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In working out and administering this plan we have had excellent cooperation from the insurer; administration costs and retentions have been kept to a minimum, thus making the greatest possible proportion of premiums available for benefit payments; and every effort has been made to strike a reasonable balance between benefits and costs so as to provide as nearly adequate benefits as could be obtained at premium rates that retired employees might be expected to be able to afford. The plan is, so far as I know, the largest group plan for retired employees in the country. With all of these favorable circumstances, this plan may well be regarded as representing the best arrangements now attainable for retired employees who are severed for insurance purposes upon retirement from the group comprising active employees.

Nevertheless, our experience indicates that the best attainable under these circumstances is not enough. There is much to be said for the proposition that retired employees should continue for insurance purposes to be a part of the group in which they participated during active service and that employers should continue to carry responsibility for the protection of the entire group. Perhaps such a solution if sufficiently generally adopted and if group insurance based on employment becomes sufficiently universal might be considered preferable to the assumption of responsibility by the Government. But our experience indicates that such a solution is not foreseeable.

It is clear from our experience that the adverse circumstances inherent in the type of arrangement we now have make it impossible to achieve really satisfactory results by this approach. The administrative costs involved in handling indi. vidual applications, checking eligibility for participation and receiving and properly crediting monthly premium payments necessarily absorbs a disproportionate share of the premium. Individual choice as to participation results in coverage of a disproportionately small segment of the group eligible to participate and must involve a considerable degree of adverse selection.

The present premium rates under our policy for retired employees are $4.48 per month for employee benefits only, $4.60 per month for dependents only, and $9.08 per month for employee and dependents benefits. The benefits include hospital room and board charges up to $8 per day but not to exceed $480 for each period of disability. Hospital extras are covered to a maximum of $80 for each period of disability and an ambulance charge up to $25 is allowed. Surgical expenses are covered under a schedule with $150 maximum. We believe that it is readily apparent from an examination of these premium rates and benefit limitations that some better method of providing hospital, surgical, and medical benefits for retired employees must be found.

It was estimated in 1959 that during the approximately 412 years that our plans had been in effect probably about 130,000 nonoperating employees had retired and that about 119,000 of these were still living. About 40 percent of our employment is on hospital association roads and employees retiring from service on those roads would, as above indicated, generally continue hospital association protection with respect to employee benefits and would be eligible to participate in the Travelers plan only for dependents' benefit insurance. It may thus be calculated 60 percent of the 119,000 surviving retired employees or 70,400 have been eligible for insurance for employee benefits. As of June last year 17,753 were actually participating for employee benefits ; 15,520 had dependents benefit insurance but this latter figure would include employees from hospital association roads eligible for dependents benefit insurance only and must therefore be related to the 119,000 figure rather than to the 70,400.

It cannot be assumed, of course, that the difference between the 70,400 who have been eligible and the 17,753 participating for employee benefits are without any hospital, surgical, or medical insurance. Some, we have no way of knowing how many, undoubtedly carry other forms of protection by reason of continuation or conversion of other insurance carried while in active service or policies that have been taken out upon or during retirement or various other possible types of protection. The figures do indicate, however, that the degree of participation in relation to the size of the total group is too low to achieve results that can be regarded as a real solution to the problem. Perhaps there is a very high degree of adverse selection. Perhaps the nonparticipating eligibles do not feel that their income is sufficient to afford any insurance payments and that they must, therefore, run the risk of incurring uninsured expenses and hope that this does not happen. Or perhaps they consider the benefits available relative to the premium rates inadequate to give them their money's worth, Whatever the reason, it is apparent that intensive efforts under favorable circum

stances have not succeeded in developing adequate hospital, surgical, and medical insurance for retired employees by this method.

We bring this experience to your attention with the sincere hope that most thoughtful consideration will be given to what it portends not only with respect to railroad employees but also with respect to employees covered by the Social Security Act. We think it compels the conclusion that there is a genuine need to include medical insurance benefits in our social insurance structure.



Washington, D.C., June 30, 1960. Hon. HARRY FLOOD BYRD, Senate Office Building, Washington, D.C.

DEAR SENATOR BYRD: Enclosed is a copy of the letter to the Vice President and Senate majority and minority leaders from a distinguished group of persons long identified with our social insurance system. This letter urges that H.R. 12580, the social security bill, be amended to provide contributory social insurance which would pay the cost of hospital and related services for our older citizens. It is our earnest hope that you will support such an amendment. Sincerely yours,




Washington, D.C., June 30, 1960. Hon. RICHARD M. NIXON, Vice President of the United States, The Capitol, Washington, D.O. Hon. LYNDON B. JOHNSON, Majority Leader, Senate of the United States, Washington, D.O. Hon. EVERETT MCK. DIRKSEN, Majority Leader, Senate of the United States, Washington, D.C.

The undersigned who have long been identified with the American system of social security, having served the Government in administrative or advisory capacities, urge the incorporation in social security legislation now before the Senate of a program of contributory social insurance through which our citizens can pay for the cost of the hospital and related services they may need in old age. An extension of Federal old-age, survivors, and disability insurance to include hospital coverage would provide a systematic way of financing serious illness and prevent the exhaustion of the savings of aged persons and the consequent, often devastating, demands upon the resources of their children.

There is every indication of the willingness of Americans to share the cost of basic health protection for their elderly parents and later for themselves by paying for such a program through their working years. If such health protection were available for older persons, private organizations would be enabled to offer more economical protection to the younger people in our population.

We sincerely hope that the social security bill now pending before the Senate will be amended to provide for hospital and related services to older people through the social insurance system. Sincerely yours,

(List of signators attached.)


Mr. Arthur Altmeyer, Madison, Wis., former Chairman of Social Security Board

and Commissioner for Social Security. Mr. Joseph P. Anderson, executive director, National Association of Social Work

ers, member, Advisory Council, 1961 White House Conference on Aging.

Dr. Eveline M. Burns, professor of social work, New York School of Social Work,

Columbia University, former consultant to Committee on Economic Security and Social Security Board, and member of advisory committee to Secretary

of Health, Education, and Welfare (1954). Mr. Wilbur J. Cohen, professor, public welfare administration, School of Social

Work, University of Michigan, member of the staff of the President's Commit

tee on Economic Security (1934–35). Mr. Nelson Cruikshank, AFL-CIO, Washington, D.C., member, Advisory Council

on Social Security (1948-49) and Advisory Council on Social Security Financ

ing (1958-59). Miss Loula Dunn, Chicago, Ill., member, 1959 Advisory Council on Public As

sistance. Mr. Fedele F. Fauri, dean, School of Social Work, University of Michigan,

former consultant on social security to House Ways and Means and Senate

Finance Committees. Miss Helen Hall, National Federation of Settlements, member, Advisory Council

of the President's Committee on Economic Security (1934-35). Mr. Seymour Harris, Littauer professor of political economy, Harvard Univer

sity, consultant to President's Council on Economic Advisers. Miss Jane M. Hoey, New York City, Director, Bureau of Public Assistance, Social

Security Administration (1936–54). Mr. Raymond W. Houston, commissioner, New York State Department of Social

Welfare, member, 1959 Advisory Council on Public Assistance. Mr. John Kidneigh, director, Graduate School of Social Work, University of

Minnesota, chairman, 1959 Advisory Council on Child Welfare Services. Mr. Murray Latimer, Washington, D.C., former Chairman, Railroad Retirement

Board. Mr. Richard A. Lester, professor of economics, Princeton University, member,

Advisory Committee to Federal Bureau of Employment Security. Mr. Norman V. Lourie, deputy secretary, Pennsylvania Department of Public

Welfare, member of ad hoc advisory committee to Department of Health, Edu

cation, and Welfare. Mr. Charles I. Schottland, dean, Florence Heller Graduate School of Social Wel

fare, Brandeis University, former Commissioner of Social Security (1954-58). Mr. Karl de Schweinitz, Washington, D.C., former consultant to Social Security

Board, and professor emeritus, University of California. Mr. Herman M. Somers, chairman, Political Science Department, Haverford

College, former consultant to Social Security Administration. Mr. John W. Tramburg, commissioner, New Jersey State Department of Institu

tions and Agencies, former Commissioner of Social Security (1953). Mr. George K. Wyman, executive director, Welfare Council of Metropolitan Los

Angeles, former Deputy Commissioner of Social Security (1959). Mr. J. Douglas Brown, dean of faculty, Princeton University, Chairman of

Advisory Co on Socia Security (1937–38) and member of Advisory

Council (1948-49). Mr. John J. Corson, McKinsey & Co., Washington, D.C., former Director, Bureau

of Old-Age and Survivors Insurance.



Washington, D.C., June 29, 1960. Hon. HARRY F. BYRD, Chairman, Senate Finance Committee, U.S. Senate.

DEAR MR. CHAIRMAN: I am writing on behalf of the city of El Centro in the hopes that your esteemed committee may be able to assist that community to solve a problem which has been called to my attention.

My colleagues on the House Ways and Means Committee have suggested that I contact you directly because the House has already enacted H.R. 12580, the Social Security Amendments of 1960.

In 1957 the city of El Centro acted in good faith in response to the desires of the employees of the municipally owned hospital to be covered by Federal social security Action was taken upon the advice of the State employees' retirement system to divorce hospital employees from that system. An account was established with the Internal Revenue Service and the city and employees have made payments which have been deposited to the proper social security accounts since that time.

Recently, the city was advised by the State employees' retirement system that due to a technicality, the account was not properly established. The hospital employees thus have been ruled to be without either State or Federal retire ment coverage since 1957.

I am enclosing a report from the Social Security Administration on the case which has just been furnished to me for your committee's consideration. Also enclosed is the draft of a proposed amendment to H.R. 12580 which has been prepared by Mr. Robert Hoyer of the Baltimore office of the Social Security Administration.

Any relief which your committee could provide to correct this unfortunate situation would win the unending gratitude of the officials of the city of El Centro and the employees of the municipal hospital, all of whom have indicated that they wish to have the Federal coverage which they had erroneously been led to believe that they enjoyed.

Also enclosed is a complete compilation of correspondence and exhibits which have been prepared for your consideration by Mr. T. Ernest Johnson, administrator of the El Centro Municipal Hospital.

Mr. Johnson has indicated his willingness to come to Washington immediately if he can be of assistance to the committee in any way. Please call on me if I can be of any assistance in any way. Sincerely yours,

D. S. SAUND, Member of Congress.


OFFICE, SOCIAL SECURITY ADMINISTRATION Notwithstanding any provision of section 218 of the Social Security Act, the agreement with the State of California heretofore entered into pursuant to such section 218 may, at any time prior to 1962, be modified pursuant to subsection (c) (4) of such section 218 so as to apply to services performed on and after July 1, 1957, for the El Centro Municipal Hospital by employees and former employees of the city of El Centro in positions which were covered by the California State employees' retirement system on June 30, 1957, and which are not covered by such system on the date of the enactment of this subsection. The preceding sentence shall not apply to services performed by any individual who on December 31, 1959, was an employee of such city and was on such date either a member of such retirement system or eligible to become a member thereof.



Washington, D.C., June 29, 1960. Hon. D. S. SAUND, House of Representatives, Washington, D.C.

DEAR MR. SAUND: This refers to your letter of May 27 concerning old-age and survivors insurance coverage for certain employees of the city of El Centro, i.e., some employees working at the El Centro Community hospital.

The information which we have indicates that the employees for whom coverage is desired were in positions under the State employees' retirement system from October 1, 1953, to July 1, 1957. Effective July 1, 1957, the positions were removed from coverage under the State system. Those employees who were members of the system prior to July 1, 1957, or who were employed prior to July 1, 1957, and who thereafter became members of the system upon completion of 6 months' service, were permitted to retain their membership in the retirement system.

In 1959 the city took action to provide coverage for employees of the city, including hospital employees, who were then members of the State employees' retirement system and who chose to be covered. This coverage was accomplished under a special provision in the Federal law which permits certain States to cover members of retirement systems on a “desire for coverage” basis. Such coverage is limited to the members who have chosen coverage and to all new members of the system. The employees of the hospital for whom coverage is now desired were not members and, therefore, they were not covered by this action.

Under the Federal law, the fact that they were in positions under the retirement system on September 1, 1954, precludes their obtaining coverage under the provisions which authorize the coverage of positions which are not under a retirement system. Prior to the 1954 amendments, the law specifically precluded the coverage of positions under a retirement system. When such coverage was made possible by the 1954 amendments, it was conditioned upon certain requirements. Having thus opened the door to the coverage of positions under a retirement system, the Congress stipulated that (with minor exceptions not applicable here) the required conditions must be met with respect to all positions which were under a retirement system as of the enactment date of the *1954 amendments, i.e., September 1, 1954.

Initially the Federal law conditioned the coverage of positions under a retirement system upon a favorable referendum among the eligible members of the system. The coverage based on such a referendum included the coverage of all positions which are or had been under the retirement system including the positions of those who were not members and also those who may have voted against coverage.

In the 1956 amendments, an alternative procedure for the coverage of retirement system people was made available to certain States. Under this provision (California was given this option in the 1957 amendments), coverage can be provided only for those members of a retirement system who desire coverage. It was under this procedure that coverage was provided for those employees of the city of El Centro who were members of the State employees' retirement system.

One of the results of the use of this special procedure is that it establishes two deemed "retirement systems” for coverage purposes. One system is composed of the members who have chosen coverage. The other system is composed of the members who did not choose coverage as well as all other positions under the system including the positions of those who are not eligible for membership. It is possible under Federal law to provide coverage for this group which would include the El Centro Hospital employees. Such coverage is possible, however, only if a referendum is held and a majority of the eligible employees vote in favor of coverage. Coverage on the basis of the members' desires is not available under these circumstances. We recognize that as a practical matter it would be unlikely that there could be a favorable referendum in respect to a group which consists (as to those eligible to vote) only of those who have not voted in favor of coverage. 194 You are, of course, aware of the fact that there is a proposed legislative change in H.R. 12580 under which a retirement system covering the positions of employees of a city-owned hospital which also covers positions of other city em‘ployees could be deemed to constitute a separate retirement system for hospital employees only for coverage purposes. It does not appear that this provision would furnish a basis for providing coverage for the employees involved for the reason that the employees of the El Centro Community Hospital for whom coverage under the State agreement is sought, are not presently members of any retirement system. We believe that this would preclude the use of this proposed legislative change in respect to employees working at the El Centro Community Hospital. If we can be of any further assistance in this matter, please let us know. Sincerely yours,

W. L. MITCHELL, Commissioner.



We wish to limit our comment to the matter contained in title VI of H.R. 12580. This would add to the Social Security Act a new "title XVI-medical services of the aged."

Our organization, the International Association of Health Underwriters, is an association which represents persons active in the merchandising of health insurance.

We cannot stress often or pointedly enough the importance of the matter contained in the above-mentioned legislation. It is indeed a broad subject. Ramifications extend into a number of areas of our social and economic life.

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