Summary of State legislation respecting formation of health plans-Continued

51 percent.

1 Part.

50 percent plus in area.

11 Doctors, 1945; lay, 1947.

13 51 percent in area.

SUMMARY

1. RESTRICTIVE ACTS: (TOTAL 26)

2. OPEN ACTS: (TOTAL 9)

STATEMENT ON S. 3114 BY AMERICAN MUTUAL ALLIANCE, CHICAGO, ILL.

The American Mutual Alliance is an association of 113 mutual insurance companies. We have an interest in the subject matter of S. 3114 because a number of our mutual casualty members write accident and health insurance. The stated purposes of S. 3114 are laudable inasfar as they are addressed to the encouragement and stimulation of private initiative in making good and comprehensive health services generally accessible on reasonable terms, through adequate health service prepayment plans, to the maximum number of people. Nevertheless, there is no need for a program of Federal reinsurance of accident and health insurance plans. The amount at risk under most of such plans can be assumed readily by the insurers without danger to their financial structure. In those instances where reinsurance is necessary or desirable, it is presently available from private sources. It is therefore entirely unnecessary for the Federal Government to be put to the expense which enactment of S. 3114 would involve. While reinsurance operations under the bill are designed to be selfsustaining, payment of administrative expenses for the first 5 years are to be paid from general revenue. We understand an estimate has been made of $1,250,000 for such expenses for the first year. This may well be too low intially, and the figure is almost certain to increase for subsequent years.

We do not think enactment of this measure will accomplish its stated purposes. Voluntary health insurance has had a very rapid growth in recent years. If this rate of growth continues, and there is no opinion or evidence that it will not, nearly all of the country's population will soon have health-insurance protection if they are able to pay for it. If they are not, enactment of S. 3114 will not enable them to purchase coverage. Taking care of those who find themselves in this unfortunate position is not an insurance problem but one of public assistance, which should be dealt with at a local level. For those who can purchase coverage, increasingly broad protection is available. Insurers are experimenting constantly in new areas. The incentive to do so comes from free and active competition among them, and S. 3114 is not needed and would not serve any useful purpose in this regard.

Under S. 3114 Federal reinsurance of health-insurance plans would be available only if not obtainable from other sources. Due to the existence of private reinsurance facilities to the full extent necessary or desirable, we believe the program would not be used to any appreciable degree. We further believe that therein lies a road and present danger to private enterprise. Once S. 3114 is enacted and Federal reinsurance facilities are set up but not used, there is a likelihood that an effort would be made to remove the restriction against competition with private insurers. Once Government is in competition with private enterprise, eventual monopoly by it is a threat which cannot be disregarded. To the extent that Federal reinsurance was availed of, S. 3114 would put the United States into a new area of insurance business. Not only does S. 3114 put the Federal Government into competition with private insurance, it also provides for Federal regulation of the latter. In order to qualify a particular health-insurance plan for reinsurance, all details of the contract except rates (and including them under certain circumstances) would have to be approved by the Secretary. The American Mutual Alliance is of the view that the insurance supervisory officials of the respective States are the proper persons to regulate the writing of insurance.

The Congress is already on record as stating its general policy that continued regulation of the business of insurance by the States is in the public interest. Public Law 15 of the 79th Congress, 1st session, enacted in 1945, enunciates this policy as follows:

"The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business."

That policy should not now be disturbed through the instrumentality of a bill which would directly inject regulatory powers of the Federal Government into the business of accident and health insurance.

A further objection to S. 3114 is the broad powers placed by it in the hands of the Secretary of Health, Education, and Welfare. While not attempting to resolve the question of whether or not the bill is unconstitutional, we believe that the authority which it vests in the Secretary is too great.

In short, we believe S 3114 is neither necessary nor desirable legislation. We therefore respectfully urge that it not be enacted.