While unions pushed for health insurance for their retired employees, employers and insurance companies sharply resisted demands for such coverage, especially during the early 1950's. According to one large union:

"At the earliest stages of our efforts to enroll retirees, the carriers often refused to make coverage available and, in effect, instructed their field agents to discourage actively any moves to include retiree coverage. *** Almost without exception, employers were initially unwillinging to assume responsibility for direct contributions."

More recently, as an apparent consequence of pressure for a legislative solution to this problem, ideological resistance on the part of employers toward coverage of their retired workers became less intense, but there was little change in their unwillingless to put up the amounts of money required if retired persons were to be covered under reasonable eligibility requirements and with an adequate scope of benefits. Even an appeal by the chamber of commerce to selected employers had little effect. Several years ago the chamber wrote to a number of companies that had refused to extend private health insurance through union negotiations and advised them, in effect, to do for political reasons what they would not do for humanitarian reasons. Despite such appeals and the glowing reports of the insurance industry, little progress has been made. The number of retired persons protected through group coverage remains small, benefits remain inadequate, and there is no reason to believe that this situation will change for the better.

While comprehensive figures on the coverage of retired workers through collectively bargained plans are not available, we were able to obtain for this committee some indication of the current situation by requesting reports from a representative number of the major unions affiliated with the AFL-CIO. Information obtained from these reports and from several published studies follows: A. Most companies still do not extend health insurance coverage to retired workers

Even among the 100 major plans studied most recently by the Department of Labor, only 63 of them extended coverage to retired employees. Among 300 plans studied by the Department of Labor, only 115 extended benefits to retired workers. The smaller the plan, the less likely it is to provide coverage to retired workers. One study in Ohio found that of firms with health insurance plans, less than 20 percent of the firms with fewer than 100 workers, 31 percent of those with 250 to 499 employees, and 44 percent of those with 500 or more employees, provide health insurance for retired workers.

But even many large companies continue to resist the extension of health insurance to retired employees. One union which negotiates contracts with some of the largest corporations in the country writes: "We have found a general reticence on the part of companies in our jurisdiction to provide retiree insurance. This is true even when we are willing to agree to a contributory plan."

Several of the unions reporting indicate that only between 3 and 5 percent of their members will become eligible at retirement for health insurance obtained through collective bargaining. Many unions write of their frustrations in negotiating such coverage. "The demand for hospital, surgical, and medical program coverage for retired employees and their dependents," writes the president of one union, "has been an unsuccessful issue in several recent significant negotiations."

The unions in the railroad industry, to cite another example, are among the many that have not been able to secure employer participation in covering retired workers.

"Nearly all railroads are parties, with the unions, to [a contract] which provides health insurance for nonoperating employees in active service and their dependents ***. It was necessary, however, that the unions themselves negotiate [with the carrier] to provide health insurance for furloughed and retired employees because of the repeated refusal of the railroads to join with the brotherhoods in setting up a health insurance program for these workers ***. The entire monthly payment is made by the furloughed or retired employee."

B. Many workers are not eligible for health benefits at retirement because they do not have the required length of service to qualify, or because of other eligibility restrictions

Most plans, especially those to which the company makes a substantial contribution, have high eligibility requirements. Ten or fifteen years of service is typical; a 20-year service requirement is frequent; a 25-year requirement is not

exceptional, and 30-year requirements can also be found. With today's industrial mobility, such service requirements eliminate an enormous number of working people from coverage.

Since eligibility for health insurance in retirement is usually tied to pension eligibility (while, of course, only a fraction of firms with pension plans also have health plans for retired persons), one can get an idea of prospects for future eligibility for health benefits at retirement from estimates of eligibility for pensions. According to Senator Paul Douglas, who recently reviewed the data on this point, "only from one-third to one-half of those ostensibly covered, and from whom contributions are made, will actually benefit at journey's end" from existing pension plans.

One union, more successful than most in obtaining health protection for its retireees, writes of the situation that prevailed for its members until 2 years ago, and that is still usual elsewhere.

"For a number of years, there were no employer contributions for retirees and the underwriting rules were very strict. The retirees were offered a single lifetime opportunity to become enrolled. A worker not covered by Blue CrossBlue Shield at the time of retirement, or one who retired without a pension was unable to obtain group coverage. A retired worker who, for any reason, missed a month's or quarter's premium was permanently removed from the group. If for any reason the actively employed group ceased to be enrolled in Blue Cross-Blue Shield, the retirees were stranded. A number of retired groups have lost coverage when plants moved or were permanently shut down. Others have been continued under precarious arrangements at the sufferance of the carriers with the possibility of discontinuance always present."

The same union comments further that it still has a substantial number of retired members without any health insurance. In addition to those workers who retired from an establishment without a pension plan, others are without health protection in retirement for any of the following reasons, as cited by this union: (1) The workers may lack the required 10 years of pension service credits to qualify for any company financed pension benefit. Hence they are barred from participating in hospital-medical coverage after retirement for lack of an acceptable source of payment.

(2) Although covered under a pension plan from which they may eventually collect some benefits, their employment (and coverage) was terminated by a permanent layoff-because of their jobs being abolished through automation, business failure, transfer of operations, etc.-prior to retirement.

(3) Their coverage is canceled because they are retired from establishments that have been permanently shut down (or that have been drastically curtailed) and there is no longer any actively employed group (or a very small one) by which the excess claim costs of the retired group can be absorbed. Among those cut off in this way are retired employees of the former Hudson Motor Co. of Detroit, of the former Electric Auto-Lite (now Eltra Corp.) plant in Toledo, and of the South Bend operation of Studebaker.

(4) They die and their survivors, having no continuing pension, are not permitted to continue coverage. Naturally, this occurs most frequently among the older retirees.

C. Costs to retired workers often prohibitive

Plans arranged for or negotiated by the union may be out of reach of the retired person, and entail severe financial sacrifices-even where there is an employer contribution. Most plans of health coverage for retired employees require some contribution from the retired worker; often the retired person must pay the entire amount; where the employer does contribute, his payment is usually limited, and often the retired person must bear the cost of any increase in premiums.

According to a survey of the Health Information Foundation, nearly onethird of persons without insurance who were formerly insured had to drop their coverage because "they could not afford to make the payments, or found them too expensive."

One union that has obtained group coverage for its retired members finds that the fact that the entire cost must be paid by the retired person keeps the great majority of members from being able to enroll.

"The benefits * * * are not adequate, but they are the best that could be obtained for the premiums paid. It has been necessary to keep the monthly payments as low as possible in view of the reduced income of our retired members. Nevertheless, many of them have been unable to take advantage

of the protection of [this] policy. * * The health insurance coverage presently available to [our members] is very inadequate, both from the standpoint of benefits and the number of retired workers who are able to avail themselves of this protection. The situation is brought to our attention repeatedly by letters from our retired members who either have been financially unable to participate in the plan or, having enrolled, find that they are still required to pay a substantial portion of the hospital, medical, and surgical expenses they have incurred."

Even where there is an employer contribution, the cost problem is severe. Here is the description provided by one large union:

"The average retiree, even with employer contributions, has out-of-pocket costs for coverage now that are almost as high as they were a few years ago when the retiree paid the full cost himself. In Michigan, for example, retirees enrolled in Blue Cross-Blue Shield, with the employer paying half the cost, now have premium payments to make that are approximately 75 percent of the amounts they had to pay for identical coverage in 1959 when there was no employer contribution. Nor can it be overlooked that people who were retired at that time have had increases neither in OASDI nor in their pensions.

"Currently the typical pensioner pays about $5 a month if he is single, and about $12.50 if he is married. On the average this means that an elderly couple would have to spend about 15 to 20 percent of their negotiated pension benefits for health insurance. For some, particularly those still paying unaided the full cost, the amounts spent for health insurance are more than half of the pension. The best that we have been able to achieve is a continuance of group coverage and group benefits for retired workers. The cost of coverage, in addition to any employer contributions, comes from deductions from pension benefits, authorized by the retiree."

D. Benefits for retired employees are almost always reduced from those available to active workers, and are usually inadequate

"It is painfully obvious," writes one union official, reflecting the conclusions of the majority of those reporting, "that these private plans do not begin to cover our retirees in serious illness.

"Program coverage for retired employees is universally inadequate," begins another. "This is true regardless of the hospital, surgical or medical benefit analyzed. Realistic benefits in terms of present-day costs are not provided. In this regard our examination of the programs on file indicates that in every case program benefits for retired employees are less than those for active employees.

"Hopelessly inadequate," "benefits startingly reduced," are the phrases that reflect the tenor of every one of these reports.

E. Plans that provide conversion rights to individual enrollment after retirement are of very little value

One union, which has a large concentration of membership in New York State the only State which requires insurance companies to provide conversion rights for those covered previously by group insurance-writes us: "The costs of insuring persons over 65 years of age for hospitalization and surgical benefits individually are so high that very few retired *** members can afford to buy such individual health insurance policies. Less than 1 percent of retired members *** who were eligible to convert to individual policies have converted their group health insurance to individual health insurance policies

CONCLUSION

In the light of experience of the kind we have cited, what is the practical possibility of providing health benefits for aged persons through collective bargaining?

It is clearly evident that no national program can be based on a projection of limited success among a relatively small number of the more fortunate workers. Even though people who belong to AFL-CIO unions are among those most likely to have benefits made available through collective bargaining, and despite our best efforts for more than a decade to bring these plans in line with the protection our members need, we are absolutely convinced

that the social security method offers the only practical solution. to this conclusion because:

We came

A. The aged with potential access to negotiated health benefits do not constitute a typical segment of the over-65 population. They are among the best off of the Nation's elderly. Their incomes are substantially higher than those of the rest of the aged population, as the following table shows:

Median total income of persons aged 65 and over in 1962

Though people with potential access to negotiated coverage are not, by and large, getting the kind of health insurance they need, they are sufficiently better off than those not having such access to make them quite unrepresentative of the total aged population.

B. There are inherent limitations to extending covering to the aged through collective bargaining.

As we have shown, the proportion of persons over 65 in regular full-time work is decreasing and can be expected to continue in a downward trend. This means that in the future a smaller segment of persons over 65 will be receiving health benefits as active workers.

While there may be an increase in the number receiving negotiated benefits in retirement, this number is severely limited by the limitations of collective bargaining itself. These limitations are reflected with most serious consequences in the strict eligibility requirements under collectively-bargained plans. A mobile society such as ours simply cannot tie a basic minimum retirement benefit to continuous service with one employer. But the mechanism of collective bargaining cannot go beyond the individual employer-employee relationship. Only a Government program can do that.

C. Attempts to extend coverage of private insurance plans to the aged have confronted the plans with irreconcilable conflicts. If the premium rate, adjusted to include the high-cost experience of the elderly, is spread over the entire group then the costs to others under the plan become, if not prohibitive, impracticable in a competitive insurance market. If separate rates for different groups under the plan are set to reflect the high-cost experience of the elderly, and the lower costs for the younger groups, they are definitely prohibitive for most of the aged. The stresses and strains of these hard facts have simply proven too much for the private plans.

The question of whether the health bill of the aged shall be paid is not up for discussion. The only question is how. The problems the aged face in paying for their own care, the difficulties they encounter when they must turn to their children for help, the serious drawbacks of using State and Federal public relief funds is a matter of record. Here we would like to comment only on the problem of these costs being shared and often subsidized by others who are insured.

Indications are that a considerable proportion of the rate increases in plans that retain an element of community rating come as a result of the high cost of coverage for persons over 65. Now we wish to make it plain that we are in favor of persons who are in active employment sharing in the high cost of coverage of the aged. But we want this sharing to be equitable. That is why we advocate sharing through social security contributions. We do not believe that the sharing should be limited to those Blue Cross subscribers who happen still to belong to a community-rated plan. Nor do we believe that sharing should be limited to those who belong to plans where the high cost of over-65 coverage can somehow be kept hidden, and charged surreptitiously to the actively employed.

We have long maintained, and every bit of additional evidence confirms our position, that the best that could happen to private health insurance plans, both the commercial carriers and the nonprofit plans is the enactment of health benefits for the aged through social security. With basic protection assured under social security hospital insurance, aged persons could use what funds they have

to supplement their coverage. Supplementary insurance could be sold by private insurance plans to cover items not covered by social security hospital insurance, such as surgery, drugs, physician visits, and dental care. Without the burden of insuring the high-cost aged, Blue Cross, Blue Shield and commercial insurance carriers could hold down their rates and provide health insurance to the working population more successfully.

The pluralistic approach to our major social problems has become in this century the typical American approach. It has worked in the pension field, with basic protection provided under the Government social security program, supplemented by a multitude of private plans. It is the only practical approach to the knotty problem of health care for the aged. With a basic social security plan, private plans can continue and even flourish. But they can never do the job alone. Mr. CRUIKSHANK. We appreciate the opportunity to appear before this subcommittee, Mr. Chairman, and members of the committee, as we think this is a tremendously important inquiry that your subcommittee has undertaken, one of vital concern to our members and those whose interests we try to reflect.

I will, as you suggested, be as brief as possible in view of the time and the fact you have given us permission to enter into the record the formal statement which we have presented.

I would like to make it clear at the outset, Mr. Chairman, that in our testimony, as in the inquiry of this committee, we are not attacking the private insurance industry or nonprofit plans, the Blue Cross or Blue Shield, we are examining the adequacy of these plans in a situation such as we have now where there is no basic Government plan. The fact that we find these private insurance plans unable to do the whole job does not mean that we feel there is no place for them or that they should be done away with.

Now, our interests, both in terms of the people for whom we are concerned and the range of the subject is broader, much broader than the statement we have presented.

We are, of course, concerned with our own membership, those who we represent directly, but we also are concerned with the people who are not our members-the aged generally, and those who have the aged as a problem within their family.

We are concerned also with the quality of the insurance that people have its adequacy to protect them against the devastating costs of hospitalized illnesses. But we do not deal with that extensively in this paper.

Others will examine that and already this morning you have gone into it at some length. I could say in an aside that it is interesting to us to see the picture that was suggested by representatives of the insurance industry that people have a great smorgasbord of policies before them and apparently operating with complete freedom to determine what kind and extent of insurance is tailored to their individual needs, and then buy that which is available.

One representative kept insisting that insurance was available to everyone in the country, that everyone over 65 had a policy available to him. Well, this I suppose is true exactly in the sense that every person in the United States has a Cadillac available to him, if he could meet the conditions of the Cadillac agency in his community.

We do, however, deal in our paper with two issues with which we feel we have the most experience, and where we can be the most useful to this committee in its deliberations.