Health Insurance

§ 14. Need of ideals in social insurance.

The world has had forty years of experimentation of a remarkably varied kind in the field of social insurance, since the German system was inaugurated in the eighties of the nineteenth cen tury. America stands almost at the beginning of a develop ment along those lines that is certain to be of enormous ex tent and importance. It would be folly for us to repeat the costly errors of other countries by failing to recognize certain principles that have been clearly established by experience. If these could be grasped and firmly kept in mind, our prog ress in this field in America would be faster, more certain, less costly, and farther reaching than it promises otherwise to be. We can here attempt no more than merely to outline these principles that must be embodied in an ideal system of social insurance in America.

§ 15. Insurance rather than penalty. The principle of social insurance rather than that of legal penalty should be universally recognized. At present, in all countries where the several kinds of insurance are found side by side, accidents are indemnified on plans that are still rooted in the notion of employers' liability for negligence; whereas, necessarily, the indemnity in case of sickness and of old age has no such explanation. The unfortunate result of this difference of view is that, whereas all cases of sickness and invalidity entitle to benefits, only those accidents suffered "in the course of em ployment" are indemnified, and the worker is left unprotected in a large share of the accidents to which he is liable. The worker's need and the social need are thus not adequately met. We have started along the same line of development in America, and it is to be feared that only through a long series of legal fictions and contradictory judicial decision shall we be able to work out toward the practical need in this matter. Another unfortunate result of this difference is that accident' compensation, being made peculiarly the task of the employers, does not develop the spirit of responsibility on the part of the workers and of cooperation between them and em ployers that other forms of insurance call forth, where repre sentatives of 'both parties sit together in the administration of the system.

§ 16. The compulsory principle. Insurance must be gen eral in its application to all the persons within broad wage earning classes, and in order to be general it must necessarily be compulsory, not voluntary, in its application. To leave any form of insurance optional or elective, with either em ployers or wage workers, is to fail of the main purpose in a large proportion of the individual cases where it is most needed, and to increase the expense to those that are included. Within a compulsory system, however, there should be given wide opportunity for the voluntary principle by admitting to the system others that are not compelled to insure, and to enable any insured person to increase his paid-up, non-forfeit able insurance at any time by extra payments made at times of unusually high wages, from legacies, or from any other exceptional income.

§ 17. State insurance and a unified system. The state, through the public insurance office, must ultimately be the sole agency for social insurance. Only in this way can the maximum of simplicity and economy be attained. Experi ence thus far has shown the much greater economy (among other advantages) of giving to the state fund a monopoly of compensation insurance: the ratio of management expense to premiums in commercial stock insurance companies is 35-40 per cent, in competitive state funds 6-9 per cent, and in the Ohio state fund (exclusive) 1.6 per cent. However, state management calls for a better appreciation of expert training and a broader sentiment in favor of the merit system in the public service than is frequently found in America.

There should be a unification of various kinds of insurance in one general plan and under one general administration for the whole state. This should be done with full regafd to the actuarial differences in costs as among various kinds of in surance, various trades, various establishments, and, to some extent, even the various individuals, so as to ascertain the costs and to distribute them equitably. On13f in this way can provision be made for entire mobility of labor, so that men may not be bound, as a condition for obtaining bene fits, to continue in the service of any one employer. To this end there should be interstate comity and cooperation, so that the insured could at any time transfer his actuarial equity from one state to another.

§ 18. The contributory principle. The contributory prin ciple should be adopted, employers and wage-earners contributing to the cost in equal amounts. But, further, the general public interests may be recognized through the payments in aid of the funds (subsidies, subventions). Both employers and employees usually seek to escape the burden by getting the state to bear the whole expense* or by getting the other party to pay all or the larger part. But it is much to be desired that in large part the finances of a system of social insurance should be disassociated from the ordinary budgetary system of taxation and public expenditures. The fundamental reason why the premiums should be divided be tween employers and employees is that this is most favorable to the equal participation and cooperative efforts toward re ducing the risk, and developing right industrial and political 4 See examples in the lists of laws above cited, § 11, relations. Everywhere it is the practice to provide for rep resentation nearly in proportion to contributions.