company prefers to retain the whole coverage of the risk. So it is true in accident and health insurance, even though adequate and rather extensive facilities for reinsurance are available, they are not greatly used.

Mr. DOLLIVER. May I turn your attention to one other matter? There has been, as was indicated by this chart, a vast increase in medical, surgical, and hospital insurance over the past period of 10 years. I think your graph starts in 1940, so it has covered 13 years, let us say. Mr. FAULKNER. Yes, sir.

Mr. DOLLIVER. What has been the trend with respect to the premium cost to the individual policyholder during that period?

Mr. FAULKNER. In hospital insurance we must recognize that the industry is up against an increasingly expensive hazard. I would say that there has been some upward trend due in part to increasing costs of health care and perhaps quite as much to a broadening and expansion of coverage, liberalization of the type of insurance provided. Mr. DOLLIVER. So there has not been any noticeable decrease, but, rather an increase in the cost to the individual policyholders, generally speaking.

Mr. FAULKNER. I could not characterize it as a major trend, but there has been, I believe, a gradual upward adjustment necessitated by the increasing cost of health-care services.

Mr. DOLLIVER. Of course, most of your policies are written on the basis of indemnity in money rather than the hospital care; are they not?

Mr. FAULKNER. That is true, sir. But when you anticipate in the construction of a premium rate that not every case will represent a pay-out of the entire miscellaneous benefit or unallocated expense benefit, and in nearly every case your claim does absorb that entire limit-not the number of days of hospitalization, but the benefit provided for miscellaneous expenses-then you are faced with the proposition necessarily of a gradual upward adjustment of premium as health-care costs continue to rise.

Mr. DOLLIVER. In the life-insurance field each individual company has to be licensed to do business in the various States and has to comply with the laws of those States. Generally speaking, if they comply with the New York life-insurance law they are admissible in nearly every State. Is there any comparable standard in the health-insurance field?

Mr. FAULKNER. I believe there is a great similarity to that situation, sir. A company is required to be licensed in each State in which it maintains an agency organization, which is a situation comparable to the life-insurance situation.

Mr. DOLLIVER. Is there any standard law which is recognized universally as being acceptable in a majority of the 48 States?

Mr. FAULKNER. The licensing laws will vary slightly. They will vary; I should not say "slightly." They will vary from State to State, just as do the requirements for incorporation or admission of lifeinsurance companies.

Mr. DOLLIVER. Are there any companies in this field who are licensed in all the States?

Mr. FAULKNER. Yes, sir. Many.

Mr. DOLLIVER. Do they write a uniform policy, then, in all the States?

Mr. FAULKNER. It is customary for nearly all companies to offer the same policy forms in every State in which they operate. There are minor exceptions, but the practice of the industry is to offer the same coverage everywhere the company operates.

Mr. DOLLIVER. I take it from the latter part of your statement and from what you have said as to the present availability of reinsurance that even if this bill were passed and became a law there would be little demand for the utilization of the service?

Mr. FAULKNER. That is my judgment, sir. It is based solely, of course, on the reading of the bill and a study of the situation, and conversations with insurers.

Mr. DOLLIVER. Thank you, Mr. Chairman; that is all.

Mr. THORNBERRY. Mr. Chairman?

The CHAIRMAN. Mr. Thornberry.

Mr. THORNBERRY. Mr. Faulkner, I want to be sure I understand now. In your introductory statement you stated the office you hold with the Woodmen Accident Co. Are you here for this company, or are you here for the United States Chamber of Commerce?

Mr. FAULKNER. I am here, sir, representing the United States Chamber of Commerce, a member of whose insurance committee I happen to be.

Mr. THORNBERRY. What I want to make clear is that you are not here representing a committee of the chamber of commerce, but you are here representing the United States Chamber of Commerce? Mr. FAULKNER. Yes, sir.

Mr. THORNBERRY. I was interested in the summary of the reasons why the chamber of commerce is opposed to this bill, and I direct your attention to (5).

The bill seems designed to promote the extension of prepayment of health-care costs to uninsurable risks.

Why do you make that statement?

Mr. FAULKNER. That statement, sir, reflects the fact that insurable risks have today available the benefits of insurance. The insurance industry is exceedingly anxious to write every possible insurable risk. They have the facilities for doing so. If the expansion of health insurance is to be promoted into any area which is not now available to the insurers it could only be the area of the uninsurable risk.

Mr. THORNBERRY. In that connection let me ask you this: Is it fair to say that the position which you take, and the chamber of commerce takes, is that if this bill does not provide an opportunity to extend prepayment of health care cost to uninsurable risks then there is no reason for the bill.

Mr. FAULKNER. Yes, sir. We take the position, Congressman, that this bill will be disappointing in the results that it will accomplish and that unless some of the principles or major conditions on which the bill is based-conditions that we certainly endorse-are abandoned, that it will contribute nothing to the expansion of voluntary health insurance.

Mr. THORNBERRY. Let me ask you a question in connection with what Mr. Dolliver asked you. You said that there was in the field of health insurance certain private reinsurance available. To me that is rather surprising because I was under the impression, from the prior testimony we had here, that at one time Lloyds of London provided rein

surance, but that was no longer available. Do I understand from you that there are other private companies which make available reinsurance to private health insurance companies?

Mr. FAULKNER. Yes, sir. There are a number of fine, strong companies-American companies-that not only make that coverage available but whose salesmen are constantly in the offices of the directwriting companies trying to get them to buy it.

Mr. THORNBERRY. Do I take it from what you say that there has not been a tendency on the part of the direct-writing companies to take advantage of the opportunities for reinsurance?

Mr. FAULKNER. The volume of accident and health reinsurance done is relatively small in comparison to the total premium volume of the industry because the essential need for reinsurance does not exist in this business the way that it does in life insurance or in property insurance. Direct-writing companies obviously are not going to buy reinsurance when they do not need it, in their judgment.

Mr. THORNBERRY. You make another statement here, and I do not know whether it is 1 of the 5 points

Mr. BENNETT. Would you yield, Mr. Thornberry, before you leave that point?

Mr. THORNBERRY. Yes.

Mr. BENNETT. What is your reason for the statement that the health insurance and types of insurance we are talking about do not need reinsurance or that it is not desired? You said in response to Mr. Thornberry's question that it was a different thing.

Mr. FAULKNER. That is right, sir. Reinsurance is useful in the distribution of risk. If a direct-writing company has no unusual concentration of risk, such that the occurrence of a loss to the person who is insured for an excessive amount is involved, unless there is a situation of that kind you have a broad spread of average risks and you will get an average underwriting result. We do not have in accident and health insurance this unusual concentration of risk in a particular person, which is found in life insurance, and which makes life reinsurance desirable and necessary in some instances. There is not the concentration of risk in accident and health insurance that you find in property insurance. So, since insurance is basically a business of averages, when you do not have unusual concentrations of risk, there is no need-no underwriting need-for reinsurance.

Mr. BENNETT. You say the program we are devoting ourselves to is wholly unnecessary because there is no need for reinsurance in the health insurance field?

Mr. FAULKNER. It is my judgment, sir, that there is no need for reinsurance facilities that is not now already available in the private market.

Mr. BUSH. Will the gentleman yield there for just one question? Mr. THORNBERRY. I do not want to get in trouble with the chairman. I have the time. Is it all right with the chairman if I yield? Mr. BUSH. Then you proceed.

Mr. THORNBERRY. I yield to Mr. Bush. Go ahead.

Mr. BUSH. If there is not a need for this reinsurance, then your position is that there are companies that are available and looking for that kind of business now; is that right?

Mr. FAULKNER. There are companies that offer reinsurance now and are very anxious to provide it.

Mr. HARRIS. Are what?

Mr. FAULKNER. Are anxious to provide reinsurance, sir. They offer it. It is on the market. An insurer can go to one of them and buy it. Mr. BUSH. Thank you.

Mr. THORNBERRY. Mr. Faulkner, would you furnish the committee with the names of those companies who are offering that type of reinsurance and are anxious to sell it?

Mr. FAULKNER. I can think of two, and there are undoubtedly more. A leading reinsurer in this field is the Employers Reinsurance Corp. of Kansas City; the Lincoln National Life Insurance Co. of Fort Wayne, Ind., which also operates in this field; probably the Connecticut General; and a number of others. A complete list, sir, can be prepared and will be supplied very gladly for inclusion in the record. Mr. THORNBERRY. Would you do that, please?

Mr. FAULKNER. Yes, indeed.

(The information is as follows:)

Companies writing reinsurance exclusively, including health and accident reinsurance

Employers Reinsurance Corp., Kansas City, Mo--
General Reinsurance Corp., New York_--

Assets in excess of

$52, 000, 000

72, 000, 000

North American Casualty & Surety Reinsurance Corp., New York 57, 000, 000 North American Reassurance Co., New York____

40, 000, 000

Direct writing companies which also write health and accident reinsurance

Indemnity Insurance Co. of North America, Philadelphia, Pa.

155, 000, 000

Lincoln National Life Insurance Co., Fort Wayne, Ind_.

562, 000, 000

8, 000, 000

Sterling Insurance Co., Chicago_.

Woodmen Accident Co., Lincoln, Nebr__.

Woodmen Central Life Insurance Co., Lincoln, Nebr__.
World Insurance Co., Omaha, Nebr-_-.

5, 000, 000

6, 000, 000

13, 000, 000

Mr. THORNBERRY. Let me ask you this, on the question of reinsurance being available: Would it be possible to say or fair to say that the base of this available reinsurance is so confined or restricted or restrained that it would not be of any service to those companies who care to write health insurance?

Mr. FAULKNER. No, sir. If a risk is insurable it is reinsurable. If it is uninsurable in the first place, of course, it is not reinsurable. Mr. THORNBERRY. I believe that what we are talking about here involves fundamentals. It has been my feeling and my hope that this proposal would enable the extension of health care and other features of coverage we are talking about here, not only in a more comprehensive way to those who are taking advantage of the opportunity to be covered under the program, but also as an extension to a great group of people who are not now covered.

Now, is it fair to say from what you have testified here that it is your feeling that the reason that a great number of these people—I believe it was testified 63 million Americans are not now covered

and would not be covered under a sound system of reinsurance is because they are uninsurable risks?

Mr. FAULKNER. No, sir; by no means. A very vast segment of the American people has not yet seen fit to buy. The two-hundred-thousand-odd salesmen of the insurance companies and the representatives of the prepayment plans, like Blue Cross, are constantly at work endeavoring to convince them that they should buy. More and more of them are buying every year.

The job we feel will eventually be done to the point that substantially the entire insurable population has a measure of protection against health care costs through voluntary insurance.

There is, of course, as I attempted to bring out in my testimony, sir, an element in the population. Happily, it seems to be an element that is growing smaller each year. That element is the indigent, the person who does not have the money to pay for insurance. It is our contention that his need, which must be met, is best met by direct assistance.

Mr. THORNBERRY. I guess I had better not get into that field. I was about to ask you how we were going to do that.

I believe it is a fair question to say it is not contemplated by anybody-by those responsible for this bill or anyone here-that this bill will provide the health care coverage to the indigent?

Mr. FAULKNER. That is my impression.

Mr. THORNBERRY. I believe that is all, Mr. Chairman.

Mr. HESELTON. Mr. Chairman ?

The CHAIRMAN. Mr. Heselton.

Before you proceed, I think it is the usual custom, at least in the trial of cases, that when an individual presents himself we will say as an expert, he lays the ground work on which a judgment can be made as to whether he can be accepted on that basis as a witness. I am not going into that question with you, because you have already made a very great study which would establish you, in my opinion, as a person qualified to speak on the subject.

What I am interested in-and I am always interested in it—is the situation where I hear individuals come before this committee and say, as you have said today, "I appear today to represent and speak for the Chamber of Commerce of the United States, a federation of more than 3,100 business organizations, with an underlying membership of more than 1.6 million." I am interested to know to what extent and how you get authorized to speak for the 3,100 business organizations and 1.6 million membership. I think that is in the minds of some members of this committee.

Did you have such a thought in your mind, Mr. Heselton?
Mr. HESELTON. I certainly do.

The CHAIRMAN. I will leave it to Mr. Heselton to inquire into that.
Mr. FAULKNER. Very well, sir.

Mr. HESELTON. This bill was introduced here in the House on March 11. When did you first see it?

Mr. FAULKNER. I saw a copy of the bill, sir, about 2 days after it was introduced-2 or 3 days.

Mr. HESELTON. How large is the committee with which you work? Mr. FAULKNER. The committee on which I work consists of 8 or 9

men.