[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
     BUSINESS PRACTICES IN THE INDIVIDUAL HEALTH INSURANCE MARKET: 
                        TERMINATION OF COVERAGE

=======================================================================

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 17, 2008

                               __________

                           Serial No. 110-112

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 HENRY A. WAXMAN, California, Chairman
EDOLPHUS TOWNS, New York             TOM DAVIS, Virginia
PAUL E. KANJORSKI, Pennsylvania      DAN BURTON, Indiana
CAROLYN B. MALONEY, New York         CHRISTOPHER SHAYS, Connecticut
ELIJAH E. CUMMINGS, Maryland         JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio             JOHN L. MICA, Florida
DANNY K. DAVIS, Illinois             MARK E. SOUDER, Indiana
JOHN F. TIERNEY, Massachusetts       TODD RUSSELL PLATTS, Pennsylvania
WM. LACY CLAY, Missouri              CHRIS CANNON, Utah
DIANE E. WATSON, California          JOHN J. DUNCAN, Jr., Tennessee
STEPHEN F. LYNCH, Massachusetts      MICHAEL R. TURNER, Ohio
BRIAN HIGGINS, New York              DARRELL E. ISSA, California
JOHN A. YARMUTH, Kentucky            KENNY MARCHANT, Texas
BRUCE L. BRALEY, Iowa                LYNN A. WESTMORELAND, Georgia
ELEANOR HOLMES NORTON, District of   PATRICK T. McHENRY, North Carolina
    Columbia                         VIRGINIA FOXX, North Carolina
BETTY McCOLLUM, Minnesota            BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                BILL SALI, Idaho
CHRIS VAN HOLLEN, Maryland           JIM JORDAN, Ohio
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
JOHN P. SARBANES, Maryland
PETER WELCH, Vermont
JACKIE SPEIER, California

                      Phil Barnett, Staff Director
                       Earley Green, Chief Clerk
               Lawrence Halloran, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 17, 2008....................................     1
Statement of:
    Bleazard, Heidi, Logan, UT; Dale E. Bonner, secretary, 
      California Business, Transportation and Housing Agency, 
      accompanied by Amy Dobberteen, chief of Enforcement 
      Division, Department of Managed Health Care; and Kevin P. 
      Lembo, MPA, State healthcare advocate, Connecticut.........    22
        Bleazard, Heidi..........................................    22
        Bonner, Dale.............................................    29
        Lembo, Kevin.............................................    47
    Block, Abby L., Director, Center for Drug and Health Plan 
      Choice, Centers for Medicare and Medicaid Services.........    68
    Kanwit, Stephanie, special counsel, America's Health 
      Insurance Plans............................................    79
Letters, statements, etc., submitted for the record by:
    Bleazard, Heidi, Logan, UT, prepared statement of............    24
    Block, Abby L., Director, Center for Drug and Health Plan 
      Choice, Centers for Medicare and Medicaid Services, 
      prepared statement of......................................    70
    Bonner, Dale E., secretary, California Business, 
      Transportation and Housing Agency, prepared statement of...    32
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, information concerning fair and 
      appropriate practices......................................    12
    Kanwit, Stephanie, special counsel, America's Health 
      Insurance Plans, prepared statement of.....................    82
    Lembo, Kevin P., MPA, State healthcare advocate, Connecticut, 
      prepared statement of......................................    50
    Waxman, Chairman Henry A., a Representative in Congress from 
      the State of California, prepared statement of.............     4


     BUSINESS PRACTICES IN THE INDIVIDUAL HEALTH INSURANCE MARKET: 
                        TERMINATION OF COVERAGE

                              ----------                              


                        THURSDAY, JULY 17, 2008

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 9:30 a.m., in 
room 2154, Rayburn House Office Building, Hon. Henry A. Waxman 
(chairman of the committee) presiding.
    Present: Representatives Waxman, Murphy, Speier, Lynch, 
Tierney, Van Hollen, Cummings, Braley, Sarbanes, Kucinich, 
Davis of Virginia, Issa, Bilbray, Platts, and Shays.
    Staff present: Phil Barnett, staff director and chief 
counsel; Kristin Amerling, general counsel; Karen Nelson, 
health policy director; Karen Lightfoot, communications 
director and senior policy advisor; Andy Schneider, chief 
health counsel; Roger Sherman, deputy chief counsel; John 
Williams, deputy chief investigative counsel; Sarah Despres, 
senior health counsel; Michael Gordon, senior investigative 
counsel; Steve Cha, professional staff member; Earley Green, 
chief clerk; Jen Berenholz, deputy clerk; Caren Auchman and 
Ella Hoffman, press assistants; Zhongrui ``JR'' Deng, chief 
information officer; Miriam Edelman, special assistant; Mitch 
Smiley, staff assistant; Lawrence Halloran, minority staff 
director; Jennifer Safavian, minority chief counsel for 
oversight and investigations; Keith Ausbrook, minority general 
counsel; Adam Fromm and Molly Boyl, minority professional staff 
members; Patrick Lyden, minority parliamentarian and member 
services coordinator; and Jill Schmaltz, minority senior 
professional staff member.
    Chairman Waxman. The committee will please come to order.
    I want to, as the chairman of the committee, welcome our 
newest member, Representative Jackie Speier, who represents the 
12th District of California. We are very pleased to have her on 
our committee. She is very experienced as a State legislator, 
and I want to acknowledge the fact that she is now a member of 
the committee.
    Today's hearing begins what I hope will be a series of 
hearings into how the market for individual health insurance 
policies work.
    The individual health insurance market serves approximately 
14 million Americans. Some Members of Congress cite that the 
individual market as a model for national health insurance 
reform, yet the business practices of the companies that sell 
individual health insurance policies have never been closely 
examined by the Congress.
    Today's hearing will examine a little known business 
practice in the individual health insurance market, which the 
industry calls ``post-claims underwriting.'' Post-claims 
underwriting is a sanitized name for an exceptionally offensive 
practice, retroactively denying health insurance to people who 
get sick, and when they get sick.
    Most Americans who have health insurance get that insurance 
through their employers or through government programs like 
Medicare or Medicaid or Tricare. Americans who are fortunate 
enough to have group insurance are not at risk for post-claims 
underwriting. Group insurance coverage can't be terminated when 
you need it the most.
    Americans who purchase health insurance in the individual 
market face a very different situation. In most States, 
insurers require applicants for individual health insurance to 
fill out detailed application forms that are designed to 
identify any physical or mental health condition or chronic 
illness.
    Insurers are supposed to then look at the application 
provided on these forms before approving the applicant for 
coverage. Based on this information, the insurer decides 
whether to issue the policy, to issue the policy with certain 
restrictions, such as refusing to cover pre-existing 
conditions, or to deny the application altogether. This process 
is called medical underwriting and the expectation is that it 
will occur before the policy is issued or denied.
    Post-claims underwriting happens after the individual 
health insurance company has decided to approve a policy and to 
issue that policy. It is often triggered after the policyholder 
gets sick, or has an accident and requires major health 
insurance coverage to be put into place to pay for the bills. 
The insurer then goes with a fine-toothed comb through the 
insurance application, to see if there is any technicality that 
can be used to justify rescinding the policy.
    This happened to two of our witnesses, Heidi and Keith 
Bleazard. They will tell us how their health insurance was 
taken away after Heidi suffered serious injuries in a biking 
accident. Their insurer, Regence, claimed that Heidi and Keith 
made a mistake in their application for health insurance, and 
then the insurance company terminated the policy. They were 
left with more than $100,000 in medical bills.
    What happened to the Bleazards is inexcusable. The reason 
families buy insurance is so that they will be covered when 
they get sick. But Regence canceled their insurance when they 
needed it the most.
    Unfortunately, the experience of the Bleazards is not an 
isolated one. We will hear today that over 1,000 individuals in 
California had their insurance policies inappropriately 
rescinded. And we will hear about policyholders in Connecticut 
who suffered the same thing. One person who was terminated 
because the insurer said he should have known that his 
occasional headaches would later be diagnosed as Multiple 
Sclerosis.
    I understand that insurance companies need to protect 
themselves from fraud. But that is not what happened in 
California, Connecticut, or across the country. Insurers are 
using technicalities, or trumped-up ``misrepresentations,'' to 
rescind policies after policyholders get sick and accumulate 
hundreds of thousands of dollars in medical bills.
    Now, that may be a great deal for the insurance companies. 
They can pocket the premiums while the families are well and 
then cancel the coverage if anyone in the family get seriously 
sick. But it defeats the whole point of getting an insurance 
policy in the first place.
    While State regulators are the front line of defense for 
consumers, the Federal Government is the last line. Under 
HIPAA, the Federal Health Insurance Portability and 
Accountability Act of 1996, consumers are guaranteed the right 
to renew their individual health insurance policies unless they 
have defrauded the insurer or intentionally misrepresented 
their medical condition.
    Unfortunately, few consumers know of their Federal HIPAA 
rights to guaranteed renewability. That is because the Federal 
agency responsible for enforcing HIPAA, the Centers for 
Medicare and Medicaid Services, has done nothing to enforce 
those rights or to ensure that States do so. Of its 4,387 full-
time employees, only 4 are assigned to administering HIPAA. CMS 
has never taken any action against any health insurer for post-
claims underwriting that violates a consumer's HIPAA rights.
    Our hearing today will examine how the practice of post-
claims underwriting is being abused to deny coverage to ailing 
Americans. We will learn what some State regulators are doing 
to stop the abuses.
    And we will ask why the Federal Government is doing nothing 
to protect consumers from this practice.
    And we will ask the health insurance industry's trade 
association why insurers in the individual market do post-
claims underwriting, and why it has taken the intervention of 
regulators to bring an end to this unfair practice in some 
States.
    These are not academic questions. Discussions are already 
underway about how the next Congress might best ensure that all 
Americans have adequate health care coverage. Some health care 
reform proposals would move millions of Americans, including 
many of those now insured through their employers, and billions 
of Federal dollars, into the health insurance market.
    This would obviously be a radical change in our health care 
system. Whether it represents reform is a debate for another 
day. To prepare for that debate, however, we all need a much 
better understanding of the individual health insurance market 
as it currently functions. The purpose of this hearing is to 
begin that educational process.
    And I now want to recognize Mr. Issa for an opening 
statement.
    [The prepared statement of Chairman Henry A. Waxman 
follows:]

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    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Chairman, I would like to have unanimous consent for 
principles for insuring fair and appropriate practices for 
individual market policy rescissions and pre-existing 
conditions causes entered into the record at this time.
    Chairman Waxman. Without objection, that will be the order.
    [The information referred to follows:]

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    Mr. Issa. Thank you, Mr. Chairman.
    Mr. Chairman, getting individual insurance can be difficult 
in a market place. The market place clearly favors risks 
allocated or apportioned over large groups. Losing individual 
coverage retroactively can put one's life at risk. I believe 
that is the reason for this hearing today.
    I think it is an incredibly important reason for the 
Bleazards who are here today, and we will get the pronunciation 
better as we go on, I am sure. You have our deepest sympathy. 
Clearly, mistakes happen. Wrongdoing can occur. And we are here 
today to try to separate both of those from the legitimate 
practice of looking for fraud in applications.
    Undoubtedly, I am sure you will agree in testimony that all 
three exist. People make mistakes. People defraud insurance 
companies. And insurance companies make mistakes, or use 
practices in some cases that are clearly wrong and self-
serving. So, I appreciate the committee covering this.
    Although HIPAA's jurisdiction is extremely limited, and the 
administration of both President Clinton and now President Bush 
have seen fit to see little or no Federal wrongdoing. That 
doesn't stop this committee from seeing whether in fact two 
administrations have been wrong and perhaps create an 
opportunity for the next administration to get it right.
    Certainly, our witnesses today from California and 
Connecticut will be very helpful. It is very clear that 
although people who are victims, or alleged victims, of 
misconduct by health insurance carriers are important to hear 
from. It is also important to hear from as many people who are 
advocates or responsible for administering the fair use of 
these opportunities on both sides. Only State regulators have 
primary jurisdiction. Their goal, the goal of the people of 
California, Connecticut, and all of our States, is, in fact, to 
guarantee consumers the contract sanctity necessary in health 
care arrangement.
    Consumers clearly need more access and more awareness to 
this growing problem that an individual health care application 
could, in fact, retroactively be denied. It is not uncommon 
when people are filling out applications for people quite 
harmlessly to gloss over or not take time to mention that they 
had an injury or an illness decades earlier. That clearly 
should not allow a technical and unrelated cancellation to 
occur.
    We have an industry in America that is under considerable 
assault with rising costs and limited ability for individuals 
or even companies to pay. I join with the chairman in 
recognizing that with 44 plus million uninsured Americans, the 
last thing we need to do is to have people doubting whether it 
is worthwhile to get insurance to begin with.
    Very clearly, unless people can count on contract sanctity, 
it is likely that we would only increase the number of people 
who choose to put the money into a savings account or spend it 
rather than make that investment against the rainy day 
occurrence of an illness or injury.
    Mr. Chairman, as we talked earlier, at this time I would 
like to ask unanimous consent to have our witness from the 
third panel, so closely related to the industry and to the 
regulators, Stephanie Kanwit, be allowed to be on the first 
panel, because we believe that it is the only way to have a 
fair back and forth during the evaluation. And it will save a 
considerable amount of time.
    Chairman Waxman. This suggestion that you are making and 
requesting by unanimous consent is one that we have discussed. 
And as we looked at how to organize this hearing, we think we 
have organized it in a way that is fair to everyone and will 
give everyone an opportunity to speak. We could put everybody 
on one panel, but CMS didn't what to be on with the State 
regulators, which might have made some sense. The insurance 
companies' trade association, are going to be on afterwards. I 
don't see why they have to be on this panel. We have always 
tried to accommodate the minority and staff in witness 
recommendations and in structuring the hearings, but our best 
judgment is we have structured it the way that it makes the 
most sense.
    Mr. Issa. Mr. Chairman, since the UC has not agreed to, and 
since the minority disagrees at this time that this is by any 
means fairness, and since there is obviously a slanting on the 
first two panels by the majority and our one witness has been 
relegated to the last panel, I would hereby make a motion that 
we move Stephanie Kanwit to the first panel at this time.
    Chairman Waxman. Is your witness the insurance company? Is 
that why you are here, to protect the insurance company? Why 
don't we hear about this problem? And also, as Californians why 
don't we hear from the California regulators, who I think we 
ought to be proud of for having done the right thing. They 
represent the Republican Governor. Let's hear from the 
witnesses and not go through a procedural motion.
    I would urge the gentleman not to try to pursue a motion to 
rearrange the committee hearing list. I understand your point. 
You have made a point. But it is the prerogative of the 
chairman to decide the order of the witnesses, and we always 
welcome input. And, in fact, I think we have been more 
responsive to the input from the minority than when we were in 
the minority.
    Mr. Issa. Well, Mr. Chairman, we did talk about the other 
alternative, which would be to have the State regulators, 
including California, who is considering some of these reforms 
that the association representative will be talking about on 
the same panel, and you also declined that. So, at this time, I 
must reiterate my motion to combine the third and first panel.
    Chairman Waxman. I don't know whether it is appropriate 
even to entertain such a motion. Let me have our counsel review 
that and advise me. I have never in my 34 years in the Congress 
ever had a Member, or seen a Member, make a motion to stop a 
hearing for witnesses by asking that they be rearranged in 
different panels, or in different positions. I have never seen 
it. It is a first time. I think it is quite inappropriate 
because we are trying to get the witnesses the opportunity to 
be heard. Members of the committee have not been informed that 
there may be motions before us today. This is a hearing and not 
a committee meeting. I will recess for a second and consult my 
counsel.
    Mr. Issa. Thank you, Mr. Chairman.
    [Recess.]
    Chairman Waxman. The Chair will recognize himself in 
opposition to this motion. I think it is quite outrageous to 
make a motion on the basis that the insurance company is unable 
to make their case because they are the last ones to speak. I 
think what we need is to have an opportunity to hear all of the 
witnesses. And it is the prerogative of the Chair to make this 
determination. I think we have acted fairly. And so, I would 
urge Members to vote against the motion.
    Mr. Issa. Speaking in favor of it, Mr. Chairman, and I will 
be brief. Insurers, and their representatives, trade 
association, have answers to many of the questions. Regulators 
have questions to be answered. The banter between the two was 
not a hypothetical request, but, in fact, one that I believe 
very strongly would promote a better dialog.
    The prerogative of the Chair under the House rules and the 
committee rules is relatively limited. The ability of the 
majority to, by vote, do what they want to do is pretty 
absolute. Today, we make this request mostly because, in fact, 
your party said that you wanted to come together. Our party did 
lose the last election. We want to work with you. This is not 
an adversarial hearing. And, it should not become one.
    This is a hearing in which we are trying to find ways to 
fix a real problem. We have real people here who were adversely 
affected by it. The regulators that are here today are here 
with hypothetical and proposed answers in order to keep this 
from happening in the future, and they will in many cases need 
legislation and perhaps Federal help to do so. The insurance 
association representative that we chose to have here, we want 
them to be answerable for this practice and we want them to be 
part of any solution. That is necessary in our free market.
    Mr. Chairman, you did mention that you thought that the 
motion was not in order. I might remind you that when you were 
in the minority, you made motions for subpoenas, or threatened 
to make motions for subpoenas at hearings like this. This is an 
opportunity, a scheduled opportunity. We were all given notice 
that, in fact, a hearing and subjects related to the hearing 
may very well be brought up.
    Mr. Chairman, I very much believe that we should look to 
redo this panel to make it more equitable and more effective. I 
am happy to work with you on any compromise, but I don't 
believe that we were properly recognized in the process of 
finding an acceptable panel that would be beneficial to all of 
the individuals who are going to spend their time on the day as 
here, and for those individuals and representatives who are 
here today to give testimony and be questioned.
    Chairman Waxman. The gentleman has made his case. The issue 
before us is a motion to rearrange the panels. All those in 
favor of the motion offered by the gentleman from California, 
Mr. Issa, will say aye.
    Mr. Issa. Aye.
    Chairman Waxman. All those opposed will say, no.
    [A chorus of noes.]
    Chairman Waxman. The noes have it, and the motion is not 
agreed to.
    Mr. Issa. Mr. Chairman, on that, I have to ask for the nays 
and ayes.
    Chairman Waxman. All those in favor of the ayes and nays 
raise your hand.
    [A show of hands.]
    Chairman Waxman. An insufficient number and the request for 
a roll call is not granted.
    Mr. Issa. Mr. Chairman, I appeal the ruling of the Chair.
    Chairman Waxman. You would go that far to keep us from even 
hearing these witnesses because you are worried that we won't 
be here to hear the insurance company? Well, we won't even get 
to the insurance company if you drag out this hearing.
    Mr. Issa. Mr. Chairman, I do not want to drag out the 
hearing. I will at this time----
    Chairman Waxman. Those in favor of overruling the decision 
of the Chair will say aye.
    Mr. Issa. Aye.
    Chairman Waxman. Those opposed will say no.
    [A chorus of noes.]
    Chairman Waxman. The noes have it.
    Mr. Issa. Mr. Chairman, on that, I ask for the ayes and 
nays.
    Chairman Waxman. All those in favor of a roll call vote, 
raise your hand.
    [A show of hands.]
    Chairman Waxman. An insufficient number. The request is not 
granted.
    Now we will hear from our witnesses. The committee will 
receive testimony from Heidi and Keith Bleazard, who are from 
Logan, UT. They had their health insurance policy retroactively 
rescinded by Regence Blue Cross and Blue Shield, of Utah, after 
Heidi was in a serious biking accident. They will explain the 
circumstances and consequences surrounding the rescission of 
their insurance coverage.
    Dale Bonner is secretary of the Business, Transportation 
and Housing Agency for the State of California. Mr. Bonner was 
appointed by Governor Arnold Schwarzenegger in March 2007, and 
oversees 13 departments, including the Department of Managed 
Health Care. He will testify about the actions his agency has 
taken to help consumers who had their health insurance 
inappropriately rescinded.
    Cindy Ehnes, the director of the Department of Managed 
Health Care, was initially listed as a witness, but she was 
unable to appear this morning, because she is in negotiations 
with two remaining large plans, Anthem Blue Cross and Blue 
Shield of California, on this issue.
    Mr. Bonner is accompanied today by Amy Dobberteen, chief of 
Enforcement Division of the Department of Managed Health Care.
    And Kevin Lembo heads the Office of the Healthcare Advocate 
for the State of Connecticut in his role as Connecticut's lead 
advocate for patients and their families. Mr. Lembo will 
discuss Connecticut's experience with health insurance 
rescissions and what steps Connecticut has taken to aid 
policyholders and prevent future rescissions.
    It is the policy of this committee that all witnesses that 
testify before us do so under oath. So I would like to ask all 
of you, if you would, to please stand and raise your right 
hands.
    [Witnesses sworn.]
    Chairman Waxman. Thank you. The record will indicate that 
each of the witnesses answered in the affirmative.
    Mr. Bleazard, why don't we start with you and your wife, 
and have you speak to us. There is a button on the base of the 
mic, which you have to push in to turn the mic on, and we want 
to welcome you to the committee and express our appreciation 
for your willingness to be here.

   STATEMENTS OF HEIDI BLEAZARD, LOGAN, UT; DALE E. BONNER, 
  SECRETARY, CALIFORNIA BUSINESS, TRANSPORTATION AND HOUSING 
  AGENCY, ACCOMPANIED BY AMY DOBBERTEEN, CHIEF OF ENFORCEMENT 
   DIVISION, DEPARTMENT OF MANAGED HEALTH CARE; AND KEVIN P. 
       LEMBO, MPA, STATE HEALTHCARE ADVOCATE, CONNECTICUT

                  STATEMENT OF HEIDI BLEAZARD

    Ms. Bleazard. Hello, my name is Heidi Bleazard.
    Chairman Waxman. The button on the mic needs to be pressed, 
and pull it closer so that we can hear you.
    Ms. Bleazard. Can you hear me? My name is Heidi Bleazard, 
and I am here with my husband, Keith Bleazard to testify about 
the problems we had with Regence Blue Cross and Blue Shield of 
Utah rescinding our health insurance coverage.
    In February 2005, Keith and I decided we wanted to get an 
individual health insurance policy for ourselves. We had two 
friends who are insurance agents, Doug Thatcher and Troy 
DeLair. Keith had known them for over 10 years. We met with 
them a few times, and filled out applications for health and 
life insurance, and a nurse came out to complete more detailed 
paperwork. On one of the forms Keith marked that he had a 
history of back trouble, but wasn't sure what to write in the 
comment section on the back. We consulted with Doug who knew 
all about Keith's back history having similar difficulties with 
his own back.
    Over the years and quite recently, they discussed and 
compared their similarities, including medicines and doctor 
visits. After discussing Keith's back, Doug Thatcher, one of 
our agents, wrote in the application that Keith had ``slipped 
disc in back, had surgery 1996, full recovery.'' Doug assured 
us the paperwork was filled out satisfactorily, and we trusted 
his knowledge of what information the insurance company needed.
    Keith had surgery in 1996 for a herniated disk and went 3 
years without any pain or trouble of any kind. Later Keith 
pulled his back playing basketball and developed back pain that 
his Doctor helped him control with medicine. He has since then 
carried on his normal active life, including his job in floor 
covering, involving hard physical labor, a wide variety of 
rigorous activities such as hockey, snowmobiling, and being an 
active member of a Search and Rescue team.
    The medicine and doctor visits were detailed by the nurse 
on another form. We thought all the forms were being used 
together with our medical records, which we signed a release 
for the insurance companies to use to make their decisions. We 
received a letter in March 2005 from Regence, indicating that 
our application had been accepted and we had health insurance 
coverage.
    On August 18, 2005, I was in a bad mountain biking 
accident. I broke my neck in two places and my back in five, 
had a pulmonary contusion, a few broken ribs, and a brain 
injury. Search and Rescue got me to where I could be life flied 
to a trauma center, and they placed me in an intensive care 
unit. I had to have several hours of neurosurgery on my spine. 
When I got out of the hospital, I had to stay in a 
rehabilitation unit until I was good enough to go home. My 
medical bills were over $100,000.
    In November, just when the scope of the bills was becoming 
apparent, Regence notified us they would be looking into our 
medical records. And then in January 2006, Regence notified 
Keith and I that they were rescinding our health insurance 
policy retroactively. They claimed that Keith failed to provide 
information in the application about his back. Regence did not 
respond to our attempt to talk with them to find out where the 
misunderstanding came from.
    Troy DeLair, the senior agent, also attempted to clear 
things up with Regence, communicating to them we had no 
intention of misleading them. Regence had accepted the claims 
and paid for Keith's medicines and doctor visits without any 
problem for most of a year. Having signed the release of 
records at the time of our application, and being open to the 
agents and the nurse, we had no reason to suspect Regence was 
missing any information. Only after the bills from my accident 
were mounting did they notify us of a problem.
    Later we learned that they had not received the nurses 
report detailing Keith's pain medicines and doctor visits, and 
went to life insurance only, and that these things should have 
been included on the form that Doug had helped us fill out. Had 
Regence returned a copy of our application with our healthcare 
policy, as prescribed by law, at the time of our acceptance, we 
would have had the opportunity to question where the rest of 
the paperwork was, and perhaps avoid the future confusion.
    I hope insurance companies such as Regence would be 
prohibited from rescinding insurance coverage without making a 
thorough inquiry into the facts and circumstances surrounding 
the application of the insurance. In our situation it was 
completely inadequate to simply look at the application and 
compare it to Keith's medical records. Had Regence understood 
all of the facts, I do not believe they would have felt it was 
appropriate to retroactively cancel our coverage.
    And I thank you for the opportunity to appear before this 
committee to provide information about our circumstances. Keith 
and I are hard working, responsible citizens. We have never had 
any trouble with our creditors before this time, or with the 
law. I believe that Regence has taken advantage of the 
situation to avoid paying the large medical bills for my biking 
accident. Any help that you can provide in making sure that 
these unethical practices do not continue in the future would 
be most appreciated.
    [The prepared statement of Ms. Bleazard follows:]

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    Chairman Waxman. Thank you very much. Mr. Bleazard, did you 
have anything to add, or is that it for both of you?
    Mr. Bleazard. No, that was pretty much what we had prepared 
as far as the outline of our rescission.
    Chairman Waxman. OK. At least you are here, and when we get 
to questions, you may want to respond to them.
    Mr. Bonner.

                    STATEMENT OF DALE BONNER

    Mr. Bonner. Thank you, Mr. Chairman, and members of the 
committee. I am Dale Bonner, secretary of California's 
Business, Transportation and Housing Agency. Some years ago, I 
was the HMO regulator in the State of California, and now as 
secretary, I oversee the Department of Managed Health Care, and 
a number of other regulatory departments.
    With me is Amy Dobberteen, chief of the Department's 
Enforcement Division. And she will be happy to answer any 
specific questions that you may have about the law or specific 
enforcement actions. We appreciate the opportunity to be here 
this morning to help shed light on what you, in your opening 
comment, noted is a very troubling practice occurring in 
California, and we are sure across the Nation.
    By way of background, we started getting aggressive in this 
area in 2006, when we saw a number of complaints, consumer 
complaints and an increase in litigation. And so, the 
Department initiated what has probably been the largest 
investigation of this practice in the Nation, looking at the 
five largest plans that provide the most individual coverage in 
California. That would be Anthem Blue Cross, Blue Shield of 
California, Kaiser, PacifiCare and Health Net.
    And we think that since we started getting involved, we 
have seen dramatic changes in industry practices. We have seen 
about an 81 percent drop in rescissions just in the first year 
alone. And we have continued to focus on the area because, as 
it was noted earlier, this is a particularly harsh practice 
that affects individuals because unlike having your insurance 
policy canceled, which just means that you have no coverage 
going forward, in this case rescission results in the entire 
withdrawal of your coverage even going back. And so, it leaves 
the member in many cases in limbo relative to existing or 
ongoing treatment, and also, at risk of being, in some cases, 
bankrupt, as a result of substantial legal bills going back in 
time.
    And so, we have continued to focus on these practices 
intensely. We don't deny that health plans have the right and, 
in fact, the responsibility to take a look and try to police 
inaccurate statements in applications and to make sure that 
everything is appropriate. But we have been concerned about 
what appeared to us to be little or no consistency in their 
processes or procedures for investigating these issues and 
medical history in determining whether to rescind coverage.
    The Department's investigations and actions to date have 
included a total of about $3.1 million in fines, and we have 
brought about a number of procedural changes in health plan 
practices, and we have achieved a significant roll-back in a 
number of rescissions. Working with our State attorney general 
and Department of Insurance, we have been able to work with the 
industry in making sure that insurance applications are much 
more transparent, and that everyone has a much more clear 
understanding of what is required in the up-front review 
process.
    A final point, or a couple of final points, one is that in 
April of this year, the Department announced that we were going 
to take the issue a little bit further and actually go back and 
review each and every individual case that was, in fact, 
rescinded dating back to 2004. And that announcement prompted a 
number of the plans to come forward and offer settlements. And 
we achieved successful settlements with Kaiser, Health Net and 
PacifiCare.
    And those settlements specify that the previously rescinded 
enrollees will be guaranteed coverage. The pre-rescission out-
of-pocket medical expenses will be reimbursed or paid by the 
Plan, and additional compensatory damages can be gained in 
arbitration or private litigation, if the member so desires. 
Unfortunately, there are two of the major Plans that we have 
yet to achieve some settlement with to date. That is Anthem 
Blue Cross and Blue Shield of California. Together they have 
about 2,200 cases of rescission between them. And if we are not 
able to achieve settlements in those cases, then we will go 
forward and review each and every case. And, of course, we 
would prefer not to have that result. But if we are not 
successful, there could be very substantial fines that would be 
imposed against each of those Plans.
    But in summary, we think our aggressive action in 
California has achieved significant improvements in the 
industry, certainly in the State, and maybe in other States, 
because we have brought an end to this very unfair and illegal 
practice. We have been assured that consumers have a much 
better understanding of what is required on the application at 
the point of intake. We have been very successful in restoring 
coverage for a substantial number of enrollees who have had 
their coverage unfairly rescinded in the middle of care. We 
think it is a good thing that we have been able to avoid 
lengthy litigation between consumers and health plans. And more 
importantly, we have restored some measure of faith in the 
individual market, so that those who go out and buy individual 
coverage have some greater sense of assurance that the coverage 
will not be rescinded at an inopportune time.
    On the policy front, the Governor has signed legislation 
that prohibits insurance companies from trying to recoup 
payments from providers after they have already approved or 
authorized a course of treatment and then subsequently 
rescinded care. He also wants to outline the practice of 
offering bonuses or financial incentives, to claims adjusters 
and others, to incentivize rescinding coverage. And ultimately, 
the Governor wants to see a guaranteed issue in California, 
coupled with an individual mandate, because we feel very 
strongly that would eliminate the need for medical underwriting 
altogether in the individual market.
    In the meantime, we are going to continue to vigorously 
enforce the existing law. And we are going to continue to look 
out for the interests of consumers, so that we cannot only 
bring light to this issue but more importantly bring an end to 
this very troubling practice.
    Thank you.
    [The prepared statement of Mr. Bonner follows:]

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    Chairman Waxman. Thank you very much. And Ms. Dobberteen, 
are you here for questions?
    Ms. Dobberteen. I am here for questions.
    Chairman Waxman. Mr. Lembo.

                    STATEMENT OF KEVIN LEMBO

    Mr. Lembo. Thank you, Mr. Chairman. My name is Kevin Lembo. 
I am the State healthcare advocate in Connecticut. Connecticut 
has a unique set-up in that we have an insurance regulator in 
our insurance department, and I am the full-time advocate for 
those consumers.
    On behalf of the growing number of Americans who find 
themselves trying to get and keep coverage in the individual 
health insurance market, thank you for your willingness to shed 
light on this very important issue.
    The problem with post-claims underwriting abuse and policy 
rescissions appears to be growing.
    Mr. Lynch. Mr. Chairman, can we have the witness speak into 
the mic. I cannot hear. I am sorry.
    Mr. Lembo. The result of this process and the particularly 
egregious result is the unjust rescission, cancellation, or 
limitation of health insurance contracts after someone is 
diagnosed with an illness and faced with expensive medical 
care.
    In Connecticut, we were fortunate and identified this 
problem in our market beginning in 2003. My office, the Office 
of our Attorney General Richard Blumenthal and our State 
Insurance Department saw a jump in complaints from consumers 
whose policies were rescinded or limited in some other way. 
They were sick, and didn't understand why their coverage was 
taken away or limited. Ultimately, a coordinated and successful 
effort by our offices was undertaken to fix the problem through 
legislation.
    Connecticut's law, an act concerning post-claims 
underwriting, is the product of 3 years of work at the 
legislature to protect consumers from unfair health insurance 
rescissions, cancellations or limitations. Under the 
Connecticut statute, insurers now need to seek the approval of 
the Connecticut Insurance Department before they can rescind, 
limit, or cancel a policy.
    I want to be clear at the outset that this public policy 
debate is not about consumers who intentionally misrepresent 
their health status. That is a red herring that is utilized as 
a distraction by those who would rather not have this 
conversation. Further, we could spend a day arguing about what 
motivates the desperate, albeit infrequent, action to lie on an 
application. Instead, I am focusing on those whose policies 
were unjustifiably rescinded, canceled or limited by a carrier 
to avoid paying claims.
    In Connecticut, a company denied claims for a resident 
named Maria, who was diagnosed with non-Hodgkin's lymphoma in 
2005. The insurer said Maria should have sought treatment and 
found out the diagnosis sooner, in other words, before seeking 
a policy.
    Once the company started receiving her medical claims, it 
found out she had gone to the doctor for what she thought was a 
pinched nerve. She also told the doctor she had been feeling a 
little tired. Maria said she wasn't concerned about the way she 
was feeling because she had been working particularly hard. 
Tests were done at that time to determine whether there were 
other issues. These tests did not yield significant results, 
and they were not tests for cancer. The company denied payment 
for subsequent, cancer-related bills, saying that Maria had 
this condition before she bought the policy and should have 
sought treatment. Maria ultimately died from her illness.
    A young man, named Frank, was taken by surprise when his 
insurance was rescinded because his insurer alleged that he 
omitted material information from his insurance application. 
When Frank applied for coverage, he disclosed that he had 
occasional headaches. After he applied, the carrier obtained 
all of Frank's medical records, theoretically for medical 
underwriting, and then wrote him a policy. Several months after 
getting the policy, Frank went for a routine eye exam and was 
referred to a neurologist by that eye doctor. The neurologist 
diagnosed Frank with Multiple Sclerosis.
    Immediately following that diagnosis, the carrier rescinded 
the policy stating, in effect, that he should have known his 
headaches would have led to a diagnosis of MS. The carrier 
stuck to its position even after receiving a letter from 
Frank's doctor saying that there would have been no reason at 
all to suspect MS, since Frank was an otherwise healthy young 
man with a normal exam. Frank was now responsible for more than 
$30,000 in care that he could not afford. His condition rapidly 
deteriorated, forcing him to end his employment, and seek 
public insurance and assistance.
    These are the kinds of people who are impacted by post-
claims underwriting abuses, and that impact is medically and 
financially devastating.
    Unfortunately, while State Insurance Departments can often 
intercede in these cases through market conduct examinations 
under their existing laws against unfair insurance practices, 
there is little that can be done as regulators to make it right 
for these consumers, at least completely. As State regulatory 
agencies, they can fix problems going forward, making it safe 
for future consumers, but are limited in what they can do now, 
for these relatively uninsurable consumers who are back in the 
marketplace.
    States need to stop this problem on the front-end with 
good, clear law that prohibits these abuses and forces 
companies to seek permission before rescinding a policy. The 
practice must be stopped on the front-end, because the clean-up 
is almost impossible.
    In Connecticut, the Insurance Department recently concluded 
a very long and deep investigation of Assurant Companies, in 
particular, Time Insurance, formerly Fortis, and John Alden, 
that resulted in a record fine for Connecticut of $2.1 million 
in fine, and more than $900,00 in restitution to consumers. The 
Department did all they could, but the damage to the 
individuals, in fact, was done. Although the company admitted 
no wrong-doing, they agreed to pay the fine and restitution.
    Mr. Chairman, it is my opinion, and that of many of my 
colleagues, that our States need to move rapidly to address the 
issue of post-claims underwriting. It is my hope that 
legislatures across the country, with your encouragement, will 
take the following steps to protect consumers and ensure a 
level playing field in the individual market.
    We need to create and adopt a State or National uniform 
application for individual insurance that is clear, easy for 
consumers to understand, and takes out some of those trip-ups 
that do occur in the application.
    States must define medical underwriting and be clear that 
the review of the application alone is not sufficient. Further, 
States must require that underwriting be complete, and all 
outstanding questions be asked and answered to satisfaction 
before the policy is written.
    And finally, there should be creation and adoption of laws 
to stop post-claims underwriting abuses, and provide greater 
limitations on a company's ability to rescind or limit a policy 
without a finding of fact and approval of the State regulator.
    Since passage of our Connecticut post-claims underwriting 
law, complaints from consumers have dropped to a handful, and 
the Insurance Department has received no requests to modify or 
rescind a policy. I think this speaks to the effect of a good 
law yet to be tested, but I would encourage my colleagues in 
other States to join us in ending the practice.
    Thank you.
    [The prepared statement of Mr. Lembo follows:]

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    Chairman Waxman. I want to thank all of you on this panel. 
I think it is a panel that made a lot of sense because you are 
all explaining the problem to us, and you are all advocates of 
trying to do something about the insurance company practices to 
take away insurance when people need it the most. It really is 
astounding. And what you have described, Mr. and Mrs. Bleazard 
is horrible. When you are sick, that is when you want that 
insurance coverage to be there, not to have to have insurance 
companies come in and take it away from you, sticking you with 
the bill, which I think in your case was $100,000; isn't that 
right?
    Well, people think they get insurance coverage and 
insurance is insurance. But the reality is that most people 
have group insurance. And group insurance spreads the risk. The 
private insurance policies try to avoid the risk. They try to 
avoid the risk by not insuring people who have been sick. If 
they have been sick, the insurer won't cover any treatment for 
that illness. If someone has had cancer, and they apply for a 
private insurance policy, and they, of course, say they have 
cancer, because that is part of the questions that are asked, 
they may be told, well, we will insure you for everything but 
cancer. Well, that is the business arrangement that can be 
agreed to. There is no Government requirement to do otherwise, 
if it is a private insurance policy.
    But once they have asked those questions, and all of the 
information has been furnished, the insurance company can deny 
coverage of an individual, but if they agree to cover the 
individual, they shouldn't be coming back afterwards when they 
get the bills for medical care and say, oh, we are rescinding 
the policy. And it sounds to me like in many cases it is a 
trumped-up argument. Is that your experience, Mr. Lembo? You 
just went through a lot of horrible examples of people who have 
been denied coverage after they already had the policy and had 
been paying for it, on trumped-up charges. Is that fair to say?
    Mr. Lembo. Mr. Chairman, in some cases, I think it is fair 
to say. I think, in the case of the Bleazards, that certainly 
sounds like what happened. We are looking at a case now that is 
under investigation, where a person's policy was rescinded as 
she was in a hospital bed being treated for cancer, but the 
rescission was based on information, as it was not disclosed, 
or on hypertension. Under normal circumstances, and without 
that specter of a large claim coming in, they might has simply 
limited the coverage to exclude anything related to that 
hypertension, rather than rescind the whole policy.
    Chairman Waxman. And tell me again, that in other words, if 
somebody was denied healthcare coverage and had their policy 
rescinded because when they put on their application they had 
occasional headaches that person was supposed to have known 
that later he would be, or she would be, diagnosed with MS; is 
that accurate?
    Mr. Lembo. She should have known that it was a large enough 
problem that she should have sought additional medical 
attention. As I stated, she didn't think it was that big of a 
problem.
    Chairman Waxman. That is really astounding to me. And there 
are Members of Congress who are not aware of the fact that 
individual healthcare policies, health insurance policies, are 
different than from the group policies. Now, let me just say 
this to you, and to anybody watching this hearing, if it 
weren't for a free press, the L.A. Times particularly, doing a 
series of articles about this issue, I don't know that the 
State of California officials, and others, would have realized 
what a problem it was. But when the regulators in California, 
and in Connecticut, and in Utah, saw what kind of problem it 
was, these regulators came in and tried to do something to 
protect people.
    We are trying to do this same thing here with this hearing, 
because there is a Federal law, called HIPAA, that is supposed 
to stop insurance companies from carrying on these practices. 
And we are going to hear in the second panel from the Center 
for Medicare and Medicaid Services. They didn't want to be on 
with anybody else. They represent the Bush administration. They 
didn't want to be on a panel with anybody else. We could of had 
them on with the regulators, but they didn't want that.
    Mr. and Mrs. Bleazard, I just can't tell you how pleased I 
am you would be willing to come and talk about this. This is 
not a happy situation in your lives to have your insurance 
coverage canceled on you. You certainly believe you were not 
treated fairly; isn't that the case?
    Mr. Bleazard. No, certainly not, you know, we were as 
honest as we could be. We certainly weren't trying to mislead 
anybody. You know, we felt all alone, you know, I am surprised 
that there are other people that are experiencing the same 
thing.
    Chairman Waxman. Well, it is clear that your situation was 
not an isolated incident. We are hearing it from others as 
well.
    Mr. Bleazard. At the time, you feel like you are all alone.
    Chairman Waxman. Yes.
    Mr. Bleazard. It is you against the world.
    Chairman Waxman. Yes. Well, this committee is going to open 
an investigation into the practices of the private health 
insurance market. We are going to be sending questionnaires and 
document requests to the major health insurers to get answers 
to these questions. And I am pleased that all of you are here 
to give us your perspective.
    Mr. Davis of Virginia. Mr. Chairman, I wasn't here earlier. 
Maybe we can combine the second and third panels. That would 
certainly be OK with us, just so we could expedite and get the 
appropriate questions.
    I would ask unanimous consent that my opening statement go 
on the record, so I won't have to read it.
    Chairman Waxman. Without objection, all opening statements 
by Members will be put into the record.
    Mr. Davis of Virginia. Thank you.
    Mrs. Bleazard, let me ask you, obviously the rescission 
issue in your case is, I think, very disturbing to all of us. 
On a later panel, the committee is going to hear about a 
proposal to give individuals in situations like yours, an 
opportunity to appeal a rescission to an objective panel that 
includes a doctor and a lawyer, which would have the power to 
reinstate the policy immediately, so you get an instant appeal 
to an independent group, including a doctor and a lawyer.
    And even if you lose that, you can still sue. So it 
wouldn't take away your right to sue, if you were to lose that 
panel. But, what it would allow is, it would give you an 
independent group to take a look at something like this very, 
very quickly, because having to go to court is a long--even if 
you win, you lose, because you have carrying costs, and you are 
not sometimes getting the care you need in the meantime.
    Had that kind of option been available to you and your 
husband, would you have pursued that understanding that if the 
panel did rule against you, you could still sue? Would that be 
something that could be of interest to you?
    Ms. Bleazard. As I understand it, yes.
    Mr. Davis of Virginia. OK. I mean, it obviously devils in 
the details. I am not trying to trap you. I mean, conceptually, 
but in an earlier panel, I think you need an instant right of 
appeal to some independent group in a case like this that can 
call balls and strikes right off, and sometimes mitigate or 
solve this earlier on, so you don't have to go to court. If you 
lose, and you think you got a raw deal, you would still have 
the right to go to court. That is one of the concepts.
    And it would allow you to get, possibly, the opportunity to 
get your insurance reinstated on an expedited basis. It seems 
to me that is a reasonable route to go, but we will talk about 
that a little more. I just wanted to get your reaction to it.
    Secretary Bonner, given California's well-publicized 
problems with rescissions, do you think that the Federal 
Government should take over enforcement of HIPAA protections?
    Mr. Bonner. Well, HIPAA, being a Federal law, I think it 
would be an inappropriate thing for the Federal Government to 
be taking a hard look at, yes.
    Mr. Davis of Virginia. OK. From the State regulatory 
perspective, under what circumstances should the Federal 
Government take over State regulation in the individual 
insurance market for failure to substantially enforce HIPAA?
    Mr. Bonner. Boy, that is, I think, a very difficult 
question, because I don't think that it is in our interest to 
have too many carve outs of our State regulatory jurisdiction. 
As I say, HIPAA, being a Federal law, I think it is a very 
appropriate thing to be looking at. Beyond that, I am not sure 
if you are suggesting the State taking over certain aspects of 
our Knox-Keene or other insurance regulation?
    Mr. Davis of Virginia. Well, the problem always is if the 
Federal Government isn't doing its job, sometimes the State is 
better off in a State like California, sometimes States don't 
do the job. I mean, that is always the dilemma in terms of, do 
you Federalize something like that or give it back to the 
States? Mr. Lembo, let me ask you, from a State perspective, 
under what circumstances do you think the Federal Government 
should step in and take over State enforcement of HIPAA 
protections?
    Mr. Lembo. Like, Mr. Bonner and Mr. Davis, I would have to 
say, I am not sure on its face, what those circumstances would 
be. We would want to preserve the right of States to regulate 
insurance as they are doing now. I think the Federal Government 
has a role in encouraging better and stepped-up enhancement.
    Mr. Davis of Virginia. Here is my understanding. The 
individual health insurance market is regulated almost 
exclusively by States. CMS is responsible for making sure that 
States enforce protections that are contained in HIPAA. That is 
the current law. Only if the States fail to enforce HIPAA can 
the Federal Government take over enforcement and that has not 
happened.
    So I am guessing, with that perspective, from a State 
perspective, when do you think the Federal Government should 
step in and take over State enforcement of HIPAA protections? 
And second, do you think that prior to the recent enactment of 
State legal reforms in Connecticut, prior to those reforms, was 
Connecticut failing to substantially enforce HIPAA protections?
    Mr. Lembo. I'll take the second piece first, if you don't 
mind?
    Mr. Davis of Virginia. Yes, you are probably more familiar 
with that.
    Mr. Lembo. And that is, there was enforcement activity 
around Connecticut's existing Unfair Insurance Practices Law. 
Those laws exist in most States, because they are based on an 
NAIC model that has been adopted by both States, and give the 
States lots of opportunity to regulate around this issue, 
without naming it specifically. I think at this point the 
conversation that happens on an ongoing basis between CMS and 
the NAIC around ways for those two groups to work together to 
make sure that there is, in fact, even enforcement seems to be 
working but could be encouraged.
    Mr. Davis of Virginia. Thank you.
    Mr. Lembo. Thank you. Mr. Davis. Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. Mr. and 
Mrs. Bleazard, I, too, thank you all for being here today, and 
I am sorry that you are continuing to experience this 
nightmare. Mr. Bleazard, you and your wife had recently 
married; is that right?
    Mr. Bleazard. Yes.
    Mr. Cummings. And then you decided that you needed to get 
both health and life insurance; is that right?
    Mr. Bleazard. Yes.
    Mr. Cummings. And you met with an insurance agent who was 
fully informed about your health, including your back; is that 
right?
    Mr. Bleazard. Yes, they were friends of mine.
    Mr. Cummings. And in March 2005, Regence Blue Cross and 
Blue Shield issued you an insurance policy. Do you remember how 
much you were paying in premiums?
    Mr. Bleazard. I think it was in the $300 range.
    Mr. Cummings. But you paid them?
    Mr. Bleazard. Oh, yes.
    Mr. Cummings. And Mrs. Bleazard, in October, you had a 
serious accident, and just hearing your testimony, and so that 
we reiterate it, you said, ``My physicians told me that the 
fracture is so severe many individuals die as a result of it. 
The fractures in my back were impact fractures, which shattered 
the bone at the point of greatest impact. I also had a 
pulmonary contusion, three broken ribs, and a brain injury. 
Several hours of neurosurgery were performed to save my spine. 
I spent 3 weeks in the hospital and in a physical 
rehabilitation unit, and I am continuing to do physical 
therapy. My medical bills are over $100,000.00.'' Is that 
right?
    Ms. Bleazard. Yes.
    Mr. Cummings. And it is your testimony that the insurance 
company hadn't paid a dime; is that right?
    Ms. Bleazard. Well, at first, they paid. And once the bills 
started mounting, they said they were going to look into it. 
And then, they took all the money back. And we were left 
responsible for all of it.
    Mr. Cummings. Now, do you have health insurance now?
    Ms. Bleazard. No.
    Mr. Cummings. Are you concerned that you can't or won't be 
able to get it?
    Ms. Bleazard. That is correct.
    Mr. Cummings. And what impact has this incident had on you, 
on your family?
    Ms. Bleazard. Indescribable stress.
    Mr. Cummings. And can you tell us a little bit about it? 
You know what happens so often, I mean, and I was very glad to 
hear Mr. Bonner's testimony and Mr. Lembo, but what happens too 
often is that the insurance companies collect, and then when it 
comes time, when somebody is going through a nightmare, the 
very thing that they paid insurance for, they then suddenly go 
AWOL, and individuals like you are left in pain and suffering. 
And as I listened to Mr. Lembo's testimony, one of the things 
that I like about the Connecticut system is that they have to 
have basically preapproval before doing the rescinding; is that 
right, Mr. Lembo?
    Mr. Lembo. Yes, Mr. Cummings.
    Mr. Cummings. And it seems like that system, and then I 
also am interested to see that in your testimony, Mr. Lembo, 
you talk about how since the passage of your system, you had 
very few complaints from consumers; is that right?
    Mr. Lembo. That is correct.
    Mr. Cummings. And why do you think that is?
    Mr. Lembo. I think sometimes the best law never has to be 
enforced.
    Mr. Cummings. What do you mean by that?
    Mr. Lembo. Having good law on the books will often put an 
end to certain behaviors that are questionable, and it never 
gets to the point where it has to an enforced law, just knowing 
that the law is there.
    Mr. Cummings. And the fact is that when, you know, you 
think about a person going through the trauma of the Bleazards, 
or somebody who walks into a doctor's office, and I have often 
said that we are all one diagnosis from disaster. But they walk 
into a doctor's office and the doctor says, God forbid, gives 
them a diagnosis of cancer, they have to have surgery, 
radiation, chemotherapy, but at the same time they have to 
tackle a question of whether an insurance company is going to 
pay. That is a major problem, isn't it?
    Mr. Lembo. It is.
    Mr. Cummings. Do you see those kinds of situations, Mr. 
Bonner, in your experience?
    Mr. Bonner. Situations where the insurance company just 
refuses to pay all of the previously incurred medical bills?
    Mr. Cummings. That is correct.
    Mr. Bonner. Yes, I mean, you see that is often the case is 
that sometimes what prompts the review in the first instance is 
the utilization of services. So it is the big ticket medical 
bills that sometimes prompts the insurance company to go back 
and take a look at the application, and then that sometimes 
results in the decision to rescind.
    Mr. Cummings. Now, going back to the Connecticut system, 
what is your opinion of that system, Mr. Bonner?
    Mr. Bonner. Well, we are taking a look at many of the same 
types of things. We have already developed a model application 
that is available through the regulatory, through the 
Department of Managed Health Care, but we are also looking at 
legislation that might lay out an independent review process, 
an instant appeal, some of the other preapproval, some of the 
other things that were referenced in Connecticut.
    Mr. Cummings. Thank you, Mr. Bonner.
    Chairman Waxman. Thank you, Mr. Cummings. Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman. Mr. Bonner, I am a 
fellow Californian. I appreciate the good work that you and the 
Governor are trying to do. As you heard earlier, because we are 
not able to sort of get our questions and between yourself, the 
others, and the representative from, if you will, the 
healthcare industry, I am going to ask you a series of 
questions. In some cases, they may be obvious, but remember I 
am going to later be asking the health care industry to comment 
on some of these same things. For now, I will look at it as a 
California issue, only because, as a Californian, I am a little 
more familiar.
    First of all, my understanding is in California, the 
Insurance Commissioner has authority over all insurance, except 
health care; is that roughly correct? That Insurance 
Commissioner Poizner has limited jurisdiction in this area?
    Mr. Bonner. Well, it is not entirely accurate that he has 
jurisdiction over health insurance, it is the distinction 
between regulating the insurance product, which is basically 
indemnity insurance versus managed care, you know, HMO 
insurance, which is what the Department of Managed Healthcare 
regulates.
    Mr. Issa. OK. So, my question would be, do you believe that 
even if it is joint, that greater jurisdiction to the elected 
Insurance Commissioner might be helpful in bringing pressure to 
bear to insure that these kinds of selective abuses don't 
happen?
    Mr. Bonner. You know, I don't see the structure of the 
regulator itself as being key to the solution here. I think 
aggressive enforcement and clear rules, and aggressive 
enforcement of those rules, are really the key.
    Mr. Issa. OK. Well, if I can get to a couple of those 
potential rules. If, in fact, transferability was an absolute 
right, meaning that no pre-existing conditions in California 
could be looked at under any circumstances as long as you were 
continuously insured, would an absolute statement of that in 
all 50 States be helpful, to prevent essentially people having 
to, if there are continuously insured, having to find 
themselves, you know, going through this process of looking in 
the rear view mirror, and there is a serious of questions here?
    Mr. Bonner. To make sure I understand, you are asking if we 
just prohibited the practice of rescission, or it would require 
guaranteed issue?
    Mr. Issa. No, as long someone didn't have a break in 
insurance when they went from a group insurance to an 
individual insurance, their background would be prohibited. In 
other words, if you will, an assigned selection, that if you 
want to do business in California, you have to accept anyone 
who is going, let's say, from a COBRA coverage, having left an 
employer that did have care, to an individual? We would have 
that right as a condition in California. Would that, in fact, 
distribute the risks in a way that would be fair but at the 
same time prevent a huge amount of people having to deal with, 
in some cases, their pre-existing conditions?
    Mr. Bonner. I think, as I understand the question, one of 
the things that you would be concerned about when you refer to 
distributing the risks is the scenario where there are 
substantial numbers of people who in the individual market, in 
particular, who simply are not in the system. And so, you know, 
you don't have that same opportunity to share risks or 
distribute, as you would, in a group environment.
    Mr. Issa. And I want to get to that, but, you know, this is 
assuming people coming out of a distributive risk. Second, 
limiting pre-existing conditions to ones which are chronic and 
life threatening, in other words the State could eliminate 
conditions that are unrelated to the claim from being allowed 
to cause cancellation of the claim? The State could do that, 
just yes or no, it is certainly within the power of the State?
    Mr. Bonner. The State could do that.
    Mr. Issa. Yes or no, if you don't mind. Is it a good idea?
    Mr. Bonner. Yes.
    Mr. Issa. Is it a good idea? You know there have been 
specific conditions, and Amy may speak to this better, but 
there are specific conditions where the legislature has made a 
termination that they are not grounds for cancellation or 
rescission.
    Mr. Bonner. And in this case, an accident. In other words, 
an event, which is traumatic in its nature. Would that be 
probably first and foremost among them that even if you knew 
you had cancer and didn't say so, but you were in a car 
accident, uninsured, or you were just a rider in the car and 
you became seriously injured, cancellation, even though you 
didn't say you had cancer, the injuries are, you know, are 
unrelated, by definition, wouldn't that be one of the first 
ones that California should ensure would not allow this 
retroactive cancellation?
    I agree with you that an accident should not be grounds for 
cancellation, or a recission, yes.
    Mr. Issa. OK. Once again, Mr. and Mrs. Bleazard, you have 
our deepest, not just sympathy, but recognition that you 
shouldn't have to be here today. This shouldn't have happened. 
And I appreciate the chairman's willingness to try to bring 
focus for change. And I yield back, and thank the chairman.
    Chairman Waxman. The gentleman's time has expired. Before I 
recognize the next Member, Members have a lot of conflicts in 
their schedule, and that is just the way this place operates. 
And I am going to have to go to a conference committee that I 
pleaded with the Senate not to call at the same time, but they 
didn't pay attention to that. So that is why I wanted to speak 
out of order.
    There has been another request of changing the panels. And 
Mr. Davis said, perhaps we could put the insurance companies 
with CMS. Now, I suppose, we could have put everybody on one 
panel, and we could have moved this hearing faster, but I 
really don't think that makes sense, because CMS is the 
regulator. And as the regulator for the Federal Government, 
they didn't even want to be on a panel with the regulators in 
the State government, because that would have made some sense.
    But to put the insurance companies with CMS doesn't make 
sense. And you can't have everybody talk all at once. So, we 
have to have witnesses get a chance to speak and ask questions. 
So, we have had this panel, which we thought made sense to put 
you altogether. We have CMS next. And then, we have the 
insurance companies.
    Now, there is a concern on the Republican side of the aisle 
that people won't be back for the insurance companies. They 
won't be here for the insurance companies. Well, we only have 
two Republicans here now, and I hope they will be here, but I 
don't see Republicans rushing in to be here at all at the 
moment, but they do have conflicts in their schedule. We have 
some Democrats, but we don't have all of our Democrats.
    So, the Chair's prerogative is to set the agenda, to call 
the hearings, and to set the agenda, and to, in consultation 
with the Republicans, establish the order for the witnesses. 
And I am going to stick with what we have, even though this 
request has been made because I think what we have makes sense. 
I will certainly try to be back here for the insurance 
companies, because I, particularly, want to hear from them and 
ask them questions.
    So, Mr. Davis, I know you have made that request and I hope 
you will acquiesce.
    Mr. Davis of Virginia. Well, you are the chairman. Can we 
just move ahead? Thank you.
    Chairman Waxman. OK. Thank you. Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. And right on point, I 
am actually in two hearings simultaneously, one down the hall, 
so I am going to have to leap out and go over to that hearing, 
and hope to come back in time for the insurance company 
testimony.
    Mr. Chairman, I want to thank you for your willingness to 
work with the minority, as well. I want to thank the panel for 
coming forward with their testimony, helping the committee with 
its work.
    Following the chairman's initial remarks, the essence of 
our insurance system is really to spread risks, to distribute 
risks across a wider, healthier, less accident prone 
population. And what has been described here, this practice of 
post-claims underwriting, basically turns the whole theory of 
insurance on its head. In other words, the end result here, at 
least the cases that have been described here, demonstrate a 
pattern of conduct, and I would say thousands of cases 
demonstrate a pattern of conduct, by some insurance companies 
in some States, in which the insurer actually accepts an 
application for insurance and accepts payment of premiums from 
the consumer until the point at which a claim is filed.
    Then, it appears, at least from the cases we have seen here 
today, the insurance company rescinds the insurance agreement 
in many cases based on specious reasoning. The end result is 
that the consumer is led to rely to his or her detriment on the 
inducement by the insurance company to rely up to the point 
that the harm, or the illness, is actually irreparable. 
Because, but for the insurers inducement, the consumer could 
have kept on looking for insurance elsewhere, but it was sort 
of trapped by the insurer's conduct. And again, the number of 
cases that have been cited here in California, and Connecticut, 
and elsewhere, indicates that there really is a national 
pattern of conduct here that is indeed troubling.
    Mr. Lembo, you provided a lot of testimony here today, and 
I want to ask you about a couple of cases that you described. 
You described a case of a woman who purchased health insurance 
and then was later diagnosed with Hodgkin's lymphoma, or cancer 
that attacks the lymph nodes. After she received her diagnosis, 
her insurer terminated her coverage. Can you tell me why the 
insurer terminated the coverage in that case?
    Mr. Lembo. Yes, sir. I just have to flip to that one, I am 
sorry. In the case of the woman with Hodgkin's lymphoma, a 34-
year old woman, it was a straight pre-existing condition charge 
on the part of the insurance companies. They said that she 
should have sought treatment, because she had experienced minor 
shortness of breath while exercising.
    Mr. Lynch. Shortness of breath, while exercising?
    Mr. Lembo. That is correct.
    Mr. Lynch. You are serious? OK. Was there any connection 
between her shortness of breath while exercising and the 
lymphoma, in your opinion?
    Mr. Lembo. Not being a doctor, I would say, no, but----
    Mr. Lynch. All right. I will let you go on that one. I want 
to ask you about another example. Some of these are really 
outrageous. According to your statement, you had a young man in 
good health. I think you named him Frank. He disclosed to the 
insurer that he had occasional headaches, that the insurer 
agreed to issue a policy nevertheless, and then several months 
later, Frank was diagnosed with Multiple Sclerosis. After 
learning of that diagnosis, the insurer rescinded Frank's 
policy. You are more familiar with the detail of this case. Was 
the rescission in this case justified, in your opinion?
    Mr. Lembo. No, it was not.
    Mr. Lynch. OK. I know that there are tens of thousands of 
cases cited in California, or in Connecticut, and elsewhere, is 
it your opinion that this is an isolated practice, or these are 
outliers, or does this, as I suspect, represent more of a 
pattern of conduct by perhaps a narrow group of insurers?
    Mr. Lembo. I think that is probably the case, Mr. Lynch, 
that it is not a common practice, at least not in Connecticut, 
but the outcome of that process is pretty awful for consumers. 
So, in a State of $3.4 million, when you get a couple hundred 
cases of rescission, that is a trend and a spike.
    Mr. Lynch. Mr. Bonner, just the same question on the scope 
of this----
    Mr. Cummings [presiding]. The gentleman's time is up.
    Mr. Bonner. Yes, I think that the number of cases we have 
seen, almost 5,000, or about roughly 4,800, in the last few 
years, that it suggests that it is a common practice.
    Mr. Lynch. OK. Thank you, Mr. Chairman. I yield back.
    Mr. Cummings. Thank you very much. Mr. Bilbray.
    Mr. Bilbray. Mr. Bonner, we heard a lot about this problem 
in California. And I guess, there is no uniform National policy 
on reporting rescissions, or whatever. Do you think California 
is unique in any way, and that is why it seems to have been 
focused more in California. Or, why is California such a hot 
bed?
    Mr. Bonner. Well, the short answer to your question is I 
don't think there is anything structurally unique about 
California, particularly since we are talking about the 
individual market. And I think part of it obviously is the 
numbers, you know, it is a large State. And we have almost 3 
million, I think roughly 3 million in the individual market, so 
just the scale and the numbers is, I think, significant. But I 
would venture to guess that if you just adjust for population 
and so on that you would find that it is probably a routine.
    Many of the same carriers in California are national 
companies, so those that we mentioned, Kaiser, Health Net, 
PacifiCare, are national companies, and so, some of these 
practices are the function of national corporate practice and 
policy. So, I don't know that there is anything unique to 
California that would suggest the problem is greater there than 
other States.
    Mr. Bilbray. Well, if the problem isn't greater there, the 
problem itself, if you were judging by the complaints 
themselves, or the highlights of the problem, it goes far 
beyond our proportionality and population. Is there, you know, 
is it a heightened sensitivity? Is it the fact that the 
reporting, or the sensitivity, or the concerns about that, is a 
little more heightened in California than it may be in the 
general population of the United States? Because it seems like 
proportionality in population, even though we are the big guy, 
we still seem to have more press, more media, more reporting 
coming out of California than even the numbers would justify. 
You say you don't think the problem is any worse than anywhere 
else in the country, do you think the sensitivity to the issue 
may be what is driving the appearance, at least, of more 
activity, or more concern, in California based on what we have 
seen?
    Mr. Bonner. I think that maybe a variation on that theme, I 
would say, rather than sensitivity, I would say awareness, 
meaning that we have done a lot of work over the last several 
years to increase consumer awareness of what their rights are, 
and made it easier for consumers to bring complaints, not 
necessarily legal complaints, but just complaints with the 
regulator, and through their health plans.
    So, I think all of those things, and in addition to the 
private litigation that we have seen, the more that you do to 
shed light on the issue and let people know that they have some 
form of redress, the more people you are going to have raising 
the issue, and hence it is much more transparent on the 
regulatory radar as well.
    Mr. Bilbray. Well, I think the sensitivity to consumer 
protection in California has been something that, you know, the 
whole world has talked about before. And, as somebody who has 
come from a family lawyer, it also happens to be that 
California proportionately per capita has more lawyers in any 
other State in the Union, so, it might raise a little degree 
there too. But, thank you very much. I appreciate it. And, Mr. 
Chairman, I yield back.
    Mr. Cummings. Thank you very much. Mr. Murphy.
    Mr. Murphy. Thank you very much, Mr. Chairman. I know 
Chairman Waxman had to go a conference committee, but I would 
just like to thank him for keeping the order of panels that we 
have here today.
    I am going to go out on a limb and take a guess that the 
Bleazards don't have a lobbyist, or representative, here in 
Washington. And I am pretty certain that the families and the 
individuals that Mr. Lembo talked about don't have lobbyists or 
representatives, here in Washington.
    And I, for one, have absolutely no problem with individual 
citizens coming to Washington, the stories of individual 
citizens being told here, being given preference to 
associations and corporations, who will have every opportunity 
after this panel is done to reach out to the Members that 
didn't get to make it to this hearing and make their case. I 
think that is how hearings should be run. I think we should 
hear all of the evidence, but I have absolutely no problem with 
regular, average, everyday people, getting a little bit of 
preferential treatment in terms of how the stories are being 
told here, given that they don't have the type of 
representation that others do.
    Mr. Lembo, first of all, I want to thank you for coming. I 
was in the State legislature for a number of years when the 
office was created, and have watched it grow, and have watched 
it become an asset for consumers in Connecticut. And, I guess, 
my question is this, for all of the States out there that don't 
have the new statutory structure that we have put in place in 
Connecticut, what were the tools available to you before this 
law passed, or to the Insurance Commissioner, when you were 
receiving these hundreds of phone calls, what was the recourse 
that you had, or what was the recourse that those individuals 
had, when they were seeing these rescissions?
    Mr. Lembo. Thank you very much, Mr. Murphy. First of all, I 
always believe that for every call we get, there are probably 
10 that we don't. And I think that is mostly because people 
don't feel in power to fight that big fight, and also maybe 
second-guess themselves, did I complete the application 
appropriately? Is the company right? That said, as I mentioned 
earlier, there are model laws on unfair insurance practices in 
most States in the country. They are very useful. In some of 
our cases, we were able to utilize the pieces of that law to 
get an appropriate outcome for consumers; but in others, we 
were not. It wasn't until we had very specific language that we 
were able to get relief and I hope stop the practice.
    Mr. Murphy. And in many of the cases that you were 
describing, you were really talking about the insurance 
companies asking these patients, and these consumers, to be 
doctors themselves, that they should have known that something 
was wrong, and should have sought treatment and help before 
they submitted an application. It is bad enough that we now 
have insurance companies acting as doctors, and now we are 
asking the consumers and the clients to be doctors, as well.
    And I guess the question is this, what kind of normal 
medical underwriting would we expect, and this is a question 
potentially for Mr. Bonner and Ms. Dobberteen as well, would we 
expect of an insurance company up front when they see an 
application with a notice of shortness of breath, or back pain, 
or other specific problems, what is the normal obligation on 
behalf of that insurance company to go out and do due 
diligence?
    Mr. Lembo. There is certainly a growing body of agreement 
around what real medical underwriting is. I think it is fair 
for a company that is faced with an application that has no 
flags in it. There are no yeses to any of the medical condition 
questions. To go forward with that application under certain 
circumstances. But any, as you mentioned, any of the things 
that you mentioned should cause the company to then seek the 
medical record and investigate further.
    And once they complete medical underwriting, in the 
academic sense, medical underwriting, not a shorthand medical 
underwriting that is just a review of a screening tool, which 
is what the application is, in a rush to sort of own on a 
market in a particular State, because it is a lucrative market. 
If we get there, I think we will see a lessening of this issue, 
and frankly, the companies will be given an opportunity to 
fulfil their obligation to their corporate entity, and to their 
stockholders in some case, to make sure that they are doing 
their job, as well.
    Mr. Murphy. Mr. Bonner, any comments on the scope of up-
front medical underwriting that we really want to be requiring, 
if we were to proffer a uniform law or encourage States to 
adopt such laws?
    Mr. Bonner. Well, short of a uniform law, or much more 
detail than what the regulatory requirement is, I think you 
definitely want to see reasonable inquiry into those issues 
that may be suggested on the application itself. I think the 
other thing that is very important is to look at the 
qualifications of those who are actually doing the review, as 
well, because one of the issues that we have found is that in 
many cases the person reviewing the application and the 
information may not have the necessary qualifications to 
determine whether they should be making further inquiry to 
discover a problem. So, we think that there needs to be some 
very clear rules on what is asked on the application, and very 
qualified reviewers, as well. Anything you would add to that?
    Ms. Dobberteen. Just that new case law in California did 
add that insurers would be obligated to verify the, not only 
the accuracy but the veracity of the answers on the 
application, so that there should be more than just reviewing 
an application and stamping it OK, that they actually do have 
the duty of the investigation prior to issuing the policy, 
rather than post-claims.
    Mr. Murphy. Thank you very much.
    Mr. Cummings. Thank you very much, Ms. Speier.
    Ms. Speier. And thank you to the panelists for being here. 
I apologize for coming in, and going out, and coming in, but 
again, a number of hearings are taking place. I want to welcome 
the regulators from California here. It is great to see you 
again.
    Congressman Bilbray asked a question that I think needs to 
be explored a little bit more. The question was, you know, is 
this kind of something more attributed to California than 
anywhere else where there are more cases? My understanding is 
that California is unique in the country in that so many 
Californians are in managed care. The vast majority of 
Californians, in fact, are in managed care, so they are in 
group health insurance settings where this would not be an 
issue. And I would offer that as a question to either of you to 
answer.
    Mr. Bonner. Well, that is certainly true that we have a 
much greater saturation of managed care in California than you 
see in other parts of the country.
    Ms. Speier. So, it would suggest that in areas where there 
are a larger penetration of individual health insurance, that 
this is going to be a problem. Obviously, it is a problem in 
the individual market, not in the group market. So, in States 
across this country, where individual health plans have a 
greater penetration, this is conceivably more likely to be a 
problem?
    Mr. Bonner. I think that is a logical assumption to make in 
the absence of information to the contrary.
    Ms. Speier. And in your assessment in California, you have 
identified a number of insurers who have engaged in this 
practice. Do you have any reason to doubt that it is a practice 
that is embraced by most insurers, not just in California but 
across the country?
    Mr. Bonner. No, you know, my assumption or, let me back up 
and say that first, you know, the insurance industry is a very 
risk adverse industry and very competitive, as well. And what 
they seek is clear rules, and consistent application in what 
you see often times, or what I have seen over the years, as 
both the regulator and now having oversight of the regulator, 
is that competition in the industry is such that when you have 
one company that has one approach, or practice, you often see 
some consistency in that approach and practice among their 
competitors. And so, I think at least that is what is implicit 
in your question is, would we tend to believe that the practice 
is common amongst insurance companies in general, and I would 
say, it is likely.
    Ms. Speier. This is a hypothetical, of course, but we are 
excluding fraud. So, anyone who fills out an application, and 
fraudulently fills out an application, says that they don't 
have any pre-existing conditions when, in fact, they did have 
pre-existing conditions, is not someone we are talking about. 
We are talking about rescission where it is done unrelated to 
fraud. Shouldn't we just create a burden on the insurer to 
establish that, in fact, it is fraud before a rescission can 
take place?
    Mr. Bonner. Well, you may speak to some of the recent case 
law in California that has moved closer to that result, but you 
may want to speak to that a little more directly.
    Ms. Dobberteen. In fact, California law requires a showing 
of willful misrepresentation before they can rescind, if they 
have completed medical underwriting. The new case law did 
delineate that they have to either absolutely complete medical 
underwriting in order to rescind, or make a showing of willful 
misrepresentation. It does require documentation. It does 
require looking into, rather than just making that assumption.
    Ms. Speier. So that is case law, but not statutory law?
    Ms. Dobberteen. No. It is based on the statute in 
California.
    Ms. Speier. All right. So then, it is just an issue of 
enforcement? If you don't hear about it, you can't enforce it?
    Ms. Dobberteen. We have investigated in depth, not just 
waiting for complaints, but we have investigated all five major 
health plans who have any products in the individual market.
    Mr. Cummings. Thank you very much.
    Ms. Speier. Thank you.
    Mr. Cummings. Mr. Platts.
    Mr. Platts. Thank you, Mr. Chairman. I will be real brief 
here. Mr. Lembo, I apologize with coming in late, and I don't 
think I'm being repetitive, but in your testimony you talked 
about the issue of intentional misrepresentations, as being 
more or a red herring issue, can you expound on that? Is that 
because it is a very small percentage in your opinion and it is 
blown out of proportion?
    Mr. Lembo. I think it is a very small percentage of the 
group of folks who have the policy that you are saying.
    Mr. Platts. What level would you put it at in your opinion?
    Mr. Lembo. You know, not having real data to support that, 
it is just our experience based on the case work that we do.
    Mr. Platts. Given the work you do, and seeing that not as a 
driving issue here apparently by your testimony, is it 
something that rescissions should not be allowed, or there 
should be a high bar for a rescission being granted?
    Mr. Lembo. I think before a policy can be rescinded, there 
needs to be a showing that there was a willful, knowing 
misrepresentation of health status.
    Mr. Platts. In Connecticut, what is the standard?
    Mr. Lembo. Knowing.
    Mr. Platts. Knowing. And your opinion is just that, that 
should be replicated nationally like that?
    Mr. Lembo. We went for intentional, but lost that 
particular battle.
    Mr. Platts. OK. All right. Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much to our witnesses. We 
would to thank you very much for your testimony to the 
Bleazards. We thank you. Clearly, I think everyone on both 
sides are very concerned about what happened to you, and I 
don't think we want to see that happen to anybody else. And we 
will do our very best. And I want to thank our other witnesses 
for providing the testimony. This is the United States of 
America. We can do better by our citizens. And again, all of 
your testimony is very helpful. You are now dismissed. Thank 
you very much.
    We will now call on Ms. Abby Block, the Director, Center 
for Drug and Health Plan Choice, Centers for Medicare and 
Medicaid Services, here in Washington.
    Mr. Davis of Virginia. Mr. Chairman, while she is getting 
here, let me just note, the reason I want to combine panels is 
we allowed Mr. Waxman to move the hearing up to 9:30 a.m. this 
morning. It was inconvenient to us for different reasons, but 
we allowed him to do that. I had a 12 appointment I couldn't 
make, and I wanted to get our appointment while I was still 
here.
    It had nothing to do with bringing lobbyists up front. I 
want to underscore that. There is a proposal that they have, 
and it would be interesting to have people comment on, but this 
is not an adversarial hearing. And I think this kind of 
rhetoric is exactly what is wrong with Congress. Everything has 
to get torn up into partisanship. We have tried our best to 
accommodate, you know, the majority with their time. They 
didn't give appropriate notice for it, but we wanted Mr. Waxman 
to be able to get his hearing in and be here, because we knew 
this other committee meeting was called that he couldn't avoid. 
Thank you.
    Mr. Cummings. I want to thank you for your comments. But 
irrespective of that, I think we can still try to resolve these 
issues for the people of our great country.
    Ms. Block, it is the policy of this committee to swear in 
all out witnesses. Would you stand and raise your right hand?
    [Witness sworn.]
    Mr. Cummings. First of all, we are very happy to have you 
with us. You may proceed.

   STATEMENT OF ABBY L. BLOCK, DIRECTOR, CENTER FOR DRUG AND 
 HEALTH PLAN CHOICE, CENTERS FOR MEDICARE AND MEDICAID SERVICES

    Ms. Block. Thank you, Mr. Cummings, and our thanks to 
Chairman Waxman for inviting us today. And thank you Mr. Davis, 
and distinguished members of the committee for giving us this 
opportunity to speak. It is my pleasure to be here to discuss 
the Centers for Medicare and Medicaid Services role in the 
oversight of individual health insurance markets.
    As you know, the agency core mission is administering 
Medicare, Medicaid, and the State Children's Health Insurance 
Program. As Director of the Center for Drug and Health Plan 
Choice within CMS, I oversee day-to-day operations and lead new 
policy development with respect to individual insurance market 
issues within the agency's jurisdiction, as well as with 
respect to private plans in Medicare.
    We share the chairman's concern with recent reports that 
insurers in the individual market might be using rescission as 
a means for circumventing the guaranteed renewability 
requirements established in the Health Insurance Portability 
and Accountability Act of 1996. HIPAA is very clear that, with 
limited exceptions, an individual insurance policyholder has a 
right to guaranteed renewability. In other words, an insurer 
must renew or continue in force an individual's existing 
coverage unless a specific exception is met. The most relative 
exception for purposes of today's discussion is if the 
policyholder acted fraudulently, or made an intentional 
misrepresentation of a material fact under the terms of the 
coverage.
    CMS believes that States have primary responsibility for 
enforcement of guaranteed renewability and that CMS can act 
only if it determines that a State fails to substantially 
enforce the requirement. Specifically, if a State fails to 
enact legislation that meets or exceeds Federal HIPAA 
standards, or if it otherwise fails to substantially enforce 
the HIPAA standards, the U.S. Department of Health and Human 
Services has authority to investigate, and if necessary, take 
over direct enforcement of the standards in that State. While 
there is Federal oversight authority, there is no direct 
Federal role in regulating the private individual insurance 
market.
    It has been suggested that in certain States private 
insurance issuers might be using rescission, a State contract 
law concept, to circumvent guaranteed renewability. The role of 
CMS in addressing such situations hinges on the specific facts 
of the situation, including any actions already taken by the 
State. If there is any indication that the rescissions may be 
occurring for reasons that are inconsistent with the HIPAA 
guaranteed renewability standards, that would be a red flag 
that the State may be failing to substantially enforce those 
standards. CMS could then begin a process, set forth in our 
regulations, to assess the State's compliance with HIPAA 
requirements. Depending on the outcome of our investigation, 
CMS could ultimately take direct control over enforcement of 
guaranteed renewability in a State.
    In light of recent scrutiny of the use of rescission in 
certain States, the National Association of Insurance 
Commissioners established a work group in May 2008 to examine 
and develop recommendations relating to the use of rescission 
in the individual health insurance market. CMS is actively 
engaged in this effort, and we applaud the NAIC's leadership on 
this emerging issue, particularly given HIPAA's clear intent 
that States take the lead in enforcing individual insurance 
market protections.
    It is CMS's goal to work collaboratively with States and 
other stakeholders to enforce policyholder protections 
established by HIPAA. We will do whatever is possible within 
the scope of our jurisdiction to ensure that States are 
substantially enforcing HIPAA's protections. Thank you for the 
opportunity to testify today, and I would be happy to answer 
any questions you may have.
    [The prepared statement of Ms. Block follows:]

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    Mr. Cummings. I want to thank you very much for your 
testimony. And let me just ask you, there is a Federal law, the 
HIPAA Act of 1996 that sets a clear Federal standard that 
protects policyholders against unfair rescissions, and under 
that law, your agency is charged with enforcing this minimum 
standard in ensuring that insurers are not illegally 
terminating policies; is that correct? Is that what you are 
testifying to?
    Ms. Block. Yes, although HIPAA does not specifically 
mention rescission, it does mention the discontinuance of 
coverage.
    Mr. Cummings. All right. And the witnesses on our first 
panel, were you here to hear them?
    Ms. Block. Yes, I was.
    Mr. Cummings. As a matter of fact, they are sitting right 
behind you. Describe how insurance companies have engaged in 
widespread abuses and routinely terminated policies after the 
policyholder gets a serious illness or injury. The witnesses on 
the first panel told us that this is very likely a National 
problem, not one limited to their particular States, and in 
many States, however, such as Utah, where the Bleazards lost 
their coverage, there has been no State enforcement. Now, tell 
me, Ms. Block, has CMS taken any enforcement action with regard 
to improper rescission practices, any action?
    Ms. Block. CMS has not because, remember that, the only 
time that CMS has any jurisdiction is if a State, if there is 
any indication that a State is not substantially enforcing the 
HIPAA provisions.
    Mr. Cummings. And how would you know?
    Ms. Block. We would have to receive specific complaints to 
that effect, and we have not received any such complaints.
    Mr. Cummings. And so, in other words, a complaint would 
likely come from someone who felt that they were a victim; is 
that correct?
    Ms. Block. Yes, that would be correct.
    Mr. Cummings. And so, you are saying that you have never 
received any complaints. Is that to your knowledge?
    Ms. Block. Not in regard to rescission. Over the last 5 
years, we received a total of five complaints about HIPAA 
compliance, particularly in the State of Missouri----
    Mr. Cummings. But in regard to rescission?
    Ms. Block. And none of those were in regard to rescission.
    Mr. Cummings. I see. Now, one of the reasons your agency 
hasn't taken any action to protect policyholders is that you 
have devoted almost no resources to this important 
responsibility. HIPAA is a big law with numerous enforcement 
provisions. For example, requirements relating to patient 
privacy insurance portability standards preventing drive-
through births and mental health parity, and all of which need 
to be enforced. But we were told by the administration, that 
you all only have four people assigned to the task of enforcing 
all of HIPAA's provisions, and that is throughout the entire 
United States of America. Is that right?
    Ms. Block. No, I don't believe that is correct, sir. I have 
four people on my staff specifically that do enforce, have 
responsibility and jurisdiction over specific HIPAA provisions. 
HIPAA is, as you say, a very big statute. The Department of 
Labor has jurisdiction over some aspects. The Department of the 
Treasury has jurisdiction. So, I don't represent the whole U.S. 
Government.
    Mr. Cummings. Well, I'm just talking about, with what you 
testified today with regard to rescission, you all have 
jurisdiction over that; is that correct?
    Ms. Block. That is correct.
    Mr. Cummings. You and the four people?
    Ms. Block. Yes, I have four dedicated staff.
    Mr. Cummings. And they do other things other than the 
rescission oversight; is that correct?
    Ms. Block. They do everything related to the private 
insurance market.
    Mr. Cummings. Very well. Four people for the entire United 
States of America. Today, we heard appalling stories of truly 
abusive conduct by insurers who unfairly rescind policies 
leaving people uninsured and uninsurable in the middle of a 
medical crisis. Your agency is the ultimate authority of 
HIPAA's protections and it is your job under the law to make 
sure that insurers in all States are complying with HIPAA's 
important safeguards for individual policyholders. How can you 
possibly enforce all of that with four people?
    Ms. Block. We believe that the States have primary 
responsibility and that our jurisdiction is to ensure that 
States are, in fact, substantially enforcing the HIPAA 
provisions. If we have any indication that a State is not doing 
that, we have the ability through our regulations to 
investigate and take appropriate action. And I assure you, we 
will do that.
    Mr. Cummings. But that has never happened to your 
knowledge; is that correct?
    Ms. Block. That has not happened.
    Mr. Cummings. And when you hear stories like the Bleazards, 
does that concern you, and does that make you want to go back 
and do something about it?
    Ms. Block. It concerns me very, very much. And, I believe, 
I have expressed our concern. Obviously, we believe this is a 
serious issue. We take it very, very seriously. And that is why 
I look forward to working closely with the NAIC, as they review 
the problem and come up with solutions.
    Mr. Cummings. And what would your solutions be to them, 
because they are sitting here. They have a $100,000 worth of 
bills, trying to figure out how they are going to pay them. And 
by the way, and counting, I mean, what would your solution be? 
I am just curious.
    Ms. Block. I don't have any authority to come up with a 
solution. I have to act within the jurisdiction that I have 
under the law and regulations.
    Mr. Cummings. Mr. Bilbray. Mr. Murphy.
    Mr. Murphy. Thank you, Ms. Block. Just to explore the Utah 
situation and law a little bit further. The Federal law, as you 
have stated, gives you authority to step in when a State 
doesn't comply with the Federal standard, which is tied to the 
constitution of fraud, or intentional misrepresentation, and 
the Utah law, which had jurisdiction in the case of the 
Bleazards, does not have that same Federal standard of fraud or 
misrepresentation. In fact, it allows for the insurer to 
discontinue a policy simply made on material reliance with or 
without any intentional misrepresentation.
    And so, it appears, and I know you may not have had the 
chance to, you know, take a look at the Utah law, it certainly 
appears from our reading that there is a clear statutory 
conflict between the law in Utah that controlled in the case of 
the Bleazards, and the Federal standard. And so, it would seem, 
you know, given the fact that we have here today at least one 
example of a State law, which stands in direct conflict of the 
Federal law, that maybe a first step might be for the agency to 
do a review of, and there is only 50 States, so it is probably 
not that hard to go and take a look at all of the different 
statutes that control here, and determine which States, by the 
very definition of their statutory treatment of this issue, 
aren't in compliance with the Federal law. Does that not seem 
like a reasonable step to take?
    Ms. Block. We actually reviewed all of the State laws right 
after the enactment of HIPAA to make sure that they were 
consistent. And it was the determination of the staff at the 
then-HCFA, that they were, with a few exceptions, the last 
State that came into compliance was Missouri, which enacted its 
legislation just recently, in the individual market. What 
really occurs here is, as I indicated, if there is a situation 
such as the situation in Utah, and we are very sympathetic to 
that situation, that could be a red flag. So we would have to 
look at the specific circumstances of the specific case to 
determine that in that specific situation, the State is not 
substantially enforcing the HIPAA provisions. If we were to 
make such a determination after an investigation, we would then 
work with the State to make sure that the State came into 
compliance, which is the ultimate goal, as a very last resort. 
If the State failed to come into compliance, we could then 
assume jurisdiction in that State.
    Mr. Murphy. And I appreciate that, but looking at the Utah 
law, and just to quote you the law, it is unclear to me how on 
Earth there could have been a determination that this was in 
compliance. The Utah law says, ``No misrepresentation or breach 
of an affirmative warranty affects the insurer's obligations 
under the policy, unless the insurer relies on it and it is 
material, or it is made with the intent to deceive.'' And so, 
that or clause allows I think insurers in Utah to cancel a 
policy based on material reliance.
    So, this is just by way of hoping that one of things you 
will take from this hearing is the chance to go back and re-
review the determination that there are 50 States in 
compliance, because, at the very least, it looks like the Utah 
policy is not. And last, I understand you haven't received 
complaints into your office, but don't you think there a pro-
active duty on the part of your agency to at least be examining 
the experience that States have.
    It wouldn't take much effort for your agency, I understand 
you are short-staffed and that is a problem that maybe needs to 
be solved, but it doesn't seem like it would take much effort 
to be in contact with someone like Mr. Lembo, or Mr. Bonner, on 
even an irregular basis. And that kind of contact, that kind of 
solicitation of input from State regulators and State 
advocates, would have discovered I think pretty easily, that 
there was a problem here that CMS could have stepped in to 
address. Shouldn't there be some, at least rudimentary, pro-
active obligation?
    Ms. Block. In fact, that happened, sir. That happens on a 
regular basis. We talk regularly with State regulators. We meet 
regularly with them at the quarterly NAIC meetings. That kind 
of interaction goes on regularly.
    Mr. Murphy. And this didn't come up in any of those 
discussions?
    Ms. Block. Well, it is not that it didn't come up, it is 
that, remember our jurisdiction kicks in if we have determined 
or believe that there may be a situation where the State is not 
substantially enforcing the law, the HIPAA rules. We have no 
such indication in Connecticut, nor do we have any such 
indication in California. So, of course, it comes up in 
discussion, but until, and if, there is a situation where it 
appears that there may be circumstances where the State is not 
substantially enforcing the HIPAA requirements, we have no 
jurisdiction.
    Mr. Murphy. And last, Mr. Chairman----
    Mr. Cummings. The gentleman's time is up.
    Mr. Murphy. And last, Mr. Chairman, just to mention, I do 
think that conflict with State laws would be immediate evidence 
that a State isn't enforcing the Federal law, and I would just 
hope that you would go back and take a look at some of these 
State laws to make sure that your determinations are correct. 
Thank you.
    Mr. Cummings. Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman. Ms. Block, we all work 
for the taxpayers of this country. And they expect us to 
respond. Now, you have a minimum of $400,000 of taxpayer's 
funds in four people that are supposed to be doing something to 
make sure that the laws of the State and the country are being 
enforced. Now, your comment to us was, well, you saw no 
problems in Connecticut or California, so you haven't taken any 
action. Let's talk about some cases that may not have been 
brought to you specifically, but were brought to you in the 
media.
    In December 2007, USA Today wrote an article in which they 
talked about a woman's insurance policy being canceled after 
she had emergency surgery for a perforated ulcer. And it was 
canceled by her insurer because the only thing that she 
disclosed on her application was that she was having heavy 
menstrual periods, a condition her doctor said was normal for a 
woman her age. So, based on the fact that she was having heavy 
menstrual periods, her insurer canceled her. It was national 
media. What action did you take in that case?
    Ms. Block. I have no indication that the State had failed 
to take action. I don't know that the individual had exhausted 
their State remedies. I can't really act simply on information, 
which is never full and complete in a news media report. If 
that case was brought to my attention, I would be happy to look 
into it and see whether appropriate steps needed to be taken. I 
don't even know what State that incident occurred in?
    Ms. Speier. Well, let's talk about another case. This is a 
case in South Carolina where a policyholder received a $15 
million verdict following an illegal rescission. The case 
disclosed an array of abusive practices. For example, the 
insurer's computer system was pre-programmed to trigger 
automatic fraud investigations based on billing codes. The 
insurer then rescinded coverage based upon an erroneous date 
written on a single form. Did you take any action in the South 
Carolina case?
    Ms. Block. With all due respect, ma'am, I do not regulate 
the individual insurance market.
    Ms. Speier. No, we understand that, but you do have 
authority over HIPAA.
    Ms. Block. No, the State, apparently, appropriate action 
was taken in that case. You just said that the person received 
appropriate compensation.
    Ms. Speier. Did you contact the South Carolina regulators 
to determine whether or not they had taken action against 
insurers in this case?
    Ms. Block. It is not my responsibility to do that. It is my 
responsibility only to determine if, in fact, a State is 
substantially enforcing HIPAA rules, if a case is brought to my 
attention.
    Ms. Speier. With all due respect, if it is in the national 
media, it is brought to your attention. And, if you do not 
believe that is brought to your attention if something appears 
in the national media, then there is about $400,000 we can cut 
from the budget right now. Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much. Ms. Brock, I just have 
one question for you. Let me just pick up on what Ms. Speier 
just asked you. There is an expectation of the people of this 
country that government is working for them, not against them. 
And they pay us to solve their problems. And they have one life 
to live. This is no dress rehearsal and this is their life. And 
I just have one question for you. If right this second, Mr. and 
Mrs. Bleazard wrote on a piece of paper, Dear Mrs. Block, we 
believe that the State of Utah has not done what it is supposed 
to do in this regard, would that trigger an investigation from 
you? That is all I want to know.
    Ms. Block. That certainly could trigger an investigation.
    Mr. Cummings. No, I didn't say could. I said, would it? All 
we are talking about is an investigation now, I didn't say, 
conclusion, investigation, because they are sitting here right 
now and they want to know that their government is working for 
them. And you just sat here and said you needed a complaint. 
And I am asking you, these are just regular everyday citizens 
who paid their premiums, who did everything that they were 
supposed to do, and they feel like they have been cheated. And 
I am asking you if right now, if they scribbled on a piece of 
paper those words, would that trigger an investigation?
    Ms. Block. That would certainly trigger my looking into the 
situation to determine whether the circumstances in that 
particular case, in fact, triggered an investigation. If they 
would like to make such a request, I would be very happy, you 
know, to entertain it.
    Mr. Cummings. Very well.
    Mr. Bilbray. Mr. Chairman.
    Mr. Cummings. Mr. Bilbray.
    Mr. Bilbray. You know, I don't think that it is appropriate 
to close this discussion without highlighting the fact that 
contrary to what a lot of people in this city like to believe, 
the State and local governments are the front line of 
protection and service to the people of the United States. 
Washington is not, and has never been meant to be. It is meant 
to be that we end up, try to be, I agree with you, the last 
line of defense when systems break down.
    But I just have to say it, somebody who comes from almost 
20 years of local government service, the biggest frustration I 
had as a mayor, a county supervisor, as an air resources member 
trying to protect the public, was the Federal Government always 
thinking that they were the first line rather than the last 
line. And we just got to understand that there are always going 
to be times that we can sit in Washington and second-guess the 
men and women that are serving the American people on the front 
line in cities, counties, and States, and always thinking that 
we could do it better. History has proven that we don't do it 
better.
    Mr. Cummings. I want to thank the gentleman for his 
statement. With all due respect, let me just say this, and I 
will be extremely brief, because Mr. Davis has asked me to try 
and move this hearing along, and I will do that. But, so that 
we will be clear, Ms. Block, under sworn testimony, said a few 
moments ago that there were certain things that were under her 
jurisdiction, No. 1. No. 2, she said that there were certain 
things that would trigger an investigation of those things 
under her jurisdiction. That is No. 2.
    No. 3, under her jurisdiction, what she has paid for, what 
she has sworn is her job, I simply wanted to get some answers 
to a question of a couple that, by the way, at the beginning of 
our terms, we raise our hands and swear that we are going to 
protect the American people, I want to make sure that this 
couple is protected. I am not saying the Federal Government can 
do it better, or whatever, I am just basing that upon the sworn 
testimony that was given here this morning.
    Ms. Block, I just want to thank you very, very much, and 
you are now dismissed. Thank you.
    Our next witness is Ms. Stephanie W. Kanwit, who is special 
counsel, to the America's Health Insurance Plans, the trade 
association for the health insurance industry. Ms. Kanwit, am I 
pronouncing that correct?
    Ms. Kanwit. You are, sir. Kanwit, thank you.
    Mr. Cummings. Good.
    Ms. Kanwit. Thank you for asking.
    Mr. Cummings. She will explain the association's policies. 
And Ms. Kanwit, I know you just sat down, but I am going to 
have to ask you to stand up.
    [Witness sworn.]
    Mr. Cummings. We will now hear from you. And thank you very 
much for being with us.

   STATEMENT OF STEPHANIE KANWIT, SPECIAL COUNSEL, AMERICA'S 
                     HEALTH INSURANCE PLANS

    Ms. Kanwit. Thank you very much, Mr. Cummings, and members 
of the committee.
    I am Stephanie Kanwit. I am special counsel for America's 
Health Insurance Plans, and we represent the 1,300 health 
insurance plans offering coverage to more than 200 million 
Americans. I heard Chairman Waxman this morning say that one of 
the primary issues we are discussing is how to ensure that all 
Americans have adequate health care coverage. We couldn't agree 
more.
    AHIP, my organization, believes that all Americans should 
have access to coverage. And I want to tell you very briefly 
this morning about two of our proposals for reinforming the 
individual health insurance market, which is what we are 
talking about.
    No. 1, proposals to ensure that no individual falls through 
the cracks, and No. 2, initiatives to give consumers in this 
market peace of mind, including new consumer protections with 
regard to rescissions and pre-existing conditions.
    Just very quickly, my paper summarizes what the individual 
market covers, who is in it. We believe that there are about 18 
million people in there. We just took a survey in December 
2007, so it is very recent. We found that the individual market 
is both available and affordable, that 89 percent of applicants 
who apply and go through the process are offered coverage, and 
the majority at either standard or preferred rates. But we want 
to go further.
    We have heard some disturbing testimony this morning on 
rescissions in some very articulate testimony from the 
Connecticut and California regulators. We know that rescissions 
are exceedingly rare. Our statistics say that it is two-tenths 
of 1 percent of policies. Two tenths of 1 percent. We want to 
make them rarer still. We want to make them extinct.
    First, rescission would not be an issue at all if universal 
coverage existed. So, we have proposed, just recently, a 
strategy for individual market reform that would guarantee 
access to health care coverage. That plan would be a public/
private cooperative adventure, and it would have States create 
what we call guaranteed access plans to provide coverage, for 
those who are uninsured, with the highest medical costs, and 
our plans correlatively, would do their parts with a coverage 
safety net, and guarantee coverage to all applicants who aren't 
eligible for the guaranteed access plans. And there would be 
capped premiums on that.
    Second, and very critically, our Board of Directors, last 
year, recommended important initiatives to enhance piece of 
mind to those in the individual market. We have outlined in our 
testimony in great detail the numerous consumer centric 
practices we are advocating. And chief among them, and the one 
that I am most proud of, is the position that legislative 
drafting, which States can use to enact legislation to provide 
consumers like the consumers we heard testify this morning, 
with access to independent third party review, third party 
review, which would resolve any disputes about medical issues 
related to not only rescissions, but also pre-existing 
exclusions.
    And our policy, or our proposal, goes even further than 
Connecticut's, because it would be independent of the health 
plan, and it would involve both a medical professional and an 
attorney who is expert in that particular area. And any 
decision, any decision, and this is critical, would be binding 
on the health plan.
    The other key initiative that we set forth in our testimony 
are a number of principles. I made them seven separate 
principles about rescissions. We believe that the health plans 
have very serious responsibilities. First of all, they should 
take responsibilities, and you heard this reiterated in some of 
the testimony this morning, for conducting a thorough, thorough 
review of questions asked in an application. And if a plan 
failed to conduct that thorough review of unclear or 
questionable information, and failed to seek additional 
information, then the health plan cannot use that information 
as a basis for rescinding coverage.
    Just quickly, on a final note, we are trying, our 
association, is trying to come up with policy solutions that 
work, both immediately and in the long term. Our proposals, 
which we have detailed in the testimony, take account of State 
reform efforts over the last 15 years. They were very well 
intentioned, but we cited a report we just did last year by 
Milliman, which found that even these well-intentioned State 
efforts at reform in the individual market, and I am talking 
about guarantee issue, without a requirement for individual 
coverage, or community rating, had negative consequences for 
consumers, higher premiums, decline in enrollment, and often 
and unfortunately an exodus of health insurers from the market.
    I am happy to take any questions this morning.
    [The prepared statement of Ms. Kanwit follows:]

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    Mr. Cummings. Thank you very much for your testimony. Ms. 
Kanwit, you have heard the testimony earlier; right? Have you 
been here?
    Ms. Kanwit. I did, sir. I have been here all morning.
    Mr. Cummings. And probably, all of those insurance 
companies are part of your association, the ones that you heard 
mentioned?
    Ms. Kanwit. I believe so, yes.
    Mr. Cummings. And, as I listen to your testimony, it was 
quite impressive. And you were talking about things that, you 
all, would propose. And I am just curious why haven't you all 
done some of those things? Some of these things, you don't need 
us. My friends constantly say in the Congress that if they can 
do it in private industry, let private industry do it.
    I have a couple sitting behind you, who is facing $100,000 
plus in bills, and counting, after having paid their premiums, 
and I am sure they are saying, well, that all sounds nice, but 
what about us? You follow what I am saying?
    Ms. Kanwit. I do.
    Mr. Cummings. So why haven't your folks done this before? I 
mean, it sounds good, and it sounds like this is something that 
has been on the drawing board, most of these things for awhile, 
or are these things that just came up? When did you all come up 
with these things?
    Ms. Kanwit. Our Board, sir, came up with this last 
December. We publicized this material last December. And it has 
been an issue that has been discussed for a while. We are also, 
as you heard this morning about the NAIC, we are working with 
them as well on proposals here.
    Mr. Cummings. And so, when do you anticipate some of these 
things to go into effect, because the people who are watching 
us on television, and I know that you said it is only a very 
minuscule number of people that may be affected by this, but 
those people are in pain. Those people are suffering just like 
this couple is suffering. And we have faces to put with the 
failure to institute these policies. And I am just curious, 
when do you anticipate that is going to happen? Or any of them?
    Ms. Kanwit. We hope to make again what happened to the 
Bleazards this morning, for example, a never event. Some of our 
health plans, for example, have already instituted these 
policies in terms of the underwriting standards, but we are 
also working with the State legislatures to implement the issue 
that I talked about, the third-party review, which would 
obviate a lot of the problems in this area. It has worked in 
the medical field, having external review, and this would be 
third-party review, for rescissions and pre-existing 
conditions.
    Mr. Cummings. Now, the reason that the insurer gave for 
rescinding the policy that the husband Keith had, is that he 
failed to provide information in the application about his 
medical issue relating to his back. You heard that testimony? 
Yet, the relevant section of the application was filled in by 
Keith's insurance agent, whom Heidi testified had complete 
knowledge of the medical history. And in any event, the medical 
history of Keith's back has absolutely nothing to do with 
Heidi's horrific mountain biking accident, exactly the kind of 
catastrophic event that health insurance is supposed, and I am 
sure you would agree, to protect policyholders against.
    And you testified that your industry has new initiatives 
designed to give consumers peace of mind about their individual 
health insurance coverage. And I am just curious, why do you 
think insurers treat people the way that they treated these 
folks? I mean, I am sure in your discussions, you tried--I 
mean, in order for you all to get to the recommendations, you 
had to, I guess, know that these incidents take place. You also 
needed to know to even come up with that third-party proposal, 
you had to know that there is some problems here. And so, why 
is that? Why do you think that is, because they have their 
opinion, I am sure, but why do you think that is?
    Ms. Kanwit. Well, sir, we are trying to fix it. We want to 
make sure that what happened to them does not happen again in 
the future. We are asking affirmatively, our member health 
plans, and our Board supports this, to go back and do thorough 
up-front underwriting, and if that underwriting is not done, if 
that investigation is not done, if there is an unclear 
question, then the health plan cannot rescind based on that 
information. And I am sure the Chair knows that there are 
reasons to do underwriting, but you wouldn't need that if we 
had universal coverage.
    Mr. Cummings. And so, you don't think that any of this has 
anything, I am just curious, I am not trying to put words in 
your mouth, has anything to do with money?
    Ms. Kanwit. I can't speak to that, sir. I can't speak to an 
individual situation. As a lawyer, I try not to opine in an 
area where I don't know the facts. I don't know, except what I 
heard this morning in the testimony, which was very disturbing, 
I do not know the facts.
    Mr. Cummings. All right. Mr. Davis.
    Mr. Davis of Virginia. Ms. Kanwit, thank you very much. The 
facts of the case we heard this morning, that were pretty 
devastating to whoever was insuring, and I think that is the 
kind of thing that we don't want happening within the industry. 
You would agree with that from the facts that were presented 
here?
    Ms. Kanwit. I agree. We are trying to make it never happen 
again, a never event, as they would say.
    Mr. Davis of Virginia. Do you think that the proposed 
external panel review could mitigate harm done in cases like 
this?
    Ms. Kanwit. Absolutely. I think it absolutely would have. I 
also want to point out that the Utah couple this morning who 
testified, had their policy been rescinded under our proposal, 
they would have gone into the guaranteed access plan that we 
are supporting very strongly here, where the State and the 
private plans would get together and assure coverage for every 
single person, so no one falls between the cracks.
    Mr. Davis of Virginia. Look, there are good insurance 
companies, and there are bad insurance companies, just like 
good lawyers, bad lawyers, good Congressmen--I mean, whatever, 
but if you have to take a look at, and I am not going to get 
into names, but I think in those bad situations, getting some 
kind of instant appeal to an independent panel is the 
appropriate resolution quickly. And the difficulties with some 
of the other things suggested today, we are just going to put 
on an army of investigators, and this like doesn't necessarily 
bring this to any kind of climate, it doesn't bring it to a 
conclusion.
    Additional policing may be part of what we need, maybe, we 
need to bring CMS into this. That is something we can look at, 
but ultimately if you are the consumer out there, and you have 
an injury, and you have a dispute, you don't want to have to go 
to court. You know, you don't want to have to go on a 
contingent--nobody gets anything out of that over the short 
term. And so, that is what intrigues me about this. Now, can 
this be instituted, it could be instituted voluntarily as part 
of policies, but do you suggest we do this legislatively?
    Ms. Kanwit. We are suggesting that we do this, Mr. Davis, 
by State legislation, but you are absolutely right, it could be 
done relatively quickly and expeditiously. And, as I said, it 
has worked in the medical external review area, and it is a 
variation of that.
    Mr. Davis of Virginia. From an insurer's perspective, is 
there a difference between rescissions and post-claims 
underwriting?
    Ms. Kanwit. Yes, there is. There are different principles. 
Post-claims underwriting is a review of the policy after the 
policy has been issued, which can result in rescissions, but 
may also result in, for example, additional limitations, pre-
existing conditions, or higher premiums. You know, you didn't 
tell us about your back problem 2 years ago and, therefore we 
are going to issue the policy, but at a slightly higher rate. 
So, they are not quite analogous.
    Mr. Davis of Virginia. So, post-claims underwriting, you 
feel is an appropriate industry practice?
    Ms. Kanwit. I think it is necessary when you have the 
individual market that we have now. As I said, AHIP, and our 
members, and our Board, would like to make it--if you had 
universal coverage, we would work with the States and the 
Federal Government to consider how we could do guaranteed issue 
and you would never need to talk about rescissions, or pre-
existing conditions.
    Mr. Davis of Virginia. On an earlier panel, Mr. Lembo, you 
heard him state that associating fraud and rescissions is a red 
herring, that basically he didn't think there was a lot of 
fraud in this. There was a small bit of this. Do you agree with 
that statement, or what has been the experience of the 
industry?
    Ms. Kanwit. I can't speak for the whole industry, but I 
used to work for one company in the industry. And there is some 
fraud. People need to be careful, because all consumers are 
paying for that kind of fraud. And again, with universal 
coverage, you wouldn't have to worry about that.
    Mr. Davis of Virginia. Did some of this originate with the 
consumer? How about the underwriter? Does it exist there some 
times, where the underwriter is just interested in selling a 
policy?
    Ms. Kanwit. That could be possible as well, yes.
    Mr. Davis of Virginia. It can go up the chain. All right. 
Well, I am intrigued by this. I hope that we can get more 
information out on this so that consumers can have some 
independent appeal in a case like this and not have to hold the 
court system to do it. And I appreciate your being here today. 
And I just hope we can get some resolution to these issues.
    Mr. Issa. Just following up on the ranking member's 
question, when you have an independent insurance agent writing, 
a bonded agent, would one of the other reforms be that because 
that is a bonded agent and the insurance company who works with 
them could seek reimbursement for their wrongful act, would it 
be reasonable for claims made against failures by that bonded 
agent to be paid?
    In other words, that these two individuals still seated 
behind you would not find themselves, because of a failure of 
the bonded agent but rather that person's bond would be where 
you would seek to get reimbursement. You know, often insurance 
companies look at themselves as simply a mover of dollars. In 
their case, it seems like they were a victim of the gentleman's 
friend, but somebody who failed to do their job properly. How 
would you comment on that on behalf of, if you will, your 
industry?
    Ms. Kanwit. That could work, but the consumer is 
responsible for the statements of an agent. But in that 
particular situation, you could possibly find some recompense 
there.
    Mr. Cummings. The gentleman's time has expired. Mr. 
Kucinich.
    Mr. Kucinich. Thank you very much for appearing before this 
committee. In looking at your prepared remarks, I continue to 
see where you express an interest in making sure that no one 
falls through the cracks of the health care system. How do you 
square that with the industry policy of canceling people's 
health care? I mean, if you are concerned that they don't fall 
through the cracks, doesn't the industry's policies, basically, 
push people into the cracks?
    Ms. Kanwit. I don't believe so, Mr. Kucinich. One of our 
problems is that, and this is a serious problem for all of us, 
have, whatever the number is, 45, 47 million Americans 
uninsured. We have kind of a patchwork system whereby you heard 
this morning, Ms. Block testified the States have primary 
authority to regulate under McCarran-Ferguson, and the Federal 
Government has some authority.
    Mr. Kucinich. Why do you think people don't have insurance? 
You are in the insurance business, why do you think it is that 
people don't have insurance?
    Ms. Kanwit. I think that some of it is costs. I think some 
of it is that people choose not to buy insurance. We all have 
to work together to get universal coverage.
    Mr. Kucinich. And do you think people don't have insurance 
because they can't pay for it, that it is unaffordable, that it 
is not accessible to them?
    Ms. Kanwit. Currently, absolutely.
    Mr. Kucinich. The price of insurance is too high; do you 
think?
    Ms. Kanwit. As I said, it is cost as well, and that is what 
our guarantee----
    Mr. Kucinich. People just can't afford it, I mean, it is 
too high. The industry charges too much; right?
    Ms. Kanwit. Well, the industry charges what it needs to pay 
out in claims for a system which--the Commonwealth Fund just 
came out with a report this morning that talked about the 
number of procedures that are done in the United States, costly 
procedures that are not medically useful.
    Mr. Kucinich. What is the profit rate of the industry, of 
private insurers?
    Ms. Kanwit. I believe, sir, that it is about 2 percent.
    Mr. Kucinich. Two percent. Does that 2 percent reflect 
audited figures that relate to their true costs, or does it 
reflect after paying money for salaries to their executives?
    Ms. Kanwit. Those are the profit figures. I can't----
    Mr. Kucinich. Are there people who run health insurance 
companies who make millions of dollars a year to run those 
companies?
    Ms. Kanwit. I believe some of them do, yes.
    Mr. Kucinich. That is included in the cost of operation; 
isn't that correct?
    Ms. Kanwit. So are all the claims fees, and all of the 
medical claims, yes.
    Mr. Kucinich. Now, the neurosurgeon in the hospital and the 
physical rehabilitation unit that delivered this care to Heidi 
that has been talked about, making it possible for her to 
resume a normal life, and even travel to Washington to testify, 
they delivered excellent care, but yet her insurance policy was 
rescinded and Heidi and Keith don't have the savings to pay 
$100,000 in medical bills, so the providers are left holding 
the bag. How does the industry justify treating physicians and 
hospitals that way?
    Ms. Kanwit. Well, I can't speak for the industry or the 
particular cases. I mentioned to Mr. Cummings I don't know all 
the facts except what I have heard this morning. We want to 
make the situations, such as that testimony this morning, not 
occur again.
    Mr. Kucinich. Should insurers be permitted to tell 
hospitals individuals are covered, and then later rescind the 
coverage, and stick the hospital with six figure bills that are 
likely not to be paid?
    Ms. Kanwit. That should not happen and under our proposal 
would not happen.
    Mr. Kucinich. Now, in northeast Ohio, Mr. Chairman and Ms. 
Kanwit, Metro Health has been struggling with enormous growth 
and the cost of uncompensated care. In 2007, they were left 
with $10 million in bad debt alone, which does not include 
uncompensated care. This is a huge financial burden on doctors 
and hospitals, but it happens, you know, to make money for the 
insurance industry. I want to know how much of this practice of 
rescission is costing Metro Health and public hospitals like 
it?
    Ms. Kanwit. Probably, very little sir, because rescission 
is so rare, and 99.99 percent of people do not have their 
individual policies rescinded. It occurs so infrequently. It is 
not the bulk of the issues that are a serious problem under 
uncompensated care. That is a cost-shifting issue that again we 
have to take care of in the American health care system.
    Mr. Kucinich. Well, I look forward to exploring this 
further, because we may have uncovered yet another creative but 
until now virtually invisible way that the insurance industry 
makes money by denying care. You know, I think, Mr. Chairman, 
that this industry is the problem not the solution. Other 
countries have decided to get rid of their for-profit insurance 
industry and leave the care to patients and doctors without 
insurance companies intervening, and they have enjoyed great 
success in providing coverage for everyone, improving the 
quality of care, and saving substantial amounts of money.
    Mr. Cummings. The gentleman's time is up.
    Mr. Kucinich. I would like to state that H.R. 676 is an 
important part of that. The U.S. Conference of Mayors supports 
it, and 91 sponsors in the House. Thank you for being here, Ms. 
Kanwit. I hope that in the future we can have a not-for-profit 
health care system, which would make your presence here not 
necessary. Thank you.
    Mr. Cummings. Thank you very much. Mr. Issa.
    Mr. Issa. Thank you, Mr. Chairman. You know, the amazing 
thing about this committee is that we have virtually no 
jurisdiction in this area, but we are asserting ourselves, and 
perhaps the best reason is that if your member companies, and 
government, and the people fail to resolve this, Mr. Kucinich's 
bill will become law.
    And, it is very clear that we do have to choose between 
dealing with the 45 to 47 million uninsured, dealing with 
people who may have pre-existing conditions, but they have to 
be able to get insured, or they are going to fall not only into 
personal bankruptcy, but they are going to fall back on to the 
State anyway.
    You know, I, for one, believe that we have a universal 
health care system. It is the worst possible universal health 
care system, but what it really says is, everyone will have 
insurance but that it will be at the emergency room. As a 
Californian, and I am particularly sensitive to the fact that 
it is very expensive to deliver that care the wrong way, rather 
than the right way. On the earlier panel that I had hoped to 
have you on at the same time, I asked a series of questions and 
they were probably less tough on the regulators than they will 
be on you.
    The first one would be, why wouldn't it be fair for a State 
or, if you will, all States to simply assign to every company 
based on their percentage in the market, cases with pre-
existing conditions and essentially, either with or without 
some participation, financial participation of the State, say 
this is the cost of doing business?
    You know, as you said, there is this two-tenths of 1 
percent. If you got only your fair share of all the high risks 
at a particular company, and everybody took part of that two-
tenths, wouldn't we effectively cover pre-existing conditions, 
get people insured. And the rest of America, or the rest of the 
State, the 99.8 percent would have a relatively small increase, 
if assigned risks were part of the scheme. And, I know, you 
have a proposal for a universal health care, but just dealing 
with the man and woman behind you, who today have no insurance 
and, in fact, have a widely exposed pre-existing condition that 
puts them in the worst possible position in their home State.
    Ms. Kanwit. Well, I mentioned, Representative Issa, this 
morning that we had done this Milliman study that talks about 
some of the State attempts at reform, all of these well-
intentioned reforms, such as guarantee issue, which is what I 
believe you are referring to right here, that everyone who 
applied would get insurance. And unfortunately, as I said, the 
data show that those kinds of reforms raise prices, drive 
insurers out of the market, and make insurance less rather than 
more affordable. One of the problems----
    Mr. Issa. But my question was narrow for a reason. As a 
Californian, one out of every nine people there, now with due 
respect to the earlier witnesses, that might be true in Utah, 
if Utah were the only State to do it, but to say that insurance 
companies will leave California if California were to enact 
that, let's say, California, Florida, New York, and Texas, I 
think you would get to a point where you couldn't afford to be 
in insurance, and more importantly, I accept your statement 
that you are going to raise prices. But if, in fact, what we 
are talking about is a fraction of 1 percent, and not all of 
them, because somebody has hypertension, or has a bad back, or 
something, not all of them are going to represent large 
amounts. Some are going to be cancer survivors, who are in 
remission but find themselves in a very difficult situation, so 
there will be some.
    So my question to you is, looking at it as a National, 
where would your insurance companies go? They wouldn't go. So, 
now the question is, how much would that raise the cost? And I 
would be more than happy to accept an estimate for the record, 
because I have one or two more quick questions that I need to 
ask.
    And one of them is, what would be the effect if, in fact, 
State Unemployment Insurance became part of that legacy in that 
when someone lost their job, they would be covered by the State 
as part of unemployment, and then would, in fact, come back to 
you without a gap of insurance? Would that, which is not on the 
books in any State that I know of, but is part of what Governor 
Schwarzenegger was trying to do in a comprehensive way, and 
Congressmen Speier probably knows more about it than I do, 
having just come from there, would those kinds of things, 
active from large States, like California, be effective or at 
least be helpful?
    Ms. Kanwit. Your first question about is raising the cost 
for just this small percentage. But it is not just the small 
percentage of people, very small, who have their policies 
rescinded, or canceled, or have pre-existing conditions imposed 
on them, it is all of how do we get the 47 million, the one out 
of nine Californians, included in the system, which is why we 
want coverage for all, and believe that is the way to go to 
keep prices affordable for everyone by a combination of private 
and public funding, and our guaranteed access proposal works 
for that.
    On your workman's compensation question, that is a more 
difficult----
    Mr. Issa. Not workman's comp, unemployment insurance.
    Ms. Kanwit. I'm sorry. Oh, unemployment insurance.
    Mr. Issa. Workman's comp should already be----
    Mr. Cummings. The gentleman's time is up. I have been very 
courteous, but I will allow you to answer the question.
    Ms. Kanwit. Well, to be honest, I don't know the answer to 
the question, because you still have, Mr. Issa, the issue of 
who is going to pay for insurance for some of those folks who 
are of moderate means? And that is going to be an issue as 
well. What we have tried try to do with our guaranteed access 
plan is have the public-private funding there to make sure that 
they are all covered.
    Mr. Issa. Thank you for your indulgence, Mr. Chairman.
    Mr. Cummings. Thank you very much. Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Just on the pre-
existing condition thing. Right now, there is a lot of 
employers, I guess, leaving sort of the individual versus group 
insurance distinction aside for a moment, there is a lot of 
employers where presumably you have some workers who might have 
moved on to another job that are staying in the job because of 
a pre-existing condition and understanding that if they move 
somewhere else, they may not get that covered. So, the employer 
that person is staying with, just for the purposes of keeping 
their insurance in place, is going to face higher costs that 
drive up the premiums associated with that plan, where if you 
had a system that was more seamless where people felt they 
could move without facing this situation related to pre-
existing condition, in theory across the board, it would sort 
of come out in the wash; right? Does that make sense?
    Ms. Kanwit. Well, it would be better for everybody. As a 
matter of fact, our proposal talks, Mr. Sarbanes, about pre-
existing conditions, and said, we are recommending a one-time 
open enrollment plus the third-party review that I talked about 
with rescissions to apply to pre-existing conditions as well. 
And by the way, HIPAA provides some protection on that in terms 
of the portability of your continuous coverage, credible 
coverage, the continuation of that has made a huge difference 
in the market.
    Mr. Sarbanes. Let me ask you again about this distinction 
between instances where rescission is pursued when there is 
evidence that somebody fraudulently, or willfully, 
misrepresented information on their application versus a 
situation where they just made an innocent mistake, because, I 
guess, California is a State that requires that there is 
evidence of willful misrepresentation, or fraud, in order to 
justify a rescission, but there is other States that do not 
approach it that way; right?
    Ms. Kanwit. Exactly right. Some States have laws that say 
it can be just a misrepresentation, negligent or otherwise, or 
omission, whereas a few States say it has to be actual fraud. 
And, as you heard this morning, California did that with a case 
called Healy.
    Mr. Sarbanes. Right. The proposal that the AHIP put 
forward, you know, as part of these principles, and so forth, 
where do, you all, stand on that question?
    Ms. Kanwit. We are not opining on whether it should be 
fraudulent or whatever. I mean what we are ultimately hoping is 
that you don't need rescission at all. We want coverage----
    Mr. Sarbanes. Why wouldn't you? Why wouldn't you opine on 
that?
    Ms. Kanwit. Well, because you don't need to underwrite, if 
you have coverage for everyone. If 100 percent of the market is 
covered, underwriting is never necessary. Underwriting is only 
necessary when you have a market such as this, which is 
voluntary, and consumers get to choose, if, and when, they want 
to buy health insurance. And it really isn't fair to everyone 
else in the market, and everyone else who has to afford 
premiums, if a person can find out if he or she needs major 
medical services, and then decide to buy a health insurance 
policy.
    Mr. Sarbanes. But why wouldn't you under the circumstances 
that currently exist, why wouldn't your association want to 
encourage a practice that only seeks to rescind in 
circumstances where there is a willful misrepresentation or 
fraud? Why wouldn't you take that position?
    Ms. Kanwit. Well, we might. We just haven't taken that 
position, because we really don't go there. We figure that is 
really up to State insurance law to define the situations. We 
are more interested in the 20,000 foot policy view of how to 
make it rare or non-existent.
    Mr. Sarbanes. Well, I would encourage you to incorporate 
that into your policy. I don't quite see how the policy can be 
considered a rigorous one without that component to it. And one 
of the things that you have talked about is that, you know, one 
way to pre-empt this situation and rescission, or avoid it, is 
to do a good thorough review of the initial application; 
correct?
    Ms. Kanwit. Right.
    Mr. Sarbanes. So that all of the analysis is done there. 
And I would suggest to you that it is an incentive to do that 
work on the front-end, if an insurer knows that the only basis 
for which they can rescind later would be willful 
misrepresentation, because you would catch the innocent 
mistakes presumably. Right?
    Ms. Kanwit. Right.
    Mr. Sarbanes. If you were doing a thorough review up-front. 
So, one of the reasons I am encouraging you to follow the 
example in the voluntary policy that you are putting forth of 
States like California, who have made it a requirement that it 
has to be a willful misrepresentation, as I think that actually 
encourages the insurers to do the up-front work much more 
diligently, and in the absence of that policy, they won't be 
back in the same situation again. Thank you, Mr. Chairman.
    Mr. Cummings. Thank you very much. Let me make one 
correction. Mr. Issa made a statement with regard to the 
jurisdiction of this committee, and I want to make it clear 
that under the House rules, this committee has express 
jurisdiction to conduct oversight over virtually any subject 
under the legislative jurisdiction of the standing House 
committees. And I just want to make that very clear. Ms. 
Speier.
    Ms. Speier. Thank you, Mr. Chairman. Ms. Kanwit, I was very 
impressed by your testimony. And you obviously understand the 
issue of the insured and the importance of trying to make it 
universal in nature. When I chaired the Senate Insurance 
Committee in California, we had, from time to time, occasion to 
engage insurers through their trade associations on issues 
whether it was health care, or a particular policy that was 
undertaken by the health insurers that we found to be 
problematic, but the trade association actually agreed was a 
problem, and we were able to on a case-by-case basis actually 
resolve those issues working with the trade association. Is 
Regence Blue Cross and Blue Shield one of your members?
    Ms. Kanwit. Yes, it is.
    Ms. Speier. All right. I guess I am going to ask you a very 
specific question then. Having seen it happen in California, 
and it happened very successfully, I would like to ask you to 
use your authority and the benefit of your trade association to 
go back to Regence Blue Cross and Blue Shield on behalf of Mr. 
and Mrs. Bleazard, because by your own testimony here this 
morning, you have indicated that you think that rescission was 
wrong, and you want to see rescissions become extinct and, 
clearly, the mountain bike accident that happened to Mrs. 
Bleazard had nothing to do with that application, and they 
acted in good faith in filling out that application, and their 
agent did as well. So I would like to ask you if you would take 
this case to Regence Blue Cross and attempt to resolve it.
    Ms. Kanwit. Absolutely. We will do that.
    Ms. Speier. I thank you very much.
    Chairman Waxman [presiding]. Ms. Kanwit, you set out some 
principles, in fact, seven principles, that you describe as the 
``cornerstones of what we believe are the responsibilities of 
health plans to ensure consumer-centric rescission practices.'' 
As I understand it, these seven principles were approved by the 
AHIP Board last November. Can you tell us how many of AHIP's 
1,300 members have adopted all seven of these principles? And 
can you tell us how many are planning to adopt these 
principles?
    Ms. Kanwit. They were adopted by the Board, Mr. Waxman, in 
December. I don't have figures for you. I would note that of 
the 1,300 members, many of them, the majority, I would guess, 
do not even write policies in the individual market, so they 
wouldn't even be relative to them. Rescission doesn't occur in 
the group market by and large, because the group market is not 
underwritten, so they don't even apply. But I don't have an 
exact figure for you about who has adopted, and who hasn't. I 
will say that our Board of Directors made up of the presidents 
of all of our big member companies have adopted these 
principles and believe that this is the way to go.
    Chairman Waxman. Well, the reason I asked this question is 
that judging from their actions, it doesn't seem like all your 
members are on board. Let's take the rescission of Heidi and 
Keith Bleazard's coverage. Your principle six States that, 
``information about a health condition or treatment arising 
subsequent to the issuance of the policy may not be used as the 
basis for a proposed rescission,'' so it is clear to me that 
the Bleazards' policy was rescinded because Heidi had a serious 
mountain biking accident that resulted in medical bills in 
excess of $100,000, and this accident clearly happened 
subsequent to the issuance of the policy. So under principle 
six, it can't be the basis of rescinding the policy, yet the 
policy was rescinded anyway. I thank you very much for your 
testimony, and helping us deal with this insurance issue, and 
trying to understand it further.
    Ms. Kanwit. Thank you, Mr. Chairman.
    Chairman Waxman. We have all learned a lot at today's 
hearing about the abusive practices of some insurance 
companies, which are dropping coverage for sick people just 
when they need it the most. We have also discovered that there 
is much we don't know about the nature of these business 
practices and the scope of this problem throughout the country. 
It is important that this committee find answers to these 
important questions. And so, we will be opening an 
investigation into the practice of post-claims underwriting by 
private health insurers. I thank you very much. Mr. Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman. I will be 
very brief. I, first of all, want to thank our newest Member, 
Ms. Speier, for her question. Mr. Chairman, as I sat here, I 
could not help but look at the Bleazards and the first slight 
smile that I saw come from them is when Ms. Speier asked the 
question, would Ms. Kanwit look into their case? And Ms. 
Kanwit, I just want to followup, and I want to thank you Ms. 
Speier for raising that. I am hoping that you will look into 
their case and try to help them.
    Behind you are sitting two people who are in pain. You can 
call it 2 percent, you can call it whatever you want to call 
it, but the fact is that they are Americans who are suffering. 
And we are concerned about the 2 whatever percent of a percent 
that you are talking about, because they are the ones that have 
to pay the bills. They are the ones who have to figure out a 
way out of no way. They are the ones who have to wake up at 4 
a.m., trying to figure out why did they pay the premiums, but 
yet still when trouble comes, the insurance company is not 
there.
    And so, I know you talked about some things that you all 
want to do, but I am very pleased to hear that you are going to 
look into their case. And we are hoping, like you hope, that we 
won't have to have these hearings in the future, and so that we 
can address these problems up front, and I want to thank you.
    Chairman Waxman. Thank you, everyone involved, and I do 
want to welcome Ms. Speier to her very first meeting of our 
committee. We are delighted that you are now a member of this 
committee, and, as I pointed out, you began your tenure as a 
Member of Congress just a few months ago, but you bring many 
years of legislative experience to the table from your service 
as a former counsel to the late Representative Leo Ryan, and 
from your experience in the California State Legislature, which 
from my own experience is a good training ground for Congress.
    So we are delighted that you are here. Your commitment to 
improving health care, protecting privacy, looking out for 
American consumers is certainly going to be an asset to this 
committee. And I know all Members are looking forward to 
working with you.
    That concludes our hearing for today. And we are going to 
stand adjourned.
    [Whereupon, at 12:15 p.m., the committee was adjourned.]

                                 
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