Mr. CURTIS. I do not know that we need tax incentive. We may. Certainly if you meet the problems necessary, that in my judgment would be a much better way of proceeding.

Now to get back to the first problem. If this analysis of our longrange program is correct, then, as time goes on, the problem of the present age group is going to gradually phase out.

Mr. RIETZ. It will decline rapidly.

Mr. CURTIS. It will decline rapidly. Then the question comes: How about our present aging? They do have a problem. And that is why I thought if we had this problem, the Kerr-Mills approach was the better one, because it would identify the people over 65 who actually were having trouble in this area. The Forand bill did not even deal with all the people over 65; nor does the King bill. It does not deal with all the people over 65 at all. It is just those who happen to have lived at the right time, who are covered.

And to get back to another point: The Secretary of Health, Education, and Welfare suggested that we might have a cost problem in the area of Kerr-Mills. I suggest that if we do the proper job on the second problem, long-range, we will phase out the group under KerrMills. And that is going to be a declining problem in the same way that we always have figured that as we extended OASDI, we would phase out old-age assistance. And indeed we see that we are. same way, Kerr-Mills, in effect being tied to OAA, will be phased out, too.

In the

So it strikes me that by separating the two problems, the one of our present aged, who did not have the health insurance available to them, and the long-range problem, where I think we could best meet it by having this kind of coverage available to our people that you have described in your presentation

If you would like to comment on that

Mr. RIETZ. I think you are entirely right. We should expect a decrease. I am afraid as long as social security does not include everybody in the active working force, we will always have some limited numbers of people coming down to the end of the road who, because of misfortune or other circumstances that have happened to them during their active career, will be a caseload. But all of the predictions and all of the indications indicate that this will be a declining problem. It has declined already.

I think the same analogy goes to the MAA. If we keep a sound economy, if we keep the responsibility on the individual with broadened OASD benefits and private pension plans, I think this phases down. I do not think that these programs would ever be completely eliminated.

Mr. CURTIS. No.

Mr. RIETZ. You will always have a hard-core problem.

Mr. CURTIS. I think it will be below the 2 percent we do have in our society today, and that is a pretty low figure. But I do worry about these people who try to change the program for the 98 percent of our people who do not need this in order to grapple with the problem of the 2 percent. I think we can handle the problem of the 2 percent without altering the program for the 98 percent.

Mr. KING (presiding). Mr. Ikard?

Mr. IKARD. You mentioned the study made by the Texas Research League. I have heard of that report, and I have heard it is a good

one, but I have been unable to get a copy of it. I wonder if you could furnish that for the record.

Mr. RIETZ. I will supply copies in one way or another. They are in pretty short supply. I have one in Washington with me. I do not have it here. And I will be glad to see that you get it.

(The report referred to is on p. 855.)

Mr. IKARD. I was interested also, in reply to an earlier question, where you compared the benefits under certain policies with those under the bill under consideration.. Would it be possible for you also for the record to break down several typical types of health insurance, group as well as individual? We are familiar with the Connecticut plan. We have heard of that from several sources. Giving the general benefits and the cost involved as compared to the benefits provided here would that be possible?

Mr. RIETZ. I believe that you will get the information that you are interested in in this survey that we are now making, which Mr. Williams of the Health Insurance Institute says will be available within the next week or so. This will be all plans that are available and are continuable for life in this area.

Mr. IKARD. That is fine. Thank you very much.

Mr. KING. Mr. Derounian?

Mr. DEROUNIAN. What concerns me a bit is the wide disparity in your estimate of the cost and the estimate of the cost by the Social Security Administration, which has already been referred to. I would imagine that the insurance companies, having to make profits, would be more realistic in their actuarial tables than the Social Security Administration, which does not have to make a profit, because all it has to do is ask the Congress for money, and it gets it.

Another thing that concerns me is the fact that the proponents of this bill keep on saying that this is not socialized medicine. I believe that the author of the bill believes that this is not socialized medicine. But when you get fellows like Andrew Biemiller, who back some years ago was one of the sponsors of the Ewing plan, and when you get the "agrarian reformers," I am just wondering whether the American public ought to stop, look, and listen.

I wonder if you have any comments on my observation.

Mr. RIETZ. I would agree with what you say in many respects. All through the vein of literature that is available from various sources is this thought that you have got certain groups who have been aggressive and active in seeking what we would call socialized medicine. We have got, here, just in December 1960, this New American. And they make very vividly the point-this is a special supplement they put out on health care plans that you may be familiar with, and they have invited people to buy and distribute this supplement widely on a nominal price basis. But they make known very clearly and in bold type the fact that once the Forand bill is passed a mechanism will be provided for socialized medicine. So that you do have this fear, which I participated in as an individual, but which certainly I did not originate. It comes because of the positions taken by other groups and other people in urging this step-in-the-door type of situation. And there are a number of them, some of which you have cited here this morning.

Mr. DEROUNIAN. And, Mr. Reitz, I do not object to those who want socialized medicine. They have a right to fight for it. But let the

American people know that these people who hace fought for socialized medicine before are looking very happily on this type of legislation to reach their true objective.

Mr. RIETZ. I would agree with you.

Mr. MACHROWICZ. Do the insurance companies keep separate accounts and separate records for the several senior citizens' policies? Or are they merged financially with their other operations?

Mr. RIETZ. My own company is not in the senior citizen field at the present time. Actually, we are new in the health insurance business. But I would be sure that the companies of the size that participate in these programs could get their experience records for any large segment of their business, and certainly for any segment such as the senior citizen policy.

Mr. MACHROWICZ. Do they keep separate accounts for this type of policy?

Mr. RIETZ. I am sure they could determine their experience under these policies; yes.

Mr. MACHROWICZ. Do they have to make any sworn reports to any Government agency on their experience with these senior citizens' policies, on number of policies in effect, or the number canceled or terminated?

Mr. RIETZ. I think the only one that contemplates a rather detailed individual reporting by the particular policy is your Connecticut plan. Mr. MACHROWICZ. That is the only one?

Mr. RIETZ. At the present time. Now, the insurance departments, of course, in their regular examination procedure, have the right to go into any phase of our operation they want to go into.

Mr. MACHROWICZ. You have told us about the trend in the coverage of voluntary health insurance policies. Is there any way that we can verify these claims against sworn statements by individual companies?

Mr. RIETZ. What claims do you have in mind?

Mr. MACHROWICZ. Well, your claim about the increased trend in the coverage policies. I wondered whether there was any real way of determining whether the trend has gone up as high as it has.

Mr. RIETZ. As to more liberal coverages and types of policies? Mr. MACHROWICZ. And the number of policies.

Mr. RIETZ. And the number of policies? They are reported in annual statements; yes.

Mr. MACHROWICZ. What are the administrative costs as a percentage of premium paid in by persons of age 65 or over for individual hospital and surgical medical insurance policies other than senior citizens' policies?

Mr. RIETZ. This would vary considerably by individual companies. Mr. MACHROWICZ. Can you give us any idea what the amount of those administrative costs is?

Your predecessor, Mr. Faulkner, I believe did testify to this several

years ago.

Mr. RIETZ. Well, I believe that one of the companies that is active in this mass enrollment field pays a one-time enrollment fee to an agent of $1.75. And I hope I am right. We can get you this information, for sure.

I do not know what their administrative costs are. I have never seen the figures. I am talking about the cost of administering claims,

76123 061-pt. 218

and so forth. But I understand that they are running loss ratios, dollars paid out in benefits, between 70 and 80 percent of the premiums being collected, in this one situation.

Mr. MACHROWICZ. I think it was in 1959 that Mr. Faulkner, who has testified for these insurance companies before the Senate committee, testified that the amounts paid out, on this type of policy, as compared to the premiums collected, that is, the loss ratio, was about 6623 for such individual policy, and later that figure was corrected to 56 percent. Would you say that is about the correct figure?

Mr. RIETZ. Well, I think that the conflict is—and I think we have to be very precise about what plan and what policy we are talking about, when you start using individual figures.

Mr. MACHROWICZ. Can you give us any ideas as to any of these policies, just about what the loss ratio is?

Mr. RIETZ. I am sure we can get you the loss ratio for some of these mass enrollment programs.

Mr. MACHROWICZ. Would you say that the figure would be approximately what Mr. Faulkner testified to?

Mr. RIETZ. I think it is higher than that, from my understanding. I think in one company that has been quite active it is well over 70 percent being paid back today, in my understanding.

Mr. MACHROWICZ. Well, Mr. Faulkner corrected his figure to 56 percent, after having testified before the Senate committee. I would like to have the figures today to see whether they are any different. Could you furnish them?

Mr. RIETZ. I think we can do that.

(The information referred to is on p. 852.)

Mr. MACHROWCIZ. On page 14, you made some comments that I am rather curious about. You seem to suggest in your statement that the 73 percent of the people in the United States that you estimate to be insured have what you say is adequate insurance. Now, do you not have to take into account that some of those who are insured have only $10 a day hospital coverage and do not have any protection against prior impairments and have cancellations features?

Mr. RIETZ. Well, I believe you have asked about three different questions, but let me try to touch on the various points.

It is true that there are some people who have benefit levels that are not up to the level of the current hospital costs. In some cases, this may be because this is the only amount the individual is willing to buy. He decides that he can carry the rest of it. This may be all he wants.

In other cases, it may be that he bought a plan that was relatively adequate some years ago, and admittedly it is now inadequate, but he has done nothing about it, and unfortunately some agent has done nothing about it. Maybe an agent has not seen him.

On the concellation situation, there was an extensive study of cancellation and the problems of cancellation made by the National Association of Insurance Commissioners, which was quite revealing, from the very low level of cancellation that prevails, and in many cases of something like four-tenths of 1 percent of the policies that were cancelled by action of the companies, the company offered to continue the coverage subject to payment of an additional premium or some other limitation on the coverage.

So that the cancellation matter has been magnified. You have got to an increasing extent guaranteed renewable and noncancellable coverages being issued in the indiviudal field. In my own company, we introduced in 1954 a small pattern or package of policies that were the old standard, where we had the right to nonrenew. We replaced those with a guaranteed renewable coverage in the hospital and surgical field. And once we replaced them, our small volume doubled, frankly. So apparently this is what the people will not like. But we have no cancellable coverages being written in this area today.

So that the cancellation problems are being depreciated and running out for this reason. But remember also that of the total picture, there is 70 percent of it that never has been cancellable, because it is group insurance.

Mr. MACHROWICZ. What percentage of people over 65 today would you say do not have guaranteed renewable policies?

Mr. RIETZ. Oh, I would not have any idea, offhand. I think we could get some estimates of it. All these people that are included. in the mass enrollments programs have guaranteed renewable. There are some people I am sure now that have paid up policies, which is a relatively new introduction, but there are two or three major companies that have issued paid up individual policies.

Mr. MACHROWICZ. Would you say a considerable portion of those in the area over 65 do not have guaranteed renewable policies?

Mr. RIETZ. I am sure there are lots of not guaranteed renewable policies still in force.

Mr. MACHROWICZ. And will you furnish the committee with a figure as to how many there are?

Mr. RIETZ. We will see what we can get. I think we can get something in that area for you.

Mr. MACHROWICZ. Of course, your answer leads to another question. You say there are very many of the aged who do not want health insurance. I certainly agree that very many of the aged people, when faced with a choice between meeting their health insurance costs and meeting their day-to-day living expenses, probably decide they do not want health insurance. I know there are many aged people who do have some health insurance that they know is not adequate, and these people do not want more complete protection.

I would like to ask you: Do you not think that the real reason behind the attitude of both these insured and the uninsured toward health insurance is that, first of all, they do not have very much money, and secondly, even incomplete health insurance for them is expensive, because their health costs are high, and because they are not members of groups that are covered under these group insurance policies?

Would you have any comment on that?

Mr. RIETZ. Well, there are two surveys among the general population that are referred to in the footnote at the bottom of page 10 of my testimony, the Michigan survey as to the reason people did not have insurance. We have had this Federal employees, retired Federal civil service employees' plan. There have been some figures released on that, and there are some more to be released very shortly. This is a contracting-out plan, where the coverage is provided through the insurance industry, the Blue Cross and Blue Shield facilities. There are two or three interesting things in it.