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PRESIDENT'S HEALTH RECOMMENDATIONS AND

RELATED MEASURES

TUESDAY, APRIL 13, 1954

UNITED STATES SENATE,
COMMITTEE ON LABOR AND PUBLIC WELFARE,

SUBCOMMITTEE ON HEALTH,

Washington, D.C. The subcommittee met at 10:03 a. m., pursuant to call, in room P-63 of the Capital, Senator William A. Purtell (chairman of the subcommittee) presiding.

Present: Senator Purtell (chairman of the subcommittee). Also present: Roy E. James, staff director; Melvin W. Sneed, and William G. Reidy, professional staff members. Senator PURTELL. The subcommittee hearing will come to order, The hearing of the subcommittee resumes today with primary emphasis on health insurance. The testimony will focus on the adminsistration's recommendation for a reinsurance program designed to encourage more extensive use of voluntary prepayment health insurance plans, although some witnesses, especially those not previously appearing before the committee during these hearings, may testify also on other related matters before the committee.

Our first witness in this phase of the hearings will be the Secretary of Health, Education, and Welfare, who will present the administration's view on S. 3114.

The bill will be inserted in the record together with the reports thereon by the executive agencies. (The bill, S. 3114, and the reports referred to are as follows:)

(S. 3114, 83d Cong., 2d sess.) 4 BILL To improve the public health by encouraging more extensive use of the voluntary

prepayment method in the provision of personal health services Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it is the purpose of this Act to encourage and stimulate private initiative in making good and comprehensive health services generally accessible on reasonable terms, through adequate health service prepayment plans, to the maximum number of people, (a) by providing technical advice and information, without charge, to health service prepayment plans and to the carriers or sponsors thereof; and (b) by making a form of reinsurance available for voluntary health service prepayment plans where such reinsurance is needed in order to stimulate the establishment and maintenance of adequate prepayment plans in areas, and with respect to services and classes of persons, for which they are needed.

TITLE 1-GENERAL

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DEFINITIONS SEC. 101. As used in this Act

(a) The term “beneficiary” means an individual (1) with respect to wbom a carrier, pursuant to a health service prepayment plan, undertakes to pay in! whole or in part for specified personal health services furnished to him by others, or (2) to whom, pursuant to such a plan, it undertakes to provide specified personal health services :

(b) The term “carrier” means a voluntary association, corporation, or part: nership, other than an instrumentality wholly owned or controlled by a State or political subdivision thereof, which is organized under State law, and the is sponsoring, or is engaged in providing protection under insurance policies or subscriber contracts issued pursuant to, or is otherwise engaged in operat : ing under, a health service prepayment plan;

(c) The term "Council” means the National Advisory Council on Health Service Prepayment Plans;

(d) The term "fund” means the Health Service Prepayment Plain Reinsir ance Fund established by section 307; the term “account" means an account within the fund, established by the Secretary pursuant to that section;

(e) The term "health service prepayment plan" means a set of specificatiots under which a carrier undertakes, through a class or classes of insurance policies or subscriber contracts (as defined by the Secretary) or both, to do any or a combination of the following in return for insurance premiums or prepaid subscription charges :

(1) To reimburse specified beneficiaries or a class or classes of bene ficiaries (or others with respect to such beneficiaries) in whole or in part for expenditures incurred by them for specified personal health services:

(2) to pay (directly or through another carrier or carriers) to providers of personal health services all or part of their costs or charges for specified personal health services furnished to specified beneficiaries or a class of classes of beneficiaries: Provided, That, if (A) such payments are to be made in accordance with a contract or arrangement between the carrier and the provider of such services (or between the carrier and another carrier through whom such payments are to be made) and (B) such contract or arrangement fixes the basis upon which the amount of such payment stall be determined, such contract or arrangement shall be deemed to be ab integral part of the plan;

(3) To provide, wholly or partly through its own staff or facilities, spage fied personal health services to specified beneficiaries or a class or claimer of beneficiaries; (f) The term “personal health services" includes any serrices rendered to individuals by licensed health personnel, or, under the supervision of such per sounel by auxiliary personnel for the improvement or preservation of physical ar mental health or for the diagnosis and treatment of disease or injury; the use by such licensed or auxiliary personnel of any and all apparatus or machines de signed to aid in the diagnosis or treatment of disease or injury; the proris to of bed and board in general or special hospitals, convalescent homes, nursine homes, sanatoria, or other institutions licensed or designated as such by a Sale when care in such institutions is prescribed by such licensed personnel; the poin vision of drugs and medicines, dressings and supplies, posthese and appliades (including eyeglasses), when prescribed by such licensed personnel; and amblance service;

(g) The term "Secretary”, except as otherwise specified, means the Secretars of Health, Education, and Welfare; and

(h) The term "State" includes the District of Columbia, Alaska, Hawaii, Puerto Rico, and possessions of the United States.

NATIONAL ADVISORY COUNCIL AND OTHER COMMITTEES Sec. 102. (a) There is hereby established within the Department of Healt Education, and Welfare a National Advisory Council on Health Service Prever ment Plans, which shall meet at the call of the Secretary but not less often than four times each year. The Council shall consist of twelve members applied by the Secretary without regard to the civil-service laws, who shall be fanal is! with the need for, or the availability of, personal health services, and not les than four of whom shall be experienced in the administration of health service

prepayment plans. The Secretary shall, from time to time, designate one of such members to serve as Chairman of the Council.

(b) The Council shall advise, consult with, and make recommendations to, the Secretary on matters of policy relating to the activities and functions of the Secretary under this Act.

(c) The Secretary is authorized to utilize the services of any member or members of the Council, or of any member or members of a special advisory committee appointed by him, for advisory or consultative purposes in connection with matters related to the administration of this Act, for such periods, in addition to conference periods, as he may determine.

(d) Appointed members of the Council and of other advisory and technical committees, while attending conferences or meetings of the Council or of their respective committees or subcommittees or while otherwise serving at the request of the Secretary, shall be entitled to receive compensation at a rate to be fixed by the Secretary but not exceeding $50 per diem, including travel time, and while away from their homes or regular places of business they may be allowed travel expenses, including per diem in lieu of subsistence, as authorized by law (5 C. S. C. 735-2) for persons in the Governinent service employed intermittently.

CONSULTANTS

Sec. 103. The Secretary is authorized, to the extent he deems it necessary and appropriate in order to carry out the provisions of this Act, to employ experts and consultants or organizations thereof, as authorized by section 15 of the Administrative Expenses Act of 1946 (5 C. S. C. Jja). Individuals so employed may be compensated at rates not in excess of $.30 per diem, including travel time, and while away from their homes or regular places of business they may be allored travel expenses, including per diem in lieu of subsistence, as authorized by law (5 C. S. C. 73 b-2) for persons in the Government service employed intermittently.

UTILIZATION OF OTHER AGENCIES SEC. 104. (a) In administering the provisions of this Act, the Secretary is authorized to utilize the services and facilities of auy agency of the Federal Government and, without regard to section 3703, as amended, of the Revised Statutes, of any other public or nonprofit agency or institution, in accordance with agreements between the Secretary and the head thereof. Payment for such services and facilities shall be made in advance or by way of reimbursement as many be agreed upon by the Secretary and the head of the agency or instition concerned.

(b) In administering the provisions of title III, the Secretary shall utilize to the optimum extent, in accordance with arrangements entered into pursuant to subsection (a) of this section, the services and facilities of State agencies engaged pursuant to State law in supervising carriers of health service prepayment plans with respect to such plans or with respect to policies or subscriber contracts issued pursuant thereto. The Secretary shall, in particular, endeavor to make arrangements for utilization of the appropriate agency of the carrier's home State in connection with determining compliance with the terms and conditions prescribed by the Secretary pursuant to section 303, and in determining, in accordance with criteria established by the Secretary, whether, as required by sertion 304, the carrier is financially sound and entitled to publie confidence; and such determinations pursuant to section 304 may be accepted by the Secretary as conclusive. As used in this subsection, the term “home State" means the State under the laws of which the carrier is organized or, if the carrier's principal place of business is in a different State, then either of such States as the Secretary may determine, except that in the case of a carrier not organized under the laws of any State, the term “home State" means the State in which the carrier's principal place of business in the United States is situated.

VOLUNTARY AND UNCOMPENSATED SERVICES SEC. 105. In carrying out the provisions of this Act, the Secretary may, notwithstanding any other provision of law providing for payment for services, accept and utilize voluntary and uncompensated services of individuals, or of public or nonprofit agencies, institutions, or organizations.

EXEMPTION FROM CONFLICT-OF-INTEREST STATUTES

SEC. 106. (a) Any person appointed, employed, or utilized in an advisory or consultative capacity under section 102 or 103 of this Act is hereby exemped. with respect to such appointment, employment, or utilization, from the operatie of sections 281, 283, 284, and 1914 of title 18 of the United States Code, except as otherwise specified in subsection (b) of this section.

(b) (1) The exemption granted by subsection (a) of this section shall be extend to the following acts performed as an officer or employee of the United States by any person so appointed, employed, or utilized: (A) The negotiation or execution of, or (B) the making of any recommendation with respect to, or 10 the taking of any other action with respect to, any individual application or contract for reinsurance of a health service prepayment plan operated or sponsored by the private employer of such person or by any corporation, joint stock company, association, firm, partnership, or other business entity in the pecuniary profits or contracts of which such person has any direct or indirect interest.

(2) The exemption granted by subsection (a) of this section shall, during the period of such appointment, employment, or utilization and the further period of two years after the termination thereof, not extend to the prosecution or participation in the prosecution, by any person so appointed, employed, or utilized, of any claim against the Government involving any individual application or contract for reinsurance concerning which the appointee had any responsibility during the period of such appointment, employment, or utilization.

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REGULATIONS Sec. 107. (a) The Secretary shall make such regulations as he was deem necessary to carry out the purposes of this Act.

(b) Except as may be specifically provided for in this Act, nothing in this Act shall be construed to authorize the exercise of any supervisory or regulators control over any carrier, or over any hospital or other health facility or personnel furnishing personal health services covered by a participating health service prepayment plan.

TITLE II-STUDIES AND ADVISORY AND INFORMATIONAL SERVICES

Sec. 201. The Secretary is authorized to conduct studies and collect informs tion concerning the organizational actuarial, operational, and other problems of health service prepayment plans and their carriers, make available throh publications and other appropriate means the information so collected and the results of such studies, and provide to carriers and sponsors of health service prepayment plans, on request and without charge, organizational and other teab pical advice and information, including information on morbidity and organiza. tional methods.

SEC. 202. There are hereby authorized to be appropriated for the purposes of this title such sums as may be necessary. TITLE III-REINSURANCE OF HEATH SERVICE PREPAYMENT PLANS

AUTHORITY TO REINSURE Sec. 301. (a) If, in the judgment of the Secretary, reinsurance with respirent to any kind or type of health service prepayment plan, upon terms and condi tions and at premium rates comparable to those offered pursuant to this title, is needed to promote the purposes of this Act and is not available from private sources to an extent adequate to promote such purposes, the Secretary is author ized, subject to the provisions of this title and to such terms and conditions as may be preseribed under the authority of this title, to reinsure, on behalf of the United States, any carrier with respect to such a health service prepayment plan submitted by it.

(b) For the purpose of this title, the term "health service prepayment plan" shall not include so much of any plan, or of any risk insured pursuant to such plan, as is covered by reinsurance other than reinsurance granted pursuant to this title.

APPLICATIONS FOR REINSURANCE Sec. 302 (a) Any carrier desiring reinsurance under this tlle with respect to a health service prepayment plan shall file with the Secretary an application

for such reinsurance. Such application shall be in such form and contain or be supported by the information required pursuant to section 305 and such

additional information as the Secretary may require, and shall contain or be E accompanied by a full description of the plan, including specimen copies of the

kinds of insurance policies or subscriber contracts covered by the plan, and indie eluding, in the case of a plan within the scope of the proviso to section 101 (e)

(2), any applicable contract or arrangement between the applicant carrier and the provider or providers to whom payments for personal health services covered by the plan are to be made (or between the applicant carrier and another carrier through whom payments to such provider or providers are to be made), which contract or arrangement fixes the basis upon which such payments are to be made.

(b) Such application shall, further, contain or be supported by an agreement by the applicant undertaking, in the event of approval of the plan for reinsurance, (1) to pay the premium charges for such reinsurance required under this title when due, (2) to comply at all times with applicable provisions of State law governing the operations of the carrier with respect to the plan, (3) to make such reports concerning its operations under the plan, in such form, and containing such information related thereto as the Secretary may from time to time reasonably require, and (4) to comply with the applicable provisions of the reinsurance contract.

(e) Ang carrier desiring a renewal of reinsurance under this title shall file with the Secretary an application for such renewal, which application shall, except as otherwise provided by or pursuant to regulation, contain or be supported by such information, and such agreements and assurances as are required in the case of an initial application for reinsurance.

TERMS AND CONDITIONS OF APPROVAL FOR REINSURANCE SEC. 303. (a) The Secretary may prescribe such terms and conditions governing the approval, for reinsurance, of health service prepayment plans under this title as he finds will best promote the purposes specified in section 1, including, but not limited to, such reasonable requirements, provisions, or limitations as he may from time to time by regulation prescribe for all carriers or particular dasses of such carriers, or for all or particular classes of health service prepayment plans or policies or subscriber contracts issued pursuant thereto, or both, with respect to

(1) the kinds and types of health service prepayment plans which will be eligible for reinsurance, taking into consideration the purposes declared in section 1, with special emphasis upon the objective of encouraging experimentation designed to extend or adapt the prepayment method to substantive problem areas or geographic areas for which that method is in any significant respect new, untried, or not yet fully effective or widely available on reasonable terms, such as (A) coverage of classes of individuals for which protection through such health service prepayment plans appears to be feasible but is not adequate, or (B) the offering of protection in communities or areas in which such protection (in the respects in which it is offered) is not adequately available on a prepayment basis, or (C) a coverage of benefits or srevices which, either as to type, range, amount, or dura. tion of such benefits or services, is not otherwise (generally or in a given area) widely available through such plans on an adequate basis;

(2) minimum ranges of health conditions to be covered by the plan, minimum provisions as to the kind, quantity, and duration of health services to be covered or provided under the plan, and safeguards against undue exclusions of health services or health conditions from coverage or against any other undue exclusions or limitations ;

(3) deductible amounts and maimum liability amounts, if any, provided or to be provided for in the plan;

(4) waiting periods as a condition of entitlement of health service benefits;

(5) plan provisions which require that a given portion of the cost of personal health services or of expenditures therefor, covered by the plan, be borne by the policyholder, subscriber, or beneficiary;

(6) plan provisions, in the case of plans within the scope of the proviso to section 101 (e) (2), as to costs or charges of providers of personal health services payable by the carrier, to the extent that, in the judgment of the Secretary, such regulations are necessary to protect the Fund against abuses or arbitrary cost increases during a reinsurance term;

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