members to receive all the benefits to which they have been entitled under the terms of our agreements.

COST OF ADMINISTRATION OF INSURANCE FUND

More than 5 years of experience with the operation of the pension and insurance programs on a very wide scale in our industries convinces me that the administration patterns developed have been extremely effective. We do not believe that any other conceivable arrangement for the administration of our agreements could have produced as low an operating cost as we have experienced.

As one illustration, I present a statement, prepared by our experts, of insurance costs of five basic steel companies for the third and fourth insurance years under our agreements. Data for the fifth year are not as yet complete.

In these 2 years, they are therefore not the 2 most recent years, for the 5 companies the total cost of benefits and of administration ran to a little more than $100 million, an average of about $112 per employee per year. The total administrative cost in these 2 years, including insurance company charges for additions to contingency reserves which are not reported on separately by all the carriers-and which are not, strictly speaking, operating costs-was slightly under 10 percent of the aggregate of benefits and administration costs.

That figure is normally included in the retention figure, that is, the figure that includes your administrative cost, because it is a figure that will be retained permanently by the insurance company in the event the contract is terminated, although as we say, it is not strictly speaking an administrative cost, it is a cost which we cannot hope to recapture.

Of this what may be called fund expense-that is the actual cost of running the program, administrative cost of funding the programamounted to 2.1 percent of such aggregate. Effective November 1, 1954, this fund expense is no longer charged against the insurance fund but is being absorbed by the employer.

I wish to emphasize that these are the totals of all administrative costs. In the recent New York State survey of union health and welfare funds it was found that the operating expenses of funds with benefits insured or partially insured ran to 6 percent of the total contributions to the fund, while in the fully self-administered plans these costs were 9 percent of the total contributions.

Senator ALLOTT. May I interrupt you, please. Fully self-administered-do you mean that is the same as fully self-insured?

Mr. GREENBERG. Since that statement has been prepared by Mr. Latimer, I would ask if he would be good enough to answer that question.

Mr. LATIMER. The first is the 6 percent, which relates to the funds in which the benefits are insured or partially insured, and the second, the 9 percent, refers to those plans in which none of the benefits are insured. That is, they are paid directly out of the fund, self-administered.

Senator ALLOTT. That is a self-insurance, then?

Mr. LATIMER. Self-insurance; yes, sir.

Mr. GREENBERG. In the case of fully self-administered plans, total operating expenses as a percentage of the total benefits and operating

expenses were about 17 percent, which is the figure properly to be compared with our 10 percent. The 6-percent figure for the insured and partially insured funds referred only to the expenses of the funds and omitted entirely the expenses of the insurance companies. By deduction from figures included in the report, but nowhere explicitly set forth, insurance company operating expenses must have been at least 15 percent of the total benefits and operating expenses of the insurers. The total expenses of administration of the insured and partially insured funds must have been at least 21 percent of the total of their benefits and expenses. By any measurement the operation of the insurance funds in the steel industry has been conducted on an exceedingly economical basis. The detailed figures for the five funds to which I have just referred are given in the following tabulation:

1 These amounts were charged against the insurance funds to reimburse the employer for costs incurred in administering the insurance programs. Beginning on Nov. 1, 1954, employers are no longer being reimbursed by the funds for such expenses.

For the first 5 years of our insurance contracts the total expenditures for benefits and administrative expenses averaged about $90 million a year. Under the new agreements, which began to operate on November 1 last, these expenditures will probably average between $140 million and $150 million annually.

PENSION FUND CONTRIBUTIONS AND EXPENSES

The contributions for pensions made by employers in the steel industry have averaged more than $200 per covered employee per year. A precise statement on this point is made difficult by the fact that a company like United States Steel Corp. or Bethlehem Steel Corp. operates a single trust fund to which contributions are made not only for its employees represented by the United Steelworkers of America but also for its other employees, including the officers.

The actuarial calculations underlying the contributions of these great companies are predicated on the aggregates for all their em

ployees, irrespective of affiliation or nonaffiliation with any particular labor organization. For a group of important companies the contributions for pensions may be summarized as follows:

You will note that in 1949 prior to our negotiations, there was an average contribution per employee annually of $32. By 1953, the cost had risen to $277, and of course we have no figures at this moment as to what the cost will be for the pensions provided under our new plan, which became effective on November 1, last year.

Senator DOUGLAS. You mentioned seven companies. I assume that means the Big Seven, so-called?

Mr. GREENBERG. Mr. Latimer, would you be good enough to answer that question?

Mr. LATIMER. Yes, that includes United States Steel, Bethlehem, Republic, Jones & Laughlin, Inland, Youngstown-excuse me, it does not include Youngstown.

Senator DOUGLAS. National?

Mr. LATIMER. No, sir. These are only the contracts-National in part has a contract with United Steelworkers, but it is not for the major part. These are only the contract companies.

Mr. GREENBERG. The table below is also interesting because I think it gives you an indication of the wide differences in the method of funding among 43 companies under contract with the Steelworkers. There are six who are on a pay-as-you-go basis, as you can see. There are at the other end of the scale 7 who have been making an average contribution of over $200 a year per employee.

The bulk of the pension contributions is paid into pension trusts created and administered by the companies. Frequently the trustee and investment agent for the pension trust is a corporate trustee. Sometimes, as in United States Steel Corp., there is a corporate trust created by the company itself; in some cases there are individual trustees.

There are perhaps 75 companies with about 75,000 employees in bargaining units represented by the United Steelworkers of America where the pensions called for by your agreements are provided by the companies through insurance carriers.

The pension trusts usually bear a very small administrative cost. This is to be expected for the great companies with trust funds running into the hundreds of millions, but it is no less true of the smaller trusts. For example, we secured reports last year from 25 trusts, each covering fewer than 1,000 employees.

The contributions to these trusts in the first 3 years of operation totalled $2,400,000. Only 8 of the 25 companies had any charges against the trust funds for administrative expenses, and the total of these charges for the 3 years amounted to only $10,000.

In addition to these reports, there were reports from 15 companies whose trusts each covered from 1,000 to 12,500 employees. Contributions to these 15 trusts for the first 3 years of their operation amounted to $31,800,000. The administrative expenses charged in the 3 years against these trust funds were a little less than $9,000.

In neither case do the expenses charged against the trust fund represent the total administrative expenses. We believe these expenses, however, to be small.

We believe that the administration of insurance and pension funds, with the employer taking the responsibility for administration, has been demonstrated to be both effective and economical.

SELECTION OF CARRIERS

With one major exception, primary responsibility for the selection of an insurance carrier has fallen upon the employer. That carrier usually has been the insurer for the plan in effect before the union agreement. The exception arises from the firm policy of the union to use health agencies providing service benefits to the greatest extent practicable.

We have favored Blue Cross over commercial insurance carriers, and on occasion we have obtained agreements from employers to discontinue insurance indemnities in favor of Blue Cross and, where service benefits are provided for a major fraction of the employees, in favor of Blue Shield.

Senator DOUGLAS. Mr. Greenberg, in cases where there was not a previous sickness benefit plan or a private insurance carrier, but where this has been provided for the first time by collective agreement, have you ever tried to provide that the insurance shall be carried by Blue Cross?

Mr. GREENBERG. Yes, sir; we have. In addition, we have discontinued coverage with commercial carriers in favor of the Blue Cross where we have felt that the Blue Cross benefit was superior to that offered by the commercial carrier. That has happened quite frequently.

It has happened quite frequently, and I believe that Mr. Fitzhugh will agree with me that there has been a considerable change in the thinking of the insurance companies on the question of providing the full cost of a range of services in the hospital.

In fact, Mr. Fitzhugh's company, Metropolitan, has recently obtained a contract in two companies with which I have negotiated because he was agreeable to underwriting the full value of the hospital benefits that we wanted.

Prior to this year, I would say it was either very unusual or extremely difficult to get a commercial carrier to underwrite full service benefits. That is why we have always favored the Blue Cross whereever we were able to.

Senator DOUGLAS. This is not the standard policy of Blue Cross, is it? You have been able to get a special policy?

Mr. GREENBERG. That is right. That results from our needs and our 1949 negotiations. In 1949 we negotiated for the first time on a company wide basis with such companies as United States Steel, Bethlehem Steel, and Republic, who have plants all over the United States. Of course we wanted to have uniform benefits for all of our members throughout the United States.

That is a very difficult matter, I might say, if you attempt to do it by indemnities. Of course, for example, in Birmingham, Ala., the costs of providing for a private room are considerably different from what they are in let us say Buffalo, N. Y., Gary, Ind., or in San Francisco.

So it was naturally our desire to see to it that uniformity was established in terms of benefits. That meant that we wanted to have the equivalent of a semiprivate room accommodations for our members and for their families. We also wanted a uniform set of benefits with regard to hospital X-rays. We wanted to see to it that our people, if they were entitled to all drugs, were entitled to all drugs wherever they were located.

There were differences among the Blue Cross plans on all of those scores. There were differences on duration of benefits. So we requested the Blue Cross to devise a plan that would be uniform throughout the United States. That they did. We still are in this position, and I think this is important: We are in the position in many States of having a far more extensive and superior Blue Cross arrangement than is available normally to the citizens of the community, and that is a situation which in my opinion again will continue for some time in the steel industry.

The steel industry contracts do provide more money for health and welfare benefits than is available, let us say, in less prosperous industries, less basic industries.

For that reason we are able to afford more than what perhaps the majority of the citizens in the community can afford. We have felt very strongly that we should be permitted to continue to have that kind of additional arrangement. We think we have achieved a considerable flexibility and have been able to make important advances in the care of our people through our ability to underwrite nationwide coverage on a uniform basis through the Blue Cross.

Senator DOUGLAS. Are there any other unions which you know of which have a national agreement with Blue Cross for a more liberal