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3114/ADDITIONAL EMPLOYEE HEALttit'"‹

965 BENEFIT PLANS

GOVERNMENT

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HEARINGS

BEFORE THE

SUI TTEE ON RETIREMENT, INSURANCE,

Er AND HEALTH BENEFITS

OF THE

-D COMMITTEE ON

OFFICE AND CIVIL SERVICE

ISE OF REPRESENTATIVES

EIGHTY-NINTH CONGRESS

FIRST SESSION

ON

H.R. 5147

A BILL TO AMEND THE FEDERAL EMPLOYEES HEALTH BENEFITS ACT OF 1959 TO PERMIT UNTIL DECEMBER 31, 1965, CERTAIN ADDITIONAL HEALTH BENEFITS PLANS TO COME WITHIN

THE PURVIEW OF SUCH ACT

JUNE 8 AND AUGUST 24, 1965

Printed for the use of the

Committee on Post Office and Civil Service

U.S. GOVERNMENT PRINTING OFFICE

4f.'-569 WASHINGTON : 1965
COMMITTEE ON POST OFFICE AND CIVIL SERVICE

TOM MURRAY, Tennessee, Chairman

JAMES H. MORRISON, Louisiana

THADDEUS J. DULSKI, New York

DAVID N. HENDERSON, North Carolina

ARNOLD OLSEN, Montana

MORRIS K. UDALL, Arizona

DOMINICK V. DANIELS, New Jersey

LINDLEY BECKWORTH, Texas

HARLEY 0. STAGGERS, West Virginia

ROBERT N. C. NIX, Pennsylvania

JOE R. POOL, Texas

WILLIAM J. GREEN, Pennsylvania

SPARK M. MATSUNAGA, Hawaii

PAUL J. KREBS, New Jersey

RAYMOND F. CLEVENGER, Michigan

JAMES M. HANLEY, New York

JOHN V. TUNNEY, California

CHARLES E. JOHNSON, Staff Director

B. BENTON BRAY, Associate Staff Director

JOHN H. MARTINY, Counsel

WILLIAM A. IRVINE, Assistant Staff Director

ROBERT J. CORBETT, Pennsylvania

H. R. GROSS, Iowa

GLENN CUNNINGHAM, Nebraska

EDWARD J. DERWINSKI, Illinois

ROBERT F. ELLSWORTH, Kansas

ALBERT W. JOHNSON, Pennsylvania

JOHN H. BUCHANAN, JR., Alabama

JAMES T. BROYHILL, North Carolina

SUBCOMMITTEE ON RETIREMENT, INSURANCE, AND HEALTH BENEFITS

DOMINICK V. DANIELS, New Jersey, Chairman

LINDLEY BECKWORTH, Texas

WILLIAM J. GREEN, Pennsylvania

SPARK M. MATSUNAGA, Hawaii

RAYMOND F. CLEVENGER, Michigan

JAMES M. HANLEY, New York

TOM MURRAY, Tennessee

II

GLENN CUNNINGHAM, Nebraska

H. R. GROSS, Iowa

JOHN H. BUCHANAN, JR., Alabama

Ex Officio Voting Members

ROBERT J. CORBETT, Pennsylvania
CONTENTS

Statement of—

O'Neill, Hon. Thomas P., a Representative in Congress from the State Page

of Massachusetts 2

Lawton, David F., Deputy Director, Bureau of Retirement and Insurance, U.S. Civil Service Commission, accompanied by Solomon Papperman, Chief, Contracts and Instructions Division, Bureau of

Retirement and Insurance 31

Lyons, Kenneth T., president, National Association of Government

Employees 2, 17

Ruddock, Andrew E., Director, Bureau of Retirement and Insurance,

U.S. Civil Service Commission 11

111

ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

TUESDAY, JUNE 8, 1965

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON RETIREMENT, INSURANCE, AND HEALTH

BENEFITS OF THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

TV a8hing ton, D .0 .

The subcommittee met at 10 a.m., in room 219, Cannon House

Office Building, Hon. Dominick V. Daniels (chairman of the subcommittee) presiding.

Mr. DANIELS. The Subcommittee on Retirement, Insurance, and

Health Benefits will come to order.

The subcommittee is meeting this morning to consider H.R. 5147, a,

bill sponsored by Congressman O'Neill, to amend the Federal Employees Health Benefits Act of 1959, to permit certain additional plans

to come within the purview of such act during 1965.

(H.R. 5147 follows:)

,[H.R. 5147, 89th Cong., 1st sess.]

A BILL To amend the Federal Employees Health Benefits Act of 1959 to permit until

December 31, 1965, certain additional health benefits plans to come within the purview

of such Act.

Be it enacted by the Senate and House of Representatives of the United States

of America in Congress assembled, That section 2(i) of the Federal Employees

Health Benefits Act of 1959, as amended (73 Stat. 710, 77 Stat. 76; 5 U.S.C.

3001 (i) ), is amended by striking out "1963" and inserting in lieu thereof "1965".

• Mr. DANIELS. The original law provided for the participation in the

program of employee organizations which are national in scope, or in

which membership is open to all employees of Government agencies

who were eligible to enroll in a plan under the 'program, and which

applied for approval of their plans to the Civil Service Commission

prior to December 31, 1959. Subsequently, the law was amended to

permit additional employee organization plans to became eligible for

participation by making application before December 31, 1963.

The objective of the bill we have under consideration today is to

again open the health benefits program through December 31, 1965,

so as to permit still other additional employee organizations to apply

to the Commission for approval of their plans.

Our first witness this morning is the Honorable Thomas P. O'Neill

of the Eighth District of Massachusetts. He is a highly regarded and

respected Member of this Congress, a hard-working Member of the

Congress, and commands the respect of all his colleagues in the House,

and we welcome you here this morning.

1
2 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

STATEMENT OF HON. THOMAS P. O'NEILL, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF MASSACHUSETTS

Mr. O'NEILL. Thank you for the welcome. I am going to be very brief because I have a Rules Committee meeting this morning. I am here for the purpose of introducing Kenneth Lyons, who is the president of the National Association of Government Employees. This man I have known for over 20 years as a neighbor. When I came to Congress 14 years ago there were 54 different orga- nizations in the Charleston Navy Yard which in those days had about 10,000 employees, and every time we wrote a letter to the Navy yard concerning a problem, we had to write to the 54 different orga- nizations. At the present time they have one organization in the Navy yard which has the official sanction of the Government. This union has been in being over 16 years. They are a national organization in Federal installations and have over 100,000 members. I believe they are at the present time in 98 establishments.

In view of the fact they are one of the leading union organizations within the Federal Government, I believe they should have the same rights as the other organizations have as regard health and benefit plans.

With that, Mr. Chairman, I will introduce to you Mr. Kenneth Lyons, a man for whom I have the highest regard, a real leader within the Federal employees of the United States, a man who wants to do nothing but the best for the Government itself, and for those members who are in his union. I present Mr. Kenneth Lyons. Mr. DANIELS. Mr. Lyons, you may proceed.

STATEMENT OF KENNETH T. LYONS, PRESIDENT, NATIONAL

ASSOCIATION OF GOVERNMENT EMPLOYEES

Mr. LYONS. I want to thank Mr. O'Neill for his kind remarks. I have a brief statement that I submitted this morning. Unfor- tunately, we have other material that I will have to submit to all the members of the Post Office and Civil Service Committee and my office did not forward it to me. Whether it is failure to put the ZIP code on, I do not know.

The National Association of Government Employees was formerly known as the Federal Employees Veterans Association. It was founded in Philadelphia and in 1960 we changed our name to the National Association of Government Employcez.

At one time only veterans could belong to the organization, but since 1960, both preference and nonpreference eligibles may be mem- bers of the association.

Of course, as Congressman O'Neill pointed up, the National Asso- ciation of Government Employees is comprised of Federal employees only.

The National Association of Government Employees is most anxious to improve the welfare of its membership as it pertains to working conditions and as it pertains to their health and that of their immedi- ate family.

When Congress enacted the Federal Employees Benefit Act of 1959, the National Association of Government Employees contacted insur-
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 3

ance companies in an effort to develop a plan that would provide

maximum benefits, at a reasonable cost to the employee, of hospitalization and the payment of medical bills and medical care.

The various and sundry plans that were submitted to the National

Association of Government Employees and me by many of the outstanding insurance companies were unsatisfactory in that they were

not equal to or better than health plans already in existence.

The National Association of Government Employees, after a considerable amount of research, did not and could not come up with a

comprehensive program within the time specified by section 2(i) of

the Federal Employees Health Benefits Act of 1959 which would improve benefits already available to our membership. Therefore, National Association of Government Employees did not participate in

the program.

Congress by Public Law 88-59 extended the time specified in the

original act from 1959 to 1963, in an effort to allow another Government employee group to submit their health benefit program. This

organization was the Mail Handlers Association.

This action of Congress stimulated and renewed our efforts to discover a better service and benefit plan than those in existence, whereby

Federal employees could and would receive greater benefits at less cost

to them and their families.

Congress has realized that to improve the Federal employee health

benefit program innovations and novations are necessary. In order

to provide for these improved plans, it is essential that Congress amend

the existing law.

The National Association of Government Employees contacted the

Metropolitan Life Insurance Co. and they submitted a plan which is

%lite unique and one that will be explained in detail by the representative, Mr. _Ambrose Redmond, who is here with me today to explain the

health benefit plan to the committee.

It is the opinion of the National Association of Government Employees that, in view of the constant increased cost of medical care, a

plan devoid of a high-option and low-option contingency could, if

properly administered, give greater and broader benefits to the participants at a much lower cost. At the present time, the Federal Government has a fixed cost for all plans they administer and at the present time the Federal Government is administering a Blue Cross and

Blue Shield plan, an Insurance Industry Indemnity plan, National

Postal Union plan, et cetera.

Thus the initiating of an improved plan, which we will call the

National Association of Government Employees plan, will not in any

way cause any additional cost to the Federal Government.

We believe that the National Association of Government Employees

plan is quite unique. We have reviewed and studied all the present

plans and their features and sifted out many of the pitfalls that exist

in these plans.

We are positive that the committee will agree with the National

Association of Government Employees that the Metropolitan Life

Insurance plan will be most acceptable to the families of our Federal

employees.

We believe that the -U.S. Civil Service Commission will be in opposition to our plan, claiming that there are many other good plans
4 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

available for our Federal employees. But it is the National Associa- tion of Government Employees opinion that we, too, should be com- petitive with other employee organizations and have the right to have an improved plan of our own instituted and made available to tour membership. Certainly, the U.S. Civil 'Service Commission should not disapprove our plan because it is new, because it is unique, and because our plan will have new innovations which could result in drastic changes beneficial to all concerned.

Without a doubt, yesterday's best is less than adequate today. The National Association of Government Employees is convinced that, if you were to question Federal employees concerning the various health plans that are available to them, that they in unison would claim that the majority of these plans are less than adequate. We are of the opinion that our Federal employees would be more than receptive to the plan that the Metropolitan Life Insurance made available to the National Association of 'Government Employees. Of course, we are all familiar with the 'Metropolitan Life Insurance Co. It is the. largest insurance company in the world and we feel quite strongly that they can deliver the most effective coverage at the least possible net cost to the members of the National Association of Government Employees who are, of course, civilian Federal employees.

I am thankful to the committee for allowing me the opportunity and time to present the National Association of Government Em- ployees views and I certainly hope that the committee will act most favorably upon H.R. 5147.

I would like to point out, too, that the association spent a consider- able amount of time in reviewing various plans of insurance com- panies and we could have presented :a number of plans before Con- gress within, shall we say, the statute of limitation of the prior bill. However, just to have another plan made available I did not think, nor did our 'association think, was the proper thing to do. We wanted to get the best, and I think at this time we do have the best possible plan for our membership and the Government.

This plan is devoid of any low option or any high option. This plan is one major plan for all Federal employees.

As I pointed out, unfortunately I do not have with me all the graphs and charts that spell this out in 'detail, but I will make them available for each and every member and send copies of it to the U.S. Civil Service Commission, who I would hope will change their minds con- cerning their stand of opposition to our request to be competitive with all of the other assfociations that presently have plans in the Federal Government.

I want to thank you for giving the this opportunity to appear before

you.

Mr. DANIELS. How many members belong to your association?

Mr. LYONS. We have over 100,000. We have members in the Fed- eral Aviation Agency, the Navy Department, the Department of Jus- tice, Internal Revenue Service, and so forth.

Mr. DANIELS. Where are your installations located?

Mr. LYONS. They are all over the country and outside the country. FAA agency locals in Puerto Rico, Miami, Charleston, S.C.

'

the Frankfort Arsenal in Pennsylvania, the Boston Naval Shipyard, the Portsmouth Naval Shipyard, the Philadelphia Naval Shipyard.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 5

The Washington Traffic Control Center at Leesburg and at The

Towers here are under the NAG-E.

Mr. DANIELS. Your membership extends to these various installations in the different parts of the country.

Mr. LYONS. That is correct.

Mr. DANIELS. And it is to represent their approximately 100,000

members?

Mr. LYONS. That is correct.

Mr. DANIELS. I noted with interest the fact you could not get a comprehensive plan together prior to the cutoff date under the original

act, or the extension that permitted these plans to be submitted before

December 31, 1963.

Mr. LYONS. That is correct.

Mr. DANIELS. Any plans that you had under consideration were no

different than prior plans, but now you think you have a better plan,

a more unique plan?

Mr. LYONS. Absolutely.

The plans prior to 1963 that were made available to us by the majority of the insurance companies, we thought, were entirely inadequate. They did not prove to us to be any better than any in existence.

This one is much better.

Mr. DANIELS. Have you submitted this plan to the Civil Service

Commission for their approval?

Mr. LYONS. No • we have not. I had the opportunity of meeting

with Mr. Ruddoeli, of the Civil Service Commission, approximately a

syear ago and I discussed this matter with him personally. I had

representatives of our organization with me and an insurance consultant, and we discussed the various plans available and he told us

t that time that the Civil Service Commission would be in opposition

to any additional plans because there were enough plans already available to Government employees.

We pointed out at that time that we believed that the plan we had

was better than anything available to them, but the Commission's

attitude was there were enough and they would be in opposition to this.

Mr. DANIELS. You did not submit the plan to them?

Mr. LYONS. No we did not, Mr. Chairman not in view of the fact

they told us quite plainly they would be in opposition to any additional plans being proposed for Federal employees.

Mr. DANIELS. Can you tell us what some unique features of the

plan are, to the best of your recollection?

Mr. LYONS. To the best of my recollection and knowledge, Mr.

Chairman, one thing, the cost would be less than the present cost of

the plans available to Federal employees.

No. 2, there would be no such thing as a low-option plan and a highoption plan. There would be one plan for everyone in the Federal

service without any of these contingencies.

There would also be dental benefits in the plan. There would also

be benefits in the plan, as I recall, that would provide for prescriptions

to be paid for by the insurance company, which in many of the plans

is not available to the Federal employee and his family.

Mr. CLEVENGER. Would you say after you have given the consideration you have to this question, it is a truism that the larger and more

49-569-65--2
6 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

representative the group, the better the benefits per premium dollar are that a person will receive?

a plan 

Mr. LYONS. I think so. You mean if you have more participants in you give them greater benefits?

Mr. CLEVENGER. Yes.

Mr. LYONS. I would say absolutely.

you 

Mr. CLEVENGER. As a president of a large employees' union, how do think we could bring about increasing the size of the groups par- ticipating in health plans?

Mr. LYONS. I do not quite understand your question. Mr. CLEVENGER. I assume you and others are interested in achieving the most benefits for each Government employee per premium dollar that are obtainable.

Mr. LYONS. That is correct.

Mr. CLEVENGER. To do this, we should seek to increase the number of persons in the groups covered by the plan? Mr. LYONS. That is correct.

Mr. CLEVENGER. Now, how do you propose we might go about doing this?

could 

Mr. LYONS. Our proposal in effect, if passed by Congress, if we

this 

be a participant in the program, that would be one of the ways could be achieved.

Mr. CLEVENGER. Just how seriously do you propose we do this? The effect of your proposal and the effect of reopening this would

that 

be to multiply groups rather than to increase the size of groups is not so?

groups?

Mr. LYONS. To multiply groups rather than to increase the size of

Mr. CLEVENGER. Yes.

Federal 

Mr. LYONS. No. In looking over all the plans now available to the

much 

employees, I believe that we have come up with a unique plan

an 

better than any available to the Federal employees, and when

to 

open season came about the Federal employees would have a right pick this plan as their health benefit plan.

ficial 

I am convinced because of the various features of it that are bene- to the employee and his family, he would select this plan. I think

I 

it 

think 

makes it more competitive indeed for the insurance companies, and

ing 

the more competition you put into this, you will see a lessen- of rates and increased benefits.

Mr. CLEVENGER. Let me ask one other question.

governmental 

What would you consider to be the ideal health benefit plan for a

employee?

for 

Mr. LYONS. I think if we were to seek the ideal health benefit plan

eral 

Federal employees, that would be a complete subsidy by the Fed- Government to give to the Federal employee a complete health benefit plan with no payment by the Federal employee.

would 

Mr. CLEVENGER. I am talking of the benefits under the plan. What be the ideal plan in terms of benefits?

family.

Mr. LYONS. Free hospitalization to the Federal employee and his

Mr. CLEVENGER. Anything else?

Mr. LYONS. That would be it.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 7

Mr. DANIELS. You say free hospitalization to the employee and his

family without any limitation as to amount?

Mr. LYONS. Without any limitation as to the amount.

You are asking me the question, what would I believe to be the best

possible plan for the Federal employee. I think if in the future we

ever did get such a plan, I think within the years to come such a thing

will happen for Federal employees in lieu of additional pay increases,

and so forth. I think this will be a fringe benefit of the future.

Mr. CLEVENGER. Let me probe here if I may.

I am talking solely of the benefit, not the payment for the benefit,

and I am using "benefit" in terms of perhaps its technical sense. If we

are concerned with furnishing health care for a Government employee, would you agree that the ideal that we are seeking is that all

of the health needs of a Government employee would be furnished on

a prepayment basis, that his doctors' bills would be paid, his hospitalization would be paid, his dental care would be paid for and that of

all his dependents?

Surely there could be no more than this that we would want under

an ideal health benefit plan.

Mr. LYONS. That is correct.

Mr. CLEVENGER. Now, have you or your organization given any

time to analyzing how close to the ideal your proposed plan comes

compared to others, rather than comparing your plans with other

plans?

If you accept what I said as an ideal, have you started to say we have

achieved so much of our ideal by our plan and analyzed it in those

terms?

Mr. LYONS. Let me answer by saying we went over all the plans

available to Federal employees, and in certain respects, to make the

plan more palatable, they would give more on one side of the sheet and

a little less on the opposite side of the sheet, and each plan had to be

weighed carefully. And the reason we did not come before Congress

in the time limitation before was the fact that all the insurance company plans, if laid side by side, were practically identical, so it seemed

rather ridiculous for us to come to Congress and say we want a National Association of Government Employees plan.

We went over the Metropolitan Insurance plan with no high or low

option and tried to put into effect one good plan, whether a person was

a GS-18 or a laborer. With that we get the most benefits with the

least amount of money in our plan.

I certainly hope that Mr. Redmond will be here at 11:30. I think

he can explain this much better than I, the pitfalls that have been

taken out of the other plans and have been cleansed and put into ours.

As far as your questions concerning the ideal health benefit plan and

what has our organization done about this are concerned, we have

opened up and started in New England what we call medical clinics

that we are participating in, getting doctors from the Massachusetts

General Hospital. We are spending money for some of the health

care of our own membership and their families. Federal employees

and their families can go over to the clinic and get physical examinations for $5. We are paying for many of the drugs, and so forth.

So here, maybe one of these plans in the future could be turned over

to Congress and maybe that could be a fringe benefit in the future, the
8 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

setting up these clinics in and around Government agencies throughout the country. That would be a step in the right direction.

We found it has proven most successful because we have opticians, dentists, and the doctors available right in the clinic. We started this 2 years ago.

Mr. CLEVENGER. The problem there is you lose the choice of doctors.

Mr. LYONS. We have a referral list of some 38 doctors operating at the clinic. I know we received some calls from the medical society.

They were quite upset. They thought we may have been practicing socialized medicine, but after we pointed out the association was also contributing money to pay for the doctors' bills as well as some of the health plans and the like, they agreed it was a marvelous idea.

Mr. CLEVENGER. I do not know what the words "socialized medicine"

mean, so leave it out.

The benefit, of a health insurance plan to the extent that doctors par- ticipate, you have the greater selection of doctors than the clinic plan. This is one of the advantages, it seems to me, of an insurance-based

health plan.

I only ask these questions to see how far along the road you have

gone to not start comparing plans, which I have always found an impossible job. It depends on the salesman you are talking to. They

can put together any package you want.

If a person is unlucky enough, or unfortunate enough, to get, sick

during the month of August at high noon, he can get $10,000 if he is

struck by malaria.

For a Government employee now to try to determine what is a good

plan, it is hard to do.

Mr. LYONS. I agree with you because of the various numbers of

plans. I believe right now a Federal employee should consult an insurance consultant when he is making his selection for some of these

various plans that are made available to them. That is what we had

to do. I could not understand a great number of them, to be frank

with you.

Mr. CLEVENGER. Where do you find a noninterested consultant?

You find those who are selling plans with their own vested interests,

you find the union and their representatives having their own plans,

so where is a Government employee to go for an impartial analysis of

what would be the best plan for him?

Presumably he could hire an independent, insurance consultant at a

cost far in excess of several years of care. Where does a person go right now for this impartial analysis? Does he go to you?

Mr. LYONS. No.

Mr. CLEVENGER. Would he go to your organization after your organization adopts a plan?

Mr. LYONS. Well, certainly what the Federal Government is doinc,

right now, they are preparing material which is made available to the

Federal employees for their review in their consideration of insurance

plans.

Mr. CLEVENGER. For their individual review? The employee has to

review this whole mass of material?

Mr. LYONS. That is correct.

Mr. CLEVENGER. But every Federal employee is not a knowledgeable

person in insurance, and the employee organizations, when they take
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 9

on their own plans, cut off from the employee a service they can give

them, which is an impartial analysis of the various plans available to

them.

Mr. LYONS. When a man is elected to Congress to represent his people, he goes to Congress and does the best he can for them, and certainly the people depend on him to give them the proper information

as it pertains to any bill in Congress.

Now, when the employees have an organization and elect representatives, the representatives of their organization also hire, I hope, good

staff members to handle such things as insurance, and so forth.

We have a very capable staff of attorneys that went over every

single plan made available for Federal employees, and, as I pointed

out, we would not accept any of the insurance plans. We went over

every single plan. I did not 'care personally what the name of the

company was. I was interested in the best possible benefits for the

members of our association, and again I wanted it even better than

anything that was available to any Government employee organization.

We did not contact the Metropolitan Life Insurance Co. until after

we had contacted many others and then we went over all the other

plans, and the Metropolitan made their presentation to our attorneys;

our attorneys said this was the best possible plan.

I am dependent upon the staff we hire, that our association membership hires, to protect their best interests, and depend on them to

protect the interests of our membership, as your constituents depend

upon you to give them your best advice as it pertains to any bill in

Congress.

I would tell them, our attorneys would tell them, we have gone

over all these plans and we can assure you if the NAGE does get its

plan passed by Congress, it is much better than any that are available

for you, and we can explain why it is much better.

Mr. DANIELS. Mr. Lyons

'

I happened to be sitting on the 'committee

when the law was amended a couple of years ago to submit additional

plans prior to December 1, 1963, and the argument presented at that

time, to the best of my recollection, to support that amendment was

that the existing organizations were losing members and therefore

they were not being placed on a competitive basis with other membership organizations. That, I think, was the major factor in the consideration of the committee and Congress in reopening the plan at that

time.

Now, can you tell this committee if your organization has lost any

significant members of your organization by virtue of the fact you do

not have a health plan at the present time?

Mr. LYONS. I cannot say that, Mr. Chairman, because we have

tripled our membership over the past year without any insurance

program. As a matter of fact, I would have the FAA here testifying

before you of the tremendous increase in their activity and the Department of the Army, and so forth.

I can say this, however, that there are many people that feel they

cannot pay into our association that want the benefits of our association and the legal talent that (roes along with our association, but

they are caught in insurance plans and they cannot afford to belong

to two organizations. That is one of the reasons, but certainly I
10 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

would not want Congress to pass an insurance benefit bill to help our

organization increase our membership, and I certainly do not want

to impress upon Congress to enact any legislation for the sole purpose

of increasing the membership of the National Assobiation of Government Employees.

The main reason the bill was introduced is the fact that I am positive we have the best health benefit plan available for Federal employees. There is no doubt in my mind that, if this bill passed, the National Association of Government Employees will increase its membership quite sharply upon its passage.

Mr. DANIELs. I was going to ask you that question but you answered it before I had the opportunity of asking you. You have mentioned

that there are pitfalls in other health benefit plans sponsored by other

employee organizations. Can you tell us what some of those pitfalls

are?

Mr. LYONS. Mr. Chairman, there are pitfalls in some of the plans made available by insurance companies to Federal employees and all of this is on the graphs and charts that our consultant has prepared.

I do not think any attempt to explain it on my part would do it justice.

I would appreciate refraining from answering that question until

we have that material available for your committee.

Mr. DANIELS. Your proposed plan eliminates the low- and highoption plans.

Mr. LYONS. That is correct.

Mr. DANIELS. What type of a plan do you submit?

Mr. LYONS. It would eliminate any low and any high option, but

it would incorporate the benefits that are available to the Federal employee and put it into one plan.

According to the insurance company it would reduce the cost of administration, and it would actually give additional benefits to the

employees.

Mr. DANIELS. You stated that your policy would be cheaper to the

employee. How much cheaper?

Mr. LYONS. As far as the cost is concerned, I think it was about a

dollar or a dollar and a half over all.

Mr. DANIELS. How does that dollar or dollar and a half compare to

the cost of other plans?

Mr. LYONS. It would be a dollar less per pay period than the other

plans available.

Mr. DANIELS. A dollar less per pay period.

Mr. LYONS. Excuse me, not a pay period, per quarter; that is, every

3 months.

Mr. DANIELS. Your plan in addition to the customary and usual

benefits also furnishes dental benefits and prescriptions for members

and their families, which prescriptions are paid for by the insurance

company?

Mr. LYONS. The prescriptions are paid for by the insurance company. There is a portion of the plan that has to do with dental care.

I do not know all of the details of that, Mr. Chairman.

Mr. DANIELS. On the question of dental care, is such dental care

furnished at a clinic?

Mr. LYONS. No.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 11

Mr. DANIELS. May the employee go to any dentist of his own

choosing?

Mr. LYONS. Yes, absolutely. In my explanation of the clinic I was

pointing out to the Congressman that we have clinic,s of our own.

It has nothing to do with Metropolitan Life Insurance or any insurance program. This is done by the association.

Mr. DANIELS. Thank you very much, Mr. Lyons.

Mr. LYONS. Thank you very much, Mr. Chairman.

Mr. DANIELS. Our next witness is Mr. Andrew E. Ruddock, Director, Bureau of Retirement and Insurance, U.S. Civil Service

Commission.

STATEMENT OF ANDREW E. RUDDOCK, DIRECTOR, BUREAU OF

RETIREMENT AND INSURANCE, U.S. CIVIL SERVICE COMMISSION

Mr. RUDDOCK. Good morning, Mr. Chairman and members of the

subcommittee. I appreciate this opportunity to appear today to

present the views of the Civil Service Commission on this proposal

to amend the Federal Employees Health Benefits Act. The bill

would permit additional employee organizations to be considered for

approval as carriers of health benefits plans if application is made to

the Commission before December 31, 1965.

Chairman Macy's letter of June 7, 1965, to Chairman Murray of

the full committee states the Commission's official position of strong

opposition to this proposal. I believe it would be well to incorporate

that letter in the record at this point.

(The letter follows:)

CIVIL SERVICE COMMISSION,

Washington, D.C., June 7, 1965.

Hon. Tom MURRAY,

Chairman, Committee on Post Offlce and Civil Service,

House of Representatives.

DEAR Mn. CHAIRMAN: This is in further reply to your request for Commission

report on H.R. 5147, a bill to amend the Federal Employees' Health Benefits

Act of 1959 to permit until December 31, 1965, certain additional health benefits

plans to come within the purview of such act.

H.R. 5147 is identical in purpose and effect to H.R. 1819 which was enacted as

Public Law 88-59, approved July 8, 1963. The Commission, on March 18, 1963,

reported unfavorably on H.R. 1819 but because of considerations of equity your

committee recommended to the Congress that H.R. 1819 be enacted. However,

in so recommending, it took cognizance of the validity of the Commission's

reasons for opposing enactment and in its report (No. 190, 88th Cong.) on H.R.

1819, your committee emphasized that its favorable action was not to be a

precedent for similar action in the future and that organizations desiring to

apply for approval as carriers of health benefits plans would have only this

one opportunity to do so.

The two plans came into the health benefits program as a result of the enactment of H.R. 1819 do not offer anything appreciably different from what was

offered by existing plans already available to the members of the unions sponsoring the new plans. Both new plans attracted enrollments from only a small

number of their members. As I predicted in my testimony before your committee (p. 7 of hearing on H.R. 1819), the advantages attributed by advocates

of H.R. 1819 to having a plan have not been realized by the unions sponsoring the two new plans.

There is no reason to believe that any new union-sponsored plans could or

would offer anything unusual in the way of health benefits or premiums which

would redound to the advantage of employees. No new plan can realistically

expect to compete with existing plans and attract enrollment sufficient to rebound

to the union's advantage. Most, if not all, of our reasons for objecting to

enactment of H.R. 1819 are still valid today. The reasons include--
12 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

1. Each new plan adds to the already bewildering number from which employees may choose.

2. Neither the Government's nor the employees' interests are served by admitting new union plans to participation in the health benefits pro- gram.

3. Each new plan adds to the duties and responsibilities of employing agencies and the Commission and increases the administrative complexi- ties and expense of operating the health benefits program.

For the reasons stated, the Commission strongly opposes enactment of H.R. 5147.

The Bureau of the Budget advises that from the standpoint of the administra- tion's program there is no objection to the submission of this report. By direction of the Commission:

Sincerely yours,

JOHN W. MACY, Jr..

Chairman.

Mr. RUDDOCK. In considering this proposal the Commission found it helpful to review the original purpose of the 1959 health benefits legislation. The legislative history shows that Congress contemplated two Government-wide plans—one a service benefit plan, the other an indemnity benefit plan. Also, it was expected that there would be per- haps half, a dozen employee organization plans and a similar number of comprehensive plans, about 15 in all. It has developed under the law, however, that the Commission has 'approved more than twice this number; of the existing 38 plans, 14 are employee organization plans.

In 1959, in redrafting the bill which became the health benefits law,

your full committee realized the wisdom of limiting the number of union-sponsored plans and very carefully did so. To recognize the real contribution made by the organizations which had arranged

group health insurance for their members, and to prevent hardship to the organizations and their members, particularly the members no longer in the Federal service, the law admitted as carriers under the

new program only those union-sponsored plans which were in opera- tion July 1, 1959. This assured that eligible plans would be restricted to a number which would not unreasonably complicate administration of the program. It assured further that participating union plans would have a minimum of 1 year's operating experience when the program went into effect in July 1960.

In addition, it amounted to a legislative expression of the policy that the health benefits law was not intended to be a recruitment aid

or incentive for employee organization membership campaigns. Later this policy was breached, despite Commission objection. The amendment enacted July 8, 1963, repealed the July 1, 1959, in-opera- tion requirement and permitted newly formed employee organization plans to apply for approval as carriers before December 31, 1963. Two new plans came into the program as a result of this amendment. As the Commission had predicted, these plans offered no unusual advantages to employees in terms of health benefits or premium levels and they attracted only relatively small enrollments. One plan with

a reported membership of 30,000, has an enrollment of 2,633. The other plan has enrolled only 1,529 out of its reported membership of 24,000.

Against this background, most, if not all, of the Commission's 'objections to the 1963 legislation are valid today and apply to this bill.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 13

Employees already have a choice of every kind of health insurance

plan. In fact, the variety of choices-38 plans with 57 options—is so

great as to be confusing to many employees. Any new plans coming

into the program simply add to the already bewildering number from

which employees may choose.

New union plans could not possibly offer more health benefits for

less money than do existing plans. Their admission to the program

would thus not serve either the interests of the Government or of the

employees.

Each new plan admitted would actually do a disservice by increasing the duties and responsibilities of employing agencies and the Commission, thus adding to the costs of program administration. This

means diverting premium income—the Government's money and the

employees' money—from use for health benefits to pay for added costs

of administration. Any proposal which raises administrative costs

with no real benefit to employees is unsound and should be rejected.

In April 1963, in reporting out H.R. 1819, the legislation which permitted admission of additional plans during 1963, your committee made

the following statement:

The committee further emphasizes that this action is not to be a precedent for

similar action in the future. The so-called open season will exist for only this

one period of time specified in the bill and organizations desiring to apply for

approval as carriers of health benefits plans will have only this one opportunity

to do so.

The Commission is in complete agreement with this position and

urges that favorable action not be taken on H.R. 5147.

I would be glad to try to answer any questions- the Members of the

Committee may have.

Mr. DANIELS. Mr. Ruddock, the previous witness, Mr. Lyons, who

represents the National Association of Government Employees, stated

that the plan that his organization proposes is rather unique. It is

one that has been submitted to his organization by one of the largest

insurance companies in the world, or the largest insurance company

in the world, the Metropolitan Life Insurance Co., and that it contains features which give greater benefits to the employees at a much

lesser cost; a dollar cheaper a quarter. Do you have any comment

about that statement?

Mr. RIJDDOCS. Mr. Chairman, I have the greatest respect for Mr.

Lyons. I have the greatest respect for the Metropolitan Life Insurance Co. I do not, however, accept as valid any contention that any

new plan can come into this or any other program and offer more in

health benefits for the dollars that are available. I think it boils down

simply to the fact that whatever we offer in health benefits, those benefits have a price tag. The price tag is the cost of the hospitalization,

it is the cost of the doctor's services, it is the cost of the drugs, it is the

cost of the services which the employees receive. Nobody has yet devised a way to get a dollar and 10 cents worth of benefits for a dollar.

So whatever benefits we get we are going to have to pay for. We can

vary the benefits which are available to the employee in terms of the

percentage of premium dollar which goes into benefits only as we vary

the pennies that are taken out of the dollar for administrative expenses,

for taxes, and for the risk charge which is the profit of the carrier or

the insurance company. But except as we vary those features, we are
14 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

not going to be able to get more for the dollar merely by putting to- gether a different arrangement of benefits.

Mr. DANIELS. Mr. Lyons testified that a short time ago he came to the Commission office and sat down with you and other members of

your staff to discuss this plan. Did you go into detail about the plan? Mr. RUDDOCK. No, sir. We were discussing the principle of the deadline for organizations filing application. I did at that time ask Mr. Lyons if, in his opinion, his organization would be able to offer its members more in health benefits for the dollars available. He ex- pressed then the opinion that they could. I disagreed with him then. I disagree with him this morning.

Mr. DANIELS. Up to this date, no plan such as has been proposed here this morning by Mr. Lyons has been submitted to your office for re- view is that correct?

Mr. RUDDOCK. That is right.

Mr. DANIELS. Would you consider this legislation necessarily de- claring an open season for Federal employees on membership in health plans?

Mr. RUDDOCK. I am not sure I understand the question, sir. If this legislation were passed, we would have until December of 1965 during which any existing employee organization could file with the Civil Service Commission an application to participate as a carrier. There is nothing in this legislation which would require the Commission to offer employees—Federal employees—an immediate opportunity to change plans or options. So the legislation does not require an open

season in that sense. We have, however, timed the beginning of par- ticipation of the two new plans which came in under the 1963 amend- ment so that as they began to participate Federal employees did have the opportunity to leave their existing Plans and join the new plans. This touches on a point which was made earlier this morning. Mem- bers for a new plan can only come from two sources. Either from new employees just being appointed to Federal service, or they have to come from employees who are currently enrolled in one of the existing plans. In the first 2 weeks in February of this year, 1965, we had an open season, an open enrollment period for Federal employees. Every employee who is eligible to participate in the health benefits program had the opportunity to change plans, if he chose to do that. Out of 2,200,000 Federal employees who are enrolled in the various plans, approximately 45,000, or just about 2 percent changed plans. Only this small number were dissatisfied with their existing plan to the point that they thought they saw a plan which would be more attrac- tive or which would be better suited to the needs of their own par- ticular family. I think any circumstance in which 98 percent of enrolled employees indicate their satisfaction with what they have by remaining with it when they have this unlimited opportunity to change speaks well for the structures of the participating plans. Mr. DANIELS. Mr. Ruddock, you stated that two new organizations

came in under the reopening of the plan in 1963 by virtue of which

one organization with a membership of 30,000 now has an enrollment of 2,633 members and under the other plan there was enrolled only 1,529 out of a reported membership of 24,000. Can you furnish this committee with the names of those two organizations?
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 15

Mr. RIIDDOCK. Yes. The first of those two organizations is the

Mail Handlers organization. They began to participate over a year

ago. Employees have had two opportunities to join the Mail Handlers

plan. They now have a total of 2,633 members. The second organization is the National Alliance of Postal Employees. They began to

participate in the spring of this year. During the first 2 weeks in

February employees had the opportunity to join that plan. One of

the requirements of employee organization is that an employee to

join the health plan must be or must become a member of the organization. So we have out of a reported membership of 24,000 in the

National Alliance of Postal Employees 1,529 who chose to join the

newly formed health plan of that organization.

Mr. DANIELS. Mr. Ruddock, I notice you were in the room while Mr.

Lyons testified. Would you care to make any further comment on his

testimony?

Mr. RITDDOCK. I would like only to repeat my own opinion, that

while I respect his sincerity I do not accept at this point an allegation

that a newly devised plan is going to offer Federal employees something better than is currently available to them.

Mr. DANIELS. We will now adjourn this hearing. The Chair will

announce when future hearings will be held.

(Whereupon, at 11 :20 a.m., the hearing adjourned subject to the

call of the Chair.)

ADDITIONAL HEALTH BENEFITS PLANS

TUESDAY, AUGUST 24, 1965

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON RETIREMENT, INSURANCE, AND HEALTH

BENEFITS OF THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE,

ashing ton, D .0 .

The subcommittee met, pursuant to notice, at 10 a.m., in room 219,

Cannon House Office Building, Hon. Dominick V. Daniels (chairman

of the subcommittee) presiding.

Mr. DANIELS. The Subcommittee on Retirement, Insurance, and

Health Benefits will come to order.

The meeting this morning is for the further consideration of H.R.

5147, a bill to amend the Federal Employees Health Benefits Act of

1959 to permit until December 31, 1965, to certain additional health

benefits plans to come within the purview of such act.

The particular purpose of this hearing is to receive testimony from

the Civil Service Commission and representatives of Government employee organizations.

Our first witness this morning is Mr. Kenneth T. Lyons, president

of the National Association of Government Employees, to supplement

his testimony given on June 8, 1965.

Mr. Lyons, you may proceed.

STATEMENT OF KENNETH T. LYONS, PRESIDENT, NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES; ACCOMPANIED BY

AMBROSE J. REDMOND, JR., REPRESENTING METROPOLITAN

LIFE INSURANCE CO.—Resumed

Mr. LYONS. Mr. Chairman and members of the subcommittee, at our

last meeting you gave us—the National Association of Government

Employees—the opportunity to go over our health benefit plan with

representatives of the U.S. Civil Service Commission. This has been

done and representatives of the Commission went over our health benefit plan, and I believe you have a copy of their report. The report of

the Commission, although it may appear to be adverse, I am quite

sure if you will review it you will find it is almost tantamount to an

endorsement of the plan itself.

I brought with me today a representative of the Metropolitan Life

Insurance Co. who has worked with our organization in preparing

this health benefit plan and, with your permission, Mr. Chairman, I

would appreciate it if he could point out to the committee the benefits

of this plan to the Federal employees.

17
18 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

Mr. DANIELS. Is there anything further you desire to state before

we call this representative of the Metropolitan Life Insurance Co.?

Mr. LYONS. Not at this time, Mr. Chairman.

Mr. DANIELS. Very well.

Mr. LYONS. Mr. Chairman, this is Mr. Ambrose J. Redmond, a rep- resentative of the Metropolitan Life Insurance Co.

Mr. DANIELS. Very well, Mr. Redmond.

Mr. REDMOND. Mr. Chairman and members of the subcommittee,.we

have for the past 21/2 years been working with the National Association of Government Employees to develop a program of insurance which

we feel is the strongest possible contract that can be offered to Federal Government employees at the least possible cost.

As Mr. Lyons mentioned, you have before you an analysis presented by the Civil Service Commission relative to the plan that we proposed,

It is our feeling, as Mr. Lyons indicated, their adverse report neverthe- less does highlight, in our mind, why we feel our plan is extremely

strong and should therefore result. in a favorable reaction to H.R. 5147 by this subcommittee.

I think it is interesting to note in relation to Mr. Ruddock's letter to

you he brought out certain points he felt important and he also pre- sented to you an analysis or a comparison of the proposed NAGE plan and two Government-wide plans, the service benefit plan and the in- demnity benefit plan.

In the third paragraph of his letter7 Mr. Ruddock points out that he does not, see any unique advantages in the proposed National Asso- ciation of Government Employees plan; he does say, however, that he thinks the NAGE plan is a strong plan. He specifically highlights four points, and I would like 'to go over them with you. Point No. 1 is one option. We are suggesting a one option plan, a

high option plan. The statistics submitted by the Civil Service Com- mission in the open season in February as well as in their latest fiscal year report indicated an overwhelming preference by Government employees for a high option plan. This is what we are offering. Beyond that, Mr. Ruddock talks about this one option plan and suggests it is a good idea, and we agree. We have analyzed it and our analysis indicates a one option plan does result in economies to the carrier and to the organization accepting the program we are offering.

Mr. Ruddock talks about prescription drugs, and in this area our plan is doing every bit as good as any other plan offered. Another area mentioned by Mr. Ruddock is dental care. He says our plan would cover in-hospital expenses for dental care and services of dentists only for repair of accidental injury to teeth. That is not true. This is highlighted on page 10 of our plan, item b. We are talk- ing about medical expenses not covered and we point out we do cover dental service except two. We do not cover expenses necessary to correct damage caused by accidental injury sustained while insured; and we do not cover hospital expenses for room and board and hospital special services while a registered bed patient. The fourth area he discusses is the area of cost. In this area he points out again the relationship of cost in our plan and the cost of the indemnity benefit plan and the service benefit plan. In both cases our plan costs less money. Mr. Ruddock says he does not feel the
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 19

difference in rates is substantial. Nevertheless, in his previous appearance he said the cost of our plan was $1 a quarter less than that under

the Government-wide service plan. Our plan is $1 per quarter less

than the Government-wide service plan and 66 cents per quarter less

than the indemnity benefit plan.

Mr. Ruddock further suggests there is no guarantee that the rates

we are quoting will hold. However, in a news release relating to the

February open season he points out in the fourth contract year fourfifths of the programs in effect have a rate increase. But that was in

the fifth contract year. We feel that the program and the rates we

are offering for these benefits are in fact adequate rates to cover this

coverage for an extended period of time, and by that I mean a number of years. True, we do not know where the costs of hospitalization are going, but we are all aware they are on the increase. It is our

feeling the rates quoted here are sufficient to handle the risks involved.

Beyond this, what about our contract? Again, if you will look at

Mr. Ruddock's comparison, he was pointing out the Civil Service

Commission found our plan was not better. I would like to point out

to you that if you analyze the comparison which they prepared—not

that we prepared—you will note in every area our plan is as good and,

specifically in the area of major medical, we have a $75 deductible

compared to the $100 deductible under the service benefit plan; that

we have an overall family deductible of $150 in a calendar year compared to the $200 family deductible. This represents a 25-percent

lower deductible and there2 again, this is for comparison.

It was not mentioned in this analysis that the maximum benefit

under our proposed contract is $40,000 compared to $30,000 under the

service-indemnity plans.

Furthermore, in the analysis of the news release relating to the

open season in February there are certain points I would like to bring

to your attention in relation to what is happening to the Federal

employees health program. This is highlighted in this Civil Service

'Commission report. First, the large majority of Federal Government employees are switching over to the high option plan. That is

what the NAGE plan is offering. Ninety percent of the Federal

Government employees are choosing the high option plan.

It mentions that four-fifths of the programs had a rate increase in

the fifth contract year. Further, 120,000 Government employees

switched at the last open season and 28,000 new employees

came in. That represents a little less than 150,000 employees, small

percentagewise but large in number.

Furthermore—and I think this is important—a smaller portion of

Government employees, 70 percent as compared with 80 percent in

previous periods, chose the Government-wide plans. The largest

increase was made 'by the employee organization plans. This would

indicate, perhaps, that the Government-wide plans are not necessarily

doing the job they were intended to do.

Beyond this, our program, we feel, is the strongest possible contract,

properly designed, properly underwritten, and effectively administered, that could be made available to any group anywhere.

I represent the Metropolitan Life Insurance Co. We are the largest

insurance company in the world. We are a mutual company. We are

the lowest net cost company in the insurance 'business. We in fact
20 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

underwrite the Federal Government life insurance program and ad- minister it quarterly. We feel that the plan we have offered, which is outlined and highlighted here, is an extremely good one. We provide broad semiprivate room and board and hospital special service benefits for 1 year. We provide surgical allowances up to $450. Our diagnos- tic X-ray and laboratory benefits cover first cost. We have no deduct i- ble. Our major medical has a $75 deductible, not $100. And we have $40,000 maximum benefits, not $30,000.

Our plan is available to all employees of the National Association

of Government Employees and covers their expenses in any hospital in the United States or outside. We are not a service benefit organi- zation. Under the service benefit contract if you go to a nonmember hospital you are limited to $12 a day. We have no such thing as non- member hospitals. We will respect any qualified hospital and consider it on that basis.

In conclusion, let me just say that Mr. Lyons' organization and myself, in discussing this with them in the development of this plan, feel that this is a contract stronger than any available to Federal Government employees. We further feel $1 a quarter is a saving, as small as it might be, it is a saving. The rates were developed by our chief actuary, who also developed the rates for the Federal Government life insurance program. We feel the rates will bold for some period of time.

I would like to request that favorable consideration be given to H.R. 5147, and I thank you very much for the opportunity to speak this morning.

Mr. DANIELS. You have indicated that the plan proposed by the Metropolitan Life Insurance Co., would save $1 per quarter?

Mr. REDMOND. $1 per quarter. $4 per year, in relation to the most popular plan, which is the service benefit plan and which has better than 50 percent of all employees.

Mr. DANIELS. Obviously you have seen the report of the U.S. Civil Service Commission because you made reference to the points they make. In point 4 of the Commission points out your plan would cost $8.75; is that for a quarter?

Mr. REDMOND. These are the monthly rates.

Mr. DANIELS. That is the rate for self, and for self and family your plan would cost $23.50. For the indemnity benefit plan the cost would be $8.97 for self, a difference of only 22 cents; and for self and family it would be $23.51, or a difference of only 1 penny.

Mr. REDMOND. That is correct. I indicated our plan was $1 per

quarter less than under the Government-wide service plan and 66

cents per quarter less than the Government-wide indemnity plan on self only. However, the largest net loss in enrollment in the open

season in February in the relation to the Civil Service Commission's

report itself was in the Government-wide indemnity plan.

Mr. DANIELS. Really, this plan that you offer is a one option plan and it is tantamount to the high-option plan under the existing plans; is that not true?

Mr. REDMOND. Yes.

Mr. DANIELS. So if an employee desires to make application for a

low-option plan he would not have that choice?
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 21

Mr. REDMOND. He would not have that choice. I might point out

almost 90 percent of all Federal Government employees have chosen

the high-option plan. And in relation to the Civil Service Commission's letter to you, in their original discussion, at the original hearing, they indicated that the idea of a one-option plan should perhaps

be considered. I think you can appreciate that, from the carrier's

point of view, the one-option plan can result in administrative savings

and this can have a direct effect on the net cost implications of the

overall contract.

Mr. DANIELS. But if a person desires a low-option plan he would

not have that choice under your program and he would have to pay a

higher premium?

Mr. REDMOND. Yes, but he would have the option of not choosing the

plan and choosing another plan.

Mr. DANIELS. Does the opportunity for an employee to choose a lowoption plan at less cost make that option or the high option less desirable?

Mr. REDMOND. It is our feeling that a choice for a high option is for

greater protection and that is the consideration rather than the factor

of cost. In relation to the cost implications, again relating to the fact

our plan is $1 per quarter less, we feel this makes it attractive enough

to those people who would perhaps choose a low-option plan.

Mr. DANIELS. Mr. Lyons, in his previous testimony before this Committee, stressed the point that his plan would offer greater • benefits

in the area of dental care and prescriptions. Do you agree that your

plan is only comparable to other plans now in existence?

Mr. REDMOND. I think it is better when you consider at what point

would the employee and his dependent be eligible for benefits for prescriptions and drugs, and it is only after a deductible has been satisfied

and our deductible is 25 percent lower than the most popular plan,

the service benefit program. This means they would get benefits

quicker under our plan m that area than under any other program, so

I would say it is definitely stronger.

Mr. DANIELS. How much is the deductible under your plan?

Mr. REDMOND. $75 in a calendar year.

Mr. DANIELS. How much is it under the indemnity plan?

Mr. REDMOND. Only $50. Again I am pointing out to you that the

indemnity plan we do not feel is as strong as that which we are offering

or that which the service benefit plan is offering when you consider

in the last enrollment the largest single loss was in the area of the

indemnity plan. This was the one plan that lost more heavily than any

other plan in effect for Government employees.

Mr. DANIELS. , I would like to direct my next question to Mr. Lyons.

Mr. Lyons, when were you first aware of the fact you had only until

December 31, 1963, to apply for participation in the health benefits

program?

Mr. LYONS. To be frank with you Mr. Chairman, I believe it was

10 days after the end of the period that we presented to the U.S. Civil

Service Commission a request to submit a plan. Unfortunately, we

were unaware of the cutoff date and I take full responsibility for that.

When we did go to the Civil Service Commission they informed us we

were exactly 10 days too late.

Mr. DANIELS. And did you submit a plan at that time?
22 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

Mr. LYONS. At that time, no, we did not, Mr. Chairman, because, as you will recall from the last hearing before you, the Commission did not indicate any favorable response to the acceptance or review of any further plans. They informed us that the employees already had a sufficient number of plans.

Mr. DANIELS. When you appeared here on June 8 you indicated to the committee that the plan you proposed was unique and that it would be better than any plan now available. Will you state to the committee in what manner this plan is unique and far superior to any existing plan?

Mr. LYONS. Mr. Chairman, in going over the various plans that were available to Federal employees we broke down practically every plan and we met with various insurance companies and in going over the plans with the Metropolitan Life Insurance Co. we felt that this one-option plan would be the best. For one thing, it would cost the employees less money and we feel, as indicated by the testimony of Mr. Redmond, there are far greater benefits under this plan than under any plan presently available.

Mr. DANIELS. Then your indication that your plan is unique is based on the fact it is a one-option plan?

Mr. LYONS. That is one distinguishable feature.

Mr. DANIELS. Why does that make it better?

Mr. LYONS. I think even the Civil Service Commission will agree the cost to administer it would be less, and I am of the opinion that eventually they, too, will make the same suggestion; whether our plan is approved by this committee or not, I think the Commission will make that suggestion in the future.

Mr. DANIELS. If it would be cheaper to administer a one-option plan rather than a two-option plan, would not that be sufficient reason to be- lieve that a one-option plan would be better?

Mr. LYONS. That is a possibility, yes.

Mr. DANIELS. Any questions?

Mr. BUCHANAN. When you say cheaper to administer do you mean cheaper for the Civil Service Commission—for the Government? Mr. LYONS. No I think for the insurance company involved it would be less to administer and, therefore, I think they would be more inclined to hold their rate level.

Mr. BUCHANAN. Would this result in a substantially lower rate? Mr. LYONS. It would eventually, I think.

Mr. BUCHANAN. Thank you.

Mr. DANIELS. Thank you very much, gentlemen.

Mr. LYONS. Thank you.

(The following papers were submitted for the record by the wit- nesses:)

PROPOSED PLAN OF HEALTH BENEFITS FOR THE MEMBERS OF THE NATIONAL ASSOCIA- TION OF GOVERNMENT EMPLOYEES, JUNE 1965

( Submitted by Ambrose J. Redmond, Jr., supervisor, Metropolitan Life

Insurance 00.)

ADVANTAGES OP THE NAGE PLAN

provide 

A. The 

a 

NAGE 

maximum 

plan is a broad comprehensive major medical plan intended to

lowest 

protection for NAGE employees and their families at the possible net cost.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 23

B. The NAGE plan is unique in that it offers only one high option plan. This

has a threefold purpose:

1. The plan competes more than favorably with all high option plans available

to all Government employees.

2. The one-option approach reduces substantially the cost of administration

to NAGE and the carrier involved.

3. The Government employees have shown an overwhelming preference (90 to

10) for the high option plans.

C. The specific plan benefits have the advantage of providing:

1. Broad semiprivate room and board and hospital special service benefits for

365 days for any hospital confinement.

2. Surgical allowances up to $450 under the basic benefits with supplemental

surgical benefits on a reasonable and customary fee basis (no schedule) .

3. Attending physicians' allowances of $10 for the first day and $5 for the next

364 days which are more than adequate in relation to current charges.

4. Diagnostic X-ray and laboratory benefits providing wide coverage, when

such services are received other than on an inpatient basis with no deductible.

5. A nominal deductible of $75 per individual with a $150 maximum family

deductible in a calendar year. This deductible is substantially less than the most

popular plan available to Government employees.

6. A $40,000 reinstatable major medical maximum which is more than liberal

in relation to the popular Government-wide plans.

7. A very ample maternity benefit for normal delivery while providing full

regular plan benefits for cesarean or complications.

8. A cost which is approximately $1 per quarter less than that under the Government-wide service plan.

Gross monthly rates: Self only, $8.75; self and family, $23.50.

PROPOSED SCHEDULE OF INSURANCE FOR EMPLOYEES AND DEPENDENTS (AS DEFINED

ON P. 13)

Hospital room and beard: Semiprivate fox 365 days.

Hospital special services: Unlimited amount.

Doctors inhospital visits: $10 for first day, $5 for next 364 days.

Surgical operation: Up to $450 depending upon type of operation.

Diagnostic X-ray and laboratory examinations: Up to $50 depending upon type

of service.

Medical expense insurance—extended coverage: $75 deductible ($150 family

maximum). Plan pays 80 percent of remaining covered expenses. Up to $20,000

for a calendar year. Up to $40,000 for a lifetime.

Maternity benefits: Normal delivery, up to $250.

Gross monthly rates: Self, $8.75; self and family, $23.50.

HOSPITAL EXPENSE INSURANCE (NONOCCUPATIONAL)

Payable for hospital confinement as a result of injuries or sicknesses.

Payable toward charges for room and board up to the semiprivate room rate tor

each day of hospital confinement. For any one period of confinement whether

from one or more causes, or successive periods of confinement from the same or

related cause (s) , maximum payment 365 days.

Additional payments toward charges for anesthetics and their administration

and other hospital special services (except those of doctors, special nurses, and

services and supplies not related to medical care and treatment) received during

period for which room and board benefits are paid.

Payable for different periods of hospital confinement commencing while insured

and resulting from unrelated causes.

No minimum hours of confinement required for emergency care not later than

day following an injury or if a surgical operation is performed in the hospital.

Benefits are payable for all other confinements lasting more than 18 hours.

These benefits are not payable for pregnancy or resulting childbirth or

complications; nor fox room and board accommodations or any other services

which are or may be obtained without cost in accordance with laws or regulations of any government. If a charge is made which the confined person is legally

required to pay, any benefits under the plan's provisions will take into account

only such charge. "Any government" includes the Federal, State, provincial, or

local government, or any political subdivision, of the United States or Canada.
24 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

IN-HOSPITAL PHYSICIANS ATTENDANCE INSURANCE (NONOCCT.IPA.TIONAL)

Payable toward doctor's fees for visits during hospitalization as a result of injuries or sicknesses.

Payable only for visits made during days for which hospital room and board benefits are paid.

Payable up to an amount equal to $51 times the number of days of confinement for which room and board benefits are paid to a maximum of $1,830 if no surgical operation is performed.

If a surgical operation is performed, maximum payment will be $51 times the number of days of confinement for which room and board benefits are paid pre- ceding the operation up to a total of $1,830.

Benefits are not payable if confinement is for pregnancy or resulting child- birth or complications; nor for visits which are or may be made without cost in accordance with laws or regulations of any government. If a charge is made which the confined person is legally required to pay, any benefits under the plan's provisions will take into account only such charge. "Any government" includes the Federal, State, Provincial, or local government, or any political sub- division, of the United States or Canada.

SURGICAL OPERATION INSURANCE (NONOCCUPATIONAL)

Payable for operations—regardless where performed—as a result of injuries or sicknesses.

Up to 150 percent of the amounts shown in the schedule payable toward sur- geon's fees; $450 maximum payment during a period of disability whether from one or more causes, or during successive periods of disability from the same or related causes.

No limit to the number of times benefits are payable for operations performed during successive periods of disability resulting from unrelated causes and occurring while employee is insured.

These benefits are not payable for pregnancy or resulting childbirth or com- plications; nor for surgical operations which are or may be performed without cost in accordance with laws or regulations of any government. If a charge is made which the person is legally required to pay, any benefits under the plan's provisions will take into account only such charge. "Any government" includes the Federal, State, Provincial, or local government, or any political subdivision, of the United States or Canada.

SCHEDULE OF SURGICAL OPERATIONS

through 

Two or more procedures performed during the course of a single operation

operative 

the same incision, or in the same natural body orifice, or in the same

equal 

field are to be considered as one procedure with a maximum payment

procedures 

to the maximum payment specified in the schedule for that one of Such

specifies 

for which the largest amount is payable, except where the schedule otherwise.

surgical operation 

General: Maximum

payment,

Accidental lacerations of skin structures, suture of face, neck, geni- talia, and hands, all lacerations combined:

1 inch or less 

More than 1 inch up to 2 inches 

Other body areas, all lacerations combined:

$15. 00

20.00

1 inch or less 

More 7.50 than 1 inch up to 2 inches 

Bronchoscopy 10.00

:

Diagnostic, with or without biopsy 45.00 Operative removal of tumors or foreign bodies 

Cystoscopy 75.00

:

Diagnostic, with or without biopsy:

Withdut ureteral catheterization 25.00 With ureteral catheterization 35.00 1 Maximum payment will be 150 percent of the amounts shown.

1 $10 for the first day.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 25

Surgical operation-Continued

General-Continued

Cystoscopy-Continued Maximum

Operative: payment

Transurethral resection of bladder neck or bladder tumors

or crushing of bladder stones $110. 00

Fulguration of bladder tumors or removal of bladder stones

without crushing 50.00

Cyst, excision of:

Pilonidal cyst 90.00

Sebaceous cyst 15. 00

Mammary glands:

Excision of benign tumors or cysts:

Unilateral 50. 00

Bilateral 75. 00

Mastectomy:

Total 100.00

Radical, with axillary anode dissection 200. 00

Skin abscess, superficial, incision and drainage:

One 7.50

Each additional 4. 00

Maximum 25.00

Thyroid gland:

Thyroidectomy, total or subtotal 175. 00

Thyroid lobectomy, hemithyroidectomy 150. 00

Excision of thyroid adenoma or cyst 125. 00

Tumors, benign, Superficial :

Excision from face, neck, genitalia, hands, or feet:

One 20.00

Each additional 10.00

Excision from other body areas:

One 10.00

Each additional 5. 00

Electrocauterization or fulguration, with or without curettage,

per day of such treatment:

One tumor, except plantar wart 5. 00

More than one tumor, or each plantar wart 10. 00

Musculoskeletal :

Amputations:

Finger, thumb, or toe (one or more phalanges) :

One 25. 00

Each additional 15. 00

Thigh, through femur 150.00

Closed Open

Dislocations: reduction reduction

Elbow $40. 00 $100. 00

Shoulder 35.00 125. 00

Fractures, simple or compounded:

Ankle:

Malleolus of tibia or fibula 50. 00 100. 00

Rimalleolar (Potts) 60. 00 150. 00

Clavicle 30.00 100.00

Elbow, distal end of humerus or proximal end of

radius or ulna, one or more bones 60.00 150.00

Femur (except knee) 120.00 240. 00

Fibula (except ankle) 40. 00 80. 00

Finger, thumb, or toe:

One 20.00 40.00

Each additional 10.00 20.00

Humerus ( except elbow)75.00 150.00

Knee, distal end of femur or proximal end of tibia,

one or both bones 75.00 150.00

Twins, including Colles' (except elbow) 50.00 100.00

Radius and ulna (except elbow) 70.00 140.00

Maximum payment will be 150 percent of the amounts shown.
26 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

Surgical operation-Continued

Musculoskeletal-Continued 

Fractures, Closed Open simple or compounded-Continued reduction reduction Ribs, one or more 

Tibia (except ankle and knee) 

Tibia and fibula (except ankle)

Ulna (except elbow) 

$20.00

75. 00 $150. 00

100.00 200.00

40.00 100.00 Closed reduction is correction of displacement by manipulation without incision including application of casts or traction and including debridement at fracture site. For closed re- duction of a fracture with skeletal pinning and external fixation, the maximum amount is 11/2 times the maximum amolunt for closed reduction.

Open reduction Ls correction of displacement

by manipulation and incision with or without skeletal traction or metallic fixation. Intervertebral Maximum disk, excision of: payment Without spinal fusion 

With 225. 00 spinal fusion 

Tendons 300.00 -Excision of ganglion 40.00 Suture of tendon laceration:

One tendon 50.00 Each additional tendon 

Eye, 25.00 ear, nose, and throat:

Chalazion, excision or curettage:

Single 15.00 Multiple 25.00 Extraction of lens for cataract 200. 00 Strabismus, operation for:

1 eye 135. 00 Both eyes 175.00 Each additional operation, one or both eyes 75. 00 Fenestration operation for otosclerosis 300. 00 Myringotomy or tympanotomy 

Nasal polyps, removal of 1 or more, 1 or more stages: Unilateral 

Bilateral 

Nasal septum, submucous resection of Tonsillectomy with or without adenoidectomy 

Heart and blood vessels:

15.00

15. 00

25. 00

100. 00

40.00

Commissurotomy or valvotomy 300.00 Saphenous vein, long, ligation with or without retrograde injection

or distal interruptions:

Without stripping:

Unilateral 75.00 Bilateral .110.00 With stripping on same or successive days:

Unilateral 100.00 Bilateral 

Chest: 150.00

Lobectomy :

Total, subtotal, or segmental 300.00 Wedge resection 225.00 Thoracotomy, for drainage of empyema :

Without rib resection 50.00 With rib resection 

Abdomen: 100.00

Appendectomy, with or without incision and drainage of appendiceal abscess 110.00 Cholecystectomy, with or without exploration of common duct 175.00 Colon resection:

Partial, with or without colostomy 250.00 Total 300.00

Maximum payment will be 150 percent of the amounts shown.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 27

Surgical operation-Continued

Abdomen-Continued maxim am

Gastrectomy, with or without vagotomy : payment 1

Partial $250. 00

Total 300. 00

Herniotomy, inguinal or femoral:

Single 110. 00

Bilateral 150. 04

Proctology and urology:

Fistulectomy or fistulotomy :

Single 65. 00

Multiple 90. 00

Fistulectomy or fistulotomy (single or multiple) , with incision and

drainage of ischiorectal abscess 90.00

Hemorrhoidectomy, by excision, internal only or both internal and

external:

Without fistulectomy 80.00

With fistulectomy 100.00

Hydrocele or varicocele, excision of:

Unilateral 75. 00

Bilateral 100. 00

Ischiorectal abscess, incision and drainage 35. 00

Nephrectomy or hemirephrectomy 225.00

Proctectomy, complete, combined abdominal-perineal procedure, one

or more stages 300. 00

Proctectomy :

Suprapubic, 1 or more stages 250.00

Transurethral, 1 or more stages including control of postoperative

bleeding 200.00

Gynecology:

Conization of cervix 30.00

Cystocele, repair of 100. 00

Rectocele, repair of 75. 00

Cystocele and rectocele, repair of 140. 00

Dilation of cervix and curettage of uterus, nonpuerperal, with or

without electrocauterization, conization, or polypectomy 40. 00

Electrocauterization of cervix, nonpuerperal 15. 00

Hysterectomy, with or without dilation and curettage:

Complete (panhysterectomy), with or without adnexa 180. 00

Subtotal or supracervical, with or without adnexa 150. 00

Radical, for malignancy 250. 00

Salpingectomy or oophorectomy, or both, unilateral or bilateral 125. 00

Uterus, suspension of, any type, with or without dilation and curettage or surgery on tubes or ovaries 125. 00

Neurosurgery:

Craniotomy (other than trephination only) :

Decompression, unilateral or bilateral 175. 00

Excision of brain cyst, neoplasm, or abscess 300.00

Lumbar symphathectomy :

Unilateral 150. 00

Bilateral 225. 00

Trephination:

Drainage of subdural, epidural, or brain abscess or heniatoina :

Initial trephination 150. 00

Subsequent needling 30.00

Pneumoventriculography 100.00

1 Maximum payment will be 150 percent of the amounts shown.
28 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

INSURANCE FOR DIAGNOSTIC X-RAY AND LABORATORY EXAMINATIONS

(NONOCCUPATIONAL)

injuries 

Payable 

or 

for X-ray and laboratory examinations made for the diagnosis of sicknesses.

mum 

Payable toward fees for the following examinations up to the indicated maxi- amounts:

X-ray examinations: 

Abdominal Maximum region: payment Gastro-intestinal series—barium meal $25. 00 Colon—barium enema 15.00 Gall bladder, dye method 15.00 Flat film 10.00 Kidney, ureter or bladder:

Dye method, intravenous 10. 00 Dye method, retrograde pyelogram 20. 00 Arm or leg 5.00 Chest region:

Heart and lungs 10.00 Stereoscopic 

Head, 15. 00

Pelvis, 

skull, sinuses, or lower jaw (except dental X-ray) 10. 00 hip, spine, or shoulder 10.00 Ribs, one side 10.00 Laboratory examinations:

Electrocardiogram:

With interpretation 10.00 Without interpretation 7. 50 Sugar tolerance test, involving two or more blood sugar determina- tions and accompanying urinary sugar determinations 10.00 All other laboratory examinations (except urine examination) 5. 00

Fifty dollars is the maximum amount payable for all examinations from any one accident and $50 is the maximum amount payable for all examinations dur- ing any 12 consecutive months from sickness.

Not payable for examinations made during hospital confinement and for which a charge is made by the hospital, or if reimbursement for such examination is otherwise payable under the plan. Not payable for X-ray therapy treatment, urine examination, or examination in connection with dental work or treatment, or because of pregnancy or resulting childbirth or complications.

Not payable for any examinations which are or may be made without cost, in accordance with laws or regulations of any government. If a charge is made which the person is legally required to pay, any benefits under the plan's provi- sions will take into account only such charge. "Any govermnent" includes the Federal, State, Provincial, or local government, or any political subdivision, of the United States or Canada.

MEDICAL EXPENSE INSURANCE—EXTENDED COVERAGE (NONOCCUPATIONAL)

Protection against expenses of medical care—in or out of hospital—resulting from unusual or severe illnesses or injuries of long or short duration. Total disability not required.

Payable for covered medical expenses incurred during a calendar year. Benefits payable—From the total covered medical expenses, as outlined, for each calendar year is deducted—

(1) The total amount payable under the basic group plan, and (2) $752

with the plan paying 80 percent of the remaining covered medical expenses to a

maximum of—

(a) $20,000 for any one calendar year, and

(b) $40,000 for all injuries or sicknesses.

2 One hundred and fifty dollars family maximum (for all members of the family). Any part, or all, of the initial amount of expenses for a calendar year arising from covered medical expenses incurred during the last 3 months of that year will be used to reduce the initial amount for the next calendar year.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 29

COVERED MEDICAL EXPENSES

Any reasonable, necessary, and customary charges for the following medical

services performed or prescribed by a licensed physician or surgeon:

Hospital services, other than room and board, required for medical or

surgical care or treatment.

Services of doctors and surgeons, including specialists.

Services of registered graduate nurses except nurse residing in employee's

home or who is a member of the immediate family.

Local professional ambulance service.

Oxygen and anesthetics, and their administration.

X-rays and other diagnostic laboratory procedures.

X-ray or radium treatments.

Blood transfusions, including cost of blood.

Drugs and medicines which may be purchased only upon a doctor's prescription.

Rental of iron lung or other durable equipment for therapeutic use.

Artificial limbs or other prosthetic appliances, except replacement.

MEDICAL EXPENSES NOT COVERED

Dental service except—

( a) Expenses necessary to correct damage caused by accidental injury

sustained while insured, and

( b) Hospital expenses for room and board and hospital special services

while a registered bed patient.

Surgery or treatment for cosmetic purposes except where necessary to correct

damage caused by accidental injury sustained while insured.

Eye glasses, hearing aids, and examinations for prescription or fitting.

Routine health checkups.

Expenses from injury or sickness caused by an act of war.

Services which are or may be received without cost in accordance with laws

or regulations of any government. If a charge is made which the person is

legally required to pay, any benefits under the plan's provisions will take into

account only such charge. "Any government" includes the Federal, State, provincial, or local government, or any political subdivision, of the United States or

Canada.

Services for which the person receiving them is not required to make payment,

or where payment is received as the result of legal action or settlement.

Also, expenses incurred before the effective date of the individual's insurance.

Maternity: Expenses incurred because of pregnancy (resulting childbirth, miscarriage, Caesarean section, prenatal or postnatal care) are not covered. However, any additional medical expenses incurred because of severe complications

will not 'be excluded if they otherwise qualify as covered medical expenses.

OTHER PROVISIONS

Reinstatement—If at least $1,000 benefits have been paid, the amount will

not be included in determining the $40,000 maximum on the covered person on

and after the date Metropolitan accepts as satisfactory, evidence submitted of

insurability of that person.

The plan will pay benefits for mental or nervous conditions. However, for

psychiatric treatments or consultations received while the employee is not

totally disabled so as to be prevented from working, or while a covered dependent is not confined in a hospital or similar institution, the plan will pay 50

percent of covered medical expenses to a maximum of $500 in a calendar year.

Benefits will be determined separately for each person. However, if two or

more covered members of a family should incur medical expenses as a result of

3"Doctor" is a duly licensed doctor of medicine (M.D.) or a duly licensed doctor of

osteopathy (D.0.). A duly licensed dentist or a duly licensed podiatrist (chiropodist)

when acting within the scope of his license, is considered a "doctor." Types of practitioners not specifically mentioned above are not considered "doctors" for the purposes of

this plan.
30 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

the same accident, the deductible amount will be applied only once against such covered expenses during the calendar year in which the accident occurs, re- gardless of the number of family members injured.

MATERNITY BENEFITS

Payable for childbirth or complications

Normal delivery: Amount of benefits

For hospital up to $150.

For doctor up to $100.

Cesarean section or operation for ectopic pregnancy:

For hospital—same benefits as for nonmaternity confinement.

For doctor up to $150.

Miscarriage:

For hospital up to $150.

For doctor up to $50.

Payable for pregnancies existing on the effective date of the covered in- dividual's insurance, but not for pregnancies existing at termination of insurance.

DEPENDENTS

Dependents include—

(1) An employees' spouse.

(2) Any unmarried child under 21 years of age of a male employee, of

a widowed female employee or of a female employee whose husband is not

an employee.

The term "child" includes any legally adopted child, any stepchild residing in the employee's household, any child supported solely by the employee and permanently residing in the household of which the employee is the head, and any child who, regardless of age, is incapable of self-support because of mental or physical incapacity which existed prior to his reaching the

age of 21.

Dependents do not include—

(1) Any person who is eligible for insurance as an employee; and

(2) Any person who is in the armed forces of any country.

PROVISIONS APPLICABLE TO THE ENTIRE PLAN

Coordination of benefits with other benefits: Medical care benefits under

this plan will be coordinated with nonoccupational medical care protection un- der any other plan for which any employer of the enrollee or any person in his family makes either (a) contributions toward premium or ( b ) deductions

from pay or annuity. Benefits otherwise payable under this plan may be reduced so that, for expenses incurred in each calendar year while coverage is pro- vided under this plan, the total benefits and service allowances under all plans will not exceed the reasonable and customary charges for items of necessary

medical expense covered under any of the plans involved.

The plan limits to $1,000 per calendar year the benefits for a person confined

to a hospital on the effective date of his or her insurance. This limitation will

no longer apply when the person has been free of confinement for 31 consecutive days.

Insurance will cease when the employee leaves his job for any reason other than retirement.

Mr. DANIELS. Our next witness is Mr. David F. Lawton, Deputy

Director of the Bureau of Retirement and Insurance, U.S. Civil

Service Commission.

Mr. Lawton.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 31

STATEMENT OF DAVID F. LAWTON, DEPUTY DIRECTOR, BUREAU

OF RETIREMENT AND INSURANCE, U.S. CIVIL SERVICE COMMISSION; ACCOMPANIED BY SOLOMON PAPPERMAN, CHIEF, CONTRACTS AND INSTRUCTIONS DIVISION, BUREAU OF RETIREMENT

AND INSURANCE

Mr. LAWTON. Mr. Chairman and members of the subcommittee, I

have with me this morning Mr. Solomon Papperman, Chief of the

Contracts and Instructions Division of the Bureau of Retirement and

Insurance.

I appreciate this opportunity to reiterate the Commission's views on

this proposal to amend the Federal Employees Health Benefits Act so

as to permit additional employee organizations to be considered for

approval as carriers of health benefit plans. The Commission's strong

opposition has been set forth in Chairman Macy's letter of June 7,

1965, to Chairman Murray of the full committee, which has been incorporated in the record, and in Mr. Ruddock's testimony before this subcommittee on June 8, 1965. I would, however, like to restate briefly

the principal reasons for the Commission's opposition.

The 38 plans with 57 options—I would like to point out here that

half of the plans have only one option—now participating in the program give employees a choice of every kind of health insurance plan.

Adding new plans will add to the Federal employees' already bewildering choice and increase the cost of administration of the program without serving either the interests of the Government or of the

employees.

Mr. Lyons submitted to us the plan his organization proposes to

sponsor. As Mr. Ruddock stated in his letter to you dated July 13,

1965, the plan is only a variation of the numerous high options of plans

already available to employees under the program; it is not unique,

nor does it provide any broader coverage than the other plans. If

the chairman agrees, it might be well to incorporate the letter in the

record at this point.

Mr. DANIELS. Without objection, the letter of July 13, 1965, will be

made a part of the record at this point.

(The letter referred to follows:)

U.S. CIVIL SERVICE COMMISSION,

BUREAU OF RETIREMENT AND INSURANCE,

Washington, D.C., July 13, 1965.

Hon. DOMINICK V. DANIELS,

Chairman, Subcommittee on Retirement, Insurance and Health Benefits, Committee on Post Office and Civil Service, House of Representatives

DEAR MR. DANIELS: After the June 8, 1965, subcommittee hearing on H.R. 5147

you suggested that Mr. Kenneth T. Lyons, president of the National Association

of Government Employees, furnish me for evaluation a copy of the health benefit

plan his organization proposes to offer to its members if H.R. 5147 is enacted.

Mr. Lyons met with me on June 9 and June 23 to discuss various aspects of the

proposed plan. On June 29 he supplied me with a copy of the final version which

he has submitted to your subcommittee.

Mr. Lyons stated in substance at the hearing that his organization did not

avail itself of the opportunity for participation provided by H.R. 1819 because

he was not satisfied with any of the plans submitted to him by various insurance

companies, and that interest in participating in the program was renewed only

after he found an underwriter with a unique plan providing broader benefits

than other plans available to his members.
32 ADDITIONAL EMPLOYEE HEALTR BENEFIT PLANS

In my considered opinion, the proposed NAGE plan is not unique, nor does it provide broader coverage than other plans participating in the Federal employees health benefits program. This is not in derogation of the plan; it does provide good coverage which meets the requirements set forth in the act for the two Government-wide plans. It is, however, only a variation of the numerous highoption plans already available under the program and I find no single feature which would distinguish it as outstanding from among the other participating plans.

A detailed comparison of plans, benefit by benefit, is not feasible or meaningful because they all vary in structure. None pay all the expenses of medical care and where one may pay more for certain kinds of expenses, it will pay less for other kinds. Coinsurance provisions are applied to some expenses, especially those for care that is often elective on the part of the enrollee, to discourage overutilization. Deductibles are used for the same purpose as well as to eliminate the administrative cost of paying small bills. Plans vary largely by the way in which these controls are applied. If a person could anticipate exactly what illnesses he and his family would have and exactly what expenses would be incurred, he could determine in advance which plan would pay the most in benefits for those particular expenses and hence which plan was "the best." This, of course, is rarely possible and comparison, therefore, has to be made on the general overall coverage of the plans. For purposes of such a comparison, I am attaching a chart briefly summarizing (and without details) the major provisions of the NAGE plan and those of the two Government-wide plans already available to all employees.

As I recall, at the hearing Mr. Lyons specifically mentioned the following

as unique or distinguishing features of his plan: it has only one option; it pays benefits for prescription drugs; it provides benefits for dental care; and it costs less than other available plans. I would like to comment briefly on these points:

1. One option: One option is not unique; although the Government-wide plans are required by the act to offer two options, three employee organization plans have only one option. If it is assumed, however, that only one option is de- sirable the answer would be to enact legislation limiting all plans to one option, not adding more plans.

2. Prescription drugs: Both the high and low options of the Government-wide plans and most of the high options of employee organization plans cover out-ofhospital prescription drugs. All plans and options cover in-hospital drugs. 3. Dental Care. The proposed NAGE plan would cover in-hospital expenses for dental care and services of dentists only for repair of accidental injury to teeth. Both Government-wide plans and most employee organization plans pro- vide the same coverage plus coverage for the excision of impacted teeth. 4. Cost. Following is a comparison of NAGE's monthly premium rates with those of the Government-wide plans:

Self Self and

family

NA GE plan 

Indemnity 8.75 23.50 benefit plan 

Service 8.97 23.51 benefit plan 9.14 23.83

There is no guarantee that any of the above rates will not change but it should be recognized that both Government-wide plans have built

up prudent reserves which operate to stabilize their rates whereas there is no assurance that the rate for the NAGE plan would not have to be sharply increased in a year. In any case, the difference in rates is negligible. In fact, for a self and family enrollment, an employee's biweekly contribution for the NAGE plan would be exactly the same

as for the indemnity benefit plan and only 15 cents less than for the service benefit plan.

If I can be of further assistance to the committee, please do not hesitate to let me know.

Sincerely yours,

ANDREW E. RuppocK, Director.
ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS 33

Brief summary of major benefit provisions of NAGE plan and two Governmentwide plans (high, option)

NAGE plan Service benefit plan Indemnity benefit plan

Hospital charges:

Room and board In full for up to 365 In full for up to 365 In full for up to $1,000

days per confine- days per confine- per calendar year.

ment. ment. (Excess covered by

major medical.)

Other hospital expenses do do Covered by major

medical.

I >octors' charges:

Surgical Per fee schedule, $450

maximum.

Per fee schedule,

ranges from $300 to

Do.

$700, depending on

area.'

In-hospital visits $10 first day; $5 next

364 days.

Per fee schedule varying with area, averaging about $15 first

day, $10 second day,

$5 thereafter.'

Do.

Home and office visits_ Covered by major

medical.

Covered by major

medical.

Do.

Diagnostic X-ray and lab exams_ $50 a year per fee

schedule. (excess

covered by major

medical.)

Covered by major

medical ($20 deductible).

Dt,.

Major medical (covers above ex- 80 percent of expenses 80 percent of expenses 80 percent of expenses

penses not paid for by benefits

shown above, plus other medical expenses, e.g., drugs and

medicines, special nurses, etc.).

after $75 deductible. after $100 deducttible.

after $50 deductible.

Maternity expenses (normal Hospital, $1.50; Hospital, in full; Same as illness or

delivery). doctor, $100. doctor, fee schedule

from $87.50 to $175

depending on area.'

injury.

I Participating doctors accept fee schedule allowance as payment for persons under stipulated income

ceiling which vary by area.

Mr. LAWTON. A new employee organization plan cannot offer more

benefits for less money. We know of no magic by which a plan can pay

out more than it takes in and remain solvent. The employee organization plans under the program as well as the two Government-wide

plans are all experience rated, which means that after provision for administrative expenses, taxes, and risk charges, that is, profit of the

underwriter, all money paid to them in premiums is earmarked for the

payment of benefits. Whatever benefits a new plan provides are going

to have to be paid for. Except to the extent that a plan can save money

on its retention, that is, the administrative charges, taxes, and risk

charge, no arrangement of benefits is going to give its members any

more for their premium dollars.

The plans already available give good, broad coverage of hospital

and medical expenses, as does the proposed NAGE plan, but none of

them, for good reason, cover all expenses. Except in the rare case

where an employee can anticipate his or his family's illnesses and

know exactly what expenses he will have, no employee can predict

which variation of these broad coverage plans will be best for him.

I again urge in the interests of the Government and the employees

that favorable action not be taken on H.R. 5147. I will be glad to answer any questions.

Mr. DANIELS. Mr. Lawton, in 1963 the full committee reported favorably on the legislation which became Public Law 88-59. At that

time the Commission opposed the reopening for new plans. Is the situation any different with respect to the bill before us, H.R. 5147?
34 ADDITIONAL EMPLOYEE HEALTH BENEFIT PLANS

Mr. LAWTON. I think it is, Mr. Chairman. The Commission did

oppose Public Law 88-59 for the same reason it opposes H.R. 5147. There is even less basis now than there was then for a reopening. At the time this committee approved Public Law 88-59 it stated the program was not intended to be a recruitment aid to organizations but it

was not the committee's purpose to place one organization in unfair competition with another. It was to be a one-time opportunity.

I understand from Mr. Lyons' testimony that his objective in at- tempting to get a reopening now is not because of loss of membersh, but because they feel they can offer a better health benefit plan tha

any available now.

Mr. DANIELS. When was Public Law 88-59 signed by the President

and when did it become effective?

Mr. LAWTON. As I recall, it was signed by the President on July 8,

1963, and it became effective at once. There was a deadline date in

the law by which anyone who wished to come in had to file his appli- cation by December 31, 1963.

Mr. DANIELS. Was any notice given of that?

Mr. LAWTON. Yes. We issued a press release that got wide coverage. We also put a notice in the Federal Register.

Mr. DANIELS. And as a result, how many organizations made appli- cation for participation in the plan?

Mr. LAWTON. Altogether four, one of which—the Postal Mail Handlers—was able to participate in the 1963 open season. The others

merely filed their intention to submit a plan to us later on. Two of

them did, the National Postal Alliance and—what was the name of the

other one?

Mr. PAPPERMAN. The National Association of Postal Supervisors.

They did not come in. The National Association of Internal Revenue

Employees filed an application but did not pursue it.

Mr. LAWTON. There was just one other?

Mr. PAPPERMAN. Two, the Postal Mail Handlers and the National

Alliance of Postal Employees. They are both now participating in

the program.

Mr. DANIELS. How many organizations participate now?

Mr. PAPPERMAN. Thirteen.

Mr. DANIELS. In your opening statement, Mr. Lawton, you say there

are 38 plans with 57 options now participating in the program.

Mr. LAWTON. Yes.

Mr. DANIELS. Were they offered by the 13 organizations

Mr. LAWTON. No. The 13 are included in the 38. Two of the others

are Government-wide and others were local, with membership clustered around metropolitan centers.

Mr. DANIELS. Any questions?

Thank you, gentlemen. That concludes the hearing..

(Thereupon, the subcommittee, August 24, 1965, adjourned.)

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