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

More than 40 percent of full-time workers in the U.S. receive short-term disability (STD) insurance through their employers. Distinct from private long-term disability 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 exploiting 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. We caution against viewing the current results as reliable, but conclude that the question of how STD coverage affects the SSDI program remains important, and we touch on potential alternative research strategies.