It Isn't Insurance; M. Cassidy

IT ISN'T INSURANCE THE FEDERAL TRADE Commission has been very active lately in prosecuting manufacturers who call their prod ducts by the wrong name, or make unwarranted claims about what they will do. More power to it. But who is going to make Senators and Congressmen and bureaucrats live up to similar standards of plain honesty? Specifically, who is going to make them stop talking about the various Social Security programs as "insur ance" programs, and speaking of the contributors' "rights" to the promised benefits? The question promises to become a lively one when Congress meets again and takes up anew the question of making health-care for the aged a part of the Social Security system (with a corresponding increase in the nick taken from everyone's take-home pay). Over and over, in the rump session just ended, the word "insurance" kept cropping up in the speeches of Senators urging that health-care be put into the Social This article is reprinted by permission from the September 19, 1960 Philadelphia Evening Bulletin of which Mr. Cassidy is As sistan t Edi tor.

301 302 MORLEY CASSIDY Security system. They insisted hotly that the aged should get health-care benefits as "a right." They should be able to receive them "with dignity," because "they had paid for them." This is noble Iang!Jage. Unfortunately, it falls under the head of grossly deceptive language, of a kind that would bring the FTC pouncing down on a manufacturer. It is charitable to suppose that the Senators and Con gressmen who use such language are themselves de ceived about the true nature of the Social Security pro gram. It has been spoken of as "insurance" almost from its inception. The word appears in the name of the Old Age and Survivors' Insurance program. But it is not insurance. It carries no "rights" to any thing except what Congress, from time to time, may grant as a gift. The contributions to it, deducted from pay, are not "insurance premiums," but a tax, pure and simple.

Who says so? The Secretary of Health, Education, and Welfare says so. The Solicitor General of the United States says so. Finally, the Supreme Court says so. In a little noted decision last June 20 the Supreme Court ruled finally on a question which has irked many real insurance men for a quarter-century. The case was that of Nestor v. Flemming. Ephram Nes tor, a Bulgaria-born industrial worker in Los Angeles, was deported in July 1956 to his homeland, as a Commu nist. He had been a Social Security contributor since 1939 and was drawing old-age benefits when deported. He drew two monthly checks after his deportation and IT ISN'T INSURANCE 303 wanted his benefits restored on the grounds that he "had paid for them." His theory was that on which most discussion of So cial Security is based: that he had been paying money into Social Security which would be held for him and, in his old age, given back with interest.

He was wrong, and the brief of the U. S. Solicitor General, on appeal to the Supreme Court, leaves no ex cuse for any Senator, Congressman, or bureaucrat ever again to speak so loosely about their product. "The old-age monthly benefits program which Title II of the Social Security Act establishes is not a federally administered 'insurance' program," Secretary Flemming declared in this brief. "The contribution exacted under the Social Security plan," he went on, "is a true tax. It is not comparable to a premium promising the payment of an annuity commencing at a designated age." The Solicitor-General presented this version to the Supreme Court to explain why Nestor had no "right" to any benefits, and went on to say: "The 'Trust Fund' from which OASI benefits are paid is maintained by an nual appropriations made by Congress. . . . Unlike pri vate insurance companies, which essentially require re serves equal to the present value of all benefits, ~he Social Security program needs no such reserves, since it is as sured of continuing participation through the exaction of taxes. . . . The beneficiary or prospective beneficiary acquires no interest in the fund itself."

Insurance companies, of course, are required by law to 304 MORLEY CASSIDY charge premiums ample to cover the benefits promised, and give a binding contract with firmly established rights. Many people in the insurance field who deal di rectly with the public and know firsthand how the pub lic interprets Social Security language have long been vexed by the loose use of insurance terminology. Some highly-regarded actuaries, too, are horrified by the pre tense that Social Security contributions are scientifically calculated, as with genuine insurance, to cover the prom ised benefits. Albert C. Adams of Philadelphia, past president of the National Association of Life Underwriters and chair man since 1952 of the Association's Social Security com mittee, has long been a leader in the fight to insist that the government stop the improper use of language in referring to the Social Security program, and expects to redouble his efforts in the light of the Supreme Court's clear decision. ' HIn the business community," he says, "truth in ad vertising is enforced to permit the public fairly to make up its collective mind as to the wisdom. of patronizing the advertiser.

"In governmental matters, truth in· advertising will likewise permit the public fairly to make up its mind as to the wisdom of retaining or expanding, or restrict ing, existing legislation. It is as patently unfair for a governmental agency to expand on the basis of false and misleading advertising as it is for a business competitor to expand on the same s6rt of misrepresentations."