Secretary HOBBY. Well, perhaps the group, the committee would be most interested in would be the group of insurance consultants who came-eight of them, I believe, Mr. Chairman-and sat with us in reviewing the draft of this bill and making very helpful suggestions in areas in which they certainly had a great deal more competence than we.

Now, that is the professional group, and I should like, Mr. Chairman, if I may, to submit for the record the names of these gentlement who were kind enough to come.

Senator PURTELL. We would like to have them become a part of the record, and it is so ordered, Mrs. Secretary.

(The list of names to be supplied by Secretary Hobby is as follows:)

EXPERTS WHO SERVED AS CONSULTANTS IN DEVELOPING RECOMMENDATIONS WITH
RESPECT TO S. 3114

C. Manton Eddy, Chairman of Committee of Consultants, Connecticut General
Life Insurance Co., Hartford, Conn.

Henry S. Beers, Aetna Life Insurance Co., Hartford, Conn.

Jarvis Farley, Massachusetts Indemnity Insurance Co., Boston, Mass.

Dr. Charles G. Hayden, Massachusetts Medical Service (Blue Shield), Boston,

Mass.

William S. McNary, Michigan Hospital Service (Blue Cross), Detroit, Mich.

H. Lewis Rietz, Lincoln National Life Insurance Co., Fort Wayne, Ind.

J. Henry Smith, Equitable Life Assurance Society of the United States, New
York, N. Y.

James E. Stuart, Hospital Care Corp. (Blue Cross), Cincinnati, Ohio.

Secretary HOBBY. And also, sir, I should like to make it clear that the gentlemen who helped us came in their individual capacities and not as representatives of their companies.

Senator PURTELL. But their experience was in many various fields affected by this bill?

Secretary HOBBY. We couldn't have produced a bill that we believe is as sound as this one without their aid and counsel.

Senator PURTELL. Thank you, Mrs. Secretary. You have indicated here generally, and somewhat specifically at times, who will be helped by this program, but would you want to elaborate a bit about that?

What are the fields that you hope this program will open up that aren't presently available to people; that is, those fields in which this health program can benefit more people?

Secretary HOBBY. Mr. Chairman, if you remember earlier what we called a pie chart (chart E)

Senator PURTELL. Yes.

Secretary HOBBY. Showing the people who are not now covered by insurance, 62 or 63 million, as I recall, in the blue part, the right side of it, were self-employed, rural, small firms and others, the others being casual labor; the upper left part of it, as you will see, were the aged and chronically ill and those in public assistance; and those in the lower left were those with no special coverage problems.

I am sorry my eye is not true to scale, but actually this health reinsurance fund could help all of those in blue-the farm families, those in small firms, self-employed or others and I would think that is a little better than half of the 63,000,000, Mr. Chairman.

Senator PURTELL. Yes.

Secretary HOBBY. The lower left segment-of course, there is no special coverage problem. They could buy health insurance if they

wanted to now.

This Reinsurance Fund would, we think, approach 361⁄2 million people.

Senator PURTELL. What improvements in existing plans do you expect? What kind of new insurance policies are likely to result from this program, Mrs. Secretary?

Secretary HOBBY. Let me see. Let me think slowly on this one, Mr. Chairman.

We would hope that the carriers would write a hospitalization policy, for example, that would pay for more days in a hospital.

There are many, many types of hospitalization policies with various numbers of days in the provisions and, as you remember from (chart H) that Dr. Keefer went over earlier, there is great room for improve ment in that coverage.

Mr. Chairman, if we could take care of a greater percent of the families with hospital bills, as reflected on that chart, by a health reinsurance policy, you see how many families we would affect.

As you come on down to the surgical part of it, I notice a smaller percentage of people having their bills met adequately. That again is another type, another group, that we would hope to reach.

Then when you come down to the gross medical care and see what a small percentage of families have from 40 to 100 percent of their bills met by insurance, you see there is a great area for experimentation in these three fields.

Would you like to add anything to that, Mr. Rockefeller, or Mr. Perkins?

Senator PURTELL. Incidentally, if you wish any of your associates to answer any of these questions, we will be very happy to have them do so.

Secretary HOBBY. Thank you.

Secretary ROCKEFELLER. I think there is the field of catastrophic medical expense, where families are met with bills way beyond their income that put them in a tremendously serious financial situation. That field has been explored, but there are tremendous possibilities there; and also in the field of preventive medicine, protection so that a family can get doctor's care before they need hospitalization and keep them out of the hospital, keep their bills down and keep them in good health so they don't have to drop out of employment and have to go on unemployment relief, and what not.

Those two fields have great possibilities for improving the health of the Nation and in protecting the families from a budgetary point of view.

Senator PURTELL. Of course, that term "catastrophic insurance." as it is referred to, is objected to by some; but it does describe what might happen.

Secretary ROCKEFELLER. Major medical expenses is perhaps a bet

ter term.

Senator PURTELL. There is an increasing need for such type of corerage, you feel?

Secretary ROCKEFELLER. Absolutely; and, with the help of the Gor ernment, through this reinsurance, they would be able to take risks which up to date some of the companies haven't felt they could afford to take, to explore and find out what the actuarial problems were in those areas.

Secretary HOBBY. Dr. Keefer, would you like to comment on that? Dr. KEEFER. I would agree with Mr. Rockefeller, that one of the areas for experimentation that is needed is in this major medical expense field; and, according to the most recent information, only about a million people are covered by such policies. Since they are relatively new, adequate facts and figures have not been developed by all the companies that would like to engage in this type of business. This is one of the areas oin which the Reinsurance Fund might aid in speeding up this process very much indeed.

Senator PURTELL. Thank you, doctor.

Secretary HOBBY. Mr. Perkins, would you like to add anything? Mr. PERKINS. No.

Senator PURTELL. Thank you.

I think you have pretty well dissipated the idea that some people have held, that this is a subsidy to insurance companies. Do you want to talk any more about it, although I think your testimony here clearly indicates it is not so intended?

Secretary HOBBY. Mr. Chairman, it certainly isn't meant to be, and we spent a great deal of care in drafting the bill to make sure it was not a subsidy to the insurance companies.

Mr. Ellenbogen, would you like to comment on that?

Mr. Ellenbogen was on the drafting committee.

Mr. ELLENBOGEN. In the first place, the bill specifically and explicitly limits liability on reinsurance contracts to the assets in the fund, and the fund consists of premium payments, the earnings from investments, and that is about all. There is a capital advance account provided for, as there would be in the case of any business which goes to a bank and borrows money. But those advances, if needed at all, have to be repaid from earnings and premiums with interest. So, I don't see how anyone could legitimately call this a subsidy.

Secretary HOBBY. Mr. Rockefeller, would you like to add to that? Secretary ROCKEFELLER. Mr. Chairman, in the discussions with the representatives of the insurance companies and the voluntary plans, it was very clear they did not want subsidies. They felt it would be an opening wedge to compulsory health insurance and socialized medicine. Hence, this bill is drafted very carefully so as to avoid any possibility of that.

Senator PURTELL. Is there any possible danger that the proposed measures of this bill would tend to encourage insurance carriers merely to expand in unprofitable fields and to ultimately expect the Government to carry those losses to the extent the amount provided for by the Government would permit?

Secretary HOBBY. Mr. Chairman, I don't think so, for a very practical reason: They have got to lose some of their own money first, and everybody that has been in business knows you are in business to make a profit.

Mr. Perkins, would you like to comment on that?

Secretary PERKINS. Both the elements of the absorption of their own contingencies and profits plus one-eighth of administrative expenses, and, then, that coinsurance factor, I think, as the Secretary points out. would insure that the carrier had adequate interest so that it would not want the reinsurance fund to have to help itself out.

Senator PURTELL. Thank you.

Did you wish to have any more testimony on that point?

Secretary HOBBY. No, sir.

Senator PURTELL. I think you have covered it most adequately in your testimony here, you and your associates, but I think you might want to talk a bit more, if you will, on this question of the idea in the minds of a few that this might be the entering wedge to compulsory health insurance or socialized medicine. I think perhaps you have some strong ideas about that, Mrs. Secretary, and want to express them.

Secretary HOBBY. Well, sir, we do have some strong ideas about it, and the whole purpose of the bill is to negate that, if I may express t that way.

This bill is not compulsory in any sense, and if a carrier, either a commercial or nonprofit carrier, were to apply and have a plan reinsured under the Federal reinsurance fund, the person purchasing the insurance would be purchasing it in the same way that he had purchased it before.

There is no relationship disturbed between the buyer, the individual who buys the insurance, or the person who uses the insurance, and the traditional doctor-patient relationship. Neither is there anything compulsory as far as the Federal Government is concerned.

Mr. Rockefeller, would you like to add to that?

Secretary ROCKEFELLER. I think, Mr. Chairman, supplementing what the Secretary has just said, that in view of the facts that 93 million people have some health insurance, and 63 million have none: that the total bill per year for medical care, is running around 89.4 billion and that only $1.4 billion of that is covered through insurance protection; I think this shows that there is room and need for better protection.

There has been in previous times a great deal of support for various forms of compulsory health insurance, or so-called socialized medicine. The Secretary and the Administration have felt that the proposal embodied in S. 3114 was a way of approaching that problem in the traditional American way of encouraging private groups to assume responsibility and, therefore, it was the greatest possible bulwark against socialized medicine or compulsory health insurance that could be developed, and that it gave great promise for that very reason. Senator PURTELL. Does it in any way put the Government in the insurance field in competition with private insurance companies? Secretary HOBBY. No, sir; it doesn't The bill specifically provides that where comparable reinsurance is available from private sources, the Secretary is not authorized to reinsure.

Senator PURTELL. Is the purpose, Mrs. Secretary, likely to result in Federal control of the insurance business?

Secretary HOBBY. Oh, no, sir. We tried to spell that out very carefully, Mr. Chairman, because, as you know, now usually the State departments of insurance or the State commissioners of insurance regulate carriers doing business in their States.

There is no provision for any kind of control by the Federal Government over these carriers, and the Secretary is directed to use the State departments of insurance to the best possible extent.

Senator PURTELL. So, there is no intention, Mrs. Secretary, then, to change that traditional regulation of insurance companies by the States?

Secretary HOBBY. No, sir.

May Mr. Perkins comment on that, Mr. Chairman?
Senator PURTELL. We would like to have him do that.

Secretary PERKINS. Just one amplification-and that is the provisions which authorize the Secretary to establish standards for eligibility are very different from regulation of the industry. It is the same as offering a contract on certain terms; and if an insurance company doesn't like the terms, it doesn't accept the contract and there is absolutely no compulsion on any insurance company to enter into the program at all. It is very much the same relationship as would exist between a private reinsurer and an insurance company.

Senator PURTELL. Thank you.

I had some other questions here, Mrs. Secretary, but you have answered them all in your testimony, with this exception: I wondered if you wanted to elaborate a bit on the matter of so few regulations in the bill. I think you did touch upon it before, but it would leave so much to the administrative judgment of the Secretary, would it

not?

Do you want to develop that?

Secretary HOBBY. Well, really, Mr. Chairman, we didn't think we know enough to write it any differently, and actually we hope there will be many types of plans that carriers will ask to have reinsured, and we could not envision enough to do that.

Now, that is one place where we think the advisory committee will be so useful, in this respect, because they will be people who have had practical experience in this field; and I should think if this plan works well, Mr. Chairman, it will be changing almost from plan to plan. Mr. Perkins, would you like to comment further on that?

Secretary PERKINS. I think that last point is a very important one, and that is the changing and developing nature of health insurance coverage. As we move forward in areas of major medical expense, and elimination of exclusions and that type of thing, the standards of eligibility would have to be changed in order to assure that the program is one to promote continuing development rather than to preserve the status quo. In order that we do not simply make the bill rigid, but enable it to be flexible, so as to provide for continuing improvement, it seemed essential, and the consultants were unanimous on this point, that authority ought to be given to the Secretary to modify the standards of eligibility from time to time. This would be extremely difficult if they were written into the act itself.

Senator PURTELL. Mrs. Secretary, this is really experimental and you want to feel your way along; is that correct?

Secretary HOBBY. That is correct.

Dr. Keefer, would you like to comment on that point?

Dr. KEEFER. I think it would be unwise to have any rigid regula tions at this time because we want to have plans as flexible as possible This was a matter that was discussed very freely by our consultants, and it was their considered opinion that it would be unwise at the present time to write in rigid regulations, that it would tend to freeze the

plan for health-insurance protection.

Senator PURTELL. Thank you, Doctor.

to those that have been expressed. As you know, there are 48 different Secretary ROCKEFELLER. Mr. Chairman, might I add one thought State laws governing insurance. Each one has its own pattern. And