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New Disability Bill May Have Unintended Consequences which will benefit Insurance Companies

This is an example of how governments with the best intentions can still screw things up.

It’s quite noble for the federal government to want to help people with disabilities make ends meet. Get people with disabilities more money in their pockets so that they can pay their bills, live independently, and with dignity.

So, the Federal Government unanimously passed Bill C-22 “An Act to reduce poverty and to support the financial security of persons with disabilities by establishing the Canada disability benefit and making a consequential amendment to the Income Tax Act”. Yes, that is the full legal name of the Bill because legislators and lawyers tend to get oh so creative and descriptive when naming a new Bill!

The Bill does not go into specifics about how much people would receive. Nor does it go into specifics about how you would qualify for the benefit.

But it does detail that if you qualify for assistance, you would receive money in the form of a disability benefit.

People should know that receiving money, from any source has consequences. There are never “no strings attached”; especially when receiving money from the Government.

While the Bill has passed its first reading unanimously at the House of Commons, it has bit a bit of a stall at the Senate as reported by the Globe & Mail.

People in the know (insurance companies, personal injury lawyers and disability advocates) understand the unintended consequences (or benefits) of handing out free money to disability claimants.

Insurance companies; in particular, disability insurers want this bill to pass, as written, quickly and quietly without any further debate.

The reason for this is because in the majority of private disability policies, there is a set off provision. Generally speaking, they read such that if a disability claimant recovers any source of money (like a government disability benefit); the insurer gets to deduct that amount of money dollar for dollar against the insurance benefit being paid out.

This presents a potential windfall to disability insurers.

Example: Johnny Disability Claimant (“Johnny D“) is receiving a monthly disability payment from Manulife Insurance in the amount of $2,000/month after a very hard fight with cancer. Johnny D remains disabled, and unable to return to work in any sort of gainful capacity. For all intents and purposes, he will remain disabled for the foreseeable future.

Johnny D applies for, and receives the new Federal Government Disability Benefit under Bill C-22 in the amount of $750/month.

Johnny D is thrilled. He thinks that he will now be receiving his $2,000 disability benefit from Manulife, plus an additional $750 from the Federal Government for a grand total of $2,750/month. This will really help Johnny D pay his bills and make ends meet.London-Head-Shot-Brian-Goldfinger-201x300

The next week, Johnny D receives a letter from Manulife congratulating him on being approved for the new Federal Government Disability Benefit; and pointing out the dollar for dollar set off provision under their policy, citing the section word for word. Manulife informs Johnny D that because he is receiving a new $750 benefit,  that his monthly disability benefit from Manulife will be reduced from $2,000; down to $1,250. Johnny D is deflated.

The real winner for the creation of the new Federal Disability Benefit won’t be disabled people. The real winner, in a lot of cases (and the vast majority where there is a private disability insurer), will be the private insurance companies. They stand to save a lot of money, likely in the millions of dollars should the bill pass without addressing this set off issue.

I’m not sure how the legislation can even address the set off issue, because the set off provisions are created in each policy and expressly state that any money coming in must be set off.

It’s for these reasons that the insurance industry wants this bill to pass quickly, quietly and without any further debate or deliberation.

As you can see, the unintended consequence of this Bill is not passing money along to “the people“. The real beneficiaries of the Bill will be deep pocketed insurance companies.

Perhaps a way of getting around the claw-back or set off provisions contained in the private disability policies is to describe to a new disability benefit as something other than income.

Having lots of experience with private disability policies, I don’t think this will fly unless there is specific wording contained in the Bill which address the intent of characterizing the disability benefit as something other than income so that the clawback/set off provisions contained in individual disability policies doesn’t kick in. That way, no Court can ever have any misunderstanding as to what the legislators intended.

It would come  as no surprise if disability insurers weren’t aggressively clawing back and setting off these payments regardless of their characterization in the legislation.

It would come as no surprise if disability insurers weren’t aggressively clawing back and setting off these payments regardless of their characterization in the legislation. Money coming in, particularly for a disability benefit no matter how it’s named would like attract the attention of an insurer. It would be up to a Judge to decide whether or not these new funds coming in are subject to a clawback or to a set off under the policy. This is why the legislation needs to be very specific in its wording so that there is no confusion, no unintended consequences, and no unintended windfalls to large, multi-billion dollar insurance companies.

It’s amazing how a government is elected by individual voters. Yet, new legislation which is created to protect and to prop up individual voters doesn’t go on to serve those individual voters which elected the government. Instead these laws go on to protect, serve and benefit, multinational corporations which don’t even have a vote! What am I missing here?

This is a stark reminder that nothing is “free”; and that even the most well intentioned acts have unintended consequences. Legislators need to examine those unintended consequences and make sure that the electorate are served and protected. The government should not be serving its corporate masters under the guise of giving back to the people.


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