What’s Your Benefits Package Really Worth?

Large medical groups are desperate for physicians, both specialists and general practitioners. The HMO’s make most of their money by having their Family Medicine and Internal Medicine doctors manage the large volume of patients, minimizing costly interventions by specialists – both are in high demand.

In order to attract and keep physicians these groups offer impressive benefits packages which is what is often referred to as the golden handcuffs. They are often lavish and included for free or heavily discounted for full-time and some part-time employees.

Let’s list a few of these things and figure out what the cost would be for you replace them with your own equivalent. This is especially useful if you are considering to take a job with less benefits and are worried that the benefits you are leaving behind have more value than they really do.

1. Health insurance
2. Dental insurance
3. Life insurance
4. Disability insurance
5. Malpractice insurance
6. 401k and other defined contribution plans
7. Pension accounts
8. Paid time off
9. CME/licensing reimbursement

Health Insurance – You Don’t Need A Cadillac Plan

I’ve spent a lot of time online pricing out health plans and there are so many damn options, it’s simply a personal preference when it comes to this. What do you really need though? There are amazing HMO’s out there nowadays, these aren’t the anemic HMO’s of the 80’s and 90’s.

Understand that there are some specialists out there who get to make more money by performing a procedure on you (I said some, not all). So, make sure you are in a medical system where doctors don’t get to make money off of you for doing more to you. I’ll leave it at that.

So let’s put a value on such a health-plan, $650/month will get you an incredible plan for 2 adults and 2 kids. You can get even cheaper but let’s stick with this.

Dental Insurance – You Don’t Need This

Yea, I’ve had such horrible teeth all my life that I can assure you there is no need for dental insurance. There are plenty of good dentists out there who will give you discounts for paying cash.

The only time I had amazing dental coverage was in 2015 and coincidentally my teeth were doing great then. Now, in 2016, my medical group decided to decrease the coverage of their dental plan, it’s simply too expensive to maintain.

So, you don’t need it, your cost should be $0 out-of-pocket.

Life Insurance – Term life insurance is cheap, incredibly cheap

There are many online calculators you can use to figure out the out-of-pocket cost for these. There are many types of life insurances out there, most are great to sell but horrible to buy – keep your life simple, go for term life insurance.

You can get somewhere around $500k of life insurance value for $15-20/month – really cheap. A good health insurance broker can figure out how much you need. Let’s say $100/month for this expense if you decide to go solo.

Bonus question, if your household is financially independent do you need life insurance?

Disability Insurance – The group policies usually suck

I’ve looked over the group policies that my previous employers provided and none of them were “specific” enough to make them worthwhile. Let me explain.

Disability insurance terms have to be really detailed. There are many “riders” that can be added which I won’t get into. If the plan isn’t job-specific then come payout-time they will find one thing or another to contend with, preventing you from getting any income during your disability.

The policies you purchase privately can be fully fine-tuned, unlike the group plans. Here it’s critical to have a really good broker who can walk you through the details. You don’t want to be a surgeon who develops paresis from cervical nerve damage and not get a payout because you can still see patients in a clinic.

For around $600/month you can get quite the disability plan. I’ve priced this out a few times and for an urgent care doctor like myself making $300k/year these numbers are quite accurate.

Retirement Accounts – Nice To Have But Not As mUch of a savings as you think

This one gets a bit more involved. Let’s talk about retirement accounts for a minute. For the high-earning employees, like most doctors, it’s nice to get a tax-break by having 401k’s, Keogh’s, 401a’s etc made available to us.

Contributions from your paychecks to such accounts lower your taxable income. If you make $118k in 2016 and you set aside $18k in your 401k then you will only owe taxes on $100k. That $18k will grow tax-free until you make withdrawals from it, that’s when you will pay the deferred income taxes, whatever they might be at the time of withdrawal.

So if I’m per diem, an independent contractor, a moonlighter or whatever you want to call it, without an employer-sponsored retirement account, I won’t be able to set this tax-deferred money aside.

Sure, at first glance this might suck. But hopefully you have set a little aside in residency in your 403b or 401k, and perhaps set a little more aside in your first few years of working. When the opportunity comes knocking with a great job that doesn’t offer such retirement benefits then you need to decide whether the flexibility of the new job, the lower stress, the better hours (or whatever) is worth forgoing those retirement accounts.

The IRS allows us to set aside as much $53k in 2016. So if I make $300k and max out my contributions, I would only get taxed on about $250k. In this scenario you would have an extra $20k to pocket because of the tax savings – or $1,700/month.

I don’t want to get technical, but there is an added benefit of having your money grow tax-free or 10-30 years which is an added advantage of these retirement accounts.

Pensions or Defined Benefits – Yea, these are sweet

I’d love to shred this one but damn, these are pretty sweet if you stick around long enough to vest in them. In my case, I would have to work another 2.5 years for my employer in order to vest in my pension. I wrote about the value of my pension in another post.

If I stick around the minimum 10 years needed by my employer in order to vest, I would have an extra $400k of net worth starting at age 65.

For those who want a number, I came up with $800/month for the value of having such a pension. This is the value after accounting for the future value, taxes, years invested and assuming your ass will live long enough to enjoy it. After all, we have a 5 year lower life expectancy than the non-physician.

Malpractice insurance – Most Employers offer this

For most of us who are looking to get out of the full-time grind and find some on-call or per diem gigs you will find that most employers will pay your malpractice insurance. This is true for both MD’s as well as NP’s and PA’s. I don’t know about you dentists out there, would love to hear about it in the comments below.

You won’t save much either way, this is a wash, a saving of $0/month.

Paid time off – Great But Rarely Flexible

Most of us get somewhere around 3-6 weeks off every year for being full-time employees, this isn’t counting sick-days. On the surface it’s a great benefit, agreed.

But you earned this, it wasn’t given to you because of your bronze complexion. You had to dedicate 40+ weeks every year for however many years in order to earn these few weeks off.

In comparison you would be in complete control of your hours if you were self-employed or working per diem. So I think this is a wash. But for the sticklers I’m going to assign a value of $800/month which is what you’re left with after taxes – you thoughts it’s higher didn’t ya?!

CME/licensing reimbursement – It’s Given To you on your paycheck so you’re paying taxes on it

This one is a kick in the ass. Most employers will pay you a little extra on your paycheck in order to cover your CME expenses. For example, there might be a little blurb on your paycheck that reads “$145 Stipend”.

Well, if you are paid an extra $3,500 annually in order for you to do your CME’s then you are taxed extra on your income – not very ideal for many docs who are nearly at the top of the tax-brackets.

It also means that you cannot write off such expenses on your taxes because your employer paid you for them.

In my opinion this is nearly a wash if not in favor of being a per diem.

Let’s Add It All Up

You are looking at around $4,650/month or $56k per year of benefits if we add all these benefits up. It’s a good chunk of money, and for the most part this is money in your pocket, I have already accounted for taxes.

Now we can see why so many physicians opt to stay with their employers nearly full-time, since most of these benefits are available either only for full-time doctors or those who are doing at the very least 80% of a full-time schedule – even then, some of these benefits get prorated.

What is This $56k/year Worth?

If you are finding yourself not so happy with your current gig and long for a life of freedom doing either per diem work or simply cutting back hours then it’s important to understand the value of this $56k.

• It could pay the mortgage on a $700k home.
• It could increase your net worth by over $3 million if you invest it successfully for 30 years.
• It could pay for one nice vacation every year.

How Much Extra Would You Have To Work To Earn This $56k?

You damn specialists who are making a killing probably have to work an extra day!! JK. But it depends on how much you make.

I make a little more than $100/hour of gross income and I got a sizeable tax-bill every year. I would need to work an extra 60 hours a month to make that money; or 15 hours per week.

Those of you making double my $300k/year gross income would need to work maybe half of that, about 7 hours a week.

How Much Of This Do You really Need To Have?

I think for a comfortable life with a household that has kids you need the following:

• Health insurance ($650/month)
• Disability insurance ($600/month)
• Life insurance ($100/month)

All the other things offered to us is fluff. It’s like the camera on your phone, the cup-holders in your car, that stupid tiny pocket in your jeans. It’s nice to have but not needed.

Is a full-time employment worth the $1,400/month of actual benefits it offers? Your call.

What is your time worth? Because you can’t put a price on that and what is that extra $56k worth to you? It’s different for every person.