suppose from the chart it is indicated, because of their low income, they are not able to afford it. Is it contemplated that under the reinsurance program of this bill, or under this bill, that there will be a coverage for which the premiums would be less and would encourage the folks in the blue section to carry hospitalization? Mr. STUART. It might have that effect, Mr. Thornberry. Actually we ought to be taking care of those now regardless of any Federal reinsurance program that might be coming up. But we have not been quite flexible enough in our programs. Without too much expense we have not found a method of getting to them unless they were employed in groups. I think this will encourage us to find ways of covering these people. Actually, of people earning less than $3,000 per year, 41 percent have some kind of health insurance. Mr. THORNBERRY. I am very much interested in the chart, and you say there that even under $2,000, a fourth of them are carrying insurance. But still you have a chart showing that 63 million people of the United States today are not carrying it, and half of those are not going to be affected by this program. And now you have somewhere in the neighborhood of 30 million people who because of low income are not having medical care available to them. What I am interested in is whether under this program we are going to be able to extend coverage to where it will be available to that group? Mr. STUART. We hope we will be encouraged to do so, but I call your attention to the fact that this whole program is very young and it has only been a score of years since we have had health insurance of the type we are talking about here today. It has grown very rapidly in the last 12 years from a few million to many millions. At the same time, it has extended benefits and coverage. We are making rapid progress. I think this bill will encourage us to go even faster, particularly in the areas where we have not ventured very far. Mr. THORNBERRY. I was going to say that is exactly what a doctor in talking against this bill told me in a letter. He said we have just started and made rapid progress in the last 12 years and therefore there is no need for this bill. But when you urge that this bill will encourage us to go faster, that is an answer. Thank you, Mr. Chairman. The CHAIRMAN. Are there any further questions, gentlemen? Mr. YOUNGER. I want to express my appreciation, Mrs. Hobby, for this statement. I think of all of the good statements that have come from your department, I think this is the finest explanation of a very technical subject that I have seen in my brief experience. Secretary HOBBY. Thank you. Mr. YOUNGER. I want to also compliment you on being a little uncertain about the effective date. Too many of our governmental projects have started out with a definite effective date without any concern as to whether or not the Government is going to be prepared to do the job on the effective date; they have been crowded into a position and made too many mistakes at the original inception of a good program. I certainly want to compliment you for that caution that you have exercised here in this bill. In regard to the subsidy, further than what has been said, I doubt if you could say that there is any program that could be called subsi+ dizing if there is a premium charge for the risk. Secretary HOBBY. You say it much better than I do. Mr. YOUNGER. That to me is the test of whether or not it is a subsidy. If you are charging a premium and taking a risk, then that is not a subsidy; and this is not a sudsidized program in any sense of the word. I think that that is one thing that ought to be emphasized. I am only sorry that our State of California is not in that group of 60 to 80 percent, and I do not understand why, because we have been in our State, as you know, in the forefront of the prepaid plans. I am a little surprised and disappointed at that. But I am certainly delighted with your presentation. Secretary HOBBY. Thank you very much. Mr. PELLY. Mr. Chairman, I realize the bells have rung, and I will not have the opportunity to ask questions, but I thought possibly a better illustration than the one used of a life-insurance policy, of reinsurance, might be fire insurance where no one single company wants to take a risk in any block or any community or any area that is greater than it can afford to take. That is exactly to me what this legislation will provide, the dividing of the risk and spreading the risk in the health field. Secretary HOBBY. I really think that your suggestion is better than ours. Mr. PELLY. As Mr. Younger has pointed out, you have made a fine presentation on a very technical bill in a very concise and clear way, and I think we are all indebted to you for this help. Secretary HOBBY. Thank you very much. Mr. BUSH. I just wanted to ask one question here. That is in reference to the actuaries. Were they representatives from the large insurance companies or from the Blue Cross or White Cross, or what? Secretary HOBBY. There were two from Blue Cross, and they are not actuaries. They are Blue Cross executives. All of the others were actuaries, except Dr. Hayden, who is a physician and Blue Shield executive. I am very glad you asked me that question, Mr. Bush, because it will give me an opportunity to put something into the record for these men who were so generous in coming down here and helping us. They did not come as representatives of their companies. They came as individual citizens and actuaries-and I would like the record to show that these gentlemen were not here representing their companies. They helped us prepare this bill. Mr. BUSH. But they did this work entirely at your request? The CHAIRMAN. The work on the floor this afternoon is of such a character that I doubt the possibility of holding a session this afternoon. I am fearful that the time that would be available to us would be short that it would not warrant the inconvenience that it would be to bring the witnesses back this afternoon. SO It is our intention to proceed tomorrow morning at 10 o'clock. I would like to inquire as to whether it would be possible for the witnesses who have accompanied you today, Mrs. Hobby, to be present tomorrow morning at 10 o'clock? Secretary HOBBY. Mr. Stuart plans to return tonight, Mr. Chairman, and everyone else that is here can be present, with the possible exception of Mr. Rockefeller, for a short time. We are before the House Committee on Appropriations beginning at 9:30 in the morning, and that is where we were yesterday when we came to your committee in executive session. Everybody else will be here; and, if the Committee on Appropriations lets us off on short order, we will be right back. The CHAIRMAN. That is very kind, and we appreciate it. We will proceed, then, tomorrow morning at 10 o'clock. I think, as you have observed this morning, many members cut their questioning short in order that other members might have an opportunity; of course, there will be no disposition upon the part of the Chair or this committee to, in any way, limit the membership in the questions they may wish to ask, so that they will take advantage of the opportunity as it is afforded. I realize that, with the program as we have set up for our hearings, there will be many diversified views that will be expressed before we have finished. And it may be at that time, Mrs. Hobby, that we would be pleased if we could look forward again to your appearance in case the committee should decide that that would be the course to pursue. Secretary HOBBY. I am always available, Mr. Chairman. The CHAIRMAN. Thank you. The hearing will stand in recess until tomorrow morning at 10 o'clock. (Thereupon at 12:30 p.m. a recess was taken to reconvene at 10 a. III., Thursday, March 25, 1954.) HEALTH REINSURANCE LEGISLATION THURSDAY, MARCH 25, 1954 HOUSE OF REPRESENTATIVES, COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, Washington, D. C. The committee met, pursuant to adjournment, at 10 a. m., in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding. The CHAIRMAN. The committee will come to order. STATEMENTS OF ROSWELL B. PERKINS, ASSISTANT SECRETARY OF HEALTH, EDUCATION, AND WELFARE; DR. CHESTER S. KEEFER, SPECIAL ASSISTANT FOR HEALTH AND MEDICAL AFFAIRS, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE; JAMES E. STUART, CHAIRMAN OF BLUE CROSS COMMISSION; ROBERT J. MYERS, CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION; AND THEODORE ELLENBOGEN, OFFICE OF THE GENERAL COUNSEL, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE We will start where we left off yesterday, and endeavor to be a bit brief in questions in order that everybody might have an opportunity. It would be my intention today to recognize first those who did not get an opportunity yesterday to question the officials from the Department of Health, Education, and Welfare. We were informed yesterday that Mrs. Hobby has another engagement with the Appropriations Committee and that she would return here as soon as she is able to complete her appearance before the other committee. So that if any of you wish to examine Mrs. Hobby, have that in mind, that she will probably be here if she can get away from the Appropriations Committee. Now, there are different members of the Department here, so that if the questioners will indicate to whom they would like to address their questions, we will have that person available so that you may do so. Are there any questions, gentlemen? Mr. BENNETT. Mr. Chairman. The CHAIRMAN. Mr. Bennett. Mr. BENNETT. I think this question should be directed to Mr. Perkins, but he can decide whether someone else should answer it. My thinking on this bill is perhaps, like many others, confused up to this point and I assume that as we go along with the hearings perhaps some of the questions I have in my mind will be clarified. 53 Now, with that in mind, I will tell you what is troubling me at the moment. The Secretary testified-and I have no reason at all to doubt the accuracy of her statement-that there is no subsidy for insurance companies provided for in this legislation. Now, assuming that is the case, then my question is, What, as a practical matter, do you hope to be able to do or accomplish, in the way of providing better health insurance under your proposal? Mr. PERKINS. The answer to that is that we do not think that you need to give the insurance companies an outright subsidy in order to encourage their expansion and improvement of their plans. If they are offered the opportunity to spread their risks we believe that they will be induced, or at least given the opportunity, to move into areas where they do not have experience. It would fill a gap which has not been filled so far, namely, to have going and active reinsurance in operation and offering itself to the carriers for the sharing of risks in new areas. Mr. BENNETT. Well now Mr. YOUNGER. Will the gentleman yield there for just one point? Mr. BENNETT. I will be glad to. Mr. YOUNGER. I think this is quite comparable to the FHA and I had the privilege of sitting in with FHA when it originally started, and if you will recall at that time, no individual lender would go beyond 15 years, and a 20-year-loan basis was established, and it was not any time until the regular lenders were lending on their own account uninsured for 20 and 25 years, on their own account, and that was stimulated by the fact of the FHA, and the experience that has grown out of the FHA and I think that this will prove much the same experience. That is all. Mr. BENNETT. Well, I hope it will; but I am still not convinced, although my mind is open. I certainly believe that Congress ought to do it, if it is possible to do so, everything it can to make available better health insurance protection for the American people; but now under this proposal, could X, as you have it on your chart, could X take advantage of the provisions? Now, let us assume that they start in a new field; that they have not previously been in and as a result of that new start they lose money, and the Government comes in and pays 75 percent of the loss, and the company absorbs the other 25 percent. Now, the question is this, assuming that you get, you stimulate, a company to take advantage of this program and they start something new and immediately, or within a year or so, they have a loss. Do you think that we can assume the company would continue a program like that and pay 25 percent of the losses just to get 75 percent under this reinsurance? Mr. PERKINS. Well, I think two factors would enter into the company's thinking. First, it would probably readjust its premium rates and secondly, even after readjusting its premium rates it would probably want to take a long cold look at this plan it had set up and see whether with the readjustment it would be a plan that would operate on a break-even basis, at least over the long term. But, I do not think that the fact that a company should lose in the first year would necessitate a decision on its part that it abandon the plan. |