from the several reinsurance accounts to the administrative expense account in such proportions as the Secretary finds to be equitable. Moneys remaining unobligated in the administrative expense account at the close of the fiscal year may be retransferred to the respective reinsurance accounts in such proportions as the Secretary finds to be equitable. ADVANCES TO THE FUND SEC. 308. (a) There is authorized to be appropriated to a capital-advance account to be established without fiscal-year limitation in the Treasury for this purpose, $25,000,000. From any balance in such account there shall from time to time be transferred to the fund (or to any account within the fund), as advances of capital, such amounts as the Secretary determines are required for the purposes of the fund (or of such account within the fund). (b) Until all advances to the fund (or to an account within the fund) made pursuant to subsection (a) have been repaid through credits as provided in this subsection, the Secretary shall, at least annually, determine any balance in the fund (or in such account) in excess of an amount determined by the Secretary to be necessary for the requirements of the fund (or of such account), and such balance shall be transferred to the capital-advance account and the amount thereof shall be credited against such advances and shall again be available for advances pursuant to subsection (a). (c) At the close of each fiscal year, the Secretary shall pay into the Treasury from the fund (or from the appropriate account within the fund), as miscellaneous receipts, interest on the amount of any advances made to the fund (or to an account within the fund) pursuant to subsection (a) which has not been repaid as provided in subsection (b). The Secretary of the Treasury shall determine the applicable interest rate annually in advance, such rate to be calculated to reimburse the Treasury for its costs in connection with such unrepaid advances, taking into consideration the current average interest rate on outstanding marketable long-term obligations of the United States. PAYMENT OF REINSURANCE CLAIMS SEC. 309. (a) Any carrier claiming to be entitled to a reinsurance payment pursuant to the provisions of this title and according to the tenor of the reinsurance certificate shall furnish such proof of claim, upon such form, and within such period of time after the accrual of the claim as the Secretary may by regulation require. No judicial action on such claim shall be brought until such claim has been administratively denied by the Secretary, and the running of the period for the commencement of such judicial action against the United States specified in section 2401 of title 28, United States Code, shall, if such claim be filed within such period in accordance with this section, be suspended from the date of filing until the claim has been administratively denied by the Secretary and for sixty days thereafter: Provided, That such claim shall be deemed to have been administratively denied if not acted upon within six months after the date of such filing, unless the Secretary for good cause shown has otherwise agreed with the claimant. (b) Any claim for a reinsurance payment which is not paid within six months after proof of claim, as required by regulation, has been filed shall, except as to any amount which is tendered by the Secretary as admittedly owing or as a settlement of a disputed claim, bear interest at 4 per centum per annum until paid. (c) (1) Any claim for a reinsurance payment under this title which the Secretary finds to be due and payable, and any judgment of a court of competent jurisdiction based upon a claim for a reinsurance payment under this title, which judgment has become final and conclusive, shall be paid by the Secretary from any unobligated moneys in the fund or in the appropriate account chargeable therewith. (2) Whenever, for the purpose of a proof of claim filed pursuant to this section, the carrier's reinsurance claim for a given period is computed in whole or in part on the basis of an estimate of the carrier's benefit costs (as defined in section 305) incurred in such period but not yet due and payable or paid by the carrier, the Secretary shall not make final payment with respect to so much of such part as is based on such estimate, but in such cases the Secretary is authorized, in accordance with regulations, to approve tentatively, and to make a tentative payment on the basis of, so much of such estimate as the Secretary finds is reasonable and conservative, subject to adjustment in favor of or against the carrier when it is finally determined that such estimated costs either have become due and payable by the carrier or have not in fact been incurred, and the carrier shall be obligated, in the event of any such adjustment against the carrier, to repay to the Secretary, for the fund, the excess of the amount tentatively paid to the carrier over the amount finally found to have been payable to the carrier as reinsurance. (3) In cases in which the carrier's experience under the plan during the regular and extended periods of a reinsurance term is to be combined pursuant to paragraph (2) (B) of section 305 (e), the reinsurance contract may, if deemed appropriate by the Secretary, provide, pursuant to regulation, for making annually during the combined period a tentative determination on the basis of the elapsed portion of the combined experience and for making annual tentative adjustments on the basis of such determinations either in favor of the carrier or by refund to the Secretary (for payment into the fund), as the case may be, with a final adjustment and payment to or by the carrier after expiration of the whole of such continued period. Nothing in this paragraph shall be construed to limit the authority of the Secretary to proceed pursuant to paragraph (2) of this subsection upon the expiration of such combined period. (d) (1) For the purposes of this section, the question whether benefit costs have become due and payable shall be determined without regard to any extinguishment or reduction of liability of the carrier, under policies or subscriber contracts issued pursuant to the reinsured health service prepayment plan, by reason of the operation of, or proceedings under, Federal or State laws pertaining to bankruptcy or insolvency. (2) Reinsurance payments made under this title shall not be subject to distribution or application under any Federal or State law pertaining to bankruptcy or insolvency, except in satisfaction of claims for services or money payments arising under policies or subscriber contracts issued pursuant to the reinsured health service prepayment plan with respect to which such reinsurance was paid. INVOLUNTARY TERMINATION OF REINSURANCE SEC. 310. Upon any ground specified in regulations in effect not less than ninety days prior to the commencement of any initial or renewal term of reinsurance, the Secretary may, prior to the normal expiration of such term, terminate the reinsured status of a health service prepayment plan with respect to policies or subscriber contracts issued pursuant to such plan after a future date specified by the Secretary in the notice of termination. ACTIONS BY POLICYHOLDERS OR SUBSCRIBERS SEC. 311. No policyholder or subscriber under a policy or contract issued pursuant to a reinsured health service prepayment plan shall, by virtue of the reinsured status of such plan, be deemed to have any cause of action against the United States or the Secretary or any claim against the fund, but all such persons must look solely to the carrier. APPROPRIATIONS SEC. 312. For a transitional period of five fiscal years beginning July 1, 1954, there are authorized to be appropriated from the general fund of the Treasury such sums as may be necessary to defray the expenses of administration of this title. TITLE IV-MISCELLANEOUS LEGAL POWERS AND RESPONSIBILITIES SEC. 401. (a) With respect to matters arising by reason of title III, or such title as it may hereafter be amended, the Secretary shall, in addition to other powers conferred by this Act, have power (1) to enforce, pay, or compromise, any claim on, or arising because of, operations under such title; and (2) to enforce, pay, compromise, waive, or release any right, title, clair, lien, or demand, however acquired under such title. (b) The Secretary is authorized, on request or on his own motion, to hold such hearings and to conduct such investigations and other proceedings as he may deem necessary or proper for the administration of this Act and, in the course of any such hearing, investigation, or other proceeding, may administer oaths and affirmations, examine witnesses, and receive evidence, whether or not such evidence is admissible under rules of evidence applicable to court procedure. (c) The Secretary is authorized to determine the character and necessity of expenditures from the fund and the manner in which such expenditures are incurred, allowed, and paid, subject to provisions of law specifically applicable to wholly owned Government corporations. (d) In any action or claim against the United States arising under this title. the district courts of the United States shall have jurisdiction, without regard to the amounts involved, as in suits against the United States under section 1346 (a) (2) of title 28, United States Code, and in accordance with the procedures applicable to such suits. ACCOUNTING AND AUDITS SEC. 402. The Secretary shall, with respect to the financial operations arising by reason of title III (a) prepare annually and submit a budget program as provided for wholly owned Government corporations by the Government Corporation Control Act; and (b) maintain an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance with principles and procedures applicable to commercial corporate transactions, as provided by section 105 of the Government Corporation Control Act. ANNUAL REPORTS SEC. 403. The Secretary shall include in the annual report for the Department of Health, Education, and Welfare a complete statement with respect to operations under this Act and with respect to the status of the fund. CRIMINAL PROVISIONS AND INJUNCTIONS SEC. 404. (a) The Congress hereby finds and declares that any representation to members of the public, made in connection with the promotion of the business of a carrier or broker, or as a part of any policy or subscriber contract issued under a health service prepayment plan, that such plan or policies or subscriber contracts are reinsured under this Act or that such reinsurance has been applied for, even if such representation is in accordance with fact, would tend to mislead potential policyholders or subscribers into believing that such reinsurance is a guaranty of the standing and solvency of the carrier and of its faithful compliance with the policy or subscriber contract or that such policy or subscriber contract is superior to those issued under plans not so reinsured, and thereby to cause unfair competition with carriers which make no such representation or whose plans are not reinsured under this Act. The Congress, therefore, finds and declares that, in order to protect the public interest, safeguard the integrity of the purposes of this Act, and prevent the use of such representations for improper purposes, it is necessary to prohibit such representations except as authorized by and in conformity with regulations prescribed pursuant to this section. (b) (1) The Secretary shall by regulation prescribe the substance, forms, manner of display, manner of making, and manner of use of any sign, advertisement, or other representation, if any, which shall be authorized concerning reinsurance granted or applied for under this title. (2) Any carrier or broker, and any person acting or purporting to act for or on behalf of a carrier or broker, who, in or as a part of any policy or subscriber contract issued or offered by such carrier, or in connection with the promotion of such carrier's or broker's business, represents by any means or device whatever, except as specifically authorized by regulations prescribed pursuant to paragraph (1) of this subsection, that such carrier, or any of its subscriber policies or contracts, or the carrier's health service prepayment plan or plans under which such contracts or policies are issued or offered by it, are reinsured under this Act or that application for such reinsurance has been made, shall, for each such offense, be punished as follows: A corporation, partnership, association, or other business entity, by a fine of not more than $1,000; an officer or member thereof participating or knowingly acquiescing in such violation or any individual violating this subsection by a fine of not more than $1,000 or imprisonment for not more than one year, or both. (c) A violation of subsection (b) of this section may be enjoined at the suit of the United States Attorney, upon complaint by the Secretary or any person duly authorized by the Secretary. (d) Section 709 of title 18 of the United States Code (relating to false advertising and misuse of names to indicate Federal agency) is amended by inserting after the third paragraph thereof the following new paragraph: "Whoever falsely advertises or otherwise falsely represents by any means or device whatsoever, expressly or impliedly, that any insurance policies, subscriber contracts, or undertakings for the furnishing of, or payment for, personal health services, or the health service prepayment plan or plans under which such policies, contracts, or undertakings, are issued, offered, or assumed, are reinsured under the Health Service Prepayment Plan Reinsurance Act or that application for such reinsurance has been made; or". APPOINTMENTS ABOVE GRADE GS-15 SEC. 405, The Secretary, to the extent he deems it necessary and appropriate in order to carry out the provisions of this Act, is authorized to place not to exceed ten positions in grades above GS-15 without regard to the numerical limitations contained in section 505 of the Classification Act of 1949, as amended, but otherwise subject to the requirements of such section. EFFECTIVE DATE SEC. 406. This Act shall become effective on July 1, 1954, but nothing in this Act shall require the Secretary to receive or consider applications under title III before such date as the Secretary may determine. SHORT TITLE SEC. 407. This Act may be cited as the "Health Service Prepayment Plan Reinsurance Act". DEPARTMENT OF HEATH, EDUCATION, AND WELFARE, Hon. CHARLES A. WOLVERTON, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington 25, D. C. DEAR MR. CHAIRMAN: This is in response to your request of March 15, 1954, for a report on H. R. 8356, a bill to improve the public health by encouraging more extensive use of the voluntary prepayment method in the provision of personal health service. The bill would make available to the carriers of voluntary health insurance two forms of assistance, each separately financed: (1) Technical advisory, and informational services, without charge, to health service prepayment plans; and (2) reinsurance for health service prepayment plans for both commercial and nonprofit plans. Both programs would be administered by the Department of Health, Education, and Welfare. The bill would provide for a 12-member National Advisory Council on Health Service Prepayment Plans to advise, consult with and make policy recommendations to the Secretary. It also calls for optimum utilization of State insurance departments and other appropriate agencies. Title II would authorize a program of studies and advisory and informational services on organizational, actuarial, and other problems of prepayment plans. The study results and other material would be made generally available through publication and other appropriate means. On request by carriers and sponsors of prepayment plans, technical advice and information, including information on morbidity and on organizational methods, could be furnished to them. The actuarial data collected would also provide a firmer base for the determination of premium rates for the various risks and kinds of prepayment plans. Title III would establish a health service prepayment plan reinsurance fund, designed to be self-sustaining. The fund would be built up of reinsurance premiums and of earnings from investment of the fund. To provide a line of credit for working capital to the fund, the bill would authorize a $25 million appropriation to a capital-advance account to be established in the Treasury. From this 46789-54-2 account advances would be made to the fund when and as needed, and such advances would be repaid as the condition of the fund permitted but would remain available for future avances if needed. Interest would be payable to the Treasury on such advances until repayment. Any responsible, financially sound carrier operating in accordance with State law could apply for reinsurance of its plan. Prepayment plans would be accepted for reinsurance, and premium charges would be fixed, on an individual basis in accordance with criteria established by regulation. The conditions and terms of reinsurance would be fixed with the objective of encouraging experimentation with new types of policies, and extended benefits and coverage where they are needed. Reinsurance for any type or kind of prepayment plan could be provided only if in the Secretary's judgment reinsurance from private sources was not available on comparable terms and at comparable premium rates, to an extent adequate to promote the purposes of the act. Applying the principle of coinsurance, the fund's liability would be limited to 75 percent of a carrier's losses on a reinsured plan, after making a reasonable allowance for administrative costs according to a statutory formula. Federal liabilities arising under the reinsurance contracts would be limited to and paid from the fund. Appropriations for administrative costs from the general funds of the Treasury would be authorized for a transitional 5-year period. Criminal penalties would be imposed for falsely advertising or representing that a carrier is reinsured, and also, regardless of its truth or falsity, if the representation is not authorized by or fails to conform to regulations prescribed by the Secretary. A more detailed analysis of the major features of the bill, introduced in connection with the companion bill in the Senate (S. 3114), appears in the Congressional Record for March 11, at page 2877. This bill, if enacted, would carry out the recommendations of the President made in his state of the Union address on January 7, 1954, and repeated in his special message on health of January 18, 1954, for the establishment of a limited self-sustaining Federal reinsurance service to encourage private and nonprofit health insurance organizations to offer broader health protection to more families by reinsuring the special additional risks involved in such broader protection. For the reasons set forth in the President's message of January 18, this Department endorses H. R. 8356 and recommends its enactment by the Congress. Inasmuch as representatives of this Department have been invited to testify on this proposal before your committee on March 24, we will defer detailed comment on it until that time. We are advised by the Bureau of the Budget that enactment of this bill would be in accord with the program of the President. Sincerely yours, OVETA CULP HOBBY, Secretary. FEDERAL TRADE COMMISSION, Hon. CHARLES A. WOLVERTON, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington 25, D. C. MY DEAR MR. CHAIRMAN: This is in response to the request contained in your letter of March 15, 1954, inviting the Commission's comments concerning H. R. 8356, 83d Congress, 2d session, a bill to improve the public health by encouraging more extensive use of the voluntary prepayment method in the provision of personal health services. The jurisdiction of the Federal Trade Commission in insurance matters is limited by Public Law 15 (79th Cong., 1st sess., 38 Stat. 717; 15 U. S. C. A., sec. 45), to the enforcement of the Clayton Act and the Federal Trade Commissjon Act to the extent that such business is not regulated by State law. In this connection section 304 provides that the Secretary shall, prior to issuance of a reinsurance certificate, find that the applicant, among other things, "is operating and proposes to operate according to law" and the "manner of operation or proposed operation entitle it to public confidence." Such findings may affect the ability of this agency to carry out its enforcement duties under the acts mentioned. (See, for example, James S. Kirk & Co. et al. v. Federal Trade Commission, 59 F. (2d) 179, cert. denied 287 U. S. 663.) The same may be true as to other agencies having law-enforcement duties in this field. This suggests the desirability of amending section 304, by proviso or otherwise, in a manner which |