Disability insurance is funded through the federal Social Security program as well as through states and their own programs. For state disability insurance, employees contribute a very minute sum each week to fund the program. It may be as little as 60 cents. However, in some industries, the employer absorbs 100% of the cost usually established due to a labor union’s collective bargaining agreement.
The History of Disability Insurance in the United States
In the late 1950s, in order to be accepted into the program, a worker had to be already out of the workforce. Because working conditions were so much more severe than they are today, someone applying for disability insurance truly had no hope of ever being able to work again.
In the 1980s, the government loosened the tight restraints of disability insurance. An official medical diagnosis was no longer required. Congress widened the qualifications for disability insurance to include more subjective factors like pain and mental illness. Even with the added subjectivity, there were still many rejected. However, those rejected could appeal to an administrative judge without requiring a defense from Social Security explaining the reasoning behind the rejection.
Ultimately, more and more people were accepted into the program. Today, 1 out of 20 Americans from the ages 25 to 64 are on disability. There appears to be a correlation between a struggling economy and disability payments. Workers may be motivated to apply for the program and claim disability benefits when they forsee a layoff coming.
“The trustees said on Monday that the disability fund will be exhausted by 2016, two years earlier than they estimated last year. Disability payments won’t stop. But once the fund is depleted, a bigger share of payroll taxes will be diverted from the fund that pays benefits to old age pensioners and their survivors” (Porter, Eduardo. (2012, April 24). Disability Insurance Causes Pain. The New York Times).