Employer’s Short Term Disability Plan Is A Problematic Self-funded Group Plan

Self-funded group plans seem like their very existence is a conflict of interest and violation of employee privacy - how are they legal?

The last time I took a medical leave of absence for mental health and applied for short term disability (at a prior employer) there was a third party administrator that handled my medical information. The insurance company that held the policy would approve or deny the claim. It was my impression that my employer only had the information that they needed.

Now I my current employer is the one who funds the plan that pays the approved claims and is also the one collecting medical information and deciding which claims are approved - how is this allowed?

And how is my employer requiring my therapist’s notes an acceptable part of this process when my medical leave is due to mental health?

If a third party administrator was involved and my employer was out of the claims loop I wouldn’t be asking any of these questions.

I’ve had a few people say that this is “really common with large employers” like mine but am having a hard time understanding how this obvious conflict of interest and violation of privacy is allowed to exist.

Is there anyone with knowledge about this area who can speak to these issues?