STATEMENT OF ROBERT T. EVANS, PRESIDENT, BLUE CROSS PLAN FOR HOSPITAL CARE OF HOSPITAL SERVICE CORP.; ACCOMPANIED BY ROBERT M. REDINGER, VICE PRESIDENT

Mr. EVANS. Senator, I have prepared a digest of my testimony which I have before me.

For the record, I am president of Blue Cross Plan for Hospital Care, of Hospital Service Corp., a not-for-profit organization with headquarters in Chicago, and 21 branch offices throughout Illinois.

Our plan operates under the laws of the State of Illinois and certificates and rates must be filed with and are subject to approval of the Illinois State Department of Insurance.

In reply to Senator McNamara's letter of April 7, 1964, I would like to discuss the five points outlined, as they relate to our Illinois Blue Cross plan.

The first point: Availability of coverage and number of older people covered.

There has never been any age limit for joining through 16,000 firms in Illinois, which sponsor our Blue Cross plan. Many of these allow retirees to remain as members through the group after they retire or reach age 65. We also have a special group program for farmers and people in small communities. A substantial number of these persons are over 65 years of age. In addition, we offer special enrollments in our over-65 Blue Cross plan. One of these enrollments will be held later this spring.

As a result of all Blue Cross activities, a total of 274,308 people, or 1 out of every 4 persons over 65, in Illinois, is now a member of our Blue Cross plan.

The second point: Ability of older persons to retain membership. "Once a member, always a member" has been the principle upon which our Blue Cross plan has operated. It has never been our policy to terminate membership because of use or condition of health.

When a Blue Cross member leaves a group for any reason, including retirement, he is given the opportunity to convert to individual membership. Present individual members who reach age 65 may become members of our special over-65 plan.

The third point: Adequacy of coverage.

The service benefit ideal of Blue Cross is especially important because it follows the advances of scientific research as reflected in modern hospital care. We feel that when you start with this service benefit principle, the question of adequacy of benefits is answered positively. The principle is also embodied in our special over-65 plan, which provides 30 days of hospital service benefits in a semiprivate room for each hospital confinement.

In the other complete testimony there were examples of some of these

cases.

A study of all of the 7,223 cases paid during 1963 for our over-65 plan members shows that 6,375 or 88.3 percent of these persons were discharged from the hospital, before they had used the full 30 days of benefits.

The fourth point: Coverage.

The cost of our over-65 Blue Cross plan has remained constant. The rate of $9.65 per month for each individual membership, estab

lished when the over-65 plan was first introduced in 1960, is still in

effect today.

No rate increases are contemplated in the foreseeable future for this over-65 plan.

The fifth point the Senator asked about was: Changes in nongroup and conversion plans.

Last year members of these groups were receiving benefits to a point where it became necessary either to make a very substantial increase in rates or to alter the scope of benefits. After consideration of various alternatives and in line with expressions from many members, we offered new plans which would hold the line on rates and not alter materially the scope of benefits.

Under these plans, members who actually utilized hospital services would share in more of the cost in order that all individual members could continue to enjoy the Blue Cross protection at the lowest possible rates. These plans were submitted to the Illinois State Department of Insurance.

These new plans increased private room benefits. They also incorporated a deductible feature whereby the member would pay the first $25 and 25 percent of the benefits and Blue Cross would pay 75 percent. This was in lieu of the former daily deductible payments. Existing rates were continued for conversion members, and there was a minimal adjusting increase for the nongroup plan.

At the time these new programs were put into effect, all nongroup and conversion members age 65 and over were given the choice of converting to our over-65 plan and many of them took advantage of this right of choice and chose our over-65 plan.

In conclusion I would like to summarize briefly. Blue Cross shares a common concern about availability, adequacy, cost, and retention privileges in health care protection for the aged. We believe we have developed very practical ways to help the aged pay hospital bills, as evidenced by the 274,308 people, or 1 out of 4 persons in Illinois over 65, who belong to our Blue Cross plan.

The adequacy of Blue Cross is matched by its availability. The fundamental concepts of Blue Cross, the wide recognition of the Blue Cross identification card by hospitals, the provision of hospital service benefits, the practice of never terminating membership because of use or condition of health, are well known and also apply in our over-65 plan.

It is our intention to carry forward this program to the increasing number of people who are living beyond the age of 65, with the same sense of public responsibility which has characterized our Blue Cross service in Illinois for 27 years.

Thank you for the opportunity of appearing before your committee in the interest of the aged and in being able to tell you how we in our Blue Cross plan in Illinois help to solve their hospital care needs. Senator NEUBERGER. Thank you, Mr. Evans.

Any question, Senator Fong?

Senator FONG. Yes.

Mr. Evans, you stated that this Blue Cross package carries a cost of $9.65 per month?

Mr. EVANS. That is correct, per person, Senator.

Senator FONG. Under that amount, how much of the hospitalization is taken care of?

Mr. EVANS. I do not have that figure with me. We gave you some examples of some large amounts in our prepared testimony, some specific bills. In one case $2,406, another case $2,888.45; $1,178.90; another case $1,863.10.

Senator FONG. Approximately how much of that was doctor bills? Mr. EVANS. There are no doctor bills in this, this is just hospital bills. We have a Blue Shield program available for these people that provides for medical coverage.

Senator FONG. Blue Cross is hospitalization, Blue Shield is-
Mr. EVANS. Medical, surgical, doctors.

Senator FONG. So, for hospitalization the premium is about $115.80 a year; that is correct, is it not?

Mr. EVANS. That sounds about correct.

Senator FONG. For $115.80 a year you provide hospitalization as you have shown by your figures of approximately $2,000.

Mr. EVANS. These were examples of cases. These are 30-day, fullservice contracts. The subscriber is required to provide a $5 cooperative payment in the Chicago metropolitan area, $3 in the rest of the State.

Senator FONG. In the examples that you have shown, approximately what percentage of the hospitalization is taken care of?

Mr. EVANS. We do not have that figure. We would estimate it as 90 percent or perhaps a little larger.

Senator FONG. A little over 90 percent?

Mr. EVANS. Yes.

Senator FONG. And how many of your patients or your enrollees get this benefit of 90 percent or over in their hospitalization?

Mr. EVANS. The 274,000 I am talking about in the over-65 category. It could be higher if they have retained membership through their group.

Senator FONG. So, for any person who is an enrollee in your program, he could expect a 90-percent or over refund?

Mr. EVANS. On an average I would think this would be a reasonable figure.

Senator FONG. Payment to the hospital?

Mr. EVANS. Yes.

Senator FONG. Did you have a figure here that would show for the greater number of aged how many days they remain in the hospital— 65 and over-do you have that figure?

Mr. EVANS. We do not have that detail, although there is one figure, I think, that bears on this point, Senator.

We found in analyzing over 7,000 cases for 1963, for persons over 65 under this program, that in over 88 percent of the cases they did not use the full 30 days of care that was available.

Senator FONG. So, actually the 30-day period for which you provide compensation is adequate for 88 percent of the people over 65? Mr. EVANS. Our studies show this.

Senator FONG. And you are a nonprofit organization?

Mr. EVANS. Yes, sir.

Senator FONG. And there is no termination of policy as you stated? Mr. EVANS. That is correct, sir.

Senator FONG. In other words, a person may be sick throughout the year and then the next year if he pays his premium he will still be continued?

Mr. EVANS. No, sir.

Senator FONG. Thank you.

Senator NEUBERGER. Senator Williams?

Senator WILLIAMS. Yes.

You have a $25 deductible for the old-age program?

Mr. EVANS. No; not for the old age. That is for the conversion persons under 65 years of age.

Senator WILLIAMS. I see.

Mr. EVANS. Some few of our persons over 65 have chosen to remain with that program, something slightly over 25 percent.

Senator WILLIAMS. But you have a 75-25 split?

Mr. EVANS. This is for people who leave groups.

Senator WILLIAMS. I see.

Mr. EVANS. But this is not applicable to our over-65 program.
Senator WILLIAMS. It is?

Mr. EVANS. It is not.

Senator WILLIAMS. Oh. In other words, there is no division?

Mr. EVANS. The over-65 program carries a fixed $5 cooperative payment per day for hospital care rather than a percentage figure.

Senator WILLIAMS. How about your regular program of coverage? Is that on a per diem basis as it is in Dallas, or do you have a comprehensive payment for that?

Mr. EVANS. We write no per diem room allowance contracts.

Senator WILLIAMS. Does the individual hospital bill for a patient come to you as it would be stated to any other noncovered patient? Or do you have a discount arrangement with the hospital?

Mr. EVANS. It comes to us as it would to any other patient.

Senator WILLIAMS. In other words, you pay the same rates that any other person pays? Any noncovered person?

Mr. EVANS. Yes, sir; except that we have a contractual arrangement with the hospitals and annually we revert to cost of care rather than billed charges.

Senator WILLIAMS. The answer to the first question was yes, then? Mr. EVANS. We do pay that, but if there is an adjustment it is made at the end of the year.

Senator WILLIAMS. What would you say this adjustment averages on an annual basis? In a percentage figure I guess?

Mr. EVANS. We will pay hospitals in Illinois through our Blue Cross plan approximately $150 million this year.

Senator WILLIAMS. Now, it would be an average after the reverter or whatever you call it, would you say, accounting back to the original bill you are paying 50, 60, 70 percent of the bill?

Mr. EVANS. It would be less than 1 percent.

Senator WILLIAMS. The reduction?

Mr. EVANS. Yes, sir.

Senator WILLIAMS.Thank you.

Senator NEUBERGER. I do not understand that $5 cooperative. Is that another way of saying deductible or

Mr. EVANS. That is probably a bad term for me to use, Senator. Senator NEUBERGER. I never heard it before, I do not know quite what it means.

Mr. EVANS. It means simply this, that for each day the patient is in the hospital he receives the full benefits of the certificate and we agree to pay that with the exception that he must contribute $5 to this. This tends to hold the rate down.

Senator NEUBERGER. It holds down his benefits, too, does it not? Mr. EVANS. Well, his benefits are the same.

Senator NEUBERGER. Minus $5. Depends on which way it is viewed. It is a matter of semantics there.

You said that these were noncancelable policies in answer to Senator Fong, and I think the Senator stated a hypothetical situation, if they were sick a lot during the year, used the policy when it came time to pay the premium it would still be renewed; at the same rate?

Mr. EVANS. For the rate of that classification of business; I do not think we guarantee rates indefinitely, but this particular certificate because of use would not be uprated.

Senator NEUBERGER. But then you might find it quite unprofitable, even though you are a nonprofit organization, to carry somebody who had so much use and you might say to him, might you not, that we will continue but we will have to charge you a little bit more? I would think that would be good business, really.

Mr. EVANS. Unfortunately, whether that is the issue or not, our regulations by the department of insurance do not allow us to impose individual rates on individual memberships, we must rate by all persons in that classification. If everyone uses it this would tend to increase the cost.

Senator NEUBERGER. How much-you said that not very many of your beneficiaries use their full 30 days. I presume that on an actuarial basis this is the way you account for-you have to continue on that in order to make ends meet; is that right?

In other words, did you pay out in benefits quite a bit less than you collected in premiums from these over-65 people as a result of their not staying as long as they were budgeted to stay?

Mr. EVANS. Well, a rate was not calculated to provide that they would all stay 30 days. We hoped that this would be the exception rather than the rule. We find they do stay a little longer, but no longer than we anticipated they would stay.

Senator NEUBERGER. Then, how much do you pay out in benefits and how much do you collect in premiums from your 65 and over subscribers during 1963?

Mr. EVANS. I will have to take a look at those figures.

In this over-65 category our income, $2,512,000-
Senator NEUBERGER. I did not quite hear you.

Mr. EVANS. I am sorry.

Our premium income in this category in 1963, $2,512,000; our claims incurred, $2,429,000.

Senator NEUBERGER. It just about breaks even.

Mr. EVANS. Well, it has been our practice, and of most all Blue Cross plans, to continue rates until they become inadequate, so if you get a break in experience in one year, you would move into the next year with it.