Presented in table 4 are statistics showing the number of people age 65 and older insured under the various types of coverages offered by insurance companies. As indicated in the table, these data show enrollment under individual and family policies written by 108 insurance companies and enrollment of pensioners under group policies written by 81 insurance companies. In view of the fact that the companies surveyed write only 53 percent of the individual accident and health insurance premium and only 44 percent of the group accident and health insurance premium, it would definitely follow that the statistics shown in table 4 considerably understate the complete extent of coverage among the aged by insurance companies. In addition to the exclusion of data from nonrespondents, excluded as well are persons 65 years of age and older and their dependents actively employed. Where such persons are employed in industries covered by group insurance such persons would have voluntary health insurance since no distinction is made for age among active employees. A further indication that the data shown in table 4 are considerably understated as to the current situation is that they exclude enrollment of the aged by several very large insurance companies under the "65 plus" programs which were introduced nationwide early in 1959. Careful consideration of the aforecited three qualifications would indicate that currently in excess of 21⁄2 million persons 65 years of age and older have some form of voluntary health insurance with the Nation's insurance companies. AMERICAN LIFE CONVENTION. HEALTH INSURANCE ASSOCIATION OF AMERICA. TABLE I.—Examples of individual hospital-surgical expense policies available to persons 65 years of age and older EXAMPLES OF POLICIES GUARANTEED CONTINUABLE FOR LIFETIME OF INSURED EXAMPLES OF POLICIES RENEWABLE AT OPTION OF COMPANY FOR LIFETIME OF TABLE II.-Percentage of U.S. civilian population covered by some form of voluntary health insurance, 1940–58 TABLE III.—Estimate of percentage of U.S. civilian population with some form of voluntary health insurance, 1960-90 Source: American Life Convention, Health Insurance Association of America, Life Insurance Association of America. TABLE IV.-Number of people 65 years of age and older with health insurance through insurance companies, Dec. 31, 1958 1 Excludes the following: (1) number of aged with health insurance through insurance companies not responding to this survey; and (2) number of aged and their dependents actively employed and covered under group insurance at place of employment. Early in 1959, several large insurance companies commenced enrollment of the aged on a nationwide basis under "65 plus" programs. Such enrollment is also excluded from the above data. Consideration of these 3 factors would indicate that currently more than 21⁄2 million persons 65 years of age and older are covered by insurance companies. It should further be noted that the above enrollment data are exclusive of the persons over 65 who are insured with such organizations as Blue Cross, Blue Shield, and the independent plans. Inclusion of the persons enrolled under such plans along with those enrolled under insurance company plans would undoubtedly bring the total number of aged covered by voluntary health insurance to an excess of 61⁄2 million persons. Mr. FORAND. Can you tell me how much it would cost an aged couple to purchase a commercial policy that would cover 60 days of hospital care, inhospital and surgical care, some nursing-home benefits, as provided in my bill, for instance? Mr. FAULKNER. There, again, it is a very difficult thing to set down a specific figure. I can give you some costs of types of benefits that are very interesting because they are the comprehensive, the best type. We know, for instance, that it is possible to put on the market a major medical expense policy that has a $15,000 overall blanket limit for all of the covered expenses of the particular illness. It has a $50 deductible, and an 80 percent coinsurance benefit. That kind of contract for a retired male person can be furnished for $14 a month or active male worker for $4 per month, which, if equated to the socalled level premium basis, would be $9.50 a month. Mr. FORAND. Is that for one person? Mr. FAULKNER. That is for a single male person. The monthly cost for a family would be about double that. In other words, about $19 a month. Mr. FORAND. When you say a family, do you mean husband and wife, or children? Mr. FAULKNER. Husband and wife and dependent children. Mr. FAULKNER. Without limit as to the number of children. As I have suggested, with $15,000 maximum limit on one illness, it is a very adequate, rich plan, you might say, a very liberal plan. Mr. FORAND. If you were to use the type of insurance policy you just referred to and apply it to my bill, could you furnish for us an estimate of what my bill would cost insofar as the individual's share? Mr. FAULKNER. In my prepared statement, sir, I suggested in connection with these large billion-dollar figures that our experts like to deal with that since those figures are so far beyond my comprehension I asked them to reduce the cost to a per capita basis. If my memory serves me right, the figure for the cost of the benefits provided by your bill for the aged would run around $150 a year. You may wonder why is there this seeming disparity between the cost of private insurance and the cost of the benefits that your bill proposes. The difference essentially lies in the fact that one is a private insurance plan that incorporates financial deterrents to overutilization. The other is a plan for which the recipient, for which the public is taxed, for which the ultimate recipient feels that he has paid the tax and under these circumstances he feels free to use to the limit. In other words, he is not sharing in every element of the cost. Coinsurance and these other financial deterrents that private insurance has found it necessary to build into the protection aline the financial interests of the insurer with that of the insured. For these reasons they are not conducive to the increasing overutilization which is an almost seemingly inevitable characteristic of compulsory plans. Mr. FORAND. In other words, if I understand you correctly, and if I do not express it clearly enough for you to understand it and agree with me, I wish you would tell me. What you are saying is that the type of contract which we are discussing would have a deductible clause, so-called, in it, where the purchaser of the contract would have to foot the bill on the first, say, $50, or $100, something like the automobile insurance business is doing? Is that what you are trying to tell us? Mr. FAULKNER. That is part of it, sir. What I am saying is that essentially there is a difference between a compulsory plan for which people are taxed and a private plan which incorporates incentives not to use the benefits unnecessarily. Were there a deductible in the benefits you provide, where the recipients have to share in the cost a degree, those would be features, of course, which would tend to reduce the utilization of the benefit. Mr. FORAND. If they share the cost, that is on the basis of this coinsurance where the company would pay 80 percent and the individual would pay 20 percent, something like that? Mr. FAULKNER. That is right. In England, for instance, they started out with a sort of full payment idea, the government picked up the whole check for everything. The overutilization got so far out of hand that on many things the government said, "Well, this is just getting away from us, and as one effort to control the repeated requests for care of all kinds, the patient was required to pay a dollar when he went to see the doctor. In other words, he had to pay a little bit. That is a financial deterrent toward overutilization. Mr. FORAND. Now, would you tell us whether the type of policy you are referring to would be available to all elderly persons regardless of preexisting condition and whether it would be subject to cancellation? You will probably remember, I think it was while you were on the stand last year, that I referred to this particular case of an elderly person who developed cancer and after her first claim was paid they refused to renew her insurance, they refused to accept any further premiums. Mr. FAULKNER. Yes, I am very glad to speak to that point, sir, because it is one area in which the voluntary health insurance business can take particular pride as to the progress which has been made. I pay tribute again to you, Mr. Forand, for having been one of the principal people sparking an interest in the problems of the aged. Today the policies generally that are offered the aged are not cancellable; they are guaranteed renewable at the option of the insured. Even the individual forms of coverage generally provide, I think almost universally provide, that preexisting conditions are covered 6 months after the insurance is taken out. Now, both of these conditions, cancellation or nonrenewable and coverage of preexisting conditions are not an issue or consideration in group coverage. In group coverage the individual cannot be cancelled. In group coverage the preexisting condition is covered. But in the area where our critics have been particularly vitriolic, which is in individual insurance, I can assure you that there is today available, very generally available, coverage that is not cancellable and coverage that does cover preexisting conditions. I can say to you, sir, that I cannot think of any older person who wishes to apply for the presently offered types of contract for the senior citizen, who, if he can pay the nominal premiums involved, cannot get that insurance. If there is an older person who finds himself in this situation, if he is doubtful that he can secure this insurance, I would hope that he might write to one of the associations for whom I speak, and I can assure you that information will be given to him by which he can secure this kind of protection. This is real progress, sir. Mr. FORAND. Will you provide the committee with illustrations of costs of various types of individual policies available to the person aged 65 or older? That is something along the lines of my first or second question. I would like very much to have that material. Mr. FAULKNER. We shall be very glad to supply that. (The information referred to is on p. 461.) Mr. FORAND. Thank you. Now, what percentage return in benefits are you making on nongroup policies and on group policies? Mr. FAULKNER. Sir, speaking first to group insurance, and 7 out of 10 of the people who are insured under voluntary insurance are insured in groups, 70 percent of them, last year 89 percent of the premium was returned in benefits. Mr. FORAND. In benefits? Mr. FAULKNER. In benefits, 89 percent. Some 2.3 percent of the premium was paid in taxes. Even though in the health insurance business the proper and fast payment of claims is very much more of a problem obviously than it is in life insurance, in spite of the fact that it has been alleged that salesmen who go out and convince people that they were well served by the coverage are paid commissions, the total overhead was only 9 percent. On the group operation last year the business as a whole lost 1.1 percent of the premium. In individual insurance, which covers 3 out of 10, you have a vast range of experience. One must remember, of course, for instance, with the noncancelable type of coverage, which is a very desirable type of coverage, that in the initial years, during the period when the insured has the benefit of protection, losses are low. It is then that you begin accumulating reserves as you do in life insurance, and ultimately of course, when losses are higher than current income, you are able to pay your claims by dipping into the reserves that had been accumulated during the younger years when the impact of disability was not so great. As to the so-called term insurance, which is not noncancelable, you will find variability as to the loss ratio, loss ratio indicating that part of the premium that is paid out in benefits. Now, that variability will reflect many things. It will reflect, for one thing, the impact of the business cycle. I think, for instance, sir, of one contract-it is a very simple contract, but it will illustrate the point-that my own company wrote over a period of some 20 444325931 |