Printer Friendly

Incidence and type of disability insurance benefits, 1958-90.

Sickness and accident insurance plans have provided replacement income for disabled workers throughout the second half of the 201h century. These plans originally were available to employees primarily through collective bargaining agreements: today, they are available to a variety of workers in numerous occupations, regardless of union status. In fact, several States mandate disability income benefits with provisions similar to those in private employer and union-sponsored plans.

In general, sickness and accident insurance plans are designed to replace a portion of an employee's wages during a fixed duration of disability. These plans impose a short waiting period before payment begins. Payment is based on a formula--either a percent of earnings or a fixed dollar amount paid weekly. Benefits typically are paid for up to 6 months.

Over the past 30 years, the Bureau of Labor Statistics has tabulated data on the incidence and characteristics of sickness and accident insurance plans. During that period, benefit payments to sick or injured workers have increased, while other provisions (such as the duration of benefits) have remained largely unchanged. This report traces the evolution of sickness and accident insurance plans from the late 1950's to today. The 1958 data are from a BLS-conducted study of sickness and accident insurance plans negotiated through collective bargaining agreements. The 1958 study was the first of a series of studies of selected benefits, and provided the first comprehensive look at plan provisions.(1) The 1974 data are from the BLS Digest of Health and Insurance Plans series, which include provisions of plans covering all workers of selected employers, including those covered by a collective bargaining contract.(2) The 1979 forward data are from the BLS Employee Benefits Survey, which collects data annually on the availability and details of a wide variety of employee benefits.(3) Currently, data are available on sickness and accident insurance benefits for nearly all workers in State and local governments and in private establishments,

Brief background

Early in the 201h century, employee groups recognized a need for protection from lost income while unable to work because of illnesses or accidents.(4) To meet this need, labor unions and mutual aid societies provided small weekly payments to their disabled members. These benefits were completely financed by employees through periodic dues; little evidence exists showing employer involvement in the needs of disabled workers.(5)

Immediately before and just after World War II, considerable changes occurred in the compensation available to American workers. Because wage increases were limited by law in the early 1940's, employers began providing a variety of "fringe" benefits, including sickness and accident insurance, as a means of compensating workers. Courts in the late 1940's helped facilitate the expansion of employee benefits by ruling that health care, pensions, and disability income were appropriate topics for collective bargaining. Benefit packages featuring these topics largely have been maintained over the last half century.(6)

In the 1940's, several States fostered the development of sickness and accident insurance plans. In 1942, Rhode Island mandated employee coverage under a State-sponsored plan designed to pay employees a portion of their earnings while disabled; in 1946, California adopted a similar law. These temporary disability insurance plans required employees to contribute to an insurance fund specifically designed to pay disability benefits. Several years later, New Jersey and New York adopted similar laws, but required employers to pay some of the cost.(7)

Currently, five States--New York, New Jersey, California, Rhode Island, and Hawaii--plus Puerto Rico have State-mandated temporary disability insurance plans. The provisions vary considerably among the jurisdictions, but each law achieves the goal of protecting workers from lost income. (See exhibit 1 .)

Sickness and accident insurance is just one means of protecting workers from lost income as a result of short-term disabilities. Another form of protection is sick leave plans, which generally provide full pay to disabled employees. Sickness and accident insurance and sick leave plans differ in several respects: sickness and accident insurance is an insured benefit providing partial pay following a waiting period; sick leave provides immediate continuation of full salary paid from operating funds; sickness and accident insurance originated as a benefit for wage earners, primarily blue-collar workers; sick leave plans are more often a white-collar benefit.(8)


While data on sickness and accident insurance are available for 1958 to the present, differences in survey methods make it difficult to compare the incidence of such coverage over this period. The 1958 study included only workers covered under collective bargaining agreements, while the 1974 and 1989 studies looked at all workers, regardless of collective bargaining status. In addition, the 1974 study collected information on selected employers who provided sickness and accident insurance plans; the 1958 and 1989 studies collected data on employees who received coverage; in addition, the 1989 study covered all workers in larger ( 100 employees or more) private establishments. The studies also differ in statistical procedures. Nonetheless, the observed trends, particularly among individual provisions, are indicative of changes that have occurred in benefit plans over the last 30 years.

The 1958 survey of collectively bargained sickness and accident plans showed that about 70 percent of the 5 million surveyed employees had sickness and accident insurance coverage.

The 1974 study of all workers of selected employers reported that sickness and accident insurance coverage was provided by 65 percent of the employers surveyed, and that blue-collar workers were more often covered by such plans than were white-collar employees.

The 1989 Employee Benefits Survey data indicate that sickness and accident insurance coverage among full-time workers in larger private establishments dropped from 65 percent in 1979 the date of the first survey in this series--to 43 percent in 1989. Coverage for bluecollar workers, the most frequent recipients of benefits throughout the period, declined as well, from 75 percent in 1979 to 58 percent in 1989. The overall decline in coverage may reflect shifts in the occupational composition of the American work force: according to the Current Population Survey, the proportion of workers in blue-collar occupations declined from 34 percent in 1972 to 26 percent in 1991.(9)

Benefit amounts

The basic methods of computing benefits paid from a sickness and accident insurance plan are a percent of the disabled employee's earnings and a fixed dollar amount. The 1958 study found that 1 of 10 employees covered by a collectively bargained sickness and accident insurance plan received benefits based on a percent of earnings. The 1974 study of all workers of selected employers showed that 15 percent of the plans surveyed based benefits on a percent of earnings. According to the 1989 Employee Benefits Survey of all workers in larger private establishments, three-fifths of full-time employees with sickness and accident insurance coverage received benefits based on a percent of earnings. In all three studies, plans basing benefits on earnings typically replaced 50 percent or 60 percent of a disabled employee 's pay.

The fact that only one-tenth of the plans in the 1958 study based benefits on earnings reflects, in part, the influence of collectively bargained plans. Benefits established through collective bargaining frequently are designed to reward worker seniority or to provide equal benefits to all workers, regardless of their wages. For example, collectively bargained pension plans typically base payments on years of service, rather than on earnings; collectively bargained life insurance plans typically provide a fixed amount to all covered workers. The fact that the 1974 and 1989 surveys include workers not covered by a collective bargaining agreement may be the source of much of the increase in sickness and accident plans with benefits based on earnings, rather than a fixed dollar amount.

Sickness and accident insurance plans based on earnings also are becoming more prevalent among blue-collar workers, who traditionally are more highly unionized. In the 1979 survey of all employees of selected employers, 36 percent of blue-collar workers were covered by sickness and accident insurance plans with benefits based on a percent of earnings. The 1989 Employee Benefits Survey of larger private establishments reported that 50 percent of blue-collar workers were covered by a sickness and accident insurance plan.

As pay increases, percent of earnings formulas are adjusted automatically, while the fixed dollar amount declines as a percentage of pay. Data from the three surveys indicate that plan designers are aware of this distinction: percent of eamings plans have remained largely unchanged, while fixed dollar amount plans have been adjusted periodically. However, the majority of participants with benefits based on a percent of earnings were subject to a maximum weekly dollar amount. If not adjusted periodically, a maximum limits the plan's ability to provide adequate replacement income. The most prevalent maximum payment in 1958 was $85 per week for workers covered by a collectively bargained plan. In 1989, the maximum was nearly $150 per week for employees in larger establishments. Although percent of earnings plans are designed to change as wages change, the imposition of a maximum benefit may limit their effectiveness.

Similar concerns about the long-term effectiveness of disability benefits arise regarding plans that pay a flat dollar amount. About one-third of workers in each of the three surveys were covered by sickness and accident insurance plans specifying that benefits be paid as a weekly dollar amount. The most prevalent amounts were $25 to $50 per week in the 1958 study, $60 to $80 per week in the 1974 study, and $100 to $180 per week in the 1989 study. This illustrates that adjustments were made as earnings increased.

A hybrid formula, designed to provide flat weekly benefits that increase with salary, also was available. In the 1958 study, 44 percent of employees with collectively bargained sickness and accident insurance were covered by plans that specified flat benefits that varied by salary. In the 1974 study of all workers of selected employers, 49 percent of employees with sickness and accident insurance were covered by plans with such benefits. The 1989 Employee Benefits Survey reported that 13 percent of covered workers had such benefits. In all three studies, the plans typically based the weekly benefits on the employee's hourly wage rate ranges:
 Hourly wage Weekly benefit
 Fewer than $10 .... $150
 $10-$14 .......... 200
 $15-$18 .......... 250
 More than $18 ..... 300

Sickness and accident insurance plans that include a dollar amount (either a fixed benefit or a maximum payment) call for changes in those amounts to keep benefits consistent with increases in wages and prices. Over the 1958-89 period, the Consumer Price Index rose a little more than 400 percent, while typical sickness and accident insurance dollar amount benefits increased 400 percent and the typical weekly maximum payment doubled. (10)

Other features

Duration of benefits. In all three studies, the most prevalent duration of payments for sickness and accident insurance has been 26 weeks. In the 1989 Employee Benefits Survey, 61 percent of all covered workers received benefits for 26 weeks. Some plans allowed up to 13 weeks of benefits; very few allowed durations of 52 weeks or more. The 26 weeks, or 6 months during which benefits are provided, parallels most States' temporary disability insurance laws. Furthermore, 6 months of sickness and accident insurance benefits generally correspond with the start of permanent disability benefits, such as pension payments, Social Security, and long-term disability insurance.

Eligibility requirements. Employers may impose a service requirement before an employee is covered by a sickness and accident plan, and also may require employees to pay a portion of the plan's premium. Neither requirement was prevalent among collectively bargained plans. The 1989 Employee Benefits Survey reported a typical service requirement of 1 to 3 months for about three-fourths of those covered. A provision requiting employees to pay a portion of their plans' premium was frequent in State-mandated temporary disability plans, but was otherwise rare.

Waiting period. Once an employee meets all requirements for joining a plan, a waiting period is usually imposed at the time of disability, prior to the receipt of benefit payments. In the 1958 study of collectively bargained plans, the majority of covered workers had a 3- or 7-day waiting period before the receipt of benefits. The 1989 Employee Benefits Survey found that nearly all workers had a 7-day waiting period before benefits began. Typically, the waiting periods were waived if the employee was in an accident or was hospitalized.

Small establishments, governments

The BLS Employee Benefits Survey now collects data on small private establishments (1 to 99 employees) and State and local governments. The incidence of sickness and accident insurance is less frequent in these establishments than in larger private establishments. In 1990, one-fourth of full-time employees in small establishments had sickness and accident insurance coverage; one-fifth of full-time government employees had such coverage. However, plan provisions in small establishments were similar to those described above for larger establishments. In State and local government plans, benefits were nearly always specified as a percent of pay, generally with a weekly dollar maximum. Employees in State and local governments frequently were covered by a paid sick leave plan in lieu of sickness and accident insurance.

ALTHOUGH DATA from three studies of employer-provided sickness and accident insurance plans are not strictly comparable, they indicate that changes have occurred in the availability and amounts of benefits of such plans and that other provisions have remained unchanged. The changes coincide with labor force trends away from blue-collar employment and compensation based on hourly wages. Percent of earnings formulas designed to keep disability payments consistent with rising salaries have become more prevalent in recent years.


Jerline Thompson is an economist in the Division of Occupational Pay and Employee Benefit Levels, Bureau of Labor Statistics.


(1) Data for 1958 are from Health Insurance Plans Under Collective Bargaining Accident and Sickness Benefits, Fall 1958, Bulletin 1250 (Bureau of Labor Statistics, 1959).

(2) This series included plans covering workers under a collective bargaining contract as well as plans covering all workers. The series was discontinued in the late 1970's. For further information, see Digest of Health and Insurance Plans 1974 Edition (Bureau of Labor Statistics, 1975).

(3) For more information on the Employee Benefits Survey, see the following Bureau of Labor Statistics bulletins: Employee Benefits in Medium and Large Firms, 1989, Bulletin 2363 (1990); Employee Benefits in Small Private Establishments, 1990, Bulletin 2388 (1991); and Employee Benefits in State and Local Governments, 1990, Bulletin 2398 (1992).

(4) A mutual aid society, prevalent in the early 20th century, was a worker-financed fund that collected dues and offered group benefits, such as disability income protection and life insurance.

(5) Boris Emmet, "Disability Among Wage Earners," Monthly Labor Review, November 1919, pp. 20-39.

(6) Alvin Bauman, "Measuring employee compensation in U.S. industry," Monthly Labor Review, October 1970, pp. 17-24.

(7) For information on the effect of State laws on employee benefits, see Jason Ford, "State-mandated employee benefits: conflict with Federal law?" Monthly Labor Review, April 1992, p. 38.

(8) For more information on different types of short-term disability benefits, see William J. Wiatrowski, "Employee income protection against short-term disabilities," Monthly Labor Review, February 1985, pp. 32-38. Information on long-term disability insurance may be found in Diane B. Hill, "Employer-sponsored long-term disability insurance," Monthly Labor Review, July 1987, pp. 16-22.

(9) Data are from the Current Population Survey of 60,000 households conducted monthly by the Bureau of the Census for the Bureau of Labor Statistics. For more information on this survey, see BLS Handbook of Methods, Bulletin 2414 (Bureau of Labor Statistics, 1992).

(10 Data are from the Consumer Price Index for All Urban Consumers (CPI-U). For more information, see Handbook of Labor Statistics, Bulletin 2340 (Bureau of Labor Statistics, 1989).
COPYRIGHT 1993 U.S. Bureau of Labor Statistics
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:sickness and accident insurance plans over the past 30 years
Author:Thompson, Jerline
Publication:Monthly Labor Review
Date:Jul 1, 1993
Previous Article:Productivity in industry and government: 1973-91.
Next Article:Economic Restructuring and Emerging Patterns of Industrial Relations.

Related Articles
Employee income protection against short-term disabilities.
Comparing employee benefits in the public and private sectors.
Disability and insurance plans in the public and private sectors.
Compensation for death and dismemberment.
How firm size and industry affect employee benefits.
State-mandated employee benefits: conflict with federal law?
The development and growth of employer-provided health insurance.
The National Compensation Survey: a wealth of benefits data: the BLS National Compensation Survey provides an array of benefits data: in 2003, for...
Incidence benefits measures in the National Compensation Survey: for the first time, data from the National Compensation Survey allow comparisons...
Labor compensation and collective bargaining data.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters