How does Access to Short Term Disability Insurance Impact SSDI Claiming?

David Autor, Mark Duggan, Jonathan Gruber, Catherine Maclean

NBER Disability Research Center Paper No. NB 13-09
Issued in October 2013

More than 40 percent of full-time workers in the U.S. receive short-term disability (STD) insurance through their employers. Unlike private long-term disability insurance or Social Security Disability Insurance (SSDI) benefits, worker can access STD benefits with virtually no waiting period, which may enable workers to overcome temporary health-related work limitations and subsequently return to work. Alternatively, STD benefits may provide a pathway out of the labor force that ultimately encourages SSDI claims. We empirically assess whether the provision of STD benefits increases or reduces inflows onto the SSDI system by analyzing cross-state, cross-sector variation in STD coverage stemming from coverage mandates in five U.S. states. Initial results find that policy-induced increases in STD coverage decrease inflows into the SSDI program. Subsequent analysis, however, indicates that this relationship is not reliable: the estimated effect on SSDI enrollment is implausibly large; and the reduction in SSDI enrollment appears to occur among groups that do not see an increase in STD utilization. While the question of how STD coverage affects SSDI receipt remains important, we conclude that our empirical strategy is insufficient to credibly estimate the causal impact.

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