Social insurance programs

1. Chapter10.
Social Insurance Programs

2. Social
Insurance
versus
Public
Assistance
 Social Insurance:
 Beneficiaries are required to make contributions to it
before claiming any of its benefits
 Their employers pay into the program on behalf of
their workers
 Benefits are paid out as legal entitlements regardless
of the beneficiaries’ personal wealth

3. Social
Insurance
versus
Public
Assistance
 Social Insurance:
 Major goal is to maintain income by replacing a portion
of lost earnings
 Helps insure against the loss of income due to the
economic changes of retirement, the loss of a job, the
death of a family breadwinner, or physical disability
 Benefits from the program cannot be denied**

4. Social
Insurance
versus
Public
Assistance
 Public Assistance:
 Program is financed out of general tax revenues
(money collected by Federal government)
 The recipients are required to show that they are poor
in order to claim benefits
 Means test. Income and asset tests designed to
determine whether an individual or household meets
the economic criteria necessary for receiving
governmental cash transfers or in-kind services

5. Social
Insurance
versus
Public
Assistance
 Social insurance programs are social security, SSDI,
Medicare, Unemployment, Workers’ Compensation
 Public assistance programs are Medicaid, SSI,TANF,
WIC, SNAP
 Social insurance programs encompassed a greater part
of the federal budget

6. Excise taxes – taxes on specific goods (i.e. gas, cigarettes, airline tix, etc.) often included in the
price
Other taxes include estate, gifts, customs, etc.

7. Excise taxes – taxes on specific goods (i.e. gas, cigarettes, airline tix, etc.) often included in the
price
Other taxes include estate, gifts, customs, etc.

11. History of
SocialSecurity
 Initially suggested by California dentist, Francis E.Townsend, who
lobbied for a $200/month pension for elderly persons to be paid
out of the National sales tax.
 Franklin D. Roosevelt campaigned on a government plan to
protect the unemployed and older people.
 After being elected to office, the plan was presented to Congress
as possible alternative to public assistance
 Social Security Act of 1935 contained more than just the social
insurance plan, it addressed other public needs including:
 Old-age and survivors insurance (OASI)
 Disability insurance (DI)
 Health insurance (HI, eventually called Medicare)
 Unemployment insurance

12. Today’sSocial
SecurityAct
 Provides for:
 OASDI
 Unemployment programs under joint federal and state
partnership
 Federal assistance to aged, blind, and disabled under
Supplemental Security Income (SSI)
 Public assistance to families with dependent children (TANF)
 Federal health insurance for the aged (Medicare)
 Federal and State health insurance for the low income
(Medicaid)

13. Old-Age,
Survivors, and
Disability
Insurance
(OASDI)
 Social Security = OASDI
 Social Security including Medicare = OASDIHI
 It is administered by the Social Security Administration
 However, Medicare is administered by CMS or Centers for Medicare
and Medicaid Services, under the Department of Health and Human
Services
 Income is taxed to support the program; second largest source of
revenue for Federal government
 FICA = Federal Insurance Contributions Act – when deducted by the
employer = 7.65% tax rate (2017)
 6.20% of that amount is SS; 1.45% to Medicare
 SECA = Self-Employment Contributions Act = 15.30% tax rate (2017)

14. Old-Age,
Survivors, and
Disability
Insurance
(OASDI)
 Social Security is a regressive tax
 Regressive tax causes lower-income people to pay a larger share
of their income than the wealthy
 http://www.investopedia.com/video/play/regressive-tax/
 Levied against income only, not against other types of incomes
like dividends, interest, and rents

15. Types of
beneficiaries

16. Unintended
Consequences
ofSocial
Security Policy
 Average life span of African American is shorter than whites
which means they will collect less SS
 Because of that, the regressive nature of SS necessarily
means it is a higher burden on people who live shorter lives
 AA and Hispanics often work more physical jobs that require
them to retire at a younger age; a higher retirement age
impedes them from qualifying for full SS
 Lower levels of education, marriage and higher
unemployment rates result in lower SS benefits forAA,
Hispanics and other groups

17. Unintended
Consequences
ofSocial
Security Policy
 Women’s wages tend to be lower than men’s which means
less benefits paid out to women at retirement or for a
disability
 Women spend less time working because they stay home to
raise the family; some never work
 10 year protection (collect spouse’s SS) only available if
woman is married 10 years
 Widowed spouses do not qualify for SS until age 60
 Married workers benefit more from SS; affects both genders
but many women never marry and tend to be poorer than
men

18. Unemployment
Insurance
 Provides temporary income to workers who have lost their jobs
through no fault of their own
 Cannot collect unemployment if you quit
 However, payment cannot be denied to:
 Workers refusing to work in substandard work conditions
 Workers refusing to work jobs that require union membership
 Pregnant workers
 Federal UnemploymentTaxAct (FUTA) – employers pay taxes on
behalf of each of their employees. Money placed in a trust fund
account for each state to pay out claims of unemployment when
filed.
 Benefits normally limited, on average about 26 weeks (TX).
Extensions can be requested for another 13 – 20 weeks (funded by
Federal and State government)

19. Workers’
Compensation
 Provides medical benefits and often cash payments to workers
who are injured on the job or develop job-related diseases.
 Provides benefits to survivors of workers killed on the job during
job-related accidents
 Department of Labor administers the program at Federal level.VA
administers program for disabled veterans. States administer
everyone else. Self-employed workers do not qualify forWC.
 Program is intended to provide wages lost to injury or disease and
to make sure job caused injuries do not become catastrophic to
workers.
 Wages are calculated at 2/3 of the wage the worker was earning
when the injury happened

20. Workers’
Compensation
 It is not about compensating for pain and suffering
 Employees (for the most part) cannot sue their employers if they
are receivingWC
 Employees cannot collectWC if they were injured due to their own
willful misconduct or intoxication
 Texas does not require employers to participate inWC programs.
For that reasons, employees are allowed to sue their employers.
 Texas employers who do not carry workers' compensation
insurance coverage are required to report their non-coverage
status and work-related injuries and occupational diseases to the
Division ofWorkers' Compensation (DWC).

21. Issue with
Workers’
Compensation
 Length of the claims process. Investigations can be lengthy
 Illnesses versus physical injury claims – Illnesses take longer to
manifest
 Wages paid under WC are designed to encourage employees to
get back to work as soon as possible – not necessarily the best
plan for someone who is injured or sick
 Employers duck the program and find ways not to join it (i.e., they
hire contracted employees, casual workers)
 Employers must employ at least 15 employers before having to
offerWC
 Fear of job loss, retaliation, stigma of being onWC, peer pressure
to return to work, employer push back, uncooperative insurance
companies, cost of healthcare

22. SocialSecurity
Disability
Insurance
 SSDI provides benefits to disabled or blind persons who are
“insured” by workers’ contributions to the Social Security
trustfund.
 Contributions are based on earnings (or those of your spouse
orparents) as required by the Federal InsuranceContributions
Act(FICA).Title II of the Social Security Act authorizes SSDI
benefits.
 Your dependents may also be eligible for benefits from
yourearnings record.
 Comparing SSDI and SSI