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pledge our continuous encouragement of improved methods of assuring health protection."

Thus the final answer must come, as it has always come, through the ingenuity and knowledge, the efficiency, and industry of the American people; through the voluntary application of our free enterprise principles to a major national problem.

Now, it will be a pleasure to hear our first witness, Mr. Henry R. Beers, vice president of the Aetna Life Insurance Co. At this point in the record we will insert a biography of Mr. Henry S. Beers. (The biography referred to is as follows:)


Henry S. Beers is vice president of the Aetna Life Insurance Co.

Born in New Haven, Conn., he graduated from Trinity College with a bachelor of arts degree. After serving in the actuarial department of Travelers Insurance Co. and the Home Life Insurance Co., he went with the Aetna Life Insurance Co. in 1923. After serving as assistant actuary and associate actuary, he became vice president in 1937; chairman, Governor's Commission on Unemployment Compensation, 1936; member, Connecticut State Employees' Retirement Commission since 1939; chairman, Advisory Council under Connecticut Unemployment Compensation Law since 1937. He is a fellow of the Society of Actuaries.



Mr. BEERS. My name is Henry S. Beers of Glastonbury, Conn. I am vice president of the Aetna Life Insurance Co. of Hartford, Conn. Glastonbury is right near Hartford.

The Aetna has been writing group insurance for 40 years. During this period it has been one of the principal group-insurance writing companies, ranking among the top five. I have been with the company for 30 years, spending most of my time on group insurance. I will direct my testimony toward the subject of how group insurance protects people against medical and hospital expenses.

As you know, insurance companies offer health insurance in two basically different forms: group insurance and individual policies. Group insurance is a wholesale method of furnishing protection, so to speak, while individual policies reflect essentially a retail approach. I understand that another witness is planning to discuss the important field of individual health policies, so my remarks will be restricted to group health insurance.

To give you a very general indication of the quantitative importance of my particular field of discussion, I might say that almost 40 million persons are covered for health benefits under group insurance policies, and that the insurance companies are paying almost $1 billion per year in benefits under group health insurance policies. These benefit payments have been growing rapidly, perhaps doubling every 3 or 4 years on the average.

I had the good fortune to get into group-insurance work before group insurance was more than 10 or 15 years old. Between 1918 and 1922 I had passed the examinations of the Actuarial Society of America to become a life-insurance actuary, but soon after that I moved to the Aetna Life Insurance Co. and undertook to apply my actuarial training to group-insurance problems, as so many other members of the Actuarial Society have done before and since.

When I entered the group-insurance business, it was mostly group life insurance. My company's group insurance was then about 95 percent group life, and only about 5 percent in the health-insurance field. Nowadays our group business is one-third life insurance and two-thirds health insurance, basing the comparison on benefits paid. When I entered the business 30 years ago, the group health insurance protection was all of the kind that pays a weekly benefit on proof of disability, regardless of whether the medical and hospital expenses are great or small.

This original kind of health insurance does not bear so directly on your problems here as some of the newer kinds of health insurance; but insurance-benefit payments while a person is disabled are part of the financial resources that must somehow be stretched to cover food, shelter, hospital bills, medical expense, and other immediate necessities of life; and this is equally true whether the direct cause of the benefit payment is that the recipient is too ill to work or that he receives a particular kind of treatment for his illness.

It may help at this point to give a working definition of group insurance which I have found useful. For our present purposes we can think of group health insurance as an employee health and welfare plan administered by an insurance company.

This means that when I use the term "group policy," I normally mean a policy covering a group of employees. Usually the group policy is issued in the name of the employing company. Frequently, nowadays, a plan of group insurance is the result of negotiations between a number of employers in some industry and the union or unions representing their employees; in such a case a single group policy is often issued in the name of trustees, to cover the employees of these several employers under the same policy.

The group policy states what employees are to be eligible for coverage, such as all employees of such-and-such an employer who have been in his employ for some period, such as 1 month. Note that new employees become eligible as they meet the qualifications. Correspondingly, insurance ceases when employees terminate their employment. The policy can cover any reasonable class, such as employees at a particular plant, if the employer has several plants; or it might exclude a class, such as clerical or salaried employees.

The group policy states the benefits for which each employee is to be insured. If the benefits are not the same for all employees, they must be based on rules precluding individual selection. Those rules are set forth in the group policy.

For example, a group policy might provide $30 per week during total disability from nonoccupational accident or disease.

I might say group insurance is directed primarily against the class. referred to by the chairman in the opening remarks of his that were read, where he said:

Society has made provision for the very poor and the rich take care of themselves.

Under group insurance there are not too many of the rich covered, and in general the very poor are not covered, but it is the intermediate group that group insurance is primarily directed at.

Alternatively, the employees might be divided into three earnings. classes in which the weekly benefits might be $26, $38, and $50, respec

tively. In either of these cases, the schedule of benefits would be carefully constructed so as not to insure anybody for more than about 65 or 70 percent of gross pay. One of the oldest and best-proved principles of health insurance is that, if people are insured for too high a percentage of take-home pay, it is hard making some of them stop drawing benefits when they are really well enough to go back to work. You might be interested to know something about the usual limits on the period for which loss-of-income benefits are payable. The most popular arrangement used to be to limit total payments to 13 weeks for any one disability, and to make no payment for the first week of disability. The two most popular variations were either to cut the waiting period from 1 week to 3 days, so as to begin payments_with the fourth day of disability; or to extend the limit to 26 weeks. These two variations cost about the same amount.

We found that employees seemed to react more favorably to the cut in the waiting period than to the extended limit; i. e., they seemed to prefer the increased likelihood of collecting a claim to the increased protection against the much more serious, although less likely, possibility of being disabled for a longer time than 13 weeks. During recent years, the 26-week limit has tended to increase in popularity somewhat. This may indicate an increased popular appreciation of the value of insurance against the less frequent but more serious catastrophes.

Coming back to group insurance in general, I have stated that normally a group policy covers a defined group of employees for a stated schedule of benefits. Another generality concerns the payment of the premiums. Sometimes the employer or employers of the insured employees pay the whole premium. A number of large unions have arranged through collective bargaining for substantial group insurance plans to be paid for entirely by the employers, and these plans have received more publicity than the great number of small and medium-size plans that are in force. Among the latter, the great majority are on what is called a contributory basis, the employees paying a stated amount per month toward the premium and the employer paying the remainder. In some instances, group policies have been issued on an employee-pay-all basis, but these have been successful only to a limited extent, and they are becoming less common all the time.

I feel that I must apologize for talking to you in such an elementary way, but it seemed best to take these few minutes to get the main characteristics of group insurance before us, since it differs considerably from individual insurance in many important respects. Thus, I have said nothing about refusing to cover individuals who are not good risks. One of the great advantages of the group scheme is that when insurance is offered to a group of employees, it can be offered to all on the active payroll even though some of them may have heart impairments or anything else the matter with them. Of course, the employees out sick at the time, not being on the active payroll, will have to wait until they come back to work before becoming insured. We even make exceptions to this sometimes.


While my first 10 years in the group business seemed hectic enoughour group life business quadrupled during that period and our group health business increased twice as fast as that; it was a hectic lifewe still thought during that period that the only kind of health insurance that would work was loss-of-income coverage. We had, however, for some time been studying the possibility of some kind of hospital-expense coverage. We knew that the Goodyear Relief Associa tion and some other employee benefit associations were providing hospital benefits. We knew that some associations representing the hospitals of their localities, like the modern Blue Cross, were enrolling members for hospital benefits. We made a few tentative quotations; and then in 1934 we announced to our group field force that we were ready to write group insurance against the cost of hospital care. That was less than 20 years ago. Our plans were pretty limited in those days. At the start we offered them only in cases where they would cover at least 250 employees in the group. The benefit was $3 per day of hospitalization, with an extra allowance of $15 for expenses for operating room, laboratory fees, and anesthetic fees.

From the beginning our progress was very rapid. Within 5 years we were writing as much of the new hospitalization insurance as we were in the long-established field of loss-of-income protection-this progress was made while we were still trying to sell the insurance to cover the employees alone and not their dependents. Also, we were trying to sell policies providing benefits to cover the hospital bill but as yet not the surgeon's fee for the operation. However, in 1939, after a good deal of study and some experimenting, we commenced offering group plans including surgical-fee benefits in addition to hospital-expense benefits, and including coverage for the employees' dependents as well as for themselves. Our business continued to expand rapidly and it has not yet shown any tendency to stop.

In the foregoing, I have not meant to seem to be boasting of the progress of my own company. The same things have been happening in the other group-writing insurance companies, and in other organizations offering prepayment protection in the same fields, notably the organizations known today as Blue Cross and Blue Shield. Simultaneously, the insuring companies writing individual health policies have made similarly impressive progress in extending these kinds of insurance protection to the numerous classes of people more easily reached, or better covered, by individual policies than by group. Hospital-surgical expense insurance has been by far the most rapidly growing line of voluntarily purchased social insurance that the world has ever seen. This extraordinary and unprecedented growth would, in my opinion, have been impossible were it not that three irreconcilably antagonistic institutions were simultaneously preaching the same gospel to the American public.

The group insurance people, the Blue Cross and Blue Shield people, and the individual policy people may have been competing bitterly, but none of the 3 could have accomplished a sizable fraction of what they have actually accomplished, were it not for the activities of the other 2. We have lost a lot of business to Blue Cross and Blue Shield, and vice versa, but actually we have each benefited enormously from the other's help in spreading the gospel of hospital-surgical prepayment plans.

I have some charts that may be worth the few minutes that it will take to present them. The data pictured in these charts was assembled by the Health Insurance Council and published last month in a booklet, copies of which have been supplied for your records. The booklet, Annual Survey Accident and Health Coverage in the United States, also contains the copies of the charts I am presenting to you. (The booklet is as follows:)



An annual publication of the Health Insurance Council

The Health Insurance Council consists of nine associations in the insurance business, which in turn are made up of companies writing the various forms of protection against hospital, surgical, and medical costs and the loss of income due to disability.

The council has been set up by the insurance business to function as a central source for practical and technical guidance to medical groups and hospital administrators in connection with the development and use of its accident and health benefits, and as a source of information concerning this type of insurance. The associations represented in the council are—

American Life Convention, 230 North Michigan Avenue, Chicago 1, Ill.
American Mutual Alliance, 20 North Wacker Drive, Chicago 6, Ill.

Association of Casualty and Surety Companies, 60 John Street, New York 38, N. Y.
Association of Life Insurance Medical Directors, Box 594, Newark 1, N. J.
Bureau of Accident and Health Underwriters, 60 John Street, New York 38, N. Y.
Health and Accident Underwriters Conference, 208 South La Salle Street, Chi-
cago 4, Ill.

International Claim Association, Box 458, Kansas City 10, Mo.

Life Insurance Association of America, 488 Madison Avenue, New York 22, N. Y. Life Insurers Conference, 618-19 Mutual Building, Richmond 19, Va.

The year 1952 brought another striking contribution to the unbroken record of progress made over the last two decades by the American people in voluntarily protecting themselves, and their families and dependents, against the financial hazards of accident and illness.

New high marks were established in the number of persons that were covered against the incidence of hospital, surgical, and medical costs and loss of income due to disability. The year likewise brought another significant advance in this field with the spread of major medical coverage as insurance protection against catastrophic expenses resulting from serious and prolonged disabilities.

These developments testify to the alertness of organizations providing accident and health protection in recognizing the need for broader coverage to meet the needs of the American people. They reflect the inherent vitality of the voluntary health movement in this country and its willingness to experiment for the public good. They also demonstrate the traditional competitive basis of our society. Keen competition has characterized the field of accident and health protection since its early days, and has played a big role in augmenting the speed with which these coverages have grown and have been accepted by the people in recent years.

The survey presented in detail in the following pages is made annually by the survey committee of the Health Insurance Council. It gives the figures on the number of people in the continental United States, and in the territories of Alaska and Hawaii, covered by insurance companies, Blue Cross, Blue Shield, and other types of organizations providing accident and health protection, to the extent that information and data are available.

There are a large number and variety of organizations that provide protection against the financial costs of sickness and accident and many of these organizations are local in character. Some have probably been omitted in the survey despite the efforts of the council to seek out every source of information on the subject. Many of the figures are necessarily estimated, but every care has been taken to develop estimates which are conservative in the light of the most reliable data obtainable.

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