COVID-19 and Social Insurance

COVID-19, officially a pandemic as of March 11 (WHO), has generated proposals to deal with the health and income security needs of all Americans. This article serves as a summary of some of the latest proposals (as of March 15**) and issues to address.

Many proposals center on core social insurance programs – Social Security, Unemployment Insurance, Medicare, and Workers’ Comp – as well as new policies for paid leave, which have significant power to protect against the economic and health risks facing Americans now. The prospect of a severe economic downturn has focused policymakers on the recession-ready features and automatic stabilizers of social insurance programs, as well as their capacity to counter inequality. Some proposals would modify core social insurance programs, while others would introduce new programs. Grounded in social insurance principles, these immediate supports would help to better protect full-time and part-time workers, retirees, and others.

In a welcome spirit of bipartisanship, the House of Representatives passed legislation, the “Families First Coronavirus Response Act,” on March 13, 2020. This legislation, which was signed into law on March 18, addresses some of the risks that this COVID-19 pandemic has accentuated. References to specific provisions of the House legislation are included below.**

Social Security

Many Social Security recipients rely nearly exclusively on their monthly benefits for income, with little ability to deal with financial emergencies resulting from the COVID-19 pandemic. As such, a temporary boost in benefits may be prudent to meet a potential need for more cash. The International Social Security Association, which comprises over 320 institutions in more than 150 countries, has called on Social Security systems across the world to “take the necessary measures as early as possible to cope with an increased demand for benefits and services.”

The Trump Administration is also proposing a new “payroll tax holiday” to address the economic implications of COVID-19. A two-percentage point temporary reduction in Social Security contributions was part of the federal stimulus package enacted in 2010 in response to the Great Recession. However, Academy Member Max Richtman, CEO of the National Committee to Preserve Social Security and Medicare, cautions against enacting similar proposals now as a form of economic stimulus, asking – “how many would willingly trade their future financial security for a few dollars in payroll tax cuts?”

 

Paid Leave, Caregiving, Universal Family Care

As the final report of the Academy’s Study Panel on Universal Family Care noted, the United States is one of the few developed countries without a national paid family leave policy. No federal laws require employers to provide paid sick leave or paid time off to care for family members. Only a few states currently have such mandates. Moreover, lack of flexible leave options means that many Americans, who would prefer to stay home during the worst of the crisis to avoid contracting the virus, or who may have it but do not yet show symptoms, will exacerbate the spread unnecessarily.

The above-referenced House legislation includes $15 million for the Internal Revenue Service to implement tax credits for paid sick and paid family and medical leave. It provides a refundable tax credit equal to 100 percent of qualified paid sick leave wages paid by an employer for each calendar quarter. It also provides employees of employers with fewer than 500 employees and government employers, who have been on the job for at least 30 days, with the right to take up to 12 weeks of job-protected leave under the Family and Medical Leave Act to be used for any of the following reasons:

• To adhere to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus

• To care for an at-risk family member who is adhering to a requirement or recommendation to quarantine due to exposure to or symptoms of coronavirus, and

• To care for a child of an employee if the child’s school or place of care has been closed, or the child-care provider is unavailable, due to a coronavirus.

After two weeks of paid leave, employees will receive a benefit from their employers that will be no less than two-thirds of the employee’s usual pay.

This legislation also incorporates “The Emergency Paid Sick Leave Act,” which requires employers with fewer than 500 employees and government employers to provide employees two weeks of paid sick leave, paid at the employee’s regular rate, to quarantine or seek a diagnosis or preventive care for coronavirus; or paid at two-thirds the employee’s regular rate to care for a family member for such purposes or to care for a child whose school has closed, or child care provider is unavailable, due to the coronavirus. Full-time employees are entitled to two weeks (80 hours) and part-time employees are entitled to the typical number of hours that they work in a typical two-week period.

Academy Member Aparna Mathur explored paid medical time off in more depth in a recent American Enterprise Institute blog post. Similarly, Academy Senior Fellow Sarah Jane Glynn has co-authored an article calling for a national paid leave policy.

Another dimension of this crisis relates to long-term services and supports (LTSS), which has been highlighted by the early fatalities involving nursing home patients in the state of Washington. To the extent that COVID-19 leads to long-term debilitation among substantial numbers of older Americans, the shortcomings in current financing options for LTSS will be exacerbated. As the above-referenced Academy Study Panel, which included a Working Group of 16 LTSS experts, noted in its final report: “(t)he fundamental LTSS financing problem today is the absence of an effective insurance mechanism to protect people against these costs.”

 

Medicare

As noted in the Academy’s recently-released final report of its Study Panel on Medicare Eligibility, 27.5 million Americans were uninsured at some point during 2018. While non-Hispanic white Americans had an uninsurance rate of 5.4 percent, black Americans were nearly twice as likely to be uninsured (9.7 percent) and Hispanics were over three times as likely to face those risks (17.8 percent). Lower-income households also had much higher uninsurance rates, and approximately 5 million undocumented immigrants were uninsured in 2017. These uninsured individuals have no current coverage for tests, vaccines, or treatment, making it difficult for them to protect themselves and others. Even those with health insurance may face high deductibles or copays.

The recent House legislation requires Medicare Part B to cover beneficiary cost-sharing for provider visits during which a COVID-19 diagnostic test is administered or ordered. It also requires Medicare Advantage to provide coverage for COVID-19 diagnostic testing, including the associated cost of the visit in order to receive testing. Coverage must be provided at no cost to the beneficiary. Similar provisions apply to Medicaid.

This bill also includes $1 billion for the National Disaster Medical System to reimburse the costs of COVID-19 diagnostic testing and services provided to individuals without health insurance. It requires private health plans to provide coverage for COVID-19 diagnostic testing, including the cost of a provider, urgent care center and emergency room visits to receive testing. Coverage must be provided at no cost to the consumer.

 

Unemployment Insurance

In past economic crises, like the last major recession, Unemployment Insurance (UI) has been expanded to meet rising need.

The above-referenced House legislation provides $1 billion for emergency grants to states for activities related to processing and paying UI benefits, under certain conditions. $500 million would be used to provide immediate additional funding to all states for staffing, technology, systems, and other administrative costs, so long as they met basic requirements about ensuring access to earned benefits for eligible workers. $500 million would be reserved for emergency grants to states which experienced at least a 10 percent increase in unemployment. Those states would be eligible to receive an additional grant to assist with costs related to the unemployment spike, and would also be required to take steps to temporarily ease eligibility requirements that are limiting access to UI during the COVID-19 outbreak, like work search requirements, required waiting periods, and requirements to increase employer UI taxes if they have high layoff rates. The Secretary of Labor will also provide technical assistance to states that want to set up work-sharing programs, in which employers reduce hours instead of laying employees off, and then employees receive partial unemployment benefits to offset the wage loss.

Some states, like Rhode Island, have already taken measures to increase access to benefits, such as waiving waiting periods to apply for UI.

Depending on the severity of the potential downturn, more measures may be needed. Some have proposed an expanded and more flexible UI program to cover individuals who are laid off or whose workplaces close. Proposals include increasing the amount paid and/or the duration of benefits based on various triggers, with the federal government subsidizing state payments toward UI. Others have also proposed that the current UI requirement that people look for work be waived during this crisis. Suggestions include having triggers be based on an increase in the average of UI claims above a certain threshold, on industry triggers (workers in leisure industries such as airlines and hotels would qualify), or on geographical triggers based on a serious regional outbreak. Under these proposals, UI coverage wouldn’t go into effect until certain thresholds are met.

Others have recommended extending UI benefits paid entirely by the federal government if the crisis continues for a long period of time. They worry that households will reduce their spending in response to increased fear of job loss. They assert that federally financed extended benefits will be more likely to meet individual needs than will state financing given states’ budgetary constraints. Indeed, a key strength of social insurance is its capacity to counter these potential negative macroeconomic effects of a pandemic.

For example, Academy Member Stephen Wandner has stated: “Strengthening the UI program can help provide income to covered unemployed workers, but it will not help workers without sick leave who are still employed, and it won’t help workers who are not covered by UI. As a result, a two-pronged policy effort should be undertaken to provide income support, each program being enacted for 18 months.” He has proposed a COVID-19 “UI Policy” and a COVID-19 “Special Unemployment Assistance” program. For a copy of his proposal, please email him at stephen.wandner@gmail.com.

 

Workers’ Compensation

A workplace outbreak of COVID-19 might lead to a significant increase in Workers’ Compensation (WC) claims. In addition to unique risks that healthcare workers face, they often do not have the option of teleworking. Along with workers in other services areas and in retail, they may have a higher risk of exposure to the virus.

While WC provides coverage for injuries arising out of and in the course of employment, there are separate rules that deal with work-borne diseases with variations from state-to-state. For example, Virginia’s WC Act covers “occupational diseases,” which are defined as diseases that arise out of and in the course of employment, but generally does not include “ordinary diseases of life” to which the general public is exposed outside of employment, unless a claimant meets certain heightened proof requirements. According to one legal interpretation, “a claimant alleging work-related coronavirus would need to prove by clear and convincing evidence that the disease arose out of and in the course of the employment and did not result from causes outside of the employment.”

Some states are expanding coverage during this emergency. For example, the state of Washington “is taking steps to ensure Workers’ Compensation protections for health care workers and first responders who are on the front lines of the COVID-19 (coronavirus) outbreak.”

Academy Member John Ruser, President & CEO of the Workers Compensation Research Institute, noted that many are wondering “what the impact would be on state Workers’ Compensation systems if there were a downturn, particularly from an external factor such as the coronavirus.” Among the questions he has raised are:

• What impact do business cycles have on claims (in anticipation of a layoff), reluctance to claim due to fear of job loss, and return to work?
• What injuries can we expect to see from new vs. experienced workers as the economy continues to grow or faces a downturn?
• What injury frequency do we see during periods of employment volatility and what has changed since the Great Recession?

 

Assured Income

Finally, some propose that the federal government create a new stimulus program that provides money to every American. Writing for the Washington Center for Equitable Growth, former Federal Reserve economist Claudia Sahm has suggested measures that go beyond the Fed’s monetary policymaking. She notes that “(a)ny person who has the coronavirus, is quarantined, or stays home to care for a loved one needs financial support immediately.” She recommended that “(t)he federal government should send them money—a check for $1,000, all at once, not $70 a week.” She added: “The federal government needs to give people the financial support they need to get healthy, stay healthy, and keep their family and co-workers healthy. This is a public health crisis—all arms of the federal government need to take coordinated action now.”

Similarly, Academy Member Jason Furman, former Chair of the Council of Economic Advisors, has proposed as a fiscal stimulus that “Congress should pass a simple one-time payment of $1,000 to every adult who is a U.S. citizen or a taxpaying U.S. resident, and $500 to every child who meets the same criteria.”

The Economic Security Project (ESP), one of the funders of the Academy’s Economic Security Study Panel noted below, advocates for an “Emergency Money to the People” initiative to “provide immediate financial support to the millions of American families who were already living paycheck-to-paycheck before this crisis unfolded.” An emergency cash infusion would offer at least $1,000 and up to $6,000 to individuals and households, covering two-thirds of all Americans. A fact sheet and full policy details may be found at https://www.economicsecurityproject.org/emergencymoney.

 

The Academy’s Economic Security Study Panel

The Academy has a vehicle in place to explore a wide range of policy approaches to the risk of economic insecurity that the current health crisis has intensified. Our Study Panel on Economic Security, launched in November 2019, is currently examining such approaches and is on target to issue its final report by the end of this year. In view of the COVID-19 pandemic, however, one or more of the Study Panel’s Working Groups – Early Life, Middle Life, Late Life, and Financing – might decide to issue an interim report focusing on more immediate federal action.

In the final analysis, some people – due to biology and/or socioeconomic status – will be able to handle this crisis more safely and with less financial disruption than others. All of us, and especially the most vulnerable segments of our population, will need an effective public policy response that addresses health and economic risks through social insurance and related mechanisms. We must not succumb to panic, remembering President Franklin D. Roosevelt’s famous admonition that “the only thing we have to fear is fear itself.”

In times of heightened risks such as these, we are reminded once again of the importance of social insurance programs, the principles of risk reduction that underlie them, and the values that inspire them. As we plan for the future, social insurance principles continue to guide us.

(**This post was updated on 3/20/2020 to correct a statement saying the House legislation included a significant role for the Social Security Administration. This does not appear in the final legislation that was signed into law on March 18. Further updates reflecting the final legislation may be made to this article.)