PRIVATE HEALTH INSURANCE in 1966 continued its expansion in the number of persons and services covered and in premiums and benefit expenditures. About four-fifths of the population under age 65 have private health insurance coverage of one type or another. Health insurance meets more than 70 percent of all consumer expenditures for hospital care but less than a third of consumer expenditures for all types of personal medical care. In 1966 private health insurance organizations entered on a new role-as fiscal intermediaries under the Federal Government's program of health insurance for the aged (Medicare).

COVERAGE

Up to the present, estimates of the number and proportion of the population having health insurance have typically run in terms of persons with some health insurance coverage of hospital care, surgery, and in-hospital physician visits. Private health insurance has now outgrown these conceptions. Today the extent of health insurance can be discussed adequately only in terms of the number and proportion of the population with some coverage of all the main types of personal health care, including at a minimum: hospital care; physician services for surgery, in-hospital medical visits, out-of-hospital X-ray and laboratory examinations, and office and home visits; dental care; out-of-hospital prescribed drugs; visiting-nurse service; private-duty nursing; and care in extended-care facilities and/or nursing homes.

For a complete picture, of course, other items of care should be added-for example, hospital outpatient care for accidents and emergency illness; prosthetic appliances (artificial limbs, braces, etc.); home health services other than nursing; eye refraction examinations and the provision of eyeglasses; ambulance service; and medi

*Division of Program and Long-Range Studies, Office of Research and Statistics. The author was assisted by Willine Carr.

by LOUIS S. REED*

cal rehabilitation to the extent that this service is not fully included in any of the foregoing. In other words a discussion of health insurance coverage should deal with all types of personal health care required for the prevention and cure of disease and the maintenance or restoration of health. To keep the discussion within manageable limits, this article will deal only with items of care listed in the preceding paragraph.

Only as short a time ago as, say, 10 years, many of the above-mentioned services or items of care were considered "uninsurable"-that is, it was thought that insurance against them could not be written with profit to the carrier or with advantage to the insured. One reason for this viewpoint was the presumed danger of adverse selection since the use of these services was considered to be so largely within the control of the individual. Another was that there was no real need of spreading the risk for such services since the costs could be foreseen or tended to occur in small amounts. Still another reason may have been the lack of knowledge of the extent to which the services would be demanded or their cost. Today all these services or items of care are being covered by health insurance organizations.

It has become necessary, then, to break out of former confining shells and to deal with health insurance for all of the main items of health care. This will be done henceforth in this series of annual articles on private health insurance.

This year's article makes a new departure in another respect. Because of Medicare, which began operations July 1, 1966, it is no longer fully meaningful to discuss health insurance in terms of the number of people of all ages with private health insurance protection. Formerly, to all intents and purposes, private health insurance was the only instrumentality through which the public could purchase health care on a prepayment basis or obtain insurance protection against its costs. Now virtually all persons aged 65 and over have substantial entitlement to hospital care, care in extended-care facilities, and certain home health services under the hospital insurance provisions

of Medicare, and approximately 93 percent of all aged people have some coverage of physicians' services (whether in the hospital, office or home), of certain home health services, and of appliances (artificial limbs, braces, etc.) under the medical insurance provisions. The private health insurance that most of the aged have is complementary to their Medicare coverage. Some of the aged (perhaps 20 or 25 percent) who formerly had private health insurance coverage have dropped it. Because of this new factor in the situation, meaningful discussion of the extent of private health insurance should henceforth be in terms of the numbers in the population under and over age 65, as well as the total for all ages.

Estimates of the number and percent of the population having some coverage of each main item of care as of the end of 1966 are summarized below and are set forth in detail in tables 1, 2, and 3.

It should be emphasized at the outset that these figures are estimates. They are approximations, since precise accuracy is not yet possible in this field. Second, the figures are based on the enrollment reported by or for the various types of health insurance organizations. Over the years such estimates have run consistently higher than the findings of household surveys by the Public Health Service and other organizations on the number of people with health insurance coverage. The margin of difference is now about 6 percentage points for hospital care and 4 percentage points for surgical service. It was formerly higher but was narrowed this year by a downward revision in the Health Insurance Association of America (HIAA) estimate of per

sons covered under the individual policies of insurance companies. Third, the data indicate only the number with some protection, and for certain services the degree of protection in terms of the proportion of expense covered by the insurance is quite slight.

According to these estimates 85 percent of all persons under' age 65 have some health insurance protection against hospital care and 78 percent have some insurance against surgical expense. The proportion with protection ranges downward for the other types of care to about 2 percent for dental care. Although substantial proportions— 40 percent and 36 percent-are shown as having some insurance against doctors' office and home visits and out-of-hospital prescribed drugs, the great majority of these are covered under "major medical" provisions that allow benefits only after the insured has paid a certain amount (a deductible) out of pocket. In any one year only a small proportion of covered persons would have any part of their expenses for these items covered.

Among persons aged 65 and over, 51 percent have private health insurance coverage of hospital care and 39 percent are covered for surgical expense. Before Medicare, approximately 60 percent of the aged (according to estimates based on enrollment reported by carriers) were estimated to have some hospital insurance coverage. It is plain that most of the aged who formerly had private coverage have continued it, though for benefits that complement those under Medicare. The figures reflect the fear of heavy medical expenses that many of the aged have and their strong desire for as good protection as they can obtain.

The extent of insurance protection is greatest for hospital care, surgery and in-hospital physician visits—that is, for services received by hospital bedpatients. A much lower proportion has protection against services or care outside of the hospital. The proportion with coverage against the cost of care in extended-care facilities or nursing homes and for visiting-nurse service or home health services-services that can reduce the need for hospital care is low. Since the major medical policies or contracts, which provide almost all of the coverage of doctors' office and home visits, uniformly exclude coverage of physician services for physical examinations and health check-ups,

1 In physicians' offices, clinics or health centers. Excludes those covered only in hospital outpatient departments or those covered only in accident or fracture cases or when services are followed by surgery.

2 Number covered for all conditions. Excludes those eligible for care only after hospitalization.

Excludes those covered for drugs only after hospitalization.

Assumes that all persons covered for private-duty nursing are also covered for visiting-nurse service.

Not estimated separately, in many cases coverage is jointly written.

Calculated by HIAA for hospital care, surgery, and in-hospital visits; for other services, derived from tables 2 and 3.

7 About 15 percent of this number not covered for home calls.

8 Calculated at 3 percent for X-ray and laboratory examinations and for office and home visits, zero for dental care, 2 percent for drugs, private-duty nursing, and visiting-nurse service and 1 percent for nursing-home care. HIAA estimates.

10 Based on Census estimate of 194,550,000 as of Jan. 1, 1967.

it follows that almost all of this health insurance is for the care of illness and very little gives any coverage of services for the prevention of illness.

Sources of the Data

These estimates are built up from data provided by or gathered for each of the three groups of health insurance organizations-the Blue Cross and Blue Shield plans, insurance companies, and the so-called independent plans (all organizations providing prepayment or health insurance coverage other than Blue Cross-Blue Shield plans or insurance companies).

The data on hospital and surgical coverage of the Blue Cross and Blue Shield plans have been furnished to the Office of Research and Statistics by the Blue Cross Association and the National Association of Blue Shield Plans. The data represent enrollment reported by the plans to the national organizations.1

The Office of Research and Statistics has been

1 For enrollment of individual plans and data by state, see Louis S. Reed and Willine Carr, Blue Cross-Blue Shield Enrollment and Finances, 1966, Research and Statistics Note No. 19, 1967.

responsible for the combination of Blue Cross and Blue Shield data. The figures for all other services are Office of Research and Statistics estimates, based upon data supplied by the two national organizations.

Both national organizations reported separately the enrollment for aged persons under coverage complementary to Medicare. Data from a previous study had shown the benefits provided by individual plans under complementary contracts. By considering the enrollment of each plan, it was possible to approximate the number of aged persons covered for each service and by subtraction to obtain the number of persons under age 65 so covered.

The data for insurance companies have been provided by the Health Insurance Association of America, an association of insurance companies writing health insurance. This organization annually makes surveys of all insurance companies writing group and individual accident and health insurance policies. In the survey for 1966, re

2 See Louis S. Reed and Kathleen Myers, "Private Health Insurance Coverage Complementary to Medicare," Social Security Bulletin, August 1967. This article summarizes a more detailed report now in preparation.

plies were received from companies writing 99 percent of all group business and 83 percent of all individual business.

The Association estimates the number of persons covered by nonresponding companies on the basis of their premium volume as reported to the State insurance commissions. From the gross total number of persons covered under group and individual policies a deduction is made for persons covered under more than one group policy or holding more than one individual policy or with coverage under both group and individual policies. The remainder represents the HIAA estimate of the net number of different persons with some coverage by insurance companies. The HIAA estimates have generally been confined to three services-hospital care, surgery, and what it calls "regular medical" (all persons so covered are deemed to be covered for physicians' inhospital visits). Insurance company coverage of the other services has been estimated by the Office of Research and Statistics from HIAA data.

The HIAA asked responding companies to provide data on the number of persons of all ages and the number of persons under age 65 covered for eight different items of care or types of cover

As estimated by HIAA for first three services; calculated at 5 percent for X-ray and laboratory examinations, office and home visits, prescribed drugs, private-duty nursing and visiting-nurse service, at 3 percent for nursing-home care and zero for dental care.

7 About 15 percent of this number not covered for home calls.

8 Duplication as shown in table 1, less estimated duplication among aged as given in table 3.

9 HIAA estimates.

10 Based on Census estimate of 175,880,000 as of Jan. 1, 1967.

age, with a breakdown of "regular medical" coverage into five subdivisions. From these data it estimated coverage for the three chief services, by age.3

There are now four types of "independent” plans: (1) plans operated by community or consumer groups; (2) plans operated by union welfare funds, employers, employee benefit associations, and unions; (3) plans operated by private medical and/or dental group clinics; and (4) dental care prepayment plans sponsored by dental societies.1

The Office of Research and Statistics is the sole source of national information regarding the number of persons covered by the first three types of plans. Its information is based upon surveys every 3 or 4 years of all known plans of these types, combined with data from surveys in the intervening years of approximately 30 of the larger plans that have a substantial share of the total enrollment. The last full survey of all

3 See High Points of Voluntary Health Insurance in the United States, as of December 31, 1966, Health Insurance Council, 1967.

4 A fifth type-medical prepayment plans sponsored by medical societies (other than Blue Shield), has become insignificant or nonexistent as such plans have affiliated with Blue Shield and thus ceased to be "independent."

In physicians' offices, clinics, or health centers. Excludes those covered only in hospital outpatient departments or those covered only in accidents or fracture cases or when services are followed by surgery.

2 Number covered for all conditions. Excludes those eligible for care only after hospitalization.

Excludes those covered for drugs only after hospitalization.

4 Assumes that all persons covered for private-duty nursing are also covered for visiting-nurse service.

known plans was made in 1965 and obtained data for 1964. The estimates for 1966 here provided are based upon the findings of that survey, adjusted for changes in the enrollment of the larger plans since then. Each of the surveys obtains enrollment data for all the services listed in table 1. The surveys made in 1966 and 1967 asked for separate data on enrollment of persons aged 65 and over.5

The data on persons covered by the dental society plans have been provided by the Division of Dental Health of the Public Health Service.

Extent of Duplication

There are appreciable numbers of persons who have coverage for specific services through more than one type of carrier-that is, they have Blue Cross and Blue Shield coverage and also have insurance company coverage, or they have cover

5 For more details, see Louis S. Reed, Arne H. Anderson, and Ruth S. Hanft, Independent Health Insurance Plans in the United States, 1965 Survey (Research Report No. 17) and Louis S. Reed and Willine Carr, Independent Health Insurance Plans, 1966, Research and Statistics Note No. 15, September 1967.

10 Based on Census estimate of 18,670,000 as of Jan. 1, 1967.

age by an independent plan and also by an insurance company, or some other combination. The extent of such multiple coverage has not been firmly established.

One basis for estimating the amount of multiple or duplicatory coverage is the findings of the Public Health Service in its 1962-63 survey of the extent of health insurance coverage. This survey found that 7.1 percent of those who had hospital insurance (who knew their type of plan) had such insurance with both a Blue Cross or Blue Shield plan and another plan (insurance company or independent plan). Of those who had surgical insurance, 5.4 percent had both Blue Cross-Blue Shield and another plan coverage. From these data it can be calculated that the extent of duplicatory coverage in terms of gross enrollment in all plans-Blue Cross-Blue Shield plans, insurance company policies (net enrollment), and independent plans-is 6.6 percent for hospital coverage and 5.1 percent for surgical coverage. Before applying these figures to gross

& Public Health Service, National Center for Vital Statistics, Health Insurance Coverage, United States, July 1962-June 1963, Series 10-No. 11, August 1964, and Health Insurance-Type of Insuring Organization and Multiple Coverage, Series 10-No. 16, April 1965.