The solidarity principle in insurance is the design choice to spread the cost of illness, disability, unemployment, and old age across an entire group based on ability to pay, rather than charging each person according to their individual risk. It is why a healthy 28-year-old and a chronically ill 58-year-old earning the same salary pay identical Social Security and Medicare taxes, and why your Marketplace health plan cannot charge you more for a pre-existing condition. The principle deliberately breaks the link between what you personally cost the system and what you contribute to it.
How Solidarity Differs From Ordinary Insurance Pricing
Private insurance traditionally prices each customer based on their expected claims. A 60-year-old smoker pays more for life insurance than a 25-year-old marathon runner because the insurer expects to pay out sooner. The math is individualized and precise.
Solidarity flips that logic. Contributions are tied to income, not to health status or claims history. The high earner subsidizes the low earner. The healthy worker subsidizes the sick one. The young worker subsidizes the retiree. That cross-subsidy is the point of the system, not a flaw in it. It ensures the people who most need protection are not priced out of getting it.
This only works when participation is mandatory. If healthy, wealthy people could walk away, the remaining pool would skew toward higher-cost members, contributions would rise, and more people would leave. Compulsory membership is what keeps a solidarity system financially stable.
Where You See Solidarity in Your Paycheck
Social Security
Social Security is the clearest American example. Every worker and employer each pays 6.2% of wages toward Old-Age, Survivors, and Disability Insurance, up to a taxable earnings cap of $184,500 in 2026.1Office of the Law Revision Counsel. 26 USC 3101 Rate of Tax2Social Security Administration. Contribution and Benefit Base A worker earning $30,000 pays the same 6.2% rate as one earning $150,000, yet the benefit formula is intentionally tilted: it replaces a larger share of pre-retirement income for low earners than for high earners. That redistribution is solidarity at work.
Medicare
Medicare financing follows the same logic without a cap on taxable earnings. Employees and employers each pay 1.45% of all wages toward Hospital Insurance. High earners pay an additional 0.9% Medicare tax on wages above $200,000 for single filers or $250,000 for married couples filing jointly, with no employer match on that additional amount.3Internal Revenue Service. Topic No. 751 Social Security and Medicare Withholding Rates The funding is progressive, but every beneficiary receives the same hospital coverage regardless of what they paid in.
Unemployment Insurance
Unemployment insurance pools the risk of job loss across the workforce. Employers pay a 6.0% federal tax on the first $7,000 of each employee’s wages under the Federal Unemployment Tax Act, though credits for state contributions typically reduce the effective federal rate to 0.6%.4Internal Revenue Service. Topic No. 759 Form 940 Employers Annual Federal Unemployment Tax Act Return State rates vary. Every employer contributes; any worker who loses a job through no fault of their own can draw temporary benefits.
Solidarity in Private Health Insurance After the ACA
The Affordable Care Act brought solidarity into the private insurance market in a diluted form. Before the ACA, insurers in most states could deny coverage for pre-existing conditions or charge sick applicants dramatically more. The ACA requires all Marketplace plans to cover pre-existing conditions without charging higher premiums based on health status.5HealthCare.gov. Coverage for Pre-existing Conditions
Federal law now limits the factors insurers can use to vary premiums to four: whether the plan covers an individual or a family, the geographic rating area, age, and tobacco use. Age-based variation cannot exceed a 3-to-1 ratio for adults, so the most an insurer can charge a 64-year-old is three times what it charges a 21-year-old for the same plan.6Office of the Law Revision Counsel. 42 USC 300gg Fair Health Insurance Premiums Some states impose tighter restrictions.7Centers for Medicare and Medicaid Services. Market Rating Reforms The individual price is not fully severed from individual characteristics, but the gap is compressed enough that older and sicker applicants can still afford coverage.
The federal individual mandate, which originally enforced participation by penalizing uninsured individuals, had its penalty reduced to $0 starting in 2019. Without a financial consequence for opting out, the ACA relies on subsidies and enrollment incentives to keep healthier people in the pool. A handful of states have enacted their own mandate penalties.
The Three Channels That Move Money Between Groups
Solidarity systems redistribute money through three overlapping channels, and these channels explain why your contributions rarely match what you personally receive.
Health-based transfers. Healthy participants contribute more than they withdraw, and those funds cover the medical costs of people with serious or chronic conditions. In a given year, roughly 5% of the population accounts for about half of all health spending. Without redistribution from the healthy majority, coverage for the sickest members would be financially impossible.
Age-based transfers. Younger workers generally use fewer services and draw no retirement benefits, but their contributions fund the care and pensions of older members. As of 2024, about 2.7 covered workers support each Social Security beneficiary, down from more than 5 workers per beneficiary in the 1960s.8Social Security Administration. Covered Workers and Beneficiaries, 2024 OASDI Trustees Report
Income-based transfers. A worker earning $184,500 contributes far more in absolute dollars to Social Security than one earning $40,000, even though both pay the same percentage rate. Earnings above the $184,500 cap are exempt from Social Security tax, which puts a ceiling on how much any one person subsidizes the pool.2Social Security Administration. Contribution and Benefit Base Medicare has no such ceiling, so its redistribution from high earners to low earners is more pronounced.
What Self-Employed Workers Pay
Employees split the social insurance burden with an employer. Self-employed workers pay both halves. Under the Self-Employment Contributions Act, the combined rate is 12.4% for Social Security and 2.9% for Medicare, totaling 15.3% of net self-employment income. Self-employed workers earning above $200,000 (or $250,000 for married couples filing jointly) also owe the additional 0.9% Medicare tax on the excess.9Office of the Law Revision Counsel. 26 USC 1401 Rate of Tax
To partially offset this double burden, self-employed workers can deduct the employer-equivalent portion of their self-employment tax when calculating adjusted gross income.10Internal Revenue Service. Self-Employment Tax Social Security and Medicare Taxes The deduction does not reduce self-employment tax itself; it lowers income tax. Self-employed workers feel the weight of solidarity contributions more directly than employees do because nothing is hidden on an employer’s side of the ledger.
What Leaving the Pool Actually Costs
The savings a solidarity pool provides become visible the moment someone leaves it. Under federal law, employers with 20 or more employees must offer COBRA continuation coverage to workers who experience a qualifying event like job loss or reduced hours.11Office of the Law Revision Counsel. 29 USC 1161 Plans Must Provide Continuation Coverage to Certain Individuals COBRA lets you keep the same group health plan, but you now pay the full premium (the portion your employer previously covered plus your own share) along with an administrative fee of up to 2%.12U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers
While you were employed, your employer likely paid 70% to 80% of the premium, and the large risk pool kept rates lower than individual market pricing. Under COBRA you bear 102% of the total cost alone. If you qualify for an 11-month disability extension, the premium can jump to 150% of the plan’s cost for those extra months.12U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Employers and Advisers That gap, between what you paid as part of a group and what the same coverage costs when you are on your own, is what solidarity was quietly saving you.
Why the Worker-to-Beneficiary Ratio Matters
Solidarity systems depend on enough contributors to support current beneficiaries. When people live longer, birth rates drop, or a large generation retires at once, the arithmetic gets uncomfortable. The ratio of covered workers to Social Security beneficiaries has fallen from roughly 5-to-1 in the 1960s to about 2.7-to-1 as of 2024.8Social Security Administration. Covered Workers and Beneficiaries, 2024 OASDI Trustees Report Fewer workers funding more retirees means contributions must rise, benefits must shrink, or some combination of the two.
The Social Security Board of Trustees projects that combined trust fund reserves will be depleted by 2034. At that point, incoming payroll taxes would cover about 81% of scheduled benefits.13Social Security Administration. Social Security Board of Trustees Projection for Combined Trust Fund Reserves Depletion does not mean the program disappears. Workers would keep paying in, and benefits would keep going out, but the gap between promised benefits and available revenue would force an automatic reduction unless Congress acts. This is the central tension in any solidarity system: it works well when the contributor base is large relative to the beneficiary population, and it strains when that ratio tightens.