By Nick Trawinski
According to a survey conducted in 2018 by the American Medical Association, 2018 was the first time that the number of employed physicians outnumbered those who were self-employed. The study found that as of 2018, 47.4% of practicing physicians were now employed. This trend has increased since the time this survey was conducted as the number of out of network physicians have declined as reimbursements have decreased. This has likely had a hand in leading physicians to weigh the pros and cons of employment vs. self-employment and with all the changes in healthcare, we are likely to see a continued increase of employed physicians over self-employed physicians in the years to come.
Now that more physicians are working for larger medical groups that provide benefits as part of your compensation, many physicians believe that their Group Disability Coverage is sufficient to cover them if a sickness or injury prevents them from working in their specialty.
Because of the increased trend of employed physicians, we have seen an increase in the number of physicians that are cancelling their individual disability policies or forgoing the purchase of individual coverage all together.
However, it’s important to realize that not all disability insurance is created equal and doctors should always pay close attention to the verbiage of their plans to ensure they are covered from a disability that may prevent them from working in their medical specialty and a policy that doesn’t limit their ability to continue to earn another income.
The fact is, Group Disability Insurance is not considered Own-Specialty coverage.
What is True Own Specialty Disability Insurance?
A True Own-Specialty Disability policy pays you a tax-free income should a sickness or injury prevent you from working in your medical specialty. Under a True Own-Specialty definition of disability, you will continue to receive your full tax-free benefit even if you elect to work in another occupation.
As an example, under a ‘True” Own-Specialty Disability policy if you are working as an emergency medicine physician earning $400,000 per year and you suffered a disability that prevented you from working in the ER, a ‘True’ Own Specialty disability policy would pay you your “full” tax-free disability benefit, even if you were earning the same income working in another occupation, like telemedicine or urgent care.
How is this different from the coverage provided through your employer?
In the above example, under an employer sponsored long term disability policy, you would not be eligible to receive your disability coverage because you were working in another occupation. Employer disability policies limit and reduce your benefit if you engage in another occupation, and therefore is not considered Own-Specialty coverage.
Employer Benefits are often taxable – When suffering a disability, the last thing you need to worry about is your tax bracket. Although the cost of the coverage is FREE, the benefit you receive would be subject to state and federal income taxes which when coupled with the contractual limitation from earning allowed to earn another income, could seriously impact your ability to continue to provide for your family and maintain your current lifestyle.
Partial Disability under an Employer Sponsored long term disability plan is extremely unrealistic to qualify for – Your group policy might offer you a 90-day elimination period, but that waiting period must be met over 90 consecutive days. Statistically speaking, the majority of disability claims arise from a disability that has been developing gradually over time, making 90 consecutive days of missed work impossible to satisfy if partially disabled. In order to qualify for partial disability, the insured must first be totally disabled and then return to work on a part-time or limited income basis.
Under an individual specialty specific disability policy, your 90-day waiting period can be accumulated over a window of time. Once you have accumulated 90 days of missed work, you would be eligible to start receiving a portion of your benefit while still working in your occupation but suffering a loss of income as a result of a partial disability.
Cost of Living adjustments are non-existent – the cost of living continues to increase regardless of our ability to work. And while you are collecting disability your policy should be increased to keep pace with the rise of inflation. Employer-Sponsored Long Term Disability policies rarely include a provision to protect against cost of living increases.
Through an individual Specialty-Specific disability policy, cost of living riders (COLA) can be purchased to protect you from inflation ensuring that while you are disabled, your monthly benefit will increase every year to keep pace with the rise of inflation.
Your Income is not fully covered – Employer-Sponsored Long Term Disability Insurance only provides coverage for up to 60% of your BASE income and up to a specified cap limit. If your base income is only $100,000 per year but your total income is $300,000 per year, your Group Policy will only provide you $5,000 per month of taxable benefits (provided your group cap is not less than $5,000 per month) because coverage eligibility is calculated using your contracted base income.
However, under an individual specialty specific disability policy both your base and bonus income are considered when determining your benefit eligibility.
Coverage is not guaranteed – although you may have a group policy today that doesn’t mean you will have a group policy tomorrow. Your Employer-Sponsored plan can be canceled, changed, or modified leaving you and your income vulnerable. It can also be changed or canceled at time where your personal health situation no longer qualifies you to be eligible to purchase your own private policy.
One of the many advantages to owning an individual policy is your policy and premiums are usually guaranteed regardless of your future health or income.
Coverage may not be portable – If you change jobs or elect to go into private practice you may not have the choice to bring your policy with you. If your plan is portable, the premiums would be expensive as the policy is no longer subsidized by your employer and the contract is still not guaranteed.
Free is never better – While employer-sponsored Group Disability Benefits may be appealing to your wallet, the risk associated with the need for a physician to file a claim for coverage can
be catastrophic. Proper Disability Planning is the cornerstone of financial planning because having the right plan allows you to maintain control of your career and earning potential.
“My human resource department says they offer Own Occupation/Own Specialty Coverage” – The fact is that Own Occupation Disability Insurance actually means something different within the inner circles of insurance language than it does in the mind of a physician.
Most hospital employers don’t know that True Own Specialty Disability Insurance exists simply because it is not a plan that is available through your employer. Your human resource department is focused on keeping things simple and universal for all the employees under their establishment. They are tasked with establishing benefits that work for not only the physicians but the full-time executives, nurses, janitors, orderlies, etc. The janitors, orderlies, general staff, and nurses would be content with a disability plan that pays them 60% of their “BASE” income while restricting their ability to earn another income, but this isn’t a good fit for the physician employee and is certainly not a suitable replacement for having True Own Specialty coverage.
As a physician your income is your greatest asset and according to Life Happens.org, 1 in 4 physicians will suffer a disability lasting more than 90 days prior to their age of 65.
Own Specialty Disability Insurance can only be purchased individually and is only available through 7 disability carriers: Ameritas, Guardian, MassMutual, Mutual of Omaha, Ohio National, Principal and The Standard.
InsuranceMD is an independent insurance agency working exclusively with physicians advocating that every physician has True Own Specialty Disability coverage. We provide physicians with quote comparisons from all 7 carriers and we shop for any available discounts to ensure each physician is getting the best coverage at the best price.
We care about your disability insurance; you can request quotes here and schedule a call with one of our experienced agents to help you determine how much Own-Specialty coverage you qualify for at the best rate available.
