The estimates of net enrollment are those of the HIAA.

The figures for insurance companies for the years 1953-65 differ from those previously reported by the HIAA. The estimates of coverage under individual policies were revised downward because of drastically reduced figures for one large company. (This company, which had not responded to the HIAA questionnaires for 195865, submitted figures for 1966 much lower than its reported enrollment in 1953-57.)

The estimates for hospital and surgical coverage for 1962 and 1959 are a little higher (about 5 and 4 percentage points respectively for the two services for 1962 and 4 and 2 percentage points for 1959) than the estimates of the Public Health Service for these years based on its household surveys of the extent of health insurance coverage. The difference between the two sets of figures could be the result of overreporting of enrollment by some health insurance organizations, underestimation of the extent of duplicatory coverage, or underreporting in the household surveys of the Public Health Service. The figures are more closely in agreement than in the past because of the above-mentioned downward re

vision of the HIAA figures for insurance companies. In any case, it should be understood that the figures in tables 5 to 7 are estimates and that they may possibly overstate the extent of health insurance enrollment by a few percentage points.

It is evident that during the forties and early fifties there was an exceedingly rapid growth of private health insurance and that since about 1957 hospital coverage has grown at a slower pace, with surgical and in-hospital medical coverage gradually approaching the enrollment level for hospital coverage.

Over the years, as shown in table 8, the share of Blue Cross-Blue Shield plans in the total gross enrollment of all organizations has declined and the share of insurance companies has grown, although changes have been quite minor since about 1961. The share of independent plans in total enrollment has consistently declined.

Enrollment for other coverages.-Table 9 presents estimates of the number and proportion of the population covered for services other than hospital care, surgery, and in-hospital medical visits in 1962, 1965, and 1966. The rapid growth of coverage of these services is evident.

Enrollment under major medical policies of in

surance companies and under major medical and extended benefit contracts of Blue Cross-Blue Shield plans has grown rapidly (table 10).

Group-Practice Plans

Special interest attaches to the enrollment of plans that provide service through group-practice units of physicians and/or dentists. The 1965 survey of all independent plans found that in 1964 there were 196 plans providing service through group practice. Twenty-eight of these plans were operated by community-consumer groups, 147 by employer-employee-union units, and 21 by private group clinics of physicians and/or dentists. Total enrollment for hospital care was 2.7 million, for surgical service it was 3.5 million, and for office, clinic, or health center visits 3.8 million.

Returns from 17 of the larger group-practice plans included in the 1967 survey of independent plans provide a good basis for estimating 1966 enrollment of all group-practice plans. The estimates for four principal services are tabulated below, by type of plan.

inauguration of Medicare in July 1966. At that time all the Blue Cross plans in the United States and a few insurance companies became intermediary fiscal agents (for the paying of hospitals) under the hospital insurance provisions of the program and slightly more than half of all Blue Shield plans and 14 insurance companies became fiscal intermediaries under the medical insurance provisions.

It is not possible to state specifically how many aged persons are in effect served by the various types of intermediaries under Medicare since, with one exception,13 intermediaries are not responsible for a designated population but handle claims for certain providers of service (hospitals) or for services provided in given areas.

Of the 6,680 hospitals in the country participating in Medicare, approximately 90 percent have named a Blue Cross plan as their intermediary for obtaining reimbursement of the cost of hospital care provided to aged beneficiaries. It may therefore be roughly estimated that Blue Cross plans are serving as intermediaries for approximately 90 percent of the 18.8 million aged population entitled to hospital insurance benefits.

Some 17.6 million aged persons were enrolled for medical insurance benefits as of July 1, 1966. It may be roughly estimated that of these, Blue Shield plans are serving approximately 9.6 million persons, insurance companies 7.6 million, and independent plans about 0.4 million.14

Under the State programs of medical assistance (title XIX of the Social Security Act) or other State assistance programs a considerable number of States have asked Blue Cross or Blue Shield plans or in a few cases insurance companies to serve as agents for payment of hospitals and/or physicians. The Blue Cross Association estimates that approximately 4 million persons were being served under such arrangements at the end of 1966. (Many of these are also included

13 The exception is the Travelers Insurance Company, which handles medical insurance claims for all railroad workers (and their dependents)-about 761,000 persons -who are eligible for old-age benefits under the railroad retirement program.

14 Only one independent plan is serving as a fiscal intermediary for an area-Group Health Insurance, Inc., for Queens County, New York. Approximately 23 "independent" group-practice prepayment plans provide physician services under Medicare and are reimbursed directly by the Social Security Administration on a cost per annum basis for covered services per enrolled beneficiary.

in the count of persons served under Medicare.) Blue Cross plans estimate that they serve another 770,000 military dependents and retired personnel under the Defense Department's civilian health and medical program for the uniformed services.

The National Association of Blue Shield Plans reports that at the end of 1966, Blue Shield plans served 11,190,000 persons under fiscal arrangements. This total includes persons served under the medical insurance provisions of Medicare, under State medical assistance and other State public assistance programs, and the program for military dependents.

In addition to insurance company operations under Medicare and a few State public assistance programs, one company is serving about one-third of the military dependents for hospital care under the uniformed services' civilian medical program and other insurance companies are acting as fiscal intermediaries for payment of physicians in various States under that program.

It is difficult to make an unduplicated count of persons served by private health insurance organizations under fiscal intermediary arrangements, but it is obvious that the total is large and adds a new dimension to the role of private health insurance.

FINANCIAL EXPERIENCE

In 1966 all private health insurance organizations in the United States had a total subscription or premium income of $10.6 billion. They paid out 86.5 percent in providing benefits, used 14.4

percent for operating expenses, and had a net underwriting loss of 0.9 percent. It is probable that most or all of this underwriting loss was offset by investment income (income from investment of reserves), but data on such income are not available for all carriers. These data relate only to the regular or private operations of the organizations—that is, they exclude receipts and expenditures as fiscal intermediaries or providers of care under health insurance for the aged (Medicare) or other Government programs. The financial experience of each type of organization is presented in table 11.

Blue Cross and Blue Shield Plans

The data for the Blue Cross and Blue Shield plans were compiled from individual financial statements for all plans submitted to the Office of Research and Statistics by the Blue Cross Association and the National Association of Blue Shield Plans. Duplication resulting from the fact that seven plans are both Blue Cross and Blue Shield plans and submit identical data to both national organizations has been eliminated. The figures for Blue Cross plans include data for Health Services, Inc., an insurance company wholly owned by the Blue Cross Association, and the figures for Blue Shield include those for Medical Indemnity of America, an insurance company wholly owned by the National Association of Blue Shield Plans.

Together the Blue Cross and Blue Shield plans had a total income of $4.4 billion and subscription

income of $4.3 billion; the difference between the two figures represents mainly interest or other investment income on reserves. Aggregate reserves at the end of 1966 amounted to $1.05 billion. Blue Cross paid out 93.4 percent of subscription income in benefits (payments to hospitals and other providers of services), used 4.9 percent for operating expenses, and had a net underwriting gain of 1.7 percent of subscription income and a net income of 3.2 percent of total income. (Net income becomes an addition to reserves.)

The Blue Shield plans paid out 88 percent of subscription income in the provision of benefits, used 9.7 percent for operating expense, and had a net underwriting gain of 2.2 percent of subscription income and a net income of 3.7 percent of total income. The higher operating expense ratio for Blue Shield than for Blue Cross reflects the fact that medical claims are more numerous than hospital claims, that their handling is more complex and that premium income per covered person is considerably less.

Both the Blue Cross and the Blue Shield plans had a lower claims expense ratio and a higher operating expense ratio in 1966 than in 1965. Both changes reflect the impact of the Medicare program. The claim expense ratio is lower because (1) beginning in July 1966 the plans were freed of the losses formerly incurred on aged subscribers (before Medicare aged subscribers did not pay their way and were heavily subsidized by younger subscribers) and (2) the new complementary coverages were priced so that the experience would be favorable. The higher operating expense ratio (in earlier years the trend had been consistently downward) probably reflects the expense of offering new coverages to aged subscribers and of serving as fiscal intermediaries under Medicare. The plans are reimbursed for all costs incurred for services rendered under Medicare, but the new load on personnel and facilities probably caused at least a temporary increase in the cost of carrying on their regular business.

the Health Insurance Association of America for estimated premium income and losses incurred under the health insurance business of insurance companies as distinguished from their disability or wage replacement business. Unfortunately the reports that insurance companies make to the State Insurance Commissions on group and individual "accident and health insurance," as this general type of insurance is called, do not provide a breakdown between health and disability coverages. The HIAA annually provides such a breakdown to the Office of Research and Statistics that is based on the HIAA annual surveys of insurance companies, its surveys of benefits paid by type of coverage, and the Spectator aggregates for all accident and health insurance. The operating expense ratios under both group and individual policies are calculated by the Office of Research and Statistics and are taken from or derived from the aggregates compiled by the Spectator Company for virtually all companies writing accident and health insurance.15

The data show that in 1966 insurance companies under group health insurance policies had a premium income of $4.0 billion, paid out $3.7 billion in claims (93.1 percent), had operating expenses that amounted to 12.8 percent of premium income, and incurred a net underwriting loss of $234 million, equal to 5.9 percent of premium income. Probably all or a major portion of this underwriting loss is offset by investment income from reserves. No precise data on such income are available. The substantial underwriting loss on group health insurance business in this and previous years (it was -5.5 percent in 1965 and -4.6 percent in 1964) tends to suggest that the companies are subsidizing their health insurance business from their disability and life insurance business.16

Premium income under individual health insurance policies was $1.6 billion; 54.4 percent was paid out in claims, 43.2 percent used for operating expense, and the net underwriting gain was 2.4 percent.

The HIAA estimates that premium taxes, licenses, and fees paid by insurance companies

Insurance Companies

The data for insurance companies are estimates and are based largely upon figures supplied by

BULLETIN, NOVEMBER 1967

15 1967 Health Insurance Index, The Spectator, Philadelphia.

16 Similarly compiled data on group disability insurance show a net underwriting gain of 16.3 percent of premium income.