TERMINATION OF HEALTH INSURANCE

An important consideration in evaluating health insurance for the elderly is an understanding of the extent to which older people, for one reason or another, drop their policies or have them canceled or terminated. In response to a question at our hearings the Health Insurance Association of America stated that it had no information on this vital question.

However, through the cooperation of the Continental Casualty Co. and Bankers Life & Casualty Co., the subcommittee does have the benefit of meaningful data (see app. A) shedding light on the degree to which the elderly, voluntarily or involuntarily, lose the protection of health insurance.

The data in appendix A indicate that, even allowing for attrition by reason of death, the turnover among older policyholders is extremely high. In Continental Casualty's "Golden 65" program, for example, 80,000 policies (not necessarily that many people, for some may have held more than 1 policy) were dropped during 1963 alone. Bankers Life & Casualty reported that of 76,764 policies issued during 1961 for its special plan for the elderly, only 41,130 were still in force at the end of 1963-a loss of 46 percent. Of 77,631 similar policies issued during 1962, only 48,446 were still in effect at the end of 1963-a drop of 38 percent. Many of these terminations are attributable to the death of the policyholder. But, based upon the hundreds of letters received by the subcommittee, many more undoubtedly dropped their protection because of an inability to continue premium payments.

None of these policyholders who dropped their coverage was forced to do so because of cancellation or termination. The policies for which data were shown are guaranteed renewable. However, both companies also issue other types of policies where they can and do exercise their option to cancel or terminate coverage. Continental Casualty advised the subcommittee that during the years 1961 through 1963 more than 9,000 people ages 65 and over had their health insurance policies either canceled or not renewed by the company. Thousands of other older persons who had filed claims were either required to agree to waive future benefits for certain illnesses or accept substandard coverage as preconditions to the continuation of their policies.

Detailed data similar to that furnished by Continental Casualty were not provided to the subcommittee by either Bankers Life & Casualty or Mutual of Omaha. However, careful study of the "Post-Claims Underwriting Manual" of Bankers Life indicates that the practices of that company with regard to cancellation, termination, etc., of individual health insurance would be comparable to those of Continental Casualty. Indeed, all three companies offer essentially the same types of individual health policies to the elderly. It can be assumed that because of competitive circumstances, their underwriting procedures are similar.

But the older person may not only be required to take reduced benefits and/or pay higher premiums after he has been issued a policy. He may very well have had to accept such conditions before being initially issued a health insurance policy. Continental Casualty, in its response to the questionnaire of the subcommittee reported that

37 percent, or more than one-third, of the 98,431 applications for individual health insurance, received during the period 1961 through 1963 from people 65 and over, were waivered and/or rated by the company. That is, the applicants had to agree to accept lower benefits and/or higher premiums than those standard to the policy applied for. In contrast to this, Continental Casualty waivered or rated only 14 percent of the applications for individual coverage received from persons under age 65 during the same period, demonstrating the extra load carried by older people.

No doubt the companies had sound business or actuarial reasons for canceling, terminating, or increasing the cost of insurance protection to people over age 65. But justification of these practices in terms of the aged being poor insurance risks does not solve the problems of those people who find themselves forced to take limited coverage or, even, as we have indicated, suffer complete loss of their health insurance at a time when their health insurance needs are greatest.

CHAPTER II

ADEQUACY OF HOSPITAL INSURANCE FOR THE ELDERLY

The subcommittee has found that only one in four of our 18 million older Americans hold hospital insurance which can be considered as reasonably adequate under acceptable standards of quality. But even those people who are now reasonably well protected will soon find their hospital insurance covering smaller and smaller proportions of their bills due to the steadily rising costs of hospital care. results of this will be either a reduction in benefits, an increase in premiums, or both.

SIGNIFICANCE OF HOSPITAL INSURANCE

The

Within the spectrum of medical expense, the costs of hospital care have the greatest impact upon the elderly. The older person requiring hospitalization incurs total annual medical costs which are 5 to 10 times as great as those of the individual who has not been in a hospital. One-half of the total annual medical expenses of the person who needs hospital care are directly attributable to his hospital bills.

As we have noted, the Bureau of the Census recently undertook an extensive survey of the aged for the Social Security Administration. The survey revealed that where one or both spouses had been hospitalized during the year 1962, aged couples had total medical expenses averaging $1,200-of which $600 was accounted for by hospital bills. Comparable figures for the nonmarried elderly were $1,040 and $540. Thus, some one-half of the total medical expenses of an older person who requires hospitalization are for items outside of the hospital. Nonhospital medical expenses-doctors' fees, prescribed drugs, dental fees, private nursing, and so forth-which comprise such a substantial portion of total medical costs, are precisely those areas which are only partially covered or not covered at all by health insurance. Obviously, then, unless most, or all, of his hospital bill is covered by insurance, the older person cannot possibly cope with his out-ofhospital medical costs without seriously depleting or exhausting his already limited financial resources. Given such a situation, it is readily apparent why one-third of the older people applying for public relief programs cite problems of health as the principal reason for application.

Table I indicates the extent to which the need for hospitalization affects the total medical costs of an older person in comparison with the dramatically lower medical costs of the aged who do not require hospital care during the year. Table II offers data concerning the costs of short-term hospital care to older people who were hospitalized during 1962. Both of these tables vividly demonstrate that the older person's fear of hospitalization as a threat to his economic independence is well founded.

TABLE I.-Medical costs incurred and hospitalization status of persons 65 and over: Percentage distribution of aged by amount of costs, hospitalization status, marital status, and sex, 1962

1 Includes costs met by health insurance but excludes the premium of the insurance. In general and short-stay special hospitals. In the case of couples, 1 or both members were hospitalized. Excludes persons in nursing homes and long-stay hospitals.

Units reporting total medical costs of known amounts without any care provided by Government or private voluntary agencies; units assuming responsibility for payment out of their own resources, including health insurance, or with the help of relatives.

Units receiving some or all care provided through Government or private voluntary agencies, or supplied by a doctor or hospital with no bill rendered.

Source: "Medical Care Costs for the Aged," an article based upon 1963 Survey of the Aged which will appear in July 1964 issue of the Social Security Bulletin.

TABLE II.-Short-stay hospital costs incurred by persons 65 and over. Percentage distribution of aged by amount of costs, marital status, and sex, 1962.

1 In general and short-stay special hospitals; includes costs met by insurance, excludes premium costs. 2 With one or both members hospitalized.

Units reporting total medical costs of known amounts without any care provided by government or private voluntary agencies; units assuming responsibility for payment out of their own resources, including health insurance or with the help of relatives.

4 Units receiving some or all care provided through government or private voluntary agencies, or supplied by a doctor or hospital with no bill rendered.

Source: "Medical Care Costs for the Aged," an article based upon 1963 Survey of the Aged which will appear in July 1964 issue of the Social Security Bulletin.

STANDARD OF ADEQUACY OF HOSPITAL INSURANCE

Perhaps the best yardstick for measuring the adequacy of hospital insurance is that applied by the American Hospital Association in its "approval" program for Blue Cross plans. In order to receive recognition as an "approved" Blue Cross plan, the plan's insurance contracts must cover "not less than 75 percent of the total amount billed for usual and customary hospital services rendered on an inpatient basis in multiple-bed accommodations."

A leader of an important segment of the commercial health insurance industry also supported use of the "75 percent or more" yardstick. In his testimony before this subcommittee on April 28, 1964, Mr. Morton Miller, president of the "New York 65" health insurance program (and vice president of the Equitable Life Assurance Society), stated that the "New York 65" plan was designed and intended to cover "about 75 percent of the hospital costs within the limits of the benefits provided."

Other representatives of the commercial health insurance companies and their industry association were unwilling to define concretely an adequate hospital insurance policy. They pointed instead to the types of policies available. On this point, Senator Muskie commented: "I am not talking about what is available; I am talking about what they have."