Recognizing the force of this paral• Temporary Disability Insurance lel, Maryland, Montana, and Nevada in 1945, and Idaho and Tennessee in Coordinated With State Unemployment 1947, modified the requirement in their unemployment insurance laws that a claimant must be able to work by pro• Insurance Programs viding that no claimant will be consid• ered ineligible for unemployment ben• By Arthur J. Altmeyer* efits by reason of illness or disability Wage loss incurred by disability is one of the most serious occurring after he has registered for work if he has not refused a job that, threats to the economic security of American workers. The except for his disability, would have illogicality of paying benefits to an unemployed worker only been suitable. Under the Servicemen's so long as he remains able to work, and stopping those pay• Readjustment Act, readjustment al• ments when he becomes ill, has been evident ever since unem• lowances are paid to veterans who ployment benefits became payable, and States and their employ• were able to work when they filed their ment security agencies are manifesting a growing interest in claims, even though they later refuse temporary disability insurance. Coordination of temporary work because of disability. Though disability benefits with State unemployment insurance pro• such provisions alleviate some prob• grams, the Social Security Administration believes, offers a lems, they create other inequities and 1 feasible approach to this goal. But the value of such a pro• are not a substitute for temporary dis• gram, to workers and employers within a State and to the State ability insurance. as a whole, will depend in large part on the soundness and effectiveness of the provisions actually incorporated in the Rhode Island became the first State State law. to provide general social insurance against wage loss in temporary dis• PROBABLY BECAUSE our Social Secu• the present very high levels of em• ability when, in 1942, it established rity Act became law in the midst of ployment and earnings, it has become cash sickness benefits for workers cov• a severe depression, when millions of increasingly clear that our present so• ered by its unemployment insurance workers had no jobs and old people cial insurance programs, however well law. In 1946, California followed suit. were being crowded out of the labor developed, leave large areas of eco• Bills relating to temporary disability market, the United States began its nomic insecurity still untouched. All benefits have been introduced in 21 national social insurance program States but one have workmen's com• other States. In the 2 State laws en• with unemployment insurance and pensation laws that provide cash ben• acted and most of the proposed State old-age insurance. In all other coun• efits and medical care for covered laws, and also in a Federal law passed tries, social insurance has begun with wage earners who meet with certain by Congress in 1946 for railroad work• measures to provide cash benefits or work-connected injuries or diseases. ers, cash benefits for temporary dis• medical care—and usually both—to Disabilities resulting from such ability are administered by the agency workers who fall sick or are chroni• causes, however, are only a small frac• that administers unemployment in• cally disabled. In every country and tion—perhaps 5 and certainly less surance; the programs cover the same at all times—good and bad—sickness than 10 percent—of all disabilities workers who are covered by unemploy• and permanent disability constitute a suffered by workers. Nor has private ment insurance in the jurisdiction and chief cause of poverty, dependency, insurance been able to offer the ma• use the same wage records and benefit and family break-down. jority of wage earners adequate pro• formula. As our Nation has swung past the tection against the costs of sickness Both Rhode Island and California peak pressures of war production to and disability at a price that they can have arranged to finance the cash afford. sickness benefits from employee con• *Commissioner for Social Security. It is obviously illogical to provide tributions that formerly went into the 1 For a discussion of substantive and social insurance benefits to meet part unemployment trust fund. In 1946, administrative problems involved in de• Congress passed legislation permitting veloping a sound plan of disability in• of a worker's loss of earnings when surance as part of a State's unemployment he is able to work but cannot get a job States, if they so wish, to use employee insurance program, see Temporary Dis• but to make no provision against his contributions formerly deposited to ability Insurance Coordinated With. Un• precisely similar loss when he is too their accounts in the Federal unem• employment Insurance (January 1947), a ployment trust fund to finance tempo• monograph prepared by the Bureaus of sick to work. The sick worker not only Research and Statistics and Employment loses wages but also usually has to pay rary disability benefits. In addition Security, and available, on request, from the doctor, buy medicine, perhaps to California and Rhode Island, seven the Social Security Administration. A meet hospital bills and other medical States—Alabama, Indiana, Kentucky, brief and nontechnical introduction to Louisiana, Massachusetts, New Hamp• the statistics on disability is available in costs. The development of insurance Disability Among Gainfully Occupied Per• against unemployment due to lack of shire, and New Jersey—have collected sons . . ., by I. S. Falk, Barkev S. Sanders, work has inevitably called attention to employee contributions for unemploy• and David Federman (Bureau of Research the need for insurance against un• ment insurance; most of them have and Statistics Memorandum No. 61), June considerable amounts of accumulated 1945. employment due to sickness. funds ready at hand that can be used State will depend in considerable part standpoint of workers, employers, and for disability insurance. on the adequacy of the State's provi• administrative staff. Thus, social insurance against non• sions for unemployment insurance as To serve both these objectives, the occupational temporary disability has well as on the specific provisions (not same wage reports, wage records, and come into existence in this country all of which need be the same as for initial determination of a worker's fi• in conjunction with unemployment unemployment benefits) adopted for nancial eligibility (in terms of his insurance. Workers, employers, State temporary disability benefits. earnings in covered employment in administrators, and the general public Of great importance, too, is the fact the base period) should serve for both have an important stake in consider• that neither the existing laws nor most programs. Coverage provisions, the ing the potentialities of such a pro• of the proposals for State legislation base period, certain eligibility require• gram and the choices that lie open make any provision for meeting costs ments, and the basic benefit formula to them in establishing insurance of medical care of the disabled work• should also be the same. against the economic risks of sickness er. Cash disability benefits, like un• On the other hand, disability in- and disability. employment benefits, replace only surance entails some special decisions part of the earnings the individual by a State that is contemplating such Scope of Present Laws and Proposals would have had if he had been on the a program, such as the definition of It should be recognized at the out• job. Benefits therefore usually do not the disability to be compensated, pro• set that the two existing State laws represent the family's ordinary living cedures in determining that the work• and most of the proposals for State costs, let alone the additional expenses er is disabled, and so on. Several of legislation deal, and are intended to created by sickness. In other coun• these points are mentioned briefly be• deal, with only part of the problem of tries, temporary disability insurance low. A further decision of crucial economic insecurity due to sickness has almost always been linked with importance from the standpoint both and disability. medical services in a health insurance of the cost of the system and of its On an average day, nearly half of program. value to workers and the community all the cases of disability among mem• This linkage recognizes that ade• concerns the type of fund to be estab• bers of the labor force, or persons quate medical care is fully as import• lished—whether, as in Rhode Island, of working age who would have been ant to the worker as the money he all benefits are to be paid from the in the labor market except for their receives to replace part of his wage State fund built up from social insur• disability, have already existed for 6 loss. Prompt and adequate care of ance contributions, or whether, as in months or more. Ordinarily these sickness and, whenever possible, pre• California, commercial insurance car• long-disabled persons would be out• vention of more serious and prolonged riers participate in the program. This side the scope of temporary disability incapacity are of paramount impor• question will be discussed in connec• insurance; if they had qualified for tance also to the insurance fund and tion with the costs and financing of a such benefits, they would have used to the community as a whole. The im• State program. up their rights. The greatest need portance of linking cash benefits with for insurance protection, however, is provision for care of the sick or in• Definition of disability.—Under in such households, where a worker jured worker has been recognized in temporary disability insurance, a logi• has been laid up for a long time and this country by the State workmen's cal definition of disability is incapa• may never be able to hold a job again. compensation laws. city of the insured wage earner to per• Only comprehensive provisions that Granted, however, the limitations form his customary or most recent include insurance against chronic or inherent in a program of temporary work without jeopardizing his recov• permanent disability will meet the disability insurance alone, such a pro• ery. Since most spells of disability are needs of the families on which the gram of social insurance can enable brief and insurance payments are risk of incapacity falls most heavily. workers to buy important protection made for only a relatively short time, Among some 1,750,000 members of which, by and large, they cannot get it would be unreasonable to require the labor force who, on an average or afford in any other way. that a claimant be disabled for any day, have been incapacitated for less gainful work if he is to receive bene• than 6 months, many are outside the Characteristics of a Coordinated fits. For example; a watchmaker with coverage of State unemployment in• Program a broken wrist that keeps him from surance laws or cannot meet the Unemployment insurance and tem• working at his own trade should be eligibility requirements of such laws. porary disability insurance are alike considered disabled even though he If the potential duration of disability in that both are intended to compen• could perform a job as, say, a mes• benefits follows the patterns now set sate workers who are ordinarily in the senger. for State unemployment benefits, labor market for part of their wage The disability insurance law should many incapacitated workers would loss during relatively brief periods be clear on the course to be followed have exhausted any temporary dis• when they cannot earn. Coordination in claims from pregnant women. The ability benefits for which they had of administration of the two types of desirable course is to provide benefits qualified long before the end of 6 benefits can effect considerable sav• to any insured woman who is unable months. Under a coordinated pro• ings in administrative costs and can to carry on her customary work, gram, the meaning of a temporary simplify administration, as compared whether or not the cause of her inca• disability program for workers in a with two separate systems, from the pacity is pregnancy. In any case, it would be desirable to provide a mini• week would have an added incentive to on the evidence that he has been em• mum period of benefits of 6 weeks be• wait until the following Monday, for ployed at a prior period—his base pe• fore and 6 weeks after childbirth. otherwise he would lose compensation riod. for the earlier days when he was ac• Also on the principle that the use Waiting period and benefit week.— tually too ill to work. of the insurance funds is intended In temporary disability insurance, as It is therefore desirable that the for workers whose disability causes in unemployment insurance, the wait• waiting period should consist of any actual loss of earnings, an insured ing period serves to rule out brief pe• 7 consecutive days of disability and worker, though otherwise eligible, riods of inability to earn when the that benefits should be paid on the should not receive benefits if he con• amount of the wage loss is less serious basis of a flexible week of this type— tinues to draw pay while he is sick for the worker, and to conserve the 7 consecutive days of incapacity—with or if he is receiving another social funds of the system for the insured provisions for compensating part- insurance benefit (unemployment persons whose losses are greater. It weeks at the end of a spell of com• benefit, old-age and survivors insur• also gives the time needed by the pensable disability. ance benefit, or workmen's compen• agency to carry through the opera• sation payable for the same incapac• tions necessary to pay benefits Eligibility.—To show that he is cur• ity) equal in amount to his temporary promptly when due. rently in the labor market, an unem• disability benefit. In the interest of Relatively many more spells of dis• ployed worker must register at a pub• prompt payment of benefits for dis• ability than of unemployment are lic employment office before he can ability at the time when the claimant limited to only a few days. Of all the receive benefits, and must also hold most needs the money, it is desirable spells of a day or more of disability himself available for any suitable job to have temporary disability benefits among workers, probably from 75 to that offers. A disabled worker, to paid to an otherwise eligible claim• 80 percent last less than 8 days. A whom benefits are payable also on the ant even though his incapacity may waiting period of 7 consecutive days assumption that he is losing earnings, later be found to have been covered would therefore conserve the finan• obviously cannot be required to meet by the State workmen's compensation cial resources of the disability fund, that test of current attachment to the law. If an award is later made to him since the many very brief disabilities labor market. Because eligibility for under that law, the disability fund would be ruled out, while at the same benefits is based on wages received in would then be reimbursed. time it would not leave a heavy finan• a past period—the base period, as de• cial loss to be carried by the worker. fined by the law—disability benefits Claims and certification.—Obvious• The waiting period appropriate in all may be paid to persons who have been ly, provision should be made that a States, regardless of the provisions in out of the labor force for a consider• disabled person can file his benefit the unemployment insurance law, able time before the onset of their claim by mail and that others can fill would be 1 week in a benefit year, disability. out and sign his claim or other docu• equivalent to a week of total unem• For example, in Rhode Island, ments if his physical or mental condi• ployment rather than to a week of which uses a calendar-year base pe• tion makes it impossible for him to do total or partial unemployment. riod, a person who earned $100 in so. Certification by a licensed physi• The calendar week may be used for covered employment in the first cal• cian that the claimant is incapacitated benefit purposes in unemployment in• endar quarter of 1945 could claim dis• for his customary or most recent work surance, since lay-offs are likely to ability benefits at any time between is essential, since this is a medical come at the end of the week and since the first Sunday in April 1946 and the question on which only a physician is workers can receive benefits if they first Sunday in April 1947. Rhode Is• competent to rule. In States that re• are only partially unemployed during land amended its law in 1946 to re• quire employee contributions, persons the week. The beginnings of spells of quire, as a test of current attachment whose religious tenets prevent them disability, however, do not follow the to the labor market, that a claimant from consulting a physician may be calendar. To use a calendar week for must have been employed or have permitted, as in Rhode Island, to the waiting period and benefit week registered for work at an employment "elect out" of the program—that is, in disability insurance (as in Rhode office within 6 months before the they are exempted from contributions Island) results in hardship for claim• weeks for which he claims disability and are ineligible for benefits under ants whose incapacity begins or ends benefits. California, which has an the program. in the middle of a week. A worker individual base period and benefit Experience in this country and who falls sick on a Tuesday, for ex• year, is using a similar require• elsewhere shows that it is desirable to ample, will have to be incapacitated ment, but within a 3-month period. have the medical certification made by for not only the remainder of that To safeguard use of the insurance the claimant's attending physician week but also all the week following funds for the purpose for which they and to have medical review of all such before he completes the waiting-period are intended, it is important that both certificates by the agency. This prac• requirement—not 7 days, but 12. unemployment insurance and tempo• tice, which Rhode Island follows, as• When benefits are paid only for a full rary disability insurance should have sures consideration of the case by a calendar week of incapacity, a claim• tests to determine that the worker is doctor who knows the patient, while ant who is really well enough to go actually in the labor force at the time the review (and, if indicated, exam• back to his job by the middle of a he claims benefits and not rely merely ination of the patient) by the agency physician protects the family doctor ployment insurance and temporary rary disability benefits wholly from from undue pressure on the part of the disability insurance will include the employee contributions. The Federal patient or his family, safeguards in• provision of dependents' allowances temporary disability system for rail• surance funds, and helps to assure under both programs. road workers, on the other hand, is uniform and equitable policies and de• financed out of the 3-percent em• cisions on claims. Duration of benefits.—Under both ployer contribution originally levied unemployment insurance and tempo• for unemployment insurance alone. Amount and type of benefits.—A rary disability insurance the potential Temporary disability insurance con• worker should not have a financial in• duration of benefits should be enough tributes to the well-being of the com• centive to claim a disability benefit to give most covered workers protec• munity as a whole and of employers rather than an unemployment benefit tion for the whole period of their in• as well as of the workers directly or vice versa. For this reason, and ability to earn. The two programs protected, since it may be expected to also to simplify and unify administra• differ in one respect, however. While help improve the health of the pop• tion, the same benefit formula should the average length of spells of unem• ulation, reduce dependency and the be used for both purposes. The basic ployment differs considerably between need for public aid, and sustain benefit amount must, of course, be less good years and bad, the amount and worker morale and the buying power than customary wages so as not to average duration of disability among of the community. It is a sound prin• weaken the beneficiary's incentive to workers does not vary greatly from ciple of social insurance that all who get a new job or go back to his job year to year. Payment of temporary benefit from the program should share as soon as he can. disability benefits to any eligible in financing it. Consideration there• The unemployment insurance laws worker for as much as 26 weeks would fore may well be given to having em• of five States recognize the presump• protect the large majority of persons ployers and government also contrib• tively greater needs of beneficiaries on with valid claims, though, as has been ute toward the costs of temporary dis• whom others are dependent by provid• pointed out, it would not solve the ability benefits. ing an allowance for certain depend• subsequent problems of persons with In unemployment insurance, Fed• ents of a jobless worker in addition to protracted or chronic disabilities, eral grants to States meet the full the basic amount to which the in• which require insurance against per• cost of administering State unemploy• dividual's past wage record entitles manent disabilities or invalidity. It is ment insurance laws that have been him. Such allowances express the ob• therefore desirable that temporary approved by the Federal Security Ad• jectives of social insurance by adjust• disability benefits should have a uni• ministrator as meeting general con• ing benefits to take account of the form potential duration of 26 weeks. ditions specified in the Federal law. presumptive needs of the individuals Such a provision would not cause se• The Federal Government does not rious administrative difficulties in concerned. To make additional al• share financially in costs of the ex• States that have a briefer uniform lowance for dependents enables a so• isting State programs of temporary duration or variable duration for un• cial insurance system to meet actual disability insurance. In its conclud• employment benefits. needs effectively without the unneces• ing annual report, for the fiscal year sarily high costs and other disadvan• 1945–46, the Social Security Board re• affirmed its conviction of the unde- tages that arise if an amount ade• Cooperation of interested groups.— sirability of the 100-percent Federal quate for the claimant with depend• As in other areas of social insurance, grant for State administration and ents is payable to everyone who qual• effective and economical administra• proposed as an alternative method a ifies for benefits. For these reasons, tion can be greatly facilitated by the Federal contribution for unemploy• dependents' benefits have also been full understanding and cooperation of ment insurance if those programs are incorporated in the Federal system of the groups directly concerned—work• maintained on a State-by-State basis. old-age and survivors insurance, in ers, employers, physicians and others certain provisions for veterans, in who deal professionally with sickness The Board recommended, in brief, a some State workmen's compensation and disability, and the general public. grant-in-aid program under which, laws, and in many foreign social in• Both in working out and setting up after modification of existing provi• surance systems. The need for allow• a program of temporary disability sions of the Federal Unemployment ances for the family of a disabled benefits and in its subsequent opera• Tax Act, matching Federal grants worker is ordinarily even greater than tion, a State may make good use of would be made to States to help pay for that of a jobless worker since, as advisory councils composed of mem• costs of both benefits and administra• has been pointed out, the former or• bers of such groups to aid in furnish• tion of State unemployment insurance dinarily must meet the additional ex• ing needed information, reconciling laws. If Congress so desires, modifica• penses of illness at the time when he the inevitable differences of opinions tion of Federal provisions relating to is losing earnings. This need is the arising from different viewpoints, and the financing of State unemployment more urgent when, as under the exist• promoting a wider understanding of insurance programs could be developed ing programs in this country, disabil• common interests in the program. in such a way as to include Federal participation in financing temporary ity insurance is not linked with insur• disability benefits in States that had ance against the costs of medical care. Financing and Costs a coordinated program for both these It is to be hoped that the development Source of funds.—Both Rhode Is• short-term risks. This participation of coordinated programs of unem• land and California finance tempo• would express the important Federal would be relatively lower in that State common among some groups of work• stake in national health and economic than elsewhere because of its small ers than others and are most com• well-being and in effective efforts to area and urban concentration of pop• mon among the workers whose earn• promote these objectives throughout ulation. California has provided 5 ings are lowest and most irregular. If the Nation. percent of contributions (which are 1 the cost of insurance is not to be too A more comprehensive recommen• percent of taxable wages) for admin• great for the groups with the highest dation of the Social Security Board istration. disability rates and the greatest need for a unified national social insur• for protection, the risk must be pooled so that contributions from the more ance system, including insurance Type of fund.—One major factor fortunate groups help to pay the costs against all major risks of loss of earn• determining costs, and in fact the ul• of benefits to the less fortunate. This ings and also against medical costs, timate social value of a system of tem• is the essence of social insurance— would facilitate not only a consistent porary disability benefits, hinges on the pooling of a risk among a large and equitable plan for financing tem• the decision as to the type of fund to group of persons who are subject to porary disability benefits and other be established. it so that all have protection at a cost social insurance benefits but also ap• A State plan of disability insurance that all can pay. propriate coordination of the various makes protection of covered workers types of insurance benefits, without mandatory, but there are different Private insurance companies, on the gaps or overlapping, and the utmost ways of furnishing this protection. other hand, are business enterprises. simplicity and economy in social in• The State itself may pay all benefits, In order to exist, they must have busi• surance administration. as Rhode Island does, from contribu• ness that is profitable or is likely to tions deposited in the State fund. At become profitable. They must avoid Contribution rate.—The cost of the other extreme is the recommenda• insuring poor risks, or charge higher temporary disability insurance will tion made in 1946 by the New Jersey rates for such groups, or limit the poli• depend on the particular provisions State Commission on Post-War Eco• cies they write for them so as to pay a State adopts, the composition and nomic Welfare, which would require in only the most serious cases and in characteristics of the groups of work• all employers covered under the sys• small amounts. Conversely, they ers covered, administrative methods tem to guarantee protection, either must seek the good-risk groups. and practices, and geographic and as self-insurers or through Insurance The employees who would choose other factors. Assuming a waiting underwritten by private commercial to "contract out" of a State plan period of 7 consecutive days, 26 weeks' insurance carriers. The California would generally be the good risks who, uniform potential duration of benefits, law follows a middle road: an individ• by doing so, could get a cheaper rate a requirement of attachment to the ual employee may elect exemption or what appeared to be more liberal labor force equivalent to that required from the pay-roll tax if his employer benefits under a private contract. for unemployment insurance, and is insured under a private plan ap• The competition of many commercial weekly benefit amounts equivalent to proved by the California Employment insurers for the profitable business the State benefits for total unemploy• Stabilization Commission. Under would inevitably require the com• ment, a State should probably have such an arrangement, in other words, panies to refuse poor-risk groups, or in sight, for some years ahead, at least private insurance companies are al• drop them as they were discovered, or annual amounts equal to or approxi• lowed to participate, subject to certain adjust benefits to premiums in one mating 1.5 percent of pay roll. Its regulations, in insuring nonindustrial way or another. The net effect of this own experience, coupled with the ex• disability, and persons who choose to situation would be to leave the poor• perience of other State systems, will take out commercial insurance with est risks to the State fund. To assure then be its best guide for future ad• such companies are not obligated to reasonably adequate benefits for these justments. Administrative expense contribute to the public system. groups in which disability is frequent, the State would have to charge may be expected to represent from 5 The object of temporary disability more—possibly double, treble, or even to 10 percent of contributions or of insurance, as of any social insurance, quadruple the contribution rate that benefit payments, whichever is higher. is to provide basic protection to cov• would be adequate if all covered In other words, out of each dollar col• ered workers and to provide it at the workers contributed to the State fund. lected in contributions, 90 to 95 cents lowest possible cost. If commercial This difference would be taken as a would be returned in benefit payments insurance carriers take part in the severe reflection on the State's ad• to sick and disabled workers. program it is impossible to achieve ministration by many persons who Actual experience under the partic• this second objective—insurance at did not realize the circumstances. ular provisions of the Rhode Island the lowest possible cost—and it will be law showed benefit costs in the first more difficult to assure basic protec• The effect of contracting out may 3 benefit years of 0.86, 1.08, and 1.01 tion of all covered workers. Workers be seen in workmen's compensation in percent of taxable wages in the re• have an especially important stake in States that do not have an exclusive spective calendar base years. Rhode the decision on the type of fund to be State fund. Some employers pay as Island now allocates 4 percent of cur• adopted if, as under the present sys• much as 50 percent of pay roll in pre• rent contributions (which are 1.5 per• tems, it is they who are to pay for the miums for insurance against work- cent of taxable wages) for costs of ad• disability benefits. connected accidents and diseases; ministration. Probably such costs Sickness and disability are more others pay a fraction of 1 percent. The range in rates for nonoccupa• dent and health insurance companies, der an exclusive State fund. Admin• tional disabilities would probably not group and individual contracts com• istrative costs will be higher for both be as large, but it would certainly be bined, paid to policyholders 52 cents the State agency and employers. Un• great, and the highest rates would fall of each dollar of net premiums col• less all their employees are under the on those least able to pay. lected. State fund, employers would have to In the long run, the effect of such It is often assumed that competi• ascertain each quarter which em• a system would be to use the manda• tion for business eliminates the less ployees are thus insured and which tory force of public law to develop, efficient, but in health and accident are continuing with private insurers. largely at the expense of low-paid insurance such elimination has not It will be hard for workers, particu• workers in a State, the business of been at all rigorous. For more than larly those who change employers, to commercial insurance companies. half the companies for which infor• know their rights. It will often be Some of the better-risk groups might mation was obtained in the study necessary—and both costly and com• pay a little less to a private insurer mentioned above—133 companies out plicated—to apportion the benefit lia• than they would pay under an all- of 215 that provided usable informa• bility for a claimant among the State inclusive State program, or for the tion on this point—the return in bene• fund and one or more private carriers same rate might appear to get a some• fit payments to policyholders averaged or among several private carriers. what more generous contract, though only about 38 cents of the net pre• Though the problem is simpler un• it appears doubtful whether, on the mium dollar taken in—34 cents un• der workmen's compensation, since in whole, the group would get more in der individual contracts and 60 cents that program an employer makes the benefits. They certainly would get under group contracts. These com• decision for all his employees, in much less in benefits than they paid panies represented one-fourth of the States where the State fund is not the in premiums. entire health and accident business exclusive insuring agency the admin• and one-fourth of the group business. istrative expenses are three times as The companies with the best records In social insurance, any excess of great as those in States with exclu• returned, on the average, only 68 cents contributions over benefits to the more sive State funds. Much if not all of of each premium dollar for all types fortunate groups goes toward lighten• this difference is due to the greater of health and accident business—59 ing the otherwise necessary contribu• administrative complexities that are cents on individual contracts and 76 tion rates of the less fortunate; under inevitable when a State fund must op• cents on group contracts. private insurance, it goes toward pay• erate in conjunction with commercial ing the costs of underwriting the busi• insurance carriers. ness, which are high, and toward When the Social Security Act was profits or other purposes. Rhode under consideration, Congress re• Conclusion Island is administering temporary jected a proposal that it permit con• disability insurance for 4 percent of tracting out for the old-age and sur• Coordination of temporary disabil• the premiums collected, and has ad• vivors insurance program. In disabil• ity benefits with State unemployment ministered it for less. From April 1, ity insurance also I believe that con• insurance programs offers a feasible 1943, when Rhode Island began pay• tracting out would run counter to the approach to some of the untouched ing cash sickness benefits, to June 30, objectives of social insurance. The area of economic insecurity arising 1946, when contributions were tem• California law contains provisions in• from sickness and disability. Such a porarily increased to build up the dim• tended to safeguard the State insur• program can be of very significant inished reserves of the State fund, the ance fund against adverse selection, value to workers and employers within State collected $14,631,262 in con• but it has not been established that a State and to the State as a whole. tributions and paid out $14,979,389 in they can operate effectively. I per• The importance of the program to all benefits, with a resultant loss ratio of sonally know of no feasible method groups, however, will depend in con• premiums written to losses paid of 102 for assuring that the good and the siderable part on the soundness and percent. By contrast, a recent study bad risks will actually be pooled, that effectiveness of the provisions actually for the Social Security Administration basic protection will be provided to all incorporated in the State law—that showed that in the 5-year period covered workers at the lowest possible is, on the establishment of a system 1938–42 a group of 60 health and ac• cost, and that the contributions or that is simple, understandable, and cident insurance companies paid in premiums paid for temporary disabil• economical of administration, returns benefits 69 cents of each net pre• ity insurance will go—as they do in fair value to its contributors, and mium dollar collected. Many em• social insurance—almost wholly to the furthers the basic objectives of all so• ployees are in small establishments disabled. cial insurance. In formulating the that could not well be covered by Moreover, voluntary contracting plan for such a program, no decision group contracts and would have to be out, as provided under the California is more important than that concern• covered by something more like in• law, will necessarily require more com• ing the type of fund to be used dividual health and accident policies. plicated and cumbersome administra• in financing and administering the The same study showed that 226 acci• tive practices than are necessary un• benefits.