Chapter 14 Social Insurance REASONS FOR SOCIAL INSURANCE To help solve social problems o Historically NOT the role of government To provide coverage for perils that are difficult to insure privately o Does not compete with the private market To provide a base of economic security o Entitlement BASIC CHARACTERISTS OF SOCIAL INSURANCE Compulsory Floor of income o All of us pay a percentage with an employer s match Emphasis is on Social Adequacy rather than Individual Equity Benefits are only loosely related to earnings Benefits prescribed by law No means testing o Don t look at your assets Full funding unnecessary SOCIAL SECURITY OASDHI Most Employment Situations Covered Payroll Tax Withholding Required Participants Accumulate Quarters of Coverage o Fully insured o Currently insured o Disability insured SOCIAL SECURITY OASDHI Benefit Amounts Based on Primary Insurance Amount PIA Financing is on a Pay as you go system COLA cost of living adjustments Financing is NOT actuarially sound Employee Pays Payroll Tax Employer Matches Employee Contribution Maximum Taxable Earnings Set Each Year SOCIAL SECURITY BENEFIT RULES o Covered earnings averaged o Adjustment for inflation o Legislated minimum benefit Loss of Benefits Possible o Disqualifying income o Loss of eligible status SOCIAL SECURITY BENEFITS Retirement Benefit o 1 2 payable to spouse Survivors Benefit o Payable to spouse o Payable to children Disability Benefit o Payable to disabled employee MEDICARE Payable to Retirees Designated Others Part A Hospital Expense Insurance Automatic Hospital services Deductible Graduated cost sharing MEDICARE Part B Physicians Services o Voluntary o Requires monthly premium o Includes cost sharing Part C Medicare Choice Optional o HMO or other managed care plan o May pay extra benefits e g prescription drugs o May remove need for Medigap policy New to Medicare Part D Prescription Drugs o Requires separate premium o Must chose from several plans o Deductibles and co pays o Very expensive OTHER PROGRAMS Workers Compensation o No fault system of recovery for injured workers o States set standards and benefits Unemployment Compensation o Part of original Social Security legislation o Purpose is to treat short term temporary unemployment o States set standards and benefits o Federal Government uses tax dollars
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