The Partner Penalty: How Typical Group LTD Underpays the Doctors Who Buy It

Doctor groups are among the hardest accounts in the benefits business to open. The incumbent broker has held the case for a decade. The administrator is comfortable. And every competing quote gets reduced to the same three numbers — rate, replacement percentage, monthly maximum — a comparison that favors whoever already sits in the chair. 

Winning the account means changing what gets compared. It means raising a question the incumbent never has — because answering it would expose what the current policy misses. 

That question is about how the partners get paid. 

Here’s the short version, and the rest of this article explains it: in most doctor-owned practices, the partners — the doctors who built the group, chose the carrier, and sign the premium checks — carry weaker income protection than the associates they employ. We call it the partner penalty. It never appears on a plan summary, it grows as a doctor’s career advances, and the broker who can demonstrate it changes the conversation from rate to expertise. 

The paycheck changes shape. The policy doesn’t. 

Start with what changed. The American Medical Association published new compensation research in March 2026, analyzing the 2024 wave of its biennial Physician Practice Benchmark Survey, and it confirms what you see in every doctor group: the single-method paycheck is disappearing. In 2024, 60.8% of doctors drew income from two or more methods — base salary, personal productivity, bonus, practice financial performance — up from about half a decade earlier. The AMA excluded solo practitioners, so every doctor in the dataset works in a group. This research describes your prospect list. 

But prevalence isn’t the story. The story is what ownership does to the mix. 

An employed doctor draws roughly 70 cents of every income dollar as base salary. An owner draws about 35. The rest arrives as production pay and practice distributions — real, recurring, taxable income that never touches the base-salary line. These are averages, not laws; every practice sets its own split. The direction, though, is nearly universal: buying in moves pay out of salary and into everything else. The shift runs deepest in the surgical specialties — orthopedic surgeons, on average, draw just 36% of income as salary — which is one reason surgical groups have the most to lose from the wrong contract. 

Now hold that against how group LTD policies are commonly written: a benefit calculated as a percentage of covered earnings, with covered earnings defined as base salary. 

The day a doctor makes partner, her income goes up — and the share of it her policy can see goes down. The reward and the exposure arrive in the same signature. 

One practice, one policy, one career 

Watch it happen inside a single practice. A 30-doctor orthopedic group, doctor-owned, single specialty. One group LTD policy covers everyone: 60% of covered earnings, covered earnings defined as base salary, capped at $15,000 a month. Apply the AMA’s national averages to three doctors and one policy quietly becomes three. 

The associate. Dr. A earns $450,000, drawing roughly 70% of it — about $313,000 — as base salary. Sixty percent of her salary works out to just over the cap, so she collects the maximum: $15,000 a month. Against her full income, that’s 40% replacement. Not the 60% on the brochure, but workable. Notice one thing before moving on: for her, the definitions page is irrelevant. Her salary alone maxes out the benefit. Counting her bonus and production income would change nothing. 

The new partner. Three years ago, Dr. B was Dr. A. Then she bought in. Her income climbed to $550,000 — and her base salary fell to $192,500, because production pay and a K-1 distribution now carry the rest of her earnings. Sixty percent of $192,500 comes to $9,625 a month. The $15,000 cap never enters her math. She isn’t close to it. 

Sit with that comparison for a moment. The partner earns $100,000 more than the associate and would collect $5,375 a month less — $64,500 a year. Making partner was the achievement of her career, and it quietly cut her disability benefit by more than a third. That’s the partner penalty, and nothing on the plan summary warned her. If her contract counted everything she earns, she’d reach the same $15,000 the associate already collects. She is stranded below a ceiling her own practice pays for. 

The senior owner. Dr. C is where Dr. B is heading: twenty years in, $750,000 in total compensation, about $262,500 of it salary. Her benefit as written comes to $13,125 a month. Fix the definition — count every dollar she earns — and she gains $1,875, topping out at the cap. Better. But $180,000 a year against $750,000 is 24% income replacement, and that is her ceiling under perfect contract language. Dr. C’s problem is no longer the definition. It’s the cap — and no rewrite reaches above a cap. Only a second layer of coverage does, which is precisely the job of High Limits Disability Insurance. 

	Total comp	Base salary	Monthly benefit as written	Real replacement
The associate	$450,000	$312,750	$15,000	40%
The new partner	$550,000	$192,500	$9,625	21%
The senior owner	$750,000	$262,500	$13,125	21%

Composites — national averages applied to hypothetical incomes under one common plan design. Every real practice lands somewhere different, which is exactly why the numbers are worth running. 

Two numbers that tell the whole story 

Look at the right-hand column. The partner and the senior owner replace exactly 21% of income, despite the $200,000 between them. That isn’t coincidence. It’s multiplication: salary share times replacement rate equals real income replacement. An owner drawing 35% of pay as salary under a 60% policy replaces 21% of her income whether she earns $400,000 or $900,000. Income cancels out of the equation. The number that decides everything is the one no plan summary reports — what share of the doctor’s pay runs through payroll. 

That’s the first number. The second tells you who’s exposed. Multiply the monthly cap by twenty. That’s the base salary at which a 60% policy tops out: $200,000 under a $10,000 cap, $300,000 under $15,000, $400,000 under $20,000. (For a two-thirds plan, multiply by eighteen.) A doctor whose base salary clears that line already collects the maximum, and the definitions page can’t touch her. A doctor below the line loses money to the definition every month — and because ownership pushes pay out of salary, the doctors below the line are overwhelmingly the partners. 

Not always, though. Salary structures swing hard from practice to practice, and some partners pay themselves generous salaries that clear the line easily. You can’t guess which kind of practice you’re sitting in. That’s the point of the two numbers: they replace guessing with sixty seconds of arithmetic. 

The gap no cap protects 

There’s a third failure, and it survives everything above. A disabled partner’s K-1 distributions don’t stop when she does — the practice earned that money, and ownership income keeps flowing. Some carriers count those distributions and subtract them from the benefit. MGIS has seen that provision cut an expected $10,000 or $15,000 monthly benefit to as little as $100. 

Notice what just failed. The cap didn’t protect her. The replacement rate didn’t. A perfect earnings definition wouldn’t have. Offsets attack the benefit after it’s calculated. 

Two cousins do the same quiet work. Lagged income: checks arriving for procedures performed months before the disability, which some carriers count as current earnings. Maximum capacity language: the carrier estimates what a doctor could earn and trims the benefit accordingly, whether she earns it or not. Disability Guard for Doctors™ omits maximum capacity language entirely, treats the definition of disability by the procedures a doctor actually performs, and evaluates lagged earnings for source and timing — money earned before the disability doesn’t count against the claim. 

Conversation Starter 

You need the plan summary and sixty seconds. 

“What’s your monthly maximum? Multiply it by twenty — that’s the base salary where your policy tops out. Now, which of your partners draws a salary under that number? Those doctors are losing benefit to a definition, not to a rate. Let’s run their real replacement numbers.” 

Then the follow-up that no cap or definition answers: 

“If a partner went out on disability tomorrow and kept receiving distributions, would your carrier count that money against her benefit?” 

Most administrators have never been asked either question. Together they turn a renewal into a coverage gap audit — and a coverage gap audit turns a defended account into an open one. 

Close all three gaps 

Three failures, three fixes. Disability Guard for Doctors™ closes the definition gap, building pre-disability earnings from bonuses and K-1 partnership income so partners reach the ceiling their practice already pays for. It closes the offset gap with no maximum capacity language, no self-reported condition limitations, and no mandatory rehabilitation. And High Limits Disability Insurance closes the ceiling gap, stacking above the group plan to lift income replacement to 70% for the doctors who have outgrown any cap. 

Your client’s partners built the practice, hired the associates, chose the carrier, and sign the premium checks. Until someone runs these numbers for them, they’ll keep carrying the weakest coverage in the building — and the broker who shows them will be the one they remember. 

Sources

American Medical Association, Physician Practice Benchmark Survey 2024: Physician Compensation (Policy Research Perspective, March 2026). https://www.ama-assn.org/about/ama-research/physician-practice-benchmark-survey-2024-physician-compensation