Disability Insurance – What Does It Mean for You as a Resident?

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Are you curious as to what kind of disability insurance you have right now as a resident?  Let’s talk about a typical group disability plan. If you are a resident, you are probably covered under a relatively inexpensive group plan and will be covered until the end of your residency. I’ll take the Stanford group disability plan as an example and use it for this post.

In a nutshell, the Stanford group disability plan, administered by a company called Guardian, will pay you 60% of your prior month’s earning, 90 days after you’re disabled provided that you meet their definition of disability, and you hand in all the paperwork. 90 days is what’s called the “elimination period” – the period of time you must be continuously totally disabled before disability benefits kick in. Yes, that’s right; even if you do everything right after a disabling event, you won’t see a dime until after 90 days of continuous disability. Remember insurance companies make money by not paying you. They are probably counting on the fact that you are young and that most health issues you will face during residency will most likely resolve within three months time.

There are other problems with this type of group plan:

1) The disability benefit amount isn’t that much. Your benefit, if you qualify, will be 60% of your prior month’s earning, and that will most likely be taxed as income. Furthermore, the Stanford group disability plan “integrates” as most group plans do. As covered in the previous post, a plan that integrates benefit will decrease the payout amount by whatever is covered under other plans, like worker’s compensation or social security disability benefits. So at the end, what you see in your bank account won’t amount to that much.

2) The Stanford group disability insurance does not have a “true own occupation” coverage. Under a policy without a “true own occupation” coverage, the insurance company will decide that your disability ends “the date [they] determine you are able to perform the major duties required of a Doctor of Medicine or any other medical practitioner, even if you choose not to perform such duties.” This means that if the insurance company deems you capable of working as any kind of a physician (not the one for which you had been training), you’re no longer eligible for benefits. True own occupation coverages are expensive; it’s not surprising that a generic group policy doesn’t have it.

3) The disability coverage ends on the date your full-time service to your hospital ends. This one seems obvious, but it just means that the group plan ends on the date you cease to be a resident.  Another way of saying this is that the plan is not portable.

4) Pregnancy is considered a pre-existing condition. If you pregnant while you’re a resident and get disabled from any complications arising from pregnancy, chances are, you will not be covered.

All in all, such a group disability plan is better than nothing, but it certainly isn’t something you can depend on.

So what’s the right answer for you as a resident?

The tricky thing about being a resident – when it comes to disability insurance – is that your typical group disability plan isn’t that great, but you also don’t make enough in income to get adequate individual disability coverage. In my opinion, the best you can do is to be prudent with potentially dangerous activities so that you don’t sustain any injuries that will limit your coverage down the road and start buying disability coverage with future increase option (FIO). The FIO offers you the opportunity each year, until you reach a certain age (usually 45 – 55), to purchase additional coverage without a physical exam. This gives you the flexibility to increase your coverage down the road. Of note, the FIO is subject to your income level so you won’t see a dramatic increase in coverage during your residency, but you should be able to increase the coverage significantly when you become an attending and make more money.  Once you become an attending, and you find that you want more coverage on top of what the FIO provides, you can purchase additional policies.  I have five separate policies in all.

Some of you might be asking, ‘But why not wait until after residency?’  With each passing year, the odds of your having a pre-existing condition increases.  Let’s say you go skiing in Tahoe and break your arm.  You have surgery and have hardware placed in your arm.  When you get disability insurance after an event like this, your arm with the hardware will be excluded from coverage.  Not good.  So the younger you are when you get disability insurance, the less likely it is that you have pre-existing conditions that won’t be included in the policy.

The tricky thing about being a resident – when it comes to disability insurance – is that your typical group disability plan isn’t that great, but you also don’t make enough in income to get adequate individual disability coverage.

I want to reiterate the fact that I am not telling you go get disability insurance; I want you to examine your situation.  As I said in my first article about disability insurance, the decision to buy disability insurance is a personal one and depends on your finances, health, and risk tolerance.

So what insurance companies provide “own occupation” coverage for physicians?  There are only a handful, and the following are the links to their website.  Contact them and see which company’s policy fits your needs the best.  And keep in mind that good disability insurance policy has certain features I discussed in a previous post, “Disability Insurance – What to Look For.”

A list of insurance companies that provide “own occupation” disability insurance coverage for physicians:

Berkshire Life (Guardian)

Northwestern Mutual Life

Union Central Life

MassMutual

Standard Insurance Company

Principal

MetLife

I have most of my disability insurance policies with Guardian and one with MetLife.  In my opinion, I think that the “own occupation” language is more specific and stronger with the Guardian policies than is with the Metlife policy.  At the time that I purchased the Metlife plan, I made the mistake of not asking my agent about the specific features of the policy.  I just trusted him blindly and ended up with an inferior policy.  My Metlife policy is small, but had I done my due diligence and had a healthy dose of skepticism for insurance agents, I probably could’ve avoided the mistake.  Hopefully you won’t make the same mistake.

Also, I encourage you to read the Stanford Hospital and Clinics group insurance document for yourself. Here is the link. http://med.stanford.edu/gme/current_residents/documents/LTD_Guardian%20Benefits_SHC_2014.pdf.  It will probably take you 30 minutes and you will learn a lot.

I know the last thing you want to do after a tough day at the hospital is to read an insurance document. I hear you. However I encourage you to be more mindful of “financial” matters as a resident if you aren’t already.  By learning about “financial” matters, you can free yourself to focus on the patient care that you have spent so many years training to provide.

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