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Washington, D. C. The committee met, pursuant to adjournment, in room 1334, New House Office Building, Hon. Robert Hale, presiding.

Mr. HALE. The committee will be in order. The committee resumes this morning its hearings on H. R. 8356, the so-called reinsurance legislation.

Our witness this morning is Mr. John H. Miller, who is vice president and actuary of the Monarch Life Insurance Co., of Springfield, Mass.

Mr. Miller appears on behalf of three trade associations in the insurance field: The Health and Accident Underwriters Conference, Chicago, Ill.; the Bureau of Accident and Health Underwriters, New York; and the Association of Casualty and Surety Companies, New York.

I trust that Mr. Miller will explain the nature of these three organizations, what their respective membership is and to what extent, if any, the membership overlaps.

Mr. Miller is well qualified to talk on the subject of insurance. He was associated with the Metropolitan Life Insurance Co. from 1927 to 1929. From 1929 until 1933, he was associated with a firm of actuaries, and since 1934, he has been an officer of the Monarch Life Insurance Co.

We are pleased to hear from Mr. Miller, who is now recognized. Mr. Miller.


MONARCH LIFE INSURANCE CO., SPRINGFIELD, MASS. Mr. MILLER. Mr. Chairman and members of the committee, we appreciate this opportunity of appearing before you to give our views on this proposed legislation.

As the chairman has stated, I have been asked to appear on behalf of the three organizations named.

The Association of Casualty and Surety Companies is a trade association, a voluntary association, representing through its membership 112 fire and casualty companies, companies which conduct a general line of insurance other than life-fire, liability, compensation, and many of them health and accident insurance.

The second group is the Bureau of Accident and Health Underwriters, which represents many of these same companies and others

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as well in the field of health and accident insurance, both group and individually. The bureau has a membership of 89 companies. There is considerable duplication between the two. Perhaps as many as 60 or 70 companies are members of both.

The Health and Accident Underwriters Conference represents other health and accident insurance companies. Its headquarters are in Chicago and it includes in its membership many western as well as eastern companies. There are 205 company members of the conference and there is duplication of or overlapping, or common membership of about 25 companies between those 2. The total of the 3 memberships, without regard to duplications yields the sum of 406 companies, and without having made an exact count, we estimate that the actual companies represented by 1 or more of the 3 organizations total somewhat over 300. With respect to the conference, there are some fraternal societies among its membership and I believe reciprocals, as well as the regular insurance companies.

I should preface my remarks with the statement that I cannot speak for all of the members of these associations. There has not been time since the release of the bill for discussions aimed at reaching a consensus. My remarks today reflect the views of a representative group of insurance executives who have been able to get together to discuss the bill and agree upon this statement. We hope that it represents the center of gravity of the members of the three associations.

The administration's health program deals with important aspects of the sickness and accident costs of the entire Nation. Its primary emphasis is on the provision of services and facilities for treatment of illness or injuries. The program includes proposals for diagnostic centers and for specialized institutions to meet the specific needs of our chronically ill and aged citizens, the provisions of medical facilities for rural areas, programs for the rehabilitation of disabled persons, promotion of public health measures at the local level, and a study of improved income-tax treatment of medical expenses. We strongly favor the objectives of the program in general.

I would \ike to comment on the highlights of the program from an insurance viewpoint. Insurance is concerned with providing a means of easing the financial burden of medical services, rather than with providing the services themselves.

We are pleased that this program places major reliance on voluntary insurance as the most effective means of distributing the costs of sickness and accident. Insurance men are the first to recognize, however, that insurance does not reach every segment of our population.

Insurance is beyond the reach of those of our citizens who do not have the purse to pay the premiums; their needs we believe must be handled by assistance at the local level. The services of voluntary insurance have been less in demand in rural areas than in urban areas, in part because medical facilities have been less easily available in some country districts.

Insurance companies are continually studying the problem of providing more complete protection to a larger portion of the aged population and how to distinguish between those health-care costs of the aged which can be insured and those which cannot.

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Insurance among the aged is gaining in volume as companies are extending, or removing, the age limits and with the growing practice of continuing group insurance protection on retired persons. We must recognize, however, that other means must be used if the community is to help bear those costs to which insurance does not apply.

A result of adopting the voluntary approach is the necessity of recognizing the areas which insurance cannot reach. With this there must be acceptance, at least to some extent, of the use of subsidies in those areas. We believe that any such subsidies should be applied directly and openly and should not be obscured.

Furthermore, we strongly believe that they should be administered at the local level in proper perspective to the services available and to prevailing cost patterns, which vary from State to State, as well as between communities in the same State.

As insurance men we are well aware of the implications of the decision to place primary reliance upon voluntary insurance provided on a self-supporting basis. Most important is the necessity to expand as far as possible the areas in which insurance is effective and to minimize the areas which insurance does not reach.

Tremendous progress has already been made in that direction. Currently there are about 100 million Americans with some form of insurance against hospital expenses, or nearly 3 out of every 5. persons in the United States. Over 75 million have surgical expense insurance and nearly 40 million have insurance policies providing protection against medical expenses.

Gentlemen, these figures embrace all types of voluntary protection and I just noticed that a last-minute reading of this, after it was duplicated, that the word "policies” used in that last sentence might be misleading.

The figures referred to include not only group-insurance policies, group and individual, but Blue Cross and Blue Shield, and the comprehensive plans involving group practice. I just wanted to make it clear that that word “policies” was used in the broadest sense of meaning methods of protection.

Last year, through voluntary insurance of all types, our citizens received about $134 billion of benefits for hospital, surgical, and medical expense.

In addition, insurance companies alone paid over one-half billion dollars in income benefits for loss of time due to disability, a basic and essential protection against the economic costs of sickness and accident.

More significant, however, than the current extent and quality of coverage is the record of rapid growth and development in both respects, for we are concerned with reaching goals, more than with looking back over the road we have traveled. At the end of 1941, for example, there were slightly more than 16 million persons in the entire population with hospital expense coverage.

Today that figure has multiplied more than sixfold. Fewer than 7 million persons in 1941 had surgical expense coverage. That figure has been multiplied more than tenfold. Medical expense coverage, practically unknown before World War II, already covers about 40 million citizens. With this growth in numbers protected, there has also been an improvement in the quality and adequacy of the coverage, which I will comment upon later.

Another very important implication of the reliance on voluntary insurance, of which we are keenly aware, in the need for insurers to merit the confidence of the insuring public. Sickness and accident insurance in the past has been characterized by a constant improvement in the coverage offered and in the service provided.

Recent developments have made insurance men even more than normally aware of the progress which still remains to be made, and responsible insurers are seriously concerned with and are intensively studying criticisms voiced by the public. To some extent those criticisms point to areas where performance can and will be further improved.

To some extent they indicate some lack of understanding of what insurance properly can and should do. That very lack of understanding shows a need of an improved public informational program by accident and sickness insurers to advise the public how to make the most effective use of insurance facilities in preparing to meet the costs of accident and sickness.

Despite the tremendous progress in recent years in bringing better insurance to more people, it is only natural that there has been some impatience with the rate of growth. Perhaps you will recall the following pertinent observation in the testimony of one witness who appeared before this committee last October.

The only unhealthy aspect of the situation is the tendency of some people to see in progress only signs of incompletion. Those who think that if a thing is good, it should be provided now to everyone, do not understand that basic truth that human progress must needs be unending.

The voluntary insurers, while increasing the number of policyholders, have also improved the quality and adequacy of their benefits. During the past decade such improvement has been made more difficult by the rising level of medical care costs due to inflation. Average benefits, however, have increased at a more rapid rate than have the costs against which insurance is provided, so that there has been an effective improvement in the protection afforded. Also, limits of payment have been increased and the scope of available coverage broadened.

Grace periods are now common in accident and sickness policies; time limits on defenses or incontestable provisions after 3 years are provided in most policies currently issued; and the number and type of restrictions and exclusions have been materially reduced.

Furthermore, methods of bringing insurance services to more people have been and are being developed. Group insurance has been extended to smaller employer units, and more and more small employers with only 10—or in some cases even fewer-employees are purchasing accident and sickness insurance as part of their employee benefit plans.

In rural areas voluntary insurance is being actively distributed through such groups as consumer and marketing cooperatives, and other farm organizations. This is in addition to the successful efforts of insurers to sell individual policies to self-employed persons and others who are not members of any group. In 1952 there were 22 million persons covered for hospital benefits under individual policies, to mention only one type of benefit so provided.

Insurance-policy provisions have been liberalized and underwriting techniques improved in an effort to offer better accident and sickness

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