The Social Security Administration (SSA) warned last week that Trump’s Department of Government Efficiency’s efforts to reduce federal spending may result in “significant workforce reductions” across the agency, which is responsible for processing some 2 million benefit applications per year.
This comes at a time when the SSA is already short-staffed and dealing with extensive backlog. Indeed, once an individual has submitted their application for social security disability benefits (SSDI), it takes 6 to 8 months to get an initial determination. If the initial claim is denied, the individual will have to go through additional appeal processes, and all told, applicants may wait one to three years for a final decision. Thus, a reduction to the SSA’s funding and workforce will only worsen this wait time, and force vulnerable applicants to go even longer without essential financial support.
One major consequence of these delays is the increased burden on private disability insurers. Many individuals rely on employer-sponsored group disability insurance plans as an income source while awaiting SSDI approval (you can learn more about the difference between LTD and SSDI benefits here). However, as SSA processing times lengthen, insurers will be responsible for supporting claimants for longer periods of time, thus increasing their costs. Additionally, many LTD insurance policies include provisions that allow insurers to offset/reduce the LTD benefits they pay out by the amount a claimant receives from SSDI. When SSDI decisions are delayed—sometimes for years—LTD insurers are forced to continue paying full benefits for longer periods, further cutting into the company’s profits.
While decreased insurer profits may not elicit much public sympathy, the reality is that insurers are unlikely to absorb these losses themselves. Instead, they are likely to compensate by tightening their own claims approval processes, increasing denials, or making it more difficult for disabled individuals to qualify for benefits. This could mean heightened scrutiny of medical evidence, more frequent requests for documentation, or a greater reliance on technicalities to reject claims. Ultimately, this shifts the burden onto the individual claimant.
Ultimately, reducing SSA funding and workforce capacity does not just impact government services. Failing to adequately fund the SSA and reduce disability claim backlogs not only harms disabled individuals but also creating a ripple effect that leads to stricter LTD insurance policies, making it harder for people to access the benefits they need. Ensuring timely SSDI processing is essential not just for claimants but also for maintaining a functional and fair private disability insurance system.