Guides · Benefits

The Locum Tenens Benefits Gap

Published 5 August 202612 min read

The rate is the part of a locum contract everybody negotiates. The benefits are the part nobody negotiates, because there are none — and the value of what an employed contract quietly provides is large enough to reverse the comparison between two offers that look far apart on paper.

This guide prices the gap, and covers the one decision in it that people get backwards for tax reasons.

What an employed package includes that a 1099 contract does not

• Employer-subsidised health, dental and vision cover for you and your family.
• The employer half of FICA — 7.65% of pay, worth $15,738 on $321,000 of profit.
• Employer retirement contribution or match, commonly 3–8% of salary.
• Paid time off, sick leave and paid parental leave.
• Employer-paid group disability and group life cover.
• A CME allowance and paid CME days.
• Licensing, DEA and board fees.
• Malpractice cover, usually including the tail.
• Unemployment insurance eligibility, and workers' compensation.

Take a mid-range employed physician package and those add up to something in the region of $45,000–$65,000 a year of value that never appears on the offer letter. That is the number the day rate has to beat, on top of matching the salary.

Health insurance

The largest cash line, and the one that most often decides whether locum work is viable for someone with a family. Your realistic options are a marketplace plan under the ACA, a spouse's employer plan, COBRA from a previous employer for up to 18 months, or a professional association group plan.

A spouse's plan is nearly always the cheapest answer if it is available. COBRA is expensive but useful as a bridge while you establish yourself, because it preserves your existing network and deductible progress mid-year.

The deduction, and its two limits

IRC § 162(l) allows a self-employed person to deduct health, dental and qualified long-term care premiums for themselves, a spouse and dependants above the line — you get it without itemising. Two limits matter:

• It cannot exceed your earned income from the business, after the deduction for half of self-employment tax and after any retirement contribution. A quiet year can strand part of the premium.
• It is unavailable for any month you were eligible to participate in a subsidised employer plan — including your spouse's. Eligibility is enough; you do not have to enrol. This catches people who decline a spouse's plan to buy their own and then try to deduct it.

And the limit everyone forgets: like every Form 1040 deduction, it reduces income tax and not self-employment tax. Putting health premiums on Schedule C is a real and common error that understates your self-employment tax.

Own-occupation disability insurance

For a clinician this is the most important policy you will buy, and it matters more once you are independent, because there is no group cover underneath it. Your ability to work is the asset that produces every dollar in this site's calculator.

What "own-occupation" means and why it is not optional

A true own-occupation policy pays if you cannot perform the material duties of your specialty, even if you go on to earn money doing something else. A weaker "any-occupation" definition pays only if you cannot work at all — which for a surgeon with a hand injury who could still teach or do utilisation review is close to worthless. The definition is the product; the price difference between definitions is far smaller than the difference in what they pay out.

Other terms worth understanding before you shop: non-cancellable and guaranteed renewable (the insurer cannot raise your premium or change terms), the elimination period (90 days is the usual trade-off), residual or partial disability benefits for a reduced ability to work rather than none, and future purchase options that let you increase cover later without new medical underwriting.

Business overhead expense cover

A separate product that reimburses fixed business costs — malpractice premiums, licence renewals, professional dues — if you are disabled. Unlike personal disability cover, BOE premiums are deductible and the benefits are taxable, which is the right way round because the benefits are offset by the deductible expenses they pay for. Relevant mainly to a locum carrying significant fixed costs of their own.

Retirement

The one place where independence is straightforwardly better. A solo 401(k) allows up to $72,000 in 2026 — the $24,500 elective deferral plus roughly 20% of net profit as an employer contribution — with no entity, no payroll and no extra return. That is typically far more room than an employed physician's plan permits, and every dollar of it is under your control.

What you lose is the employer match, and the discipline of automatic payroll deduction. The match is real money, commonly $10,000–$20,000 a year in an employed post, and it belongs on the employed side of any comparison. The discipline problem is solved by scheduling the contribution rather than intending it. Full detail in solo 401(k) vs SEP-IRA.

The two gaps with no product to fill them

Paid time off. There is nothing to buy. The only remedy is to count the weeks honestly: a locum working 42 weeks against an employed colleague's 52 paid weeks is taking a 19% reduction in earning weeks before any rate comparison. This is why the calculator asks for weeks worked per year rather than assuming a full year.

Unemployment insurance. In most states an independent contractor is not covered and cannot claim when an assignment is cancelled or the market softens. Workers' compensation generally does not apply either. The substitute is a cash reserve — and the usual advice of three to six months' expenses is a floor rather than a target for someone whose income arrives in lumps and can stop without notice.

A sensible order to do this in

1. Health cover in place before the first assignment. Not after. A gap is both a financial and a practical problem.
2. Own-occupation disability cover, paid with after-tax dollars. Buy it while you are young and healthy enough to be underwritten well, and buy the definition rather than the price.
3. Term life insurance if anyone depends on your income.
4. A cash reserve sized for lumpy income and no unemployment cover.
5. Fill the solo 401(k) — the largest tax lever available to you, and worth more than an S-corp election at almost every income level.
6. Then think about entity structure.

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