to your back benefit monies? If yes, obtain an attorney not recommended by any insurance company. See below how the insurance company and their “recommended” representative uses the rules below to take your money.

Social Security has a general rule under GN 02410.001 Assignment of Benefits, and Section 207 of the Social Security Act (42 U.S.C 407) states: “The right of any person to any future payment under this title shall not be transferable or assignable, at law or in equity, and none of the monies paid or payable or rights existing under this title shall be subject to execution, levy, attachment, garnishment, or other legal process, or to the operation of any bankruptcy or insolvency law.”

HOWEVER,

No Assignment is found when an insurance company that is paying long-term disability (LTD) benefits to a claimant requires the claimant to file for Social Security benefits. If the claim is allowed, the LTD benefit amount is offset by the amount of Social Security benefits received. As an incentive to induce the LTD insurer to refer claimants, a claimant’s representative offers to assist the insurer with recovering the overpayment made by the insurer to the claimant. The representative does not charge the claimant a fee for this service. The representative also makes it clear to the claimant that the claimant may pay the LTD directly and does not have to pay the LTD through the representative.

At the representative’s request, the claimant grants the representative pre-authorization to withdraw funds from the claimant’s bank account if SSA allows the claim and awards the claimant past-due benefits. AFTER the past-due benefits are deposited into the claimant’s (now an SSA beneficiary) account, the representative gets oral authorization (in addition to the pre-authorization) to transfer those funds to the LTD insurer to satisfy the LTD overpayment. The representative also documents the oral authorization.

This arrangement is not contrary to Section 207’s prohibition against assignment. The beneficiary is exercising control over the past-due benefits deposited into his account before the funds are transferred, and the beneficiary understands that he could have elected to pay the LTD directly. The representative is not getting a fee from the beneficiary and only gets a pre-authorization to transfer funds from the beneficiary’s account in order to satisfy an obligation to a third party (i.e., the overpayment of LTD benefits). The representative also gets an oral authorization AFTER the social security money is deposited into the beneficiary’s account.

The exception above is shocking to may claimants we come into contact with but many do not even know that the “recommended” representative is not on their side when it comes to an absolute right of “negotiating” with the insurance company as to how, when and how much in back benefits will be paid to the private insurer. Yes, you do have the right to negotiate with your insurance company and attempt to reduce any reimbursement! Please don’t make the same mistake as many claimants who think reimbursement to a private insurer is somehow “automatic”. From the start do not sign any authorization to allow anyone, especially your Social Security representation, access to your personal bank account. No representative with your interest will ask you to sign an authorization or “pre-authorization”. For more information call us at 813-657-9175.