HEALTH BENEFITS HEARING BEFORE THE SUBCOMMITTEE ON COMPENSATION AND EMPLOYMENT BENEFITS OF THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP75B00380R000500200004-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 84
• Document Creation Date: December 9, 2016
• Document Release Date: August 23, 2001
• Sequence Number: 4
• Publication Date: November 9, 1973
• Content Type: REGULATION

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9
HEARING 0e171,1)
BEFORE THE trin
SUBCOMMITTEE ON 194s
COMPENSATION AND EMPLOYMENT BENEFITS
OF THE
COMMITTEE ON
POST OFFICE AND CIVIL SERVICE
UNITED STATES SENATE
NINETY-THIRD CONGRESS
FIRST SESSION
ON
H.R. 9256
AN ACT TO INCREASE THE CONTRIBUTION OF THE GOV-
ERNMENT TO THE COSTS OF HEALTH BENEFITS FOR
FEDERAL EMPLOYEES, AND FOR OTHER PURPOSES
NOVEMBER 9, 1973
Printed for the use of the
Committee on Post Office and Civil Service
U.S. GOVERNMENT PRINTING OFFICE
24-938 0 WASHINGTON : 1973
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CONIMITTEE ON POST OFFICE AND CIVIL SERVICE
GALE IV. MeGEE, Wyoming, Chairman
JENNINGS RANDOLPH, West Virginia
QUENTIN N. BURDICK, North Dakota.
ERNEST F. HOLLINGS, South Carolina
PRANK E. NIOSS, Utah
If [RAM L. TONG, Hawaii
TED STEVENS, Alaska
11 ENRY BELLMON, Oklahoma
WILLIAM B. SAXBE, Ohio
it(d) CROWLIN, iVf./ff Director
CLYDE S. DUPONT. Minority Counsel
SuBcommurrgE ON COMPENSATION AND EMPLOYMENT BENEFITS
QUENTIN N. BURDICK, North Dakota, Chairman
ERNEST F. HOLLINGS, South Carolina TED STEVENS, Alaska
FRANK E. MDSS, Utah WILLIAM B. SAXBE, Ohio
(ID
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CONTENTS
CHRONOLOGICAL ORDER OF WITNESSES
Page
Opening statement of Senator Burdick 1
Text of H.R. 9256 2
Text of S. 1908 6
Departmental report: U.S. Civil Service Commission 9
Ruddock, Hon. Andrew E., Director, Bureau on Retirement, Insurance,
and Occupational Health, U.S. Civil Service Commission 13
Sadler, Carl K., legislative director, American Federation of Government
Employees (AFL?CIO), accompanied by James Lynch, assistant legisla-
tive representative and Leonard M. Brockman, assistant director of re-
search 24
Geller, Irving, general counsel, the National Federation of Federal Em-
ployees, accompanied by Michael Forscey, legislative counsel 53
Sparks, Arthur, president, National Association of Retired Federal Em-
ployees, accompanied by Judith Park, administrative assistant 56
MeCart, John, operations director, AFL?CIO Government Employes Coun-
cil, Washington, D.0 62
Connell, Peter J., counsel, Aetna Life and Casualty; accompanied by Mal-
colm McIntyre, Jr., Government relations administrator of the Group
Division of Aetna Life and Casualty 69
SUBMISSIONS FOR THE RECORD
MR. 9256?Alternative proposals, increase in cost for nonpostal employees_ 19
Annex I?Six selected health and insurance plans for private enterprise
employees:
Aluminum Company of America 30
The Detroit Edison Co 34
General Motors Corp 37
International Business Machines Corp 40
Penn Central Co 42
Radio Corp. of America 45
Annex II?Selected list of other major American enterprises which provide
benefits at no cost to their employees 49
Appendix III?Retirement and disability program, statement of cash re-
ceipts and cash disbursements, U.S. Civil Service Commission 51
Appendix IV?Table B-10.?Number of employee annuitants and survivor
annuitants on the retirement roll as of June 30, 1972, by monthly rates
of annuity 52
Statement of Arthur L. Sparks, president, National Association of Retired
Federal Employees 58
Statement of John A. McCart, operations director, Government Employes
Council (AFL?CIO) 63
Statement of Stanley Lewis, executive vice president, National Association
of Letter Carriers 67
Statement of Peter J. Connell, Washington counsel, Aetna Life and
Casualty 74
Statement of Patrick J. Nilan, legislative director, American Postal
Workers Union (AFL?CIO) 78
Statement of James L. O'Dea, legislative counsel, National Association of
Government Employees 80
(m)
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HEALTH BENEFITS
FRIDAY, NOVEMBER 9, 1973
U.S. SENATE,
SUBCOMMITTEE ON COMPENSATION AND EMPLOYMENT
BENEFITS OF THE SENATE COMMITTEE ON
POST OFFICE AND CIVIL SERVICE,
Washington, DLI.
The subcommittee met at 10 a.m., pursuant to notice, in room 6202,
Dirksen Senate Office Building, Hon. Quentin N. Burdick (chair-
man of the subcommittee) presiding.
Also present: Senator Fong.
Staff members present: Thomas Ebzery, counsel; and Clyde Du-
Pont, minority counsel.
OPENING STATEMENT OF CHAIRMAN BURDICK
Senator BURDICK. The Subcommittee on Compensation and Em-
ployment Benefits has been convened to take testimony on H.R. 9256,
a bill to increase the Government contribution to health insurance
coverage for Federal employees.
This bill, along with its predecessors, including S. 1908, which I
introduced this year, is long overdue. Last year H.R. 12202, similar to
H.R. 9256, was approved in both Houses of Congress only to be
scuttled in conference over a provision unrelated to the basic Govern-
ment contribution to the spiraling costs of health insurance.
Today it is my desire to solicit the testimony from experts on both
sides of the issue on all provisions of this legislation. Next week, the
full committee will meet in executive session and at that time it is
hoped that many of the provsions in this bill will be approved and
sent to the Senate floor for quick approval.
While Andy steps up to the witness table, for the record, I request
that copies of H.R. 9256, S. 1908, and the agency report from the Civil
Service Commission be printed with today's colloquy.
[The aforementioned follow:]
(1)
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MD CONGRESS
ler SESSION I-I. R. 9256
21. THE SENATE OF THE UNITED STATES
SEPTEMBElil 21, 1973
Read twice and referred to the Committee on Post Office and Civil Service
AN ACT
To increase the contribution of the Government to the costs of
health boats for Federal employees, and for other purposes.
1 Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled.
3 That (a) subsections (a) and (b) of section 8906 of title
4 5, *United States Code, are amended to read as follows:
5 "(a) The Commission shall determine the average of
6 the subscription charges in effect on the beginning date of
7 each contract year with respect to self alone or self and.
8 family enrollments under this chapter, as applicable, for the
9 highest level of benefits offered by-
10 " (1) the service benefit plan;
11 "(2) the indemnity benefit plan;
II
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1 "(3) the two employee organization plans with the
2 largest number of enrollments, as determined by the
3 Commission; and
4 "(4). the two omprehensive medical plans ?With
5 the largest number of enrollments, as determined by
6 the Commission.
7 "(b) (1) Except as provided by paragraph (2) of this
8 subsection, the biweekly Government contribution for health.
9 benefits for an employee or annuitant enrolled in a health
10 benefits plan under this .chapter shall. be adjusted, beginning
11 on the first day of the first applicable pay period of each year,
12 to an amount equal to the following percentage, as applicable,
13 of the average subscription charge determinod under
14 section section (a) of this section: 55 percent for applicable pay
15 periods commencing in 1973; 60 percent for applicable pay
16 periods commencing in 1974; 65 percent for applicable pay
17 periods commencing in 1975; 70 percent for applicable pay
18 periods commencing in 1976; and 75 percent for applicable
19 pay periods commencing in 1977 and in each year thereafter.
20 "(2) The biweekly Government contribution for an em.
21 ployee or annuitant enrolled in a plan under this chapter
22 shall not exceed 75 percent of the subscription charge.".
23 (b) Section 8906 (c) of title 5, United States dodo, is
24 amended by striking out "subsections (a) and (b)" and
25 inserting "subsection (b) " in lieu thereof.
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(c) Section 8906 (g) of title 5, United States Code, is
2 amended by striking out "subsection (a) of".
3 SEC. 2. (a) Notwithstanding arty other provision of law,
4 an attnuitant, as defined under section '8901 (3) ?of title
5 United States Code, who is participating or who is eligible to
6 participate in the health benefits program offered under the
7 Retired Federal Employees Health Benefits Act (74 Stat.
8 849; Public Law 86124) , may elect, in accordance with
9 regulations prescribed by the United States Civil Service
10 Commission, to be covered under the provisions of chapter 69
n of title 5, "United States Code, in lieu of coverage under such
32 Act.
13 (b) An annuitant who elects to be covered under the
1.1 provisions of chapter 89 of title 5, United States Code, in.
15 accordance with sitbscerion (n) of this section, shall be en-
1.6 titled to the benefits under stwh chapter 89.
17 SEC. 3.. Section 8902 of title 5, United States Code,
ig is amended by adding at the end thereof the following
19 subsection:
20 "(i) Each contract under this chapter shell require
21 the ,aarrier to agree to pay for or provide a health service or
22 supply in an individual case if the Commission finds that the
23 employee, annuitant, or family member is entitled thereto
24 under the terms of the contract.".
25 SEC. 4. (a) The first section of this Act shall take effect
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1 on the first day of the. first 'applicable pay period which
2 begins on or after the thirtieth day following the date of
3, enactment.
4 (b) Section 2 shall take effect on the one hundred and
5 eightieth day following the date of enactment or on such
6 earlier date as the United States Civil Service Commission
7 may prescribe.
8 (c) ?Section 3 shall become effective with respect to any
9 contract entered into or renewed on or after the date of
10 enactment of this Act.
11 (d) The determination of the average of subs...otion.
32 charges and the adjustment of the Government contributions
19 for 1973, under section 8906 of title 5, United States Code,
14 as amended by the first section of this Act, shall take eff9et
15 OA the first day of the first npplicable .pay period which
16 begins On or after the thirtieth day following the date of
17 enactment of this Act.
Passed of
1073.
Attest: W. PAT JENNII
Clerk
24 ,31
(-7!
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6
ND CONGRESS
isT Swum
S. 1908
IN THE SENATE OF THE UNITED STATES
MAY. .:A), 1973
Mr. Mcxtrearc introduced the following bill; which was read twice and referred
to the Committee on Post Office and Civil Service
A BILL
To increase the Government's contribution to the costs of health
benefits insurance for Federal employees, and for other
purposes.
1 Be it enacted by the Senate and House of Represent a-
2 lives of the United States of America in Congress assembled,
3 That (a) section 8906 (a) of title 5, United States Code, is
4 amended by striking out "40 percent" and inserting in 'lieu
5 thereof "50 percent (in the ease of any pay period c,ommenc-
ir.g after December 31, 1973, and before January 1, 1975) ,
7 60 percent (in the case of any pay period commencing after
8 December 31, 1974, and before January 1, 1976), and 70
9 percent in the Case of any pay period commencing after
10 December 31, 1975) ,".
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1 (b) Section 8906 (b) of such title is amended to read
2 as follows:
3 " (b) In no?event shall the Government conbribution for
4 an employee or annuitant enrolled in a plan exceed-
5 " (1) in the case of any pay period commencing
6 after December 31,. 1973, and before January 1, 1975,
50 percent of the biweekly subscription charge;
8 " (2) in the case of any pay period commencing
9 after December 31, 1974, and before January 1, 1976,
10 60 percent of the biweekly subscription charge; and
11 "(3) in the case of any pay period commencing
12 after December 31, 1975, 70 percent of the subscrip-
18 tion biweekly charge."
14 SEC. 2. The amendments made by the first section of
15 this Act shall become effective at the beginning of the first
16 applicable pay period which commences after December
17 31, 1973.
18 SEC. 3. (a) Notwithstanding any other provision of
19 law., an annuitant, as defined under section 8901 (3) of title
20 5, United States Code, who is participating or who is eligible
21 to participate in the health benefits program olTered under the
22 Retired Federal Employees Health] Benefits Act (74 Stat.
28 849;, Public Law 86-724) , may elect, in accordance with
24 regulations prescribed by the unitedStates Civil Seryice
25 Commission, to be covered under the provisions of chapter
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1 89 of title 5, United States Code, in lieu of coverage under
2 such Act.
3 (b) An annuitant who elects to be covered under the
4 provisions of chapter 89 of title 5, United States Code, in
5 accordance with subsection (a) of this section, shall be en-
ti titled to benefits under such chapter 89.
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CHAIRMAN
UNITED STATES CIVIL SERVICE COMMISSION
WASHINGTON, D.C. 20415
November 8, 1973
Honorable Gale W. McGee
Chairman, Committee on Post Office
and Civil Service
United States Senate
Washington, D.C. 20510
Dear Mr. Chairman:
Although we have not received a request, we are submitting the Commission's
views on H.R. 9256, a bill to increase the contribution of Government to
the costs of health benefits for Federal employees, and for other purposes.
In brief, H.R. 9256 would amend the Federal Employees Health Benefits law
(5 U.S.C., ch. 89) to make the following changes:
Increase the Federal Government's contribution from 40
to 55 percent of the average high option premium of the
two Government-wide plans, the two largest employee
organization plans and the two largest comprehensive
medical plans participating in the Federal Employees
Health Benefits Program, with an additional increase of
5 percent per year until the Government contribution
reaches 75 percent of the average high option premium
of these selected plans; however, the Government contri-
bution would not exceed 75 percent of the employee's or
annuitant's actual subscription charge.
? Allow pre-1960 retirees under the Retired Federal
Employees Health Benefits Program (RFEHB) to change to
the Federal Employees Health Benefits Program (FEHB).
? Require a carrier participating in the Federal Employees
Health Benefits Program to agree to comply with a
Commission decision in a health benefits claims dispute.
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SECTION 1 - INCREASE IN GOVERNMENT CONTRIBUTION
In 1971, the Government's contribution was almost doubled to approximately
40 percent of premium. The Commission cannot favor a further increase in
the Government contribution at a time when the Administration is trying to
exercise financial restraint.
The Commission's opinion is that under present circumstances the current
40 percent contribution, with provision for maintaining it at that level
in future years as premiums increase, represents an equitable sharing of
the cost of health benefits with employees, especially when considered in
the light of the Government's natal expenditure for fringe benefits.
Government expenditures for Federal employee benefits compare favorably
with those of private employers although the components of the Federal
and private benefits packages vary.
Government contributions to fringe benefits, as a percentage of basic pay-
roll, will continue to rise as a result of commitments made over the past
few years. For example, the added paid holiday (Columbus Day) will contri-
bute to an increase in the percentage of Federal payroll expenditures
attributable to employee benefits. Also, the requirement that the Govern-
ment's share of the health benefits premium be maintained at approximately
40 percent will increase the percentage of payroll expenditures for health
benefits, assuming health costs continue to rise faster than payroll.
Federal sa.ary rates have been raised substantially during recent years as
a result of adoption of the comparability principle. As a result, the
purchasing power of Federal employees, including their ability to pay
higher heaLth benefits premiums, has been maintained despite inflation.
As emphasised by the President in his 1974 budget message in which Congress
was urged to join in a concerted effort to control Federal spending, there
is a current urgent need to exercise fiscal restraint. In view of this
need, the substantial cost of this proposal, and the reasons discussed above,
the Commission strongly opposes enactment of section 1 of this bill.
The following table shows what the additional cost to the Government would
be for the five fiscal years beginning July 1, 1973 if Section 1 of H.R. 9256
were in effect beginning January 1, 1974. Costs are shown on a static basis
which assumes no increase in premiums or enrollment and on a dynamic basis
which assumes increases in premiums and enrollment similar to those experi-
enced in the past. Both projections include the increased contributions for
the second half of Fiscal Year 1974.
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Estimated Government Health Benefits Contribution (in millions)
Static Dynamic
Fiscal Year
Present
Law
H.R. 9256
Increase
Present
Law
H.R. 9256
Increase
1974
$266.8
$417.6
$150.8
$266.8
$ 417.6
$150.8
1975
533.6
865.2
331.6
558.4
921.5
363.1
1976
533.6
923.9
390.3
607.9
1102.3
494.4
1977
533.6
976.6
443.0
659.1
1299.1
640.0
1978
533.6
1000.7
467.1
714.3
1480.8
766.5
SECTION 2 - RETIREES IN THE RFEHB PROGRAM
There are approximately 210,000 pre-1960 retirees enrolled in the RFEHB
Program. Some 80 percent of these retirees are over age 65 and are covered
by Medicare hospital and medical insurance. They have available excellent
coverage supplementary to the basic Medicare protection, either through
the Government-sponsored Uniform Plan or through privately sponsored plans
especially designed to supplement Medicare. The cost of many private
plans supplementary to Medicare is reasonable and the Government adds
$3.50 (self only) or $7 (self and family) to the retiree's monthly annuity
check to help pay these premiums. The same contribution is made to en-
rollees in the Uniform Plan, and they pay only an additional $ .50 (self
only) or $1 (family) a month for the supplementary protection.
Our experience is that many older people tend to buy as much insurance as
they can get and may already be overinsured. If section 2 is enacted, it
is our considered opinion that a significant number of these people would
switch to the FEHB Program in the mistaken belief that they needed the ad-
ditional protection and at considerable more needless cost to themselves,
as well as to the Government.
Because the large majority of people enrolled in the RFEHB Program already
have excellent health insurance protection at very reasonable cost, and be-
cause we believe that the option afforded by section 2 to switch to the
more costly FEHB Program would cause many of them to do so contrary to
their best interests, the Commission opposes enactment of section 2 of
H.R. 9256.
The annual Government cost for section 2 is estimated to be about $7.6 mil-
lion, assuming that only enrollees not eligible for Medicare transfer. Be-
cause this would entail a substantial additional cost to the enrollee, we
further assume that only one-fourth of those not covered by Medicare will
transfer, in which case the cost would be $1.9 million a year.
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SECTION 3 - HEALTH BENEFITS CLAIMS DISPUTES
We are not currently experiencing any problems in securing carriers' com-
pliance with Commission decisions on interpretation of contract benefit
provisions. However, the Commission has no objection to Section 3 and
would support its enactment if it were introduced as a separate bill.
The Office of Management and Budget advises that there is no objection to
the submission of this report and that enactment of H.R. 9256 would not
be in accord with the program of the President.
By direction of the Commission:
Sincerely yours,
Chairman
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Senator BURDICK. Our first witness this morning is Andrew E. Rud-
dock, Director of the Bureau on Retirement, Insurance, and Occupa-
tional Health, U.S. Civil Service Commission.
STATEMENT OF HON. ANDREW E. RUDDOCK, DIRECTOR, BUREAU
ON RETIREMENT, INSURANCE, AND OCCUPATIONAL HEALTH,
U.S. CIVIL SERVICE COMMISSION
Senator BURDICK. It is a pleasure to welcome an old friend to our
committee. Proceed in any way you wish, Andy.
Mr. RUDDOCK. Thank you, Mr. Chairman. I would like to present
my statement.
Senator BurwicK. Please proceed.
Mr. Ruonocii. I appreciate this opportunity to appear before your
subcommittee to give the Commission's views on H.R. 9256, a bill to
increase the Government contribution to the costs of health benefits
for Federal employees, and for other purposes.
Briefly, H.R. 9256 would amend the Federal employees health ben-
efits law to make these changes:
1. It would increase the Federal Government contribution from 40
to 55 percent, with an additional increase of 5 percent per year until
the government contribution reaches 75 percent of the average high
option premium of the six largest plans participating in the Federal
employees health benefits program.
2. It would allow pre-1960 retirees now in the retired Federal
employees health benefits program to change to the Federal employees
health benefits program.
3. It would require a carrier participating in the Federal employees
health benefits program to agree to comply with a Commission decision
in health benefits claims disputes.
The Commission is strongly opposed to the first two proposals relat-
ing to an increase in the government contribution and pre-1960 re-
tirees. It would support the third proposal relating to claims disputes
if it were in a separate bill.
With respect to the first proposal for an increase in the Govern-
ment's contribution, the Government now contributes 40 percent of
the average high-option premium of the two Government-wide plans,
the two largest employee organization plans, and the two largest com-
prehensive health plans participating in the Federal employees health
benefits program.
H.R. 9256 would increase the Government's contribution to 55 per-
cent of this average beginning in 1973, with an additional increase of
5 percent yearly until the contribution reaches 75 percent in 1977 and
thereafter. This bill would also extend the ceiling on the Government's
contribution for any enrollee to 75 percent of the actual subscription
charge, in contrast to the 50 percent maximum under present law.
The Commission is strongly opposed to a liberalization in the for-
mula for fixing the Government's contribution toward the cost of
health benefits as proposed by H.R. 9256. This view is based pri-
marily on our present comparative position in relation to benefits
offered by other major employers, and on the current need to exercise
fiscal restraint.
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Those in favor of an increased Government contribution frequently
cite other employers who pay a larger share of the cost of employee
health benefits as evidence in favor of their position. We agree that a
number o employers?especially in the private sector?contribute a
larger share of the cost, of health benefits than does the Federal
Government.
More significant, in our judgment, is a closer consideration of what
these same employers offer in the major parts of their benefits package
in comparison with what the Government offers its employees. It
should also he noted that by no means do all other major employers
pay a larger share of the cost of health benefits for their workers
than we do.
In a comparison based on 6 major benefits programs, for example,
we found. through a recent study of H employers who were paying a
larger share of the cost of health benefits, that only one of these em-
ployers had a more liberal package of total benefits than does the
Federal Government. This one employer was New York State which is
encountering grave financial problems in attempting to finance these
I enefits.
Copies of this study were recently sent to the Committee on Post
Office and Civil Se,rvice,. The study included consideration of retire-
ment, life insurance, health benefits, vacations, sick leave and holidays.
study showed essentially that while one employer may devote
afore of his compensation resources to a specific benefit program than
another employer, their competitive positions tend to be reversed if
you examine a. different area of compensation. In short, it is unlikely
that a single employer can be most liberal in every element of the total
compensation package.
A few specifies may help to illustrate, this point. General Motors, for
example, pays almost the entire cost of health benefits for its em-
ployees. However, it offers notably lesser benefits in respect to retire-
ment (for example, no automatic cost of living adjustments), and va-
cations (for example, 15 years' service required to earn 4 weeks'
vacation rather than the 3 years in Government), than are enjoyed
by Federal employees.
Conversely, while the Government offers vacation benefits which
are more liberal than those of most, other employers studied, it pro-
vides less compensation in the form of a contribution toward health
benefits than do the other employers studied.
This leads me to a consideration of what the increased contribution
proposed in 1-LR. 9256 would cost. Exclusive of any costs for postal
employees, the added cost to the Government would increase from
about $151 million in fiscal year 1974 to $467 million in fiscal year 1978.
This assumes an effective date of January 1, 1974, and no further in-
creases in health plan rates or enrollment. If we use a dynamic pro-
jection, assuming, increases in health plan rates and enrollment similar
to those experienced in the past., the additional cost to the Government
Won 1 d increase from about $151 million in fiscal year 1974 to $767
million in fiscal year 1978. .Both projections include the increased con-
tributions for the second half of fiscal year 1974.
In our opinion, these added costs nie. clearly incompatible with the
imperative need to exercise fiscal restraint. This was emphasized in
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the President's address to the Nation on June 13, 1973, announcing the
price freeze, as well as in his 1974 budget message urging the Con-
gress to join in a concerted effort to control Federal spending.
We have concluded, therefore, that an increase in the Government's
share of the cost of health benefits is unnecessary from the standpoint
of overall benefits comparability with other employers, and is unwar-
ranted from the standpoint of fiscal responsibility.
I would next like to consider the second proposal which would allow
pre-1960 retirees now in the retired Federal employees health benefits
program to change to the Federal employees health benefits program.
There are about 210,000 of these people. Some 80 percent of them are
over age 65 and are covered by medicare hospital and medical insur-
ance. They have available adequate coverage supplementary to the
basic medicare protection, either through the Government sponsored
uniform plan or through privately sponsored plans supplementary to
medicare. The cost of many private plans supplementary to medicare
is reasonable and the Government adds $3.50 for a self-only or $7 for
a family enrollment to the retiree's monthly annuity, check to help
him pay these premiums. The same contribution is made to enrollees in
the uniform plan, and they pay only an additional 50 cents a month
for self only or $1 for a family for the supplementary protection.
The Commission's experience is that many older people tend to buy
as much insurance as they can get and may already be overinsured. If
this proposal in II.R. 9256 is enacted, it is our opinion that a significant
number of these people would switch to the Federal employees health
benefits program in the mistaken belief that they need the additional
protection and at considerable more needless cost to themselves, as well
as to the Government.
Because the large majority of people enrolled in the retired Federal
employees health benefits program already have very good health in-
surance protection at very reasonable cost, and because we believe
that the option afforded by this proposal to switch to the more costly
Federal employees health benefits program would cause many of them
to do so contrary to their best interests, the Commission opposes en-
actment of this proposal.
The third proposal would require that there be inserted in each con-
tract under the Federal employees health benefits program, a provision
relating to claims disputes. This provision would require the carrier
to pay for or provide health benefits in individual cases where the
Commission makes a determination that the covered employee, annui-
tant, or family member is entitled to the benefit under the terms of
the contract.
We are, not currently experiencing any problems in securing car-
riers' compliance with Commission decisions on interpretation of
contract benefit provisions. However, the Commission has no objection
to this proposal and would support its enactment if it were intro-
duced as a separate bill.
In conclusion, for the reasons stated, the Commission strongly op-
poses enactment of the proposals relating to an increase in the Gov-
ernment's contribution to health benefits and to pre-1960 retirees, and
strongly urges that favorable action not be taken on the bill.
I will be glad to try to answer any questions the subcommittee might
care to ask.
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16
Senator Bminicx. Thank you, Mr. Ruddock.
We never have, any problem in finding out where you stand.
Mr. RininocK. No, and I guess it is not a surprise.
Senator Binimcii. Mr. Ruddock, what are the proposed increases for
the employee by Blue Cross and Aetna this year?
Mr. RUDDOCK. Mr. Chairman, the increases in the plans for employ-
ees who chose to participate in the service benefit plan, which is
Blue Cross-Blue Shield, and in the Aetna plan, which is the indemnity
benefit plan, as well as all the other benefit plans, are already fixed.
We are not in the proposal stage. The rates have been negotiated, and
have been approved by the Commission, for 1974. In Blue Cross-Blue
Shield, let me give you the high option family, which I think is the
most significant rate. For 1973 the total biweekly premium was $24.28;
for 1974 it will be $28.97.
For the indemnity benefit plan, in which Aetna is the contractor,
the 1973 ligh option family rate was $23.05 biweekly; for 1974 it will
be $26.17.
Senator BURDICK. Then as these costs go up, the percentage of Fed-
eral con tri tuition goes down; is that correct?
Mr. Rtronocx. It does for those employees who are in a plan in
which the premium increase is larger than the average increase in the
six largest plans. Let me explain that.
The, Government's contribution is 40 percent of the average high
option premium of the service benefit plan, the indemnity benefit
plan, the National Association of Letter Carriers plan, the American
Postal Workers Union plan, the Kaiser Plan of Northern California,
and the Kaiser Plan of Southern California. The average increase in
the premium of these six for 1974 is around 8 percent. So the Govern-
ment's contribution goes up by the average of that increase. Since the
increase for Bliw Cross-Blue Shield and for Aetna is larger than that
average, then the percentage of the total premium for those employees
paid by the Federal Government, you are quite correct, does go down.
Senator ifirnioutx. Mr. Ruddock, with the postal workers receiving
an increase in their contribution of iS percent next year, wouldn't it
also be consistent to increase Federal employees' contribution because
they share many of the same benefits?
Mr. RUDDOCK. Consistent, yes, sir. However, I would point out that
the provision you have just cited was a provision in a contract negoti-
ated between the, unions representing the employees and management.
1 was not party to those negotiations and obviously know very little
about what, occurred. But ordinarily, where there are contract.negoti-
ations with the unions, there is give and take. You get something and
3.-ou give something. I have no idea what concession, if .any, was made
by the unions in order to get that particular provision in the contract.
Senator BuRnick. Mr. Ruddock, we are negotiating right now.. Isn't
it going to be a little inconsistent to have one Federal employee in this
building getting 55 percent and a Federal employee in this building
next to him getting 40 percent?
Mr. Rtinnocx. Yes, sir.
Senator BuRnicK. Don't you think we ought to kind of correct that
disparity?
Mr. RtinnocK. I think a comparison can be made between those Fed-
eral employees who are in the Postal Service, where an entirely differ-
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ent set of conditions prevail, and other Federal employees. But I think
a comparison also needs to be made with other large employers.
In making that kind of comparison, it is our finding that when you
look at the total fringe benefits package, the Federal Government's
package compares very, very favorably with the best.
Senator BURDICK. Yes, but the postal workers have the same retire-
ment package.
Mr. RUDDOCK. Yes, sir. The fringe benefit package in total for non-
postal employees does not compare favorably with what has been
negotiated for postal employees. But that is one comparison. Other
comparisons can also be made.
Senator BURDICK. The President, as I am advised, has stated several
times that a 75-percent contribution by private industry to employees'
health plans is reasonable. Why is it acceptable for private employees
and not for public employees?
Mr. RunnocK. It is my recollection, Mr. Chairman, that that pro-
posal was made in connection with a proposal for a system of national
health insurance, and that what was contemplated in terms of the 75-
percent contribution by the employer was a more or less basic set of
benefits, Et set of benefits which would not compare favorably with our
high option benefits and, of course, which would not be comparably
priced. I think I can say without any qualms whatsoever that if, as,
and when, the law of the land requires private employers to make a
larger dollar contribution toward health benefits than what the Fed-
eral Government is making for its employees, it is my belief that the
Federal Government will get in line very, very quickly.
Senator BuBnicK. As to the retired Federal employees health benefit
program you mentioned that these 210,000 employees have available
adequate coverage supplementary to their basic medical protection.
Explain what you consider to be adequate.
Mr. nu-moon:. We consider as adequate the protection offered by the
hospital and medical insurance of medicare supplemented by a plan,
which can be any one of a variety of plans, which would pick up a
substantial part of the cost of the health care not paid for by medicare.
For example, a plan that would help the employee to meet the deduct-
ibles and coinsurance that apply under medicare.
Senator BURDICK. Administratively, what kind of problems result
from the enactment of the pre-1960 retiree provisions of the bill?
Mr. RUDDOCK. Administratively?
Senator BURDICK. Yes.
Mr. RuDDocK. I think the major administrative problem would be
the problem of communicating with the pre-1960 retiree, getting them
to understand what is being offered, and to enable them to make a
reasoned decision. Many of the annuitants are getting up in years.
They are not at all familiar with insurance in general and particularly
with the details and the complexities of health insurance. We have to
deal with them by correspondence, and it is extremely difficult to get
across the message that here is what is being offered, here is what it
costs, here is how it ties in with what else they may have.
I would say the problem of communication with these elderly people
would be the biggest problem. In the retired health benefits program,
would remind you, mostly we have people who are getting up in
years because they are all retirements that occurred before, July 1,
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1960. In other words, we are talking about a group of whom, generally
speaking, the youngest has been retried for 13 years.
Senator BURDICK. You have, stated that the termination of child's
health benefits at age. 22 presents no barrier, financially or otherwise, to
the continuation of his educational programs or intentions. Can you
explain that a little more fully?
Mr. Rureocrc. Senator Burdick, in the bill as it was introduced in
the House, there was a provision which would have continued family
coverage, for a child beyond the age of 22, which is the current provi-
sion. As the bill passed the House, and as we are looking at it this
morning, there is no provision for changing the age limit for cov-
erage of a child.
Senator BURDICK. But we are enacting a bill, too. What would be
the objection to raising it?
Mr. RUD?OCK. To raising that age?
Senator BURDICK. Yes, for educational purposes.
Mr. Ruonorac. I think we are talking in terms of the Goveniment's
contribution and the pooling of premium, if you will, with other Fed-
eral employees being intended to help the employee to carry his
family responsibilities.
There is a real question, it seems to me, as to at what point does that
responsibility end? If the coverage is extended beyond age 22 for
children who are in full-time attendance at school, then what we are
doing is shifting financial responsibility, which is now with the
parent to take care of the health care costs of that child, partly to the
Government and partly to other employees who are paying premiums
and who do not have children beyond the age of 22.
It is my personal belief that the responsibility for the health care
of children beyond the age of 22 should remain where it is, which is
with the family.
Senator BURDICE . Now, Mr. Ruddock, will you get your pencil out
and a piece of paper? We will do some bargaining right now.
Mr. RUDDOCK. May I send for a calculator?
Senator Btrimicy. Suppose, we should report a bill that would re-
quire a 50-percent contribution by the Federal Government for em-
ployees for the year 1974 and 55 percent for 1975. What would it cost?
Bear in mind this is still below the postal workers.
Mr. RuonocK. This is extremely rough and I would like to refine the
figures and submit them for the record.
For the balance of fiscal year 1974, assuming a January 1 effective
date, the increased Government cost would be, roughly $100 million.
Senator BURDICK. For the year 1974?
Mr. Rtionocat. For the year 1974. That is an increase from 40 percent
to 50 percent for the second half of fiscal year 1974. The increase for
the following year would be 55 percent.
Senator Brranircy. It would be about half of the $100 million;
wouldn't it ?
Mr. Ruonocx. No. It would be twice $100 million plus the cost of
an additional 5 percent, which would be about $300 million for 1975.
As I say, I .would like to refine those figures for the record.
Senator BURDICK. I see. You are talking about the fiscal year now?
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Mr. RUDDOCK. Yes, sir. You see, for fiscal 1974 we would have only
6 months. For fiscal 1975 we would have a full year and with the
55-percent contribution rather than 50.
Senator BURDICK. In other words, the first year would cost $100
million and the second year would cost $200 million?
Mr. RUDDOCK. The first year $100 million and the second year about
$300 million.
Senator BURDICK. Would you supply these figures from your calcu-
lator?
Mr. RUDDOCK. Yes, sir.
Senator BURDICK. Could you get them to us before next Tuesday
afternoon?
Mr. RUDDOCK. Yes. I will get them this afternoon.
Mr. EMERY. Would those figures be on a static or dynamic basis?
Mr. RUDDOCK. Static. Do you want it both ways?
MT. EBZERY. Yes.
Mr. RUDDOCK. Yes' sir, we will.
Senator BURDICK.. Will you give us the figures on the postal contract
also?
Mr. RUDDOCK. That is, if the terms of the postal contract were
applied to all Federal employees?
Senator BURDICK. Yes.
Mr. RUDDOCK. Yes, sir.
Senator BURDICK. By Tuesday morning?
Mr. RUDDOCK. This afternoon.
Senator BURDICK. Thank you very much.
The aforementioned was subsequently supplied for the record:]
H.R. 9256?ALTERNATIVE PROPOSALS
INCREASE IN COST FOR NONPOSTAL EMPLOYEES
un millions of dollars]
Fiscal year
Static
Dynamic
A. 50 percent rate on Jan. 1, 1974; 55 percent on Jan. 1, 1975 and later; 75 percent max-
imum on Jan. 1, 1974:
1974
$90. 1
$90. 1
1975
210.9
234.8
1976
241.6
315.4
1977
241.6
370.7
1978
241.6
432.8
B. Postal rates: 55 percent rate on Jan. 1, 1974 with 68.75 percent maximum; 65 percent
rate on July 20, 1974 with 81.25 percent maximum:
1974
119.5
119.5
1975
361.0
392.6
1976
364.4
461.6
1977
364.4
533.7
1978
364.4
614.4
Senator BuRnicK. Senator Fong?
Senator FONG. Thank you, Mr. Chairman. ,
Mr. Ruddock, the present cost to the Government is how much?
Mr. RupnocK. Are you talking in terms of biweekly or are you
talking in terms of calendar years or fiscal years?
Senator FONG. The regular fiscal year basis.
Mr. RunDocx. Let me give it to you by calendar year. I don't have
it by fiscal year.
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20
Senator Fm o. That will be all right.
Mr. RUDDOCK. For calendar year 1974, using the present law the
Government contribution, excluding postal employees, will be $533
million. It is anticipated that employees in calendar year 1974 will
contribute about $800 million, making the total program cost, exclu-
sive of postal, $1,334 million.
Senator FONG. You said the Government's contribution in 1974
would be $533 ?
Mr. Rtionock.. Yes, sir.
Senator FoNti. And then the $800 million is by whom?
Mr. .Rtamock. By the employees. We add those two together to pay
the premium.
Senator FONG. The two give one billion three?
Mr. RunnocK. $1,334 million yes, sir.
Senator FONG. If we were, to increase the Government's contribution
to 55 percent, you stated it will cost another $151 million in fiscal 1974,
but what would be the increase in calendar 1974?
Mr. Rummy:. Calendar would be twice that. That increase is for
the first 6 months of 1974, so it would be $302 million.
Senator Fowl. $302 million increase?
Mr. Rum-iodic Increase, yes, sir.
Senator FONG. This would reduce the employees by $302 million?
Mr. Runuodw. The employee contribution would be reduced by an
identical amount.
Senator Dm-G. And then if he were to continue, to increase it by 5'
percent every year, what would that amount to?
Mr. RunnocK. On a static basis, which is assuming no further pre-
mium increases and no changes in the number of people covered, for
fiscal year 1975 the increase would be $331 million; for 1976 it would
be $390 ; for 1977 it would be $443 million ;and for 1978, the
increase would be, $4-67 million.
If we, assume dynamic conditions, where we assume the number of
people covered continues to increase and that the premiums continue
to increase roughly as they have in the past, then by fiscal year 1978
the increase in Government contribution would be $766.5 million.
Senator FONG. Considering the escalation of costs?
Mr. Itunnocx. Yes, sir.
Senator FONG. That would be for 1978?
Mr. RunnocK. Yes, sir. That would compare with the $467 million
on a static basis.
Senator FONG. ID other words, if we were to just consider it on a
static basis, we would almost double the contribution of the Govern-
ment by 1978?
Mr. RunocCK. Yes, sir.
Senator FONG. You stated that no other employer is as generous
as the Federal Government in its total fringe benefit package to the
Government employees?
Mr. RUDDOCK. Senator Fong, of the employers that we included in
this particular study we, found only one employer whose total Pack-
age was better than that of the Government. We started off with 11
employers where we knew that the employer was paying more toward
health benefits than the Federal Government. But then when we looked
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at retirement, vacation, sick leave, life insurance-when we looked at
the total package of fringe benefits we found that we compared very,
very favorably with most of them. There was only one, New York
State, where the total package was more liberal than that of the Fed-
eral Government.
Senator FONG. I noted New York pays their legislators 31/2 percent,
is that correct?
Mr. RUDDOCK. I don't remember that, but they are very liberal in
many respects.
Senator FONG. New York State is the only entity that pays a better
fringe benefit than the Federal Government?
Mr. kimnocK. Of those we included in this particular study. Sen-
ator Burdick pointed out if we compare postal employees with Fed-
eral employees who are not postal employees, the postal employees
have a package which now is better than that of the Federal Govern-
ment for its employees generally.
Senator FONG. Because of the negotiations?
Mr. RUDDOCK. Because of the negotiations, yes, sir.
Senator FONG. That was particularly on this one item?
Mr. RUDDOCK. There is also a. provision in that contract under which
the Postal Service will begin to pay the total life insurance premium.
I don't recall all of the details of the contract, but if you look at the
total package it is better for postal employees.
Senator FONG. Postal employees have all that the Federal employees
have plus whatever has been negotiated?
Mr. RunnocK. Yes, sir.
Senator FONG. When you look at the Federal employees, deducting
the postal employees and the military, and you have the blue collar
and white collar, minus military, a 1-percent increase in salary amounts
to how much?
Mr. Riinnoox. I do not know. I should know, but I don't. I do not
know what the total salary breaks into by the different groups.
Senator Fox?. Could you get us that figure?
Mr. Ru i. nnocx. Yes, sir, for record I will.
IThe aforementioned was subsequently supplied for the record :11
A 1 percent across the board salary increase would cost $450 million.
Senator FONG. I understand 1 percent will run about $350 million,
for all of the employees and military?
Mr. MADDOCK. I am sure it would. The total payroll, I know, is in
that neighborhood, $35 billion, and that is certainly in the ball park,
but I don't know What the precise figures are.
Senator FONG. You say the Government is opposed to this increase
of 40 to 55 percent, and the 5 percent increase?
Mr. RunnocK. The administration is opposed to any increase in the
percentage, of the Government's contribution. -
Senator FONG. This bill states that it would be 75 percent of the
average high-option premium of the six largest plans participating
in the Federal employees' health benefits prograin. How does that
differ with the present, law-?
Mr. Runnocx. The present law says that the Government's contribu-
tion will be 40 percent--
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Senator FONG. No, no. Outside of the numerical figures of 40 and
75. When you talk about the six largest plans participating in the Fed-
eral employees' health benefit program as distinguished from the pres-
ent law where you have the two largest employee organizations, the
two Government-wide plans and the two largest comprehensive plans
participating. Is that the same?
Mr. RUDDOCK. I don't believe that would make any change. I think
the six largest plans happen to break down that way?two Gov-
ernment-wide, two employee-organization sponsored, and two
comprehensive.
Senator FoNo. So there would be no change?
Mr. REDDOCK. There would be no change in that part of it.
Senator Fox?. You state under present law the bill would extend a
ceiling on the Government contribution for any enrollee to 75 percent,
of the actual subscription charge in contrast to 50 percent under pres-
ent. Under the, present law the employee can choose a lesser plan and
the Government would pay 50 percent?
Mr. RunDocx. Yes, sir.
Senator FONG. That is if it is below 40 percent?
Mr. RUDDOCK. Yes. Let me follow that through for a second. Take
the average of the six largest plans and take 40 percent of that: You
have then fixed the dollar amount of contribution and each employee
will get that dollar amount except he may not get more than 50 per-
cent of the cost of the plan he has chosen. So as you have indicated, if
he chooses a low-cost-option plan., his Government contribution is
limited to 50 percent of the cost of that plan. This bill would change it
so that he could get up to 75 percent.
Senator FONG. if he chooses the lower plan?
Mr. RUDDOCK. Yes.
Senator FONG. All our calculations and so forth to date, in this
hearing, have been based on the high option premium cost?
Mr. RunnocK. Yes. That is with the exception of this change to a
maximum 75 percent which would apply I think entirely to low op-
tion, certainly to less expensive plans.
Senator FONG. Would that increase the cost?
Mr. RIIDDOOK. Yes, but the additional cost because of that feature
which has been included in the figures 1 gave you is a very, very small
part of it.
Senator FONG. What is your objection to the second part of the bill,
to allow pre-1960 retirees now in the retired Federal employees health
benefits program to change to the Federal employees health benefits?
Mr. Barroom. When the Federal employees health benefits program
was being debated before the Congress in 1959, a decision had to-be
made as to whether it would apply only to employees then in service or
whether it would also be applied to those already retired. It was a
deliberate decision of the Congress that the Federal employees health
benefits program should apply only to those currently in service and
would continue to them after they retired.
Senator FONG. What year was that?
Mr. Rironocii. 1959. So the law was passed for active Federal em-
ployees but it was recognized at the same time that this left all of
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those people already retired and on the annuity rolls who did not have
any health benefits protection except as they might have it through
private sources.
In 1960 the Congress passed the law which set up a retired Federal
employees health benefits program to provide some help for the pre-
1960 retirees. In my opinion, that law would not have been enacted if
medicare had already been on the books because when medicare came
along medicare then provided the hospital coverage and medical cover-
age to most of the people included in this same group.
The decision, if you will, not to include the pre-1960 retirees in the
active program?well, there really is no more compelling reason for
it today than there was when the decision was made back in 1959.
It is further our experience, and we have seen this happen over and
over again, that these people, as they get up in years, are fearful of the
cost of health care; they buy insurance and then another policy be-
comes available from some source and they buy that. Some of them
have three and four and five different insurance policies. They are
overinsured, a term you will clearly understand. It is our belief
that if this provision is enacted, many of these people out of that fear
of health care cost will choose to come over into the active program,
will pay the premiums for the very broad coverage, coverage which
they don't need because they alreakiy have the medicare hospital and
medical insurance.
We think many of them would do themselves a disservice by choos-
ing: to become even further overinsured.
Senator FONG. I understand what you mean. I am retired from the
military. I get insurance from the companies I was connected with and
the Government here gives me insurance. Sometimes I am confused
as to whether I have three policies giving me the same thing and if I
get sick only one policy pays. Is that correct?
Mr. RUDDOCK. That is certainly true of our policy. It is not neces-
sarily true of medicare. Most policies do have an antiduplication of
benefits provision.
Senator FONG. Then I bought medicare. I bought that because I
was over 65 and it was available. I don't know why I did it because I
wouldn't have benefits from it.
Mr. RUDDOCK. You are overinsured. You are in the position of a
man who has taken $100,000 worth of fire insurance on a property
valued at $20,000.
Senator Form. So if we passed the second provision, we would be
-putting some of these retired employees in the same position?
MT. RUDDOCK. That is Our belief, that they would choose to Come over
and pay these premiums for more insurance which in many cases they
do not need.
Senator FONG. Because they are already covered.
Mr. RUDDOCK. Eighty percent of them are 65 and over and are cov-
ered by medicare.
Senator FONG. Thank you, Mr. Ruddock.
Mr. RUDDOCK. Thank you.
Senator BURDICK. I have one more question.
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With the spiraling cost of premiums that result in additional cost
to both employees and Government, what can you do about some cost
control features?
Mr. RunDocx. I. guess about the only thing we can do is what we are
which is continuing to urge the 40 carriers with whom we have
contracts t..1 be very careful in their claims review, to be alert to un-
necessary care or overutilization.
There is nothing T am aware of that, we can do to control the cost of
health care in the hospital. Increases come about because, of factors
certainly outside of our jurisdiction or control. There is nothing we
can do that If am aware of in the area of charges made by a physician.
I think you have put your finger or. basically what is a problem for
;.he Nation as a whole, and that is the spiraling cost of health care.
Once we as a nation bring that fully under control, then this spiral
n the premiums under this and other health insurance programs will
slow down or stop. But the premiums are, strictly related to the in-
creased costs and increased
Senator 3-criunoK. In other words, there is nothing you can do.
Mr. Runaoc,K. If there were something positive and tangible that
I could, do about it I would have done it a long time ago.
Senator Bunmc.K. Do you think there is something that the legis-
lative, branch could do?
Mr. Ruonoca. I wouldn't know what to suggest. you do because I
don't think really at this point anyone has found the. solution to that
problem.
Senator Brum-tom. Are there, any further questions?
Ef not, thank you very much.
Mr. Rupeoca. Thank you.
Senator BurtmcK. Our next witness is Mr. Clyde Webber, president,
the American Federation of Government Employees. I see he is rep-
resented well this morning.
STATEMENT OF CARL K. SADLER, LEGISLATIVE DIRECTOR, AMERI-
CAN FEDERATION OF GOVERNMENT EMPLOYEES (AFL?CIO), AC-
COMPANIED BY JAMES LYNCH, ASSISTANT LEGISLATIVE REPRE-
SENTATIVE AND LEONARD M. BROCKMAN, ASSISTANT DIRECTOR
OF RESEARCH
Mr. SAougn. First, let me say that Mr. Webber could not be here this
morning as the hearing was called rather suddenly and he couldn't
adjust his schedule.
Senator litnanc.K. I would suggest if you could to summarize your
statement. We are trying to complet,, these hearings before noon. All
statements will be made part of the, record in full.
Mr. SADLER. Let me introduce my colleagues. On my right is the
legislative assistant, James Lynch, and on my left Mr. Leonard
irockman.
I am grateful to you, Senator Burdick, for this opportunity to ap-
pear here today and endorse the bill, H.R. 9256, which forms the sub-
stance of these, hearings.
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25
The most important feature of H.R. 9256 is its modification of the
sharing formula between Federal employer and Federal employee for
health insurance premiums. This bill would increase employer health
benefit premiums from 40 to 55 percent in 1973; to 60 percent com-
mencing in 1974; 65 percent commencing in 1975; 70 percent in 1976,
and 75 percent commencing in 1977 and each year thereafter.
This is not even as much as the President. himself, in a February 18,
1971, message to Congress advocated for private industry. He pro-
posed that private industry pay a minimum of 65 percent of em-
ployee health insurance basic programs starting July 1, 1973, and in-
crease this to 75 percent. in 1976. We would hope that the President,
as the head of the executive branch, would support the same standard
for Federal employees.
- It is, of course, also below the formula for the proportionate sharing
of health benefit premiums recently incorporated in the agreement
between the Postal Service and the unions representing Postal Service
employees.
Under that agreement, effective in July 1973, the Postal Service
increased to 55 percent its share of health insurance premium pay-
ments. This percentage will then rise to 65 percent in July 1974. In
addition, the entire cost of life insurance coverage will shift to the
Postal Service in July 1974.
We believe that Federal employees should receive treatment equal
to that given postal employees. Therefore, we hope that the committee
will amend this bill accordingly?scheduling the commencement of
the increase in the employer's share of health benefit premiums to 65
percent in 1974. We urge the committee also to incorporate language
which would raise the ultimate employer contribution, in the not too
far distant future, to 100 percent.
We would also like to see the committee take action to give Federal
employees comparability with postal employees with regard to a 100-
percent employer-paid life insurance program.
-I would like also to urge that the committee enact a very minor
amendment to the bill which would provide that anyone who has never
been a part of a plan be allowed to become a part of the plan under
any status he desires at any time. Let me offer an example: A person
comes into the Federal. service with GS-2 pay and Ile sometimes feels
he can't afford, at that rate of pay, to come under the plan. We know
he probably can't afford not to, but at that rate of pay there isn't much
left for health benefits.
Later on, even though his status doesn't change, he is told because
he didn't opt to take this immediately he has to wait for an open sea-
son. Maybe he wants to come under the plan.
Another example would be a person who comes in the Federal serv-
ice under his parent's plan. He decides not to take it and stays under
his parent's plan. He later gets married, for instance. As we both
know, when you first get married you are not always aware of all of
the requiremmts around you. You don't, opt to take it within the 60
days and all of a sudden you find out you need health benefits. But
you are not allowed under the present system to take health benefits
unless it is open season if you go beyond that 60 days.
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26
So, I hope we can make an adjustment in that to provide that any-
one who nas not at any time been a member of any plan could opt to
take it at any time he chooses.
Then, of course, he would be governed by the regulations provided.
7P I I E PROBLEM: OP HEALTH INSURANCE COSTS
Today, as we are all aware, it is not unusual for a serious or extended
illness to result, in financial catastrophe. Without substantial health
insurance coverage it is well within the realm of reality that a Fed-
eral employee could find himself iii severe financial straits even to the
point of bankruptcy because of medical bills. The mental and finan-
cial strains can be so great as to affect an employee's morale on the job
because of the impact on the individual's total security. I don't think
it is at all far-fetched to state that health insurance has become one
of the necessities of modern civilized life.
As such, it should be made as widely available as possible to Fed-
eral employees. So far as plans presently in effect go, the general Fed-
eral employee health benefit program seems to us to be the fairest and
most practical mechanism readily at hand. However, it is today se-
riously inadequate.
We feel that the Federal Government, as the Nation's largest em-
ployer, should be among the forerunners in providing increased ac-
cessibility in proportion to increased need. This is not the case. Al-
ready in the private sector many ern ployers are paying 75 percent and
some even 100 percent of their employees' health benefit premiums.
Compared to this, the Government's contribution to the FEHB of
40 percent. is paltry and offers little in the way of comparability with
private industry.
As proof of this situation, I request your permission, Mr. Chairman,
to insert into the record, as annex 1. the, provisions of six major pri-
vate enterprise health benefit plans covering the following companies:
Xlmninum Company of America; Detroit Edison Co.; General Motors
Corp.; International Business Machines Corp.; Penn Central'Co.; and
Radio Corporation. of America. This excerpt was extracted from Bul-
letin No. 1,929, entitled "Digest of 50 Health and Insurance Plans for
Salaried Employees, Early 1969."
I. request your further indulgence to permit me to insert into the
record, as annex II to my statement, a selected list of other major
American enterprises which provide these benefits at no cost to their
employees. The fact that more than 60 major enterprises, covering,
in sonic cases, entire industries, are included, shows that by 1970 it had
become the normal practice for major-scale American industry to pay
100 percent. of the health benefit insurance contributions of their
employees.
IT.R. 9256 is a step toward alleviating the inferior position of the
Federal employee in respect to health insurance. However, we would
like to see, as the, ultimate ideal, the Federal Government joining the
ranks of the, more, enlightened employers found in private industry
and pay 100 percent of the premiums.
It is not unreasonable either from. the standpoint of enlightened
lVederal personnel policy or from the standpoint of budgetary costs.
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Even under present methods of funding, these budgetary costs would,
in fact, be less than the actual apparent costs when one realizes that
good health insurance will reduce absenteeism due to illness and result
in greater productivity of Federal employees on the job.
As to total fundings costs of the present method of obtaining this
insurance according to information supplied by the Office of the Actu-
ary, in the Bureau of Retirement, Insurance, and Occupation Health
of the Civil Service Commission, the total receipts of the fund in 1971
amounted to approximately $1.2 billion at an annual rate. Therefore,
each 1 percent of payment amounts to $12 million. Of this amount, the
Government's share, which is 40 percent, is $480 million a year and
the employee's share which is 60 percent is $720 million.
An increase in the Government's share from 40 to 55 percent would,
therefore, cost an additional $180 million annually to the United States
Treasury. This would be the additional budgetary appropriation neces-
sary to cover the percentage increase in H.R. 9256.
As further increments were made along the lines of the Postal
Agreement, the additional cost would be about $50 million over the
preceding year.
We believe that this additional cost is not inequitable and improper
and that the formula set forth is in step with President Nixon's mes-
sage to Congress with regard to health insurance coverage for em-
ployees. These figures assume current premiums, benefits and enroll-
ments.
With respect to section 2(a) of H.R. 9256, we note that this would
enable annuitants retired prior to 1960 to choose coverage under the
Federal employees health benefits program in lieu of coverage under
the Retired Federal Employees Health Benefits Act. Pending further
statistical analysis, we are not sure of the implications of this provi-
sion, because many of these annuitants have become deceased.
Although at first sight it might not appear relevant, we believe it
might be of some interest to your subcommittee in this connection to
review the interrelationship between Federal employee health premium
payments and the payments to the Federal Employee Retirement
Fund.
The present annual income of the Civil Service Retirement Fund is
predicated on contributions of 14 percent of current payroll, half paid
by the employer and half by the employee. The Civil Service Com-
mission concedes there is a gap of 9 percent between the annual income
of the fund and the future contingent liabilities on behalf of current
employees. This means that the fund is receiving annually almost
$340 million in excess payments for which no retirement benefits will
be furnished employees.
For the purposes of information to the subcommittee of the actual
cash receipts and disbursements of the Retirement Fund, we should
like to introduce as appendix III that standing of the fund, as of May
30, 1973.
As appendix IV, we should like to introduce a table showing the
number of employee ammitants and survivor annuitants, as of June
30, 1972.
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We welcome the inclusion of section 3, the purpose of which is to
grant the Civil Service Commission effective authority to overrule the
carriers on individual cases of claim denials when the Commission
finds that the claim is payable under its interpretation of the contract
provisions.
tinder the present situation, for the two Government-wide plans,
which enroll most of the Federal employees, the Commission's power
is limited to asking the carrier to conduct the further review but the
Commission does not have the authority to overrule the carrier on
borderline cases involving policy interpretation.
We belicve such a power should reside in a Government authority,
that is, the Civil Service Commission, and not be left to the judgment
of the carrier which is obviously acting in a matter affecting its own
self-interest.
We would like, to see the subcommittee restore to H.R. 9256 a section
which. was contained in H.R. 3025, the original bill from which H.R.
9256 resulted. This section provided for coverage of unmarried chil-
dren who were full-time students or who are, incapable of self-support
because of mental or physical disability which existed before age 22.
It is in the public interest that dependents, irrespective of chrono-
logical age, who are genuinely incapable of self-support or who are
enrolled in full-time education be Ale to obtain the same kind of
health benefits as any other dependent of a Federal employee.
In summary, I would like to endorse H.R. 9256, with special em-
phasis on the reforms included in the first three sections.
As I: stated earlier, we hope that the committee will amend the bill
to bring it into line with the provisions of the postal employees' agree-
ment regarding health benefits premi urns. We certainly endorse estab-
lishing the right of the Civil Service Commission to make the final
decision in individual eases of claim denial when the Commission finds
that its own interpretation of the contract provisions indicates the
claim should be paid.
We would like to see H.R.. 9256 amended to permit a family health
benefits enrollment to cover full-time students, regardless of age, and
children who are incapable of self-support because of mental or physi-
cal disability which existed before age 22.
We appreciate the opportunity to :qibmit our comments and assure
your subcommittee that we, will cooperate in every way with you to
assure passage of this bill.
Senator ETTRDICK, You support the bill with the amendment you
propose?
Mr. SADLFR. Yes, sir,
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[Attachments to prepared statement follow:]
ANNEX I
SIX SELECTED HEALTH AND INSURANCE PLANS FOR PRIVATE ENTERPRISE
EMPLOYEES
Aluminum Company of America, The Detroit Edison Co., General Motors
Corp., International Business Machine Corp., Penn Central Co., and Radio
Corporation of America.
These Plans were extracted from the following publication :
Bulletin No. 1629, U.S. Department of Labor, Bureau of Labor Statistics, November 1969,
entitled "Digest of 50 Health and Insurance Plans for Salaried Employees, early 1969".
24-938 0 - 73 - 5
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ALUMINUM CO. OF AMERICA
Schedule of benefits
Accident and sickness
Sick leave
Eligibility (when new em-
ployee becomes eligible) Basis of graduation
Li fe insurance
Optional
life
insurance
Accidental
death and
dismem-
be rment
Maximum
Accident and sickness duration
When
benefits
begin
Years of
service
Days of benefit
per year at-
Full pay
Half pay (weeks)
Optional lifa incaranen Flat
$5, 500
26 weeks
When paid
sick leave
ceases.
After 90 days of employment_ Annual salary
(4)
0 to.5,4
2
Long-term disability benefit__ Less than $2,000
$2, 000
$2, 000
% to 1
4
After 3 years of employment. $2,000 to $3,000
3, 000
3,000
Ito 3
6
Other benefits: Immediately $3,000 to $4,000
4,000
4,000
3 to 5
8
or 1st of following month. $4,000 to $5,000
6,000
6, 000
5 to 7
11
$5,000 to $6,000
8, 000
8,000
7 to 10
13
$6,000 to $7,000
10, 000
10, 000
10 to 15
17
$7,000 to $8,000
13, 000
13, 000
15 to 25
21
$8,000 to $9,000
16, 000
16,000
25 and over
26
$9,000 to $10,000
$10,000 to $12,000
20, 000
35,000
20,000
30,000
(a)
$12,000 to $15,000
50,000
40,000
$15,000 to $20,000
65, 000
50,000
$20,000 to $25,000
85, 000
60, 000
$25,000 to $30,000
105, 000
70, 000
$30,000 to $35,000
125, 000
80, 000
$35,000 to $40,000
140, 000
80, 000
$40,000 to $50,000
155,000
80,000
$50,000 to $60,000
170, 000
80, 000
$60,000 to $70,000
185,000
80,008
$70,000 and over
200, 000
80,000
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0
Weekly salary
(1)
CD
Up to $107.30
(2)
0-
Over $107.30 to $114.25
$66
Over $114.25 to $122.30
$69
Over $122.30 to $129.25
$72
0
Over $129.25 to $138.45
$74
Over $138.45 to $145.40
$76
Over $145.40 to $153.45
$78
Over $153.45 to $160.40
$80
Over $160.40 to $169.60
$82
Over $169.60
(2)
Long-term disability
0(2)
Service
To age 65_ _ After 6 mo
Under 15 yr
50 percent of monthly
salary.
15 yr and over
50 percent of monthly
salary plus additional
oo
1 percent for each
year of service over 15
yr.
1 For employees earning $20,000 annually or more the optional insurance amount includes the following supplemental insurance which cancels stage 65:
Salary
Insurance
Salary Insurance
0
$20,000 to $35,000
$5, 000
$50,000 to $60,000
$50, 000
$35,000 to $40,000
20, 000
$60,000 to $70,000
65, 000
$40,000 to $50,000
35, 000
$70,000 and over
80, 000
See footnotes at end of table.
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ALUMINUM CO. OF AMERICA?Continued
Health benefits for active employees under age 65 and dependents under age 65
Hospital benefits Surgical and medical excluding major medical
Daily benefit or service Extended Ancillary
and duration coverage services
Medical allowance
Emergency Income Allowance Number of
outpatient limits for and visits or When
care or service Surgical procedure maximum days paid benefits
Maternity benefits service benefits allowances benefit for begin Other benefits
Semiprivate room Full cost of Regular benefits_.... Required Reasonable and Anesthesia allowance: Reason-
specified services customary able and customary charge.
services. provided. charges.
Employee with under 10 yr of
service, 365 days.
Employee with 10 yr of service
or over, 730 days."
Radiation therapy allowance:
In or out of hospital, $7.50
per treatment?.4 to !!13.i-
mum schedule allowance for
each disability.
Diagnostic X-ray allowance: $75
during any 12-month period.
Diagno.t.tic examinations: Mc-
troencephalogram, $25; elec-
trocardiogram, $15; basal
metabolism, $10.
Health benefits for active employees age 65
Health benefits for active employees under age 65 and dependents under age 65?Continued and over and dependents age 65 and over
Major medical
Benefit period
From incurrence Care in Medical
Accumulation of expenses in extended Home and other
Daily benefit or service and Deductible period and From start of excess of Maximum In-hospital care health health
duration amount its application disability deductible Coinsurance benefit Reinstatement care facility care care
Semiprivate room
Employee with under 10 yrs. of
service, 365 days.
Employee with 10 yrs. of service
or over, 730 days.6
$100 Calendar year, Calendar year, 80 percent______ $10,000 a Upon evidence Same as for active employees under age 65
all disabilities, all disabilities, calendar year; of insurability. but reduced by Medicare benefits.
$20,000 during
lifetime.
See footnotes at end of table.
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ALUMINUM CO. OF AMERICA?Continued
Benefits for retirees age 65 and over and their dependents age 65 and over
Financing
Life insurance
In-hospital care
Care in
extended
care
facility
Home
health Medical and other
care health care
Employer pays Part B
Employee pays monthly towards private plan benefits, Medicare premium for?
Active employee Retiree
Active
employee Retiree
Basic insurance: Preretirement
amount reduced to $3,500 and
further reduced $300 annually:
minimum, $2,000 at age 70.
Optional insurance: Preretirement
amount, excluding supple-
mental, reduced to 25 percent of
that amount.
(Optional supplemental amount
discontinued.)
1st $44 of expenses during 1st 20 percent of reasonable Optional life insurance: 2 Optional life insurance: X
60 days of confinement; $11 and customary $0.60 per $1,000. $0.60 per $1,000.
daily during 61st to 90th day; charges for surgery Accidental death and Other benefits: None
for additional 30 days, full and certain physicians' dismemberment: (company pays full
cost of semiprivate room, in-hospital services. $0.10 per $1,000. cost).
board, and ancillary services. Other benefits: None
(company pays full
cost).
X
I Including supplemental insurance for employees earning $20,000 annually or more.
2 65 percent of weekly base salary minimum, $53; maximum, $63.
5 50 percent of base weekly salary: maximum, $200.
Applicable only to employees in New York and New Jersey. The benefit for an occupational
disability is the difference between workmen's compensation benefit and the above amounts. Mater-
nity benefit payments limited to 6 weeks. For women with 2 yrs. of service and over, the weekly benefit
for a maternity disability is 70 percent of base salary.
5 Employee collecting accident and sickness benefits receives difference between full pay, if col-
lecting sick leave pay, and the accident and sickness benefit payment.
Not applicable to confinements for mental or nervous disorders, and pulmonary tuberculosis.
Note: Unless otherwise indicated employer pays balance of cost.
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9170000Z009000t108?0089/dCIU-VIO : 6Z/80/1.00Z eseelet1 JOd PeA0AdV
THE DETROIT EDISON CO.
scneouie OT oenents
Eligibility (when new ern
ployee becomes eligible) Basis of graduation
Life insurance
Aidniii diu.1 sit;kIIUS
Sick lee,ie
Days of benefit
Accidental per year at?
Optional death and When
life dismem- Maximum benefits Years of
insurance berment Accident and sickness duration begin service Half pay Full pay
mmediately or lot of follow- Annual salary 2 times annual 1/2 and under
ing month, salary; maxi- Over
mum, $300,-
000. Plus
1U
20
Weeks
,,,i to 4 3
5 to 9 6
10 to 14 9
15 to 19 14
20 to 24 19
25 to 29 24
30 to 34 32
35 and over 40
See footnote at end of table.
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THE DETROIT EDISON CO.?Continued 0
Rt
Health benefits for active employees under age 65 and dependents under age 65
Hospital benefits Surgical and medical excluding major medical ?11
0
Medical allowance n
X
Emergency Income Allowance Number of Rt
outpatient-, limits for and visits or When
47
Daily benefit or service Extended Ancillary care or service Surgical procedure maximum days paid benefits
and duration coverage services Maternity benefits service benefits allowances benefit for begin Other benefits O)
V)
M
Semiprivate room, 365 days Full cost Regular benefits $20 Most expensive, Hospital only: 365 days__._ 1st day__ _ Anesthesia allowance: For IV
$450. V aday; nonhospitalized cases ex- 0
(2) Appendectomy, maximum, cept when used as part of 0
$160. $1,825. treatment for accidental
Normal delivery, bodily injury, up to $10
$175. for each use. 8
Operating room allowance: For CO
nonhospitalized cases ex-
cept when used as part of ,ocArcb
treatment for accidental ..
bodily injury, up to $10 for
each use. 0
Diagnostic X-ray allowance: ?
For diagnosis in connection >
with any 1 disability in
X
365-day period, up to $20.
Laboratory diagnosis allow- 0
ance: For any 1 disability in 1:1
365-day period, up to $20. ...,4
Radiological therapy allow- Cu
ance: Up to $10 per treat- CO
ment of malignancy (maxi- 0
mum, $100 for any 1 din- 0
ability in 365-day period). C4
Ambulance allowance: Up to CO
$20 per trip. 0
1 Employee may carry over into current year unused leave from previous 2 yrs; total maximum days 4 Sick leave is reduced by State temporary disability and workmen's compensation benefits.
of leave during any 1 yr. is 40. 5 Less $12 a day payable under California State temporary disability law (see BLS Bulletin 1502,
2 Also payable for emergency treatment in clinic or doctor's office. 1966; op. cit.).
, Employees covered by California State temporary disability law (see BLS Bulletin 1502, 1966; op. 5 Amount determined by a relative value scale at a $6.25 factor. $6.50 effective August 1969 and
cit.). $7 effective August 1970.
tri
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0
CD
a.
TUEDETROIT EDISON CO.- Continued -11
0
Health benefits for active employees age 65
Health benefits for active employees under age 65 and dependents under age 65?Continued and ever and dependents rig,a 55 and iYair X
CD
Major medical
(7)
Oa
Benefit period
U1
RS
From incurrence Care in Medical
Accumulation of expenses in extended Home and other IV
Daily benefit or service and Deductible period and From start of excess of Maximum in-hospital care health health 0
duration amount its application disability deductible Coinsurance benefit Reinstatement care facility care care 0
?s.
Semipr vate room 365 days $100 Calendar year; Calendar year; 80 percent $10,000 for each Dependents: Dependents only 2 8CO
all disabili- all disabil- disability. After use of
ties. ities. Dependents $1,000 ex- Same as for active employees under age 65 17V
only: $20,000 penses; but reduced by Medicare benefits. CD
during upon ..
lifetime. evidence of
insurability. CAD 0
Cn 5
Benefits for retirees age 65 and over and their dependents age 65 and over Financing
Employee pays Part B 0
Care in Employee pays monthly towards private plan benefits, Medicare premium for? -0
extended Home -NI
care health Medical and other Active CA
Life insurance In-hospital care facility care health care Active employee Retiree employee Retiree CO
0
0
Preretirement amount reduced 45 Same as for active employees under age 65 but reduced by Medicare benefits None (company pays full None (company pays full X-retiree C.)
percent and further reduced 5 cost) 5. cost). only. CO
percent annually to 25 percent 0
of original amount; minimum, X
$2,500. 0
0
0
I Unless otherwise indicated employer pays balance of cost. 4 All charges except those for hospital, surgical radioisotope treatment for proven malignancies, in- tri
2 Active employees retire at age 65. , hospital medical treatment, radiological procedures, X-ray, and laboratory and pathology tests. 0
2 Employee pays $1.05 monthly for each of the following dependents: Under age 65 parent, brother, s 1st 5 visits, 100 percent of schedule allowance; Oth-lOth visit, 85 percent; 11th-15th visit, 70 0
sister, unmarried child over age 23, or married child. percent; thereafter, 55 percent. 1%,)
0
0
0
0
9170000Z009000t108?0089/dCIU-VIO 6Z/80/1.00Z aseeietpioAspeAwddv
GENERAL MOTORS CORP.
0
Schedule of benefits Accident and sickness Sick leave
Accidental Days of benefit 11
Optional death and When per year at-- 0
Eligibility (when new ern- life dismem- Maximum benefits Years of n
Ployee becomes eligible) Basis of graduation Life insurance insurance berment Accident and sickness duration begin service Half pay Full pay
AO
M
Immediately or 1st of follow- Annual salary 2 times annual 50 percent 75 percent of salary; 12 months__ 8th day Regardless 1st week. E
ing month. salary; min- of life minimum, $325 a (3)(4) (3) of service. ? 2)
imum, insur- month. Thereafter?
$10,600. ance; (3) ? ? ? ? S I)
(1) maximum 1 to 5 7.
$12,000. 5 and over 12. r..)
(2) (3) (5) (5). o
Long-term disability: Monthly 50 percent of monthly Months of When ac- 0
?%
salary. salary; minimum, participa- cident and
$265. tion in in- sickness 8
surance benefit or CO
plan or to salary
age 65, continua-
whichever tion pay
is shorLif ceases. "
period. 0
5
Health benefits for active employees under age 65 and dependents under age 65
i3
Hospital benefits Surgical and medical excluding major medical 0
-0
Medical allowance ???1
cri
Emergency Income Allowance Number of CO
outpatient limits for and visits or When 0
Daily benefit or service Extended Ancillary care or service Surgical procedure maximum days paid benefits 0
and duration coverage services Maternity benefits service benefits allowances benefit for begin Other benefits C.4
CO
Semiprivate room. 365 days 67 Full cost of Regular benefits__ Required Usual and custo- Hospital only: 1st day 0
specified (6) services. mary charges. Usual and X
service. customary 0
67 charges., 0
o
cri
See footnotes at end of table. 0
o
r..)
o
o
o
o
4:.
c!),
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GENERAL MOTORS CORP.---Continued
Health benefits for active employees under age 65 and dependents under age 65?continued
Health benefits for active employees age 65
and over and dependents age 65 and over
Major medical
Daily benefit or service and Deductible
duration amount
Accumlation
period and
its application
Benefit period
From start
of disability
From incurrence
of expenses in
excess of
deductible Coinsuraace
Maximum
benefit
Care in
extended
In-hospital care
Reinstatement care facility
Home
health
care
Medical
and other
health
care
Semiprivate room, 365 days 5
5- _ Annual salary:
Less than
$12,000?
$100,
$12,000 to
$18,000?
$18,000 to
$24,000?
$200,
$24,000 to
$30,000?
$250,
$30,000 and
over $300.
12 mo.; all
disabilities.
12 mo.; all
disabilities.
80 pervert
(2)
$25,000 during
each benefit
period; un-
limited during
lifetime of
employee;
$50,000
during life-
time of
dependent.
Upon evidence
of insure-
bility.
Same as for active employees under age 65
but reduced by Medicare benefits.
I Also survivor's benefit: $150 a month payable to surviving eligible spouse who is age 50 or older
but less than 62 at time of employee's death until the earlier of death, remarriage, or age 62. Benefits
not payable for any month widow can qualify for mother's insurance under social security.
5 Also, an additional $12,000 if accident occurs while on company business.
Also occupational cases. Accident and sickness benefit provided for employees with monthly
salaries of less than $1,000. Employees earning $1,000 and over a month covered by an informal salary
continuation program. Employees employed in California, New Jersey, New York, or Rhode Island
covered by State temporary disability law (see BLS 1502, 1966; op. cit.). Occupational benefit is the
difference between workmen's compensation benefit and the above amounts.
Maternity benefit payments limited to 1,14 mo.
o For employees with monthly salaries of less than $1,000. Employees earning $1,000 and over a
month covered by an informal salary continuation program. Sick leave pay reduced by any statutory
sickness or accident benefits the employee receives.
6 Michigan Hospital Service and Michigan Medical Service (Blue Cross and Blue Shield plans).Em-
ployees in other areas covered by plans providing coverage as nearly equal as practicable to coverage
provided for employees in Michigan.
7 Also 730 days (reduced 2 days for each day in hospital) of convalescence and long-term illness care
other than tuberculosis care, in approved facilities.
5 Excludes psychiatric medical services.
o Not provided for maternity disabilities.
0
CD
0-
0
co
CS)
0
4.
th
CO
C.)
Co
th
1%,)
9170000Z009000t108?0089/dCIU-VIO : 6Z/80/1.00Z aseeieu JOd PeACLIddV
GENERAL MOTORS CORP.?Continued
Benefits for retirees age 65 and over and their dependents age 65 and over
Financing
Life insurance
In-hospital care
Care in
extended
care
facility
Home
health Medical and other
care health care
Employee pays Part B
Employee pays monthly towards private plan benefits, Medicare premium for?
Active employee
Retiree
Active
employee Retiree
Preretirement amount reduced 2 Same as for active employees age 65 and over Life insurance: For under
percent monthly until (1) for $24,000 of coverage,
employees with 10 years or more none (company pays
coverage, amount equals 1.5 full cost); for $24,000
percent of preretirement amount of coverage and over;
times amount maximum, mul- $0.50 per $1,000.
tiplied by years of coverage Major medical: Employee
(maximum, 20 years). $0.40; employee and
spouse, $1.00; em-
ployee and family,
$1.15.
Other benefits: None
(company pays full
cost).
Major medical: Retiree
only, $0.90; retiree and
spouse, $1.80.
Other benefits: None
(company pays full
cost).
1 Unless otherwise indicated employer pays balance of cost. 2 Covered expenses for medical treatment and hospital care in institutions operated primarily for
nervous and mental disorders?$55 a day less any payment under basic hospital benefit.
9170000Z009000t108?0089/dCIU-VIO 6?Z/80/1.00Z aseeieu -10d peACLIddV
9-170000Z009000t109?0089/dCltl-VIO : 6Z/90/1.00Z eseeieu Jod peAoiddv
I NTERNATi ONAL BUSINESS MACHI NES CORP.
Schedule of benefits
Accident and sickness Sick leave
Eligibility (when new em-
pioyee becomes mom) Basis of graduation
Days of benefit
Accidental per year at?
Optional death and When
life disrnem- Maxi MUM benefits rears of Half pay Full pay
Life insurance insurance berment Accident and sickness duration begin service (weeks)
Immediately or 1st of follow- Service 5 times Under 10 026
ing month. Under 1 year $1,000 annual 10 and
Ito 2 years $3,000 salary; over. 130
2 to 3 years $6,000 mini- (4).
3 to 4 years. $9,000 mum,
4 to 5 years $12,000 $50,000.
5 to 6 years $15,000 (2).
And up in increments of-
1 yew to 10 to 11 years__ $1,000 to
$20,000.
And up in increments of?
I yeas to 25 years and 1.333.33 to
over. $25,000.
Health benefits for active prnon.yees ?nder ago 65 and dependents under age 65
Hospital benefits Surgical and medical excluding major medical
Daily benefit or service Extended Ancillary
and duration coverage services
Medical allowance
Emergency Income Allowance Number of
outpatient limits for and visits or When
care or service Surgical procedure maximum days paid benefits
Maternity benefits service benefits allowances benefit for begin Other benefits
Semiprivate room. 365 days in Full cost Regular benefits Required Most expensive
any 36 consecutive months. services. $500.
Appendectomy
$200.
Normal delivery
$175.
I In addition, employee's spouse or dependents receive the greater of (I) $3,000, (2) 6 months of
employee's regular compensation, or (3) the amount which when added to life insurance will provide
a total benefit (including life insurance) equal to twice the employee's regular compensation (maxi.
num, $100,000) payable monthly at rate of of employee's monthly compensation.
2 Payable only if death or dismemberment results from accident which occurs while traveling on
company business.
Additional weekly payments may be made on an individual basis.
I For occupational disabilities company pays difference between workmen's compensation benefit
and pay.
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9170000Z009000t108?0089/dCIU-VIO : 6Z/80/1.00Z aseeieu -10d peACLIddV
INTERNATIONAL BUSINESS MACHINES CORP.?Continued
Health benefits for active employees age 65
Health benefits for active employees under age 65 and dependents under age 65?Continued and over and dependents age 65 and over
Major medical
Benefit period
From incurrence Care in Medical
Accumulation of expenses in extended Home and other
Daily benefit of service and Deductible period and From start excess of Maximum In-hospital care health health
duration amount its application of disability deductible Coinsurance benefit Reinstatement care facility care care
Semiprivate room. 365 days in Individual, Calendar year, Calendar year; 75 percent $15,000 during After 11S3 Of Dependents only'
any 36 consecutive months. $200; family, 3-month all disa- lifetime. $1,000 ex = .
$400. carryover; all bilities. penses; upon Same as for retired employese age 65 and
disabilities, evidence of over but reduced by Medicare benefits
insurability.
Benefits for retirees age 65 and over and their dependents age 65 and over Financing
Care in
extended Home
care health Medical and other
Life insurance In-hospital care facility care health care
Employee pays monthly towards private plan benefits'
Employee pays Part B
Medicare premium for?
Active employee
Active
Retiree employee Retiree
$500 plus $50 times years of Some as for active employees under age 65 but reduced by Medicare benefits except None (company pays full None (company pays full X- depend- X
service, maximum payable under basic plan to surgeon is $100 and the major medical deduc- cost), cost). ent only.2
tible is $50 a year.
1 Unless otherwise indicated employer pays balance of cost. 2 Employees must retire stage 65.
9170000Z009000t108?0089/dCIU-VIO : W80/1.00z aseeieu -10d peACLIddV
9-170000Z009000t109?0089/dCltl-VIO : 6Z/90/1?00Z eSeeleti -10d peACLIddV
FENN c:-.NTRAL co.
Schedule of benefits
Accident and sickness
Sick leave
Eligibility (when new em-
ployee becomes eligible)
Baqk of gr rnn
Optional
life
Life in3u..
Accidental
death and
dismem-
bermeni Accident and sickness
Maximum
duration
When
benefits
begin
Yearn of
service
Days of benefit
per year at?
Full pay
Half pay (weeks)
Cnimediately or lot of follow-
ing month.
Annual salary
Under $7,200
After 1-yr
After 2 yr
$7,200 and over
At age 65: Amount reduced
Annual salary
2 times annual
salary.
2 times annual
salary.
(9
(9
(9
(0)
(a) (5)
10 percent and 10 per-
cent annually to 50 per-
cent of pre-1965 amount.
See footnotes at end of table.
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9170000Z009000t108?0089/dCIU-VIO : 6Z/80/1?00Z eseeieu JOd peACLIddV
PENN CENTRAL CO.?Continued
Health benefits for active employees under age 65 and dependents under age 65
Hospital benefits Surgical and medical excluding major medical
Daily benefit or service Extended Ancillary
and duration coverage services
Medical allowance
Emergency Income Allowance Number of'
outpatient limits for and visits or When
care or service Surgical procedure maximum days paid benefits
Maternity benefits service benefits allowances benefit for begin Other benefits
Semiprivate room. 120 days $300 $150 $300 Most expensive, Employees
$300.
Appendentomy, Hospital: 1st In-hospital Hospital:
$150 day, $15; 120 days. 1st day.
Normal delivery, 2d day, Home and
$90. $10; 3d? office:
11th day, 4th visit.
$4 a day;
thereafter,
$3 a day.
Home: $5 a
visit
Office: $4 a
visit.
Maximum,
$388.
Dependents
Hospital only: 120 days_ _ _ 1st day
Same as
employee;
maximum,
$388.
1 occupational cases only.
2 Reduced by 50 percent of social security benefit and by 100 percent of other statutory payments
and company payments.
3 Accumulated at the rate of 10 days per year. Unused leave accumulative to a maximum of 80 days.
Under specified conditions an additional 20 days is granted upon exhaustion of accumulated and
current leave.
4 Formerly Pennsylvania Railroad Co.; applicable to all salaried employees of company.
a Employees receive sick leave benefits of Railroad Unemployment Insurance Act (see BLS Bulletin
1502. 1966; op. cit.).
9170000Z009000t108?0089/dCIU-VIO : 6Z/80/1?00Z eseeieu Jod peAwddv
PENN CENTRAL CO.---Continued
Health benefits for active employees under age 65 and dependents under age 65?continued
riealtri benefits tor active employees age 65 73a,
and over and dependents age 65 and over
(D
Major medical 23
CB
Benefit period (D
From incurrence Care in Medical 0
Accumulation at expenses in extended Home and other 0
Daily benefit of service and Deductible period and From start excess of Maximum In-hospital care health health
duration amount its application of disability deductible Coinsurance benefit Reinstatement care facility care care .......
0
CO
Semiprivate room. 120 days Annual salary: 6 consecutive 3 yr; each 75 percent $10,000 for each Upon evidence Same as active employees under age 65 but 17;3
Under months: each disabiliy disability. of reduced by Medicare benefits. CO
$7,200?$100, disability. insurability.
$7,200 to "
$10,000?
$200, $10,000
and over
$250. _...I
?AJ
0
Benefits for retirees age 65 and over and their dependents age 65 and over Financing -0
? .....i
Employer pays Part B cri
Care in Employee pays monthly towards private plan benefits, Medicare premium for?
extended Home
care health Medical and other Active
Life insurance In-hospital care facility care health care Active employee Retiree employee Retiree
Same as for active employees at Same as for active employees over age 65.
age 65.
None (company pays full Life insurance: None
cost). (company pays full
cost).
Other benefits: Full cost_
I Unless otherwise indicated employer pays balance of cost. 2 Expenses due to nervous and mental disorders, except hospital charges, not covered.
CO
CO
cri
1%,)
0
CD0-
0
C/)
CD
O
o
CO
17.s.3
? ?
0or
)3'
0
-0
cri
CO
co
cri
41%
Cri
RADIO CORP. OF AMERICA
0
CD
71
0
-s
X
M
07
a)
CD
8
CO
Pf&J
CAO
"
0
13
X
0
-0
'??1
cri
CO
o
o
c.4
co
o
X
o
o
o
cri
o
0
NI
0
0
0
0
41%
6
Schedule of benefits
Accident and sickness Sick leave
Eligibility (when new em-
ployee becomes eligible) Basis of graduation
Accidental
Optional death and
Life life dismem-
insurance insurance berment
Accident and
Days of benefit
per year at?
When
Maximum benefits Years of
sickness duration begin service Half pay Full pay
Life insurance and accident Annual salary
and sickness benefits: Im-Under $1,200

mediately or 1st of follow-$1,200 to $1,800
ing month. $1,800 to $2,400
$2,400 to $3,000
$3,000 to $3,600
Long-term disability: After And up in increments?
60 days of employment and $600 to $15,000 and over..
annual earnings of $15,000
more. (4)
Other benefits: After 60 days Weekly salary:
of employment. Under $60
$60 to $70
$70 to $75
$75 to $80
$80 to $85
$85 to $90
$90 to $120
$120 to $130
$130 to $140
$140 to $150
$150 and over
Flat
Long-term disability:
Annual salary: $15,000 and
over.
$1,500
$2,500
$3,500
$4,000
$5,000
$1,000 to
$25,000.
(4)
$2505
26 weeks 8th day
(4)
$40
$47
$50
$54
$57
$60
$62
$63
$68
$73
$75
$2.10 daily 100 days ?..... Upon cessa-
tion of basic
benefit.
50 percent of annual Unlimited After 6 mo
salary; maximum (7)
$2,500 monthly. 7
See footnotes at end of table.
>
TS
> -0
-0 n
0
-0
RADIO -s CORP. OF AMERICA?Continued <
O (D
< Health benefits for active employees under age 65 and dependents under age 65 a
CD m
a Hospital benefits Surgical and medical excluding major medical o
-n -s
o Medical allowance X
n M
X Emergency Income
outpatient limits for Allowance Number of
and visits or When CV
m Daily benefit or service Extended Ancillary care or service Surgical procedure m3XiMUM days paid benefits Rd
tr) and duration coverage services Maternity benefits service benefits allowances benefit for begin Other benefits co
o) m
co n.)
(D Semiprivate, room= (,) (2) (2) Most expensive, 0
$600. o
n.) Appendectomy, ?s.
o $160.
0
8
Normal deliverys
?% 03,....
$25, 365 days $300 Regular benefits_ _ $75 Most expensive, Hospital
$900. only: $5 a 365 days _ __ 1st day _ _ __ Anesthesia allowance: In or
8
out of hospital, only if sur- 1s.)
03 Appendectomy, day: maxi- germ makes a separate co
$21)0. mum, charge for anesthesia, $25.
I'.) Normal delivery, $1,825. Nonemergency accident and ..
co $158. sickness allowance: In out- i.P..0
..
patient department of has. 05
0 pitai, $75 per disability.
s. Nonoccupational accident X-ray
and laboratory examination
T
allowance: Tests performed i--1
0
X outside of hospital, $50 per 1:1
O accident. -.1
-0 Employee only s ? ol
-4 CO
ol
? $2, 20 days o
l..s.f o
o (.4
0 3 Upon expiration of full pay portion of paid sick leave, employees with under 5 yrs of service re- 7 Benefits after age 65: co
C a ceive 3i of pay through the 26th week of disability; those with over 5 yrs, 1,f of pay through the 52d Monthly benefit o
co week of disability. Payments are on a disability basis except payments for employees age 65 and as percent X
0 over with under 5 yrs of service are limited to 26 weeks during any 12 consecutive months. Age when disability began of salary o
xj 2 Full cost of semiprivate room, board, and ancillary services up to $500, and 80 percent of excess. Under 40 37.5 o
o Duration unlimited. 40 to 45 30.0 0
0 3 Lump-sum benefit of $250 for hospital and surgical expenses. 45 to 50 22.5 01
o 6 Certain employee groups earnings over $15,600 have additional life insurance based on a similar 50 to 55 15.0 o
tr, schedule. 55 and over o
o a Provided in addition to above insurance. Maximum benefit: Difference between social security benefit, workmen's compensation I?3
0 6 Not provided for maternity disabilities, benefit and cash payments from life insurance and 70 percent of base salary. o
K3 8 Provided in addition to basic benefit and payable only if confined to the hospital for at least 8 o
o days and receiving accident and sickness benefit. o
o o
o 41.
0 61
41.
6
>
TS
TS
-1
O >
< "0
M -o
a -s
o
m <
o fD
-s a
7.1 "ri
M 0
IT-0 RADIO CORP. OF AMERICA?Continued ?-s
S1.1 33
(/) fD
fD Health benefits for active employees age 65
Health benefits for active employees under age 65 and dependents under age 65?Continued and over and dependents age 65 and over 6
N.1 23
0 Major medical CO
0 f'D
?a Benefit period
8 IN
0
CO
r.3
CD
? ?
0
3>
i../
0
13
"..1
Daily benefit of service and
duration
Deductible
amount
Accumulation
period and
its application
From start
of disability
Semiprivate room 2
Annual salary:
Under $10,-
000, $150,
$10,000 and
over $200.
6 consecutive
months; per
disability,
From incurrence Care in Medical
of expenses in extended Home and other 0
excess of Maximum In-hospital care health health ?.%
?-,
deductible Coinsurance benefit Reinstatement care facility care care 0
.2e....i4C0
2 yr per din- 75 percent $100,000 for After use of Same aster active employees under age 65
ability, each disa- $1,000 ex- but reduced by Medicare benefits. CD
Exception: Out- bility.
of-hospital penses; upon
evidence of ? ?
0
psychiatric Exception: Out- insurability.
care, 50 per- of-hospital
cent. psychiatric 3>
care, maxi-
33
mum, $20a 0
CO visit; 50 "CS
0 visits.
0 'V
CO CO
0 0
X 0
0 CO
0 CO
0 0
C.TI A3
0 0
0 0
IV 0
0 Ull
0 0
0 0
0 IV
41. 0
61 0
0
0
.111.
r.j.n
7..
-0
-0
-,
I:. 0
-0 <
-00
a 0.
< -n
CD o
0- -I
m 73
O co
-I Ft
73 o)
u)
co RADIO CORP. OF AMERICA?Continued
(D
if
IV
$1) Benefits for retirees age 65 arid over and their dependents :gc 65 aid uvel Financing a
u) a
CD
Employee pays Part B
N.) Care in Employee pays monthly towards private plan benefitsi Medicare premium for-
75
o extended Home 03
Cs care health Medical and other Active
-a, Life insurance In-hospital care facility care health care Active employee Retiree employee Retiree ili
a co
co With 10 yr. of service or more. 40 1st $40 of charges during 1st ce None (company pays Ml None (company pays full ..
i::3 percent of prcrati Mint amount; days of confinement plus $5 cost). cost). 0
CD with 5 to 10 yr. of service, 20 daily during9th-601hday;$10
.. percent. daily during 61st-90th day; 87'Cl;
thereafter, $30 a day; IMM-
OX
5T
mum for retiree and depend-
) ent combined, $3,000. a
-0
73 I Unless otherwise indicated employer pays balance of cost. Annual salary Amount -4
at
O a Deductible, applicable to all expenses except hospital and scheduled surgical allowances, varies $9,000 to $12,000 87.50 CO
11 according to earnings, as follows:
$12,000 to $15,000 100.00 0
'-4 $15,000 to $20,000 125.00 0
0 Annual salary Amount
$20,00G to $30,000 110.00 C.4
CO Under $4,000 $50.00 $30,000 to $40,000 _ 200.00 co
o scow to $6,000 6250 $40,000 and over 250.00 o
o $6,000 to $9,000 75.00
X
(A) 3 Employee most retire at age 65. 0
Co 0
0 0
73 al
0 0
0 0
o N.)
US o
o a
o a
N.) o
o .P.
o
1
o
o
4=.
&I
Approved For Release 2001/08/g: CIA-RDP75600380R000500200004-5
ANNEX II
The Firestone Tire and Rubber Co.?Rubber workers.
Aluminum Company of America?Aluminum workers; steelworkers.
Chase Brass and Copper Co., Inc.?Automobile Workers,
United States Steel Corp.?Steelworkers.
Weirton Steel Co.?Independent Steelworkers Union.
Massachusetts Leather Manufacturers' Association?Leather workers; meat
cutters.
Minnesota Mining and Manufacturing Co.?Oil chemical and atomic workers.
California Metal Trades Association?Various unions.
Radio Corporation of America?Electrical (IUE) ; electrical (IBEW).
American Can Co.?Steelworkers.
Caterpillar Tractor Co.?Automobile workers.
North American Aviation, Inc.?Automobile workers.
Ford Motor Co.?Automobile workers.
Pullman Inc. (Pullman-Standard Div. )?Steelworkers.
General Motors Corp.?Automobile workers.
Johnson and Johnson (New Brunswick, N.J.)?Textile workers (TWUA).
Construction industry, Associated General Contractors of America, and other
employers (Northern California )?Carpenters.
Jewelry industry, Associated Jewelers, Inc., Jewelry Crafts Association, and
other employers (New York, N.Y.)?Jewelry workers, Local 1.
Doll and toy industry, National Association of Doll Manufacturers, and other
empoyers (New York, N.Y.)--Toy and Novelty Workers, Local 223.
Various Employers, St. Louis, Mo., area?Machinist, District 9.
Association of Master Painters and Decorators of the City of New York, Inc.?
Painters, District Council 9.
Construction industry various employers (Western Pennsylvania)?Various
unions.
Trucking industry, local cartage and over-the-road freight, various associa-
tions, and individual employers, Central States, Southeast and Southwest areas?
Teamsters.
Distributors Association?Longshoremen's and Warehousemen's Union, Locals
6 and 17.
Truck Owners Association of California?Teamsters.
Deere and Co.?Automobile workers.
Coal industry (bituminous), various employers?United Mine Workers.
Railroad industry, various employers?Various nonoperating railway unions.
National Automobile Transporters Association?Teamsters, National Trucka-
way and Driveaway Conference.
Retail, Wholesale, and warehouse industries, various employers (New York.
N.Y.) ?Retail, Wholesale and Department Store Union, District 65 (65 Se-
(urity Plan).
New York Shipping Association, Inc. (Port of New York)?Longshoremen's
Association.
Maritime industry, various employers, Atlantic and Gulf Coasts?Maritime
Union.
Maritime industry, various employers, Atlantic and Gulf Coasts--Marine
Engineers.
Hotel Association of New York City, Inc.?New York Hotel and Motel Trades
Council.
Restaurant industry, various employers (New York, N.Y.)?Hotel and Res-
taurant Employees, Local 89.
Realty Advisory Board on Labor Relations, Inc. (New York, N.Y.)?Building
Service Employees.
Retail Drug industry various associations and employers (New York, N.Y.)?
Retail, Wholesale and Department Store Union, Local 1199.
Retail trade industry, various employers (New York, N.Y, ) ?Retail Clerks.
Laundry industry various employers (New York, N.Y.)?Clothing Workers.
Maritime industry, various employers, Atlantic and. Gulf Coasts?Seafarers.
Construction industry, various employers (New York, N.Y.)?Carpenters.
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Approved For Release 2001/08/29 : Cfol-RDP751300380R000500200004-5
HOSPITALIZATION PLUS HEALTH BENEFIT PLANS FINANCED IN FULL BY PRIVATE
EMPI OYERS
(Note: The table shows the company and the labor union establishing the
agreement by contract.)
The American Sugar Raning Co. (Brooklyn, N.Y.) ?Longshoremen's Associ-
ation.
Swift & Co.?Meat cutters: packinghouse workers (TJPWA) ; packinghouse
workers (NBPW).
Armour and Co.?Meat cutters; packinghouse workers ( UPWA).
American Millinery Manufacturers Association (New York, N.Y.)--Hatters,
Cap and Millinery Workers.
Campbell Soup Co. ( Camden, N.J. ) ??Packinghouse Workers ( UPWA).
Lumber :industry, various employers {Southern California)?Carpenters.
Furniture. Manufacturers in Southern California, Industrial Relations Council
of?Carpenters.
Brewers Board of Trade (New York, N.Y.)?Teamsters.
Clothing Industry, men's and boys', various employers?Clothing Workers,
National Plan.
Furniture industry, various employers?Furniture Workers, National Plan.
Philip Morris, Inc.?Tobacco Workers.
Bigelow-Sanford Carpet Co., Inc.?Textile Workers (TWUA).
Continental Can Co., Inc., Robert Gair Paper Products Group?Papermakers
and Papervvorkers.
Printing Industry, Chicago Lithographers Association, and other employers?
Lithographers, Local 4.
The B. F. Goodrich Co.?Rubber Workers.
Bethlehem Steel Co.?Steelworkers.
Luggage and leather goods industry, various employers?Leather Goods, Plas-
tic and Novelty Workers. National Plan.
Publishers' Association of New York City?Typographers, Local 6.
Continental Can Co., Inc.?Steelworkers.
United States Rubber Co.?Rubber Workers.
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Approved For Release 2001/08/2V-: CIA-RDP75600380R000500200004-5
APPENDIX III
RETIREMENT AND DISABILITY PROGRAM
STATEMENT OF CASH RECEIPTS AND CASH DISBURSEMENTS, U.S. CIVIL SERVICE COMMISSION
May
1973
Cumulative fiscal year
May 31, 1973 May 31, 197 2
Receipts:
Withholdings and contributions:
Employees
Agencies:
Federal
Non-Federal
Appropriations:
$178,
030, 708
178, 062,515
4,924,017
$1, 926, 747,948
1,926, 716, 291
37,757,884
$1, 850, 658, 479
1,850 862, 025
35, 523,491
New and increased annuities
0
546,
570,
000
436, 152, 000
Increase on unfunded cost, and military service annuities.
0
0
0
Service credit deposits; redeposits
3,
558, 874
32,
085,
749
28, 745, 234
Voluntary contributions
86, 800
612,
887
758, 035
Interest, etc., on investments
Total receipts
29,
229, 919
851,
466,
154
812, 338, 475
393,
892, 835
5, 321,
956,
915
5, 015, 037, 741
Disbursements authorized:
Annuities:
Retired employees
Survivors
326,
52,
267, 489
513, 575
3, 382,
547,
853,
097,
254
080
2, 759, 507, 952
481, 642, 852
Refunds:
Separated employees
17,
051, 881
183,
077,
319
177, 134,680
Deceased employees
990, 071
9,
444,
368
9, 553, 669
Deceased annuitants
Voluntary contributions
700, 438
3,459
8,
542,
210,
750
514
9,553,669
277, 585
Administrative expense:
Due and paid
0
6,
636,
881
6, 153, 545
Advanced
Reimbursed
0
0
2,
(1,
700,
376,
000
304)
2, 049, 000
(1, 422, 864)
Other expense
0
422,
107
(1, 585, 423)
Total disbursements
Net receipts
397,
526, 916
4, 139,
607,
971
3, 442, 864, 668
(3,
634, 080)
1, 182,
348,
943
1,572, 173, 073
Analysis of balance in fund:
Cash in CSC
30,
689, 802
30,
689,
802
17, 657, 124
Cash in Treasury
Total cash
(6,
158, 130)
(6,
158,
130)
308, 991, 786
24,
531, 671
24,
531,
671
326, 648, 911
U.S. securities (par)
29,
148,
029, 000
29, 148,
029,
000
26, 278, 947, 000
Unamortized discount, premium
Total assets
10,
990, 045
10,
990,
045
10, 889, 554
29,
161,
570,626
29, 161,
570,
626
26, 594, 706, 356
Number of checks:
Annuities:
Retired employees
842, 892
758, 251
Survivors
284, 488
269, 370
Refunds:
Separated employees I
14, 106
149,
006 '
127, 724
Deceased employees
Deceased annuitants
Totals
336
1,713
3,
20,
450
512
4,234
19, 824
1,
143, 535
172,
968
151, 782
1 Includes voluntary contribution refunds.
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APPENI)IX IV
TABLE B-10.-NUMBER OF EMPLOYEE ANNUITANTS AND SURVIVOR ANNUITANTS ON THE RETIREMENT ROLL AS
OF JUNE 30, 1972, BY MOICHLY RATES OF ANNUITY
Monthly rates of annuity
Employee annuitants
1962 law
and after
Survivor annuitants
Children
Total
Prior to
1962 law
Total
Prior to
1956 law 1
1956 law
and after
Under $10
77
74
3
127
23
51
53
$10 to $19
1, 978
1, 870
108
3, 704
2, 201
926
577
$20 to $29.
8,867
8,470
397
9,664
4,437
4,208
1,019
$30 to $39
10,362
9,416
946
11,820
4,989
4,874
1,957
$40 to $49
8,093
7,331
1,562
12, 048
4,196
5,403
2,449
Subtotal, unde $50___
30, 177
27, 161
3, 016
37363
15,846
15,462
6,055
$50 to $59
9,338
7,498
1,840
14, 448
4,831
5,460
4,157
$60 to $69 .
12, 445
9, 644
2, 801
20, 737
6, 079
7, 587
7, 071
$70 to $79
11, 158
7,768
3,390
16, 160
6,883
8 123
1,154
$80 to $89
7,613
4,723
2,890
58,772
4,115
5,031
49,626
$90 to $99 _
13,608
8,921
4,687
20,271
9,880
10,329
62
Subtotal, under $100 _ _
84, 339
65, 715
18 624
167, 751
47,634
51,992
68,125
$100 to $109
7, 751
4, 498
3. 253
14, 201
3,597
5,651
4, 953
$110 to $119
12,735
7,681
5,354
10,888
3,338
7,550
$120 to $129
10, 445
6,122
4,323
9,117
2,413
6,704
$130 to $139
14, 319
7,927
6, 392
11,520
3,181
8,339
$140 to $149.
13, 095
6,957
6, 145
9,519
2,408
7,111
Subtotal, under $150 . _
142, 684
98, 893
43, 791
222, 996
62, 571
87, 347
73, 078
$150 to $159_
12,575
6,35?6,218
13, 546
2,278
11, 268
$160 to $169
14, 937
7, 843
7, 094
9, 844
2, 999
6, 845
$170 to $179
11,864
5,781)
6,084
6,160
1,730
4,430
$18010 $189
15, 656
7,2311
8,158
8,553
2,408
6,145
$19010 $199
14, 810
6,5911
8, 212
7,189
1,750
5,431
Subtotal, under $200 _ _
212, 526
132, 769
79, 757
268, 288
73,744
121, 466
73,078
$200 to $249-----------
86, 940
30, 4811
56, 454
27, 586
5,680
21, 906
$250 to $299.
91, 341
28, 840
62, 493
15, 609
2,211
13, 398
$300 to $349
74, 517
13, 843
50, 674
8,604
897
7,707
$35010 $399
65, 164
19, 705
45, /159
4,891
472
4,419
$400 to $449_
52, 572
13, 380
39, 192
2, 985
235
2, 750
$45010 $499---------38, 785
8,811
29, 974
1,822
123
1,699
Subtotal, under $500 __ _
621, 845
257,842
364,003
329, 785
83,362
173, 345
73, 078
$500 to $599
54, 340
8 654-
45,186
2, 092
68
2, 024
$60010 $699_
29 081
3,963
25,118
843
12
831
$700 to $799
17, 832
2, 04.
15, 788
355
4
351
$800 to $899_
11,752
1,160
10,092
170
3
167
$900 to $999
8.122
643
7,479
117
2
115
Subtotal, under :11,000_
742, 972
274, 306
468, 666
333, 362
83, 451
176, 833
73, 078
$1,000 to $1,1199
5,555
315
5,240
$1,100 to $1,199
3,638
171
3, 467
$1,200 to $1,299
2,393
83
2,310
$1,300 to $1,399
1, 480
26
I, 454
$1,400 to $1,499
982
26
956
Subtotal, under 14,500 .
757, 020
274, 927
482, 093
333, 362
83, 451
176, 833
73, 078
$1,500 and over
I, 449
22
1, 427
Grand total
758,469
774, 949
483, 520
333, 362
83, 451
176, 833
73, 078
1 Includes Public Law 85-465 widows.
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Senator BURDICK. Next will be Mr. Nathan Wolkomir, president,
the National Federation of Federal Employees.
STATEMENT OF IRVING GELLER, GENERAL COUNSEL, THE NA-
TIONAL FEDERATION OF FEDERAL EMPLOYEES, ACCOMPANIED
BY MICHAEL FORSCEY, LEGISLATIVE COUNSEL
Mr. GELLER. The president of our organization could not be here,
Mr. Chairman. I am the general counsel. I would like to present his
statement.
May I introduce our legislative counsel, Mr. Michael Forscey.
I appear before you today to testify on behalf of enactment of H.R.
9256, a bill which would increase the Federal Government's contribu-
tion to the costs of the Federal employees' health insurance program.
The original intent of Congress in establishing for Federal employ-
ees a contributory health benefits program was to provide a system
comparable to that available to employees of major industrial corpora-
tions in the private sector. That goal has not been met. Today many
private sector employers are paying 75 percent and the trend in the
major industrial corporations is toward 100-percent contribution by
employers. In light of this, we believe that the enactment of H.R.
9256 is an essential first step in providing Federal employees with the
kind of health insurance program they deserve.
If enacted in its present form, H.R. 9256 will increase the Govern-
ment's contribution to 55 percent beginning in 1973; gradually escalat-
ing that contribution to 60 percent in 1974; 65 percent in 1975; 70
percent in 1976 and 75 percent beginning in 1977.
The cost to the Government, if the legislation is enacted, is projected
at $1.3 billion in 1977. Without minimizing the cost, we believe this
can be considered expensive only if viewed in straight dollar and cents
terms. But if we remember that a health benefits program is enacted
to provide protection for the livelihood of employees, we realize that
in human terms the price is a fair one.
In this connection we must remember that under the present system,
costs to employees increase each time premiums are increased. These
increases are often difficult for _employees to bear. Since premiums are
the same regardless of salary, .the increased cost drains vitally needed
income from those who need the funds to purchase the basic necessi-
ties of life.
In addition, while it is widely believed that a health care plan ob-
viates the problem of medical expenses, in fact, the patient invariably
has a balance he must pay after insurance reimbursement.
Under present. economic conditions, these circumstances are creat-
ing a situation in which many Federal employees may be forced to
forego participation in a health care program sometime in the future
because the premium payments are needed for everyday necessities.
While it is no elixir, H.R. 9256 will partially alleviate this problem by
increasing the Government's contribution and commensurately reduc-
ing the individual employee's monthly premium.
But while NFFE supports H.R. 9256 for this reason, we are frankly
less than satisfied with the role the Federal Government is playing
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in the health insurance field. In previous appearances before this
committee, we have noted that the Federal Government is lagging far
behind the trend in the private sector in this field. This is true even
though, as we have stated, the intent of Congress in enacting the Fed-
eral employees' health benefit system was to provide to Federal
employees a program comparable to that available in the private
sector. 'We now believe the trend toward noncontributory plans among
major private sector concerns is so char that the Federal Govermnent
should commit itself to assume the total cost of the health benefit plans.
This solution is warranted because of the growing crisis in the health
care .delivery system in this country, and particularly because of the
continuing failure of the Civil Service Commission to act on behalf of
the Federal employee.
The House Subcommittee on Retirement and Employee Benefits has
documented the component parts of the crisis; burgeoning surpluses
for insurance carriers; inaccurate, ratemaking procedures; inadequate
services to subscribers and a general lack of accountability by anyone
in the system.
The public has been led to believe that this crisis, like so many
others we face today, results from increased costs, or lack of trained
personnel, and that, therefore, no one is really to blame.
We reject this contention. While we realize increase costs are tied
in with the general inflationary trend, medical costs have led the way
by a wide margin for more than a decade. The evidence thus far
produced indicates to us that the blame lies with the system itself, and
that the evidence is now clear enough to warrant remedial action.
We, therefore, propose that in addition to initiating a noncontribu-
tory health benefits program, the Government should become the in-
surer of that program. We believe that such an approach would not
only remedy the outrageous state of the present Federal program, but
could also serve as a pilot for some kind of national health insurance
program for all of our Nation's citizens.
The basic problem with the present system is the passive role taken
by the Federal Government. The Federal employee is confronted with
a bewildering number of insurance plans. The Government permits
private firms to compete with one another and supposedly oversees
their activities. But the competition engendered does not benefit the
employee iin any way, but rather confuses him and obfuscates the
nature of the program.
The point here is that a program like this cannot be run with car-
riers pursuing their own interests which are, almost by definition,
different from those of the employees. And while it may have been a
novel notion 10 years ago, it is now generally accepted that a regu-
latory agency invariably serves the interests of the industry it is
supposed to manage.
In saying this we, assume no evil intent on the part of the parties
involved, we merely state a fact. The individual employee is silent
and anonymous while the carriers are familiar and omnipresent. This
relationship creates a commonality of outlook and perspective on the
part of regulator and the regulated, which benefits the employees only
on rare occasions.
As an illustration of this point we refer the committee to a discus-
sion of legislation similar to the bill under consideration today. In
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that hearing in 1971, Mr. Ruddock, under questioning by the chair-
man, described a Catch-22 situation which clearly demonstrated that
the major beneficiary of the present system is the carrier. We learned
that Blue Cross was guaranteed a rate increase to offset a $75 million
deficit. So far as we can tell no effort was made to determine the rea-
son for the deficit.
We think it could have been shown that Blue Cross was inefficient,
failed to provide proper claims service and spent far too much money
investigating claims. Even if this were all true, we were led to be-
lieve, Blue Cross would still be granted a rate increase to make ends
meet.
We further learned that Blue Cross demanded a 1 percent risk
charge?in other words a profit?and that this charge, about $6 mil-
lion, was not used to calculate a reduced deficit. Thus, no matter how
badly the business is run, a profit is guaranteed and losses are recouped
in the next fiscal year.
And now we are presented with the latest example of the incestuous
relationship between the Commission and the insurers?this time with
the aid of the Cost of Living Council. Under new contracts signed last
month Blue Cross high option premiums will rise 19.3 percent?but
because employees pay 60 percent of the total premium?the increase
to them will be 26.7 percent. You will recall that the wage increase
for Federal employees was limited to 4.7 percent. This health premium
will substantially wipe out that pay raise.
In his 1971 testimony, Mr. Ruddock pointed out that Blue Cross had
threatened to discontinue its service as a carrier if it could not be
guaranteed a profit. A system which rewards incompetence by forcing
the Government and the consumer to pay higher premiums, and is
then threatened with discontinued service by the carrier who reaped
those benefits, is not a good system and should be scrapped.
We have recently learned that the General Accounting Office will
soon report to Congress on the advisability of the Government becom-
ing a self-insurer for the Federal Employees Life Insurance program.
The questions raised by such a study are strikingly similar to those we
confront in the health insurance field. Are we getting the best buy we
can? Is there collusion between the insurers and the administrators of
the program? Are the insurers reaping hidden profits?
Mr. Chairman, in light of the above, NFFE not only endorses
H.R. 9256, but respectfully suggests that the committee request GAO
to study the feasibility of the Government becoming a self-insurer in
the health field concurrent with its study of the life insurance
program.
We thank you for giving us an opportunity to present our views
here today.
Senator BuRnicx. Thank you very much.
You support the legislation. The committee is certainly going to
watch the GAO studies and will certainly bring to attention the
request to extend the study.
Senator Fong?
Senator FONG. I have no questions.
Senator BuRpicic. Thank you very much.
Mr. GELLER. Thank you.
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56
Senator Btninpat. Our next witness is Mr. Arthur Sparks, president,
National Association of Retired Federal Employees, accompanied by
.Judith Park, an able administrative assistant.
STATEMENT OF ARTHUR SPARKS, PRESIDENT, NATIONAL ASSO-
CIATION OF RETIRED FEDERAL EMPLOYEES, ACCOMPANIED
BY JUDITH PARK, ADMINISTRATIVE ASSISTANT
Mr. SPARKS. Thank you very much, Mr. Chairman.
Chairman Burdick and members of the subcommittee, I am Arthur
Sparks, president of the National Association of Retired Federal Em-
ployees. I will be very brief. Mr. Chairman.
I am pleased. to appear before you this morning on behalf of our
18'2,000 members in support of ILR. 9256, the bill to increase the Gov-
ernment's contribution toward health benefit premiums for enrollees
under the Federal Employees Health Benefits program, and to extend
this coverage to retirees not presently eligible for enrollment under
the program.
Our membershp is composed exclusively of retirees of the Federal.
Government and their survivors, and with today's skyrocketing infla-
tion, one of the major problems facing them is the maintenance of ade-
quate health care coverage at prices Which they can afford on their
fixed retirement, incomes.
Mr. Chairman, in the interest, of time, I would like to ask that our
statement in full be inserted into the record and allow me to briefly
summarize the National Association Of Retired Federal Employees
position cn this legislation.
We fully support this bill, Mr. Chairman, as passed by the House
of Representatives. We feel that the health benefit premium increases,
scheduled to become effective January 1, 1974, make the need for an
immediate increase in government contributions imperative, and we
would hope that the Senate would see fit to provide for this immedi-
ate increase, to no less than 55 percent.
Our association as a group composed solely of Federal retirees is
especially interested, Mr. Chairman, in approval of section 2 of this
bill, which would allow pre-July 1., 1960 retirees the option of elect-
ing coverage under the FESII program.
These early retirees are not presently eligible for this coverage,
which is more liberal than the plans offered to them under the Re-
ti red Federal Employees Health Benefits program.
We feel that they should be mule eligible for this more extensive
coverage on the, same: basis as other employees and retirees.
Section 2 was included as part of H.R. 1.2202 in the last Congress,
and we trnst that the Senate will again favorably report this section
of H.R. 9256.
U hank you, Mr. Chairman, for the opportunity to appear this
morning and lend our support to this very important piece of legisla-
tion.
Thank you, sir.
Senator BinuncH. Thank you. Your full statement will be placed
in the record.
Mr. Sparks, one of the problems we are facing, of course, is the
opposition by the Civil Service Commission and presumably by the
administration to go as far as this bill goes.
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Would you be in favor of reducing the coverage in any way?
Mr. SPARKS. Reducing the coverage?
Senator BURDICK. The cost.
In other words, if we didn't go the full 75-percent route to get
acceptance?
Mr. SPARKS. Yes sir, we would appreciate very much and support
the 55 percent at the present time and build our hopes on the future.
Mr. Ruddock made one statement this morning, sir, that there was
a tendency, maybe, to overinsure by some of the Federal retirees. I
wish he could have made the statement honestly this morning that
some of the retirees were. overpaid as well as overmsured. That would
help us a lot.
Senator Bunpica. Is he correct? Do you know of any instances
where a retiree would be overinsured ?
Mr. SPARKS. I don't know, sir. Certainly not in my case. I just had
a $6,000 hospital bill and I know the circumstances.
Senator Bmimcic. My other question had to do with a practical
thing to try to get improvement in this bill. I wondered how you felt
about some compromise on it if we had to do it.
This chairman doesn't Want to compromise, but sometimes you have
to face reality.
Mr. SPARKS. I understand, sir. We are not in any way trying to
appear hoggish. We would welcome 55 percent for our Federal re-
tirees, I am sure, if that is the best we can get out of the Congress.
Senator ButimoK. It isn't the Congress you are talking about totally,
you know.
Senator FONG. In view of what Mr. Ruddock said, I hope you will
study that problem in relation to your retirees who are now on medi-
care and medicaid.
Mr. SPARKS. Yes, sir. Some of our retirees, of course, are on medi-
care. They don't have both A and B unless they did have social secu-
rity. We hope that some day they can be brought under where they will
not have to pay that added coverage for the medicare program.
Senator BtTromcK. Prior testimony today has revealed that a retiree
pays the same premium as an active employee for health benefits.
With the, spiraling increases taken directly from a retiree's annuity,
doesn't this present a hardship to those members particularly whose
annuity falls below $100 a month?
Mr. SPARKS. Yes, it is a definite drawback to them. These people who
we are trying to bring in under this option, who are not qualified
for this program now, a lot of them, will never be able to pay the
premium. That is why we ask that it be optional to them.
Some of them cannot afford, with their income, to come under the
new program.
Senator BURDICK. Then you really have no way to ascertain at this
moment what the percentage of participation will be?
Mr. SPARKS. None whatsoever.
Senator Burtnicx. You have no facts and no guesses or anything2
Mr. SPARKS. Nothing.
Senator BURDICK. Thank you.
Mr. SPARKS. Thank you, Mr. Chairman.
[Prepared statement follows:]
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NATIONAL ASSOCIATION OF RETIRED FEDERAL EMPLOYEES
isaa lk:cw HAmteptswel Ave., L?J.W ? WAL181NOTON, 0. C. 20030 AmE4 Cope 1202 234.0052
A.,111411P2 L. SPARKS. 10111eSiDENT
CLArNOL M
JOHN 1. 10c.CLC+ 1.0ND
fIALIS 0PER/471,N.
MRS. DEATIAUDE CV DAVIE,
attoecture
DAVID 0. CHAPMAN
TAtAsuntR
STAIWPW-T OF ARTHUR L. SP&RU, PRESIDENT
NATIDNAL h:Z001ATION OF RETIRED FEDERAI EMPLOYEES
;WORE THE
3ZATE POST OFFICE AND CIVIL SF2VICE COMMITTEN
WBCOMMITTEE ON OOMFENSATION AND EMPLOYMENT BENEFITS
LIONCrAbkE QUENTIN N. HURD:CR, CHAIRMAN
a H. R. 9256
NOVEMBER. 9, 1973
Chairman Burdick and Members of this Subcommittee, I ia
Arthur . Sparks, President or the National Assoiation of Retired
Federal &IpLoyeas (NARFE). I am pleo.sed to appear before you this
morning
on ehalf of our 162,000 members in support of H. R. 9256,
the bill to increave the Government's contribution toward health
beneftt prelliums for uimlicei under the Federal Employae2 Health
Benefts Prpgram, c.nd to extend this coverage to retirees not
presently eligible for enrollment ander the Program. Our member-
ship is composed wxciacively of retirees of the Federal Government
and tbeir survivor , and with -eday's skyrocketing inflation, one
of the major problems facing them is the maintenance of adequate
health care coverage at prices which they can afford on their
fixed retir ment incomes.
The provibions outlirad in H. R. 9256 would be a major step
forward in alleviating this worry, for by increasing the Federal
Government's percentage contribution, to health benefit premium cost,
it would reduce the cobt of such insurance for the retirees who are
fortunats enough to have coverage under one of the Federal Employee
Health. Benefit Program's plans. It v)uld further provide more ex-
tensive coverage for the retiree who retired from the Federal Service
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before the enactment of the Federal Employee Health Benefit Program by
giving these older retirees the option of electing coverage under the FEHB
Program, a choice heretofore denied to them.
Nan fully supports tht primary- intent of H. P. 9256 to immedi-
ately increase. the Government's contribution toward premium cost from
the current 40 percent of premium to 55 percent, to be followed by an
additional 5 percent increase each year hereafter until the Government's
share of the premium reaches 75 percent. While we, should like to see
the Government pay 100 percent of health premium cost, a percentage as-
sumed by many- of the major private uniployare in this nation, we believe
that the assumption of 75 percent of cost is justified now, in line with
the Preidentla recommendation fc-.c private industry's goal in his health
care message to Congress acme two yoars ago.
We arc especially pleased that this Committee is acting early in.
an attempt to get this measure before the Senate for a, vote before this
First Session of Congress adjourns, an the proposed premium rate increases
scheduled to become effective January. 10 1974, makes the need for this
bill's provisions Even greater than they were at the time of the
introduction.
The enactment of H. R. 9256 would be a special boon to the Federal
retiree and his survivor, who by fact of retirement from the work force
is in the upper age brackets whore health care costs increase in fre-
quency and whose fixed. income status gives them less money to meet those
increasing costs. While retirement income is too often only adequate to
meet the coot of life'e necessities, it certainly cannot be argued but
that adequate and extensive health care insurance is a necessity in
today's society. The decreased oust of such insurance coverage which
would result from enactment of H. Ti. 9256 would be one small way of
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lessening the finuicial worry of maby of our Federal annuitants.
A:cur:tit:into who retired before july 1, 1960 were excluded from coverage
under the plans available to employees and later retirees under the Federal
Employeea Health Benefits Program. Pre-1960 retirees were granted the
privilege of full Medicare coverage (parts A and 11) if they attained
age 6;5 on or before January 1, 1968. Thus, a majority of the pre-1960
retirees do today have full Medicare coverage, but there are still many
of them sho are occluded from both Medi care coverage and coverage under
the IdlitH Progrim, The cost of aeinyaing adequate health insurance for
the eiderly bereoha is in most cades far in exbese of their ability
to pay, especiallv when eompounded rty the fact that these earlier retirees
at!e, Les enee rece vine; the 1.01,1,NI; zumuities, and ;:t..1 noted bcfore, their
need fen healt, (7,T+7' P:11d. correspond, :ng coverage 12 ge,?ater.
liveno &Jr t trees who oo have full Medicare coverage are
exemo tee Cr,;.6r1 :r1r1A7 ensuga oeverad:e to react. utloalty meet their
tied:, eel redu 000! till the high hoot of such sopplementary Medicare
coe tv.g.-! on all fru: tvidaisi oar o, an the availablihiiv of the more ex-
titan Lve euvs rage 1. rovided by the FEE3 plane, with the Government assuming
a meter acerceningt of the premium cost would greatly benefit them.
1he rcre,!, Ni HYkl would 'ink that this Subeomtaittee anel the full
Committee give op,. e La] attention and favorable report to Sec. 2 of
H. H. 92':6, which sotat i; the nnnuitant who retired before July 1,
1960 to elect coverage icier one of the Federal '&ealevee Health Benefit
-,411:4 if he oo d i red. Oertainly tbe se retirees ahcuJ it be granted
tile same beheft to in reard to heaLte oars coverage as all other retirees
ana: etriPjc'Ptesic the Eraieral Government. The Government's obligation
to 1,10:.5 should_ 0 00 lesc than it ic to othera who have spent their
careers _in the lee:dere! Serviee. We OeeL that all deeerve to be treated
equal 1 f, ao beet al ly in so vital a ft J.S ati health coverage,
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We are pleased with the provision of this bill which gives the
Civil Service CommiElsion authority to overrule an insurance carrier's
claim denial, if and when the Commission determines that ouch disputed
coveraee is within the scope or the carrier's contract according to
the Commiosion's interpretation of that contract. We believe such a
provision. has lone. been needed in the lawo and we welcome thin op-
portunity to endorse its enactment.
The National Association of hettrud.Feieyal boployoen thanks
this Subcommittee for its consideration of H. R. 9256, whose provisions
are no important to all Federal LiMployeca, anhultants and surviyoro. We
fully support the provisions of thin bill and. trust that early action
by the Committee and. the Senate will put it on its way to enactment in
the near future.
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Senator 13tmoica.. Our next witness is Mr. John McCart, operations
dirdutor, APL?CIO Government Employes Council, Washington,
D.C.
STEI OF Ago 1w4ivr, OPERATIONS DIRECTOR, AFL?CIO
NT FIEFLO'kFS OOVNCIL, WASHINGTON, C.
CCART. There will not be a necessity for me to sit, Mr. Chair-
man.
Senator BURDICK. Are you for or against this bill?
Mr. MoOART. I simply want to convey the message, Mr. Chairman,
that the Government Employes Council and its 30 affiliated unions
endorse 11.11. 9256. There is really no necessity for me to embellish the
record verbally. The subcommittee is fully aware of the problem from
previous hearings as well as the current session.
I -would like to request, Mr. Chairman, the opportunity to offer a
statement for the record supplement ing, my remarks before the record
ClOSS(1.
Senator )3Ittmoica. That will be received.
Mr. 31cCtearr. In addition, Mr. Chairman, the next witness is Mr.
Stauly Lewis the executive vice president of the National Association
of tater Carriers, AFL?CIO, who was here earlier, but who had to
leave becatise of some urgent business. He asked me to transmit to the
subconimittee also the Letter Carriers Union's endorsement of H.R.
9256 and to repeat a similar request that his organization be permitted
to file a statement prior to the closing of the transcript.
Senator tbRDICK. Mr. Lewis and Ins organization may file a state-
ment and it will be received.
I want to compliment you on a very effective statement.
Mr. McCAuT. Thank you, Mr. Chairman.
[The statements to be furnished were subsequently supplied for the
record and follow :1
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Approved For Release 2001/08/2%3 CIA-RDP75600380R000500200004-5
GEORGE J. KNALY.CoAl.yAN
J. STANLY
TRUST5E5
HENRY T. WI,ON
CHARLES O. PALUSKA
RICHARD S. MURPHY
100 INDIANA AVENUE. N.W.
JOHN A. McCART. OPERATIONS DIRECTOR
WASHINGTON, D. C. 20001
November 9, 1973
/41,-...EL J. cw...Lert Sac ..... Y-Tna?voraw
TRUSTEES
JACK A. WALLA".
ROONEY A. DOWER
CLYDE M. REDDER
393.2920. 393.2021
STATEMENT OF THE GOVERNMENT EMPLOYES COUNCIL, AFL-CIO, TO TPI SENATE
COMMITTEE ON POST OFFICE AND CIVIL SERVICE ON H.R. 9256 AND RELATED
BILLS (HEALTH BENEFITS CONTRIBUTIONS)
Mk. Chairman and members of the Subcommittee:
The Government Employes Council and its 30 affiliated unions are deeply
grateful to you for arranging this hearing on the Federal Employees, Health
Benefits program and the extent of the Federal Government's participation
in financing the system.
The'Government Employes Coancil, AFL-CIO, endorses H.R. 9256.
We are grateful to you, Senator Burdick, and to Senators McGee, Moss,
Hart, Humphrey, Pastore, Randolph, and Sparkman for your introduction of
S. 1906.
When the general health plan was enacted in 1959, the principle under-
lying cost was that the employer and employee would share the expense
equally. This assumption is found in Senate Report 468 and House Report
957, 86th Congress. However, the fact that the Federal Government was
embarking on an overall program affecting the largest number of employes
and dependents in the Nation resulted in language in the law limiting the
50-50 relationship to low option coverage. Nor could anyone foresee the
dramatic growth in employer financed health plans in the private segment
of the economy in the ensuing decade.
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Today, msse Mhan 951 of rederal Elplozreas par:lsipate In high option
plans. '.4hen .hn prn4sIn ws: ins-i:Jsa...,A, the is:rsnt's :hase of sssi,:
cc': to ;his Ktn'l
enacted Public Law 91-93, Pcsizin,-; the Go'rennment's contrihrizn to 11altn
benefits cost at Lo%. We are grateful, indeed, for this action. What it
'means, however, is that in the 13 years the program has been in existence,
the employer's share of premilta has increased about 2%. In addition the goal
,
envisioned when the system was inaugurated has never been achieved.
Contrast these developments to the trend among other employers in financing
employe healthcoverage.
, .
For more than 30 years, unions and. management of the Tennessee Valley
Authority have agreed on wage and salary levels and fringe benefits for
employes through the collective bargaining process.
At present, TVA and its employes have a contributory health benefits
program. The ratio of employer and employ contributions for family, high
option coverage is approximately 90% and 10%. For salaried workers, TVA
pays approximately 80% of the cost and the employee contributes 20%.
,
Table, I appended to this statement supplies the actual monthly premium
, t ,
rates for these two groups of employees.
The method af arriving at this formula is of more than passing interest.
A survey of some 50 private firms in the area serviced by TVA is undertaken.
In addition, the Federal Government's practice is reviewed. The parties
bargain on the basis of this study.
The most impressive point is that the private industry data producing
the TVP. method of financing is acquired in the following states - Tennessee,
Kentucky, Mississippi, Alabama, and Georgia. As a matter of fact, intro-
.
duction of the Federal Government's contribution formula has a depressing
!
effect on the situation in TVA.
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The L'epartmnt of Lal:or has steeled treng in health care coverage for
,eidea.;recent ey the :!ureau cf Labor
tieeca cemp ccc the prcE::::si :4: plant and office WOrk7.74 wanse health
care premiums are defrayed solely by employers. It shows clearly that in
1970-71 for both categories of workers a large and growing number of companies
are extending free health insurance. A simple illustration of this finding
is attached as Table II.
A Department of Labor press release dated December 31, 1971, highlights
employer expenditures for supplemental benefits in private industry and
Federal Service. The information discloses that for life, accident, and
health insurance, private companies expended 2.6% more of payroll on these
items than the Federal Government.
It is clear, then, that other industries have made rapid advances in
recent years in assuming the entire cost of employee health coverage. The
Federal Government during the same period has increased its share of health
benefits payments by only 15% to a total of 40%.
At its biennial convention in October, 1973, the American Federation of
Labor-Congress of Industrial Organizations adopted a program for the Federal
employes represented by its unions. Included was -
',Legislation for the Federal Government to defray
the entire cost of health benefits
There is ample justification for the Government to pay the entire coat
of health coverage for its workers and their families, based upon the per-
suasive evidence offered earlier in this statement. Acceptance of H.R. 9256
will provide modest, but sorely needed, relief from the inequitable finan-
cial burden now carried by Federal workers in the area of health insurance.
Er. Chairman, we believe deeply that simple justice requires that the
Government accelerate the rate of its employer contribution to the Federal
program. We urge, therefore, that the Subcommittee move promptly to accom-
plish this objective by approving H.R. 9256.
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F.:2LOYE7 AD EXPL:S-YEE EHARE OF HEALTH SI:;IFITS PREMIUMS
SALARIED EXPLOTEES
TOTAL FRZNIUM TVA PAIS
Individual $13.35 , $10.70
Family
'
36425 28.30
TRADES AND La2F1
TOW.
PREMIUM TVA PATS EMPLOYEE PAYS
Individual $11.49 $ 9.50 $1.99
Featly 33.48 29.50 3.98
EMPIpTEE PAYS
$2.65
7.95
BLEII
Proportion of Workers in Metropolitan
Areas Covered by Noncontributory Health
Plans
1970-71
PLANT WORKERS
OFFICE WCRKERS
Hospital
69
57
Bergin-al
69
57
Basic Medical
64
53
Major 'Medical
43
49
opeiu-2 afl-cio
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STATEMENT OF J. STANLY LEWIS, EXECUTIVE VICE PRESIDENT
NATIONAL ASSOCIATION OF LETTER CARRIERS
Chairman Burdick and Members of the Subcommittee:
The National Association of Letter Carriers is pleased to
be afforded the opportunity to submit this statement urging
your subcommittee to report out H.R. 9256 as it was passed by
the House of Representatives.
Similar legislation proposing the increasing of the ratio
of Government contributions to the Federal Employees Health
Benefits Program has been introduced in each session of Congress
from the inception of the health benefits program, and on each
occasion, the National Association of Letter Carriers has
supported and urged the adoption of the measures.
While the pending legislation, H.R. 9256, does not have
direct impact upon postal employees, inasmuch as we were able
to secure through collective bargaining processes increased
payments on the part of the U. S. Postal Service from the 40 per-
cent now paid by the Government under existing law to 55 percent,
this legislation will greatly benefit those of our members who
are on the Civil Service Retirement rolls.
The record is replete with testimony justifying the payment
of a larger amount of health benefits premiums by the Government
and it is not our intention to reiterate this information merely
for the purposes of the record.
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68
It w0143 appear to us to be simple justice for the
Federal employees to receive comparable benefits to those obtained
by postal employees through the bargaining procedures. It is
also simple justice that those persons who, by their long and
faithful service, are now enjoying the benefits of retirement,
should also receive the economic relief that would be afforded
with the passage of this legislation.
Therefore, Mr. Chairman, we respectfully urge that your
Committee take speedy action towards the enactment of this
meritorioUs'legislation.
Thank you.
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Senator BURDICK. The next witness is Mr. Peter J. Connell, counsel,
Aetna Life and Casualty, Washington, D.C.
STATEMENT OF PETER J. CONNELL, COUNSEL, AETNA LIFE AND
CASUALTY; ACCOMPANIED BY MALCOLM McINTYRE, JR., GOV-
ERNMENT RELATIONS ADMINISTRATOR OF THE GROUP DIVI-
SION OF AETNA LIFE AND CASUALTY
Mr. CONNELL. I have with me Mr. Malcolm McIntyre, who has
come from the home office in Hartford. He has a good many years'
experience with the Federal Employees Health Benefits Act and the
Indemnity Plan, which is the plan which Aetna operates.
I will be very brief and summarize my short statement.
We are appearing solely to discuss section 3 of I-I.R. 9256.
This is a section which we believe is important and it did not receive
any consideration in the House subcommittee hearings or in the House
debates.
We would appreciate it if this subcommittee would consider this
section seriously.
Section 3 of the bill simply provides that each contract under this
chapter "shall require the carrier to agree to pay for or provide a
health service or supply in individual case if the Commission finds that
the employee, annuitant or family member is entitled thereto under
the terms of the contract."
In our view, this proposed amendment is unnecessary and undesir-
able. I would point out that in Mr. Ruddock's testimony today he
reiterated the position taken earlier in the House by the Chairman of
the Civil Service Commission who said, "We are not currently ex-
periencing any problems in securing carriers' compliance with Com-
mission decisions on interpretation of contract benefit provisions."
The amendment is unnecessary for several reasons:
First of all, there already exist adequate administrative and judicial
remedies to make sure that carriers are meeting their responsibilities
under their contracts with the Civil Service Commission. In the In-
demnity Benefit Plan, operated by Aetna, on page two of the brochure
that is given to all enrollees, it is explained that should they be denied
benefits, and should they wish to contest that denial, they may con-
tact the Civil Service Commission.
The Civil Service Commission in turn discusses this matter with us.
It is reviewed by our coordinating office here in Washington, D.C.
Further review is possible and is often taken, which involves review de
-novo by our medical and legal offices in Hartford.
If you care to get into the facts and circumstances, Mr. McIntyre
has statistics which indicate that this administrative procedure is
working very well.
Senator FONG. What does this actually mean?
Mr. CONNELL. As far as the administrative review is concerned?
Senator FONG. No, as far as the words are concerned. You say if
the Commission says you pay, you pay? Is that what it is?
Mr. CONNELL. Yes, sir.
Senator FONG. In other words, any time the Commission has asked
you to pay you have paid?
Mr. CONNELL. That is correct, sir.
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We believe essentially it. is unnecessary in that we are not experi-
encing any problems or any disagreements with the Commission.
There are other ptocedures, administrative and judicial, for reconcil-
hig any differences which may present themselves.
Also, I think it. is important to note that the section in our view is
grossly deficient in terms of procedural due process. There is no pro-
vision in the proposed amendment which calls for any procedural
standards.
Senator Foxe,. Are you afraid that the Commission may go wild
and order you to pay a claim which is not justifiable? Is that what
.\'011 are worried about ?
Mr. CONNELL. Yes, that is correct. I think it is also important to note
that the provision doesn't say anything about how depositions might
be. taken, how witnesses might be qualified, whether or not a decision
of the Commission could be appealed to a court, the standards that
would be, used for judicial review of such a matter.
It seems to us to not only a departure from the traditional way in
which the Health Benefits Act has been administered, but a marked
departure. from fundamental concepts of administrative law as well.
Senator FoNo. Have you ever had an occasion when you haven't
paid when the Commission asked you to pay?
Mr. CONNELL. Very, very few, sir, if any. We had in the year of
May 1972 to May 1973 about F70 occasions in which the Commission
asked us to take, another look at the, decision that had been made by
the field office.
When we took that second look and, reviewed the facts, and in some
cases additional facts provided to us, we paid 155 of these claims
right away.
With respect, to some of the others that we did not think we, should
pay, further review was had by our medical officers and our legal
officers. When you consider that there are something like 460,000
people covered by the Indemnity Benefit Plan and there were only
_?;70 occasions in a year that came up where individuals felt that they
were improperly denied benefits, it is really, I think, quite a small
problem. 1 think it is being handled quite well under the present
procedures.
Senator Fon. In other words, in some cases you feel that the em-
ployee is not covered because of injury or certain things that happened
outside of his employment?
Mr. CoNNEnn. It may be a question of whether or not a procedure
was necessary or elective. It may be a question of the fee, whether the.
fee is too high.
Mr. McIntyre will discuss this more, if you are interested. Aetna
does try to maintain cost controls. Sometimes a bill will be presented
which. we feel is extraordinarily high and we wouldn't want to pay
the entire bill, which we feel is unreasonable. In that case, an employee
may feel that we ought to be paying the whole bill and we take another
look at it and review it and compare the bill with charges that are
made for comparable services by other physicians or hospitals in that
particular area. In short, I think we feel that the present procedures
are adequate. There are adequate protections for the people enrolled
in this program.
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No evidence at all has been adduced in the House hearings that
would indicate that this kind of a radical change is at all required.
Finally, I would just point out that Mr. Webber in his testimony
indicated some support for section 3 of the bill and said that the deci-
sions as to whether benefits should be paid "should not be left to the
judgment of the carrier which is obviously acting in a manner affect-
ing its own self-interest."
I think that Mr. Webber misconceives the issue. Aetna is paid a flat
fee for administering this program. If this new procedure were to be
enacted and if the Commission were to require payment of a large
number of questionable claims, this would in no way affect Aetna's
profit. Money to pay these claims would have to be taken from reserves
and that might be reflected in the premiums charged to the Govern-
ment employees the next year.
So we are really not here simply as a matter of our own pecuniary
self-interest but rather to indicate that we feel that the amendment
is not necessary.
Senator FONG. And you only get a fee for handling this?
Mr. CONNELL. Yes, sir, that is correct.
Senator FONG. Whether you deny or don't deny you still get the fee?
Mr. CONNELL. That is exactly right.
Senator FONG. And it is the same fee?
Mr. CONNELL. Yes, sir.
Senator FONG. So if you deny it, the Government doesn't have to
pay out so much money?
Mr. CONNELL. That is correct, sir.
Senator BURDICK. May I ask a question along the same line?
I understand now that administrative appeal is available to anyone
covered?
Mr. CONNELL. Yes, Sir.
Senator BURDICK. But the decision of the Commission is not neces-
sarily final as far as the parties are concerned?
Mr. CONNELL. That is correct.
Senator BURDICK. What happens if the covered person is unhappy
with the decision of the Commission?
Mr. CONNELL. If he is unhappy with the decision? Let's suppose
he is denied a benefit by Aetna. He appeals this to the Commission
and the Commission agrees that payment should not have been made
in this case; his recourse then is to sue Aetna in court, and we have
been sued. We haven't been sued very many times which, again, I
think, relates to the necessity for this proposed change. But there is
judicial recourse. He can take us to court. If he can prove that we are
not meeting our responsibilities under the contract, then we would
pay.
Senator BURDICK. Are you a lawyer?
Mr. CONNELL. Yes, sir.
Senator BURDICK. And I am a lawyer. As a practical thing some
low-paid employee who doesn't get the claim paid, what chance would
he have of going through the judicial process as a practical matter?
Mr. CONNELL. As a practical matter, sir, I suppose that depends a
lot on how big a claim it is. If it is under $500, I would guess in most
jurisdictions he could take the matter into small claims court. If it is
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over $500 then, of course, he would have to hire a lawyer. Obviously,
that presents difficulties.
Senator BURDICK. This is almost like a $100 bend in a fender, you
can't afford to do anything about it.
Mr. CoNxEr,i.. That is right.
Senator BURD[ca. This is the problem that I see.
Senator Fomp, Have there been any occasions when the Commission
said to pay it and you refused to pay it?
Mr. CONNELL. I would like Mr. McIntyre to respond to that because
he has been administering this for many years.
Mr. MCINTYRE. Senator Fong, to my knowledge in the 13 years in
which we have been involved in the plan, I do not know of any case
in which the Commission has asked us to pay after their thorough
review and our thorough review where we have refused to pay.
Senator FONG. You have paid some claims which you think should
not have been paid and the Commission, after reviewing it, said you
should pay it? You have paid it?
Mr. MCINTYRE. That would only be, Senator, if we had proper
documentation that the claim should be paid under the provisions of
the contract.
Senator BURDICK. What confuses me is why does this amendment
or why does this section of the bill always pop up in all these bills
if there is no abuse, out in the field ? Is this a theoretical thing?
Mr. CONNELL. Senator, I suppose we; can only speak for Aetna. There
is no abuse, as far as Aetna is concerned. I am not really sure what is
in the minds of the proponents of this legislation. There may be diffi-
culties with some of the other carriers. We certainly have not expe-
rienced difficulties. The Civil Service Commission, in its testimony
here, which corresponds with its position in the House committee, has
indicated that it is not presently experiencing any problem in secur-
ing carrier compliance with its decisions.
Senator BURDICK. What you are contending as far as Aetna is con-
cerned that there is no abuse as far as Aetna is concerned to be cor-
rected here?
Mr. CoNwELL. That is correct.
Senator 13rinnicK. You may proceed.
Mr. CONNF.I.L. I think, Senator, those are really the. major points
that we, wanted to make. If the intent of the amendment is to insure
that the enrollees receive everything they have coming to them, I would
just like to make it clear that. that. is obviously an objective that we
share.
T believe our record of the past 13 years indicates we have met our
responsibilities in that, regard. Therefore, we see no necessity for this
amendment. We feel it is quite deficient in terms of procedural due
process and we would respectfully urge that it be stricken from the
bill.
Senator BURDICK. I would like to ask you a converse question. If
there is no abuse why do you have fear from it?
Mr. CON NELL. abuse,
me answer that this way, Senator. I get along fine
with my next-door neighbor and I haven't had any disputes with my
next-door neighbor in the years I have lived in my house, over prop-
erty boundaries or anything else. But if the legislature were consider-
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ing a bill that would give my next-door neighbor the authority to de-
cide with finality any disputes which he and I might have in the future
with respect to property boundaries I would oppose that bill on the
grounds that, (a), it is unnecessary; (b), it is unfair, and (c), we
already have courts that can handle problems like that. I think we
are ?in a somewhat similar position with respect to this particular
provision.
Senator BURDICK. I am afraid the analogy doesn't hold water be-
cause you have one neighbor across the hedge from the other neighbor
on an equal status. But here you have one little employee against a
big company. It is a little different situation.
Mr. CONNELL. If there were abuses, if Aetna were not paying claims
that should be paid, if the Commission experienced some difficulty in
securing our compliance, I think they could lean on us next time we
came around to negotiate contracts.
Senator BunnicK. We are going to ask if anybody has any evidence
of abuses.
MT. CONNELL. That is fine.
Senator BURDICK. Of course, if there is no abuse, the argument for
it lessens of course.
Are there any further questions? If not, thank you very much.
In closing the hearings, I would like to state the support of the
American Postal Workers Union and the National Association of
Government Employees of H.R. 9256, and their statements will be
made part of the record.
That will conclude the hearing.
[Whereupon, at 11 :20 a.m., the subcommittee recessed, to reconvene
subject to the call of the chair.]
[The aforementioned prepared statements follow:]
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STATEMENT OF PETER J. CONNELL, WAS COUNSEL
AETNA LIFE h CASUALTY
BEFORE
SOLCOM2aTTEE ON COMPENSATION & EIVLOYMIT BENEFITS
SENATE COMEITTEE ON POST OFFICE & CIVIL SERVICE
ON
H. R. 9256'
FRIDAY, NOVEMBER .9, 1973
ER. CRAIRMAII AND MENBERS OF THE SUBCO2E7TTEE:
I am Peter Connell, Washington Counsel for Aetna Life &
Casualty. 1 am accompanied by Mr. Malcolm McIntyre, Jr., Government
Relations Administrator of the Group Division of Aetna Life & Casualty.
Since 1960 Aetna has contracted with the Civil Serivce
Commission?on behalf of itself and many other insurance companies
which reinstre the contract--to provide the Government-wide Indemnity
Benefit Plan authorized by the Federal Employees Health Benefits Act
(FEHBA). We appear here this morning for the limited purpose of testify-
ing with respect to section 3 of H. R. 9256. This important section
proposes a marked departure from the traditional administration of the
FEHBA program and received no consideration in either the hearings or
the floor 69')ates in the House. In the interest of brevity, we will
keep this statement short and to the roint. We will be glad to respond
to any questions the subcommittee may have.
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Section 3 of the bill would amend the Federal Employees Health
Benefits. Act to provide that: "Each contract under this chapter shall
require the carrier to agree to pay for or provide a health service or
supply in an individual case if the Commission finds that the employee,
annuitant, or family member is entitled thereto under the terms of the
contract." In our view such an amendment is unnecessary and highly
undesirable.
The amendment is unnecessary because adequate administrative
and judicial remedies are already available to assure that a carrier
continues to meet its responsibilities under its contract with the Civil
Service Commission.
The opportunity for administrative appeal in the case of the
denial of a benefit under the Indemnity Benefit Plan is noted on page 2
of the brochure (BRI 41-24), which is distributed to enrollees and which
is an integral part of our contract with the Civil Service Commission.
If an enrollee is aggrieved by a decision that benefits are not payable
.re
under the terms of the plan, he may seek an impartial review by the
Bureau of Retirement, Insurance and Occupational Health of the Civil
Service Commission. In such cases, our coordinating office in Washington,
D. C., independently reviews the decision of the field office and discusses
the matter with representatives of the Bureau. I am advised that there
have been very few, if any, instances since the inception of the plan in
1960 in which we and the Bureau representatives have disagreed on the
resolution of a claim once all the facts were available. In case of
disagreement, however, the Matter would be referred to the medical and
legal officers at. our home office for further review and decision.
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76
Judicial relief is also available. Legal action may be
instituted by either the Civil Service Commission or by an aggrieved
enrollee sixty days after written proof of claim has been furnished.
It is our position that, where honest differences arise between
parties to a contract those parties should cndcaver to settle those
differences and, failing that, the matter should be decided by a court
of competent jurisdiction. This is the arrangement which presently
obtains. The proposed amendment would alter that by according to one
of the contracting parties--the Commission--a carte blanche to adjudicate
these issues and to make binding decisions with respect to the meaning
of the contract. By making this new authority an integral part of the
contract itself, the proposed amendment would effectively insulate the
Commission's decisions on such matters from judicial review; for having
contracted to accept the authority proposed for the Commissicn, a carrier
could not easily challenge its exercise in court. Moreover, the proposed
authority to decide entitlements is set forth with no procedural requisites
or standards of any kind. There are no procedures for filing pleadings;
taking depositions or other forms of oral testimony; authenticating
documentary evidence; qualifying witnesses; submitting briefs or oral
arguments; or for judicial .review of a Commission decision. This
represents a departure not only from present practices under the FEHBA
program but from fundamental concepts of administrative law. Ir short,
section 3 seeks to accord to one contracting party fall, and virtually
ultimate, adjudicative authority with no criteria for its exercise and
without any of the safeguards which would be available to the other
contracting party in a court of law.
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We respectfully submit that section 3 is seriously deficient
in providing for procedural due process--to the insured as well as to
a carrier--and is unnecessary. Indeed no evidence whatever was adduced
in the House subcormittee hearings to justify this proposed revision.
Finally I would point out that Aetna Life & Casualty is paid
a flat fee for administering the Indemnity Benefit Plan. This fee is
established irrespective of the number or size of claims paid. Should
section 3 be enacted, and should that result in the payment of a large
number of questionable claims, those claims would be paid from reserves.
This in turn would affect premium levels which are established on the
basis of experience; it would not affect the profit of Aetna Life &
Casualty or the other companies which reinsure the contract.
Thus the question before this subcommittee is whether to
establish an open-ended, procedurally deficient mechanism for adjudicating
claims disputes in the absence of any evidenee whatever supporting the
need for so drastic a change when the effect on premium levels would be
thoroughly unpredictable.
We take it that the objective of the proposed amendment is to
assure that enrollees receive the full measure of benefits to which
they are entitled under the various plans. We share that objective.
And we believe that our record over the past thirteen years testifies
to our commitment to meet our responsibilities under the Indemnity
Benefit Plan. Because of the absence of any evidence to the contrary,
we respectfully urge that section 3 be stricken from H. R. 9256.
I thank the subcommittee for this opportunity to appear here
this morning and we would be glad to try to answer any questions you may
have.
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Amertran Postai ltrarkprs Thiiim,ANE-00
411:11i
517 141 STREET, N. W., WABHINOTON. D. C. 20005
?Erkz"
STATEMENT OF
PATRICK J. NILAN, LEGISLATIVE DIRECTOR
AMERICAN POSTAL WORKERS UNION (AFL-CIO)
ON H.R. 9256
PROPOSING THE FEDERAL GOVERNMENT SHALL INCREASE
ITS SHARE TO 75% OF THE COST OF HEALTH INSURANCE
FOR FEDERAL EMPLOYEES, & ANNUITANTS
BEFORE THE
SUBCOMMITTEE ON COMPENSATION AND EMPLOYEE BENEFITS
OF THE
SENATE POST OFFICE & CIVIL SERVICE COMMITTEE
NOVEMBER 9, 1973
Mr. Chairman and Members of the Committee:
For the record, I am. Patrick J. Nilan, National Legislative
Director cf the American Postal Workers Union (AFL-CIO) with offices
at 817-14th Street, N.W., Washington, D.C.
Mr. Chairman, the American Postal Workers Union, speaking in
behalf of more than 325,000 postal employees for whom we are the Ex-
clusive National Representative for labor-management relations and
collective bargaining with the U.S. Postal Service, welcomes whole-
heartedly the opportunity to present its views on H.R. 9256, which
provides for an increase in the government contribution toward health
benefits for Federal employees and postal retirees.
1.R. 9256 passed the House on September 20, 1973 by a vote
of 217-155 and we are pleased and grateful to you, Mr. Chairman, for
holding hearings on this long overdue and vitally needed legislation.
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While we endorse the principle of 100% government contribu-
tion toward health benefits by the employer, we nonetheless, view this
as a giant step in that direction. As you know, Mr. Chairman, the APWU
along with the other exclusively recognized postal unions, was success-
ful in negotiating in our most recent contract, a provision that would
increase the U.S. Postal Service contribution toward health benefits
from 40% to 55% on July 21, 1973, and to 65% July 21, 1974. Unfortunately,
this applied only to those postal employees in the bargaining units rep-
resented by the exclusive postal organizations. This, of course, does
not include the many thousands of postal retirees who are not in the
bargaining unit and therefore, did not receive an increase in the employ-
er's contribution toward their health benefits. Needless to say, these
are the people who can least afford to pay the lion's share of their
health benefit premiums.
In addition to those postal employees presently retired, any
postal employee contemplating retirement would receive a reduction from
the present level of 55% as an active employee in the U.S. Postal Service
to 40% as a Civil Service retiree. Should they retire after July 21,
1974, the reduction is even greater since it would be from 65% to the
present 40% level.
Mr. Chairman, a relatively small group of Federal and Postal
retirees not presently covered under the Federal Employees Health Benefits
Act are those who retired prior to July 1, 1960. H.R. 9256 will correct
that inequity and we urge that section to be included in final passage of
the bill.
Therefore, Mr. Chairman, we ask that your Committee expedit-
iously approve and report to the Senate, H.R. 9256.
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Ti?E L?ROEST INOCRENOENT GOVERNMENT UN /ON N 71.1 COUNTRY
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NATIONAL ASSOCIATION OF GOVERNMENT EMPLOYEES
1.7101.1 0 STREET NI.VV..WASHINGTON, D.C.20005
202 142S-.662
STATEMENT ON HR 9256, A BILL ON HEALTH BENEFITS BEFORE
THE SUBCOMMITTEE ON POST OFFICE AND CIVIL SERVICE BENEFITS
OF THE SENATE COMMITTEE ON POST OFFICE AND CIVIL SERVICE
The National Association of Government Employees is
very much in favor of improving the Federal Employees Health
Benefit Program through HR 9256. This area is of extreme
importance as witness the continuing studies and proposals
for a nation-wide government health insurance program, as
well as the marked increase in employer contribution in the
private sector.
The present governmental payment of 40% for its employees
health insurance is unreasonable in any context. A great
number of private sector employers are paying anywhere from
70% to 100%. In addition, this is part of an employees so-
called pay package in the private sector so the 5.5% Cost
of Living Council's ceiling includes this and other benefits
on the base pay figure upon which the 5.5% is computed. Not
so for Federal employees who are, therefore, short changed
on both ends of the pay spectrum.
The huge increases in the cost of health care, as well
as the built-in lag in employees pay causes an unconscionable
burden which could more easily be picked up by the government
through application of some of the excess principal in the
Civil Service Retirement Fund. This position is shared by
the American Federation of Government Employees and so
additional mathematical input here would be superfluous.
The government has recently granted the Postal Service
a comparable increase in health insurance payments and there
would be clear inequity in denying similar provisions for
other Federal employees. After initial increase in the
government's share to 55%, a bill provides for a gradual
increase of 5% a year up to 1977 where a 75% ceiling is
reached. This is not a large amount when compared with
what so many private sectors employers are paying. The
NAGE feels that 100% would not be too great to ask, but we
can live with this for the time (the problem is, of course,
taking four (4) years to catch up with the private sector -
an unbelievable lag).
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As to the bill's other provisions, they seem both reason-
able and equitable. Retirees are more susceptible than others
to serious illness and injury by virtue of their uniformal
greater median age- the cost figures.on their share increase
is not valid due to the constant change in their number. And
the third provision giving the Civl Service Commission definition
and final authority to regulate rather than advisory authority is
a necessary step. The-insurance carrier which is by definition
acting in its own self-interest cannot be allowed the luxury
of self-regulation in such a sensitive area.
In summary, the NAGE goes on record as wholeheartedly
supporting this legislation and wishes to thank the sub-
committee for the opportunity to submit our comments. Please
be assured we will do everything in our power to assure the
speedy passage of this bill and we will hold ourselves avail-
able to all the members of the subcommittee if we can be of
any assistance.
The legislation fills a definite need in the day to
day living of the Federal employee and the final passage
will only ensure a more equitable distribution of such costs
in live with the rapidly increasing costs to workers in all
other areas.
James L. O'Dea
Legislative Counsel
National Association of
Government Employees
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