in the eyes of the public. Moreover, the loss would mean fixed costs spread over a smaller number of elements and hence increasing the cost of other types of insurance.

Further, many carriers have developed reputations for prompt, courteous and efficient handling of claims, claim cost control procedures, and efficiency of administration. These reputations have been hard-earned and are an important part of their marketing programs. Meanwhile, customer satisfaction with medical care insurance leads to the opportunity to sell other products and services. The loss of the medical care line would in many instances mean a loss of entree into other lines. It would also involve considerable dislocation costs.

For example, the lives of some 500,000 insurance employees and agents would be disrupted.

Further dislocations would be caused by private insurer needs to find other uses for assets such as buildings and electronic data processing equipment now devoted to administering health insurance.

Finally, the nation's insurance companies want to retain their health insurance business. If a government monopoly of medical care financing is proposed to solve all of the ills of that industry, then the same approach looms as a threatening possibility in life insurance, pension plans, disability insurance, and property and casualty insurance, as well as other industries.

The fallout would also be felt by state and local governments deprived of revenue from various forms of income and wage taxes, property taxes, and premium taxes. These losses would have to be met by states, many already financially hard pressed, by taxing their economies further or by appealing to the Federal government for assistance.

In addition, a government program would lose employer interest in cooperating with insurers in claim cost control. This would be undesirable in view of the substantial savings that are possible when insurer and employer financial interests in claim control are preserved.

Other Problems Created by

a Government-Run Program

A prime problem with Federal financing of health care delivery is the strain placed on the Federal budget process. Yet another claim would be added to existing demands on limited public-sector resources, reducing public funds available for other social priorities. As it is, governments at all levels are spending well over $40 billion a year for health

care. The addition of massive outlays for an all-Federal program would further complicate the government's task of fiscal management.

A significant risk of inflation would accompany Federal financing in two ways. First is the risk of accelerated general inflation caused by the Federal budget strains. Second is the inflation in medical care costs caused when the Federal program goes into operation without any phasing in, thereby creating new imbalances between demand and supply of medical resources. Recent experience with Social Security and Medicare gives little hope that these inflationary effects can be avoided.

Moreover, the Social Security system itself has serious financing problems, with its trust funds facing deficits in the years ahead. Sharply higher taxes are required simply to meet the existing demands on Social Security, let alone finance a national health care plan.

Nor does the system have the present capacity to take on a program of such scope as administration of the complex health care financing needs of some 215 million Americans.

A federally dominated program, with its increasing centralization of information, monetary power and economic decision-making in the public sector, also carries increased risks of diminution of personal freedom and government abuse of power. Economic power would shift from the marketplace to a government bureaucracy whose decisions would be difficult for the public to influence.

Conclusion

Health insurers recognize that there are problems in the health care delivery and financing systems whose solutions cannot be achieved by individual private enterprises working alone. The health insurance business welcomes the assistance of governmental and quasi-governmental agencies in such areas as health care facilities planning and control of provider charges. The aid of the public sector is also needed for appropriate regulation of the insurance business, and in making health care affordable and available to all as well as permitting private insurers to spread internally the risk of those previously considered uninsurable. However, essentially total government control of health care financing would aggravate, not solve, the nation's present problems-in fact, it would lead to new ones. Consequently, private health insurers are strongly committed to addressing these problems within the pluralistic system.

Reference

1. Fredrick E. Rathgeber, Statement of the Health Insurance Association of America, American Life Insurance Association, Life Insurers Conference, Health Subcommittee of the Ways and Means Committee, U.S. House of Representatives, November 7, 1975.

II. THE ROLE OF GOVERNMENT IN

HEALTH CARE FINANCING

To achieve a national health insurance program in which the experience of insurers may be fully utilized in underwriting and administration, the government must take steps to assure that:

1. All Americans have adequate health insurance coverage available to them,

2. Competition is enhanced, and,

3. The cost of providing quality health care to all is not increased through discriminatory charging practices by the providers of services.

To this end, the government should establish minimum standards for comprehensive health insurance benefits. In addition to increasing the adequacy of private coverage, minimum standards should reduce the consumer confusion that currently arises from competition in the small group and individual health insurance market on the basis of a myriad of benefit packages.

Further, though many employers pay the total premium for their employees' health plans, provision should be made under any comprehensive national plan to ensure that employers do not have to bear a heavier premium burden than they can afford. On the other hand, the only employers who should receive a 100% tax reduction for the cost of their plan are those with a health insurance program providing the Federal minimum standard benefits.

The individual's premium contribution must also be reasonable. This could be accomplished under Federal minimum standards by stipulating that an employee would not have to contribute more than a certain percentage of his wages from the preceding calendar month. The employee would then receive a 100% Federal tax deduction for his yearly contributions.

To assure the reasonableness of premiums, any individual policy form and rate to be charged should be required to be filed with the long-established state insurance authority in the state of occupancy or issuance. If the proposed premium is unreasonable in relation to the benefits offered, the policy could then be disapproved.

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The contribution required of individuals enrolled in a state-pool plan for the near-poor should be based on the ability of the individual or the family to pay, and periodically adjusted to keep pace with changes in the Cost of Living Index. Any individual or family who is a "Federal cash recipient" should not be required to make any contribution for coverage.

The government should continue to enforce anti-trust laws to prevent anticompetitive or monopolistic practices. However, in order to implement a comprehensive national health insurance program of the type supported by the insurance business, it should grant anti-trust exemptions to insurers for the specific purpose of (a) organizing and operating regional reinsurance mechanisms to provide standard benefits for highrisk individuals or small groups, and (b) collaboration on governmentsanctioned health care cost control efforts.

Providing adequate health insurance for people considered "medically uninsurable" is one of the serious problems confronting the insurance business. Proper exemptions from anti-trust legislation would enable insurers to resolve this problem by establishing facilities or pooling arrangements within each state or region to underwrite or reinsure the government-set minimum standard health care benefits for uninsurable individuals and small groups. Regulation of this facility would be the responsibility of the state insurance commissioner or appropriate authority. Premiums would be paid by the uninsurables who elect the plan, with the health insurance business assuming the underwriting risks.

To set in motion the coverage of uninsurables, the state's insurance commissioner or insurance authority would name an administering carrier to operate the facility. All insurers and any self-insured plans within the state would be required to join in the reinsurance agreement.

Similar steps would be necessary to set up and operate state pools to provide private coverage for the poor and near-poor. In addition, government would be responsible for providing these persons with premium subsidies related to their income.

On the question of effectively exercising health care cost control measures, the governmental bodies should recognize that the health insurance business has never had any legislative relief from anti-trust legislation so that insurers could act in concert to try to reduce costs charged by institutions or providers. This in the face of allegations by government and private bodies of insurer failure to take action in this area.

Accordingly, with the appropriate legislative relief, it would be possible to do something about discrimination in health institutions' charging practices which is one of the prime causes of higher health costs. In addition, each state should create a State Health Care Institution Cost Com

mission. This commission would be designated by the governor to review annually the proposed charges of all health care institutions within the state. Illustrative of such a mechanism is the Connecticut Commission on Hospitals and Health Care.

For a commission to perform effectively, all health care institutions would have to utilize a standard method of cost reporting. Following receipt and review of the health institutions' proposed charges, the commission would prospectively approve all patient charges, assuring in advance their reasonableness in relation to the cost of effectively providing necessary services.

Greater scrutiny must also be given to fees charged by private practitioners. To assure that benefits paid by all qualified carriers are based on a reasonable charge for services rendered, any fee which exceeds guidelines established by qualified physicians should be reviewed by a Professional Standards Review Organization (PSRO). This can be accomplished by expansion of Part B of Title XI of the Social Security Act to require that PSROs are set up for review of services rendered by private practitioners, regardless of the payor of benefits.

To be certain all carriers participating in national health insurance have adequate financial and administrative resources, government guidelines should be established setting forth the minimum requirements for involvement. It is also important that the existing apparatus for state insurance regulation be used to administer Federal guidelines.

So that government laws and regulations will not discriminate against qualified carriers, any one type of health insurer should be prohibited from receiving discounts from providers that other carriers do not receive. Moreover, in those states where all carriers are in a reinsuring or pooling arrangement, any taxes should be applied equally to each.

One cautionary note should be added. If the government were to mandate burdensome regulations, competition among carriers, with all of the accruing benefits, would be stifled. Given Federal cooperation as outlined above, however, the private health insurance business believes that through competitive efforts, reinforced by government surveillance, it should be able to respond efficiently and innovatively to buyer needs with freedom of choice preserved.