Coverage for the Aged

While Congress, in an election year, has been gingerly discussing the costs and credits of federal medical insurance for the nation's aged, an insurance company has been quietly testing whether a private firm could make money in the same field. After month-long trial studies, Chicago's Continental Casualty Co. (1959 assets: $469,465,000) last week announced a hospital insurance devised for oldsters 65 and above that offers up to $5,000 coverage without a physical examination or health questions.

Continental, which is seeking the approval of insurance commissions in every state, and Puerto Rico besides, already has received 35 O.K.s. For a $7 monthly premium, Continental offers to insure oldsters against hospital room and board expenses up to $25 a day, and against other hospital costs, such as X rays and medicine (but no physicians' or surgeons' bills), up to a total of $5,000, once the policyholder has paid the first $500. A policy goes into effect at once except in the case of already diagnosed illnesses. In that event the policyholder must wait six months before claiming benefits. The policy is "guaranteed renewable' and may not be terminated by the company unless it cancels all policies in the area.

Thirty Days. Continental began studying methods for insuring the health of the aged in the early 1950s, learned that the 65-and-above group contract remarkably few new diseases. "If you're going to get an ulcer or hypertension or cancer," says Dr. Clement G. Martin, Continental's medical director, "you'll most likely get it between the ages of 18 and 55." Furthermore, some of the most prevalent ailments do not require extremely expensive hospital treatment. Continental found that 60% of the people 65 and over who become ill have a hospital confinement of 30 days or less, and in this time either mend or die.

In 1957 the company first began offering medical insurance for oldsters under its "65-Plus" plan, which carries benefits up to $610 including surgeons' and physicians' fee, requires no physical examination, costs $6.50 per month. To trim the costs of handling policies, Continental relies on a giant IBM 705 computer to do the figuring, pays only a $1.75 commission on new policies (v. an industry-wide average of 20-30% of the first year's premiums), depends chiefly on newspaper ad coupons that prospects clip out and send in. Continental lumps all applicants in a state together, in effect handles the individual policies as if they were members of a group plan, thus spreading the risk and reducing the premium cost by as much as two-thirds.

Profit on Oldsters. Continental lost money on its original health-insurance plan (oldsters tend to wait until they have an ailment before taking out a policy). But as the number of policyholders in the over-65 age group increased, Continental made 33% profit last year. In the trial areas for the new "5,000 Reserve" policy, more than 7,000 oldsters eagerly signed up, and in Illinois 27.2% of the 65-Plus policyholders applied for the larger plan as well. With ever-increasing volume. Continental argues that it can turn insurance for the aged into a profitable line.

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