This heterogeneity is unique in our Nation. It has never existed in any other nation at any other time. These plans compete with one another. There is no monopoly by any means. And the experience of one profits all the others. In this heterogenous approach, there is a high degree of flexibility and a many-sided choice which is presented to the individual in determining how he shall protect himself against medical care costs. I think it is extremely important to recognize this unique circumstance in our Nation.

The insurance companies today employ, in the main, seven different approaches to insuring older people. One is the continuation of the health insurance coverage on older active workers is a group. This practice today is, I should say, general.

The second method is the continuation of group insurance on retired workers and their dependents, generally with part or all of the premium paid by the employer. Most insurance companies today make this coverage available. Its growth has been very rapid. For example, one large writing company has recently reported that 99 percent of the employees covered under its major medical group contracts have provision made for the continuance of coverage into retire

ment.

A third approach which is used is generally referred to as the right of conversion. That is the right on behalf of the individual to convert his group insurance coverage at the time the coverage ceases by virtue of retirement or otherwise. Today probably half the insurance companies make this right available and the proportion of persons having this right has been increasing rapidly.

The fourth approach, is that of writing group insurance on people who are already in the advanced ages. Several companies have been writing associations of retired people, of retired teachers, retired civil servants, and members of the Golden Age Clubs.

With respect to individually purchased insurance, coverage into the retirement years happens in three ways. One is the continuance into the later years of individual insurance purchased in the productive years. Today, a great many insurance companies make this coverage available. Most of those which do will renew the coverage for life. Many write coverages which are guaranteed renewable for life. The benefits include hospital expense benefits, special hospital service benefits, surgery, physicians, in-hospital visits, and some coverage for physician home and office visits.

The next approach with respect to individually purchased insurance is the new issuance of policies at the advanced ages. A great many companies today are making this coverage available. The age limits to which they will write this coverage vary, with some limiting it to 70, some to 75, and many between 75 and 85. Recently two prominent companies have been widely advertising the availability of coverage to older people, regardless of the conditions of their health. A number of companies have been known to make available to persons over 65 coverage which is guaranteed renewable for life. One large company is known to include nursing home care in the coverage, this being a quite recent development.

The final approach is the issuance of insurance which becomes paid up at age 65, with a recognition that some of the aged may

find it difficult to pay premiums after the production years have

ceased.

The foregoing are the seven methods employed by insurance companies. Many of the other types of voluntary health insurance which I have mentioned use at least some of these methods.

Senator MCNAMARA. Let me ask you a question at this point. How much does it cost when a person converts his insurance from a group plan? How much is the increased cost at age 65, generally? Mr. FOLLMANN. I do not believe there is any general answer to that, Senator McNamara. It would depend upon what the converted coverage is. I am under an impression that there are those plans where the cost remains the same.

Senator MCNAMARA. Well, there are some plans we hear about, advertised on radio and television programs, which indicate that the price at 65, on the continuation of the program that has been in effect until 65, generally is at least 50 percent higher, and generally the benefits are lower.

Now, this is my personal impression, and I have not made any study of it. I do not know whether you would be able to say that this was approximately true or not true.

Mr. FOLLMANN. I believe that is one of the reasons why some of the insurance companies have hesitated to proceed with what we call the conversion privilege. We have much more interest in coverage which will continue into retirement automatically.

Senator MCNAMARA. These are new plans, generally, just now coming on the market?

Mr. FOLLMANN. In the main in the last 5 years.

Senator MCNAMARA. In not very great numbers until more recently, I believe.

Mr. FOLLMANN. That is correct. Certainly the studies by the superintendent of insurance of New York in 1957 showed that the big progress had been made in 1955 and 1956.

Would you like me to go on?

Senator MCNAMARA. Yes.

Mr. FOLLMANN. The fact that these plans have been making headway is rapidly becoming more apparent. There are the estimates as of 1957, one by the National Opinion Research Center, that 39 percent of those over 65 had voluntary health insurance. In that same year, the social security administration shows that 43 percent of OASI beneficiaries had coverage. However, it is important to recognize, when you examine a breakdown of some of these latter figures, that for single female beneficiaries age 80 and over, 32 percent had coverage. Now, I think that in itself is a remarkable fact, when you consider that when those folks, in 1947, were 70 years old or older, only 30 percent of the entire population of the country had health insurance; the bulk of that being in the productive years. I think it is a remarkable fact to find that as of 1957, 32 percent of single female beneficiaries over age 80 had health insurance protection.

Then there is the matter of evaluation of even these figures. As has been noted here this morning, particularly by Dr. Goldmann, there are those persons whose medical care is taken care of by other means. The large proportion of these, of course, are those who are public welfare recipients and who as such receive medical care with

out cost to themselves. In addition, there are the many others, some of whom have been mentioned, who receive medical care without cost to themselves. These include care provided through the Veterans' Administration and other Government agencies, through local public and private agencies, to the members of the Armed Forces, to seamen, to members of religious orders; and the care which is provided as a matter of professional courtesy. And then, of course, there are those who by virtue of their income, their accumulated assets, or their family resources, may consider that they have no need for the purchase of health insurance.

These are real factors in the minds of people, and this has been shown by several studies.

Therefore, we feel that a more reasonable estimate of the number of persons who would have a use and a need for, and who would want voluntary health insurance in 1957 and who had such coverage would have been 51 percent. Today our rough estimate would indicate that this would be about 56 percent. And here a conclusion reached by Health Information Foundation in their recent study is of interest, when they note that voluntary health insurance among the people over 65 has been growing at a much more rapid rate than among the population generally.

Senator MCNAMARA. What is the name of that?

Mr. FOLLMANN. Health Information Foundation.
Senator MCNAMARA. Is that a new organization?

Mr. FOLLMANN. No. It is at least 10 years old, to my knowledge.
Senator MCNAMARA. Health Information Foundation?

Mr. FOLLMANN. That is right. They have made many studies of some interest in this field.

In addition to these data, I think it must be recognized that today the insurance companies have become aware of the necessity for expanding this coverage. This was exemplified by a resolution on the part of our association on December 8 of last year. I will not read the details of the resolution, although they are in the prepared statement. In the main, they go to the advancement and more rapid acceleration of the continuation of coverage into the later years.

In addition to that, of course, there is the increasing recognition of the American people of the need for and the value of voluntary health insurance, and much more important, with respect to the aged population, is the inherent delayed reaction in the number of people under 65 having health insurance. That is today about three-quarters of the population in the productive years. There is certainly a reasonable assumption to be made that there will be some relation between that figure and the proportion of future aged who will be covered.

Therefore, it is our estimate that by the end of this year, about 60 percent of those aged who have a need for health insurance will be covered; that this would grow to about 65 percent at the end of 1960, and to about 80 percent in 1965.

The entire voluntary health insurance mechanism, I believe, today is completely aware of its responsibility, and I believe it accepts this challenge with quite a show of energy and confidence, which cannot help but produce good results.

Senator MCNAMARA. I thank you very much for your statement. I think that conclusion is one that we are very glad to have. I hope

43350-59-pt. 1-15

we can see some more tangible evidence of their work in this field in the near future, because this is something that we have all been more concerned with recently. We can understand the insurance companies' approaching it after a great deal of research and study, and certainly the actuarial figures and all the rest are not easy to obtain. We recognize it takes time.

We are fortunate in having with us today Mrs. Ida Merriam, director, Division of Program Research, Social Security Administration, as a technical consultant.

Did you have a statement?

Mrs. MERRIAM. No, I did not, Senator. I am here for any questions I might help answer.

Senator MCNAMARA. Are there any questions on the part of the panel who want to question each other? Or are you satisfied that the record is fairly well straight?

Go right ahead.

Mrs. ELLICKSON. We would be very much interested in any information Mr. Follmann can give us for the insurance industry on the nature of this voluntary health insurance coverage, because it is very hard to get this information. Much of this coverage we know is only for a few weeks, or there is a low lifetime ceiling, as in the General Electric Co., where, if people have not had 10 years of service, they do not get anything, and from 10 to 15 years they get it with a $1,000 lifetime ceiling for a couple; and yet they get counted as having this coverage. And some breakdown that would give an idea of whether voluntary health insurance means more than a few dollars would be very helpful to us in evaluating this.

Senator MCNAMARA. You might answer for yourself.

Mr. FOLLMANN. With respect to all insurance coverages this must be recognized: The insurance company or the voluntary health insurance mechanism, whatever its form, can only make the coverage available. The purchaser, be he an employer, a labor union, or an individual, makes the choice of the coverage he would like to have.

With respect to group insurance coverages, this choice may be made by the employer, and it may be made as a part of the collective bargaining agreements. Therefore, there can be a broad difference between what the insurance company will write and what is purchased.

Now with respect to the individually purchased coverages, I do have some rough information which was obtained by searching through several volumes of standard data which are available. For example, there are at least 65 insurance companies which make available individual policies of insurance which pay $20 to $25 per diem for room and board in the hospital. There are some 138 companies which will offer 60 days or more of hospital coverage, which we know of. We saw 11 in some of these listings which will insure up to 365 days and 2 which will insure up to 500 days.

The majority of the plans which we looked at contain a special hospital service benefit-that is, the miscellaneous benefits in the hospital other than the per diem room and board charge of $200 or more. And the majority had surgical schedules of $300 or more. That is as much information as I have available, but I believe it does serve to indicate that within the scope of voluntary health insurance there is available to the American public quite adequate coverage.

Senator MCNAMARA. I think the question of whether it is adequate or not can be debated, and I am sure you will agree with that. But we had some testimony yesterday that indicated that about 15 percent of the people who came under the old-age and survivors insurance plan had their policies canceled at age 65. They suddenly were without insurance at a time when it was hardest for them to get insurance and doubly hard for them to pay the premium. So we are very much concerned with this thing. And your information today I am sure is very valuable, and we are going to have our staff go into it in much greater detail, because I do not think that it is generally recognized that there is in existence these plans that you refer to.

Mr. FOLLMANN. I believe that is correct, Senator McNamara.

I think it can be found that this matter of cancellation is a diminishing one, and that this is not so characteristic of insurance coverages made available by the insurance companies today.

For example, in our searching through the data, we came across 31 companies which made available coverage which is guaranteed renewable for life. And these are all large companies. This coverage is available throughout the United States.

There were another 58 who, while the contract is cancellable, today voluntarily restrict their own right to refuse renewal for the reason that the health of the policyholder has deteriorated. So that, again, the sort of coverage you speak of is available.

Senator MCNAMARA. Thank you very much. That is very interesting testimony.

Any further questions?

Dr. GOLDMANN. I should like to ask Mr. Follmann whether he would be willing to say something about three questions which in my opinion are important.

The first has to do with the quality of service rendered to the people. Now, the commercial insurance companies pay bills. That is all they do, and that is all they want to do. There is evidence that a substantial amount of second-rate care is rendered, and recent studies in New York City and in other parts of the country have provided documentary evidence of that. Now are the insurance companies going to accept this in the future? This situation?

Question 2

Mr. FOLLMANN. Could I comment on that first, Dr. Goldmann? Dr. GOLDMANN. Let me give you all three, because they are interlocked.

Item 2: There is evidence of excessive hospitalization, which means extraordinarily high cost of benefits. That is due to the fact that services outside the hospital are either minimized or excluded. I am wondering how long the commercial insurance companies are going to pour money into unnecessary hospitalization.

Item 3: Are the commercial insurance companies willing to be in open and free competition with such outstanding organizations_as the group-practice prepayment plans; for instance, the Health Insurance Plan of Greater New York, Permanente on the west coast, and many others, which are based on the three principles I stated earlier and thereby are able not only to maintain high quality but also to reduce unnecessary hospitalization and with it the total cost? I would like to hear how you feel about this whole situation.