Considering the missing insurance plans (probably at least 75 cases) and the plans not reached by telephone (estimated at 89 cases), the study population of 266 plans could be expanded as follows:

If these estimates of plans in the universe which fit the operational definition of plan are reliable, the population would consist of slightly more than 60 percent of the estimated number of existing plans.

Table 2.1 describes the geographic distribution of the 266 plans (plus the 8 "found" plans) and the number of persons reported covered in each state. (The number of persons reported covered in each state represents only those plans which provided data on number of persons covered.) The plans are found in every region of the country, with a predictable concentration in the large industrial states. Three states-California, New York and Michigan-contain 75.9 percent of the total number of persons reported to be covered. Four additional states-Alaska, New Jersey, Ohio and Pennsylvania-account for 93.3 percent of the total number of covered persons.

Note. From this data the mean size of a prepaid legal service plan in the study was found to be 3,271.6 members.

Table 2.2 depicts the distribution of plans over the 7 categories of funding source or sponsorship which were defined in Chapter 1. As shown in the table a high proportion of plans in the study are funded by individual payments, as compared to plans funded through employer or employee organization sources. Table 2.2 indicates that only 19.1 percent of the plans in the study population (plus the "found" plans) are funded by employers and thus subject to recognition as qualified group legal service plans under Section 120 of the Internal Revenue Code. 36 percent of the plans in the study are subject to the Employee Retirement Income Security Act. This figure, however, should be considered with caution since it is subject to two sources of variation. First the study did not inquire whether the employer groups were private or public entities. The group of employer plans in the study population is known to include several government plans, which are not subject to ERISA. Second, some of the individual payment plans may be minimally or informally sponsored by employee associations, and, depending on the facts and circumstances of each case, might be considered a plan "estalished and maintained. . . . by an employee organization."

Since funding through an insurance company may substantially change the character of a plan, the study examined the proportion of plans in the study population that were fully or partially insured. Recognizing that insured plans were substantially underrepresented in the study population, there still were 18.2 percent fully insured plans contained in the population.

While the average plan size nationwide was found to be 3,271.6, average plan sizes vary widely when controlling for different funding sources. Table 2.4 provides a breakdown of mean plan sizes by source of funding. Evident from the table are the extreme ranges in size of plans, even within certain funding source categories. Table 2.4 attempts to correct for extremes, providing mean sizes that are only slightly positively skewed if at all. The corrected mean for all plans provided in Table 2.4 excludes 3 cases with large plan sizes. If all individual payment plans were excluded, the corrected mean for plans in funding categories 1-4, ERISA plans, would be 2,915.7.

1 In all cases, "number of persons" refers to the number of primary covered persons, and does not include spouses or dependents unless specifically so indicated.

A comparison of the number and sizes of plans, as contained in Table 2.5 below, provides a more accurate picture of the plans by source of funding. Fully 95.8 percent of the persons covered by a legal service plan are members of plans subject to ERISA. Nearly 60 percent are members of plans subject to recognition as qualified group legal service plans under Section 120. Only 4.2 percent of the persons covered by legal service plans of the type described by this study are not subject to any sort of federal regulation.

TABLE 2.5.-NUMBER AND SIZE OF PLANS, BY SOURCE OF FUNDING

1 Taken from 215 plans providing information as to both source of funding and number of persons covered. If weighted for aggregated plan clusters, total number of persons would be 707,163. The percentages would shift by half of a percent or less.

TABLE 2.6.-NUMBER AND PERCENT OF PLANS BY SIZE CATEGORY AND DATE OF ESTABLISHMENT 1

TABLE 2.6.-NUMBER AND PERCENT OF PLANS BY SIZE CATEGORY AND DATE OF

1 Table excludes 1979 and 1980 plans, survey undercounts plans established after 1978; the master plan list was compiled during the summer of 1979

Because of the large number of very small plans, plans with fewer than 500 members comprise 63.9 percent of the plans. Plans with more than 5,000 members comprise 13.5 percent. Table 2.6 shows that while the number of large plans is increasing steadily, smaller plans form an increasingly larger proportion of the plans being established. This is explained in part by the fact that the individual payment plans, which tend to have a smaller mean size than plans established by the employer, the union or both, are being vigorously marketed commercially. The size of plans also appears to be a function of the type of delivery system which is used. Plans characterized themselves as delivering services on either an open panel, closed panel or staff basis. (See Chapter One for detailed definitions.) Plans were also permitted to characterize their delivery systems as "other". It was found that this category was used by one of the larger plans whose delivery system was "mixed", that is, providing services through a variety of delivery mechanisms, depending on the concentration of members to be served.

Table 2.7 describes the number and mean size of plans by delivery system. (It is weighted for plan clusters and contains the "found" plans.) The Table reveals very large differences in average number of persons covered or plan size in open and closed panel and staff plans. As noted above, the one large plan which provides services utilizing a mixture of open, closed and staff delivery mechanisms, is included in the "other" category. If current trends continue and plans which provide services on a national basis continue to adopt the open panel delivery, there is a strong liklihood that the mean size of open panels will increase. This will especially be the case if the concentration of covered plan members is insufficient to support the establishment of closed panel or a staff delivery system.

The following section examines delivery systems in greater detail.

As the previous section demonstrated, the plans tend, by more than two to one, to deliver services on either a closed panel (private law firm) or a staff basis. Two issues have been debated involving delivery systems. One is the degree of choice provided to the client-participant in the selection of an attorney. This issue involves ethical concerns, and also affects the degree of which the private bar generally is able to participate in prepaid legal work. The second issue, also involving both ethical and economic issues, is whether plans should be structured so as to provide services primarily through salaried attorneys or through the private bar. Section 302(c)8 of the Taft-Hartley Act (Labor Management Relations Act of 1949) expressly leaves the issue of delivery system structure to the parties in collective bargaining, to select "counsel or plan of their choice".

Open panel delivery systems by definition involve the private bar. Closed panel delivery systems generally involve small numbers of private law firms. While the study did not inquire about the method of compensation of attorneys, it can be assumed that closed panel law firms were not generally compensated on a salaried basis. Table 2.8 reviews the distribution of plans among the three basic types of

delivery system, examining the percent of plans and the percent of persons covered, in the context of the two delivery system issues.

Table 2.8.—Number of plans and number of persons covered by delivery system

Table 2.9 compares the percent distribution of the three delivery systems by funding source. An examination of it reveals a somewhat mixed use of these systems. Employer-funded plans are equally divided between open panels and either closed panels or staff plans. That is, nearly one-half of the employer plans provided an unrestricted selection of attorneys. Employee association plans, regardless of whether funded by dues or from general association revenues, tended overwhelmingly to favor either closed panels or staff plans. Individual payment plans also tended to favor closed panel or staff plans over open panels by a three to one margin.

The difference in the mean number of attorneys associated with open and closed panels is predictably large. Open panels involve an average of 687 attorneys; closed panels (law firms) involve an average of 28 attorneys. Comparable figures are not available for staff plans. The open panel figure is marginally useful as a national average; however, it is extremely sensitive to state size, since bar-sponsored plans attempt to secure broad attorney participation on their state panels. Because attorney population per state differs in direct proportion to the size (population) of the state, this figure in the future could represent little more than the proportion of attorneys participating nationally on an open panel, expressed as a per state average.

2.4 Benefit structure

Chapter One describes the three kinds of benefit structures currently in use in prepaid legal service plans. Briefly, they include the Hour Bank (client-participant is entitled to "x number of hours" of service), the Schedule of Services (listing each covered legal matter in a schedule), and the Shreveport Plan (division of benefits into functional categories: advice; office work; and representation with coverage provided fully or partially.)

A fourth category, Advice/Consultation, represents a type of group advice and referral plan which provides unlimited telephone advice and consultation, plus other services.

The plans in the study population were relatively evenly spread over the four categories: