covered by workmen's compensation and most dental surgery. Hospital confinement is not required.

A third part of the health-insurance program pays a benefit for the cost of doctors' calls in the hospital when the employee or his dependent is confined for nonsurgical treatment. The benefit equals the fees charged by the physician up to a maximum amount equivalent to $4 times the number of days of hospital confinement, but not more than 120 days during any one period of disability. This 120-day maximum, you will note, is the same as for the hospital insurance. This again is insurance for disabilities not already covered by workmen's compensation. Benefits are not payable for treatment outside a hospital, treatments caused by or resulting from pregnancy, dental work or treatment, or eye examinations or the fitting of glasses. X-rays, drugs, dressings, and medicine are also excluded, but these are covered in full by the hospitalization insurance.

The insurance program further reimburses employees for the expense of laboratory and X-ray examinations received by the employee or his dependent and made or recommended by a physician in connection with the diagnosis of illness or injuries not covered by workmen's compensation. Reimbursement equals the fees actually charged up to a maximum of $50 for all examinations in connection with any one accident, and $50 in connection with all illnesses in any 6 consecutive months. Coverage is limited to examinations made when the individual is not confined to a hospital. Examinations in connection with pregnancy are excluded, and dental X-ray examinations are covered only when made as a result of accidental bodily injury.

That summarizes the insured part of our program.

For many years it has been our policy to provide income to employees during periods of personal illness. The rate of pay and the duration of the pay are based upon length of service, attendance record, quality of performance, and dependency status.

Employees with less than 1 year's service who are ill are paid a minimum of 1 day's base pay for each month of service. Employees with 1 year or more of service who are ill are paid a minimum of 3 weeks' base pay during each calendar year. You will note these are minimum provisions. Sick pay is often continued for much longer periods to employees with long service, and good performance and attendance records. I will give a few examples of this later on. Our sick-pay plan is not insured, because it goes beyond what insurance companies can offer our employees in disability-insurance policies.

We do not carry catastrophe or major medical-expense insurance. Preliminary consideration is being given to this subject, but our present plan is generous enough so that the need has not seemed urgent.

The insurance program just described has been in effect 234 years. During that time the average number of insured employees has been about 4,000. Of this group, about 2,700 employees have had insurance with respect to their dependents. Eligible dependents of an employee include his wife and their unmarried children. Each child is covered from birth until the end of the year in which he reaches 19, or until prior marriage. We estimate that the average insured family unit includes employee, wife, and 2 children.

We have no agreements with any doctors or hospitals with respect to the charges they make for their services. As far as we can learn, there have been no serious abuses resulting from the liberality of our

insurance program. In many cases local doctors have voluntarily adjusted their surgical fees to the amounts allowed in our benefit schedule. Generally these were downward adjustments of fees, but in a few instances we think physicians have charged more than usual for services, knowing our employees could collect in full from their insurance. As long as surgeons voluntarily reduce some of their charges we are not critical if they increase other fees to the insurance allowance.

Since the plan started there have been 8,425 claims, resulting in a total of $814,000 in benefits. This averages about $74 a year per insured employee. Benefit payments have ranged from as little as $2 for diagnostic laboratory tests to $6,100 for a succession of major illnesses suffered during the first 2 years of his life by the son of one of our research scientists.

In designing our insurance program we have recognized that it is important from the standpoint of employee relations to pay_benefits for many expenses which are really not very burdensome. But our basic objective is to assist employees to meet those expenses which cannot ordinarily be met out of current income.

During the period of 234 years 389 employees have each received more than $500 in benefits, 93 have received over $1,000 each, and 5 have received more than $3,000. While this is not catastrophe medical insurance, the plan is certainly covering some major medical expense. We have some information about the adequacy of the program. For example, I mentioned that during the first year the surgical plan covered 76 percent of the fees charged. At that time hospitalizationinsurance payments were over 95 percent of total charges. Three of the hospital confinements in this period lasted more than 120 days, but the main reason benefits were less than charges is that a number of employees occupied private rooms and were reimbursed at semiprivate

rates.

Unfortunately, our records fail to show all the expenses of major illness. However, examination of some of the largest claims will give you a more specific idea of the adequacy of our plan to solve the economic problems of major illness.

Case 1: A senior clerk, male, age 47, who had been with our company for 22 years, underwent major abdominal surgery and was hospitalized for 102 days. Total known medical and hospital expenses were $3,584; total insurance benefits were $3,438. The employee's salary was $440 per month and under our sick-pay plan this salary was continued for 15 weeks until the employee died. The total sick pay amounted to $1,543 and the combined total insurance benefits and sick pay was $4,981.

Case 2: A stock clerk, male, age 52, who had been with our company for 26 years, underwent major abdominal surgery and was hospitalized for 143 days. Total known medical and hospital expenses were $4,382; total insurance benefits were $3,391. The employee's salary of $76 per week was continued in full throughout the disability, which lasted nearly 40 weeks. Total sick pay was $2,964 and the combined total of insurance benefits and sick pay was $6,355.

Case 3: A clerk-stenographer, female, age 30, who had been with our company for 6 years, received multiple fractures, dislocations, and lacerations in an automobile accident. The initial period of hospital confinement lasted 120 days and the total insurance benefits of $2,756

lacked only $5 of covering all known expenses. Full salary was continued to the employee for 14 weeks, followed by half salary for an additional 7 weeks. Total sick pay was $1,014 and the combined total of insurance and sick pay was $3,770. Subsequent orthopedic surgery for treatment of a condition arising from the same accident resulted in additional expenses of $1,247. Toward this we were able to pay the employee $1,209 in insurance benefits but no more sick pay. The combined total of benefits, including sick pay, for injuries sustained in a single automobile accident was $4,978.

Case 4: A retired employee was hospitalized for 128 days of treatment of fractures of the hip and wrist. Total insurance benefits of $2,033 came within $400 of paying all of her medical expenses.

Case 5: During the course of 2 years the infant son of a research scientist was hospitalized 5 times for a succession of ailments, including kidney trouble, pneumonia, dermatitis, and tonsilitis. The baby spent 261 days in hospitals. It was determined that the 5 periods of confinement occurred during separate periods of disability and we were able to cover all 261 days. Total claim payments were $6,106; total known medical expenses amounted to $6,200.

Case 6: The 14-year-old son of 1 of our employees contracted poliomyelitis. Our insurance plan paid $2,377 in connection with the first 120 days of hospitalization. There have been 190 days of hospitalization to date and the child is still under treatment. Total expenses to date have exceeded our insurance by $4,800.

It is fortunate to note that in this case the employee had availed herself of the opportunity to purchase an individual contract of polio insurance, which has a maximum liability of $5,000, so that her expenses up to date have been covered. It is expected that her expenses will soon exceed the $5,000 of polio insurance that she has for the son and then the national foundation will take over.

As I have implied, there may have been more uninsured expense than was reported to us. It seems clear, however, that a plan with just the basic coverage can go a long way to provide effective protection against the costs of illness.

Our hospitalization insurance and sick-pay plan contain some very liberal features, such as unlimited coverage during first 120 days of hospital confinement in ward and semiprivate accommodations and continuation of full pay beginning with the first day of illness. Most employers would expect such features to be abused and would avoid them. They work successfully for us because we happen to have an unusually responsible group of employees.

Our plan has its shortcomings. For example, we have no insurance to pay for doctors' calls or drugs when illnesses do not require hospitalization and there is no insurance to pay for special nursing care or X-ray therapy. On the other hand, we offer full insurance benefits for dependents and pay the entire cost of full insurance coverage for retired employees.

Other employers have their own particular solutions to the healthinsurance problem of their particular businesses. Many of them believe it is important to insure employees for some part of each kind of medical expense. Others have adopted catastrophe medical insurance plans covering employees but not their dependents. Some employers might feel that providing full benefits for retired employees, as we do, is too costly.

Our health-insurance program is probably unique. It fits our present needs, but it would be unsuitable for many other companies. It is fortunate that the voluntary health-insurance market is flexible enough to permit us to buy what we want, and other employers to buy what they want. The important thing is to recognize that corporations have individualities and need freedom to work out the insurance programs which suit them best.

The CHAIRMAN. Are there any questions, gentlemen?

Mr. HESELTON. Mr. Cristy, I can thoroughly understand why you said in your statement that Upjohn Co. has the reputation of being a good place to work and it has succeeded in keeping a very good class of employees.

I think you have helped this committee in its study by giving us the concise and very helpful statement on the history of the operation of your particular plan with your company, and the workings of the plan and outlining the possible differences that might exist between it and other plans. I was not certain, but I assumed that it was a contributory plan so far as the employee was concerned.

Mr. CRISTY. In the health-insurance program the employees are paying a nominal part of the cost-about 10 percent.

Mr. HESELTON. You seem to have had fairly successful experience in connection with surgical fees.

Mr. CRISTY. Yes, sir. The abuses that we hear of occasionally where doctors use the surgical schedule as a floor on which to base their fees has not been our experience.

Mr. HESELTON. Has it been your experience or have you had any opportunity to check on whether the very existence of this plan for your employees has induced them to supplement their protection by other types of insurance?

Mr. CRISTY. In the area of polio insurance I do know of several employees who have felt it desirable to supplement their insurance. It is not a general practice, though, as you can see. Most of them would feel that it was unnecessary.

Mr. HESELTON. Thank you.

The CHAIRMAN. Are there any further questions, gentlemen?

We thank you, Mr. Cristy, for your appearance and for the assistance you have given the committee in the study that it is making of this matter.

If you have any additional statements or information in the form of pamphlets which cover your plan in more detail than you have had the opportunity to speak of it here, we will be pleased to have you submit it to us so we can make it a part of the record.

Mr. CRISTY. I have copies of the booklet which explains the plan to employees, and I shall be glad to leave copies if you would like. The CHAIRMAN. Thank you very much. We shall be glad to have

them.

(The booklet follows:)

EMPLOYEE INSURANCE PROGRAM THE UPJOHN CO., KALAMAZOO, MICH. To employees:

Each of us is faced with the problem of providing some protection for ourselves and dependents against sickness and accident, retirement, and death. With the advent of group insurance in the United States in 1910, a new and less expensive means of providing more adequate protection became available.

Our own company adopted group life insurance in 1915 and added hospitalization coverage in 1941, retirement annuity in 1942, and surgical insurance in 1945. Effective January 1, 1951, we are increasing the protection provided under the life insurance, hospitalization, and surgical plans, and are adding diagnostic and medical coverages.

These plans have been made possible through the efforts of all of us, and it is our hope and intention that they will be permanent. However, the company necessarily reserves the right to modify or discontinue them at any time.

Sincerely yours,

THE UPJOHN Co.
D. S. GILMORE, President.

Persons eligible for our employee insurance plans are entitled to two classes of group life insurance. These are known as "noncontributory" and "contributory" insurance.

The term "noncontributory" means that you do not contribute toward the cost. The noncontributory insurance is effective automatically for all eligible employees and the entire cost is paid by the company.

The contributory insurance is in addition to and separate from the noncontributory. This insurance is optional and persons who subscribe pay a part of the cost. If you carry this insurance, your share of the premium will be deducted each month from your pay. The difference between the total premium and the amount you contribute is paid by the company.

The schedule on page 7 shows the insurance available to eligible employees. The insurance company will accept applications for only the amounts of insurance for which you are eligible, as shown by the schedule. Adjustments in the amount of your insurance will be made automatically in accordance with the schedule on the first day of the calendar month coinciding with or next following the date they are warranted by reason of a change in your dependency status or earnings rate.

Our insurance carrier is the John Hancock Mutual Life Insurance Co.

Our group life insurance is term insurance. This means that it has no cash or loan values. The plan contains protection only, not investment, and never becomes paid up. In this respect it is similar to fire insurance, for no matter how long the insurance is carried, premiums must be paid regularly and the insurance company pays only when there is a claim.

The insurance is payable to the beneficiary named by the employee in the event of the employee's death from any cause Or, if an employee should become permanently and totally disabled before reaching age 60, his insurance will be paid in installments to him. In the case of an employee's death before he has received installment payments equal to the total amount of his insurance, his beneficiary will receive the unpaid balance.

You may change your beneficiary at any time by completing a form prepared for that purpose. If you have a dependent' and qualify for $2,000 of noncontributory insurance, you should name the dependent as your beneficiary. This requirement does not apply to contributory insurance.