How Many Working Americans Have Adequate Disability Coverage?

Map of the USHow many working Americans have private disability insurance coverage?

This is a crucially important question for us at The Council for Disability Awareness. We would like to see all working Americans have some form of private disability coverage to protect their income when they’re out of work for an extended period of time because of a disabling injury or health condition.

Many people assume they have a safety net with either Workers’ Compensation (WC) or Social Security Disability Insurance (SSDI). But disabling illnesses or injuries are much more likely to be non-occupational in origin, which would rule out coverage under WC. And workers who become disabled off-the-job won’t always qualify for SSDI; they can face average wait times of 600 days for a hearing; and if they do eventually get benefits, the monthly amount (averaging around $1,200, based on the most recent data) probably isn’t enough to help them keep up with their ongoing expenses.  

Private disability coverage helps fill the gaps in the safety net. But how many working Americans actually have this important form of income protection?

The answer requires a lot of math — and some assumptions.

It’s important to point out that this number is not readily available. This is due to a number of complex factors, one of which is that disability insurance has traditionally been offered through different channels: as an employee benefit, as a benefit through an association, or on an individual basis. The data therefore is siloed. At The CDA, we’ve gathered data from several industry and governmental sources and have worked with this data through a set of clarifying assumptions — you’ll see these unfold in my argument below.

So, just how large is this problem? 

Let’s start by understanding the three ways you can get private disability coverage: through an employer (and there are various ways this can occur, as we’ll explain below); through an association or affinity group; or on an individual basis.

1. Through an employer

This can be in two main ways:

  • Coverage is part of a benefits plan and the employer pays some or all of the cost
  • An employee voluntarily elects coverage and pays for the entire cost  — this includes both cafeteria-style benefits and worksite enrollment plans

a) Employer pays all or some: 

The Bureau of Labor Statistics (BLS) Employee Benefits Survey is the go-to source for data on number of working Americans covered by employer-provided disability insurance (where the employer pays for all or at least part of the cost of coverage). Unpublished BLS estimates from the most recent (March 2017) National Compensation Survey show 49.4 percent of all civilian workers as having some form of employer-paid disability insurance (short-term disability only, long-term disability only, or both STD and LTD).

If we apply this percentage to 139.9 million, which is the latest (2017) BLS estimate of civilian workers in the U.S. (excluding Federal Government employees, who are not included in the Employee Benefits Survey), we get approximately 69.1 million working Americans in this, the biggest category of working Americans with some form of private disability coverage.

But that leaves 70.8 million who either are covered in some other way or aren’t covered at all. And that’s why we next look at the alternate way people can get coverage through their employer.

b) Employee pays all (voluntary coverage)

A growing number of employers are offering disability coverage on a voluntary basis. Employees can sign up for disability coverage, and they pay the full cost, but usually at attractive group rates and with the advantage of payroll deduction for premiums. Because they pick up the tab for premiums, if they do wind up collecting benefits at some point, they’ll receive those benefits on a tax-free basis. (On the other hand, benefits are taxable under a disability plan where the employer has paid the premium.)

How many of the roughly 70.8 million working Americans not covered under employer-paid disability insurance are protected by some form of voluntary coverage? There are two keys needed to unlock the answer.

The first is to get an estimate of how many employers offer disability insurance as a voluntary benefit. I asked Ginger Bates, research director at Eastbridge Consulting Group, a widely respected consultancy specializing in the voluntary space. Bates shared the following highlight from Eastbridge’s latest MarketVision Employer Viewpoint survey:

The graph shows, with respect to short-term disability (STD) and long-term-disability (LTD) coverage, the percentage of employers reporting they offered it on a fully employer-paid basis (blue), shared-payment basis (red), or employee-paid basis (green). It also shows, indirectly (if you subtract the total of blue + red + green from 100 percent), the percentage of employers that don’t offer the coverage at all.

We can redraw the graph to include “no coverage” as a fourth option:

Here, we’ve drawn a box around the blue plus the red. That box corresponds to the scope of the BLS survey (remember, they’re only looking at coverage paid in whole or in part by the employer). And we’ve drawn another box around the green plus the yellow. That corresponds to what’s outside the scope of the BLS survey. Within that second box, the green (percentage of employers who offer disability coverage, but the employee has to pay the entire cost) accounts for about a third of that box.

Now, let’s get back to our 70.8 million (the estimated number of working Americans who don’t have employer-paid disability insurance). It’s not unreasonable to assume that a third of them could be eligible for voluntary disability coverage offered through their employer.

But remember, this is voluntary coverage. Only those employees who actually sign up for the coverage (and, of course, pay the premiums) can be counted as covered. That’s why getting a handle on what the industry calls the “participation rate” (percentage of eligible employees who actually get the coverage) is so important here.

We turned once more to the experts at Eastbridge. They periodically survey voluntary insurance carriers on participation rates by coverage and provide that information to their subscribers. Eastbridge research director Ginger Bates provided findings from their most recent (year-end  2017) survey:

  • Short-term disability: 29 percent
  • Long-term disability: 34 percent

Given the greater percentage of employers offering STD coverage (based on other Eastbridge research, and also consistent with what BLS has found with respect to employer-paid coverage), let’s use an overall participation rate of 30 percent — which also happens to be consistent with what I observed when I worked at two different carriers.

The way we estimate how many people are covered by voluntary (employee pays all) coverage is:

Number of workers without employer-paid coverage (70.8 million)


Percent where employer offers voluntary coverage (33%)


Participation rate (30%)

This works out to just over 7 million.

2. Association/ affinity business

Employer-provided disability insurance (including voluntary) covers the largest number of working Americans. But it’s not the only way workers can get covered on a group basis. Another way is through a plan offered to members of a professional society (for example, the American Institute of Certified Public Accountants) or an affinity group like a college alumni association.

Disability coverage is just a piece of the larger “association/affinity” market, which includes property/casualty coverages such as auto and homeowners as well as a variety of life-insurance offerings.

The Professional Insurance Marketing Association, more commonly known as PiMA, represents most of the insurance carriers that serve this market. In 2013, it conducted a market survey, results of which are highlighted here. Based on the data they share in the public-facing report, we applied a series of assumptions:

PiMA reports that its members account for close to $10 billion in premiums with a total of 26 million certificates (i.e., individuals covered — and yes, one person can have multiple certificates, but in the interests of simplicity we’ll assume certificates = individuals). It also reports that approximately 30 percent of members’ sales involved life and health products (most association/affinity business involves property/casualty products).

Based on those numbers, we can estimate:

  • Average premium per certificate = $385 ($10 billion in premium divided by 26 million certificates)
  • Estimated total life and health premium = $3 billion (30% of $10 billion total)
  • Total life and health certificates = 7.8 million ($3 billion estimated total premium divided by estimated $385 premium per certificate)

It’s unlikely that every life and health certificate will involve disability coverage — but let’s use the 7.8 million as an upper limit to the number of people covered through this channel.

3. Individual disability

Individuals can also purchase a disability policy on their own. This is usually organized through an agent or broker. As is the case with the voluntary and association/affinity markets, there’s no comprehensive, publicly available data that gives an indication of how many people have coverage through this channel.

However, individuals with considerable experience in this facet of the business can make informed, “back of the envelope” calculations that give us a starting point. One of our contacts estimates that approximately six million workers have disability insurance on an individual basis.

Of those six million, we don’t know how many rely only on their individual disability policy for coverage, as opposed to those who have bought an individual policy to supplement coverage they already have either through their employer or an association affinity group to which they belong. For now, let’s assume that individual coverage is all they have.

Putting it all together

  • 69.1 million working Americans receive disability insurance as part of their employee benefit plan, and their employer pays some or all of the cost of coverage
  • 7 million have chosen to purchase disability insurance through their employer, but are paying the entire cost out of their own pockets
  • As many as 7.8 million working Americans belong to some kind of group like a professional organization or alumni society that provides access to disability insurance, and that’s how they purchase coverage
  • 6 million have worked with their financial advisors to obtain their own individual disability insurance policy (which may or may not be the only one that provides them coverage)

Assuming there’s no double-counting for any of these categories (and there probably is, but let’s simplify for the sake of argument here), this adds up to as many as 89.9 million working Americans who are covered by some form of disability insurance other than WC or SSDI.

But remember, we’re looking at a base of 139.9 million workers (excluding Federal Government). That would leave up to 50 million uncovered. That’s more than one in three working Americans who are potentially uncovered.

Are you one of them? If you are, do yourself — and those close to you who depend on your income — a favor, and visit our new educational website to learn how disability insurance works.  


Join the conversation: As I mentioned earlier, a lot of “clarifying assumptions” have been applied in this article. I welcome a “sanity check” of those assumptions — and the numbers to which they’ve been applied — from readers who have experience in this area. Write to us at

Unseen Employee Disability Costs, Part 3: What Can You Do?

8-16-unseen-costs-imageIn August, I wrote about how the non-occupational disabilities covered under salary continuation or disability insurance plans are more common than the occupational disabilities covered under workers’ compensation. I suggested your benefits team should be as focused on managing the costs of non-occ disabilities as your risk management team is on keeping WC costs in line.


Last month, I wrote about the “opportunity costs” of disability and how you could estimate how much they were taking away from your bottom line. Research suggests these costs can amount to nearly 40% of absent workers’ wages for the U.S. workforce as a whole.


For the final post in this series, let’s answer the question most employers ask once they’ve taken a look at their cost of disability-related absence: “What can I do about it?”


Return to Work (RTW) Programs


RTW programs have long been a fixture of workers compensation programs. Their focus is to return a disabled worker to the workplace as quickly as possible, in a medically safe manner. They can include a variety of strategies such as:

  • Part-time work
  • Remote work
  • Light/restricted duty
  • Workplace or work process modifications to accommodate employees’ recovery

They’re widely recognized as having measurable benefits for employees, employers, and the community in general.


More and more employers are offering RTW programs for non-occupational as well as occupational disabilities—a smart move, given how non-occ disability cases are more prevalent than occ cases.


Stay at Work (SAW) Programs


In the 1990’s, I worked at a large multi-line insurer whose coverage offerings included WC; I was part of the unit that did WC loss control for the company’s own employees. We realized many of the same workplace accommodations that helped people return to work after a disability could alsoi keep them from going out on disability in the first place. So, we developed what we called an “early intervention” program.


Nowadays, this kind of program would be styled a “stay at work” program. And it’s not uncommon to see SAW and RTW programs combined into a single bundle.


Sources of Guidance and Expertise for SAW/RTW Programs


SAW/RTW programs cover a lot of ground and can have many moving parts. But the good news is you can draw on many helpful sources of guidance and expertise when setting up and running such programs:

  • You can start with the U.S. Department of Labor’s Office of Disability Employment Policy. Check out ODEP’s Return-to-Work Toolkit for Employees and Employers here.
  • Another great resource is the Job Accommodation Network, a technical assistance center funded by ODEP. JAN not only provides resources on setting up RTW (or SAW) programs, but also provides a comprehensive toolkit for workplace accommodation.
  • Your peers—other employers who are looking to control the hidden costs of disability—can be a valuable source of practical insight on tools and tactics for SAW/RTW. The Disability Management Employer Coalition is a premier organization for providing education, networking, and related resources in this subject area. (The Council for Disability Awareness is a DMEC affiliate partner.)
  • And finally, insurance companies and third-party administrators that sell or service group disability benefits are a valuable source of expertise on RTW, SAW, and related matters. If you provide group STD or LTD benefits on a fully-insured basis (or if you rely on a carrier or TPA to administer a plan that you self-insure), you should make your vendor an essential partner in your efforts to keep those hidden costs of disability from sinking your business.

Unseen Employee Disability Costs, Part 2

8-16-unseen-costs-imageIn last month’s blog post, I wrote about how the non-occupational disabilities covered under salary continuation or disability insurance plans are more common than the occupational disabilities covered under workers’ compensation. I suggested that your benefits team should be as focused on managing the costs of non-occ disabilities as your risk management team is on keeping WC costs in line.

That means looking not just at the direct costs of disability (how much you’re paying in wage replacement benefits, either directly or through premiums for an insured plan) but also those indirect costs that, like the invisible parts of an iceberg below the waterline, can sink your ship if you’re not steering carefully.

Opportunity Costs of Employee Absence

When your employees can’t work because an illness or injury, your business takes a hit in ways that don’t immediately show up on the financial statements: Products and services don’t get delivered and sales don’t get made. Temporary replacements have to be brought in, and they may not be as skilled as the absent workers, or they may cost more—or possibly even both! Maybe other employees will be asked to take on absentees’ duties in addition to their own, in which case they could wind up doing two jobs at sub-par productivity (not to mention increasing their risk of burnout).

The Integrated Benefits Institute estimates these opportunity costs of disability amount to an additional 38% of absent workers’ wages for the U.S. workforce as a whole. And IBI notes this percentage (the “absence multiplier”) will be higher for jobs where:

  • It’s not easy to find an equivalent substitute to replace an absent worker
  • Work is highly time sensitive
  • People work in tightly-connected teams

Ease of Substitution

In one of my previous jobs, I consulted with employee benefit plan sponsors on what was driving their short-term disability claims experience and what they could do about it. One of my clients was a retail chain that also had a significant pharmacy operation. While their STD incidence was higher for the retail operation, they were more concerned about their pharmacists’ claims experience. Why? Because at the time the demand for trained pharmacists was extremely high, while the supply was low. For this job, ease of substitution was very low.

Time-Sensitivity of Output

In that same job, I also helped out a colleague who was consulting with a mid-size regional airline. They were especially focused on pilots’ and flight attendants’ disability claims, even though other jobs such as baggage handlers or aircraft mechanics might have had higher incidence rates or longer average claim durations. Why? Because an aircraft couldn’t take off without the required number of pilots and crew members, and if the aircraft couldn’t take off the flight would have to be cancelled. For these jobs (pilots and flight attendants), time-sensitivity of output was very high.

Tightly-Connected Teams

Another client I worked with was an academic health system that had a keen interest in reducing incidence and duration of disabilities for its nurses, especially those in the emergency department, intensive care unit, and operating room. Why? Because they worked as part of a closely-knit team, and in their absence the effectiveness of their physician and surgeon co-workers could be seriously diminished. For this particular hospital, the specialty nursing jobs required higher than average teamwork.

Putting It All Together

So, are you ready to take a look at what non-occupational disabilities are costing you, both directly and indirectly? If you are, consider starting with IBI’s Absence Cost Estimator, a tool that models your overall absence costs (wage replacement plus lost productivity), lost workdays (in total and per full-time employee), and potential health-related absence reduction savings.

The ACE draws on IBI’s benchmarking database as well as research on the opportunity-cost factors we’ve looked at in this blog post. You need to be an IBI member to access it—but the good news is, if you’re an employer, membership is free (see here for details).

Next month, we’ll look at the question that most employers ask once they’ve taken a look at their cost of absence: “What can I do about it?”

Unseen Employee Disability Costs Can Sink the Ship

8-16-unseen-costs-imageI’ve held a variety of jobs during my post-college career. One of the more interesting ones was when I was a safety and environment consultant in the risk management department of a large insurance company.

Our focus was on controlling the costs of our workers’ compensation program. Our WC costs weren’t as high as those of employers in the manufacturing or other manual-labor sectors, because we worked in an office-based industry. Still, the expenses were significant enough to watch closely — and people worried that increased use of office technology and tech-driven job stress might start to ramp up costs. And, besides, we were also a workers’ comp insurer, and actively provided loss-control services to our clients. This meant we needed to show them we managed our own WC exposure as diligently as we were prodding them to manage theirs.

Direct Disability Costs are the Tip of the Iceberg

One of my responsibilities was to do awareness training around safety and loss-control issues for line managers throughout the organization. My manager was big on communicating the bottom-line business value of workplace safety programs. So, we spent a lot of time pointing out how the direct costs of workplace accidents or illnesses were just the tip of the iceberg. The real impact of a WC case was the business disruption that followed in its wake.

As this illustration from a slide deck developed by the U.S. Occupational Safety and Health Administration (OSHA) puts it: “Unseen costs can sink the ship!”

Sunk the Ship

Indirect Non-Occupational Disability Claim Costs

When I took a job with a disability insurance carrier about a decade later, I realized I could apply the iceberg analogy to non-occupational disability, too. The “below the waterline” costs we focused on in WC risk management are just as important— and maybe even more so — when it comes to understanding the impact on short-term disability. The fact is non-occupational disabilities are a lot more common than the occupational disabilities covered under workers’ compensation insurance.

To show you what I mean, let’s look at incidence rates, that is, the number of claims divided by a defined number of people (usually 100 employees).

Comparing WC and STD Claim Incidence Rates

The go-to resource for occupational disability data is the U.S. Department of Labor’s Bureau of Labor Statistics. Every year, they produce a report on workplace illness and injuries based on employer data submitted to OSHA. One of the measures they track is “cases with days away from work” per 100 full time workers— a good surrogate for WC lost-time incidence rate. According to the most recent report (reflecting 2015 data), that rate is 1.0 case/claim per 100 workers across all employment sectors.

On the non-occupational side, there isn’t a data source with the same breadth and depth as BLS. But, the benchmarking database maintained by the Integrated Benefits Institute is a decent alternative. Among other metrics, IBI tracks claims incidence per 100 covered employees for short-term disability programs that, in most cases, cover only non-occupational disabilities due to illnesses, injuries, accidents, or pregnancies.

The most recent database (reflecting 2015 claims activity) contains incidence-rate calculations for over 13,000 employers. The overall average is 5.6 claims per 100 employees. That’s a lot higher than the average 1.0 claim per 100 rate for occupational disabilities.

IBI also provides percentile distributions— just like you see for things like test scores or annual household income. When you look at those, you can see the “sweet spot” found in the 25th to 75th percentile range runs from 2.3 to 7.1 claims per 100 employees. That, too, is higher than the occupational-disability incidence rate of 1.0 per 100.

The Impact of Non-Occupational Disability on Business Operations

So, if the “unseen costs that can sink the ship” are a motivator for your risk management team to address the costs of occupational disabilities, they should be even more of a motivator for your benefits team to address the cost of non-occupational disabilities.

In my September blog post, I’ll share some research-based insights that can help you estimate just how big of an iceberg your company might need to address.