Standard Hospitalization Insurance Contracts

Abstract

* This paper is based upon the author's doctoral dissertation. The author wishes to express his gratitude to the Honorable Charles Manson, Commissioner of Insurance of the Wisconsin Insurance Department and Professor Charles C. Center of the University of Wisconsin, who supervised the dissertation. Thomas L. Wenck, Ph.D., is Assistant Professor of Insurance in Michigan State University. Formerly a health insurance underwriter for Continental Casualty, and a representative of Aetna Life Insurance Company, Dr. Wenck has served as a teaching assistant in the University of Wisconsin. For several years he was employed in the Wisconsin Insurance Department with duties in the areas of examining, rating, and research. 1 The more descriptive term is used rather than the traditional term individual, since both group and individual contracts cover individuals as well as family members. This study is concerned only with non-group hospitalization insurance; group policies are not considered. Also, only basic policies and not major medical contracts are considered. For purposes of the study, hospitalization insurance includes the coverages typically found in the basic policies currently being issued, e.g., hospital room and board benefits, miscellaneous hospital expense or ancillary benefits, medical expense benefits, and surgical benefits. For examples of advocates see: (1) Wisconsin Insurance Department, Fifty-Second Annual of Commissioner of 1921, Part I, p. 243f., (2) State of New York, Report to Governor Nelson A. Rockefeller of the Special Task Force to Study Catastrophic Health Insurance, Vol. 1, Dec. 1960, p. xiii, (3) Wisconsin Insurance Department, Annual of the Commissioner of 1960, Vol. 91, p. 48, and (4) Frederic E. Elliott, M.D., Urges Adopting Standard Paid-In-Full Doctor-Care Plan, Fee Schedule for M.D.'s., The National Underwriter, Dec. 16, 1961, pp. 7, 21. substantially as to the desirability of a standard policy. The insurance companies, for example, are practically unanimous in opposing a standard policy, while state hospital associations and medical societies strongly prefer a standard policy rather than the present contracts. State insurance departments are about evenly divided.2 These opinions are based upon what the respondents believe are the problems of present hospitalization contracts and the advantages and disadvantages of a standard policy in comparison with the present policies. How valid are these opinions? Is a standard policy in fact preferable to a non-standard policy? The answer to this question depends largely upon three factors: the nature and extent of the problem which the standard policy is to solve, the characteristics of the standard policy proposed as a solution, and the criteria employed in arriving at a decision.