A recent study was performed on the impact of disability by the consulting firm, Milliman, Inc. that highlights many misconceptions Americans have about the impact a disability can have on their lives.  I noted with interest several myths the study rebuked:

• Disability insurance is more important for married people – FALSE.  The study shows that the financial impact of a disability is, in fact, significantly greater for non-married individuals than for those who are married to a working spouse.   Typically, only a portion of the total household income is lost when a married individual becomes disabled, according to the study.  Additionally, a single person might lose their medical insurance while, for the married person, it still might be available through the spouse’s employer.
• The financial impact of disability is much higher at higher incomes – FALSE.  Actually, the impact is much greater at lower incomes.  This is because the added healthcare costs incurred during the disability are a greater portion of income at lower income levels.  Also, according to the study, the tax savings from reduced income is proportionately greater for individuals earning higher income prior to disability.
• The financial impact of disability reduces over time – FALSE.  Again, the reverse is true – the financial impact actually increases over time, because both incomes and expenses tend to increase with inflation.

Recently, the nonprofit LIFE Foundation and America’s Health Insurance Plans (AHIP) engaged the consulting firm Milliman, Inc., to conduct a study examining the impact of disability on individuals in the United States. In this study, titled “The Impact of Disability”, Milliman outlined several expenditures that make up additional costs incurred as a result of disability. The impact of Healthcare costs is the one that got my attention.

In the study, Milliman found that healthcare expenditures can jump significantly during a disability. First of all, medical insurance may not be available to the individual who becomes disabled or may only be available at substantially higher premiums. If protection under the Family Medical Leave Act applies, according to the study, an employer is responsible for continuing the medical insurance to the worker facing a disability for up to 12 weeks. Following this 12-week period, the same medical coverage may be purchased under COBRA for the next 18 months. After the COBRA insurance ceases, the individual may seek coverage through high-risk medical pools sponsored by some states or pay the healthcare expenses out of pocket.

The study anticipates that healthcare expenditures for a person disabled for five years could be 175% to 200% higher than the healthcare expenditures for a healthy worker over the same period. If a person’s disability is severe enough to qualify for Social Security disability benefits, he or she becomes eligible for Medicare 24 months after qualifying for disability benefits. In this case, a large majority of medical expenditures is covered. The big question is will you qualify for Medicare?

I will be examining this report and sharing with you various facets of it in future postings.