Question

What are the main differences between social and private insurance? Discuss the pros and cons of each.

Answer 1

Social insurance, a public insurance system that offers protection from different economic risks (e.g., sickness-related loss of income, old age, or unemployment) and requires participation. Employment insurance is known as a kind of social security and the two terms are often used interchangeably.

Social insurance plans vary in many ways from private insurance policies. Contributions are usually compulsory and can be made by the employer and the state of the insured, as well as by the insured himself. Additionally, incentives are not so tightly linked to premiums as they are in private insurance. For example, certain groups are included among the recipients to make the services serve other social goals, even if they have not participated for the requisite periods of time. Benefits can be increased in response to cost of living changes, again weakening the connection between contributions and benefits.

However, social insurance differs substantially from other forms of state aid. Social insurance schemes tend to be self-financing, with payments to that end being invested in separate funds. Because the payment of benefits is generally based on contributions made and not on necessity, it eliminates the need for a means test. Benefits are a right, and it reduces any stigma attached to obtaining public funds. Social insurance schemes in some countries mimic private insurance, since the rates of investment expected represent varying degrees of risk.

The clearest advantage is that the health plan will cover some of the healthcare expenses. This form of insurance can pay for doctor's visits, trips to the emergency room and specialist treatments (either in whole or in part). Depending on your individual policy, too, big hospital bills associated with surgery or other significant procedures can be covered with health insurance.

Pros and Cons of private insurance

As a rule, private coverage also comes with more options than those provided by public programs like Medicare. This could allow you to pick the choices you would most likely need and omit those you don't. The benefits that come with private health insurance may include shorter processing times, more individualized care and more sophisticated facilities. Public hospitals can also get overcrowded and can in many cases offer a lower standard of treatment.

The biggest downside private health insurance can be the cost. This is especially true if you are in poor health and have no access to any sort of community coverage. Many individual plans will cost several hundred dollars a month, and even higher coverage for families. And even the most generous plans come with deductibles and copays that covered individuals must reach before they kick in on coverage.

Pros and cons os social insurance

Perhaps the most important "pro" is that because the government is so huge, and that so many people will participate in a public choice, the health care needs prices will decline. This means the premiums would be less than those paid to private insurance providers.

The drawbacks of a public health insurance program all apply to health-care practitioners. But, what ultimately trickles down on the staff to also impact patients. Private health insurers say that they would be forced out of business by a public option as it would cost much less and would have significant bargaining power. They will not be able to maintain their service rates financially, or afford to compensate their investors. Furthermore, they believe that too many people will inevitably flock to the public option, and the U.S. will end up with a one-payer program.