B. Administrative directives

You will note that there are no special instructions pertaining to overage applicants in the field office bulletins included with the exhibit material titled, "The Modern Answer."

C. Reunderwriting

1. Riders or waivers

All riders or restrictive riders are included in the exhibit "The Modern Answer" previously referred to.

2. Riders or waivers issued

3. Cancellation and termination

Again, the company's recordkeeping procedure provides no basis for making figures available and no base for a valid estimate,`particularly since rewriting is not done on the basis of age.

4. Administrative directive to claims personnel

Enclosed as a separately bound exhibit is the company's entire catalog of directives and instructions for reunderwriting, entitled "Postclaim Underwriting."

VII. ATTRITION

A. Number of policyholders signed up during 1961, 1962, 1963

B. Those no longer insured for reasons other than death

C. Those no longer insured who received benefit

D. Reinstatement

Company recordkeeping again makes impractical any valid estimates of over 65 policyholders in the categories questioned. The same statistical method used to accurately estimate an answer to question I could be applied to question IV, A only, but would not be applicable for the other parts of the question.

However, the company's experience with its policy form written solely for over65 persons (P-27), used previously for illustrative purposes, might again be useful.

Nonetheless, even among this identifiable example group of former over-65 policyholders it is impossible to determine how many had received benefits.

While no statistical correlation can be made with the above figures, it is worth noting that they have been drawn from the same policy form experience (P-27) instanced in answer to question III, B, with table II revealing a 1963 loss ratio of 76 percent for 1961 policies.

VIII. RISKS, CAPABILITY OF PRIVATE HEALTH INSURANCE: PREMIUM PROJECTION Since this company entered the health insurance field it has purposefully designed coverage and premium patterns to provide health protection to large numbers of people, at all ages, at a price within reach.

We were the first private company to offer the convenience and budgeting ease of monthly premium payments. This practice continues. As a result, our policies have had appeal to middle and lower income groups.

Over a relatively few years we have been part of the growth of a new service industry which arose in answer to need and demand with, initially, very little available data for projecting claim-premium_ratios.

Blue Cross organizations, originally specializing in group coverage, left millions unprotected while at the same time creating a growing awareness of and demand for protection among those not eligible for group protection. Against this background, early policies in the field were limited in protection and were cancelable, following generally accepted underwriting principles correlating premium cost to the insured risk.

Accumulated experience led us to move from cancelable policies to those renewable at the option of the company. This advance in policy form enabled many thousands to maintain their health insurance, without change in benefit or cost, through a predetermined renewal date.

More recently, still more extensive experience has evolved the guaranteed renewable policy form, with the reserved right to adjust premiums on a class basis. First, many such policies were renewable only to certain ages-usually 50 to 65-but now many are renewable for life, again with the reserved right to adjust premiums.

This company issues such policies and is currently developing new basic, major medical and hospital disability policies. A recent policy provides paid-up coverage at age 65.

Parallel with the pattern of developing ever-increasing coverage to an everbroadening segment of the population and to an ever-higher age level, has been our effort to keep in mind the appeal to those of limited means by standardizing the risks at the outset.

The result-no increase in premium rate for our policies until 1963. At that time, an across the board percentage increase was made, regardless of age, on policies issued prior to 1955.

This pattern of evolution has been a business philosophy, as well as a policy. As was said by an official of the company in an address at a recent accident and health industry meeting: "Our general objective in underwriting at all ages has been to obtain a body of insured lives in each premium class whose individual prospects of suffering an insured loss do not differ widely from the norm for that class. To achieve this we must consider antiselection by declining to insure or by offering special treatment to the individual who presents a risk appreciably greater than that which the standard premium was designed to cover.

This history and the company philosophy which underlies it must color our answer. We can be realistic and practical despite the relatively short span of our experience with over-65 insurance.

There simply does not exist sufficient information to document a definite conclusion regarding comprehensive insurance of persons over 65 for the indefinite future. But we do have sufficient experience to come to some tentative conclusions.

We know health costs are rising. We know insurance administrative costs are rising. We know enormous strides have been taken in private insurance in the last few years. We know millions of elderly people have been relieved of the nagging worry of their future health needs.

While we also know we have not got the answer for everyone, we believe progress will continue.

And we also know there are realistic limitations, quite apart from what one company or an industry can do, which will affect the individual's opportunity or ability to continue or obtain health insurance coverage when he reaches 65.

We take considerable pride in our role in the evolution of this business. Since 1945, we have made a constantly widening variety of protective policies available to an increasing percentage of persons to age 80 and above with the valuable advantage of monthly budgeted premiums.

We have also developed a plan of mass marketing, predicated on direct mail and media advertising, carefully planned to bring interested applicants to State licensed local resident agents.

Basic renewable coverage to impaired risks, with limited coverage for particular conditions, has permitted us to afford valuable protection to elderly persons who would normally otherwise be totally uninsurable. Supplementary coverage, such as weekly indemnity during hospitalization, guaranteed renewable medical coverage now under study and other projected refinements-made scientifically and not for pure competitive reasons-will, in our view, continue to make private health insurance more attractive to the elderly.

In the health insurance area, and with particular regard to the elderly, we confidently believe we can continually offer health coverage, providing the greatest good to the greatest number, within their economic reach, consistent with the welfare of the company and justice to other policyholders.

33-420-64-pt. 4A——2

Beyond that, we cannot go in good conscience and on the basis of experience thus far accumulated.

Respectfully submitted.

EDWARD J. KELLY, First Vice President.

TABLE 1.-Number of persons age 65 and over, by plan

1 Dec. 31, 1961, in-force was based on manual records, and Dec. 31, 1962, and Dec. 31, 1963, in-force on computer records.

MARCH 11, 1964.

Mr. JOHN MACARTHUR,
President, Bankers Life & Casualty Co.,.
Chicago, Ill.

DEAR MR. MACARTHUR: As you know, the Subcommittee on Health of the Elderly has announced that it will hold public hearings on the subject of Blue Cross and other private health insurance coverage for older Americans.

In connection with the preparations for those hearings, Mr. Constantine, of the subcommittee staff, at my direction, called on you some 2 weeks ago to discuss certain questions on an informal basis. The attached list of questions includes some modifications developed as a result of your meeting with Mr. Constantine. It would be very much appreciated if you would forward your responses to the attached questions and requests for material as soon as possible. I have asked Mr. Constantine to cooperate fully with you in the event that you desire further clarification of the information requested.

At such time as specific dates for the hearings are decided upon it is our intention to ask you to testify on the efforts of your organization to meet the health insurance needs of our older Americans. Thank you for your cooperation. Sincerely yours,

PAT MCNAMARA, U.S. Senate,

Chairman, Subcommittee on Health of the Elderly.

PLEASE PROVIDE INFORMATION AS OF END OF EACH OF LAST 3 CALENDAR YEARS FOR PERSONS AGE 65 AND OVER (EXCEPT WHERE OTHERWISE INDICATED)

I. Total number of different persons insured against items of medical expense-exclusive of holders of disability insurance policies. (Classified by group and individual.)

A. Available data (of any type) concerning other health insurance coverage held by your policyholders-commercial and/or Blue Cross.

II. Benefits and premiums:

A. Policy forms where initial issuance is available to persons age 65 or over: by principal benefits (hospital daily room and board indemnity; allowances for hospital extras; allowances for physicians' services; surgical schedule) noting changes made during each year.

B. Monthly premium charged for each type of policy form described in A (please note all changes made during each year).

C. Number of policyholders for each policy form described in A.

III. Experience:

A. Premiums earned by policy form (described in II-A).

B. Claims incurred by policy form (described in II-A).

IV. Exclusions and limitations (including waiting periods) on conditions covered (for each form described in II-A).

V. Copies of all advertising and promotional literature principally directed toward older people and all press releases issued pertaining to the mass enrollment programs.

VI. Underwriting:

A. Initial issuance of individual policies to persons age 65 and over (exclusive of mass enrollment policies)-percent rated as impaired risks and comparison with persons under age 65 rated risks.

B. Copies of all administrative directives to agents and/or brokers relating to field underwriting of individual policies for 65-and-over applicants.

C. Underwriting subsequent to policy issuance or filing or payment of claims (information on policy forms described in II-A):

1. Copies of all restrictive riders or waivers employed.

2. Number of riders issued and number of those to whom riders or waivers were issued who received or filed for a benefit.

3. Cancellation and/or number terminated (nonrenewal) by type of policy and indicating how many of these had received a benefit.

4. Copies of administrative directives to claims personnel relative to company policy on cancellation, ridering of policies, nonrenewal and rating-up of policies where age or claims experience is a factor.

VII. Attrition:

A. Number of different persons signed up during calendar years 1960, 1961, and 1962 (with breakdown of totals as outlined in the note to question II-C). B. Of those who (during the above years) are no longer policyholders, number

who are no longer insured for reasons other than death (specify reasons: lapses, terminations, cancellations, etc.).

C. Of all those no longer insured (including deaths) how many received a benefit?

D. How many were reinstated?
VIII. Other:

A. What are the unique risks involved in underwriting health insurance for the aged and to what extent do you believe these can be met by private health insurance?

B. Do you anticipate that premium increases will be necessary on some or all of your policies for the 65-and-over population during the next 2 years? Please elaborate, indicating, where appropriate, the percentage increase anticipated and the reasons therefor.

2. CONTINENTAL CASUALTY CO.

Hon. PAT MCNAMARA,

CONTINENTAL CASUALTY CO.,

Chairman, Subcommittee on Health of the Elderly,
Special Committee on Aging, U.S. Senate,

Washington, D.C.

Chicago, Ill., April 23, 1964.

MY DEAR SENATOR MCNAMARA: As mentioned in my previous letter of April 17, I am forwarding herewith the response to the list of questions specifically directed to the Golden 65 program.

Also enclosed is a revision of the first page of our response to the general questionnaire for Golden 65 previously forwarded you. In II-C some of the figures opposite the policies or combinations were transposed. This occurred on the second, third, and fourth lines.

We are presently preparing the statements for submission to your subcommittee and will submit 60 copies as requested.

Very truly yours,

Enclosures.

RAYMOND M. DEFOS SEZ.

ANSWERS TO SPECIFIC QUESTIONS ON CONTINENTAL CASUALTY CO. GOLDEN

65 PROGRAM

1. The major national campaign of 1963 resulted in the issuance of 143,854 policies to 105,460 persons: