An Analysis of Private Long-Term Disability Insurance Access, Cost, and Policy Options Using the National Compensation Survey

Policymakers are increasingly interested in expanding private long-term disability insurance (LTDI) options to increase access to work and income supports and reduce dependency on Social Security Disability Insurance (SSDI). We use data from the National Compensation Survey to examine current LTDI use and the potential effects of these proposals on access and employer costs. Currently, one-third of employers provide access to LTDI, implying that proposals to expand LTDI could affect a large number of employers. Relative to those without LTDI access, workers with access were more likely to work full time, have higher wage jobs, work in larger establishments, and work in industries and regions with lower disability rates. These differences are important because proposals aimed at expanding access would chiefly affect workers without current LTDI access, whereas proposals seeking to modify existing provisions and incentives of LTDI plans would disproportionately affect workers who currently have LTDI plans. The average cost for employers to provide LTDI to most types of workers who currently have access is typically 0.3 to 0.6 percent of their total wages, which is similar in magnitude to the disability insurance component of the Social Security payroll tax. There was a slight increase in LTDI access rates over the past decade (2003 through 2013), although it is unlikely that LTDI will become available for the majority of workers through employer plans in the absence of any policy change.