CPP drive by private insurers unrewarding

Many Canadians are being coaxed by private insurers to apply for CPP disability benefit but the end result is anything but rewarding

According to a recent Calgary news report as much as $1 billon could be going from federal coffers to subsidize private disability insurers and Canadians could be suffering financially as a result.

Calgarian Greg Blundon was first diagnosed with brain cancer 22 years ago. After undergoing rounds of chemotherapy over the years as well as brain surgery in 2004, Blundon was forced to leave his job as an IT security analyst and 18 months ago he went on long-term disability through his employer’s group plan.

The problems with the insurer began shortly thereafter when it persuaded Blundon to apply for the CPP disability benefit.

"I've been paying [into] LTD for 22 years, so I thought, 'That's it I'm covered.' But the letters came and they came," said Blundon, his words slow and laboured. "There was no choice, actually. I had to apply."

Once Blundon applied the federal government sent him a retroactive lump-sum cheque for $13,000. That sounds like good news only it’s not.

Blundon had to give that $13,000 to his insurance company, pay the back taxes on the lump-sum, and his monthly income dropped by $300 because the new CPP portion of his benefits is taxable.

"It is a burden because ... every dollar counts," said Greg who still has one daughter living at home. "They're clawing back that money....The companies are benefiting from the government's portion."

While one might consider this practice less than fair, it’s entirely legal says one expert.

"There's nothing illegal about it, or immoral," said Calgary lawyer Bob Rivard, who specializes in long-term disability claims. "I've been doing this... for 25 years at least, and it's always been this way. But just because it's been that way doesn't mean it has to be in the future."

The solution, says Rivard, is to add the CPP disability benefit to the private insurer’s payout rather than deducting it.

"When you're on disability, you're hurting financially, hurting medically," said Rivard. "It would be nice to see ... an additional net provided to these people that are often in very dire straits financially."

If only insurers could see it that way.