The Case for Disability Insurance: Part 2


A major disability is something that happens to someone else… until it doesn’t!  The sad fact is most Americans are better prepared to die than they are to deal with disabilities.  In the last blog, we made the case for having disability insurance.  In this blog, we will make the case for affording disability insurance.

 

 

The Bureau of Labor Statistics estimates that as of April, 2016 there are about 122.74 million people working on a full-time basis.  According to the chart below, only about 37% of private sector employees are covered by long-term disability insurance.  This would suggest that only about 45 million full-time workers are covered by long-term disability.

 

 

According to Kaiser Health News, only 47% of employers offer long-term disability coverage to their employees, and companies with at least 100 employees are almost certain to offer some sort of disability benefit.  Furthermore, they report that the majority of people with disability coverage get it through their jobs.  The chart below offers a glimpse of disability insurance coverage by occupation group.

 

Access to disability benefit combinations, by occupation group, private industry workers, March 2014
Occupation group Percent with access to both short- and long-term disability insurance Percent with access to only short-term disability insurance Percent with access to only long-term disability insurance Percent with no access to insurance
All workers 25 15 9 51
Management, professional, and related 42 12 17 29
Service 6 14 4 76
Sales and office 25 13 9 53
Natural resources, construction, and maintenance 21 18 6 55
Production, transportation, and material moving 25 22 7 47
Note: Costs calculated from Employer Cost for Employee Compensation (ECEC) published estimates.

Source: National Compensation Survey, U.S. Bureau of Labor Statistics.


The cost of providing both short- and long-term disability insurance access to all private sector workers would be approximately 1.0 percent of total compensation. This would cost an employer $624 each year for a full-time (2,080 hour) worker, as illustrated below.


Estimated cost of access to short- and long-term disability insurance, by occupation group, private industry workers, March 2014
Occupation group Short-term disability insurance Long-term disability insurance
Percent with Access Benefit cost per hour worked Employer access cost per hour worked Percent with Access Benefit cost per hour worked Employer access cost per hour worked
All workers 40 $0.06 $0.15 34 $0.05 $0.15
Management, professional, and related 54 $0.10 $0.19 59 $0.09 $0.15
Service 20 10
Sales and office 38 $0.04 $0.11 34 $0.03 $0.09
Natural resources, construction, and maintenance 40 $0.09 $0.23 27 $0.03 $0.11
Production, transportation, and material moving 47 $0.06 $0.13 31 $0.06 $0.19
As seen in table 6, the cost of access for short-term disability and long-term disability across all private industry workers is $0.30 per hour worked ($0.15 each). The estimate ranges from $0.11 for sales and office workers to $0.23 for natural resources, construction, and maintenance workers. There are no reliable estimates for service workers, which is not surprising given that few service workers have access to employer-provided disability insurance. As a whole, however, the cost of providing both short- and long-term disability insurance access to all private sector workers would be approximately 1.0 percent of total compensation cost ($0.30/$29.99). This would cost an employer $624 each year for a full-time (2,080 hour) worker.

Note: Costs calculated from Employer Cost for Employee Compensation (ECEC) published estimates. Dash indicates data not available or applicable.

Source: National Compensation Survey, U.S. Bureau of Labor Statistics.


Of employers that offer disability coverage 37% paid the entire premium in 2010, down from 49% in 2002.  As of 2011, voluntary programs (meaning the employee pays the full cost) make up 50% of all long-term disability offerings, up from 41% in 2002.  According to the Council for disability awareness, however, when employers add disability insurance as a voluntary benefit, participation is only around 40%.

 

Sources

Forbes

Counsel for Disability Awareness

US Bureau of Labor Statistics

Kaiser Health News