ance against the costs of health care. Many of these coverages are available for both the head of the household and dependent members of his family.

Since health care benefits for the aged have received the most attention in recent years, I shall discuss this coverage first and shall follow these by comments on life insurance benefits, pension benefits, the relationship between efforts by the Government and efforts by the insurance industry in the areas under your consideration, and the John Hancock's program for its own retirees.

HEALTH CARE INSURANCE

At your Washington hearings you heard testimony by Mr. Follmann with respect to the role of voluntary health insurance in financing health care for the aged. It is obvious from his testimony that the insurance industry is well over the threshold of providing health care coverage for the older citizens, whose needs for coverage are even greater than those of the younger people. There is every reason to believe that the considerable expansion of health care coverage for older people which we have seen in the last 5 years will continue in the future provided Government does not discourage such continued efforts by the industry. For quite some time the John Hancock has had an interest in the continuation of group insurance coverage for retired lives and in 1954 published a brochure on this subject. The following quotation from the brochure will be of interest to you:

"This discussion of group life and group accident and health insurance for retired lives is intended as an outline of the problems involved in this increasingly important phase of group insurance. It gives an indication of some of the possible solutions. There are no general recommendations, as the insurance program of each individual employer requires individual attention. The combined services of John Hancock's field and home office staffs are available to give you this attention."

This brochure was sent to all of our group policyowners and prospects. It received a most hearty welcome. We immediately began to receive, and still receive, many inquiries as a result of it; and during the past few years many of our group policyowners have amended their group contracts to continue some health care insurance for employees and their dependents after retirement. The level of benefits provided cover a wide range. In some cases the full benefits available to active employees are continued after retirement. In other cases, where the employer must feel his way as to cost, the benefits are limited by using lifetime maximums or similar devices.

Health care coverage is also provided through the use of individual policies covering both the head of the household and his dependents. This coverage is a relatively new service for the John Hancock, which entered this field in 1957. About a year ago we removed the age restriction in the renewal clause from our hospital-surgical policies issued thereafter and guaranteed renewability of the policy for lifetime. At the same time we offered to amend any outstanding policy to incorporate the same provision. We have also been offering individual and family hospital-surgical policies to persons converting from our group policies irrespective of the insured's entry age or attained age.

Since Mr. Follmann in his testimony before your subcommittee in Washington described the seven principal methods being employed by insurance companies to provide protection for the aged against the costs of medical care, I shall not repeat them. He also reviewed the recommendations made to its member companies by the Health Insurance Association of America in December 1958. In general, these recommendations urged the insurance industry to continue to expand both group and individual health care coverages at the older ages as rapidly as possible consistent with sound underwriting. These recommendations show that the insurance industry is well aware of the problems of the aged and its responsibility in this area.

LIFE INSURANCE

While much of the discussion of the insurance needs of the aged has been directed toward the need for health care coverage, very little mention has been made of life insurance and pension benefits which are certainly an integral part of the overall financial protection enjoyed by aged and aging people. In the six New England States alone there is more than $32 billion of life insurance in force under individual and group forms. Most of this insurance will provide financial security in later years for widows and other dependent members of the

family of the deceased worker whether death occurs before or after retirement. In addition, life insurance and pension plans frequently provide an income upon the insured's disability. The settlement options contained in life insurance policies allow a wide range in the methods in which the proceeds can be made available. The proceeds can be used in a lump-sum when needed or to provide a variety of supplements to other forms of retirement income available to such people. Most individual life insurance policies provide both cash and loan values. The insurance industry does not encourage its policyowners to borrow against or surrender their policies, but the value are there if they should be needed to help pay the costs of a medical or other emergency. A common provision for waiver of premium releases income for other needs during disability. This again demonstrates the flexibility available through voluntary insurance products. Certainly any evaluation of the financial needs and assets of our aged must be made with proper recognition of the extent of life insurance coverage.

PENSIONS

A substantial amount of the financial resources of the aged will be provided through voluntary pensions, insured, or otherwise. Some idea of the value of these pensions may be seen from the fact that the John Hancock alone holds over $14 billion of assets in the group annuity branch which will eventually be paid out in the form of retirement income. While this represents almost onefourth of the John Hancock's total assets it is still a relatively small part of the total amount held by all insurers and corporate pension plans to finance pension benefits.

Massachusetts employers are keenly aware of the value of providing retirement benefits for their employees. In 1955, I had the privilege of serving on the Special Commission To Study and Revise the Laws Relating to Retirement Systems and Pensions of the Commonwealth of Massachusetts. In this connection, I had occasion to write to over 100 of the largest employers located throughout the Commonwealth and engaged in all types of industry. I presented a typical wage history of two employees whose final salary would be $4,000 and $8,000, respectively, and asked these companies to tell me what pension benefits their existing voluntary plans would provide. Of the 68 companies that replied, 2 had no formal pension plans; the other 66 companies provided pensions to their career employees which averaged slightly in excess of 50 percent of final salaries. This figure does not include any recognition of social security benefits also available to these people.

We recognize that testimony given before your subcommittee indicates there remains a large number of people who are not presently covered by voluntary pension plans. The insurance industry is continually striving to bring pension plans to more people. Efforts in the same direction are also being made by banks and other trustees of self-administered pension plans. You may be interested to know that in its efforts to provide a beter product for group pension policyowners, the John Hancock has actively sought passage of legislation in Massachusetts that would enable insurance companies to invest more of their group annuity assets in equity-type investments. Experience in recent years has shown that group policyowners want to fund their pension plans under an arrangement whereby larger investments are made in equities than are permitted under many State insurance laws. Similar type legislation has been enacted in Connecticut, and we hope that it will be enacted in Massachusetts in the near future.

SUMMARY

As I have indicated above, the insurance industry provides many forms of benefits and financial protection for older people I have indicated that health care insurance is but a partial answer to the financial problems of the aged. It must be viewed in relation to life insurance and pension programs, as well as outside income, savings, and other assets, social security and the extent to which there are family members available to help. We are confident that insurance company services will continue to play an ever-increasing part in caring for the aged. In order to accomplish this, it is necessary that the public be motivated to look upon these forms of savings and protection as having a high priority in their everyday budgets along with food, rent, and other essentials of life. The extensive well-trained sales organizations of the insurance industry are a powerful influence in this direction. I will mention shortly some steps which the Government might take in the same direction.

Of course, there will always be with us a certain segment of the population, both active and retired, which is indigent. For these people State and local aid may be required. We all hope that the size of this segment of the population will be held at very low levels, but we must recognize that such a group does exist today.

One of the areas deserving of attention by the subcommittee is the relationship between the role of voluntary insurance and the role of Government in providing for the aged. This obviously is an area which involves many philosophical questions. However, it seems to me that the Federal Government can take certain fundamental steps, as follows:

(1) Adhere to a fiscal policy that will preserve the purchasing power of the dollar. Many of the problems of the aged arise from an unstable currency system where inflation constantly erodes the value of fixed dollar income. Working people's wages tend to reflect changes in the cost of living and in some cases are the direct cause of a change in the cost of living. The retired person usually does not have a comparable method of increasing his income.

One of the problems in designing health-care coverage for the aged and in convincing employers of the desirability of the purchase of such coverage for their retired employees is the uncertainty of the size of the cost commitment. This problem would be considerably alleviated by a stable dollar, since inflation is one of the reasons why hospital and medical-care costs have risen over the years.

(2) Maintain an income-tax philosophy which encourages people to save now for the needs of retirement. For instance, we are all familiar with the provisions in our current Federal income-tax laws which encourage the individual to join with his employer in seeking security benefits. The substantial amount now being taken by the social security tax out of the first dollars of income and by the income tax out of the latter dollars of income leave relatively less for an individual to spend for himself on personal security.

Furthermore, the income-tax laws encourage the purchase of group insurance and pension benefits for an individual by his employer. A step in the direction of encouraging savings for retirement by individuals who are self-employed would be the passage of the so-called Keogh bill. If a further step in the direction of encouraging personal thrift were taken by allowing tax deduction to employee contributions under a voluntary pension plan, it might readily result in the reversal of the trend away from contributory plans and in higher total pension benefits.

(3) Keep benefits under the OASDI system at a floor of protection level and encourage, rather than discourage, private enterprise in its efforts to provide additional income and protection for those wishing to procure it. The social security program, while it does have a contingency reserve invested in Government debt, is essentially on a pay-as-you-go basis and does not provide capital for business expansion. On the other hand, voluntary pension plans, with their large amounts of advanced funding of benefits, and life insurance plans, with their substantial reserves, provide a vast source of moneys for investment in private industry. You have heard prior witnesses touch on the shift from an agricultural economy to an industrial one during recent decades. In the former, it was largely the younger generation which supported the older one, using land passed on to them to a large degree by the older people. In the industrial economy funds accumulated during an individual's working years to provide retirement benefits are invested in such things as factories, machinery, tools, transportation equipment, land development and other facilities for increased productivity. All of these facilities are passed on to the younger generation, just as was the land and shelter in the agricultural era, and they increase the capacity of that generation to support the older group. As the number of retired individuals increases in relationship to the working population, a continuing increase in productivity is the only real assurance we have that the country will be able to properly recognize and care for the needs of its aged population. This line of reasoning was forcefully stated by Secretary of the Treasury Robert B. Anderson in a recent speech in Philadelphia, when he said:

"The proper role of Government is to provide an atmosphere conducive to growth, not to force unsound and unsustainable growth through direct intervention in markets or through an improvident enlargement of the public sector of the economy. Governmental efforts to promote growth that rely on, or subsequently lead to, excessive intervention in and direction of market forces can in the long run only impede the kind of growth that is desirable and sustainable."

In evaluating the contribution of insurance and pension plans to the economy of the Nation in which the aging and aged have such a vital interest, we must not overlook the substantial tax revenue derived by both the Federal and State Governments from the private insurance industry. For 1958 the life insurance industry alone will have paid Federal income taxes of approximately $500 million in addition to approximately $250 million in premium taxes to the various States and municipalities.

In conclusion, I think you might be interested in my own company's efforts to aid in the retirement problems of its employees over and beyond the purely financial aspects of the pensions and continuing group life, hospital expense and surgical expense insurance which are provided after retirement. These efforts begin almost with the day of employment and extend through every decade of life. In our personnel department we maintain an active employee counseling unit to which employees are encouraged to bring personal problems of any sort on which they feel they need help. This unit has operated in such a way that the employees have come to expect help rather than preaching, and its services are sought rather extensively by both active and retired employees. The counselors encourage employees to think of and plan for their retirement long before they reach the retirement age, including such things as the development of outside hobbies and activities, planning housing which will meet continuing as well as temporary needs, utilizing the company's salary allotment plan for budgeting premiums on individual insurance and annuity policies to provide additional income in the later years and taking advantage of the biennial physical examinations which are made available to home office employees who are 40 years of age or older. Retired employees are encouraged to use the services of the counseling unit. In fact some of them have come to look on it much as a college graduate does the alumni office when visiting his old alma mater. Help is given in securing either voluntary or paying part-time work for those who want it and are able to do it. Once a year all retired employees are invited to a luncheon with the officers of the company held at the home office. The turnout is excellent and it is an inspiring affair. Recreational and dining facilities of the home office are open to retired employees whenever they are in the vicinity. They are kept posted on affairs of the company and their former coworkers through a weekly mailing of the "Home Office News," our publication for employees. Through these means a retired employee is kept a part of the company as long as he lives.

We maintain this program not from a feeling of paternalism but from the firm conviction that it is proper and sound business procedure. Incidentally, you would be surprised at the number of grandchildren who have come to our employment offices and the number of purchasers who have sought out our product because of it. Granted, our program may be one of the more advanced ones; however, we have had many inquiries about it and have reason to believe that more and more employers are moving in this direction.

STATEMENT OF EDWARD A. GREEN, VICE PRESIDENT, JOHN HANCOCK MUTUAL LIFE INSURANCE CO.

Mr. GREEN. Thank you very much for the opportunity to appear before you and the subcommittee.

I have submitted a formal statement which I appreciate your putting in the record. I have prepared about a 10-minute condensation. Senator MCNAMARA. Very good, sir.

Mr. GREEN. My appearance today is to discuss the work which is being done by the John Hancock and other New England insurance companies in our efforts to meet the needs for financial protection for the aged and aging. This matter is of vital concern to us and since approximately 200,000 persons in New England depend on the insurance business for their livelihood, it becomes a matter of great importance to the entire New England economy.

FINANCING HEALTH CARE

Since the need for health care benefits for the aged has received widespread attention, I shall discuss this area first. I will then comment briefly on the role played by life insurance and voluntary pensions in meeting the security need of the aged and will conclude with a few recommendations for your consideration, and a brief explanation of the John Hancock's program for its own retirees.

The life insurance industry provides many important services which have developed and expanded over the years. You have heard about the diversity of the security needs of the aged; they don't fit any single pattern. Obviously no single coverage or service accommodates these diverse and varying needs.

Income for retirement, death benefits, income replacement during periods of disability, many forms of insurance against the cost of health care are all provided in our wide portpolio of coverage.

Mr. J. F. Follman, Jr., of the Health Insurance Association of America I believe talked to you in your Washington hearings. He furnished you with statistics showing the significant advances which our industry has made in recent years in extending health care coverage to older age groups.

I would like to point out that if our health care coverages were not designed properly to meet the needs which exist, they would not be purchased. With continuing research and development of health care coverages even greater advances are being made in this direction.

For quite some time the John Hancock has had an active interest in the continuation of group insurance coverages for retirees. Back in 1954 we printed up a pamphlet which we sent to all our group policyholders and prospects. It was a book which discussed the continuation of coverage which was available and which stated we would be prepared to provide this service to these policyholders who wanted it. Since that time, many of our group policyholders have shown a keen interest in the subject and have amended their contracts to continue health care insurance for employees and dependents after retirement. We also provide health care coverage through individual policies. This is a relatively new service for the John Hancock which first entered this field in 1957. About a year ago we removed entirely the age restriction in the renewal clause from our hospital-surgical policies issued thereafter and we guaranteed renewability of these policies for lifetime. At the same time we offered to amend any outstanding contracts to incorporate the same provisions so that anybody who purchased the benefit earlier could get the same advantage of lifetime renewal.

We also have been offering individual and family hospital-surgical policies to persons converting from our group policies irrespective of the insured's entry age or attained age.

Mr. Follman described the Health Insurance Association of America's 1958 recommendations made to its 265 member companies to further increase the protection of the aged against the cost of medical care. I believe that the serious attention and resulting efforts which the John Hancock has given to them is representative of the attitude of the entire insurance industry toward meeting its responsibility in this area.