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deemed to have been administratively denied if not acted upon within six months after the date of such filing, unless the Secretary for good cause shown has otherwise agreed with the claimant.

(b) Any claim for a reinsurance payment which is not paid within six months after proof of claim, as required by regulation, has been filed shall, except as to any amount which is tendered by the Secretary as admittedly owing or as a settlement of a disputed claim, bear interest at 4 per centum per annum until paid.

(C) (1) Any claim for a reinsurance payment under this title which the Secretary finds to be due and payable, and any judgment of a court of competent jurisdiction based upon a claim for a reinsurance payment under this title, which judgment has become final and conclusive, shall be paid by the Secretary from any unobligated moneys in the fund or in the appropriate account chargeable therewith.

(2) Whenever, for the purpose of a proof of claim filed pursuant to this section, the carrier's reinsurance claim for a given period is computed in whole or in part on the basis of an estimate of the carrier's benefit costs (as defined in section 305) incurred in such period but not yet due and payable or paid by the carrier, the Secretary shall not make final payment with respect to so much of such part as is based on such estimate, but in such cases the Secretary is authorized, in accordance with regulations, to approve tentatively, and to make a tentative payment on the basis of, so much of such estimate as the Secretary finds is reasonable and conservative, subject to adjustment in favor of or against the carrier when it is finally determined that such estimated (nists either have become due and payable by the carrier or have not in fact been incurred, and the carrier shall be obligated, in the event of any such adjistment against the carrier, to repay to the Secretary, for the fund, the escess of the amount tentatively paid to the carrier over the amount finally found to have been payable to the carrier as reinsurance.

(3) In cases in which the carrier's experience under the plan during the regular and extended periods of a reinsurance term is to be combined pursuant to paragraph (2) (B) of section 305 (e), the reinsurance contract may, if deemed appropriate by the Secretary, provide, pursuant to regulation, for making annually during the combined period a tentative determination on the basis of the elapsed portion of the combined experience and for making annual tentative adjustments on the basis of such determinations either in favor of the carrier or by refund to the Secretary (for payment into the fund), as the case may be, with a final adjustment and payment to or by the carrier after espiration of the whole of such combined period. Nothing in this paragraph sball be construed to limit the authority of the Secretary to proceed pursuant to paragraph (2) of this subsection upon the expiration of such combined period.

(d) (1) For the purposes of this section, the question whether benefit costs have become due and payable shall be determined without regard to any extinguishment or reduction of liability of the carrier, under policies or subscriber contracts issued pursuant to the reinsured health service prepayment plan, by reason of the operation of, or proceedings under, Federal or State laws pertaining to bankruptcy or insolvency.

(2) Reinsurance payments made under this title shall not be subject to distribution or application under any Federal or State law pertaining to bankruptcy or insolvency, except in satisfaction of claims for services or money payments arising under policies or subscriber contracts issued pursuant to the reinsured health service prepayment plan with respect to which such reinsurance was paid.

INVOLUNTARY TERMINATION OF REINSURANCE Sec. 310. ['pon any ground specified in regulations in effect not less than ninety days prior to the commencement of any initial or renewal term of reinsurance, the Secretary may, prior to the normal expiration of such term, termiDate the reinsured status of a health service prepayment plan with respect to policies or subscriber contracts issued pursuant to such plan after a future date specified by the Secretary in the notice of termination.

ACTIONS BY POLICYHOLDERS OR SUBSCRIBERS Sec. 311. No policyholder or subscriber under a policy or contract issued pursuant to a reinsured health service prepayment plan shall, by virtue of the

46293-34-pt. 3

reinsured status of such plan, be deemed to have any cause of action against the United States or the Secretary or any claim against the fund, but all such persons must look solely to the carrier.

APPROPRIATIONS

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Sec. 312. For a transitional period of five fiscal years beginning July 1, 1954, there are authorized to be appropriated from the general fund of the Treasury such sums as may be necessary to defray the expenses of administration of this title.

TITLE IV-MISCELLANEOUS

LEGAL POWERS AND RESPONSIBILITIES SEC. 401. (a) With respect to matters arising by reason of title III, or such | as it may hereafter be amended, the Secretary shall, in addition to other powers conferred by this Act, have power

(1) to enforce, pay, or compromise, any claim on, or arising because of operations under such title, and (2) to enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired under

such title, (b) The Secretary is authorized, on request or on his own motion, to hold such hearings and to conduct such investigations and other proceedings as be may deem necessary or proper for the administration of this Act and, in the course of any such hearing, investigation, or other proceeding, may administer oaths and affirmations, examine witnesses, and receive evidence, whether or Dot such evidence is admissible under rules of evidence applicable to court procedure.

(c) The Secretary is authorized to determine the character and necessity of expenditures from the fund and the manner in which such expenditures are incurred, allowed, and paid, subject to provisions of law specifically applicable to wholly owned Government corporations.

(d) In any action or claiin against the United States arising under this title, the district courts of the l'nited States shall have jurisdiction, without regard to the amounts involved, as in suits against the United States under section 1346 (a) (2) of title 28, United States Code, and in accordance with the procedures applicable to such suits,

ACCOUNTING AND AUDITS Sec. 402. The Secretary shall, with respect to the financial operations arisinz by reason of title III

(a) prepare annually and submit a budget program as provided for wholly owned Government corporations by the Government Corporation Control Act; and

(b) maintain an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance with principles and pro cedures applicable to commercial corporate transactions, as prorided by sepse tion 103 of the Government Corporation Control Act.

ANNUAL REPORTS SEC. 403. The Secretary shall include in the annual report for the Department of Health, Education, and Welfare a complete statement with respect to opera. tions under this Act and with respect to the status of the fund.

CRIMINAL PROVISIONS AND INJUNCTIONS SEC. 404. (a) The Congress hereby finds and declares that any representation to members of the publie, made in connection with the promotion of the businex of a carrier or broker, or as a part of any policy or subscriber contract issued under a health service prepayment plan, that such plan or policies or snhectives contracts are reinsured under this Act or that such reinsurance has been applied for, even if such representation is in accordance with fact, would tend to mielead potential policyholders or subscribers into believing that such reinsnrane is a guaranty of the standing and solvency of the carrier and of its faithful combpliance with the policy or subscriber contract or that such policy or subseriber contract is superior to those issued under plans not so reinsured, and thereby

to cause unfair competition with carriers which make no such representation or whose plans are not reinsured under this Act. The Congress, therefore, finds and declares that, in order to protect the public interest, safeguard the integrity of the purposes of this Act, and prevent the use of such representations for improper purposes, it is necessary to prohibit such representations except as authorized by and in conformity with regulations prescribed pursuant to this section.

(b) (1) The Secretary shall by regulation prescribe the substance, forms, manner of display, manner of making, and manner of use of any sign, advertisement, or other representation, if any, which shall be authorized concerning reinsurance granted or applied for under this title.

(2) Any carrier or broker, and any person acting or purporting to act for or on behalf of a carrier or broker, who, in or as a part of any policy or subscriber contract issued or offered by such carrier, or in connection with the promotion of such carrier's or broker's business, represents by any means or device whaterer, except as specifically authorized by regulations prescribed pursuant to paragraph (1) of this subsection, that such carrier, or any of its subscriber policies or contracts, or the carrier's health service prepayment plan or plans under which such contracts or policies are issued or offered by it, are reinsured under this Act or that application for such reinsurance has been made, shall, for each such offense, he punished as follows: A corporation, partnership, association, or other business entity, by a fine of not more than $1,000; an officer or member thereof participating or knowingly acquiescing in such violation or any individual violating this subsection by a fine of not more than $1,000 or imprisonment for not more than one year, or both.

(C) A violation of subsection (b) of this section may be enjoined at the suit of the United States Attorney, upon complaint by the Secretary or any person duly authorized by the Secretary.

(d) Section 709 of title 18 of the United States Code (relating to false advertising and misuse of names to indicate Federal agency) is amended by inserting after the third paragraph thereof the following new paragraph :

"Whoever falsely advertises or otherwise falsely represents by any means or device whatsoever, expressly or impliedly, that any insurance policies, subscriber contacts, or undertakings for the furnishing of, or payment for, personal health services, or the health service prepayment plan or plans under which such policies, contracts, or undertakings, are issued, offered, or assumed, are reinsured under the Health Service Prepayment Plan Reinsurance Act or that application for such reinsurance has been made; or”.

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APPOINTMENTS ABOVE GRADE GS-15 Sec. 405. The Secretary, to the extent he deems it necessary and appropriate in order to carry out the provisions of this Act, is authorized to place not to exceed ten positions in grades above GS-15 without regard to the numerical limitations containded in section 505 of the Classification Act of 1949, as amended, but otherwise subject to the requirements of such action.

EFFECTIVE DATE
Sec. 406. This Act shall become effective on July 1, 1954, but nothing in this
Act shall require the Secretary to receive or consider applications under title
III before such date as the Secretary may determine.

SHORT TITLE SEC. 407. This Act may be cited as the "Ilealth Service Prepayment Plan Reinsurance Act".

EXECUTIVE OFFICE OF THE PRESIDENT,

BUREAT OF THE BUDGET,

Washington, D. C., March 24, 1954.
Hon. H. ALEXANDER SMITH,
Chairman, Committee on Labor and Public Welfare,

United States Senate, Washington, D. C.
MY DEAR MR. CHAIRMAN: This will acknowledge your letter of March 16,
1954, requesting the views of the Bureau of the Budget on S, 3114, a bill to im-
prove the public health by encouraging more extensive use of the roluntary pre-
payment method in the provision of personal bealth services.

The President in his special health message to the Congress on January 18, 1974, said, “I recommend the establishment of a limited Federal reinsurance service to encourage private and nonprofit health insurance organizations to offer broader health protection to more families.” This measure, if enacted, should go far to accomplish the President's objective. The bill is designed to provide reinsurance to cover the special additional risks involved in such broader protection.

I am authorized, therefore, to advise you that enactment of S. 3114 is in accord with the program of the President. Sincerely yours,

DONALD R. BELCHER,

Assistant Director, Senator PURTELL. Mrs. IIobby, we are happy to have you back with us today, and we would like to have your testimony.

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STATEMENT OF HON. OVETA CULP HOBBY, SECRETARY OF HEALTH,

EDUCATION, AND WELFARE, ACCOMPANIED BY NELSON A.
ROCKEFELLER, UNDER SECRETARY OF HEALTH, EDUCATION,
AND WELFARE; ROSWELL B. PERKINS, ASSISTANT SECRETARY
OF HEALTH, EDUCATION, AND WELFARE; DR. CHESTER
KEEFER, SPECIAL ASSISTANT TO THE SECRETARY FOR HEALTH
AND MEDICAL AFFAIRS; THEODORE ELLENBOGEN, OFFICE OF
THE GENERAL COUNSEL, DEPARTMENT OF HEALTH, EDUCATION,
AND WELFARE; AND ROBERT J. MYERS, CHIEF ACTUARY,
SOCIAL SECURITY ADMINISTRATION, DEPARTMENT OF HEALTH,
EDUCATION, AND WELFARE
Secretary IIOBBY. Thank you, sir.

Mr. Chairman, before proceeding with my prepared statement, I should like to indicate for the record that Mr. Roswell B. Perkins, ls. sistant Secretary, and Dr. Chester S. Keefer, Special Assistant for Health and Medical Affairs, will participate in the presentation of our testimony.

Senator PURTELL. We are very happy to have them.

Secretary Ilobby. And present to answer technical questions are Mr. Nelson Rockefeller, Under Secretary, Mr. Robert J. Myers, Chief Actuary of the Social Security Administration, and Mr. Theodore Ellenbogen, of the General Counsel's office.

Mr. Chairman and members of the committee, it is a pleasure once again to appear before you in support of a bill introduced by the distinguished chairmen of the Committee on Labor and Publie Welfare.

S. 3114 implements one of the President's proposals for improving the health of the American people. This bill has as its objective the stimulation of voluntary health insurance plans to do a more effective job in providing protection for our people against the mounting costs of medical and hospital care. The device proposed to achieve this ob jective is that of reinsurance.

The President has repeatedly specified the general lines of attack hisaxiministration would take toward the problem of paying for health and medical care. He has rejected any step toward socialization of medicine-or even of the means of paying for medical care. The course which he has proposed is to build on our existing system of private health insurance plans.

In line with this policy, the President's state of the Union address and his special message of January 18 on the health needs of the Nation recommended establishing a limited Federal reinsurance service to foster the growth of voluntary health prepayment plans.

Tremendous strides have been taken in the development of a voluntary system for the prepayment of medical expenses. Although these voluntary plans have developed at an amazing rate, they still pay a minor portion of our annual national medical bill. There is a wide area for expansion and improvement, as recent surveys have shown.

It would be well to review some of these facts briefly at this time in order that we may have before us the proper background for discussing this bill this morning.

With your permission, Mr. Chairman, I would like to ask Dr. Keefer to show you some statistical charts.

Senator PURTELL. We would like to have Dr. Keefer do so.
Good morning, Doctor.

Dr. KEEFER. Mrs. Hobby, Mr. Chairman, gentlemen of the committee, as the Secretary has stated, the purpose of this proposal is to stimulate and encourage the health service organizations and the private insurance carriers to achieve the two major goals of prepayment voluntary insurance; that is, first to cover as many people as possible who can afford to purchase insurance on a voluntary basis, and, secondly, to provide sufficient benefits so that when sickness strikes it will prevent medical expenses from becoming a financial hardship and a burden to the family.

It is generally acknowledged that much has been accomplished in the way of meeting the soaring medical costs in the past 10 or 15 years through voluntary insurance, but if the goals are to be achieved much remains to be done in the future. I

propose showing some charts that will illustrate three major
points:
A

INCREASE OF INSURANCE
PROTECTION

155 MILLION
POPULATION

MILLIONS OF PERSONS

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