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I think the significant point in those figures is, first, that ratio has been gaining perceptibly year by year. When you look at a 3- or 4-year comparison, which is now available, you see a steady growth. percentagewise.

Senator PURTELL. But it does indicate a wide field for improvement there on coverage, doesn't it?

Mr. MILLER. Oh, there is a great deal of room.

I think it should be noted, however, in measuring the coverage or the payments, benefit payments, made against these total expenditures that the total expenditures include a very large sum, the insurability of which is open to question.

You will note the percentage is very high on hospital, comparatively high, and continually growing. The percentage is lower in surgery, and still lower in general medical service.

Now, there are many who feel the minor bills are better met as out-of-pocket expenses or as part of the family budget than to be brought into the insurance program with the incident expense of settling a 5- or 10-dollar claim.

There has been no study, of which I am aware, that has attempted to break down that total medical bill into what is potentially insurable and what is insurable as a practical economic matter, where the insur ance is really helpful, and the best way to meet the problem, so that we have a base there that is perhaps not the best base for comparison. In other words, I don't believe that we should consider a hundred percent as the goal because we have in that such things as ordinary dentistry. You have routine physical examinations, immunizations and all those things that are just normal, everyday expenditures.

Senator PURTELL. Have you any figures that you have developed yourself on those particular fields so that we could have that for the information of the committee?

Mr. MILLER. NO. Unfortunately, there just doesn't seem to be the data available.

One might make some guesses as to what it would be, but that is about all it would be.

I have never seen an analysis of the incidence of doctors' and other health care expenditures that would give you a really solid basis for saying, "This is the amount that insurance ultimately should cover and this amount should be a matter of direct payment," and so forth.. Senator PURTELL. Has your experience led you to perhaps some thought in the matter you would like to express percentagewise, as related to these figures?

Mr. MILLER. NO; I think that would be just a guess, and maybe not a very good one.

Senator PURTELL. Well, we try to avoid guesses if we can,
Mr. MILLER. Yes.

Senator PURTELL. Thank you.

Mr. MILLER. Insurance companies are continually studying the problem of providing more complete protection to a larger portion of the aged population and how to distinguish between those hea care costs of the aged which can be insured and those which cannot. Insurance among the aged is gaining in volume as companies are extending, or removing, the age limits and with the growing practice of continuing group insurance protection on retired persons. We must

recognize however that other means must be used if the community is to help bear those costs to which insurance is not applicable. Senator PURTELL. May I interrupt there?

Actually, doesn't that point up something there?

You say that "Insurance among the aged"-and I agree with you"is gaining in volume as companies are extending or removing the age limits and with the growing practice of continuing group insurance protection on retired persons."

In other words, we are extending the coverage as experience is developed; isn't that right?

Mr. MILLER. Yes.

Senator PURTELL. And we have to take these steps rather cautiously because of the fear of excessive losses in trying to find out whether new fields are insurable or not, profitably insurable; isn't that correct? Mr. MILLER. Well, that is a part of it; yes, Senator.

Senator PURTELL. If there were limits on losses, as this bill provides, 25 percent, up to the total amount of the $25 million, and 75 percent of those losses, therefore, you are sure would be absorbed by this, under this bill, from this $25 million, wouldn't it be perhaps an incentive to go out and seek the field which we are now finding we can cover but we are doing it rather cautiously, and properly so?

Don't you think that, knowing you were assured against excessive losses in those cases, would perhaps spur on the companies to explore these fields a little more quickly?

Mr. MILLER. It isn't possible to speak for companies in general because each, of course, would make up its own mind. My own feeling is that the experimentation would not be materially hastened because the companies generally want to know pretty well what the costs are that they may anticipate and feel that they are prepared to meet them, and the reinsurance would be set up ultimately on a selfsupporting basis——

Senator PURTELL. That is right.

Mr. MILLER. So that in the long run the companies as a whole could not look to it as any source of additional revenue.

One other point that I would like to make in connection with this insuring of the aged, which we have found in my own company, is that it is not purely a matter of unavailability of insurance. The insurance is quite widely available, but insurance, even at its best, has to be sold very aggressively and this idea of insurance against the cost of medical care is a fairly new thing. It has mainly developed in the past 10 years and a lot of our older citizens just aren't interested.

We have had very definite indication of that in our own sales experience, but the younger people have grown up with it and, as they move into middle and older age, I am sure they are going to keep their insurance where they possibly can.

A result of adopting the voluntary approach is the necessity of recognizing the areas which insurance cannot reach. With this there must be acceptance, at least to some extent, of the use of subsidies in those areas. We believe that any such subsidies should be applied directly and openly and should not be obscured. Furthermore, we strongly believe that they should be administered at the local level in proper perspective to the services available and to prevailing cost patterns, which vary from State to State, as well as between communities in the same State.

We are well aware of the implications of the decision to place primary reliance upon voluntary insurance provided on a self-supporting basis. Most important is the necessity to expand as far as possible the areas in which insurance is effective and to minimize the areas which insurance does not reach. Tremendous progress has already been made in that direction as is indicated by the figures which have been cited. More significant, however, than the current extent and quality of coverage is the record of rapid growth and development in both respects, for we are concerned with reaching goals, more than with our present position or the road we have traveled.

At the end of 1941, for example, there were slightly more than 16 million persons in the entire population with hospital expense coverage. Today, that figure has multiplied more than sixfold.

Fewer than 7 million persons in 1941 had surgical expense coverage. That figure has been multiplied more than tenfold.

Medical expense coverage, practically unknown before World War II, already covers about 40 million citizens. With this growth in numbers protected, there has also been an improvement in the quality and adequacy of the coverage, which I will comment upon later. Senator PURTELL. Those figures you are giving are figures as of today?

Mr. MILLER. Yes.

Senator PURTELL. I see.

Thank you.

Mr. MILLER. Another very important implication of the reliance on voluntary insurance, of which we are keenly aware, is the need for insurers to merit the confidence of the insuring public.

Sickness and accident insurance in the past has been characterized by a constant improvement in the coverage offered and in the service provided.

Recent developments have made insurance men even more than normally aware of the progress which still remains to be made, and responsible insurers are seriously concerned with and are intensively studying criticisms voiced by the public.

To some extent, those criticisms point to areas where performance can and will be further improved.

To some extent, they indicate some lack of understanding of what insurance properly can and should do.

That very lack of understanding shows a need of an improved public informational program by accident and sickness insurers to advise people how to make the most effective use of insurance facilities in preparing to meet the costs of accident and sickness.

Senator PURTELL. I wonder if you would want to elaborate a little more than your paper here on this lack of understanding of what insurance properly can and should do, or do you feel your explanation is sufficient?

Mr. MILLER. I would be very glad to give some examples.

I think the one thing about which there is perhaps the most misunderstanding is the matter of pre-existing illness. Now, in group insurance, because of by its nature you get a cross-section of employed people, it has been found possible and the custom has been universally adopted of insuring everybody at work on the date the insurance goes into effect. Even though they may have an appointment for an appendectomy next week, they are immediately covered.

Obviously, that can't be done on individual business, where you admit persons individually, because the person who knows he has to have an operation is obviously going to want to buy the insurance, and you would get too many of those people. You couldn't get a cross section, so that on the individual insurance it is necessary to specify that this covers what happens on and after the date of issue. Although that is clearly stated in the policies, and usually should be in the advertising, and usually is, there is public misunderstanding. They buy a policy and the next week they have an operation and they wonder why it isn't covered.

Now, that is a point where public education can explain the reason and logic of that requirement and where more should be done.

Senator PURTELL. There are, of course, different practices with different insurance companies.

Mr. MILLER. Yes.

Senator PURTELL. I am not being critical at all. I think the insurance companies have done a wonderful job, but there are some, I think, who have probably been less diligent than others in pointing up the limitations of their policies.

Mr. MILLER. That is very true. There are many companies which go beyond the letter of the policy in doing what a reasonable and well-informed person might expect, or even more so. There are others who hew so closely to the line that they can really be said to be indulging in sharp practices.

Senator PURTELL. We have had some letters of complaint. I know they don't apply to most of the insurance companies. I think they apply only to a very, very small percentage.

Mr. MILLER. The voluntary insurers, while increasing the number of policyholders, have also improved the quality and adequacy of their benefits. During the past decade such improvement has been made more difficult by the rising level of medical care costs due to inflation. Average benefits, however, have increased at a more rapid rate than have the costs against which insurance is provided, so that there has been an effective improvement in the protection afforded; also, limits of payment have been increased and the scope of available coverage broadened.

Grace periods are now common in accident and sickness policies; time limits on defense or incontestable provisions after 3 years are provided in most policies currently issued; and the number and type of restrictions and exclusions have been materially reduced.

Furthermore, methods of bringing insurance services to more people have been and are being developed. Group insurance has been extended to small employer units, and more and more small employers with only 10-or in some cases even fewer-employees are purchasing accident and sickness insurance as part of their employee benefit plans.

In rural areas voluntary insurance is being actively distributed through such groups as consumer and marketing cooperatives and other farm organizations. This is in addition to the successful efforts of insurers to sell individual policies to self-employed persons and others who are not members of any group.

Senator PURTELL. May I interrupt?

This question of coverage of such groups as consumer and marketing cooperatives and farm organizations is of a rather recent origin, isn't it, or is it?

Mr. MILLER. I wouldn't say it is very recent. I think it is something that has had an accelerated growth, and perhaps most of the growth has been in the past few years; but I believe

Senator PURTELL. It has permitted, however, the coverage of groups under group plans where individually, because of the geographic loca tion of the people, themselves, it would have been more difficult to get coverage individually?

Mr. MILLER. Yes; that is true.

Senator PURTELL. That is another area which perhaps I don't mean farms particularly, but groups, where they can be group insured- might offer some opportunities for further coverage.

Mr. MILLER. Yes. Those opportunities, I think, are being actively sought out and developed.

Senator PURTELL. I understand so.

Mr. MILLER. And I think it should also not be overlooked that in the rural areas we have many individual policies sold. There is quite a volume of that.

In 1952 there were 22 million persons covered for hospital benefits under individual insurance policies, to mention only 1 type of benefit. Insurance policy provisions have been liberalized and underwriting techniques improved in an effort to offer better accident and sickness coverage to an ever-increasing number of persons.

Insurance on risks with some physical or medical impairment has long been offered subject to the exclusion of a particular disease or risk to which the individual may be unusually susceptible.

In more recent years, increasing experimentation has been carried on by several companies in insuring the impaired risks without these special restrictions, but subject to appropriate extra premiums-foilowing the practice now well established in the life-insurance business.

As the pattern of medical care has changed in the past decade, vol untary insurers have developed benefits to meet changing needs. The recent experimentation with and development of major medical expense insurance is a significant example.

How will the reinsurance proposal affect this type of experimenta tion and development?

The principles of reinsurance, as it has been known and employed, are the same as the principles of insurance. The difference is that reinsurance provides a broader base by pooling the resources and the risk of two or more companies. Reinsurance is most commonly em ployed when the amount of potential loss on any one risk is very large.

Reinsurance, therefore, does not provide a means of making insur able what would otherwise be an uninsurable risk. It does not add to the aggregate resources of the insurers. It does not help to sell insurance, nor does it reduce the cost of insurance,

If our citizens are not to labor under a misunderstanding, it's essential for them to realize that reinsurance is not a panacea and that it does not provide additional funds to finance the cost of medical

care.

As has been made clear in the presentation of the program, voluntary insurance cannot relieve the community of the burden of pro

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