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

RELATEX 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

VZDNESDA 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.

** at 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.

Purel 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 reconvene tomorrow morning, Wednesday, April 14, 1934, at 10 a. m.)

1. The


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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), Hilland 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. McNary, chairman of the Council on Government Relations of the American Hospital Association. 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. MeVary 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?


. Mr. name is William S. MeNary. 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

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can Hospital Association, and I appear before you as the official spokesman for both the Blue Cross Commission and the American Hospital Association Council on Government Relations.

I am executive vice-president of the Michigan Hospital Service, one of the country's largest Blue Cross plans, which has enrolled almost one-half of the people of Michigan, a total of more than 3 million men, women, and children. I have been in that position since 1947. Prior to that time, I was for 10 years director of the Blue Cross plan for the State of Colorado, and before that was for 10 years business. manager of the University of Colorado School of Medicine and Hospitals.

I personally had opportunity, with a group of individuals experienced in the field of health insurance prepayment, to consult with the Department of Health, Education, and Welfare as to the technical details of this legislation.

I am authorized, in appearing before you, to endorse the purposes of the Health Service Prepayment Plan Reinsurance Act.

This legislation has been introduced so recently that there has not been yet opportunity for consideration by all of the official bodies of the association. This endorsement is based on the following actions in the order of their occurrence:

1. Approval of the purposes of the bill by a policy committee of the board of trustees of the American Hospital Association authorized to act for it on this issue.

2. Approval of the purposes of the bill and specific suggestions for its amendment by the council on Government relations of the association which also recorded its readiness to assist in the development of the bill in any way possible to insure its success.

3. Endorsement by the executive committee of the Blue Cross Commission of testimony presented on March 26, 1954, supporting the purposes of the bill to the House Interstate and Foreign Commerce Committee. The substance of this testimony is repeated herein.

4. Unanimous adoption of a resolution by the Blue Cross Commission stating that the proposal constitutes a "step in the right direc tion to facilitate exploratory measures."

5. Support of the actions reported above by unanimous action of the conference of Blue Cross plans at their meeting in New York Cit on April 5, 1954.

Our association has previously testified before your committee. general, you know that we believe that the best way for finan personal health services for the employed population and the pendents is voluntary prepayment.

Some 90 million Americans presently have some type of prepayment protection.

Blue Cross alone in the United States has presently enrol million persons.

Coverage of the balance of the employed population pendents is urgently needed. This is particularly tru income groups and those with special needs for hospital

Much experimentation has been carried on by B endeavoring to cover groups difficult of enrollment, employed, farm workers, the aged, certain depende and so forth.

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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 ibe 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 stomps 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 release presently is not supplied by any one agency.

We have three points on which we would like to suggest amend

ments or the tightening of the langauge of the bill. We will oth 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 Comcil.

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 111

feel that the necessary latitude allowed in administration, which will be

be clarified through regulation, should be subject to the approval we

suggest. First, in order that the Secretary be required to consult with historie

people experienced in this field as is provided for within the mem-
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

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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

this manner.

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 use 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 voluntary 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 prepayment agencies. Even though many carriers decide not to make use of the facilities made available by the bill, we believe that the experimentation and expansion which the President wishes to encourage will be speeded if the bill is passed.

Thank you.

Senator PURTELL. Thank you very much, Mr. McNary.

Senator Hill, have you any questions you wish to ask Mr. McNary! Senator HILL. I understand the American Medical Association and perhaps other medical associations will appear and perhaps this question may be more properly directed to them, but as I read and listened to your statement, particularly section 2 on page 6, I wondered about 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. MCNARY. 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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