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These policies provide benefits, ranging from $5 to $25, toward hospital daily room-and-board charges with additional benefits for extra hospital expenses and surgical operations. Policy benefits are provided for as long as 365 days before 65, with reduced benefits and benefit periods after the policyholder reaches his 65th birthday.

Many of these fully paid-up at 65 policies offer additional benefits for maternity, emergency accidents, and in-hospital doctor visits. Some of these policies have optional "deductible" amounts which can be selected by the applicant. The maximum age range for applicants is between 55 and 60 years.

The selected yearly premium range noted above for the programs listed was calculated for a man of 35 years of age at maximum benefits under each plan.

GUARANTEED RENEWABLE LIFETIME HOSPITAL-SURGICAL EXPENSE PLANS FULLY PAID UP AT 65

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toward medical charges above the "deductible" amount and up to the maximum benefits provided - ranging from $5,000 to $25,000. Some of these policies have specified benefit amounts according to particular types of medical expenses.

Under these policies, too, the insured person has sole right of termination, with the insurance company reserving the right to adjust premiums by policyholder class.

Benefits under these policies may be continued after 65 as formerly provided by the policy, or on a reduced basis for the insured person's lifetime.

The selected yearly premium range noted above for the plans listed has been calculated for a man of 45, with a "deductible" amount of $500, and a maximum benefit amount of $7,500 or $10,000.

GUARANTEED RENEWABLE MAJOR MEDICAL PLANS WITH
LIFETIME COVERAGE OR EXTENDED BENEFITS BEYOND 65

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*Restoration privilege-Automatic $500 restoration to re-establish original maximum each calendar year no benefits paid; Restoration on satisfactory evidence of insurability of indemnity paid when maximum benefit is reduced to an amount less than 75%. **All cause deductible for two-year benefit period; Deductible determined by income.

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"Aggregate maximum benefit all accident and illness after 65; 75 and after-aggregate maximum benefit is $1,000 or the maximum benefit remaining

at 75 whichever is the lesser.

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*With Premium Paid On Annual Basis, Maximum Benefit Increased 10% And Co-insurance Decreased To 20%.

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**$1,000 fully paid up or the difference between maximum benefit and the benefits paid after 65 whichever is the lesser

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Mr. CURTIS. When we single out-and of course we do for interrogation, as Congressman King has a particular plan like Continental senior citizens plan, that is one plan that the people can have. The variety of the programs is one of the great things about the private sector, in my judgment, because it enables people to tailor the program they take to the needs that they have. One older person will have a different problem than another.

Incidentally, the Continental senior citizens plan is not what is commonly referred to as a catastrophic health insurance plan.

Mr. RIETZ. It is a basic plan, but there is a supplement to add a catastrophic rider. And the additional catastrophic feature does not care for other than the catastrophic hospital expenses; not the surgeon's or the medical physician's expenses.

Mr. CURTIS. That is what I wanted to bring out. One of the innovations, I think-if I make a mistake, I want you to correct me one of the innovations in health insurance has been the catastrophic policy. Am I right in that?

Mr. RIETZ. You are entirely right, and it has grown very rapidly in acceptance.

Mr. CURTIS. And it is in my judgment something that we all need, unless we are extremely wealthy. I know I certainly can use that, and all of us are subject to a catastrophic illness. And yet I think I am correct here the incidence of medical catastrophe, like a stroke, or heart, with prolonged illness the incidence of that is very slight; but because it is slight, it lends itself beautifully to the insurance sphere.

Mr. RIETZ. You are entirely correct.

Mr. CURTIS. And it is also my understanding that because of this, too, your premium can be relatively low, even though your coverage would be as much as $10,000.

Mr. RIETZ. This is true. And, of course, it is far more economic to administer. Now, we made an analysis recently in our own company of hospital and surgical plans, and we were amazed at the number of claims we were paying for dollar amounts of less than $5, because a youngster got bumped with a baseball bat and went to the doctor, and they took a few stitches. This is tremendously expensive to administer in relation to the claim size. When you go to the major medical and catastrophic concepts, you eliminate these claims; hence you reduce your administrative costs substantially in relation to the benefits you pay, and you pay for the things that really hurt the individual. It would really be very difficult in the family's financial pattern.

Mr. CURTIS. You can get a policy that covers the first dollar lost, or you can take a $50 deductible or a $100 deductible. And the premium for the $50 deductible is so much less than the first dollar, because of the very point that you are making, the administrative cost, and somewhat over utilization in the health field.

I was a little disappointed in the testimony of, I believe, the Blue Cross people, who said that they were not in favor of the deductible policy under Blue Cross, but preferred the first dollar. My observation is that it is not that you would say you have to have the deductible, but you give the people their choice. If they want to take the first dollar, they can at a higher premium, or if they want to take a $25 deductible, take that at a considerably less premium.

Mr. RIETZ. We in my organization, my own company and many other companies in the individual field, now, issue all of our hospital policies as guaranteed renewable, and we give the buyer the choice of buying a first-dollar benefit or of taking a fixed deductible amount, and he can choose two levels, and his premiums are down substantially. Mr. CURTIS. One final point. It has been my observation that we have two problems that face us in the field of health care for the aged. And I think it is very important to separate the two. One is a present problem, of our present aged, who arrived at this age before health insurance really existed in our society. And I think, no question about it, people over age 65 as an age group have higher medical costs than any other age group. So when we try to grapple with the problem that exists today, where there has been no insurance in the past, we are confronted with something that we hope will not exist in the future.

The second problem is our long-range program; so that people when they reach 65 in the future will not be reaching 65 without health insurance. And that leads me to just one very basic point, on the prepayment program of health insurance. And I believe that policies are now being written that do permit prepayment in the early years for the future.

Am I correct in that?

Mr. RIETZ. You are entirely correct. There are many policies being written individually that become paid up at age 65, with fixed benefit guarantee and no further premiums. The continuation of retirees under group programs, sometimes with minor contributions by the individuals, sometimes without any contribution-In our own company, for example, we have what we think is a fair pension plan. There are many pension plans that are more generous in dollar amount. We continue a major medical plan for both our retired employee and his wife. We expect them to pay $1.50 per month per person for a quite liberal $50 deductible major medical benefit after retirement. We pay the balance of the cost of this, and the balance is much more than the $18 per individual that these people pay. And I think the fact that these are coming in in greater prominence will be accentuated, because we all live in a competitive employment market, and employee benefits get to be important; so that once you have sold the concept of retiree benefits to a reasonable segment of your group cases-and I am not talking about one company; I am talking about the country as a whole you will find your extension will be pretty rapid.

Mr. CURTIS. I am happy to see that, too, because it does make sense that we ought to be prepaying for the future. And also when your actuarial tables get into this thing, a person age 30 takes out a health care of this nature, and he will pay for 35 years, during his working years, and then, when his retirement is paid up, the premiums then are not burdensome. And also he gets the advantage, along with the other people, of the actuarial help. Not all of those people will be there to pick up the health care after 65.

Mr. RIETZ. I would present to you that if what Mr. Dodson presented is merely an idea, there is a whole area in the field of tax incentives that might be applicable to this prepayment feature, and the present law might well stand some specific clarification. I cannot tell you any more of the details, but here is an area of prepayment potential on this prepayment thing.

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