The nation's largest disability insurer was recently found to have committed fraud by requiring some consumers to apply for Social Security benefits even though they were not eligible.
Because Unum processed almost 400,000 disability claims in 2007, however, paying out more than $4 billion in benefits, the verdict was based on only six claims. Only two of the six were found to have been fraudulent. Three showed no evidence of such fraud, and the jury could not reach a decision on the sixth.
The next step is to determine the full extent of Unum's overall behavior and the scope of its harm to the Social Security program.
The lawsuit is one of two federal cases contending that Unum and another disability insurer, Cigna, are forcing able-bodied people to repeatedly apply for Social Security disability benefits or face termination of their insurance payments. Because the Social Security Administration defines "disabled" more stringently than the insurance companies generally do, many people who qualify for disability insurance benefits do not qualify for Social Security.
The lawsuits, filed on behalf of the Social Security Administration, say that sending claimants into the Social Security system allows Unum and Cigna to reduce their claims reserves, which in turn raises the insurers' profitability.
Unum and Cigna say that referring claimants to Social Security is a standard practice in the industry and that there is nothing wrong with it.
