Many need high limit DI
BY JEFF BRUNKEN
REPLACING one’s income when unable to work due to a disability should be a crucial consideration for anyone who collects a paycheck. Disability insurance provides such protection, and most working Americans access short- and long-term disability insurance policies through their employer. There are unique aspects of healthcare professionals’ earnings, however, that can require special attention.
Similar to professional athletes, entertainers, lawyers and other highly-paid professionals, many healthcare professionals are among those whose earnings extend beyond the income-protection limits of standard disability insurance policies. Because their income creates coverage gaps within traditional policies, they need a high limit disability insurance policy that provides greater monthly and lump-sum benefit amounts. Whether or not they have above-average salaries, many healthcare professionals have student loans from medical school. A special policy could cover those payments if they become disabled.
In reality, there are many reasons a healthcare professional might need extra disability coverage. This may come in the form of individual or specialized group disability, or even high limit disability insurance. There is even specialized disability insurance for student loan debt. Here are the top five reasons:
1. They have earnings that exceed what is available through individual disability insurance
Most healthcare professionals carry the IDI policies they secured during medical school, which offered them an income-replacement level that was suitable at the time. But these professionals generally have more income to protect as they advance in their careers — more than any other class of professionals.
According to the most recent data from the Bureau of Labor Statistics, the top 10 highest-earning occupations in the country are physicians and surgeons. The median annual wage among this group is approximately $208,000 per year — nearly four times more than the $56,310 per year made by the average American.
2. They are high earners and have multiple income sources.
High limit disability insurance is most appropriate for healthcare professionals earning over $400,000 in annual income. According to Doximity’s 2020 Physician Compensation
Report, the highest earning healthcare professionals are neurosurgeons, with an annual compensation of nearly $750,000. Thoracic surgeons and orthopedic surgeons also receive well over $600,000 per year. Many other specialties command a compensation of over $500,000 per year and could benefit from high limit coverage, including plastic surgeons, oral and maxillofacial surgeons, vascular surgeons, cardiologists and radiation oncologists. Other candidates for high limit disability insurance may include gastroenterologists, radiologists, urologists, ENTs, dermatologists, anesthesiologists, general surgeons, colorectal surgeons, oncologists and ophthalmologists.
Brokers should look carefully at all income sources when calculating pre-disability income. Like many short- and long-term disability insurance policies, high limit coverage considers all sources of income when considering eligible benefit payment amounts. These include income sources beyond annual salary, such as bonuses, partnership (K-1) income and any other income
the high earner might have that also needs protection. Additionally some physicians’ annual salaries do not exceed $400,000, but still generate considerable qualifying income through bonuses and other income sources.
3. They often have student loan obligations.
Many healthcare professionals have large student loan balances, and they need coverage for the payments in case of a disability. According to the most recent data from the Association of American Medical Colleges, 73% of all medical school graduates hold student loan debt, and the average amount is $200,000. Many of these healthcare professionals carry debt for years or even decades while they work.
A specialized disability insurance plan helps ensure they receive a sufficient monthly payout to cover their loans. The plan should be written to account for not only the monthly student loan burden, but also for federal taxes on benefit payments that could lead to a default. Many physicians are surprised to find their monthly payments are reduced by thousands more than they expected, simply because taxes on benefits are due at claims time for employer-paid group plans. Sometimes there is not enough left to make the loan payments.
4. They need coverage for their particular specialty.
Healthcare professionals may face a greater risk of disability than some other professionals because their medical specialties and procedures performed depend upon physical health and capabilities to perform their jobs. A surgeon, for example, may develop
a hand tremor that prevents him from performing surgery. However, his tremor might not be considered disabling enough for benefits under a standard disability plan because the tremor would not prevent him from working as a family physician.
A specialized disability insurance plan works like IDI by paying out benefits based on specific CPT/CDT-coded procedures (like surgical procedures), and therefore would consider the surgeon fully disabled. Having a specialized policy means the surgeon would receive a monthly benefit for his disability, whereas with a traditional LTD policy he may receive nothing at all.
5. They risk burnout.
Healthcare professionals havea real risk of burnout. According to a September 2019 article in The American Journal of Medicine, 40-50% of physicians were already experiencing burnout pre-COVID-19. The article cited studies that suggested this burnout regularly transitions into major depression, substance abuse and even suicide. The COVID-19 pandemic introduced even higher stress levels. The Kaiser Family Foundation/Washington Post Frontline Healthcare Workers Survey published April 2021, revealed that 62% of healthcare workers said worry or stress related to COVID-19 had produced a negative effect on their mental health.
Specialized disability insurance policies provide healthcare professionals with the adequate mental health and addiction coverage they need for burnout- or stress-induced disabilities through Mental & Nervous and Drug & Alcohol (MNDA) benefits.
What Brokers Should Look For
If a healthcare professional client’s overall income seems exceptionally high, check to see if their disability policy will adequately provide a true 60-70% income replacement in the event of a claim (most traditional policies will not pay out more than $20,000 to $25,000 per month). If not, a high limit plan should be suggested to fill that gap.
There are two important definitions that brokers should look for in policies for their clients. The first is the “own procedures” definition of disability, considered the gold standard because it guarantees both the right amount and the right type of coverage. The second is the definition of covered income within the disability policy. Healthcare professionals should have an “all sources” definition to cover partnership income and various incentives outside of their normal W-2 income.
For healthcare professionals concerned about what will happen to their student loan debt if they become disabled, brokers should recommend a high-limit student loan payoff policy.
Burnout is also a risk for healthcare professionals that can affect their ability to earn an income. Brokers should look for disability policies that offer adequate mental health and addiction coverage.
Healthcare professionals have unique income-protection exposures, so they need specialized disability income-protection coverage. Most insurance carriers do not offer appropriately specialized coverage simply because they are focused on the broader market. Brokers with healthcare professional clients should work with insurance carriers who offer disability policies that are built expressly for healthcare professionals and have a track-
record of meeting these specialized income-protection needs of healthcare professionals and their brokers who advise them.
JEFF BRUNKEN is president of MGIS, a leading national insurance program manager that builds and manages specialized disability insurance programs for healthcare professionals.