INSURANCE PROGRAM OF THE CENTRAL INTELLIGENCE AGENCY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84-00780R000300070009-5
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 39
• Document Creation Date: December 15, 2016
• Document Release Date: August 6, 2003
• Sequence Number: 9
• Publication Date: September 20, 1963
• Content Type: MF

C
MFMORANDUM FOR : Deputy Director (Support)
THROUGH t Director of Personnel
SUBJECT : Insurance Program of the Central
Intelligence Agency
REFERENCE : Memorandum for C/BSD/OP, from DD/S,
dated 5 June 1963, Subjects GEHA Group
Life Insurance Program. (Tab A)
1. Pursuant to referenced memorandum, a Task Force consisting
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of Member; and
Member and Legal Advisor, submits the following
report on the Insurance Program of the Central Intelligence Agency.
The comments of the GEHA Board of Directors are attached as Tab
2. The Task Force was appointed to examine certain aspects of
the GEHA Group Life Insurance Program -- aspects which were high-
lighted in a memorandum for the record dated 2 May 1963 by Mr.
of the Office of General Counsel. (See Tab B) The Task
Force believed a broader examination than that suggested by
memorandum should be made. Hence, this report attempts to record as
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much of the history of the Agency's insurance program as was possible
to assemble from old records or from the recollection of those officess
who participated most actively in its early development.
3. Prior to World War II U. S. Government departments and
agencies, as such, sponsored no life or health insurance programs. In
isolated cases employee groups incorporated themselves under such as
"The X Benefits and Relief Association" and secured the advantages of
group life insurance. During the 1930's Group Hospitalization, Inc.
(Blue Cross-Blue Shield) and Group Health Association were two organi-
a
nations operating in the Washington area offering/tjpe of "group" health
insurance. The GHI group was, in reality, a mass of smaller groups,
each with a collector, or collectors, of premium payments. A U. S.
Government agency, a public utility, or a department store, could have
its "group". Management tolerated these arrangements for their inherent
good and overlooked the sometimes full-time preoccupation of its employee
who sr=ved as premi m?1fgli ctor in.return for which he or she received
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free insurance coverage.
4. During World War II, the office of Strategic Services was
staffed primarily by active duty military personnel. The civilian staff
was able to participate, cover permitting, in the war,-born "War Agencies
Employees Protective Association" for the purchase of term life insurance.
They were likewise able to participate in the local grub p health plans
but the extent of participation is not a matter on which the Task Force can
speak with any assurance.
5. When OSS was abolished and the Central Intelligence Group
created, the members of CIG had available to them the WAEPA life in-
surance and the two health plans - Group Hospitalisation, Inc. (Blue
Cross-Blue Shield) and Group Health Association. GHI, through employee
collectors, received premium payments from CIG employees who were
known as such, and adjudicated all claims in its Washington, D. C. office,
regardless of where the expenses were incurred. Group Health Association,
on the other hand, accepted membership from any individual in the psLstri,
l ja~ 77 i i ff l
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of Columbia and surrounding areas, which membership did not depend
upon an identified employee group from a Federal agency or a private
employer )'he individual subscribess post their premiums directly to
OHA. The GHA plan was more than a hospitalisation.,plan. . It had a
regularly salaried staff of doctors and nurses whose services were
available at several clinics located in the D. C. metropolitan area. The
services ware limited to persons in the D. C. area and, therefore, was
unavailable to persons outside that area.
6. The change from CIG to CIA on 18 September 1947 caused so
change in the existing insurance plans or procedures. However, when the
new DCI assessed the security implications in GHI methods of operations
in the fall of 1947, the decreed that no new applications would be made to
GM and that a more secure means of providing health insurance for over-
seas personnel be devised. The reasons were obvious: an a completely
unclassified sum GHI was accumulating not only the names of many CIA
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employees and their families but their specific cities of assignment
throughout the U. S. and the world and the physical and mental health
problems they were experiencing .
7. In the winter and spring of 1947-45, the Office of Personnel under-
tood a complete review of the medical and hospitalisation insurance plans
then in use by the Government and private indastry. Based upon this re-
view it was determined that* plansoffered by the Mutual of Omaha Health
w+-t r
,and United Benefit Life Insurance Company of Omaha, Nebraska, ware the
most desirable. This determination was based upon that Company's
assurance that all records pertaining to premium payments and audit of
insurance claims would be carried out under the Jurisdiction and within the
confine a?of CIA. ,In - rTO qualify for the tppr o~inauraace offered by
Mutual of Omaha, an organization had to most a requirement established
I
by the D. C. Insurance Commissioner, which was that 75% of the members
~nx had to be insured. To reveal a number representing 7S% of
zild
G."7'.1??-. -dam
decd
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the stx ength of an organization would be to reveal the total size of the
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organization.A TQ conceal-the true size of CIA, organisation known
as the Government Zmployess Health Association was born. Through
this device the Agency &ould acquire the advantages of low cost group
health and life insurance plans without revealing the true strength of the
Agency.
8', On 29 June 1948 GEHA was accepted as a corporation ender the
laws of the District of Columbia. The first meeting of subscribers to
GEH.A was held on 15 July 1948 at which the first directors were elected
and *rho, we rq:
the Directors m,t with the newly appointed officers of the
Corporation and GEHA began its I operations.
ExI Ld-O~j i; _ .1 ,, is ~:?Ic
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dovtig Usi
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The first plan of insurance offered by the Agency to its employees
throu&h the device of Gi1W was the health plan previously mentioned
underwritten by the Mutual Benefit Health and Accident Association. The
pla* was effective 1 August 1941 with the understanding that 100% of the
Association's members had subscribed. MMOMC~ the first mouth's
premiums showed twenty (20) members of the Association but after the
initial shock, MBHAA fell to and carried out their part of the bargain.
Their rates had been get on the basis of about 500 members of the
Association and it wasn't too long before this number was reachad and
by 31 December 1949 the Association had.614 "active members". Those
employees carrying OW or QHA health plans were permitted to continue
.10. By 31 December 1950 the MBHAA plan was well established and
it was clear that the underwritfr was making a good profit from the group
which had then increased to over 700. Then followed the, first exploration
if health plans which another company might be willing to offer to GEHA
om
5 T ExG9aGa~ ir;;n aa~^_;n~ils
de ra; , "! tad
a. W V W_ < deg{ sl i w i':9
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group. After talking with several commies the conclusion was reached
that the MBBM plan was the best obtainable under the circumstances,
fortified by increased benefits which KBHAA offered and wl,ial, were
accepted. By 31 December 1952 the membership had increased to nearly
1, 000 and a year later to over 1, 500. About that time some 1, 400 ether
Agency employees were contiuning their health Coverage under CIIU but the
security problem still remained with CEMIa method of operation. At the
same time OHI offered better coverage at less cost. Part of the problem
was solved temporarily by developing "Class A" and "Class a" accounts
with M. The Class A, accounts covered those Agency employees who
had no cover to noaintain and who could submit their claims directly to Gill.
The Class B accounts covered these Agency employees who were covert or
o,eereas and for whom the Insurance Breach of the Ot*ce of Persoanhl
processed hospital and/or surgical claims. With this sa"? secure arrange-
mint, several hundred persons having the M3LLAA plan, switched over to
GHI. At the same time there was conwiderable debate on the feasiMlity at
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and advisability of the Agency, through GE'HA, embarking on a "self
insurance plan, L. e. , cut out GM and MDHAA and let employees pay a
premium directly to 'A IM-2, -0 m1dw Ra life insuraace.paa -
P (W
to cut out WAXPA.
11. In early 1954, when the Agency Career Service concept was being
studied, an Insurance Task Force was appointed to esamine the following
problem:
W WW employ.. and family indemnity and beneficial
insurance coverage should the Agency arrange to have
offered in order to remddy- or alleviate any possible
existing injustice, to alleviate personal and family
concerns which dilute or district from attention to
mission, to demsastrate common ity of interoat, and
to promote the concept of career. 10.
That Task Force produced a cow rehensivs report to the CIA Career
board which approrid the recommended courses, of action on
30 Igno 1954. The action approved, in wMc
i
and employee benefit eousultannts participated, was taro-folds
Offer a new group term life insurance policy with
a: max mum of $15, 000 principal sum and a maximum
SUE
Excluded irorn a"1c,nallc
dewnradinn alId
declaesitlcala`l~
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to purchase begs aing 1 August 1954. 38ne years later, 2, 740 policies
$15, 000 ter accidental death and dismemberments
b. Offer a Mw comprehensive health insurance plan
which bad been developed between the Task Force
and the Mutual Health Benefit and Accident Association.
The United Dsss$t We Insurance Company (UBLiC) was selected as the
underwriter for the term life policy and staff employees, staff agents,
contract agents, or detailed civilian or military personnel were invited
t in force in a total amount of $34, 74%9400. 0(1, - Tho1MBHAA plan of
health insurance was greatly improved over the then eadsting plan and
was likewise offered effective 1 August 1954. 1'flus years later, more than
I
25X1 there, plans the Agency Notice 29 July 1954) observed:
"b It I I. the purpose of this# Notice to describe
the available life and health insurance plans to employees
so that they will have. adequate information an which to
base their decisions concerning this important aspect of
Exclude" frn.i ae.:^m^.,tls
du-,v r ra~ihi; and
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were being covered under this plan. In .announcing
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their welfare. I this connection, the Agency has de-
v.lCped these insurance programs is order to provide
e iloyees with better benefits and to avoid the follow-
iag problemss
(1) Commercial insurance companies have become
somewhat caat ms about selling insurance to Agency
employees because of the possibility of hazardous duty.
As a result, same companies will insure Agency employees
only for limited amounts sad usually under conditions which
preclude the payment of benefits as the. result of hazards
sometimes found is overseas areas.
(2) Because of security considerations, it is sometimes
difficult to release sufficient information to insurance. com-
panies so that under their policies they can appropriately
pay claims. It
* ? ? t
At I August 1954, tbs Agency's insurance program, available through
the legal entity of GZHA, consisted of:
--UAUC term life insurance
-WAZPA term life insurance
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--M*H" health iasaraace
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--Can btlM-lth iauu me
?-Jilin 7Mdht 1n&ui u e (from lip-Msrsl 1t54)
e P 111 the Federal Sn41oy'Ms Gx*W 140 Inwra,ace Act
of 1954, all Adcpy as p1o ss eerld airs pstcbass low-cost t w= life
ietsursMi to t nearest $1, 000 ad their s*ual s#lazy.
12. Pr a stir~,li
+~ as but dstesadaed start the ,A,Osasy+a iastraawse
,r r
program developed into a bi .
ip rear Un Co~aildatial Funds
aeetioa of the G lce oo the Comptrolleox had Carried the ball is the early
years, Nis addiiioa to,other dutiesms a on 30 Jyar 1953 resperl Mlity fw
adndni.tration of the fiat Maas trsadderrei, to the J3lsec/or si Personnel.
Board of Directors of Gmu& Lad continued throw jk the years, to meet
the technical and 1e a1 regrireiesats of the corporate eatity. The Insurance
Ts ?h Force was chaired by the Chairman of the GZHA Boa", a man of
?trsgtg convict ols. As Chien )rta jsrne$ Qtficer of the Agency he brought
to bear a we*b of esperiepcg And yowl tiir tole ap Chsirmaa
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Board as one which was later to casts soma differences of opinion on
the role of the Drard vis-a-vis the role of the Director of Poveonnel.
The first official indication sf this sitnatiea appears is a conclusion. of
the Board adapted at a meeting on 21 lebrwry 11955, as follows=
"S. In respect to the goestin cos dered by the Board
as to the proper sphere of the Board's interest, cer-
cinsion was =ado as follows:
a. The Board is responsible for the Agenicy insur-
ance program policy or policies. The Board is not
eoucersed with apy aspect of adanisistration in respect
to these policies in view of the fact that the Director of
Personnel continues to assume these responsibilities.
The Board recognises that the insurance program is
basically a, part of the general Agency personnel admini-
stration as such, and hence policy decisions made by the
Board within the insarance program field. most be com-
patible with overall Agency personnel policy. Advice in
this connection world be secured fro the Director of
Personnel as needful, but a rsselrtloa of any difference
of "Anion most go, to the DCI or his aetherised repre-
The official statement of the Director of Persennnel's astherities and
responsibilities was ssb~rtaat allythse saeaa thee as it is nova
"Preside additional serticss of coissops concema,.
inclidi$g me insssasce programs fir A?gea*ayr
personnel aces"
The by-laws of the ,Association n prssen
{.Phil. t d~tlassli{~ci; a
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13
Psvi"I
"TIw Bow al wee",rs sun. POIWY rOslaasitil* tear lb. pr, t~Nal a a~ri
sat $I lb. attatra St flat 0
ask r d.a s tae t1a-. ad t 419 it.
mw*UW
;~ rt ,5i tb. Asaaryt# sr it >asy
prop.,, ?at iSiS w~ti Sir, $Ss ,,yaws, ar
Oft"Or
s4' a ai tl. A iItral
y, liens ~, pia 7
14. The s al a .1mm q[ i~ st4ars
MWOOkS UM as2pAtc t
14ss ...mss t fou
V"9 it.am
"T. A general disasaAaa.a *as4 Sroits
lb
. Pr.ur14 ., t "4 O(A .ware stags and tk ~ at
" 3zg asrratara war At this pii^t,
,
Asaer4atiaa ? u ii.iR}+sraMaws 'd, am*"* at
Vdtii, .ti. offs c..1
Plorss.l as' rp"Or"I . whist 40 `rte sad CAMMUT
DIri ai.r In order, flat tisa is s14> w* * warn .m .
r.spss bi.for the a a'a otr&#* - a,#* tag
SLV*a
a 'wi Ida ti. is ad Ter" aoi,,"g alga be a~b^dti ssa by ..
-09810004
10-1 ALS, as a A W r:arias . 1 *I the
- iaNliaa fist is d by, I' SOW, Oj alm"t*rg. He 41PdJIJAP14- 110 4W JXV*4gtW6
parti itcrasat apsz in ,rr,s
sates zap pptaps t:r tiM, ,- rios
s
the
If+isa1 as at
was taken Iff tip Ord pt w~s UL, ~Claial
asaaot44a.
EXCIudbd RACMntic
004inE .. ;" a.;d
 '9i ; F~~'?t
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15. In may 1956 QrM p Ispitalisatioa, Iu. caa up Les sla0xo dii
Cuss by the aZL .? At t$t *~ - p 1. still earri.d
GHI bsalti iasr;t a".,_ This slrsswd to pres*t gouty ms, amt
in tha opinion of the *esarL Swimb rs and the saws Si the CgrMatioa,
the ben.$ts being edtr.i by GM were iul riou to.thea. svai1ahls under
the Association plan (MRAA). Tk..d.cavity Advisgr teal' * x4 re.
ported in June 1956 that an investigation et Q U hat rwealsd that an
employ., of GM had been in .eslam with a i proses$stt, t at a Lerr ign
embassy in an apparent offert to sell a list il aro! V$ si QA rg1sy.es
who wore W" ors Si t e Class A GiII health issue A rr as no-
successful .ilisrt to have am a(rii to =ab$sg.all CIA tsoplpTSas.Claaa a
covert), th. Depu ty Dllraetes ad Cwrtral IstOllijaa*s a :od that kkw CAM
M
plan be discootinsed, Mick satl;ou w)ts afi stud 31, Gpmbx 1916. Coppr
versions wile mil., withsst pMtaltirj, to 00 AaasCts.ti* plan,
s ? Q .~d~z / Cj,1r} l ea .
ALU
.~ _ .,w,. ~4p raved1gr.l c1~_ /?Z ~.l 9P 780R0 403000700
W ' ' GiJ
9 it -'
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as a staff officer of the Director of Personnel, to preside insurance pro-
-Al
grams for Agency personnel. (This remak n has reference to several
recorded 3loard discussions on the subject of health and life coverage for
? 1` f.1.
When on 2$ December 1956, a persea represouting himself as a "Staff
Agent"" but who was actually a Contract Bmpi (a Career Agent, to be
precise) applied for the Association health plan he was enrolled by the
Insurance Branch. When the President was informed of the case he wrote
a memorandum to the Board, dated 4 January 195. The Board directed
the rejection of the application and return of the premiums. Than a Board
member recalled that Notice No.
Mated 29 July 1954 was still
in effect. aid this Notice - Agency policy - clearly stated that Contract
Bmploywes were eligible to subscribe. The Board prptly moved"
seconded and unanimously voted:
""T' at" the: Chairman, is his capacity aa. Adldr.. l~Laaa at
taif; take `the nsceisary stops to rescind Agency Notice
utamltic
A6 tram a
., r !1',n tad
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The U-Z pilots prsducad =ore th a stZ&tegic i8te111541We OR
the Soviet union."
war* the unnwlttintz Ca*N Of n
r en and offiC#a wbiCh only time cquld hsalr Aa. a* imrsdiats after-effect
o,k the harsh dispute, the :Deputy Di rsc ter ($upport I attetnpted to d ins
he respective r4lesof the Chairman 01 the.-Board apd the.Ut;Actor of
e r sonnel. The board, ,at ft s. 1x Tebrusry meting, W *4 to invite the
Director of Personnel, to sokv as & "consultant" to ib? heard and thorn
was some discussion of appointing the Director ofPsrsoaasl as a Dasrd
ember, later to be elected Chairman. (N.? other mention to made is
the minutes of this idea. ") On-it March -19S7 the Deputy Dt rectos . ($uppoxt )
a dd;e orsed a. memorandum jointly to, t1w Chairmma ad. the. $&rd gad the
Director of Personnel which 10 quad bslow: .. -
"1. This. will. coajUsn and make a matter of record the
conversations which have takes place ""ft Golooel
White. Mr. Houston,
t had been agrss4 that:
.,GUM will continue to function in accordance with
the present Certificate of incorporation aril NT-1&ws;
amendments to thee documents will be subject to
th Director of Personnel; se.u e i
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c. the Chairman of the QZ Board will inform the
Director of Personnel of all contemplated actions of
the Board and tko Association, will report actions
taken, . will be guided by th*,, Di rector of Per Personnel in
all matters affecting the interests of the Agency, and
will represent Agency positions as set forth by the
.Director of Personnel at Board and Assoc,iatiea meetings
d. Should the Board Chairman and.the Director of
Personnel be ankle to.rico1ecile. the$r, positions with,
regard to any matter, appeal may be made to the under-
signed by one or the other or both. "
At a meeting on 26 March 1957, the Board had some reservations about
thi "asreemeEnt" and wanted some changes made. One member remarked:
'"I would like to see a recognition of the fact that we are
also operating under they corporate laws -ad the District .. .
of Columbia and we cannot surrender certain responsibilities
to the Director of Peroomnel.aa a corporate organisation. K
Withdrawing his 18 March 1957 memorandum, the Deputy'Dlrector (Support)
went along with a new statement which he again addresse~ointly to the
Chairman of the Board and the Director of Personnel dated 13 May 19571
"1. The Government employees Health, Association is a
corporation established under the laws of the District of
Columbia for the -purpose of providing to eligible employees
of the Central Intelligence' Agency insurance programs which
will meet the Agency's requirements for coverage and security.
2. The Board of Directors of GZH& doter the present
Certificate of Incorporation "shall establish policy and be re-
spontible for thee. propbr, admisdstraties- and sapitnageament of
the affairs of the Associatio*t card may a4gpt such rules and
segnlations for the conduct of its meetings and the management
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of the Association as it may deem proper, not inconsistes 1117
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with law, these By-laws i or the spile,tie"l M4 security
req*Lr.mests ad the Centrallstelligsaee Apsey". This
provision affords the Board a dual responsibility. In tn1-
fl].l tsri4t of this responsibility, the Q IM ass +t. w U .news
that all of the Association's policies and procedures are in
the interest of the policyholders and is's clearly cnaistsst
with Agency policy. To thlis and, the Sosr4 will look to- the
Director of Personnel for guidance as nece-asary on all
matters st Association, business which have policy inapli-
ca Ions fee. the Agency. r -. - A . - . . .
3. The Director of Personnel will through the Cludrumn.
keep the Beard informed of Agency policy', progoram s ens .
operetioas .which have policy implications for the Association.
4. In order that the Director of PersassAk a y lalfl11 his
functional responsibilities for the issuance programs for
the Agency, the Board, through its Chair=" and the Annual
Association's Report, will beep the.Dtrsetoar of Personnel
informed of Association activities and regnssts for support.
S. No clangs will- be made is UM aim&.GertiSaa s of
Incorporation or the by-laws without coordination, with the
Director of Persoaael.
6. It is expected that in magaging the AaserstMon, tie Board
will continue to study opportsnities is extend GZUA insurance
coverage. In addities, from troth to time, the =A%Gtor off .
Personnel may request the $oatd to mats studios of other
insurance programs for CIA employ s..
Excluded from autoxr
dcwnrr.-i;ing an,
deal: tisliicEll
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19. The Deputy General Counsel was also concerned with the way
things were going and commissioned a mmber of OOC to study the.pro-
blew "with the objective of more precisely defining the, substantive nature
of GBHA and its function within and sfla#Wto the- Central Intelligence
Agency". A 14-page memorandum (with 23 attachments) dated +7JOctober
W
1957 resulted from a comprehensive study by
In commenting on the second DD/a msnmiandnm'quoted in the proceeding
paragraph, it was observed:
"The Board of Directors still can relict any application for
membership and than can control coverage. The Board does
not acknowledge the Director of P rsenne1 as the Agency's
exponent of insurance policy. The Board does not use the
Agency's legal staff in the conduct of its day-to-day corporate
business. Choosing rather to .have a de to house counsel.
The Board views itself as the manager of'a par ~j
personnel policy, if not the formulator of it, and as such issues
instructions to 'Agency. administrati rs officials. The Board has
shown a tepdency to think in competitive teri and otherwise
manifest a commercial approach to the operations of GIHA. "
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~ k ~. JP~ ~'~"`I a [ciuiT
cluded fium :matl
6Eu~~~ W140 "'a, and
U~_?4%. I.i4kle.A1
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memorandum explored many aspects of the U-2 pilot coverage
under UILLC and contains the following.summations
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25X1 Use +od
"My observations of the 'begin i*g. and growth of fUCHA
leads me to conclude that It was spawned by the Agency
and nurtured by it to provide employees with a service
they could obtain elsewhere onljO with -difflc*lty and to
provide a benefit to help fill the space left when hazardous
duty pay was rejected. GZHA is not a cammarcial voutursI
it is a service.erga1liiatipn. It. b' fa*ctida id not tr'Nseils '
insurance but rather to make-it avaLlaWe to those who
need it. Taken to the Anal simplified ; t the AQIIA Q~W
issue_was the result of the Board's re.Uai to'iusure a
group of employees who sorely needed insurance, a reins"
grounded an a fear of iacreaain premiums of terse perpos
s,~ready a gird oo~rterage. This is c erew.; 0i.roMi4
But as a service ergasisatlee CLX" is to Age 'my employ,res
mach as a Qovernnnemct I. to the citiseary= there will.be . .
some which..ars tenAdsrod a6masurj 'but svik& t' y
benefit every psrsou nevertheless, the eaSt a" bw bores
by the body politic. In short, it is just part of the des~l that
low-risk. policyholders to a eertaiti. *xbsnt 'Hca*rjrp"hig't--risk
policyholders. "
more important coatribotiau was the discovery that
OZHA was incorporated under a provision of D. C. Law which did not
authorise it to coatrag~life insurance coverage der, its ,mombsxs. This
defect was legally tome" an Li /epteo4er 1959 wira the Board a eq dud
its .Certificate of Iaceiporatiea which was file 29 leptsmber 1954 vdA this
D. C. Baperiitend?nt of Corporatipas. lint lbe real dispute was not then
brought up for a re-hearing, - that of the rolo, the Hoard of GiXlIA should
play in relatibn to the Agency'i insurance' ft*'J" r, 1n4 'whether a sound
lR9IRdld it
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decisi,on.had been made is the m;nnsr ,ia wMchl
be girsnlusuranc? coverage. uodsr the , U policy.
~~ 1EXCWdOUiOLUC
dotv,i~r~ziati aP,~l
S
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20. - Oki 6 February 1156, eye
Gha3rmaa ofthe Board, : a it ba was to 66H 4130 August 196S.' Be-
Sinning jwith. tais.meeting, the i.cretary dd Ito Ar.odaftu again began
attending mestings of the see". a practice,w5dch had teen diseoslle~ti~.d
by the Q trmaa b.ginataog with the 12 March 19117 a ..ting.
having seemed thzenghout the period of dspitb as a Dirticter of Q>U1A, was
careful to sew that they DGr.ctor of 1%rseaaol bas iad"ed'ia4W discussions
involving the Agency`* insnranca -program., But the 3oasd, under Chairmanship seemed to coatiaaa to impinge, at times,
on the r.spon.i lities of the Director of Psrio isi where, for example.
(as room "d is the minutes ad as re nlar'ae.tiag Of tbo -Board 'a t5
irebrsary 1151)-be decided to himself Wit. Mutual 'of Otoaha requesting a
meeting with-the Board to discuss a special health insurance contract for
employees serving abroad. ? Again, 'as reported is the minutes of a Dowd
meeting on 13 May 1151, it is recorded that "Pisally to Bard. decided that
should visit the Home Oiflce is Oenaba, Nebraska, A"
'ET
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Mutual', proposed rates for the following two puns: * * * I',
21. The Federal Employees Health Benefits Act of 1959 was approved
by the President on 28 September 1959 and provided that the enrollment
of employees and annuitants in health benefits plans and the withholding
and payment,of contributions would take effect on the first day of the first
pay period beginning on or after July 1, 1960. This Act brought under
U. S. scrutiny the health benefits plans being offered to employees of
the Federal Government. It 4 authorised the C'*vil Service Commission
to contract for, or approve, one service benefits plan, one indemnity
benefit plan, comprehensive,, medical plans, and employee organization
plans. The Blue Cross-Blue Shield organization captured the service
benefit plan and the AETNA LLfe Insurance Company captured the indemnity
benefit plan. The Commission
-seed a host-of comprehensive medical
plans operating throughout the country, (ezample-Group Health Association,
Inc. of the District of Colunnbda~ and quite a few employee organisation plans,
the Association plan of GEHA undert n by Mutual of Omaha
bean
.
f a,; t r.
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eIIe'... .}~.
ic
n '3a;;r iIi; and
 "LIU a, "l I
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GEHA therefore serves to qualify our health insurance plan under the
Act and the Civil .Service Commission exercises an overseeing role to
assure that the Association Plan is in line with costs and benefits being
extended to U. S. Government employees at large.
the U. S. Government contribution to the total premium required to pur-
chase the group p Thp Board participated actively in qualifying the
Association Plan under the Act, and the Chairman, in a memorandum to
the Board dated 14 October. 1959 stated:
I'1. A meeting will be called shortly to discuss the Board's
position concerning negotiations with the'Civil Service
an
Commission on the GZHA Program. There
outline of factors to be considered in such negotiations.
sand
The Board must establish its necessary equl in the ne-
gotiations. guidance on alternatives that may op
gotiations. The position of the Board should be approved
by the Agency.
2. The Board now. has the opportunity of providing Agency
employees with several plies for hospitalisation and major
medical coverage. The Board has discussed such plans in
the past in considerable detail and each member
conversant with the practical elements involved. The GZHA
hospitalization and thii_factor will have a bearing on our pro-
p hfutursplang plans.. In ~? regard the Boasd members should
ore through
consider that since the Government is now providing,
the new bill, opportunities to employees for extensive hospital-
isation and major medical coverage, the Government is not
i s nil provides edesal
e
t
pre
y
likely, to extend the benefits
employees under the overseas Medical benefits program. "
eau_F 1
EKCluded trar,i auiomailc
down^radiu end
deCiassUic~ikt
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The Board had grown so accustomed to thinking of itself as having the
primary responsibility for providing as insurance program for the
Agency that it sometimes overlooked, consciously or unconsciously.
the fact that tl,e Director of Personnel was the Agency officer charged
officially with that task. As a further illustrationt During the first eleven
months of this first contract year Ior.h ealth insurance under the federal
Employees Health Benefits Act of 19" 9, Mutual of Omaha found that
premiums. were inadequate to cover enpenses lbsing incurred. The
Civil Service. Commission agreed that an increase in premium rates was
necessary and warranted. But it was the Chairman of the GI Board
who recommended DDCI approval of the rate change, not the Director of
personnel.: fi'rue, the Director of Personnel, the General Counrel, and
the Deputy Director (Support) concurred, but handling the matter in this
fashion further emphasised the existing duality of responsibility.
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Z2. .On 16 March 1962 by
eCIA-RDP84-0078OR000300070009-5
Agowy
a~-ogsns~~eA!
Corm life iinafurance plan for ""certain cesatraet personnel". The A nncy
determined thatz
zu ibdlity . r -
.. Contract employses and contract agents working
ono full-lions basis who have not reached theii 60th birth-
dty are eligible for this insurance. Participation is
generally lindted, however, to the followings
(1) Full.-time contract employees who are U. B.
citizens or resident aliens and whose employment
relationship is comparable to-that ad appointed em-*
ployees;
(2) Career agents who are U. - L dtisens or
resident aliens and whose operational relationship
with the Agency as well as their cover and security
will logically permit the application of the insurance. sH
Via`
AIL -;* AV
MlWw%W s delegated to the GZHA Board of Directors tha authority to
pas s upon acceptance of a rsrsodnei under this -plan. ' The Notice also
contains the tellowisgi
"Tbe agreement with tie underwriter -stipulates that the
Insured persons will be "standard risks" whose assigned
drsties are not significantly more hazardous tbaa those of
snuff personnel. Questions as to eligibility in individual
ceases should be referred to the Insurance BraLch. N
ciuead frefn aatnmatic
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the action taken bT the Chairman of the GBIHA Board asked "is not this
/~
properly a determination for the Agency to make?" Our review leads us
to the conclusion that the Notice (since expired) announcing the ? availability
of the insurance plan was defective in one or more important respects and
that in future, greater care must be given to specifying respective re-
sponsibilities in announcements affecting the insurance program. Not only
must the Board's responsibility be more precisely defined but there must
be present the opportunity for the Agency to meld its operational require-
ments into its insurance structure with due regard for the interests of employees
at large.
23. Referring again to
memorandums'observed that
the contract. for,the plan of insurance for contract personnel did not include
Exsh
any reference to what would be a "standard risk",, and that the carrier ha
u
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the right to: change the premium rates on a monthly.basis if the claims
xperience was unfavorable.
How the, "standard risk" concept came into existence, with respect
to this contract in lost in a miasmal mist, and as
observed,
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the concept is nebulous at best. We suggest that even:'after 15:years of
experience with an Agency insurance program'an attempt at definition
would produce as many-variations as there are draftsmen. We favor an
approach which retains the element of complete fleuibility to enable men
of good will to assess all known facts and to then decide whether operational,
or necessary
security, or p sonal considerations make It desirable/to cover one person
or a group of persons with ivaill.ble insurance.
The second point, that of monthly premium charges, is more easily
disposed of. In discussion with the underwriter,- we were informed that
the Company's right to -change premium rates as stated in the contract
"On the first policy anniversary and upon each premium due date thereafter,
is standard terminology and refers to the possibility of an annu uiis,.
~tp~ xuludc~ ~,,:n ?,i2miti.
declus~hl~ =~?,
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chat'ge,. not: a monthly chaa'ge. This policy, unlike the first. UBLIC policy,
i.a. a pre-printed form with blanks which aye tilled in when the, policy is
issued. Unless we wimh to ask Lox -a complete rewrite iv manuscript form,
we see no objection o the present form..
T ~ trrfr
Exclude4 :n ^~t^matlc
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has doubts about the legal effect- of a letter dated
November 15, 1956 addressed to GEHA by Mr. Joseph B. Jones, General
Agent of UBLIC which is quoted below:
"To eliminate any doubt in your minds or ours regarding
the underwriting of your group, we would like to again
state. our position.
1. Our agreement was entered into with the definite
understanding that we were to cover normal hazards of
the Intblligence business, accepting an'oceasiona1 hazardous
risk by a full-time employee, and an operator entering into
this extra-hazardous situation only,on a very occasional
basis.
2. It was further understood that we were not to cover
extra-hazardous operations on a continuing basis. (It would
be well to note Provision No. 3 in the Supplementary Pro-
visions on the Master Contract. )
3. A litter sent from me in 1954 stated that the company
must rely wholly and completely upon the integrity of the men
administering this case.
4. These convey ations were held with our First Vice
President, )Lx. Gale E. Davis, and Mr. A. W. Randall,
Chief of Group Operations, myself, and your representatives.
We very defin4.tely excluded any jet operations or extra-
hazardous flights.
We hope that, the views expressed above coincide with your
under standing.
ST
Exchdod from
doVIP. gran .,..d
declass La,,A
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We share
`ioubts. .The UBLIC contract contains no ex-
clusions of this nature... But a 'good faith,!', arrangement between the
Agency and leitutnsl of Omah+F has exl sled .for many Years and there can be
no questisn whatever that there h}s b9oa a.cenaciosi attempt on both,sides
to deal candidly and fairly with sack other. M tv l of Omaha stepped
forward in 194$ to offer us a health. insurance plan -to be administered on
our terms - something no other company was .willing to do., Over the years
we have expanded our dealings to include many other forms of desirable
insurance. We have not, therefore, /'dealt] at arm's -length". go, while
the Noennber 15, 1956 letter may have absoilabely no legal effect on as,
it does have a moral effect. Hbw then,--do we dispose'of it?, -The answer,
we believe, is to be found in. the fad that since 1936 we have continued our
close as.sociation with the company and through their cleared representatives,
Messrs. Jones and Randall, we,ha4e tried to implant the tacit acceptance
of our unique and unusual.occupations. , For. example, it"recent dealin
_
LRo;
EXCICUU3 ""Al
with these two men, the President of QXHA has emphasised that the Aga iiffy
-?
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views the -UBL.IC contract. as one in which wr' can new corer risk we
feel should be covered.. This? leaves to the $en !s discretion. whether
UBLIC should.payfgr a given death or deaths or !trhpther the Agency; with
due regard for the interests of all other UBLIC policyholders should share
in , the payment of death clsims. Referring to our earlier views on ,a
definition of "standard risk", we would hav!o.the same reservations on
trying effectively to define !'hazardous"'hxtra-ha:ardous" "super-hazardous",
fhdc. and the like. Tho:degrse.of risk to which a person is exposed has to
be purely and simply that whhch the Agency, in its best judgment, feels is
warranted under the circumstances.
Z5. Events have overtaken
~co- weed ~e~u~c~
comments respecting the
adequacy of the, present UBLIC term. policy. . study has almost been,
completed by the Insurance flranch,i working with the-under writer,. to re-
vise and update this valuable policy} In the study, an effort has also been
made to compare the UB.UC policy. with.what other suitable companies
are willing to offer. The results of this study will come forward in due time.
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-- - .-....~. waa51W4 0UYR4Q nibs cne
right of inspection of Agency insurance _recgrds and the, right. to,modical
examination and autopsy. The UHLiC policy~0oatesA n4 right of inspection
of Agency records but,the contract employefr.policy. does.
The. right to Modica 1. a .!?!-atioa and
autopsy is not objectionable. Tire right og n"cal a on VWWA
arise during pendancy.9f a claim. In either case tie. food faith relationship
would be called into play if operational or security sousidesations.dictated.
2?. The first UBLIC contract covering staff types was isaaed to
"GEHA"? The second UBIJC contract, co wring contract types,-. Was issued.
to GEHA Contract Wniployess
has a good. Point, 'with, respect
to the latter, since in fact, it i$ the spine "QXKA."" which is .the policyholder.
This.should be, corrected
28. The conclusion of the Office of :General Gowas#l as to whether
.OSHA should be re-incoporated in Virginia is
lid
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29. In addition to the desirable corrective actions already discussed
in this report, there are, others having broader implications which should
also be considered. They are:
a.. Amendment of GS1tA. ft-laws.
(1) Art$,cle n - Quali$Jatilrns for m'bonhip.
Presents
""Sect 1. The membership shall generally be
limited to Staff Zmployees, Staff Agents and
Civilian and Military details to the Central intelli-
gence Agency.. However. upon the specific approval
of the Board of Directors, certain Contract Rmployeips
may also be eligible for al}IA membership. "
"Section Z. Any person who is eligible for membership
.must make application therefor in writing. The Board
of Directors, or their duly authorized representatives,
must accept or reject any such- application, and such
action thereon shall be final. Retention of membership
shall be at the discretion of the Board of Directors. Of
Pre~osed:
"Section 1. Membership is the AssociatioA ,*hall be as .
determined by the Central Intelligence Agency. "
",Section 2. Any p. soa deola *rd 0101o for nseoaber-
s ph p must males application therofor in writing, to the
President of the Association, or his designee, Member-
ship shall cootiaueLLp~ sp* as the person is .authorised b i
to subscribe to Iknof ^surance fee~-~'-` ?L_ . __----
Excluded ti,::n automatic
a i
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(2) Article Y I Section 7 - )card of Directors.
,$Section 7. The Board of Directors shall establish
policy and be responsible for the proper ad ini-
strattow and management of the MW is of-.the
Association; and iaay adopt such rules and regulations
for the conduct of its moetisgs and the management
of the Association as it insy'deias proper, not incon-
sistent with law, these By-laws, or the epsrational
and security requirements of the Gsn$salIntelligence
Agency.
"Section 7. The fasrd of Directors shall be respon-
silriis for providing the Director of Personx0l of the
Central lnta1U$ence Agency with advice and guidance
on the suitability and acceptahtlity of plans 41f insurance
developed to Satisfy the Agency's specific reedsi card
may adopt such rules and regulations for the conduct of
its meetings and the management of the Asseel"on as
it may deem proper, not iacensist -t with haver these
By-laws, or policy said opiratiossl and security require- .
agents of the Centaal Intelligeace Agency. 11
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