TO:John Snow, Treasury Secretary
I am asking you to work up a legislative proposal that I wish to be called Livelihood Insurance. We must get this right. Karl says this will make up for our problems with Social Security reform. This title will get them enthused. I want to announce it this fall.
Livelihood Insurance will sweep away the nation's antiquated workers' compensation and unemployment compensation programs. We will eliminate almost all of the current Social Security Disability Insurance system. We will cut back on doubtful job training programs. We will toss out these rusted buckets and replace them with private, federally regulated, individual Livelihood Insurance fromgraduation to the first day of Social Security benefits eligibility or 70 years of age, whichever comes later.
Upon high-school graduation and subsequent milestones, Americans will receive a 12-year-term, renewable, high-deductible policy covering all income loss from illness, injuries or involuntary unemployment. The deductible's size and benefits package will be adjusted for education and income level.
Next, I want this program to include voluntary career changes. This country needs more 35-year-old salespeople turning to nursing, more 45-year-old nurses taking up teaching and more 55-year-old teachers entering banking.
That Yale brainiac Robert Shiller tells me you can write limited insurance for career changes that hedges against people deciding their next career is collecting seashells on Sanibel Island.
Today's worker needs to embrace the three R's: repair, reorient and re-educate on your own, to your own vision. But there is too much government bureaucracy and too much insurance to do anything but sit and wait for checks.
Workers' comp systems continue to define work-injury problems as they were in 1905. The huffing sound you hear out there is the constant effort spent blowing air into this punctured balloon. The 2005 worker faces far less pure work injury risk, but has a much higher income loss risk from personal conditions like bad backs and obesity.
The same over-insurance hazard and bureaucracy happens in unemployment insurance, and big time with SSDI. I'll send you some PowerPoints showing how for every dollar of income-loss benefits that workers get, another dollar is siphoned off in overhead.
Use the following ideas to fund the plan. Take what employers pay now in workers' comp and unemployment insurance and redirect it into individual tax-sheltered insurance accounts. Let insurers like Travelers and UnumProvident manage these policies. Make sure that initial flows come with at least marginal upticks in wage compensation so that workers can see pocketbook gains in the first year. Eliminating billions in overhead should give you a lot of money to work with.
Figure out how these new insurance accounts work with health savings accounts, and our planned Social Security private savings accounts. The theme here is "100 Million Insurance Companies: One Per Household."
Finally, we want to thank the Democrats for letting us steal their societal safety net mantle. So let's reheat educational reform by asking Ted Kennedy to sponsor a midlife education option called, "No 40-Somethings Dumber Than Their Kid."
Just be careful about overcommitting federal dollars.
is the workers' comp columnist for Risk & Insurance®.
September 1, 2005
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