Social Assistance and Social Insurance

Social Assistance:

It is a program through which the Government attempts to ameliorate the distress caused by contingencies of life. No contributions are made, for getting the benefit, by the workers.

In other words, social assistance includes “non-contributory benefits towards the maintenance of children, mothers, invalids, the aged, the disabled and others like the unemployed.” Benefits are provided to persons of small means in sufficient quantity so that their minimum standards of needs could be satisfied.

The National Social Assistance Programme (NSAP) is a Centrally Sponsored Scheme of the Government of India that provides financial assistance to the elderly, widows and persons with disabilities in the form of social pensions.

Components

The National Assistance Program consists of five sub-schemes:

Indira Gandhi National Old Age Pension Scheme (IGNOAPS)

The Indira Gandhi National Old Age Pension Scheme (IGNOAPS) is a non-contributory old age pension scheme that covers Indians who are 60 years and above and live below the poverty line. All individuals above the age of 60 who live below the poverty line are eligible to apply for IGNOAPS. All IGNOAPS beneficiaries aged 60–79 receive a monthly pension of Rs. 300 (Rs. 200 by central government and Rs. 100 by state government). Those 80 years and above receive a monthly pension amount of Rs.500.States are strongly urged to provide an additional amount at least an equivalent amount to the assistance provided by the Central Government so that the beneficiaries can get a decent level of assistance.

Indira Gandhi National Widow Pension Scheme (IGNWPS)

Indira Gandhi National Widow Pension Scheme (IGNWPS), introduced in the year 2009, provides BPL(Below Poverty Line) widows in the age group 40 to 59(later revised 40 to 79 WEF 01.10.2012) with a monthly pension of Rs. 200 (later revised to Rs.300 WEF 01.10.2012) per beneficiary. This programme was started in 2009 under the ministry for rural development.

Indira Gandhi National Disability Pension Scheme (IGNDPS)

Eligibility: Individuals aged 18 years and above with more than 80% disability and living below the poverty line.

Amount: Rs. 300 (US$3.80) per month (Rs. 500 (US$6.30) for those 80 years and above).

National Family Benefit Scheme (NFBS)

In the event of death of a bread-winner in a household, the bereaved family will receive lumpsum assistance of 20,000. The bread-winner should have been between 18–64 years of age. The assistance would be provided in every case of death of primary bread-winner in a household.

Annapurna Scheme

This scheme aims to provide food security to meet the requirement of those senior citizens who, though eligible, have remained uncovered under the IGNOAPS. Under the Annapurna Scheme, 10 kg of free rice is provided every month to each beneficiary.

Social Insurance

It is a mechanism through which benefits are provided to the contributories (out of contributions made by them, the employers and the government) necessary for satisfying wants during old age, sickness, unemployment and other contingencies of life.

The main features of social insurance are as follows:

(i) Certain risks which cannot be faced by the persons in their individual capacity are faced collectively by a group of persons.

(ii) Social insurance is contributory in nature as both the government and the subscribes have to deposit monthly subscriptions to the social insurance scheme.

(iii) Certain, benefits are provided to them in the case of contingency.

(iv) Benefits are claimed by the insured persons as a matter of their rights in accordance with their salary.

(v) They are insured against the risk on compulsory basis, and it is obligatory for them to contribute under the scheme.

Features

• The contributions of individuals is nominal and never goes beyond what they can afford
• the benefits, eligibility requirements and other aspects of the program are defined by statute;
• explicit provision is made to account for the income and expenses (often through a trust fund);
• it is funded by taxes or premiums paid by (or on behalf of) participants (but additional sources of funding may be provided as well); and
• The program serves a defined population, and participation is either compulsory or so heavily subsidized that most eligible individuals choose to participate.

Redistribution

In order to achieve a better and more equitable distribution of insurance costs, the government intervenes through the means of taxation of low risk individuals in order to subsidise the premiums that have to be paid by high risk individuals. Therefore, there is a redistribution from low risk individuals to high risk individuals. Because of this, income taxes are often used in the efficient implementation of social insurance programs. In the case of the Affordable Care Act, for example, an individual mandate was included which required Americans to purchase health insurance or be subject to a financial penalty. This allowed higher cost individuals, from the perspective of insurance companies, such as people with pre-existing conditions to be covered and not excluded at a reasonable rate. Although causing political controversy, was an example of redistribution within a social insurance program.

Externalities

If individuals do not have social insurance and are thereby unable to afford the basic right of healthcare, then not only are they subjecting themselves to illnesses but also creating the likelihood that others around them will be infected as well. This would be an example of a negative externality. In the case of the now struck down individual mandate, everyone purchasing health insurance creates a positive externality for those that are high cost to insurance companies as they can now afford health care and cannot be discriminated upon because of various emerging or pre-existing conditions.

Durability

The existence of social insurance stems from the acceptance of the ideology that workers should be insured against the risk of losses of economic status due to their participation in the labour market.  This inherent idea of fairness has propagated the desirability and subsequent durability of this program.

• Social insurance provides protection against certain risks in the economy that private insurance fails to deal with. Private insurance often becomes extremely unaffordable due to the issues of adverse selection and moral hazard, and to counteract such steep prices, the need for a publicly mandated social insurance increases.
• Social insurance is considered fair and socially responsible because it taps into the human desire of wanting to help individuals who face risks that are not their fault and neither are they in their control.
• The premiums required for the existence of social insurance policies come from workers who will ultimately be covered by the benefits and this sense of accountability makes the program seem fair and its beneficiaries, deserving.
• Social insurance helps account for the lack of predictability that individuals in the market have regarding their retirement, health and stability and thereby insures them against long term risks that they now no longer need to think about but are, for the most part, inevitable.