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BEGINNINGS OF HOSPITAL EXPENSE INSURANCE

While my first 10 years in the group business seemed hectic enoughour group life business quadrupled during that period and our group health business increased twice as fast as that; it was a hectic lifewe still thought during that period that the only kind of health insurance that would work was loss-of-income coverage. We had, however, for some time been studying the possibility of some kind of hospital-expense coverage. We knew that the Goodyear Relief Association and some other employee benefit associations were providing hospital benefits. We knew that some associations representing the hospitals of their localities, like the modern Blue Cross, were enrolling members for hospital benefits. We made a few tentative quotations; and then in 1934 we announced to our group field force that we were ready to write group insurance against the cost of hospital care. That was less than 20 years ago. Our plans were pretty limited in those days. At the start we offered them only in cases where they would cover at least 250 employees in the group. The benefit was $3 per day of hospitalization, with an extra allowance of $15 for

expenses for operating room, laboratory fees, and anesthetic fees.

From the beginning our progress was very rapid. Within 5 years we were writing as much of the new hospitalization insurance as we were in the long-established field of loss-of-income protection—this progress was made while we were still trying to sell the insurance to cover the employees alone and not their dependents. Also, we were trying to sell policies providing benefits to cover the hospital bill but as yet not the surgeon's fee for the operation. However, in 1939, after a good deal of study and some experimenting, we commenced offering group plans including surgical-fee benefits in addition to hospital-expense benefits, and including coverage for the employees' dependents as well as for themselves. Our business continued to expand rapidly and it has not yet shown any tendency to stop.

In the foregoing, I have not meant to seem to be boasting of the progress of my own company. The same things have been happening in the other group-writing insurance companies, and in other organizations offering prepayment protection in the same fields, notably the organizations known today as Blue Cross and Blue Shield. Simultaneously, the insuring companies writing individual health policies have made similarly impressive progress in extending these kinds of insurance protection to the numerous classes of people more easily reached, or better covered, by individual policies than by group.

Hospital-surgical expense insurance has been by far the most rapidly growing line of voluntarily purchased social insurance that the world has ever seen. This extraordinary and unprecedented growth would, in my opinion, have been impossible were it not that three irreconcilably antagonistic institutions were simultaneously preaching the same gospel to the American public.

The group insurance people, the Blue Cross and Blue Shield people, and the individual policy people may have been competing bitterly, but none of the 3 could have accomplished a sizable fraction of what they have actually accomplished, were it not for the activities of the other 2. We have lost a lot of business to Blue Cross and Blue Shield, and vice versa, but actually we have each benefited enormously from the other's help in spreading the gospel of hospital-surgical prepayment plans.

I have some charts that may be worth the few minutes that it will take to present them. The data pictured in these charts was assembled by the Health Insurance Council and published last month in a booklet, copies of which have been supplied for your records. The booklet, Annual Survey Accident and Health Coverage in the United States, also contains the copies of the charts I am presenting to you.

(The booklet is as follows:)

ANNUAL SURVEY

ACCIDENT AND HEALTH COVERAGE IN THE UNITED STATES AS OF

DECEMBER 31, 1952 An annual publication of the Health Insurance Council The Health Insurance Council consists of nine associations in the insurance business, which in turn are made up of companies writing the various forms of protection against hospital, surgical, and medical costs and the loss of income due to disability.

The council has been set up by the insurance business to function as a central source for practical and technical guidance to medical groups and hospital administrators in connection with the development and use of its accident and health benefits, and as a source of information concerning this type of insurance. The associations represented in the council are American Life Convention, 230 North Michigan Avenue, Chicago 1, Ill. American Mutual Alliance, 20 North Wacker Drive, Chicago 6, Ill. Association of Casualty and Surety Companies, 60 John Street, New York 38, N. Y. Association of Life Insurance Medical Directors, Box 594, Newark 1, N. J. Bureau of Accident and Health Underwriters, 60 John Street, New York 38, N. Y. Health and Accident Underwriters Conference, 208 South La Salle Street, Chi

cago 4, IN. International Claim Association, Box 458, Kansas City 10, Mo. Life Insurance Association of America, 488 Madison Avenue, New York 22, N. Y. Life Insurers Conference, 618–19 Mutual Building, Richmond 19, Va.

The year 1952 brought another striking contribution to the unbroken record of progress made over the last two decades by the American people in voluntarily protecting themselves, and their families and dependents, against the financial hazards of accident and illness.

New high marks were established in the number of persons that were covered against the incidence of hospital, surgical, and medical costs and loss of income due to disability. The year likewise brought another significant advance in this field with the spread of major medical coverage as insurance protection against catastrophic expenses resulting from serious and prolonged disabilities.

These developments testify to the alertness of organizations providing accident and health protection in recognizing the need for broader coverage to meet the needs of the American people. They reflect the inherent vitality of the voluntary health movement in this country and its willingness to experiment for the public good. They also demonstrate the traditional competitive basis of our society. Keen competition has characterized the field of accident and health protection since its early days, and has played a big role in augmenting the speed with which these coverages have grown and have been accepted by the people in recent years.

The survey presented in detail in the following pages is made annually by the survey committee of the Health Insurance Council. It gives the figures on the number of people in the continental United States, and in the territories of Alaska and Hawaii, covered by insurance companies, Blue Cross, Blue Shield, and other types of organizations providing accident and health protection, to the extent that information and data are available.

There are a large number and variety of organizations that provide protection against the financial costs of sickness and accident and many of these organizations are local in character. Some have probably been omitted in the survey despite the efforts of the council to seek out every source of information on the subject. Many of the figures are necessarily estimated, but every care has been taken to develop estimates which are conservative in the light of the most reliable data obtainable.

Some persons are covered by more than one method of protection, or hold more than one insurance policy providing similar benefits. Steps have therefore been taken to avoid duplicate counting in the final totals for the various forms of coverage. An explanation of the methods employed in this case is given in the appendix, part III.

There are a number of types of protection against the expense of sickness and accident, some of a compulsory nature, that were not considered appropriate for detailed development in this study. Such types are listed on page 23.

YOLUNTARY PROTECTION AGAINST HOSPITAL, SURGICAL, AND MEDICAL EXPENSE

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More persons were protected against the financial hazards of accident and illness at the end of 1952 than ever before, a decisive indication of the willing. ness and ability of the American people to meet their responsibilities to themselves and to their dependents. As in previous years, the increases for 1952 in the numbers of persons covered under hospital, surgical, and medical expense protection were counted in the millions. The gains under medical-expense coverage exceeded the year's gains in both hospital and surgical-expense protection.

HOSPITAL, SURGICAL AND MEDICAL EXPENSE COVERAGE

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Nearly 3 out of 5 persons in the entire population of the United States are now protected through voluntary programs against the costs of hospital care in the event of accident and illness, representing the biggest single form of coverage in the field of health protection.

The total number with this protection exceeded 91 million at the end of 1952, an increase of more than 512 million, or 7 percent, during the year. Back in 1941, when the United States entered World War II, the number of persons with voluntary hospital-expense protection added up to slightly over 16 million, indicating the rapidity with which this form of accident and health coverage has grown.

Hospital-expense protection provides benefits toward the payment of hospital charges for room, board, and miscellaneous services. Benefits have been steadily liberalized and expanded since this form of coverage began its major growth some two decades ago. Present-day coverage usually includes payment for the use of an operating room, laboratory, and X-ray examinations, medicines, and all other services incidental to medical care and treatment which are furnished by the hospital.

SURGICAL-EXPENSE PROTECTION

The second largest form of protection in the field of voluntary accident and health coverage is surgical-expense protection. The total number of persons with this form of coverage at the end of 1952 totaled over 73 million. The increase during 1952 was more than 712 million persons, or 12 percent.

Little more than a decade ago, in 1941, there were less than 7 million persons with surgical-expense protection. A later development than coverage for hospital care, surgical-expense protection has shown the more rapid growth over recent years.

Most persons with surgical-expense protection are covered either by insurance companies or by Blue Shield. In the event the services of a surgeon are needed, the protection provides payments in accordance with a schedule of fees fixing maximum reimbursement for each type of operation.

MEDICAL-EXPENSE PROTECTION

In the evolution of voluntary accident and health coverage, medical-expense protection came third, following the development of hospital and surgical benefits. Its growth, therefore, has been essentially a post-World War II phenomenon.

Eleven years ago, at the end of 1941, it is estimated that there were only about 3 million persons with medical-expense protection. By the end of last year, the number of persons with this protection had grown to nearly 36 million persons. Approximately 8 million more persons had medical-expense protection at the end of 1952 than the year before, and the gain for the year was 29 percent.

By far the greatest part of medical-expense protection is provided by Blue Shield, local medical societies, and insurance companies, and a wide range of benefits is available. The most common form of this coverage calls for the payment of benefits toward the expense of inhospital calls by doctors for other than surgical treatment. Likewise available are other forms providing for comprehensive medical coverage of home, hospital, and office treatment and examinations. In some cases, too, medical-expense protection provides benefits for paying the cost of special laboratory, X-ray, and other examinations for diagnostic purposes.

How HOSPITAL, SURGICAL, AND MEDICAL-EXPENSE COVERAGE IS DISTRIBUTED AMONG

VARIOUS INSURERS AND OTHER AGENCIES Long leaders in the voluntary health movement, insurance companies and Blue Cross-Blue Shield organizations together accounted for about 94 percent of all hospital- and surgical-expense protection last year, and about 87 percent of coverage under medical-expense plans. The balance was spread among plans provided by industrial employers, labor organizations, community groups, private group clinics, and colleges.

Insurance companies provided coverage to a majority of the people who had hospital- and surgical-expense protection. At the end of last year, more than 29 million persons were covered against hospital expense under group insurance, and 22 million persons under individual hospital expense insurance plans. Blue Cross and medical society plans had more than 43 million persons enrolled for hospital-expense protection last year, while some 5 million more were covered by industrial, community, and other group plans.

In surgical-expense protection, insurance companies covered nearly 30 million persons under group and 19 million under individual insurance plans, together about two-thirds of all persons with such protection. Blue Shield and medical society plans protected nearly 28 million persons, and nearly 5 million more persons were enrolled under independent plans.

Blue Shield and medical society plans continued to lead in medical-expense coverage with some 18 million persons, or more than half of all persons enjoying this protection. Insurance companies had about 15 million persons under

group and individual medical-expense-protection plans, and 5 million more were
covered under independent plans.
Hospital, surgical, and medical expense coverage-Number of people protected,

end of 1952
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For sources of figures see appendix pt. I. For basis of estimated duplication see appendix pt. III.

MAJOR MEDICAL EXPENSE COVERAGE Major medical expense coverage, the newest addition to voluntary healthprotection plans, is designed to help meet the catastrophic costs resulting from prolonged disability. Broadly speaking, it takes up where the customary forms of health protection-hospital, surgical, and medical care-leave off. It also covers such costly items as nursing care and use of special appliances. The development of major medical expense policies is further evidence of the willingness of the insurance business to experiment in the public interest.

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For sources of figures see appendix pt. I.

Maximum benefits available under this form of protection range from $2,500 to $10,000. Major medical coverage is written with a deductible feature, as is automobile-collision insurance. It usually makes the person covered a coinsurer of expenses incurred above the deductible amount, requiring him to pay some portion of these expenses. The purpose of the coinsurance feature is to encourage the person protected to obtain as reasonably as possible only such health services as are needed, thus helping to keep down the costs of protection.

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