In order to ascertain the degree of performance of our organization, an independent survey of our policyowners was conducted and in response to the question, "Are you satisfied with Mutual of Omaha's overall service?", 97 percent of the policyowners replying said "Yes." Control of the mailing of these questionnaires and the receipt and tabulation of the replies are attested to by the nationally known firm of Arthur Andersen & Co.

Mutual of Omaha has always provided an exceptionally high return to policyowners. According to the latest independent statistics, Mutual pays out 23.3 percent more in benefits and operates at 13.5 percent lower costs than the combined average of the next 24 companies in the individual health insurance field. Mutual of Omaha lives up to its slogan-maximum benefits at minimum costs. As the pioneer in the health insurance business, we have been privileged to introduce to our policyowners many liberalizations of their contracts at no additional cost-such as: Addition of a 31-day grace period; extension of oversea travel benefits; guarantees of reinsurability for servicemen recalled to active duty during the Berlin and Cuban crises; and, most important of all, the addition to most individual policies of special travel accident benefits, the aggregate face amount of which now totals over $2 billion.

Responding to our civic responsibilities to encourage outstanding contributions in the fields of health and safety, Mutual of Omaha's board chairman, V. J. Skutt, established the Mutual of Omaha Criss Award consisting of a $10,000 grant and a gold medal. This award has been given to such outstanding men as Dr. Edward Kendall and Dr. Phillip Hench for their work with cortisone; Dr. Howard Rusk for his work in the field of rehabilitation; Dr. Jonas Salk for development of the Salk vaccine; W. Earl Hall for his work in traffic safety; the late Dr. Thomas Dooley for his people-to-people program; and J. Edgar Hoover for his contributions to the personal security and safety of the American people.

Mutual of Omaha also gives a public service award. The most recent recipient was Lt. Frank Ellis, valiant young disabled Navy officer who successfully rehabilitated himself and was reinstated as a pilot by the U.S. Navy. For its work in the field of rehabilitation, the company received the President of the United States Distinguished Service Award.

Many times in the past, Mutual of Omaha has recognized its responsibility to help the overburdened Federal Government. We have had the opportunity to be of service by :

(1). Pioneering voluntary group insurance coverage for Federal employees:

(2) Extending low-cost MATS flight insurance to the members of the military (passengers on transport flights) and their dependents as they travel the world pursuant to Government orders;

(3) Perfecting a system of insurance to protect the flight pay of pilots in the Air Force; and

(4) By acting as fiscal agent for the true medicare program (hospitalization for military dependents) in 20 States. Mutual has performed this service at a cost-only basis. We are proud that in the years of its administration our per unit cost of this program to the Government has been about one-half of the cost of other administrators in the other States. A copy of the latest report on this true medicare program as submitted to the Congress by the office for dependents' medical care is attached to our statement. (The information relative to cost is on p. 37 of the report.)

From the beginning, Mutual of Omaha's individual policies could be continued without regard to age. In 1944 a hospital program was made available to those between the ages of 65 and 75 years. Continuing the program in 1949, a new series of policies which were issued without regard to age was prepared.

This path of progress continued, and again in 1955 new programs of insurance encompassing the improved coverage were marketed by Mutual of Omaha.

In 1958 the concept of more liberal renewal guarantees and improved coverages was continued again by the introduction of new product lines.

In 1959 Mutual of Omaha pioneered the first national enrollment of those age 65 or over in an insurance program. The approach was that of mass enrollment regardless of medical history and without requirements for a physical examination or a physical questionnaire. This concept also introduced a unique policy renewal agreement. This policy cannot be canceled because of changes in health or because of the number of times or the amount of benefits paid. This mass approach utilized electronic procedures to streamline costs. This protection was merchandised through local resident agency forces. The policy provided benefits of $10 per day for 60 days in hospital, miscellaneous expense benefits, a surgical schedule, and-for the first time coverage for accredited nursing home

care for each illness. Benefits could total as much as $1,825 for each separate illness or accident. The monthly cost for this coverage is $8.50, or 28 cents a day.

In addition, in November of 1959 the company made available on a nonselective (issued regardless of health) enrollment basis a policy which provided cash benefits of $50 per week for 50 weeks in hospital. This policy also carried the special renewal agreement as outlined previously. The cost of this contract is $4.25 per month, or 14 cents a day.

In the period of 1950 through 1963, the company through its many thousands of field representatives conducted 11 nationwide enrollments. In these enrollments, over 602,600 applications were received and processed. In conducting these enrollments, we are pleasantly surprised by two factors not common to that segment of our policyowners under age 65. The first was that approximately 50 percent of the applicants tendered an annual premium with their applications; this number was in excess of the average for applicants under 65. Second, our senior security policyowners have shown their satisfaction with this form of private voluntary health insurance and their ability to pay for their protection with an unusually high renewal persistency.

Figures assembled by a recently conducted survey of our records show a lapse ratio on this business of only 1 percent per month, including terminations caused by death. The 1958 CSO mortality tables, the accepted standard tables in the life insurance industry, show a death rate of about 1 percent per month at the average age of our enrollment policyowner in the block of business surveyed. While the company was developing this mass enrollment technique it also continued to make improvements in individual policies made available to those age 65 and over on a selective underwritten basis. Broad benefits-up to $25 a day in the hospital-were made available.

In 1960 the company introduced a policy which provides, on a paid-up basis at age 65, hospital room benefits, miscellaneous benefits and a surgical schedule. This policy is available to people through age 55. Depending upon the age of the purchaser and the scope of coverage selected, the annual premium varies from $15.80 at age 20, to $153.20 at age 55. The contract provides for full premium refund in the event of death before age 65.

In 1961 a lifetime guaranteed renewable $10,000 major medical policy, available to people of all ages, was introduced. The premium, depending on the age of the purchaser and the plan he selects, varies from $6.92 to $15.17 per month. Also in 1961, a lifetime guaranteed renewable major hospital expense policy paying 80 percent of the expenses up to $5,000 exceeding a deductible amount selected by the policyowner was introduced. There are no age limits. Depending on the plan selected and age, premiums vary from $3.92 to $10.84 per month. Also in 1961, a lifetime guaranteed renewable policy providing benefits for doctor's calls for treatment and surgical operations, was introduced and available to all ages. Medical benefits are payable regardless of the place of attendance.

During 1963 alone, senior citizens were issued coverage on over 50 policy forms, most of which are specially tailored for persons age 65 and over.

Since 1963, the company has offered a lifetime guaranteed renewable policy which provides up to $30 a day for 90 days in hospital, miscellaneous expense benefits, and a surgical schedule to those people between the ages of 60 and 74. Depending upon the type of plan selected, the monthly premium varies from $4.30 a month to $17.35 a month.

It is my pleasure, Mr. Chairman, to advise you that my company has requested State insurance department approval of a new comprehensive senior security policy to be made available on an enrollment basis without regard to health. This new contract is unquestionably the most outstanding over-age-65 contract available today. For the first time, all senior citizens can choose any combination of five basic coverages. Maximum benefits are available up to $11,637.75 for each separate sickness or accident.

Coverage A: Daily room benefits up to $20 a day for hospital confinement, and $10 a day room benefits for convalescent or nursing home confinement. Coverage B: Basic hospital miscellaneous expense benefit.

fit.

Coverage C: Basic radiotherapy, surgical, and anesthetic expense benefit. Coverage D: Catastrophe hospital and convalescent home expense benefit. Coverage E: Catastrophe out-of-hospital and hospital outpatient expense bene

The premium, dependent upon the plan or plans selected, varies from a minimum of $5 a month to a maximum of $38.30 a month.

We intend to make this exciting new policy available again through our field labor forces, which we have found after many years of experience are absolutely essential to the placement of proper health insurance for each individual. It should be pointed out that this broad new coverage will be available to policyowners who may convert or supplement their present policies if they so desire. In conclusion, Mr. Chairman, I would like to offer some observations on the future of health insurance for our senior citizens. As an underwriter who has had the opportunity throughout 20 years with this great organization—having worked in close cooperation with the insurance industry-I feel that great substantial strides will continue to be made by voluntary insurance in meeting the needs of the American public of all ages, and particularly those over age 65. I have witnessed the birth and growth of senior citizen insurance.

I predict that voluntary insurance operating within the American competitive system will continue to produce outstanding coverages to suit each citizen's own needs and wants. We can and do consider such diversities as religious beliefs and partial coverages available through employers which can be supplemented by individual contracts.

I foresee continued development in the field of paid-up hospital insurance.

I have noticed with satisfaction the great strides made in the group insurance field in providing continuance of hospital coverage to retired employees, oftentimes with the employer paying all or part of the premium costs.

We hope that this statement is of assistance to you and that it provides information useful in considering the availability, adequacy, retention, cost, and extent of health insurance for persons age 65 and over.

Thank you.

Senator MCNAMARA. The next witness is Mr. J. F. Follmann, Jr., director of information and research, and Mr. David Robbins, Assistant director of statistical research of the Health Insurance Association of America.

Will you tell us for the record what the term "Insurance Association of America" indicates? Would this be a federation of all the associations in the field or a number of companies in the field?

STATEMENT OF J. F. FOLLMANN, JR., DIRECTOR OF INFORMATION AND RESEARCH, HEALTH INSURANCE ASSOCIATION OF AMERICA; ACCOMPANIED BY DAVID ROBBINS, ASSISTANT DIRECTOR OF STATISTICAL RESEARCH, HEALTH INSURANCE ASSOCIATION OF AMERICA

Mr. FOLLMANN. It is a customary business association composed of over 300 insurance companies which write health insurance.

Senator MCNARAMA. But you write no health insurance?
Mr. FOLLMANN. That is right.

Senator MCNAMARA. Thank you very much. You may proceed in your own way.

Mr. FOLLMANN. With me, Senator, is Mr. David Robbins, assistant director of statistical research, who is responsible for our statistical surveys and analyses. There are nine principal methods being employed by insurance companies to make health insurance available to both the present aged population as well as those that will become senior citizens in the future.

These methods include both group approaches, mass enrollment techniques, and individual coverages of various types. In addition, there are, of course, coverages available through Blue Cross and Blue Shield plans. It is clear that private health insurance is generally available, regardless of physical condition, for both the present and future aged.

Almost half of the aged insured with insurance companies are covered under group policies. For such persons, it is not infrequent that the employer pays some or all of the premium charge.

Vigorous competition among insurance companies and Blue Cross plans, all under the supervision of State insurance departments, assures the public of a reasonable relationship between benefits and premiums in the instance of both group and individual policies.

In all cases, the cost of insurance can only reflect the cost of and expenditures for hospital and medical care. As the cost of care rises, largely in response to the remarkable growth of medical technology, as well as the general inflation in the general economy, the cost of providing health insurance must necessarily rise.

This is true with respect to any type of program for financing or providing medical care, whether through a voluntary private program, a public welfare program, or through a compulsory governmental program.

We estimate that 60 percent of the aged were insured at the end of 1962. This proportion is more than twice the 26 percent covered at the end of 1952. The slightly over 10 million aged persons with private health insurance at the end of 1962 is three times the number with such insurance 10 years previously. There is every reason to believe that this remarkable rate of growth shall continue.

With 60 percent of the aged population covered by private health insurance at the end of 1962, with an additional 14 percent recipients of old age assistance and hence entitled to medical care without costs, and with others eligible for benefits under the medical assistance for the aged program, as veterans of the Armed Forces, as members of health care professions, or because of affiliations with unions, lodges, or religious groups, it is apparent that for over three-fourths of the aged, provision has been made for payment of some or all of their hospital costs.

The function of the system of private health insurance is to make available to the public a wide spectrum of coverages distributed in a variety of ways, so that the circumstances of different individuals can be met in the most efficacious manner possible. It is our conviction that in the main, and recognizing that experimentation continues, this has been accomplished and that the growing public acceptance of the coverages made available testify to the public confidence

in what has been done.

Coverages available with insurance companies range, under individual policies, from $5 a day for 21 days to $30 a day for 400 days. Miscellaneous hospital expense benefits are available in amounts from $30 to $1,000. Surgical expense maximums run from $100 to $600. Major medical expense coverages are offered with maximum amounts which range from $1,000 to $10.000 and higher.

The adequacy of these coverages can be equated in relation to the customary utilization of health care services by older people. Experience, for example, indicates that 82 percent of the aged who are hospitalized have a length of stay of 30 days or less in a year. Only 6 percent stay as long as 2 months.

At a time when the average daily room and board charge was $17 a day, in mid-1961, we know that 29 percent of the aged with insurance company coverage had policies with room and board benefits

paying $15 a day or more, 18 percent had such benefits ranging from $11 to $14 a day, and 53 percent had such benefits in an amount of $10 a day or less. We could not distribute such data by geographical area although we do know that the daily room and board charge varies significantly geographically. In addition, at about that time, a fifth of the aged were covered by major medical or comprehensive policies, and this proportion increased to a fourth by the end of 1962. Such policies provide coverage for all the usual and customary hospital and medical expenses, including prescribed drugs, nursing care, surgery, physicians' visits, and at times skilled nursing home care which in the opinion of the physician is warranted.

Our studies indicate that the aged, once insured, have excellent possibilities for retention of the coverage. As of mid-1961, we found that 90 percent of the aged insured with insurance companies were covered under group policies, had individual guaranteed renewable policies, or other individual policies not subject to individual renewal as a result of health deterioration of the individual. Although the remaining 10 percent were covered under policies subject to such renewal, there is ample evidence available, including studies furnished to your subcommittee, which indicate the limited extent to which insurance companies exercise their right to nonrenew policies.

Extensive development of State 65 programs in California, Connecticut, Massachusetts, New York, and Texas, under which many thousands of aged persons have acquired health insurance since mid-1961, makes it likely that the current proportion of the aged with health insurance coverage, including the right to retain this coverage, has increased considerably.

At

Mr. Chairman, I had the pleasure of appearing before your Subcommittee on the Problems of the Aged and Aging about 5 years ago. that time I reported that the most recent nationwide estimate as to the extent of health insurance coverage of the aged was 39 percent as of March 1957. Just 5 years later, as we now find, 60 percent of the aged had acquired this protection. We have every reason to believe that this significant growth will continue.

Senator MCNAMARA. Thank you very much, sir. As I take it from your statement, your organization is strongly opposed to the KingAnderson bill?

Mr. FOLLMANN. We have so testified before the House Ways and Means Committee.

Senator MCNAMARA. You do not consider your group lobbyists, do you, in the broad sense of the term? Or do you?

Mr. FOLLMANN. I believe we are registered.

Senator MCNAMARA. Oh, you are registered as a lobbyist?
Mr. FOLLMAN. I believe so.

Senator MCNAMARA. Thank you. Senator Dirksen?

Senator DIRKSEN. Mr. Follmann, I think there was some testimony yesterday to the effect that you indicated that 3 million of the actively employed aged were carrying health insurance and that you used that in part as a basis for the estimate that about 60 percent of the aged now have health insurance. There was evidently an intimation that the figure was not correct. Have you some comment to make on that?

Mr. FOLLMANN. I believe this was based on an incorrect assumption with respect to our methodology. The methodology which we employ, Senator, is set forth in the studies which we have filed with your sub