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The CHAIRMAN. I think that you are referring to a very important factor.
Now, what do you think about a standard which has been set up in that original bill that the policy must provide for 6 months' hospitalization during any year?
Now, I am asking this question with this thought in mind, that as you have had a discussion of the whole subject matter and the assistance of individuals who were well qualified to express opinions from the standpoint of experiences that they had gained, I am hoping that if such did take place that you could give us that particular thought.
Again, I emphasize that I do not want the answer to be taken as a positive assurance or as a statement as to what would happen if the discretionary form of the bill were adopted.
Mr. PERKINS. I think I would like to ask again Dr. Keefer or Mr. Stuart as to whether or not they would feel that a regulation concerning a fixed period of hospitalization would be desirable or whether that, too, would be something that even in regulations we would want to leave flexible.
The CHAIRMAN. Should the policy provide for 6 months' hospitalization during any year?
Dr. KEEFER. In my opinion, sir, the standards should allow for the greatest possible flexibility. In some instances you may want to have a policy that would continue hospital benefits for a year. In other plans it might very well be quite acceptable for the plan to include 120 days. That could be based mainly on experience in various plans and in different areas.
Mr. PERKINS. Without knowing much about it, I will just amplify Dr. Keefer's statement. I would guess that I as an individual policyholder might want to buy a policy that said I could be hospitalized for a year, or two, consecutively, rather than having 6 months out of any one year kind of a proposition, and I would suppose we would not be prepared to say which type would be better, at least at this time.
Mr. STUART. I think that we are really, Mr. Chairman, speaking as individuals who are interested in the problem that the basic period of coverage be adequate to cover all ordinary types of hospital admission, and we are tending toward either a 70 or 120 day basic period.
Then, in addition to that, we think that we would urge that some arrangement be made for long term, longer term than 6 months, longer than a year if necessary in individual cases with some conditions or deductible provisions.
The CHAIRMAN. What would you think of a provision that would require a subscriber to pay a dollar per day, or 5 percent, whichever is less, of any hospital bill. You see the purpose of the standard that I refer to.
Mr. STUART. In the voluntary nonprofit prepayment field we are coming to recognize the need in some areas for some conditions and some deductibles, but on the basic coverage, or days of coverage, we hope not to have to have conditions or deductibles, but we may be forced to have them.
Mr. PERKINS. The objective of the reinsurance program, we think, should be to stimulate broader and better coverage and benefits. To require that the carrier insert coinsurance or deductible provisions of this type in the plan would seem to me to go counter to this objective.
If any standard on this matter should be established—there should, I think, be no statutory standard-it should point in the opposite direction, that is, it should probably place limits on the kind of deductible or coinsurance provisions that could be inserted in a plan eligible for reinsurance. This could be done under section 303 (a) (1) and (5) of H. R. 8356.
The CHAIRMAN. What do you think of a standard that a policy must provide for payment of 75 percent of cost of 12 doctor visits at home or office during any year excluding the first visit?
Shall I read the question again?
What do you think of a provision that a policy must provide for payment of 75 percent of cost of 12 doctor visits at home or office during any year excluding first visit?
Mr. STUART. I think, Mr. Chairman, we have to in this field of voluntary prepayment plans, arrange for payment of such visits with some deduction of the first or maybe the first 2 or possibly the first 3 visits. I think it might go beyond the number which you mentioned.
Mr. PERKINS. The standard you are asking about has two aspects:
First, it would require 25 percent coinsurance with respect to the first 12 doctor visits, plus an exclusion of the first visit: and second, it would place a limitation on the number of doctor visits for which any payment could be made.
With respect to the coinsurance aspects, again, I certainly do not think we would want to fix any standards insisting upon a specified coinsurance percentage or the exclusion of a particular number of visits. On the second point, we would also not want to create a standard which limited the number of visits for which protection could be provided.
These kinds of limitations might well be necessary, in a bill such as H. R. 6949, which is a bill providing for matching of reinsurance premiums out of general revenues of the Federal Government and which reinsures individual claims. These limitations, in that type of bill, afford a certain measure of protection to the Federal Government as the reinsurer.
On the other hand, under a bill such as H. R. 8356, such limitations seem wholly inappropriate. Under the program we propose reinsurance premium rates would be actuarially determined. They would probably be higher for very liberal plans. In any event, an actuarially determined reinsurance premium would reflect these matters and, therefore, there would be no necessity of establishing statutory maxima and other restrictions on the benefits which a reinsured plan could provide.
The CHAIRMAN. Do you think that the policy should provide for payment of 95 percent of the cost of medical services in hospitals?
Mr. STUART. I am not sure who would pay the 5 percent.
The CHAIRMAN. I say, do you think that the policy should provide for payment of 95 percent of the cost of medical service in hospitals ?
Mr. STUART. I think there are better ways of covering it than on a portion of the cost basis. I think that the initial cost should be borne by the carrier and if it is a long time illness, that then there would have to be some cognizance either on a percentage or an additional basis.
The CHAIRMAN. Now, getting away from the comparison of the two bills, and the questions I am asking now are of a more general character.
Do you think that there should be a provision as to cancelability at the discretion of the carrier?
Mr. PERKINS. We are still, sir, I assume, talking in general terms, not talking specifically, and just generally as to policy?
The CHAIRMAN. That is right.
The CHAIRMAN. I am trying to ask questions that I think the average person is interested in and will want to know our thinking in the matter. It might be that in connection with some of them that we would feel that it should be made a part of the bill. So that these questions I judge are questions that are likely to be asked by individuals, judging by the correspondence that I have had, any number of questions can be asked.
Mr. PERKINS. Well, we think that every effort should be made to encourage carriers to provide noncancelable contracts and certainly no contract should be cancelable simply because somebody becomes ill. You will note that section 303 (a) (7) of H. R. 8356 specifically mentions cancelability as one of the items as to which the Secretary might fix standards.
However, I do not think we are prepared at this time to say positively that no plan with cancelable policies should be eligible for reinsurance.
The CHAIRMAN. I would like to call to your attention a very worthwhile editorial that appeared in the News, Washington News, March 17, entitled "The Right Idea" on health insurance, and the feature that they particularly referred to and emphasized is that “we advocate that one ironbound condition be written into the bill now pending before Congress :
“No health insurance policy should be reinsured unless it is noncancelable."
I could read further from the editorial, but that expresses in a few words their views and in respect to that, I think that those are the views of the multitude of letters that have been received as a result of the article written by Colonel Grove.
What exclusions or limitations with regard to preexisting conditions on the part of the insured should be tolerated in policies which are reinsurable ?
Mr. PERKINS. Well, generally, as I understand it, Mr. Chairman, group contracts, very few of them have any exclusion or limitations as preexisting conditions.
I also understand that individually written contracts normally do. Certainly, generally, all carriers should be encouraged to waive preexisting conditions after a reasonable period of time.
H. R. 8356 would, in section 303 (a) (2), expressly authorize the Secretary to prescribe, as a condition of reinsurance, safeguards against undue exclusions of health services or health conditions or other undue exclusions or limitations. Here, again, we would have a general indication of congressional policy without an attempt to set rigid standards by law. Obviously, the implementation of this authority, especially for individual types of policies, may be difficult
and complex and will require extensive study and consultation with the Advisory Council and interested groups and organizations. There are many possible variables involved, and flexibility and room for experimentation in this program are essential. Mr. Stuart, do you care to comment on the matter?
Mr. STUART. I think the regulations could cover that; not in the bill, but in the regulations.
The problem I think has to do primarily with the individual enrolled person, not in a group, and there are in most cases, I think, these preexisting inclusions now. Many of the organizations waive that after 1 year or after some fixed time, and I think that type of program where there is a waiver of those conditions, again is preferred by the language of the bill and I think would be again preferred in the administration of the act.
The CHAIRMAN. Should policies be reinsured which do not become incontestable after being in force for a specified minimum period ?
Mr. PERKINS. I think I answered a question somewhat similar to that, that generally group contracts are now incontestable after being in force for a specific minimum period and again, individually written contracts have in them provisions as to the incontestability.
Again, we would certainly hope that by regulation or otherwise all carriers could be encouraged to write only policies that become incontestable after being in force for a minimum period of time.
And, I do think that certainly that something should be in the regulations along those lines.
The CHAIRMAN. Should policies be reinsured which do not provide for a specific minimum amount of benefits, that is, for each day in a hospital or for each doctor's visit, for example, and a specified minimum length of time during which benefits should continue?
Mr. PERKINS. I think that minimum benefit standards would be desirable. I do not think that it would be feasible to set them in the law itself, however, considering all the variables and imponderables involved. Careful consideration would have to be given in this connection to the various types of plans and carriers we would wish to reinsure, to distinctions between group plans and individual enrollment perhaps, and possibly even to different geographic areas. It seems obvious, therefore, that the matter can be dealt with adequately only by regulation, and that these may have to be changed from time to time in the light of experience and of the development of voluntary health insurance in this country.
To furnish both general policy guidance and flexibility, section 303 (a) (1) of H. R. 8356, as quoted in the Secretary's testimony, stresses the objective of expanding the types, range, amount, and duration of benefits covered by prepayment plans, and section 303 (a) (2) would specifically authorize the Secretary, as a condition of granting reinsurance, to prescribe "minimum ranges of health conditions to be covered by the plan [and] minimum provisions as to the kind, quantity, and duration of health services to be covered or provided under the plan * * *.” Any regulations developed pursuant to this provision should be designed to assure that prepayment plans provide for adequate benefits as to range, amount, and duration. It would certainly not be promoting the purposes of the act to reinsure plans that did not provide for such adequate benefits.
The CHAIRMAN. Should policies be reinsured which do not contain a provision for waiver of premium in the event of prolonged illness?
Mr. PERKINS. Well, certain basic coverage should provide for care during ordinary length of illness. Catastrophic illnesses or major medical care programs should be specifically encouraged under the bill.
The bill is designed to encourage more comprehensive plans which will in themselves protect the families against prolonged illnesses and the economic burden attendant thereon, and waiver of premium in the event of illness should definitely be included as a part of the objectives.
I think that some regulation along that line might be a desirable thing.
The CHAIRMAN. Should policies be reinsured which do not limit additional charges made by hospitals or doctors over and above benefits payable under policies to a specified percentage in excess of benefits payable under policies?
Mr. STUART. It is a very good question, Mr. Chairman. Of course, in the Blue Cross, Blue Shield Service plans, any additional charges made by the hospital are limited by the contract between the processor of service, that is, the hospital and the doctor, and the plan. So that is taken care of in those plans, where you have a complete service program and in the Blue Shield program it is taken care of in those plans that have this special feature up to a minimum amount of family income per year and beyond that the doctor can make an additional charge.
Under that the payment to the doctor is payment in full.
Now, for the other programs, the cash indemnity programs, where the benefits received are in amount of money, why, there could be no limits on the additional charge made by those that provide the services, since there is no privity of contract between the providers of the service and the plan.
Mr. PERKINS. I would like to say there
Mr. STUART. It would seem that if we are in the overall approach to this program, that this bill contemplates, it might not be wise to attempt to limit the amount that could be paid or could be charged by the provider of the service above the indemnity payment provided by the carrier.
Mr. PERKINS. Perhaps it would be well to state that so far as we are concerned, the administration does not favor any attempt on the part of the Government to regulate the practice of medicine or administration of medicine, or the charges of physicians. To the extent that such a regulation might do that we would not be in favor of it.
On the other hand, I am by no means sure whether reinsurance of a plan which, unlike the usual commercial policy, provides for paying a scheduled charge to the provider of specified medical services under an agreement with the carrier, yet leaves the provider free to make an additional charge to the subscriber, would promote the purposes of the act. There is nothing in H. R. 8356 which would require that such a plan be necessarily made eligible for reinsurance. The question here would not be how much a physician should charge for given services but rather whether we should reinsure such a plan which does not provide for meeting the physician's entire charge through the prepayment method. Whatever the answer, it would not in my judgment