The National Social Security Fund, explained

BEIRUT — In 2014, Claudine, an administrator at a private school, went to her gynecologist for a regular checkup and paid the LL200,000 fee ($133 at the time), expecting as usual to be reimbursed by social security.

Like some 1.6 million other employees and their families, Claudine is covered by the National Social Security Fund — Lebanon’s largest employment-based provider of social services.

Six years later, however, she has still not received payment, a typical tale of those who deal with the one of the most multifaceted and complex bureaucracies in Lebanon.

What is the NSSF?

The NSSF was founded in 1963 under the (then joint) Ministry of Labor and Social Affairs via the Lebanese Social Security Law, with the aim of creating universal insurance. It was considered one of the major reforms accomplished by then-President Fouad Chehab, who appointed the team that was tasked with creating the fund.

Though it enjoys financial and administrative independence from the state, the NSSF is considered a public institution. It is primarily funded by the contributions of private companies on behalf of their employees, but under the social security law, the government should also subsidize health care costs.

A board of 26 members oversees the NSSF, made up of 10 members representing workers who are elected by the General Confederation of Lebanese Workers, 10 representing employees who are elected through syndicates and six who are nominated by the government. Since 2002, the NSSF has been headed by Director-General Mohammad Karaki, who manages the fund’s offices across the country.

Like most state institutions in Lebanon, leadership positions in the NSSF are divided up along sectarian lines and demands by political leaders have in the past held up nominations to the NSSF.

While no stipulations for sectarian representation are written into law, the director-general is usually chosen from the Shiite community and the chair of the board is traditionally Maronite. The remaining board members are distributed among the sects.

What is covered?

The fund is split into three main branches: the sickness and maternity fund, the end-of-service indemnity fund and the family allowances fund. Total NSSF expenditures for all three branches totaled LL2.3 trillion in 2019, according to Karaki.

The original law establishing the NSSF also included a workplace accident and occupational hazard branch, but this was never opened in practice.

Sickness and maternity: The NSSF covers 90 percent of hospital care as a direct payment to hospitals and reimburses patients for 95 percent of cancer drugs and 80 percent of all other drugs and services.

Treatment is typically covered for up to 26 weeks. However, for chronic, long-term conditions such as heart disease and cancer, the coverage is not limited by time.

End-of-service indemnity: The end-of-service indemnity primarily acts as a form of pension fund, paid in a lump sum once a beneficiary decides to retire, optionally at 60 and obligatorily at 64.

The sum is calculated by the employee’s final monthly salary multiplied by the number of years of service up to 20 years, and 1.5 months of final salary multiplied by the total number of years beyond 20 years.

For example, an employee with a final salary of LL2.5 million who had worked for 23 years would receive a lump sum of LL61.25 million upon retirement (around $40,500 at the official exchange rate or $9,000 at a market rate of LL6,800 to the dollar, with the true purchasing power somewhere in between).

If an employee decides to permanently leave their company at any age, they can benefit from a reduced payment that increases with every five years of service.

Family allowances: The NSSF provides beneficiaries, in addition to sick or disabled persons unable to work, with a monthly payment to cover child expenses of LL33,000 per child up to a maximum of five children, and a monthly LL60,000 payment for their spouse.

Family benefits discriminate by gender. Men are allowed to transfer benefits to their wife, as long as she is not employed, whereas a wife cannot extend coverage to her husband unless he is over 60 years old or unable to work due to a disability.

Sluggish bureaucracy

The NSSF is an organization with “critical strategic importance,” said Camille Abousleiman, a former labor minister with the Lebanese Forces, a right-wing Christian party that has fashioned itself as an opposition movement since the Oct. 17 uprising.

But Abousleiman, who nominally oversaw the NSSF while in office, described it as one of the “most poorly managed institutions” he has seen in his career as a minister and international lawyer.

The NSSF is a huge institution that employs 9,000 staff at 38 branches across the country. It is notorious for its inefficiency, sluggish bureaucracy and its failure to fully digitize systems. There have been several pushes toward digitization in the past and some internal systems have been transferred online, but the system remains largely paper-based.

L’Orient Today spoke to several people, who, while wishing to remain anonymous, said they had waited months or even years to receive the money owed to them by the fund, in a lengthy process that requires multiple visits to NSSF offices and pages of paper forms.

Claudine’s husband, a manager at a dairy company, has also been victim to the bureaucracy of the NSSF. On multiple occasions when trying to claim reimbursement for medical treatment, he has waited hours at his local NSSF branch to see a representative, only to be turned away in the early afternoon when employees said, “We’re closed for today, come back another time.”

Who can benefit from the NSSF, and how?

The NSSF covers permanent and seasonally employed workers and their families in Lebanon, in addition to trainees or apprentices and public sector workers not covered by the civil service fund. There are exceptions for certain professions, including writers, artists and municipal workers, the latter of which have their social security expenses covered by the municipality.

Foreign employees in Lebanon are covered by the NSSF only on the basis of reciprocity — that is, if their country would also offer social security benefits to Lebanese workers. But Syrian and Palestinian refugees are excluded from many of the benefits afforded by the fund, even if they pay a contribution via a job in the formal sector.

Lebanese citizens not covered automatically by the NSSF have the option of a voluntary inscription for a monthly fee of LL90,000.

An employer makes a monthly contribution to the NSSF on behalf of every employee: 11 percent of the monthly salary to the sickness and maternity fund, up to a limit of LL2.5 million; 6 percent to the family allowances fund, up to LL1.5 million; and 8.5 percent to the end-of-service indemnity fund, with no limit.

That adds up to a total employer contribution of 25.5 percent, so for an employee with a monthly salary of LL1 million, the employer ends up paying an additional LL255,000 to the NSSF.

The employee automatically pays a contribution worth 3 percent of their salary each month to the sickness and maternity fund.

Financial challenges

The government pays subsidies to the NSSF that cover 25 percent of its total health expenditure. However, it has failed to pay contributions that date back at least five years, according to Chawki Abou Nassif, the NSSF’s financial director.

On Oct. 27, Karaki issued a statement calling on the government to immediately pay its debts, which total around LL4 trillion.

The 2019 state budget law included an article mandating that dues to the NSSF be repaid over the course of the next ten years. The 2020 budget stated that the government’s outstanding dues to the NSSF amounted to LL4.7 trillion.

On Oct. 5, caretaker Finance Minister Ghazi Wazni authorized the payment of LL50 billion to the NSSF, a step Karaki praised at the time for “breaking the deadlock” of nonpayment, meanwhile pointing out that it is only a drop in the ocean in the government’s total debt.

The dues owed by the government are equivalent to around a quarter of the NSSF’s total assets of around LL16 trillion, and pose a significant risk to the fund’s ability to support beneficiaries.

Karaki warned that if the state does not pay its debt by the end of the year, the health care coverage of approximately 1.6 million people would be at risk, in what he described Monday as an unprecedented “social catastrophe.”

The financial strength of the fund has also been threatened by Lebanon’s unprecedented economic crisis and the collapse of the lira.

“The essential problem we are facing is related to financing,” said Abou Nassif, explaining that many employers have been unable to pay their contributions to the fund as they suffer the consequences of Lebanon’s economic slump.

The depreciation of the lira, which has lost around 80 percent of its value against the dollar since fall 2019, is another major threat to the fund’s financial stability.

The majority of the fund’s assets are held in lira, whether in local treasury bills or lira-denominated deposits in Lebanese banks. And while the NSSF’s transactions are in lira, the fund could face serious financial challenges if prices of health care services — mostly still priced at the official LL1,500 rate thanks to subsidies — rose to meet the bank exchange rate of LL3,900 or the market rate, currently around LL7,000.

On Oct. 2, the American University of Beirut Medical Center adjusted the prices of some of its services “whose costs have skyrocketed” to the bank rate of LL3,900. However, the hospital said in a statement that the price hike wouldn’t affect third party providers, including the NSSF.

Those who rely on the NSSF for social security are also severely impacted by the currency crisis as the value of their end-of-service payments and reimbursements has plummeted.

When Claudine first made her LL200,000 claim to the fund in 2014, it was worth $133. Now, it is worth around $30.

“There have been many times when I have wanted that money back, but now I have just given up,” she said. “I would be getting almost nothing.”