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then there are a whole series of different types of insurance carriers -
nonprofit, profit, and so forth and they have a wide variety of plans.
Thus, there is a tremendous permutation and combination of problems
thronghout the country. Now, to try and write any regulations that
would cover all the variables in a changing industry would be quite
impossible. We believe that standards for the reinsurance programu
must be expressed in regulations as the program develops.

Senator PURTELL. Have you any other testimony to offer?
You have been most helpful to us.

I would like to say your entire statement, Mrs. Hobby, and the charts will become a part of the record.

Secretary HOBBY. Thank you.

Senator PURTELL. I would like the record to show that Senator Goldwater is away from the city on business and Senator (Cooper had a bill before the Agricultural Committee this morning and could not attend, and Senator Lehman, I understand, is away from the city, and Senator Hill was unavoidably detained and could not get here.

I want to thank you for appearing here and testifying on this bill.
Secretary Hobby. Thank you, sir.

Senator PURTELL. The committee will stand in recess until 10 a. m. toworrow, when the first witnesses will be representatives of the Blue Cross Commission and the American Hospital Association.

(Whereupon, at 11:33 a. m., the hearing was recessed, to reconrene tomorrow morning, Wednesday, April 14, 1954, at 10 a. m.)

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Washington, D.C. The subcommittee met at 10:05 a. m., pursuant to recess in room P-63 of the Capitol, Senator William A. Purtell (chairman of the subcommittee) presiding. Present : Senators Purtell (chairman of the subcommittee), Hill and Lehman.

Also present: Roy E. James, staff director; Melvin W. Sneed and William G. Reidy, professional staff members.

Senator PURTELL. The subcommittee hearings will come to order, and our first witness will be Mr. William S. MeVary, chairman of the Council on Government Relations of the American Hospital Associa


Good morning, Mr. McNary.
Mr. McNary. Good morning, Senator.

Mr. Chairman, I have with me this morning Mr. Kenneth Williamson, who is director of the Washington Service Bureau of the American Hospital Association. Senator PURTELL. May I correct the record and state that Mr. McNary is appearing not only in behalf of the American Hospital Issociation but also in behalf of the Blue Cross Commission of the association. Is that correct? Mr. McNary. That is correct, Mr. Chairman. Senator PURTELL. Is it your intention to read your prepared statement or do you wish to summarize it?

You may proceed in whichever way you wish.
Mr. McNary. It is short, and I would prefer to read it.
Senator PURTELL. You are at liberty to do as you wish.


Mr. name is William S. McNary. I am chairman of the Council on Government Relations of the American Hospital Association. I am also a former chairman of the Blue Cross Commission of the Ameri

641 46293—54-pt. 3-4

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We do not believe that the total goal to be attained under voluntary prepayment will come easily. We do think that it can be accomplished and that his proposed legislation may help to bring it nearer. We have regularly testified before this and other committees of the Congress that additional funds will have to be provided to supplement the resources of that segment of the population whose individual incomes are inadequate to finance the purchase of prepaid protection.

The Health Service Prepayment Plan Reinsurance Act does not propose any Government financial support and it cannot be expected to answer this question.

We believe that further study must be given to the development of methods for providing coverage for those groups which cannot pay in full for the cost of their own protection.

This Health Service Prepayment Plan Reinsurance Act has as one of its primary functions the reinsurance of prepayment offerings to groups with difficult enrollment problems and the reinsurance of plans which offer new or more liberal benefits so that prepayment carriers may be encouraged to experiment in extending coverage and benefits.

We believe that, as the act is structured, such experimentation will be encouraged, and that the act will help in the extension which we have stated is important if the people of this country are to have adequate protection.

A second broad purpose of the act is to provide for the accumulation of information in regard to voluntary health prepayment countrywide. Provision is made for the collection of information for the conduct of studies and for the publication of this knowledge which presently is not supplied by any one agency.

We have three points on which we would like to suggest amendments or the tightening of the langauge of the bill. We will be glad to submit suggested wording to carry out the following recommendations :

1. In section 107 (a), we would suggest that the regulations promulgated by the Secretary be subject to approval by the Council.

This is the pattern used in the Hospital Survey and Construction Act which has been such a successful program.

It is particularly important in this proposed legislation because it is a new area for Federal operations and of necessity the terms of S. 3114 cannot be wholly explicit in delineating the powers of the Secretary and the area in which he is to operate. This being true, we feel that the necessary latitude allowed in administration, which will be clarified through regulation, should be subject to the approval we suggest. First, in order that the Secretary be required to consult with

people experienced in this field as is provided for within the memI bership of the Council; and second, in order that the Secretary may

utilize the Council as protection against undue pressures for what might be unwise regulatory acts.

We believe that this will not only insure wiser operation of the act, but will be a protection to the Secretary.

We strongly recommend that the Congress strengthen the bill in this manner.

2. Section 201 provides for the collection of information and its publication. Elsewhere in the act there is provision for the collection of information from an individual prepayment carrier on whch to judge whether a program suggested by that carrier is eligible for



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reinsurance. We believe that these two activities inevitably interweave, but that there should be written into the act provision that confidential information secured from a carrier in order to judge whether a specific plan will be approved, and so needed in the administration of the plan, shall be considered privileged information and will not be released without the approval of the individual carrier furnishing the information.

3. Section 404 delineates the use of publicity about the reinsurance of a plan. We are entirely in sympathy with the objective of the section in protecting the public against deceptive or misleading use of the designation. We know that such statements to the public must be carefully controlled. However, we also believe that proper te of the knowledge by the public that a contract has been reinsured, could be in the public interest.

We think that the wording of this section should not imply, as it seems to us it does, that any publicity at all is unwise. In our opinion. proper publicity might well be wise.

We believe that the Health Service Prepayment Plan Reinsurance Act, if enacted, will stimulate the expansion of voluntary health insurance because:

1. It gives positive expression of the Government's role as advisor and friend of voluntary prepayment plans and the private enterprise system;

2. It does not provide for Government control of insurance plans or of health facilities or personnel. Such control would destroy the roluntary health system of America;

3. It will do much to bring national recognition of the need for some broad standards to be applied to all health prepayment plans in the public interest. The development of such reasonable standards by the Advisory Council should help to destroy those who now prey upon the public with policy offerings which return in benefits to their unfortunate policyholders only a few miserable cents out of each premium dollar: and

4. It will give a psychological "shot in the arm" to all health prepay. ment agencies. Even thongh many carriers decide not to make use of the facilities made available by the bill, we believe that the experimen. tation and expansion which the President wishes to encourage will be speeded if the bill is passed.

Thank you.
Senator PIRTELL. Thank you very much, Mr. Me Nary.
Senator Hill, have you any questions you wish to ask Mr. McNary!

Senator Ilili. I understand the American Medical Association and perhaps other medical associations will appear and perhaps this ques; tion may be more properly directed to them, but as I read and lintene? to your statement, particularly section 2 on page 6, I wondered aluut this statement :

It does not provide for Government control of insurance plans or of health facilities or personnel. Such control would destroy the voluntary health system of America.

Am I right that most of your Blue Shield plans are owned and managed by the doctors, themselves?

Mr. Mc BRY. Senator Hill, there is a representative of Blue Shield here today who is scheduled to testify, and I think I shouldn't answer on behalf of Blue Shield. I am here in behalf of Blue Cross.

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