Mr. MILLER. I am thinking of probably the moral responsibility of the Government to continue a program that had been instituted. Senator PURTELL. Did you indicate-I thought from your testimony you might have indicated-some fear this thing hasn't been spelled out in detail enough—for instance, the powers of the States in relation to the insurance?

I think the testimony that has been given here, if you haven't had a chance to hear it or read it, on the part of Mrs. Hobby indicates very clearly that they have no intention, of course, of trying to invade the rights of the States.

I asked Mrs. Hobby this question:

Is this program, Mrs. Secretary, likely to result in Federal control of the insur ance business?

Her reply was:

Oh, no, sir.

And she was quite emphatic.

We tried to spell that out very carefully, Mr. Chairman, because, as you know, now usually the State departments of insurance or the State commissions of insurance do regulate the 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 1surance or the State commissions of insurance to the best possible extent.

So, I repeated, for the record:

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

And her answer was:

No, sir.

It is difficult, however, I think you will agree, in an entirely new field such as this, in an experimental field, to try to write out every thing in detail. So, experience will have to be gained in the field.

You have been very helpful to us, and I can assure you that your whole statement will be studied. I want to thank you for coming

here.

Mr. MILLER. Thank you for the opportunity.

(The following statement was subsequently received for the rec ord :)

STATEMENT OF HENRY S. BEERS, VICE PRESIDENT, AETNA LIFE INSURANCE Co, of BEHALF OF AMERICAN LIFE CONVENTION AND LIFE INSURANCE ASSOCIATION OF AMERICA

My name is Henry S. Beers. I am a vice president of the Aetna Life Insurance Co. I appear before you on behalf of the American Life Convention and the Life Insurance Association of America, two life-insurance company associations whose combined membership consists of 245 life-insurance companies. T companies, in addition to providing life insurance for the American public, under write approximately 40 percent of the individual policies of health insurance, and approximately 80 percent of the group-health insurance in this country These totals are exclusive of the voluntary hospital, surgical, and medical pre payment plan coverage in Blue Cross, Blue Shield, and similar organizations The insurance companies and these other prepayment plans together cover 20 million or more persons in this country with some form of voluntary health

insurance.

Last October I presented a statement together with a series of charts descr ing the growth of voluntary accident and health insurance to the House Commit tee on Interstate and Foreign Commerce then conducting an investigation of

the health needs of the Nation. The data underlying these charts was assembled by the health insurance council and published in the booklet Annual SurveyAccident and Health Coverage in the United States, copies of which have been supplied for your records.

In discussing S. 3114 today, I will not take up your time reading this survey; but I do want to emphasize the tremendous growth and rapid expansion that has taken place in this country of all forms of voluntary health-insurance plansnot only group and individual insurance, but Blue Cross, Blue Shield, and various independent prepayment plans as well. I do not believe that such remarkable progress could have been made, were it not for the stimulus of competition between the insurance industry, Blue Cross-Blue Shield, and the independent agencies. Each has benefited enormously from the other's progress in expanding hospital, surgical, and medical prepayment coverages.

I also want to stress that simultaneously with the rapid spread of each line of coverage, the benefits offered have been steadily improved in an endeavor to better meet the public's desire for more adequate protection. It is our strong belief that this trend will continue; in fact the trend has acquired an irresistible

momentum.

The preamble of S. 3114 states "That it is the purpose of this act to encourage and stimulate private initiative in making good and comprehensive health services generally accessible on reasonable terms, through adequate health service prepayment plans, to the maximum number of people

The life-insurance business is in accord with the principle that voluntary health-benefit prepayment plans should be encouraged. It looks with favor on constructive methods for stimulating private initiative in achieving this objective. S. 3114 is offered as a method of providing an incentive in this direction through Government acton. The overall objective of developing the broadest possible health insurance coverage is one which can be achieved only through continuing progress in a number of different areas, through the combined activities of all concerned including the insuring public, the medical professions and institutions, and the competitive activities of the many insurance companies and other organizations offering prepayment plans. This bill deals with one possible method for the stimulation of these plans.

S. 3114 is not offered as a panacea and it is important not to expect too much of it. It must be recognized that although a great majority of the American people are insurable and ought to insure themselves through prepaid voluntary health plans, there will always be uninsurable groups of individuals. The indigent, for example, cannot provide for themselves through voluntary prepaid plans. They are and always have been a social responsibility and health care for them must be provided by public assistance. As people grow older the incidence of illness and disease increases, the availability of adequate home care decreases, and the corresponding cost of the usual prepaid hospital and medical care may be beyond the ability of some of them to pay for the protection. Nevertheless, progress is being made in extending voluntary coverage to this group. Thus, it is important that we recognize that S. 3114 will not provide health care for some individuals who are already physically impaired or those who cannot pay their share of the cost of a voluntary prepayment plan. The objective of the bill is to encourage voluntary insurers to extend further health-insurance coverage to those who are insurable and desire to purchase health insurance. The bill contemplates that this purpose might be accomplished by making a form of reinsurance available where needed to stimulate the establishment and maintenance of voluntary prepayment plans or to stimulate experimentation with new types of benefit or areas of coverage.

This reinsurance proposal is new. Although its outline is given in the bill, much of the detail is left to subsequent administrative action. There are many sound principles included in this bill, some of which I will discuss because we consider them important to maintain:

(1) The prepaid medical care the bill seeks to stimulate would be provided through nongovernmental agencies. This reliance on private voluntary agencies is in keeping with the view, which we share, that providing medical care or medical-care benefits to those who are insurable and able to pay for healthinsurance protection is not a proper function of government.

(2) The reinsurance system proposed would be voluntary. No individual would be compelled to buy health insurance; nor would any health-insurance carrier be compelled to purchase reinsurance or otherwise submit to any of the regulations issued by the Government in carrying out the purposes of the act.

Mr. MILLER. I am thinking of probably the moral responsibility of the Government to continue a program that had been instituted. Senator PURTELL. Did you indicate-I thought from your testimony you might have indicated-some fear this thing hasn't been spelled out in detail enough-for instance, the powers of the States in relation to the insurance?

I think the testimony that has been given here, if you haven't had a chance to hear it or read it, on the part of Mrs. Hobby indicates very clearly that they have no intention, of course, of trying to invade the rights of the States.

I asked Mrs. Hobby this question:

Is this program, Mrs. Secretary, likely to result in Federal control of the insurance business?

Her reply was:

Oh, no, sir.

And she was quite emphatic.

We tried to spell that out very carefully, Mr. Chairman, because, as you know, now usually the State departments of insurance or the State commissions of insurance do regulate the 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 or the State commissions of insurance to the best possible extent.

So, I repeated, for the record:

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

And her answer was:

No, sir.

It is difficult, however, I think you will agree, in an entirely new field such as this, in an experimental field, to try to write out everything in detail. So, experience will have to be gained in the field.

You have been very helpful to us, and I can assure you that your whole statement will be studied. I want to thank you for coming

here.

Mr. MILLER. Thank you for the opportunity.

(The following statement was subsequently received for the record:)

STATEMENT OF HENRY S. BEERS, VICE PRESIDENT, AETNA LIFE INSURANCE Co, os BEHALF OF AMERICAN LIFE CONVENTION AND LIFE INSURANCE ASSOCIATION OF AMERICA

My name is Henry S. Beers. I am a vice president of the Aetna Life Insurance Co. I appear before you on behalf of the American Life Convention and the Life Insurance Association of America, two life-insurance company associations whose combined membership consists of 245 life-insurance companies. These companies, in addition to providing life insurance for the American public, under write approximately 40 percent of the individual policies of health insurance, and approximately 80 percent of the group-health insurance in this country. These totals are exclusive of the voluntary hospital, surgical, and medical prepayment plan coverage in Blue Cross, Blue Shield, and similar organizations The insurance companies and these other prepayment plans together cover 10 million or more persons in this country with some form of voluntary health insurance.

Last October I presented a statement together with a series of charts describ ing the growth of voluntary accident and health insurance to the House Commit tee on Interstate and Foreign Commerce then conducting an investigation of

the health needs of the Nation. The data underlying these charts was assembled by the health insurance council and published in the booklet Annual SurveyAccident and Health Coverage in the United States, copies of which have been supplied for your records.

In discussing S. 3114 today, I will not take up your time reading this survey; but I do want to emphasize the tremendous growth and rapid expansion that has taken place in this country of all forms of voluntary health-insurance plansnot only group and individual insurance, but Blue Cross, Blue Shield, and various independent prepayment plans as well. I do not believe that such remarkable progress could have been made, were it not for the stimulus of competition between the insurance industry, Blue Cross-Blue Shield, and the independent agencies. Each has benefited enormously from the other's progress in expanding hospital, surgical, and medical prepayment coverages.

I also want to stress that simultaneously with the rapid spread of each line of coverage, the benefits offered have been steadily improved in an endeavor to better meet the public's desire for more adequate protection. It is our strong belief that this trend will continue; in fact the trend has acquired an irresistible momentum.

The preamble of S. 3114 states "That it is the purpose of this act to encourage and stimulate private initiative in making good and comprehensive health services generally accessible on reasonable terms, through adequate health service prefayment plans, to the maximum number of people * * *."

The life-insurance business is in accord with the principle that voluntary health-benefit prepayment plans should be encouraged. It looks with favor on Constructive methods for stimulating private initiative in achieving this objective. 8.3114 is offered as a method of providing an incentive in this direction through Government acton. The overall objective of developing the broadest possible health insurance coverage is one which can be achieved only through continuing progress in a number of different areas, through the combined activities of all concerned including the insuring public, the medical professions and institutions, and the competitive activities of the many insurance companies and other organizations offering prepayment plans. This bill deals with one possible method for the stimulation of these plans.

8. 3114 is not offered as a panacea and it is important not to expect too much of it. It must be recognized that although a great majority of the American people are insurable and ought to insure themselves through prepaid voluntary health plans, there will always be uninsurable groups of individuals. The indigent, for example, cannot provide for themselves through voluntary prepaid plans. They are and always have been a social responsibility and health care for them must be provided by public assistance. As people grow older the incidence of illness and disease increases, the availability of adequate home care decreases, and the corresponding cost of the usual prepaid hospital and medical care may be beyond the ability of some of them to pay for the protection. Nevertheless, progress is being made in extending voluntary coverage to this group. Thus, it is important that we recognize that S. 3114 will not provide health care for some individuals who are already physically impaired or those who cannot pay their share of the cost of a voluntary prepayment plan. The objective of the bill is to encourage voluntary insurers to extend further health-insurance coverage to those who are insurable and desire to purchase health insurance. The bill contemplates that this purpose might be accomplished by making a form of reinsurance available where needed to stimulate the establishment and maintenance of voluntary prepayment plans or to stimulate experimentation with new types of benefit or areas of coverage.

This reinsurance proposal is new. Although its outline is given in the bill, much of the detail is left to subsequent administrative action. There are many sound principles included in this bill, some of which I will discuss because we consider them important to maintain:

(1) The prepaid medical care the bill seeks to stimulate would be provided through nongovernmental agencies. This reliance on private voluntary agencies is in keeping with the view, which we share, that providing medical care or medical-care benefits to those who are insurable and able to pay for healthinsurance protection is not a proper function of government.

(2) The reinsurance system proposed would be voluntary. No individual would be compelled to buy health insurance; nor would any health-insurance carrier be compelled to purchase reinsurance or otherwise submit to any of the regulations issued by the Government in carrying out the purposes of the act.

(3) The plan contemplates no Federal subsidy except the payment by the Government of administrative expenses during the first 5 years and the tempe rary provision of $25 million of initial capital. Any plan subsidizing benent payments could not be free from Government control of the distribution of medical care.

(4) The reinsurance would be available to both insurance companies and tou profit prepayment health-service plans.

(5) The plan would operate within the framework of State supervision of the insurance business and the Secretary of Health, Education, and Welfare s directed to utilize the State insurance departments. We believe that the greatest care should be exercised to assure that the State insurance departments be utilized to the maximum extent and that there be no encroachment by Federa agencies upon the system of the State supervision of insurance.

(6) The reinsurance would cover only abnormal losses sustained by a healt insurance carrier. It also employs the so-called coinsurance principle where y a part of abnormal losses would always have to be borne by the reinsured healt insurance carrier. This gives carriers an incentive to offer only financialy sound insurance protection.

Although this new reinsurance plan includes these principles, there are many uncertainties about it which make it difficult to appraise. It is equally differ at this time to predict the extent to which insurance companies and other organ zations will be able to use this reinsurance plan.

The bill in its present form is but a broad outline of the plan. It necessarily delegates to the Secretary of Health, Education, and Welfare the responsibility for "filling in" a number of highly important details of the reinsurance plan The usefulness of the plan and whether it does good or does harm will depend on these final determinations. The Secretary is authorized to prescribe the terms which must be met for a health-insurance carrier and its plan to qualify for reinsurance. This includes benefits to be provided and terms of the insurance. These go to the very fundamentals of underwriting voluntary health insurance and without a knowledge of what the Secretary will prescribe in these respects it is impossible to evaluate the plan, predict the extent of its use, or gage its effects.

The standards prescribed in the bill for fixing the reinsurance premium rates are necessarily indefinite. The premiums are to be such as to make the re surance plan self-sustaining and at the same time promote the objectives of the bill. The final determination of the reinsurance premium rates, however, w have a very great bearing on whether the plan will be successful. If the prem rates are too high, that will discourage use of the plan. If too low, that w result in the rapid dissipation of the $25 million capital appropriated by the Government. To the extent such losses are not later repaid from premizz income, a pattern for Government subsidies would be established. We ar opposed in principle to the Government subsidizing prepaid medical-care para Even if the reinsurance premium rates are neither too high nor too low on the average, they might be discriminatory. That would have the result of favor 12 some plans and impeding other plans for reasons other than their inherent mer! This would tend to defeat the objectives of the legislation.

The administration is to be commended for its approach to this problem Its plan includes many sound insurance principles. It merits careful stnd in the hope that it may accomplish its intended purpose. However, since the plan is new and so many important details are yet unknown and, therefore many uncertainties remain unsolved, we are not in a position to go on recre in favor of the bill at this time.

We have considered the question of whether it would be desirable to am-", the bill to include many of the conditions, which under the present wording f the bill, are left to regulation. Were the bill amended to cover the important details of the plan, it would be easier to obtain an appraisal from insur companies and other organizations entitled to participate. But it is our e; clusion that a bill incorporating standards, eligibility, premium rates, and other details we have mentioned, would result in inflexibility. Reinsurance et not be readily adjusted to the many types of coverage, or the changes w!! are constantly occurring with respect to such coverages. It is our feeling the plan will be workable only in the event the Department of Health, Ed tion, and Welfare has the authority provided in the bill and exercises it wi The whole of the foregoing discussion of the uncertainties of the prop legislation inevitably raises the further question as to whether initial legis tion of this character may not be a stepping stone to subsidies, governmen competition, and the further transfer of insurance operation from its natura habitat in our economic philosophy to governmental administration and cont