Disability insurance - restricted because of employer sponsored plan?

[RogerRovers]

I’m a new attending at a university/hospital affiliated practice. I get employer sponsored group disability insurance coverage up to approx $6,000/month. Recently tried to look into private disability coverage for another $10k/month, going through an independent agent, but was told that I would not be able to qualify for more than $5k/month because of my employer paid group coverage.

Anybody ever hear of that before? ie, my employer sponsored coverage limiting my ability to sign up for personal disability insurance through an independent agent?

Thanks!

[Scott at MD Financial Services]

It is normal because it falls under the Issue and Participation guidelines established by each carrier that determines how much coverage they are willing to issue based on your income and other disability benefits.  Now, is that accurate?  Not sure, that totally depends on your income.

Let me know if we can help further.

[MPMD]

that's part of the reason why DI agents shake the trees so much when you're coming to the end of residency.

[Scott at MD Financial Services]

Agreed.  A typical conversation transpires like this:

Physician: I want disability coverage for $X amount.

Agent:  I know and I wish I could help you but based on income and the fact your employer has $Y amount of benefit in place you don't qualify for it.

Physician:  Well I don't want what they have because the definition of disability is not as good as what I want, I will just opt out.

Agent:  I understand, but the employer has done what is called forced coverage where 100% of all employees are covered thus the premiums are less to the employer.  If the employer allows people to opt out then the group is kind of stuck with the less healthy people since the healthy people tend bail out and get better coverage and thus it is an unbalanced plan.  If a group does not do a forced coverage plan then even if they had 65% participation in the plan as an optional election the total premium will typically be more than the forced plan pricing.

You see that in the life insurance as well where they offer X amount as an employee benefit but then allow you to buy up individually.  Typically people can buy their own term policy vs. what is offered through their employer for half the cost.

 

[LBKCLU]

Each insurance company has their own Issue & Participation (I&P) Limits. This is the amount of your income that they are willing to replace either on their own or in conjunction with your employer provided/sponsored group LTD coverage.

If the group LTD plan's benefits are taxable, the individual carrier will discount the amount by 25-30% (replicating the taxes) to determine the amount of individual coverage available taking this and your income into consideration.

However, if you are a "new Attending" most carriers make "New In Practice" limits available of $6,000-$7,500 month, depending upon your medical specialty. This limits allow you to purchase a certain amount of coverage, regardless of your income or group LTD coverage. Therefore, if you are in the first 12-24 months of practice, I suspect that you would likely qualify for a larger monthly benefit than $5,000 if you meet the criteria.

Keep in mind that these limits may vary from one carrier to another.

2017-51497

[adventure]

@WCI - you could update this type of post with this info - at least for many employeed university folks.

Scott @ MD Financial Services wrote:

It is normal because it falls under the Issue and Participation guidelines established by each carrier that determines how much coverage they are willing to issue based on your income and other disability benefits

Click to expand...

 

[Miss Bonnie MD]

Yup happened to me. Just left that job though (and took new job without group DI) so upgraded private DI to a much higher amount.

[nachos31]

It's normal. I was able to secure the New in Practice limit for my IDI. However, my employer's group DI just added a provision that they would offset their benefit by any existing IDI benefit, which may be normal but sure is frustrating. Furthermore, I have to pay taxes on the group DI policy premiums as the group DI benefit is tax-free, which to me is just pouring salt on the wound.

[Scott at MD Financial Services]

Employers can elect group policies to remove the offset provision for individual coverage and even things like Social Security benefits, usually it costs around 3-4% of the policy premium.  Usually it is simply an administration decision on a policy being made and not understanding what they are electing or how it changes the behavior of the policy to the physician staff...once explained they usually re-consider that decision.

[nachos31]

Scott @ MD Financial Services wrote:

Employers can elect group policies to remove the offset provision for individual coverage and even things like Social Security benefits, usually it costs around 3-4% of the policy premium.  Usually it is simply an administration decision on a policy being made and not understanding what they are electing or how it changes the behavior of the policy to the physician staff…once explained they usually re-consider that decision.

Click to expand...

Are you saying that the option to have the offset provision costs the employer 3-4% of the policy premium? As in, if they got rid of the offset provision, they would save money?

[Scott at MD Financial Services]

No, to remove those would typically cost about 3-4% extra premium since it means the carrier will have more monthly benefit exposure to every claim.

It is not often you see a group policy that reduces for Individual plans but the "other income benefit offsets" are pretty constant in the market and usually have about 20 items they can reduce payout to the insured for.  I know when I have been asked to visit with administration on this topic they usually have no clue what I am talking about and it usually ends up with "this is the first time anyone has ever pointed this out to us".  Most of the time they are pretty receptive to a product redesign that is not as restrictive.

Let me know if we can help further.