Social Security

Colombia Table of Contents

Social security in Colombia, as in most of Latin America, developed in response to various pressure groups. Like most economic benefits in Colombia, social security came first to those groups that had political and economic strength. The military formed the first health security program in 1843, followed by other privileged public sector employee groups, notably members of Congress and the judiciary. Industrial laborers and other private sector workers attained basic coverage in 1946, but many others were still without any type of health or income security benefit in the late 1980s.

The social security system in the late 1980s was divided into three types of programs. The private sector, including both bluecollar workers and management, was covered in part by the ISS, which included 70 percent of insured workers. The public sector program covered 7 percent of insured employees nationwide and was administered by Cajanal. The remaining 23 percent of covered private workers belonged to one of 300 small insurance funds operating at the national, departmental, or municipal levels.

The social security program comprised three types of coverage: health insurance provided for medical and hospital coverage; the pension system made disability, old age, and death payments; and the family allowance program granted income maintenance for families earning substandard salaries. The family allowance program was the only standardized insurance scheme in the social security system. Health coverage and pensions, by contrast, varied significantly among public sector employees, workers covered by the ISS, and employees belonging to smaller funds.

Public employee benefits far exceeded those of private sector workers. Government workers could retire ten years earlier than private workers, and their pensions averaged 66 percent higher than those paid to members of the ISS. The military was an extreme example of this inequity; their pensions surpassed private worker retirement annuities by 150 percent. Government workers also enjoyed superior health facilities and benefits, as compared with workers in the private sector.

Insurance premium payments, although similar in form among the various providers, were as inequitable as the benefits received. In all cases, social security was financed by employee and employer contributions, as well as state subsidies. Private coverage through the ISS required a joint contribution by employee and employer of between 15 and 20 percent of the premium, and an additional 4 percent contribution was made by the employer for the family allowances fund. The lowest premiums paid, by contrast, were those of the public sector Cajanal program, in which workers contributed between 4 and 12 percent of the premiums and health and pension funds were fully subsidized by the state.

In addition to the fragmented, inequitable payment and benefits programs, the social security system's greatest failing was its low coverage of the population. Colombia ranked thirteenth among nineteen Latin American countries in social security coverage of the population; only 16 percent of the population was covered by a social insurance fund in 1985. Moreover, the programs failed to cover the neediest members of society, including women, children, and low-income male workers.

The social security system was also one of the most expensive in Latin America. In 1984 approximately 2.6 percent of GDP went to health care and pension programs. The World Bank estimated that extension of coverage at that level to the entire population would require the equivalent of 23 percent of GDP. Furthermore, state subsidization of public programs, particularly Cajanal, was excessive and varied from 60 percent to nearly 90 percent of the costs. According to experts, Cajanal operated an intolerably large deficit in the mid-1980s. The lack of a coordinated, consistent management and administrative system was largely responsible for many of these cost overruns, as well as the high level of premiums paid by the state.

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Source: U.S. Library of Congress