Mr. BENNETT. It certainly would not want to continue on an unprofitable basis.

Mr. PERKINS. Certainly not for long.

Mr. BENNETT. Now, most of our insurance companies, particularly our large insurance companies, have been in business, some of them as long as the Government has been established, and they have had a lot of experience in this field.

Now, I assume the reason they have not gone into a particular program of this kind to date, is based primarily on the fact, or two facts: First, that the premiums they would have to charge would make it impossible to sell the policy or if they put the premium at a level to be salable, it would be unprofitable to them.

How much consideration has been given to a situation of that kind? Mr. PERKINS. Well, we do not think that the fact that insurance companies are not in certain fields means that they cannot and will not go into those fields. It is a question of time, to a large extent. They have not had the experience in those fields, and insurance companies are, by nature, conservative. They have to be. Their whole operation is based upon experience.

Now, until they develop the experience which takes many years of just inching further into new areas, until they develop that experience, they cannot launch a full-scale plan in a new area.

Mr. BENNETT. Now, let me ask

Mr. PERKINS. Will you excuse me, sir, until I finish this thought? Mr. BENNETT. Yes.

Mr. PERKINS. But, we think this will speed up the process by giving them something which is in some respects a substitute for experience, by giving them this reinsurance, so that they can take the risk and move faster than they otherwise would.

Mr. BENNETT. Let us take one particular feature of health or hospital insurance, or any other system that you wish to take. Give me an example of the kind of things, of the better insurance, and the wider coverage of insurance you expect will result if this legislation is adopted.

Mr. PERKINS. If I may, I would like to refer to the statement that was made by the Secretary on that score, because I do not think I can improve on it. She said on page 13 of her statement-this is at the very bottom of the page:

For example, perhaps the number of exclusions from coverage under certain forms of health policies can be reduced.

Mr. BENNETT. Now, what does she mean by that?

Mr. PERKINS. Well, as you know, many policies today contain certain exclusions, that is, as to certain types of diseases, and illnesses, and it was hoped the number of those could be reduced.

Mr. BENNETT. Give me an example of some?

Mr. PERKINS. Tuberculosis, mental diseases

Mr. BENNETT. Do you feel that in cases where tuberculosis and similar types of chronic diseases are presently excluded, that the adoption of this bill will be an incentive for those companies to provide

such?

Mr. PERKINS. Precisely; an incentive. We do not want to go any further than that. We do not want to say that the bill will of itself remove such exclusions. It depends on what the insurance companies

do. But, we do think it will encourage them to do exactly that type

of thing.

Mr. BENNETT. Why is it that they are not doing it today? Is not the answer obvious?

Mr. PERKINS. I would like to have Mr. Stuart answer that, because I am sure he can do it better than I can.

Mr. STUART. Many organizations now are covering tuberculosis and nervous and mental conditions for a limited period of time. Practically all of the Blue Cross plans do so; or if the treatment is carried on in general hospitals, many of the insurance companies do it also; but there are general limitations in that area of that type of condition or diseases. With tuberculosis, nervous diseases, and mental diseases, there are also other limitations as to conditions that now exist when you take the coverage. This is true in all, or practically all, individual contracts, and in some group contracts. It is the hope of the Secretary that in some group contracts some of those preexisting limitations might be removed.

Mr. BENNETT. I understand that is the hope, but I am just wondering about it as a practical matter. You are in the insurance business at the present time.

Mr. STUART. We have made tremendous progress in the last 10 years in removing those conditions. Now, most of the larger group companies do not have, for example, a preexisting condition clause in any group contract, and few of the Blue Cross contract plans have. Originally, we all had.

Mr. BENNETT. In your Blue Cross plans there is no fixed premium on those and you have raised the premiums from time to time and have raised—I am not saying that you should not have done so-but over the period of years your premiums for Blue Cross have been increased substantially.

Mr. STUART. That is correct, simply because we are paying the hospitals on the basis of their costs and their costs have increased. In other words, so far as the subscriber is concerned, his bill is still being paid in full under the Blue Cross program, because we pay the hospital in full.

Mr. BENNETT. Now, you can do that up to a certain point, that is, the Blue Cross or similar types of organizations can increase their premiums to meet the increasing liabilities they have; but you reach à saturation point sometime on that particular thing.

Mr. STUART. We have often thought that we had.

Mr. BENNETT. You have thought that you had.

Mr. STUART. I say that we have often thought that we had, but apparently we had not. The insurance companies do the same thing. Their rates are increased as their benefits must necessarily increase to meet the needs of their groups.

Mr. BENNETT. Most of them are not as flexible, so far as increases are concerned, as health insurance.

Mr. STUART. That is correct.

Mr. BENNETT. Or hospitalization.
Mr. STUART. That is correct.

Mr. BENNETT. Well, Mr. Perkins, can you give any other specific examples?

Mr. PERKINS. Well, the Secretary's next comment was "Perhaps the benefits can be made far more comprehensive as to total limits,

thereby providing better protection against major medical expenses." Now there, she was thinking, as you know, that policies often contain protection for a specified number of days in a hospital. The hope would be a gradual increase in that limit on the number of days.

Mr. BENNETT. Do you think this legislation would help to, or would cause insurance companies to, provide on a wider scale the so-called policies that cover unusual or catastrophic medical expenses? Mr. PERKINS. Very definitely; yes, sir.

Mr. BENNETT. What makes you say that?

Mr. PERKINS. Well, I understand that type of risk is something that the insurance companies have been reluctant to undertake and that if they were given the assurance that 75 percent of their abnormal losses in any given year would be taken up by another party in return for the payment of a reasonable premium, it might influence them then to undertake that risk.

Mr. BENNETT. I have some other questions, Mr. Chairman, but I will defer them until later.

Mr. PRIEST. Will the gentleman yield?

Mr. BENNETT. Yes.

The CHAIRMAN. Mr. Priest.

Mr. PRIEST. Mr. Perkins, has there been up to this time any preliminary studies as to the possible range of reinsurance fees? Mr. PERKINS. Yes, sir; there has been.

Mr. PRIEST. Fees that should be paid by the carriers into the reinsurance fund?

Mr. PERKINS. Yes, sir; there has been. The Chief Actuary of the Social Security Administration, Mr. Robert J. Myers, who is here with me, has done some preliminary studies looking into that line.

We have ascertained through his preliminary studies, made on the basis of certain assumptions, that the range of reinsurance premiums might go all of the way from something on the extreme low side of a quarter of 1 percent to, on the extreme high side of 4 or 5 percent. Mr. PRIEST. Well, now, Mr. Perkins

Mr. PERKINS. Excuse me. That is of the total premium income of carrier for the reinsured plan.

Mr. PRIEST. The total premium income?

Mr. PERKINS. Yes.

Mr. PRIEST. Now, let me ask this question: Suppose an application for reinsurance is filed by a carrier. Of course, before there is an approval, the Secretary must make a number of findings and there will be promulgated certain regulations and criteria of standards which will have to be met in a general sense. So all reinsurance fees will vary, according to the application. It might be one percentage for one carrier and a different percentage for another carrier. Mr. PERKINS. Very definitely.

Mr. PRIEST. It will not be a flat fee applicable to all carriers. Mr. PERKINS. No, sir. Mrs. Hobby indicated in her statement, at page 9:

This bill does not specify a statutory premium rate. Rather, reinsurance premiums would be fixed at different rates for the different health service prepayment plans to be reinsured, so as to reflect, in accordance with actuarial principles, the respective hazards involved.

Mr. PRIEST. On the type of coverage and the number of other elements that might enter into the situation.

Mr. PERKINS. Exactly.

Mr. PRIEST. Mr. Chairman, I will not ask other questions at this point, but, Mr. Chairman, may I make this suggestion? I hope at some point during the hearings, while Mr. Perkins or some of the members of the Department staff are with us, we can get a statement as to the point by point procedure in the development of this program, at one particular point in the hearings. I will not ask for it at this time, but I hope we can get a detailed brief and concise point by point statement of procedure, assuming that the bill is enacted; that it becomes a law, then what will follow, point by point, step by step.

The CHAIRMAN. To make it effective.

Mr. PRIEST. To make it effective. I will not ask for that at this time, Mr. Chairman.

The CHAIRMAN. Yes. Mr. Perkins referred to the chief actuarial officer of the Department, Mr. Robert J. Myers. I am glad to say for the benefit of the members of the committee that in my opinion, and this is based on an observation of Mr. Myers over a long period of years, there is no one that I have greater confidence in than I have in him. That does not necessarily apply to the point that you would be agreeable to everything, because whether you can agree to a thing sometimes depends on the amount of knowledge you have, but as I have found Mr. Myers over a period of years, I have found him one of the most careful, most conscientious, and most dependable officers in our Government in the particular field in which he has been active, and I thought I would like for the committee to know what my experience with Mr. Myers has been over the period of years, and I am very much pleased to learn of his interest in this particular bill.

Mr. MYERS. Thank you, Mr. Chairman.

Mr. PERKINS. The Department is highly honored by your statement, Mr. Chairman.

Mr. PRIEST. I will yield the floor, Mr. Chairman.

The CHAIRMAN. Any further questions, gentlemen?

Mr. PELLY. Mr. Chairman.

The CHAIRMAN. Mr. Pelly.

Mr. PELLY. I would like to ask if there has been any enthusiasm on behalf of the carriers since this idea was developed.

Mr. PERKINS. I do not think we ought to try to speak on behalf of the carriers, Mr. Pelly. We have had various informal comments from the people, but no official communications from any carrier, and I think that it would really be inadvisable for me to try to represent their opinion.

Mr. PELLY. You will let them speak for themselves.

Mr. PERKINS. I hope they will come before you, and I know some of them are scheduled to come before you.

The CHAIRMAN. Mr. Pelly, if you will yield for a moment, I will call to your attention, and also that of the committee, that tomorrow we will expect to have representatives from the American Hospital Association, and the Blue Cross Commission, and on Tuesday we will have the representatives of the Life Insurance Association of America. We will have representatives of the Health and Accident Underwriting Conference, and on Thursday the American Federation of Labor, and on Monday, April 5, the American Medical Association, and I might say that we are arranging further schedules for others

who wish to be heard; but that is all I can indicate today. I think that that will indicate to you that before we have finished these hearings we will have every segment we are able to contact who have any interest in the legislation of this kind to be present, the desire being that we shall know all we can in favor of and any objections that may be made to the legislation, or what modifications if any might be suggested, to the end that we will have as nearly perfect a bill, in the event the committee reports a bill.

Mr. DOLLIVER. May I make an inquiry at this point?

The CHAIRMAN. Yes, Mr. Dolliver.

Mr. DOLLIVER. Do I understand that no representatives of any individual insurance companies or representatives of group insurance companies are appearing?

The CHAIRMAN. Those that I have mentioned represent groups of insurance companies.

Mr. DOLLIVER. But not individuals.

The CHAIRMAN. Yes, I am inclined to think from the correspondence that we are having some individuals will be here. As I said we have not yet completed the list, so I cannot answer that until later, after our list has been completed.

Mr. PELLY. Mr. Chairman.

The CHAIRMAN. Mr. Pelly.

Mr. PELLY. I will proceed because I only have one more question. I think it is fair to say that probably the reason that there is some doubt, or lack of enthusiasm about the program is because nobody knows very much about it. I know I have heard from my own Blue Cross, which I have a very high regard for, and they have indicated that they do not think that they would need it, and I am just assuming that comes from the fact that they really do not know very much about it yet.

Mr. PERKINS. I think that that is a very fair statement.

Mr. PELLY. I think it will be very interesting to have the testimony of these areas as this hearing progresses, because it is certainly a pioneering program and interests me a great deal.

I have wondered sometimes whether it would not be a little cheaper to take a Lloyds' policy, as we had an example of in previous testimony, paying $3,000 for a million dollars worth of coverage in the New Jersey Blue Cross; but it may be this would be a cheaper program and be enthusiastically received.

Thank you, sir.

The CHAIRMAN. As an indication of interest, Mr. Pelly, this pile of mail that I have before me there is just what came in yesterday. So you can see from that the very great interest there is in this subject and that has pretty good reference to one feature of the bill in which people are asking for legislation to be helpful to them.

Mr. PELLY. That is quite interesting, because not very many people

know much about it.

The CHAIRMAN. You would be surprised. If you will come into my office and help answer the mail, I think you will find that there is a tremendous number of people who are interested in it.

As I said yesterday, I know of no subject in all of the years I have been a Member of Congress that has created so much interest as this particular legislation has.