For Lori Dawson, the calls of concern would come as early as 7 in the morning. People wanted to know if the Mercer Island, Wash., resident, who was battling complications from breast cancer, would consider seeing a new doctor. Was she noticing any changes in her symptoms? Did she feel well enough to exercise? All the questions would have been welcome if the calls were from friends or family. But they were coming from case managers at her insurance company and they weren t particularly friendly. The relationship got very tense, says Dawson, a pharmaceutical sales rep.

At the time, Dawson was getting disability payments from Cigna, through a policy paid for by her employer. The policy had already reduced her benefits; now the insurer argued that she was able to work, and at one point even stopped her payments for several weeks. A Cigna spokesperson says Dawson s doctors didn t initially provide enough details about her condition, and notes that the company resumed paying after Dawson and her attorney appealed the decision. But Dawson, a widow with three children, says she was the one who faced the consequences. I was pretty much at the end of my rope, she says.

For decades, disability insurance has been the least visible strand of the social safety net with many people unaware they even have it. But they may start noticing now, because a growing number of companies are adding it to the list of corporate cutbacks. According to benefits experts, more employers and insurers are not only scaling back their coverage, but also putting workers under the microscope when they try to use it. Disability insurance provides an income to people who become too sick or injured to work, and it has traditionally been a staple of a good workplace benefits package. But with companies struggling to stay afloat, the policies have become much less generous, with some paying less than half as much as they did a few years ago. Workers are also paying more in premiums: According to the insurer Unum Group, 81 percent of employers picked up the entire tab for short-term disability insurance in 2001. Today it s down to 45 percent, and patient advocates say the rocky economy is likely to leave workers picking up even more of the tab.

The reductions, of course, bear a strong similarity to what s been happening to employee health plans. But the timing could hardly be worse, since the need for disability coverage is growing as the workforce ages. It also surges when the economy slumps; indeed, claims for Social Security s disability insurance, which had been relatively flat for several years, jumped 17 percent in 2009, to a record 3 million, and the Council for Disability

Awareness, a trade group for private insurers, says it expects that 2010 will show another upward spike in claims. When those workers try to collect, they re likely to find themselves under much more scrutiny. Once employees go on disability, critics say, insurers today are more likely to require hour-long chats on the phone, hound patients for medical updates and push them back to work as soon as possible often clashing with doctors who think the workers need more recovery time. These claims are now managed, whereas they used to just be monitored. It can be very intrusive, says Terry Smith, a principal in Mercer s health and benefits practice.

To be sure, the disability battle is complex. Companies and human-resources experts say disability benefits are soaring to unmanageable levels, putting pressure on companies to do whatever they can to control costs especially given that disability fraud is quite common. Even advocates for patients agree that for people whose disabilities aren t completely incapacitating, getting back to work is critical to their mental health and overall well-being. But for people whose health problems are severe but not necessarily permanent, the new micromanagement can come as a shock. Consumers who expect a simple yes or no from the insurance company find the process is more complicated than they had ever imagined and more taxing, at a time when they are at their most vulnerable. It really catches people off guard, says Erin Moaratty, a project officer with the Patient Advocate Foundation. They think, If I get sick, at least I ve got this plan. That s not the way it works.

Benefits Under the Microscope

For years, of course, companies have been examining every dollar spent on health benefits, but it s only recently that disability coverage received the same scrutiny. The surprise is that it took so long, given that three out of every 10 workers will become disabled for three months or more before age 65. Time lost from work a category that includes disability, workers compensation and sick pay costs companies $118 billion a year, while lost productivity from the working unwell more than doubles that tab, according to the Society for Human Resource Management. Those costs have grown by a steady 4 or 5 percent per year for most of the past decade.

With regard to health care, many companies have dealt with high costs simply by dropping insurance for workers; with disability, things are playing out a little differently. A generation ago, companies largely maintained a hands-off approach to workers on disability. As long as they produced a note from the doctor, employees stayed home until they felt well enough to return to work, collecting a percentage of their income and continuing to get benefits such as health insurance. The package was comfortable enough, many employers complained, that some employees made little effort to return to work. We just sent them home, and they never came back, says Tori Weeks, the associate director of benefits at Ohio State University.

These days disability coverage is getting noticeably less comfortable. A decade ago, it was standard for a workplace disability plan to pay an employee 70 percent of her income while she was out. But those payment rates have gone off a cliff as the economy weakened, and employees now often get less than 40 percent. To make up for the drop-off, companies offer supplemental coverage as a voluntary benefit for which employees pick up the tab, but that can be expensive. And disability policies of all kinds increasingly give insurers wider leeway in determining which claims to pay. In practice, companies can decide to deny claims after submitting medical records to third-party firms that never examine or even speak to the patient. A lot of times, claimants are paying premiums for policies that they don t realize are not actually going to protect them, says Pamela Atkins, an Atlanta plaintiff s attorney who has litigated dozens of disability cases.

As part of an 11-month regimen to treat hepatitis C last year, Walter Sidorenko says he had to take five pills each day and give himself a weekly injection. He says the treatment sapped his energy and made him dizzy; after five months his physician urged him to take a leave from his job with a transportation company. The medicine was kicking my rear end, says Sidorenko. Prudential, his insurer, paid his disability claim for four weeks but then decided he was able to return to work, based on its own review of his records. The checks stopped coming, and Sidorenko says he wound up raiding his 401(k) for living expenses, though he and his doctor believed he was still too sick to work; only after a weeks-long appeals process was he able to regain his coverage and win back pay.

Kimberly Mashburn, Prudential s vice president for strategic partnerships, declined to discuss the Sidorenko case, citing patient confidentiality. She notes, however, that the company relies on extensive guidelines that show typical recovery times and the type of work a patient should be able to perform. The case managers also consult with patients and their doctors. But at the end of the day, Mashburn says, the insurer decides who is able to work. Sometimes doctors will tell us, This person is disabled, Mashburn says. We have to say, That is not what we asked.

Insurers Get Proactive

Indeed, insurers guidelines and questions are driving them ever deeper into patients lives, even when the paychecks themselves aren t cut off. Mashburn and other insurance pros say they re taking an increasingly proactive role in getting employees back to work. They have some data on their side: Multiple studies show a high rate of depression among the disabled and an increase in self-esteem when they are able to return to work. There is a lot of value to work other than just the paycheck, says Kenneth Mitchell, a Columbus, Ohio based consultant to insurance companies and employers on disability issues. Today many insurers initiate three-point contact communication with the disabled employee, his or her doctor and the company within 48 hours of a claim being filed.

But the rush to act can make patients feel as though their health is getting ignored. Lori Dawson says the turning point for her came when her carrier wouldn t take the word of her oncologist that she was unable to work. One factor in the decision, according to Dawson: A Cigna case manager had seen the words horses, tennis on her medical chart and assumed Dawson had resumed an active lifestyle. In fact, these were the activities that Dawson had to give up because of her persistent illness and exhaustion but she and her doctor were unable to convince Cigna of that. They were not even decent to me, Dawson says. It was the worst thing I ve ever experienced. (Last July, Cigna made back payments to Dawson, after she appealed with the help of a lawyer.)

Somewhere between tough love and coddling, doctors say, there s a happy medium where insurers can help patients get well without evoking comparisons to the Spanish Inquisition. The industry says it has taken major steps to improve its relationship with patients. In 2004 and 2005, insurer Unum Group agreed to pay $24 million in fines to various state regulators over its handling of disability claims. In addition, the company agreed to review previously denied claims between 1997 and 2004 and ultimately reversed 42 percent of them in the patient s favor. Today Unum stresses a training program for case managers on how to encourage employees to return to work without appearing antagonistic. The process often includes finding transitional work to ease the employee back into the workforce. We want to make sure there is a gradual progression to 100 percent, says Kristin Tugman, Unum s director of health and productivity development.

But patient advocates say that whether or not they re becoming more patient-friendly, the industry s efforts to coax employees back to the office is bound to be a double-edged sword. Some insurers, for example, have been hiring disability advocates to help severely disabled workers cut through the red tape in applying for Social Security disability insurance, or SSDI. On the surface, the help seems like a good deal for the worker, since the process can be both complex and lengthy. But the insurance firms are quietly benefiting too, since they don t have to pay whatever part of the tab the government picks up. It s good for everybody but Uncle Sam, says Dave Osterndorf, chief health actuary for the consulting firm Towers Perrin.

More important, the insurer s goodwill doesn t always last. In a growing number of cases, attorneys and advocates say, insurers stop paying at all once someone qualifies for government help which can mean a pay cut of as much as 50 percent for the disabled employee. When Mike Chapman, a production manager for a cleaning-products company, went on disability because of a back injury, he says his insurer, Cigna, required him to file for SSDI and hired a disability advocate to assist him. Chapman thought it was a big red flag when he learned that the advocacy firm worked for Cigna and not him. And he believes now that he was right: After he qualified for Social Security, he learned Cigna would no longer pay any share of his benefits. (Cigna declined to comment, citing ongoing litigation.) Chapman has been borrowing from his parents to cover his monthly expenses while he sues Cigna to get an income he can live on. I had every confidence disability would be there for me, Chapman says.