The average age of enrollees during the first enrollment period was 73.5 and during the second enrollment the average age was 73.3. In considering withdrawals from New York 65 it should be borne in mind that in this advanced age group death alone is an important cause of terminations. We estimate that deaths are responsible for about one-half of the terminations. In connection with the ages of the insureds it is interesting to note that the oldest enrollee, who has since passed away, was 106. A recent check showed that 50 of those enrolled were 100 years old or over and 1,966 were between the ages of 90 and 99. New York 65 reserves the right to modify or discontinue the New York 65 program. The coverage of an individual cannot be modified or canceled, nor can his premiums be increased unless similar action is taken for all persons enrolled for the same plan.

ADEQUACY OF COVERAGE

New York 65 desired to provide a reasonable level of benefits in respect to each type of services, and planned to reimburse about 75 percent of the expenses incurred by elderly persons of some means. In designing New York 65 protection we undertook to provide broad coverage in the scope of the medical services covered and in the amount of benefits provided for each type of service. Thus we offered benefits for hospital charges, convalescent nursing home charges, physicians charges in hospital and office, and a wide range of other services and expenses.

A measure of how New York 65 has worked out is given by a study made of 2,440 claims involving hospital charges where the insureds had both basic and major medical protection. The benefits for the expenses of hospital confinement are a daily allowance of $18 for room and board supplemented by a benefit for other hospital charges. This study showed that the average daily charge for hospital room and board and other hospital services was $40.44 and that New York 65 paid an average of $31.43. Thus New York 65 paid 78 percent of the total of the daily hospital costs.

New York 65's surgical and inhospital medical allowances were based upon the prevailing Blue Shield schedules used in different areas of the State for families with incomes of less than $6,000 annually. It was anticipated that in the great majority of cases such allowances would cover the major part of the charges of the services since most of the elderly insured under the plan are in this income group.

The allowance toward the cost of other medical services, including such items as drugs and medicines, private duty nursing, X-ray and laboratory fees, blood and blood plasma, oxygen, etc., is approximately 80 percent of such charges that are inexcess of the deductible. All of these allowances under New York 65 are, of course, subject to the overall maximum specified in the plan.

PROGRAM STILL DEVELOPING

New York 65 is still a developing program. We have been in operation for only 18 months. We are continuing with the help of our member companies and with that of other elements of the insurance industry-nonmember companies and agents and brokers throughout the State and other public spirited groups— to bring information about the advantages of New York 65 protection to more of our senior citizens who stand to benefit from the plan. We are still learning and continuing our efforts to find the most effective and economical methods of reaching and dealing with the elderly who need what New York 65 has to offer.

We are seeking to expand our program to extend our coverage. A bill passed in the current 1964 session of the New York State Legislature and signed by the Governor, empowers New York 65 to insure groups of over 65 employees even though they may not be New York State residents provided their place of employment is within the State. It also makes New York 65 protection available to those over 65 who have already retired and may reside outside the State provided that at retirement they were employed in New York State.

It was also found that in the cases of some insureds who had only Blue Cross but no Blue Shield surgical and inhospital medical protection, New York 65 major medical left gaps in their coverage since it assumes that the insured has

some kind of basic hospital and surgical protection and deducts the equivalent of New York 65 basic from major medical benefits. A special new plan to bridge this gap is now being planned which will provide for more complete coverage.

LEVEL OF PREMIUMS

With a legislative mandate to produce costs under the level of commercial insurance, and as low as possible considering the broad benefits offered, New York 65 has charged premiums which contain very narrow margins for expenses and contingencies.

The question has been asked whether any premium changes are anticipated, or will be required during the next 2 years.

It is difficult at this time to answer this question. Our original projections on which our current premium rates are based were made for 2 years. So far we have been running somewhat ahead of our estimates as far as payments of benefits are concerned.

We are presently conducting our third open enrollment during the month of April and at this time we do not know what the final results will be in terms of numbers of new enrollees and in terms of additional premium income.

Our original projections indicated that if medical and hospital costs continue to increase at the same rates as they had for the previous 2 years, it seemed likely that some upward adjustments in the premium rates would have to be made at the end of the second year or reasonably soon thereafter. So far, medical and hospital rates have continued to increase at rates similar to those of the 2 previous years.

With the unknown of additional premium income due to new enrollments, which exclude benefit payments for preexisting conditions for 6 months, it is difficult for us to come to definite conclusions concerning future premium rates at this time.

All other indicators, however, point to the need for modest increase within the next 2 years unless our current claims demands change from their present pattern.

CONCLUSION

In considering the 120,000 elderly individuals currently covered under New York 65, it should be borne in mind that New York 65 is only one of the mechanisms for health insurance protection available to elderly New York State residents. Many older individuals who retired in recent years have been able to continue their health insurance without interruption. In addition, there are a wide variety of other health insurance plans that are available on an individiual or group basis. In fact, at the time New York 65 became available many thousands of New York State senior citizens already had health insurance protection. New York 65 filled the gap for those elderly persons not then insured, many of whom were at very advanced ages.

New York 65 was designed for elderly persons and their families who wish to and are able to pay their own way. Just as they need liability insurance to protect against the financial impact of automobile accidents, they need health and major medical insurance to guard their nest eggs against the crippling financial impact of the cost of serious illness. To them and their families, it is a matter of personal pride, dignity, integrity and independence, to finance the costs of such protection out of their own pockets.

To sum up, New York 65 health insurance provides much-needed protection against the costs, often catastrophic, of serious illness or accidents that can destroy a lifetime's hard-earned savings in a matter of months. It is currently doing this for 120,000 people. In addition, it is helping to provide peace of mind and a feeling of greater security, which in themselves are powerful mental stimuli in keeping elderly citizens strong and healthy.

New York 65 has carried out the mandate of the New York State Legislature. It has made low-cost, broad coverage health insurance, designed to meet the needs of the elderly, readily available to them.

JUNE 29, 1964.

Hon. HIRAM L. FONG,

U.S. Senator from Hawaii,

Senate Office Building, Washington, D.C.

DEAR SENATOR FONG: During the recent McNamara subcommittee hearings, I promised that our actuaries would work out the estimated costs for the King-Anderson bill as that bill was presented to the Senate.

Basing our calculations for S. 880 on our experience, we also considered the following factors:

(a) The eligible exposures in 1966 provided by the Division of the Actuary, HEW.

(b) The projected average per diem hospital charge in 1966 of $44.75.

(c) The hospital frequencies and average stays experienced under Mutual of Omaha's senior security policies (4HSO series) during 1962 under its first five enrollments (enrollments from April 1959 through February 1961).

(d) The assumed distribution by option of 70 percent under the 45-day plan, 10 percent under the 90-day plan, and 20 percent under the 180-day plan. Our calculations show that both the 45- and 180-day plans are worth 4 percent more than the 90-day plan.

(e) Estimated costs by the Health Insurance Association of America for the outpatient hospital diagnostic, home visit, and nursing home benefits were used, since we have no-comparable experience in these areas.

1. Outpatient hospital diagnostic___

2. Home visits___

3. Nursing home_.

Based on the above, the following 1966 statistics are produced:

Therefore, based on Mutual of Omaha's senior security costs for the hospital benefits and the HIAA estimates for the other benefits, the cost in 1966 per eligible is $214, which is broken down as follows:

For the 15.5 million OASDI eligibles in 1966, this would produce a total claim cost for 1966 of $3,317 million. Costs of administering such a program are not included in this estimate.

It should be noted that, while 1962 costs were requested, we did not have eligible data for that year. Therefore, we based our calculations on 1966 eligibles and per diem cost levels combined with frequencies and average length of stay experienced in 1962. We will be happy to make other calculations if furnished with 1962 eligibles.

Sincerely yours,

A. M. HANSEN, Vice President.

EXHIBIT A

Copy of New York 65 Enabling Legislation

NEW INSURANCE LAWS SERVICE

NEW YORK

Laws 1962

Chapter 236

(A. Int. 4871)

Effective March 27, 1962

AN ACT TO AMEND THE INSURANCE LAW AND THE TAX LAW, in reLATION TO AUTHORIZING JOINT ACTION BY INSURANCE COMPANIES IN UNDERWRITING GROUP. HEALTH INSURANCE FOR PERSONS SIXTY-FIVE YEARS OF AGE AND OVER

The People of the State of New York, represented in Senate and Assembly, do enact as follows:

Section 1. The insurance law is hereby amended by adding thereto a new section, to be section two hundred twenty-one-a, to read as follows:

§ 221-a. Joint underwriting of group health insurance for persons aged sixty-five and over. 1. It is the concern of the legislature that many residents of this state of advanced years do not have readily available to them health insurance adequate to their needs. It is the legislature's intent to encourage and facilitate the writing of such insurance by private insurers on a non-profit group basis in order to make available to such persons broader coverage at lower rates than is possible on a regular commercial basis. It is, therefore, the purpose of the legislature to authorize and regulate, in the public interest, cooperative action among such insurers in the preparation and issuance of policies of health insurance, the making of rates to be charged therefor and other matters within the scope of this section.

EXPLANATION-Italics is new, [bracketed matter] is law repealed.

2. Wherever used in this section, the following terms shall have the respective meanings hereinafter set forth or indicated, unless the context otherwise requires:

"Association" means a voluntary unincorporated non-profit association formed for the sole purpose of enabling cooperative action to provide health insurance in accordance with this section.

"Health insurance" means hospital, surgical and medical expense insurance, provided by a group health insurance policy or contract issued in accordance with this section.

"Insurer" means any insurance company authorized to do the business of accident and health insurance in this state.

"Insured" means a person covered under a group policy or contract issued pursuant to this section.

3. Notwithstanding any other provision of this chapter or of any other law which may be inconsistent herewith, any insurer may join with one or more other insurers, on a uniform basis with respect to premium rates, policy provisions, commissions and other matters within the scope of this section, to offer, sell and issue to a policyholder group health insurance covering residents of this state who are sixty-five years of age or older and the spouses of such residents. Such insurance may be offered, issued and administered jointly by two or more such insurers through an association formed by such insurers solely for the purpose of offering, selling, issuing and administering such insurance in accordance with this section. Membership in such association shall be open to any insurer.

4. Such association shall offer health insurance coverage to all residents of this state who are sixty-five years of age or over and their spouses, subject to reasonable underwriting restrictions to be set forth in the plan of the association. Such coverage may consist of one or more of the following types: (i) basic hospital and surgical coverage, (ii) basic medical coverage, (iii) major medical coverage, and any combination of those types; provided, however, that if coverage of the first or second type is offered, it shall not be required as a condition of obtaining same that coverage of the third type also be obtained.