[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
TERMINATION OF INDIVIDUAL HEALTH POLICIES BY INSURANCE COMPANIES
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
JUNE 16, 2009
__________
Serial No. 111-50
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
HENRY A. WAXMAN, California, JOE BARTON, Texas
Chairman Ranking Member
JOHN D. DINGELL, Michigan RALPH M. HALL, Texas
Chairman Emeritus FRED UPTON, Michigan
EDWARD J. MARKEY, Massachusetts CLIFF STEARNS, Florida
RICK BOUCHER, Virginia NATHAN DEAL, Georgia
FRANK PALLONE, Jr., New Jersey ED WHITFIELD, Kentucky
BART GORDON, Tennessee JOHN SHIMKUS, Illinois
BOBBY L. RUSH, Illinois JOHN B. SHADEGG, Arizona
ANNA G. ESHOO, California ROY BLUNT, Missouri
BART STUPAK, Michigan STEVE BUYER, Indiana
ELIOT L. ENGEL, New York GEORGE RADANOVICH, California
GENE GREEN, Texas JOSEPH R. PITTS, Pennsylvania
DIANA DeGETTE, Colorado MARY BONO MACK, California
Vice Chairman GREG WALDEN, Oregon
LOIS CAPPS, California LEE TERRY, Nebraska
MICHAEL F. DOYLE, Pennsylvania MIKE ROGERS, Michigan
JANE HARMAN, California SUE WILKINS MYRICK, North Carolina
TOM ALLEN, Maine JOHN SULLIVAN, Oklahoma
JANICE D. SCHAKOWSKY, Illinois TIM MURPHY, Pennsylvania
CHARLES A. GONZALEZ, Texas MICHAEL C. BURGESS, Texas
JAY INSLEE, Washington MARSHA BLACKBURN, Tennessee
TAMMY BALDWIN, Wisconsin PHIL GINGREY, Georgia
MIKE ROSS, Arkansas STEVE SCALISE, Louisiana
ANTHONY D. WEINER, New York
JIM MATHESON, Utah
G.K. BUTTERFIELD, North Carolina
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
DORIS O. MATSUI, California
DONNA M. CHRISTENSEN, Virgin
Islands
KATHY CASTOR, Florida
JOHN P. SARBANES, Maryland
CHRISTOPHER S. MURPHY, Connecticut
ZACHARY T. SPACE, Ohio
JERRY McNERNEY, California
BETTY SUTTON, Ohio
BRUCE L. BRALEY, Iowa
PETER WELCH, Vermont
(ii)
Subcommittee on Oversight and Investigations
BART STUPAK, Michigan, Chairman
BRUCE L. BRALEY, Iowa GREG WALDEN, Oregon
Vice Chairman Ranking Member
EDWARD J. MARKEY, Massachusetts ED WHITFIELD, Kentucky
DIANA DeGETTE, Colorado MIKE FERGUSON, New Jersey
MICHAEL F. DOYLE, Pennsylvania TIM MURPHY, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
DONNA M. CHRISTENSEN, Virgin
Islands
PETER WELCH, Vermont
GENE GREEN, Texas
BETTY SUTTON, Ohio
JOHN D. DINGELL, Michigan (ex
officio)
C O N T E N T S
----------
Page
Hon. Bart Stupak, a Representative in Congress from the State of
Michigan, opening statement.................................... 1
Hon. Greg Walden, a Representative in Congress from the State of
Oregon, opening statement...................................... 4
Hon. Henry A. Waxman, a Representative in Congress from the State
of California, opening statement............................... 6
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 7
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 9
Hon. Phil Gingrey, a Representative in Congress from the State of
Georgia, opening statement..................................... 10
Hon. Gene Green, a Representative in Congress from the State of
Texas, opening statement....................................... 11
Hon. Michael C. Burgess, a Representative in Congress from the
State of Texas, opening statement.............................. 12
Hon. Betty Sutton, a Representative in Congress from the State of
Ohio, opening statement........................................ 13
Hon. Janice D. Schakowsky, a Representative in Congress from the
State of Illinois, opening statement........................... 14
Hon. Bruce L. Braley, a Representative in Congress from the State
of Iowa, opening statement..................................... 15
Witnesses
Wittney Horton, Policyholder, Los Angeles, California............ 17
Prepared statement........................................... 20
Peggy Raddatz, Relative of Policyholder, La Grange, Illinois..... 25
Prepared statement........................................... 27
Robin Beaton, Policyholder, Waxahachie, Texas.................... 29
Prepared statement........................................... 31
Don Hamm, Chief Executive Officer, Assurant Health, Assurant..... 47
Prepared statement........................................... 49
Richard Collins, Chief Executive Officer, Golden Rule Insurance
Company, UnitedHealth Group.................................... 56
Prepared statement........................................... 58
Brian A. Sassi, President and Chief Executive Officer, Consumer
Business, WellPoint, Inc....................................... 62
Prepared statement........................................... 64
Karen Pollitz, Research Professor, Georgetown University Health
Policy Institute............................................... 69
Prepared statement........................................... 71
Submitted Material
Document binder.................................................. 97
TERMINATION OF INDIVIDUAL HEALTH POLICIES BY INSURANCE COMPANIES
----------
TUESDAY, JUNE 16, 2009
House of Representatives,
Subcommittee on Oversight and Investigations,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:08 a.m., in
Room 2123 of the Rayburn House Office Building, Hon. Bart
Stupak [chairman of the subcommittee] presiding.
Members present: Representatives Stupak, Braley,
Schakowsky, Green, Sutton, Dingell, Waxman (ex officio),
Walden, Deal, Burgess, Gingrey and Barton (ex officio).
Staff present: Karen Lightfoot, Communications Director,
Senior Policy Advisor; Theodore Chuang, Chief Oversight
Counsel; Mike Gordon, Deputy Chief Investigative Counsel; Scott
Schloegel, Investigator, Oversight and Investigations, Daniel
Davis, Professional Staff Member; Ali Golden, Investigator;
Jennifer Owens, Special Assistant; Jennifer Berenholz, Deputy
Clerk; Lindsay Vidal, Special Assistant; Julia Elam, Fellow;
Paul Jung, Public Health Service Detailee; Karen Christian,
Counsel; Krista Rosenthall, Counsel; Alan Slobodin, Chief
Counsel for Oversight; and Sean Hayes, Counsel.
OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Stupak. This meeting will come to order.
Today we have a hearing entitled ``Terminations of
Individual Health Policies by Insurance Companies.'' The
chairman, the ranking member and the chairman emeritus will
have 5 minutes for an opening statement. Other members of the
subcommittee will be recognized for 3 minutes.
Before we begin, I am going to ask unanimous consent that
the contents of our document binder be entered into the record
provided that the committee staff may redact any information
that is business proprietary, relates to privacy concerns or is
law enforcement-sensitive. Without objection, the documents
will be entered into the record and we will ask that a copy of
our document binder be placed at the front table in case
witnesses wish to refer to it.
I am going to begin opening statements. I will start with
my opening statement for 5 minutes.
Every night across America, more than 45 million Americans
go to sleep without health insurance coverage. They do so in
fear of a nightmare scenario of developing a catastrophic
illness and being unable to pay for treatment. It is this fear
that has caused many hardworking Americans who are not covered
by an employer or government-sponsored health care plan to
purchase individual health insurance policies. But those
Americans fortunate enough to afford individual health care
coverage are not immune from the nightmare scenario. That is
because a practice called health insurance rescission.
Here is what happened to one victim of rescission. Otto
Raddatz was a 59-year-old restaurant owner from Illinois who
was diagnosed with an aggressive form of non-Hodgkin's
lymphoma, a cancer of the immune system. He underwent intensive
chemotherapy and was told that he had to have a stem cell
transplant in order to survive. With coverage provided by his
individual insurance policy, he was scheduled to have the
procedure performed. But then his insurance company suddenly
told him it was going to cancel his insurance coverage. Otto
could not pay for the transplant without health insurance. The
stem cell transplant surgery was cancelled. The insurance
company told him that it found when he applied for his
insurance, he had not told the company about a test that had
shown that he might have gallstones and an aneurysm, or
weakness of the blood vessel wall. In fact, Otto's doctor had
never told him about these test results. He didn't have any
symptoms, and these conditions did not have anything to do with
his cancer, but the insurance company was going to rescind his
policy, effectively tearing up the contract as if it never
happened and it would not pay for his stem cell transplant.
Otto made a desperate plea to the Illinois Attorney
General's Office seeking help to get his insurance company to
reverse its decision. He told them, and I quote, ``I was
diagnosed with non-Hodgkin's lymphoma. It is a matter of
extreme urgency that I receive my transplant in 3 weeks. This
is an urgent matter. Please help me so I can have my transplant
scheduled. Any delay could threaten my life.'' The Illinois
Attorney General's Office launched an investigation, confirmed
that Otto's doctor had never even told him about the test
findings and sent two letters to press the insurance company to
reinstate his policy. The company relented and Otto received
his stem cell transplant. He was able to live 3 more years
before passing away earlier this year.
Otto was one of the lucky ones. This committee has
concluded an investigation into the practice of health
insurance rescission and results are alarming. Over the past 5
years almost 20,000 individual insurance policyholders have had
their policies rescinded by three insurance companies who will
testify today: Assurant, United Health Group and WellPoint.
From a review of case files, the committee has identified a
variety of abuses by insurance companies including conducting
investigation with an eye toward rescission in every case in
which a policyholder submits a claim relating to leukemia,
breast cancer or any of a list of 1,400 serious or costly
medical conditions, rescinding policies based on an alleged
failure to disclose a health condition entirely unrelated to
the policyholder's current medical problem, rescinding policies
based on policyholder's failure to disclose a medical condition
that their doctors never told them about, rescinding policies
based on innocent mistakes by policyholders in their
applications, and rescinding coverage for all members of a
family based on a failure to disclose medical condition of one
family member.
The investigation has also found that at least one
insurance company, WellPoint, evaluated employee performance
based in part on the amount of money its employees saved the
company through retroactive rescissions of health insurance
policies. According to documents obtained by the committee, one
WellPoint official was awarded a perfect score of five for
exceptional performance based on having saved the company
nearly $10 million through rescissions. These practices reveal
that when an insurance company receives a claim for an
expensive lifesaving treatment, some of them will look for a
way, any way, to avoid having to pay for it. This is eerily
similar to what we found last year in our investigation of
long-term-care health insurance policies where unscrupulous
salespeople would sell policies to seniors, then change or
revoke the policies once the enrollee was locked into a plan
and making payments.
The companies who engage in these rescission practices
argue that they are entirely legal, and to an extent, they are,
but that goes against the whole point of insurance. When times
are good, the insurance company is happy to sign you up and
take your money in the form of premiums but when times are bad
and you are afflicted with cancer or some other life-
threatening disease, it is supposed to honor its commitment and
stand with you in your time of need. Instead, some of these
companies use a technicality to justify breaking its promise at
a time when patients are too weak to fight back.
I would also like to mention and compliment the staff on
their supplemental information regarding the individual health
insurance market. It is attached to my opening statement and
will be part of the record.
Today we will hear from victims of this practice of
rescissions as well as three of the leading companies that
engage in it. We hope to learn more about this problem so that
we in Congress perhaps through a comprehensive national health
care reform bill can curb abuses and put an end to this
unconscionable practice once and for all.
I would next like to now turn to my ranking member, Mr.
Walden from Oregon, for an opening statement, please.
Mr. Walden. Thank you, Mr. Chairman. Before I give my
opening statement, I just want to clarify something. You
indicated in your opening statement you do plan to put this
supplemental information in the record?
Mr. Stupak. Yes, sir. I am going to attach it as part of my
opening statement. This is the supplemental information
regarding the individual health insurance market dated June 16.
I realize a lot of members haven't had time to look at it. I
know they were putting it together last night. In the last
couple days they went through about 50,000 pages, and it just
helps members for questioning so I wanted to put it in there
because it is supplemental, and members can use it in
questioning witnesses.
Mr. Walden. OK. I misunderstood what you were saying then.
I thought you told me you weren't going to put it in since the
minority didn't see this until 9:20 this morning.
Mr. Stupak. Right. I wasn't going to put it in as part of
the document binder so I will put it as part of my opening
statement and then it is attributable to me and the majority
side and not the minority side, because as you had indicated,
it is on committee stationery and Mr. Barton had not had time
to see it so I did not want to say that Mr. Barton approved so
I just made it part of my opening statement.
Mr. Walden. I appreciate that.
Mr. Stupak. Thank you.
Mr. Walden. I hope in the future we can work those things
out in advance as we have in most hearings in the past.
Mr. Stupak. I agree.
OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OREGON
Mr. Walden. Today's hearing is the second in a series of
hearings investigating the individual health insurance market.
Approximately 16 million Americans have individual health
insurance policies. Once people apply and are issued their
insurance cards, they breathe a sigh of relief and figure their
health care is covered. Unfortunately, that sigh of relief may
turn into a frenzied panic if the Friday before the Monday a
patient is to undergo a double mastectomy she receives a call
from her insurance company saying her insurance has been
cancelled and they will no longer pay any claims. This is what
happened to one of our witnesses here today, Ms. Robin Beaton
from Texas, Ranking Member Barton's constituent. We will also
hear from Mrs. Horton and Mrs. Raddatz where the threat or
actual termination of insurance policies caused pain,
frustration and great expense.
While we may be here to discuss valid uses for and
procedural aspects of rescissions, medical underwriting and
other corporate practices, there are some actions we should no
longer allow insurance companies to do. Playing gotcha with
policyholders who have serious illnesses and huge expenses must
stop. Insurance companies cannot wait until customers are sick
or filing claims to verify their medical history and decide
whether or not they want them as a customer. This is what they
are supposed to be doing when they sign the member up. If the
company does not conduct a review of unclear or incomplete
information on the application, then the plan should not use
subsequently acquired information as a basis for rescinding
coverage. This practice is known as post-claims underwriting.
The company should conduct its due diligence at the time the
application is filled out and submitted prior to issuing
coverage. Rescission should not be a license to find loopholes
by investigating someone's medical history whenever they file a
claim well after being accepted for coverage, not if the
company hurried through the application process, not if the
company blindly accepted most applicants and not if the company
gladly collected their money with no questions asked. This is
inappropriate and it should be stopped.
I understand that companies just like the federal
government need ways to protect themselves from insurance
fraud, which does occur. Some applicants willfully lie on the
application to get insurance and pay lower premiums. This
increases the cost of coverage for the insurers and other
policyholders. When a company discovers this behavior and
believes rescission is the appropriate action, the burden must
rest on the insurer. The company should prove the insured
failed to disclose material information that he or she was
aware of at the time of the contract that would have resulted
in different contracts altogether. After all, the company has
the money, employees and resources to meet that burden. They
are the ones making the assertion and they are the ones
ultimately denying the coverage. It is not enough for companies
just to send a letter to the insured stating that an
investigation into their file has begun, and if they choose to
send in any additional information to the company. The company
needs to attempt to communicate directly with the insured, his
or her doctor and review all pertinent information to prove the
insured did make a material misstatement.
The majority requested all cases files that resulted in
rescission in 2007 in four States. For United, this was 206
case files, for Assurant, this was 321 case files, and for
WellPoint, this was 742 case files. To date, the committee has
received more than 650 of these case files. My staff had the
opportunity to review several of these files including working
all weekend. In some, there is documentation or evidence that
the insured intentionally withheld pertinent medical
information that would have affected their coverage. In others,
it is unclear whether the applicant was even aware of the
condition or notation cited by an investigator in an old
medical chart as evidence to rescind.
Today three individual policyholders will explain their
stories and illustrate how they were unaware of conditions,
symptoms or other possible diagnoses that were written in a
medical chart but never expressed to the patient. So you have
to ask yourself, can a person make a material omission or a
misstatement if he or she was not aware of a fact? I don't
think so. But if I am wrong, I want the companies to explain it
to me.
In 2008 and 2009, these companies entered into settlement
agreements with rescinded policyholders and providers in sums
topping tens of millions of dollars. Some of the companies
remain in litigation with other rescinded policyholders. I also
recognize some of these companies have initiated internal
reforms. These include steps to improve their application
process, improve communication with the insured during the
investigation and rescission process and offer independent
third-party review of rescission decisions if requested by the
policyholder.
I want to know what appropriate actions Congress can take
and what else these companies can do better to ensure that all
Americans have access to health care coverage. Health care
reform is coming and we need to have a better understanding of
the individual health insurance market and its practices. We
need to figure out first and foremost how to make qualify
health insurance affordable and reliable while keeping
protections in place to combat insurance fraud. I hope that as
this process moves forward we work in a bipartisan way to
design a system that achieves the ultimate goal of getting
those who need medical care the attention they need. Thank you.
Mr. Stupak. Thank you, Mr. Walden.
Mr. Waxman for an opening statement, please.
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Mr. Waxman. Thank you very much, Mr. Chairman.
Today we are going to hear the results of a yearlong
Congressional investigation into abuses in the individual
insurance market. We began this investigation last year when I
served as chairman of the House Oversight Committee and we
continued it this year with Chairman Stupak's leadership as the
chairman of the Oversight Subcommittee of Energy and Commerce.
As part of this investigation, we conducted a 50-State survey
of insurance commissioners and we sent document requests to
some of the largest companies that offer individual health
insurance. We received more than 116,000 pages of documents and
our staff talked with many policyholders who had their
insurance policies cancelled after they became ill. Some of
them are here today to testify, and I thank them very much for
being here.
Overall, what we found is that the market for individual
health insurance in the United States is fundamentally flawed.
One of the biggest problems is that most States allow
individual health insurance policies to deny coverage to people
with preexisting conditions. So if you lose your job and you
can't qualify for a government program like Medicare or
Medicaid, it is nearly impossible to get health insurance if
you are sick or have an illness. This creates a perverse
incentive. In the United States, insurance companies compete
based on who is best at avoiding people who need lifesaving
health care, and this incentive manifests itself in a wide
variety of controversial practices by the insurance companies
when we know that when people apply for insurance policies and
they put down that they have some preexisting condition, they
are going to be denied. But what we found is that when people
with individual policies become ill and then they submit their
claims for expensive treatments, then insurance companies
launch an investigation. They scour the policyholder's original
insurance application and the person's medical records to find
any discrepancy, any omission or any misstatement that could
allow them to cancel the policy. They try to find something,
anything so they can say that this individual was not truthful
in that original application. It doesn't have to even relate to
the medical care the person is seeking and often it doesn't.
You might need chemotherapy for lymphoma, but then when the
insurance companies find that your coverage was based on a
failure to disclose gallstones, well, they want to cancel your
policy after the fact. It may come as a surprise to most people
but the insurance companies believe they are entitled to cancel
the policies even when these omissions or discrepancies are
completely unintentional and they believe that they have the
right to cancel policies even when someone else like an agent
who sold the policy was responsible for the discrepancy in the
first place.
In addition, they can terminate coverage not just for the
primary policyholder but they go to terminate the policies for
the entire family including innocent children who did nothing
wrong. Some insurance companies launch these investigations
every single time a policyholder becomes ill with a certain
condition. In other words, if you happen to have ovarian
cancer, you should be prepared to be investigated. It is the
same with other conditions such as leukemia.
In the written statements for today, the three insurance
companies downplay the significance of these practices, arguing
that rescissions are relatively rare. But these three companies
saved more than $300 million over the past 5 years as a result
of rescissions, and I am sure they view this amount as
significant. More importantly, however, these terminations are
extremely significant to the tens of thousands of people who
needed health care and couldn't get it during these 5 years
because their policies were rescinded.
In my opinion, of course, the solution to these problems is
to pass comprehensive health reform legislation and based on
the written testimony I think the three insurance companies
testifying here today agree with that assessment. But until
that happens, insurance companies deny people coverage if they
have a preexisting condition and then afterwards if they gave
them the coverage for insurance they want to see if there is
some reason they can rescind it after the fact, after they have
already given out the insurance to see if they can rescind that
policy. I think it is shocking. It is inexcusable. It is a
system that we have in place and we have got to stop.
Mr. Chairman, I am pleased that you are holding this
hearing and I thank you for the time allotted to me.
Mr. Stupak. Thank you, Mr. Waxman.
Mr. Barton for an opening statement, please.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Thank you, Mr. Chairman.
This is my month for witnesses from Waxahachie, Texas. Last
week we had Mr. Frank Blankenbecker, who is the owner of
Carlisle Chevrolet in Waxahachie. Today we have Ms. Robin
Beaton, who is a citizen of Waxahachie. So I want to extend to
her my very best wishes and let her and the other two panelists
on this first panel know that there is nothing to be afraid of.
You speak for tens of thousands if not hundreds of thousands of
American citizens, and the country is very interested through
the auspices of this hearing to hear your story, so we
appreciate all three of you being here.
This is an important hearing. It addresses part of the need
to reform our health care system. We are going to hear today
about a problem under the current system that can occur in the
handling of individual health insurance policies when claims
are actually submitted for coverage under those policies. As I
just said, I want to extend a warm welcome to our first panel
of witnesses. Each of you has a personal story that you wish to
share and we know that it is a story that is worth hearing. We
also know that it takes courage to testify, and as I just said,
there is nothing to be afraid of at this hearing today.
We hear of problems as Congressmen and -women when our
constituents tell us what those problems actually are. Today we
are going to hear from one of my constituents, Ms. Robin
Beaton. No one should have to go through what she has had to go
through the last several years. In June of last year, she was
diagnosed with an aggressive form of breast cancer and her
doctor said that she needed immediate surgery. The Friday
before the Monday that she was to undergo a double mastectomy,
she received a letter from her carrier, Blue Cross of Texas,
that rescinded her insurance policy. The letter stated that the
company would not pay for the surgery. The letter further
informed Ms. Beaton that an investigation into her claim for
benefits when the company had thoroughly reviewed her medical
records that she submitted when she applied for the coverage
and that they discovered that she had misinformed them on
several pieces of information. One of them was that she didn't
list her weight accurately, and the other, that she failed to
disclose some medication that she had taken for a preexisting
heart condition. The record will show that she was not taking
that medication at the time that she submitted her initial
application for coverage. Robin's claim in June of 2008 was not
for weight control, it was not for a heart condition, it was
for cancer surgery, a double mastectomy for breast cancer, yet
her policy was rescinded 3 days before that surgery was
scheduled to take place. It was bad enough that she had to deal
with the trauma of breast cancer but to be denied coverage
right before potentially lifesaving surgery quite frankly is
something that no human being should have to undergo. She had
no insurance and no way to pay for her scheduled surgery. So
obviously it was postponed.
She called my office. My staff went to work. They had
several conference calls with officials of Blue Cross/Blue
Shield. In those conference calls, Blue Cross and Blue Shield
was unyielding. They were adamant. It went to the counsel, the
general counsel of Blue Cross/Blue Shield and that individual
said there was no way they were going to reinstate her
coverage. Never take no for an answer. I called the president
of Blue Cross/Blue Shield. I appealed to him personally, gave
him the facts as I knew them, and he promised that he would
personally investigate Ms. Beaton's case, and he further
promised that if the facts were as she said and I said, that
her coverage would be reinstated. Good to his word, the
president called me back within 4 hours and said that Ms.
Beaton's coverage would be reinstated. However, precious time
was lost. Luckily for Robin, she was finally able to get the
surgery, not through Blue Cross/Blue Shield though, as I
understand it. She is now undergoing chemotherapy because the
cancer has spread to her lymph nodes, but she is still with us,
thank God, and she is here today to tell us her personal story.
Robin's situation was what caused me to draft an amendment
to Representative DeLauro's breast cancer bill last year to
protect people like Robin by prohibiting rescissions of health
insurance if non-disclosure of information is not related to
the claim, not related to the claim and inadvertent. There is
no reason on God's green earth that somebody ought to have
their health insurance revoked because of some inadvertent
omission that is not related to the claim that is being
submitted to the health insurance company. This bill with my
amendment passed the House last year but it died in the Senate.
It has been reintroduced and hopefully it will pass this year.
I support the right of an applicant to request a third-party
independent review of an insurer's rescission prior to pending
or denying payments of claims. I understand that there is
another side to this story. I understand that there are people
that do try to scam insurance companies. I understand that
there is a rule of reason, but again, if somebody inadvertently
omits something or there is something that is not material to
the claim, that claim in my opinion should be paid, end of
story.
As we head towards reforming health care, it is important
that we promote honesty on behalf of the insured and the
insurers. Congress needs to be confident that there are
consumer protections in place to protect people like Robin
Beaton as well as procedures for companies to protect
themselves from insurance fraud. Companies need to have open
and clear rules on when they terminate policies. Applicants
need to be truthful when applying for coverage. Every American,
and this is something that members on both sides of the aisle
support, needs to have access to affordable, quality health
care.
This is an important hearing towards that goal, Mr.
Chairman, and I thank you for holding it. I also think that we
should give special condition to one of our panelists here on
the dais. The gentlelady from Chicago injured herself yesterday
and has a broken leg and yet she is here today at this health
care hearing, so appreciate Ms. Schakowsky here.
Ms. Schakowsky. And fortunately with good health insurance,
so I am happy about that too.
Mr. Barton. And again, thank you, Mr. Chairman, for holding
this hearing.
Mr. Stupak. Thank you, Mr. Barton, and thank you again for
helping us obtain witnesses for this hearing.
Mr. Dingell for an opening statement, please.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Dingell. Thank you, Mr. Chairman, and I commend you for
holding this hearing on the rather vicious practice of post-
claims underwriting and the detrimental effect that such
practices have on hundreds of Americans, and I want to thank
the witnesses for appearing in what I hope will be an
informative hearing today on which the committee may begin some
actions to correct what appears to be a very serious abuse, and
I remember, Mr. Barton, the way we worked together on this and
your outrage last year when we were addressing similar
questions.
Health care costs have risen sharply. In response to this,
insurance providers have taken drastic measures to reduce costs
and to improve profit margins. Unfortunately, the health
insurance industry is attempting to do so by giving in to
unscrupulous industry practice including the practice of post-
claims underwriting. I want to be clear. I have no sympathy for
individuals who intentionally misrepresent their health status
in the applications they submit for health insurance coverage.
These actions are dishonest and have a negative impact on the
cost of health care for everyone else, and they are clearly
wrongdoing and they should be punished. However, I have far
less sympathy for health care providers and insurance providers
who have made it a customary practice to exploit current laws
meant to protect individuals and to take advantage of the most
vulnerable Americans in order to turn a profit. They do this by
seeing to it that they avoid risk as opposed to practicing good
insurance practices.
As we have seen time and time again, insurance providers
have made a living out of refusing to compete on quality and
choosing instead to compete by avoiding financial obligations
at all costs. In the current market, health insurance providers
are allowed to pick and choose whom they will cover in the
individual market. We have allowed this cherry picking or cream
skimming to go on for years, but when we weren't looking the
industry decided to up the ante. In some cases, industry
underwrote countless claims for individuals that cherry picked
and then it began to quietly punish those individuals if they
got sick and used their insurance for its intended purpose, to
cover major medical claims. In some cases, industry didn't just
drop the individual policyholder but retroactively rescinded
the contract as if the agreement had failed to exist. They
refused to pay hospitals, doctors and nurses that sought
reimbursement for services rendered.
To our witnesses who are appearing this morning to share
their personal experience with post-claims underwriting, we
will work to ensure these practices come to a sharp end. To the
CEOs testifying this morning, I would like them to know this:
We don't regulate for the fun of it. We regulate when the
private sector refuses to honor its commitments to the American
public. As we work to reform the Nation's health care system,
we will work to reform the current health insurance market. We
will work to ensure such reform will prohibit insurers from
excluding preexisting conditions or engaging in any other
unfair and discriminatory practice. We will also work to ensure
these reforms include fair grievance and appeals mechanisms,
very much lacking in the insurance world today, and will ensure
information transparency and plan disclosure. These new reforms
alone will not fix the problems. We will also have to work to
ensure that there is strong oversight on both the federal and
state level. Furthermore, these insurance industry practices
are precisely the reason why we need a public health insurance
option included in our proposal to reform the health care
system, a public plan that leads by example and competes
through quality and innovation rather than unfair industry
practices is what is needed to keep the private industry in the
insurance business honest.
Thank you, Mr. Chairman.
Mr. Stupak. Thank you, Mr. Dingell.
Next for a 3-minute opening statement, Mr. Gingrey.
OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF GEORGIA
Mr. Gingrey. Mr. Chairman, thank you.
Generally, insurance is a form of risk management that
allows individuals to pay a monthly premium in exchange for a
company taking on their financial risk in the event of a health
care catastrophic loss. Health insurance, on the other hand, is
not typical insurance. For a monthly premium, individuals
purchase health insurance to financially support them in the
event of a catastrophic incident such as a broken leg, as the
gentlelady from Chicago just recently experienced, or major
surgery. Patients also use their insurance for such things as
doctor visits or monthly prescriptions. In many respects,
health insurance has become the means by which patients see
their providers and they receive treatment.
Primary responsibility for regulating the individual health
insurance market rests with the State regulators. However, in
the Health Insurance Portability and Accountability Act of
1996, HIPAA, Congress made very clear that an individual
insurance policyholder has a right to guarantee renewability.
In other words, an insurer must renew or continue an
individual's existing coverage unless some specific exception
is made. Those exceptions include a policyholder moving out of
a network plan service area, or if the policyholder
intentionally misrepresents a material fact concerning their
condition when contracting with the insurer.
I believe it is unfair for an individual to be denied
coverage for a claim when he or she has been upfront about
their condition. They played by the rules of the contract. They
paid their premiums on a regular timely basis only to be denied
coverage when a health care incident arises as described by my
colleague, Mr. Walden, what we would call post-claims
underwriting. The impact it has on patients and their loved
ones can be devastating. I have actually personally experienced
that in my own family and it literally took an act of Congress
to change that.
With these things in mind, I look forward to the testimony
of our witnesses today. I want to thank the entire panel, this
first panel particularly, as well as the second panel for
coming in today and sharing your stories with us, and Mr.
Chairman, I look forward to the hearing and to the questions,
and at this time I yield back.
Mr. Stupak. Thank you, Mr. Gingrey.
Mr. Green of Texas for an opening statement, please.
OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Green. Thank you, Mr. Chairman, and I think all of us
appreciate you calling this hearing today because like my
ranking member from Texas talked about, we deal with this all
the time through our constituents, and as a State legislator in
Texas, we have had that same problem for many years, and I
appreciate you bringing this out and hopefully we will address
this in our health care reform. I want to thank our witnesses
for being here today.
Most individuals in the country have health insurance
through their employer, Medicare or Medicaid. But millions of
Americans do not have insurance through their employers or
through the public market so they turn to the individual
insurance market to purchase insurance policies. Individuals
who purchase the insurance through the individual market must
go through an application process and supply their medical
history including any mental, physical or chronic conditions.
Insurance companies are supposed to review those applications
and review the applicant's medical history before approving the
individual for coverage. Oftentimes this medical history never
occurs and the insurance companies will cover individuals who
have conditions they would not necessarily cover. These
individuals believe their coverage is current and when they
submit a claim they often find themselves subject to that
medical history investigation and dropped from their insurance
and liable for all claims under the policy. In other instances,
individuals submit a claim for a serious illness such as cancer
and find themselves subject to a medical history investigation
and dropped from their policy because the insurance company
claims the individual did not disclose a medical condition when
filling out their initial application. Both these instances
leave the individual without health insurance coverage and
uninsurable because they have to report having their coverage
rescinded. Individuals who are undergoing medical treatment for
conditions such as cancer are dropped from their coverage often
face life-and-death situations because the insurance company
does not want to pay for their treatments. I can't imagine the
pain and suffering that these individuals go through at the
expense of an industry seeking healthy patients to make a
profit.
A few States, including Texas, have taken actions to
prevent insurance companies from post-claims underwriting. As
we are working through health reform, we need to examine the
individual market and ensure individuals never have to face
losing their coverage for simply using their coverage, and Mr.
Chairman, again, I thank you for calling this hearing. I yield
back my time.
Mr. Stupak. Thank you, Mr. Green.
Mr. Burgess for 3-minute opening statement, please, sir.
OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF TEXAS
Mr. Burgess. Thank you, Mr. Chairman, for the
consideration.
Let me just say at the outset, I do believe in the
individual market. I believe it has a place in this country.
Indeed, I was a client and a customer in the individual market
for my family's coverage for a period of time. And I also
believe that the barriers that we, the federal government, the
Congress puts in place on the individual market sometimes
creates unnecessary difficulties for the people who sell in the
individual market or the people who wish to be their customers.
But no one can defend, and I certainly cannot defend the
practice of denying coverage after the fact and I cannot be
comforted by the fact or the statements that are made that this
is in fact an infrequent occurrence because as the cases in
front of us at the witness table demonstrated this morning,
there is no acceptable minimum to denying coverage after the
fact when the coverage was duly paid for and entered into in an
honest fashion and then only when the coverage was required was
it found to be not there.
Now, I don't think anyone on either side of the dais
believes that anyone would ever lie about something on a
medical history, maybe fudge your weight a little bit, maybe
the number of times we actually go the gym or what we actually
do there, but no one would willfully do that. The question
before us today is, do people intentionally lie in order to
manipulate companies into giving them coverage when they know
that they have a preexisting condition, and the legal jargon
that we apply to that is rescission, and should insurance
companies post procedure be allowed to terminate individual
contracts based upon the omission of disclosure of a
preexisting condition irrespective of whether it was
intentional on behalf of the individual seeking coverage or
not, and I am troubled by that inability to distinguish between
those who intentionally act with fraud and those who honestly
answer broad, vague or confusing questions on the contracts to
obtain health coverage. Those are not equivalent conditions. An
omission without intent does not signify fraud and no insurance
company who hides behind filling out their request for
insurance as a strict liability should be protected. Intent is
crucial because those who act fraudulently should not be
protected by the law nor should it be our desire to do so.
It is interesting to me that all of the insurance companies
today that we are going to hear from on our panel today are
private for-profit companies, but Ms. Beaton's insurer, whose
case proved near intractable until her Member of Congress got
involved, was Blue Cross and Blue Shield, and I wonder, Mr.
Chairman, why Blue Cross and Blue Shield is not in one of our
panels today. Clearly as a nonprofit company, they would not
have a purely profit-driven motive to engage in this type of
behavior. So theirs is perhaps particularly curious and I think
there are a number of questions that we would like to pose to a
company that does in fact function as a nonprofit. It is the
responsibility of each insurance company whether for profit or
not for profit to do their due diligence before the contracts
are entered into and not use rescission as an excuse for lazy
or incomplete underwriting.
Thank you, Mr. Chairman. I will yield back the balance of
my time.
Mr. Stupak. Thank you, Mr. Burgess.
Ms. Sutton for opening statement, please.
OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF OHIO
Ms. Sutton. Thank you, Chairman Stupak, for holding this
critical hearing.
Simply put, rescission of coverage by insurance companies
puts dollars ahead of the lives of Americans, and I am not
exaggerating when I say that insurance accountability is
something that I have fought and advocated for at every stage
of my professional life. During my time as a representative in
the Ohio General Assembly, I worked on behalf of Ohioans to
ensure that when benefits were promised, benefits were given.
And now I am here in Congress to continue that fight.
Rescission of coverage is a problem that we in Congress are
seeking to eliminate and it is our hope, you have heard from
the comments here, that when we have finished reforming our
health care system, coverage discrimination will be a thing of
the past, but today it is still a problem that exists and must
be eliminated. When a health insurance policy rescission
occurs, it creates waves throughout the entire health care
system. Make no mistake, these decisions deprive people of
needed care. They deprive hospitals and doctors of the
reimbursement they have earned for their service. For some, a
rescission is a costly process that can result in a doctor or
hospital having to seek payment from the individual. For
others, it means a delay in access to a lifesaving procedure or
treatment. That is unacceptable.
Today we will hear from citizens, and I thank you all for
coming to provide your testimony and your stories about your
lives that have been turned upside down by the insurance
industry policy of rescission. We will hear from executives who
will tell us that in the name of uncovering insurance fraud and
corruption, they had no choice but to remove these
beneficiaries from their rolls. But I think the testimony of
the people who have lived through this trauma will tell a
different story.
The number if uninsured in this country is now thought to
be 47 million. It is a major flaw in our country that so many
people go without their basic right to have health care
coverage and millions more who have insurance still don't get
the care they need when they need it. It is hard to understand
how we allow those who are legitimately covered to join the
ranks of the uninsured due to the stroke of a pen or the
decision of an insurance company executive.
Unfortunately, Mr. Chairman, I have another hearing that is
going on simultaneously with this one so will be shuttling back
and forth, but I want the panelists to know that I will be
listening carefully to the testimony, both for myself and for
the people of Ohio that I am so honored to represent, and I
thank you all again for coming and I thank you, Mr. Chairman,
for your attention to this matter.
Mr. Stupak. Thank you, Ms. Sutton, and that is a good
reminder. Members will be coming back and forth as there is a
committee two floors up. The Telecommunications and Internet
Subcommittee is also meeting, and in that vein, Congresswoman
Donna M. Christensen, who is a member of this subcommittee, has
submitted her opening statement for the record. Without
objection, it will be entered into the record.
Next I will turn to Ms. Schakowsky for an opening
statement, please, and you can tell us how you broke your leg.
Ms. Schakowsky. Well, I wish there was a dramatic story,
Mr. Chairman, although it was in a fairly dramatic place. I did
go to Guantanamo Bay yesterday and fell and ended up breaking
my foot in two places. I hope soon with the help of the
attending physicians I will have a boot or a cast or something.
That was just yesterday, and I----
Mr. Stupak. Well, we wish you well and thanks for being
here.
OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A
REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS
Ms. Schakowsky. And I am grateful that I do have good
health insurance to cover that.
I appreciate today's hearing examining one of the truly
egregious practices occurring in the individual health
insurance market. I want to extend a special welcome to Ms.
Peggy Raddatz from my home State from La Grange. I thank you
for being here and sharing your family's story with us. I know
it isn't always easy to discuss personal matters but you
certainly are helping us to make better health care policies,
and I thank all the witnesses for helping us.
When a consumer goes to buy a health insurance policy, they
examine their options and they try to identify the best policy
to meet the health care needs of their family and at no time do
they ever imagine that once they buy a policy they might get
sick and their insurance will simply rescind their policy and
leave them without coverage but with a high pile of bills. The
practice of post-claims underwriting in the private market is
wrong and we should prohibit it. Let us face it is, it is
already hard enough for an individual or small business owner
to find health insurance. In my State of Illinois, there is no
requirement that insurers take all comers, and I have heard
from constituents over and over again who are unable to find a
policy really at any price. Those who do get through the
insurance industry gauntlet know that they are not home free.
They know they may face high out-of-pocket costs, denial of
doctor-prescribed treatments, prior approval requirements, caps
on services and other devices that are designed to limit the
insurance company payments. But few know that when they need
care the insurance company that has been collecting their
premiums may now go back and comb through their personal
history in order to find an excuse not to pay just when the
policyholder needs the coverage the most.
There are some who argue that rescissions are used to stop
fraud on the part of enrollees who misrepresent their health
histories in order to obtain coverage. One has to wonder why we
would put up with a health care system in which people have to
hide their illnesses in order to get access to care, but we
also know that this isn't about that. It is most often about a
company looking for an undisclosed headache 10 years ago in
order to deny coverage for a brain tumor today. The practices
of the private insurance market have less to do with the
consumer and a lot to do with company profits. As we move
forward with health care reform, we have to put an end to
practices that discourage patients from seeking out care.
Insurance coverage should be a pathway, not a barrier to care.
Mr. Chairman, I look forward to working with you to improve
care coverage, refocus our attention on patients, and I really
again thank our witnesses for being here today, and with that,
I yield back.
Mr. Stupak. Thank you.
Mr. Braley for an opening statement, please.
OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF IOWA
Mr. Braley. Thank you, Mr. Chairman. This is a very
important hearing but I would like to start by talking about
the very concept that we are here to discuss because the term
''post-claims underwriting'' is an oxymoron. Insurance
companies are structured into different departments. They have
an underwriting department and a claims department, and the
underwriting department is supposed to do pre-issuance risk
assessment to determine whether an individual policy is worth
the company investing in that person as a health care risk. The
claims department is designed to respond to requests for
coverage after a policy has been issued. So the very theory we
are here to talk about today isn't even supposed to exist in a
rational health care delivery system, and it wouldn't exist if
we had a rational health care delivery system. But when you
read news stories where the CEO of one private health insurance
company is sitting on stock options valued at $1.6 billion, it
shouldn't come as a shock to any of us that we are sitting here
today hearing these horror stories of patients who have been
caught up in an inefficient, unsustainable private health
insurance delivery system.
And Ms. Raddatz, I wish that every claims examiner at every
insurance company and every underwriter who gets engaged in
post-claims underwriting determinations had to go through what
you went through and the other witnesses who are here today
because one of the most profound experiences I have had in my
life was spending about a month at a pediatric oncology unit at
the University of Iowa Hospitals and Clinics when I was in the
Big Brothers/Big Sisters program and my little brother was
diagnosed with acute large-cell non-Hodgkin's lymphoma and
spend time every day watching young patients with no hair, with
IVs in their arms or in their chests going into a port, walking
around and taking care of each other much better than our
health care industry takes care of patients in their time of
need, and it is a slander on the names of the health care
professionals who do everything they can to keep patients like
your brother, like my little brother alive when we don't give
them the support that they need after they have invested their
hard-earned dollars by paying premiums to a health care
insurance company who turns their back on the patient in their
hour of need, and that is why I am a strong supporter of the
public health insurance option and I am proud that my
colleagues on this committee, Chris Murphy and Peter Welch,
have joined me in introducing the Choices bill to give health
insurance patients a public health insurance option with no
discrimination so we don't have to go through these nightmares
anymore.
With that, I yield back.
Mr. Stupak. Well, thank you, and that concludes the opening
statements of all members. One of our witnesses had to step out
just for a moment so let us stand in recess for just 5 minutes
and we come right back in about 5 minutes, OK? We will give
everyone a chance to stretch their legs and we will be in
recess for 5 minutes.
[Recess.]
Mr. Stupak. This hearing will come back to order.
As I stated before we had the brief recess there, that
concludes the opening statements by members of the subcommittee
and now I would like to call upon our first panel of witnesses.
On our first panel, we have Robin Beaton, who is a policyholder
from Waxahachie, Texas; Ms. Peggy Raddatz from La Grange,
Illinois, who is the sister of the late policyholder, Otto
Raddatz; and Ms. Wittney Horton, who is a policyholder from Los
Angeles, California. Welcome, all of you. Thank you for coming.
It is the policy of this subcommittee to take all testimony
under oath. Please be advised that you have the right under the
rules of the House to be advised by counsel during your
testimony. Do you wish to be represented by counsel during your
testimony? You are all shaking your heads no, so OK. Then I am
going to ask to please rise and raise your right hand and to
take the oath.
[Witnesses sworn.]
Mr. Stupak. Let the record reflect that the witnesses
replied in the affirmative. They are now under oath. We will
hear a 5-minute opening statement from each of you. Ms. Beaton,
would you like to start first with an opening?
Ms. Beaton. I would like to be last.
Mr. Stupak. You would like to be last. Ms. Horton, do you
mind going first?
Ms. Horton. No.
Mr. Stupak. Would you pull that mic forward and turn on the
green--there should be a green button there. Pull that mic
forward. It doesn't pick up as well as it should.
Ms. Horton. Can you hear me now?
Mr. Stupak. I can hear you. Thank you.
TESTIMONY OF WITTNEY HORTON, POLICYHOLDER, LOS ANGELES,
CALIFORNIA; PEGGY RADDATZ, RELATIVE OF POLICYHOLDER, LA GRANGE,
ILLINOIS; AND ROBIN BEATON, POLICYHOLDER, WAXAHACHIE, TEXAS
TESTIMONY OF WITTNEY HORTON
Ms. Horton. Good morning, ladies and gentlemen. I want to
start by thanking the committee for this opportunity to testify
this morning. I am very pleased that Congress has decided to
take a close look at rescission so that it can understand just
how damaging this practice has been to so many people across
the country.
When Blue Cross cancelled my coverage, I had no idea what
rescission meant, but now after my life has been turned upside
down for the past 4 years, I have come to understand what a
despicable practice it is. Insurance companies require you to
fill out an application that is deliberately confusing and they
don't do anything to make sure you understood the questions or
that you supplied all the information they need to decide
whether they want to insure you or not. They just accept you
and accept your premium checks. It is after you see a doctor
that everything changes.
When your doctors file claims, the insurance company starts
looking for reasons not to pay them. They dig through your
medical records and compare what they find to the information
you put down on the application. It is called post-claims
underwriting, and in California where I live, it is illegal,
but insurers ignore the law, and when they find a discrepancy
or an omission, they rescind the policy and refuse to pay any
of your medical bills, even for routine treatment or treatment
they previously authorized.
Blue Cross's decision to rescind my insurance was
devastating to my husband and me, and I consider myself one of
the lucky ones. As the lead plaintiff in a class-action lawsuit
against Blue Cross, I represent 6,000 Californians who are all
stripped of their insurance by Blue Cross. You can't imagine
how horrifying some of those stories are.
Blue Cross rescinded some of these people right after they
had undergone open-heart surgery or were receiving chemotherapy
treatment for cancer. Some of these people were left with
hundreds of thousands in unpaid medical bills. One thing we all
have in common, we all were left to somehow stay healthy and
fend for ourselves after Blue Cross walked away from its
promise to provide health insurance.
I sought insurance with Blue Cross in 2005 because my
parents raised me to believe that health insurance was an
absolute necessity that should never be taken for granted. I
work in the film industry in Los Angeles, California, where
employment is generally temporary and done on a freelance
basis. So for me and many others in the industry, individual
coverage is a necessity. At the time I applied for coverage, I
had just left a temporary staffing agency for Sony Pictures to
go to work on a specific movie. When I made the move, I had to
give up the stability of my group health care plan. So I
immediately sought out individual health care coverage.
When I applied for coverage with Blue Cross, I wanted to
make sure that I did everything correctly to ensure that there
would be no problems. I filled out the application to the best
of my ability, even though it was long and confusing. I wrote
down everything I could remember about my health history
including hypothyroidism, a condition I have had since I was
18. I even listed the contact information for my treating
doctor. Then I turned my application in to my insurance broker.
She told me everything looked good and sent it in to Blue Cross
and they quickly accepted my application. I was only 27 at the
time.
Two months later, I went to my endocrinologist for a
checkup. I had routine blood work performed and the doctor's
office sent the bill to Blue Cross. I received a letter back
from Blue Cross shortly afterwards saying that they wanted all
of my medical records from both my endocrinologist and my
gynecologist. I consented, having nothing to hide. A couple of
months later in June of 2005, I received a letter from Blue
Cross stating they were rescinding my insurance because I
didn't disclose on the application that I had taken the drug
Glucophage and because of irregular menstruation. I had taken
Glucophage the previous year but was no longer taking it when I
filled out the application. My doctor had prescribed it hoping
that it might help me lose weight, but it did not. I stopped
taking the medication when I saw that it was not working for
me.
In its rescission letter, Blue Cross said it would have
never accepted me for coverage if it had known that I had
polycystic ovaries. This letter was the first time I had ever
heard about this condition. I later learned that polycystic
ovaries, or PCOS, as it is known, is a diagnosis of exclusion
and very difficult to prove. Doctors often proceed on
suspicions of a person having it without actually having proven
it. This is what happened in my case. My doctor suspected I
might have PCOS, wrote it down in her notes, then told me she
was prescribing Glucophage for weight management. I never knew
what she wrote down in her notes because she never told me.
After I was rescinded, I had two of my doctors write
letters to Blue Cross telling them this but they didn't care.
They just wrote back that they were upholding their decision to
rescind. After being rescinded, I showed my original
application to my sister and her husband, both radiologists, to
ask them what I could have possibly done wrong in filling out
the application. They felt that the application was worded in
such a way as to be purposely confusing and that it asked the
same question in multiple ways to trip people up. I am a
college graduate and no dummy, and I still couldn't make sense
of Blue Cross's tricky application.
The worst part about my rescission is that I have been
unable to get insurance anywhere else. I applied for individual
insurance through Blue Shield but on their application they ask
if the applicant has ever had insurance rescinded. When they
learned that I had, they informed me that they would not accept
me for coverage. Every insurance company asks if you have ever
had health care coverage rescinded. For the rest of my life I
will never be able to get individual coverage again because of
Blue Cross. As someone who works in an industry that relies on
individual coverage plans, this is a really big deal. Since my
rescission, I have had to take jobs that I do not want and put
my career goals on hold to ensure that I can find health
insurance. Fortunately, after my husband and I got married, I
was able to gain coverage through his company's group health
care plan. However, if he ever loses his job or I don't have
employment with a company that offers group health insurance, I
might have to go without.
As I mentioned before, I consider myself one of the lucky
ones. I don't have large outstanding medical bills and I am
relatively healthy. In fact, I was able to pay my doctors back
for the blood work and office visits that Blue Cross refused to
pay. But many people who have been rescinded are far less
fortunate, and as the lead plaintiff against Blue Cross, I feel
an obligation to speak for them as well. What Blue Cross has
done to us is wrong and they must not be permitted to continue
getting away with it. Americans desperately need health care
reform. As my experience shows, owning an insurance policy does
not necessarily equal access to health care. If insurance
companies are not prevented from canceling or restricting
coverage after patients get sick, insurance policies are not
worth the paper they are printed on.
Insurance companies are making record profits by collecting
premiums in exchange for the promises that they make to be
there when people need them. Make them keep that promise. Thank
you.
[The prepared statement of Ms. Horton follows:]
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Mr. Stupak. Thank you, Ms. Horton.
Ms. Raddatz, and on behalf of Otto Raddatz, would you like
to give your opening statement? And thank you for being here.
TESTIMONY OF PEGGY RADDATZ
Ms. Raddatz. Thank you, very much Mr. Chairman, and thank
you to all the members of the committee for all your kind words
and your wonderful statements.
My name is Peggy Raddatz and I am appearing here today to
testify on behalf of my brother, Otto S. Raddatz. My brother
was a business owner of a restaurant that he ran with his wife,
Marie. He purchased a health insurance policy from Fortis
Insurance Company in August of 2003. On the application, he
indicated he had kidney stones and smoked. He also listed all
physicians who had treated him. Otto's health application with
Fortis was accepted and his coverage began in August of 2003. A
year later, my brother found himself inexplicably losing a
large amount of weight. His wife, Marie Raddatz, urged him to
see a doctor.
In September of 2004, my 59-year-old brother at the time
was diagnosed with stage IV non-Hodgkin's-type lymphoma. The
very next day, he began an intensive course of chemotherapy
treatments. Due to the aggressive type of cancer Otto had,
being mantel zone lymphoma, he was given six more rounds of
chemotherapy by January of 2005. He suffered a lot during this
period of time and was often unable to work. Otto was referred
to a specialist in stem cell transplantation and for high-dose
chemotherapy. Otto began more chemotherapy for purposes of
preparing him for a stem cell transplant. These treatments were
long and difficult in nature. In the midst of the chemo
treatments, Otto received a phone call and letter from Fortis
Insurance Company stating his insurance was cancelled.
It was rescinded all the way back to the effective date of
August 7, 2004, which was before his diagnosis for cancer. This
meant none of his cancer treatments would be covered at all.
Most importantly, he would not be able to receive the stem cell
transplant needed to save his life. My brother only had a very
small window of time in which to have the stem cell transplant.
He needed to be scheduled within the next three to four weeks
or he would not be able to have the transplant at all and his
life would be ended very shortly. My brother was told he was
cancelled during what they called a routine review during which
they claimed to discover a material failure to disclose, as
they stated in their letter. Apparently in 2000, his treating
doctor had done a CT scan which showed a small aneurysm and
some very insignificant gallstones. My brother was never told
of either one of these conditions nor was he ever treated for
them, nor did he ever report any symptoms from them either.
After months of preparation, the stem cell transplant could
not be scheduled. My brother's hope for being a cancer survivor
was dashed. His prognosis was only a matter of months without
the procedure. By this time, he could no longer work and
ultimately had to sell his restaurant because of it.
Mr. Stupak. Wait a minute.
Ms. Raddatz. Thank you, Mr. Chairman.
When I called the hospital to see if I could schedule the
stem cell transplant for him because he was in such a weakened
state both physically and emotionally, I was callously told
unless your brother brings in cash and a bundle of it, he is
not going to get the procedure without insurance. My brother
was accused by Fortis Insurance Company of falsely stating his
health history, despite the fact that he had no knowledge of
ever having any gallstones or aneurysms. Luckily, I am attorney
and I was able to aggressively become involved in solving this
life-threatening situation. I got on the phone and literally
made dozens of phone calls day after day after day. I put my
personal work aside and worked on this literally round the
clock calling people. I finally was told to contact the
Attorney General's Office and received immediate and daily
assistance from the Illinois Attorney General's Office and from
Dr. Babs Waldman, the medical director of their Health Bureau.
I cannot thank them enough for their daily assistance in
support of myself and my brother through this difficult time.
During their investigation, they located the doctor who
ordered the CT scan. He was not only retired, he was on a
fishing trip at the time, and through their unbelievable
resolve, they were able to get a hold of him on the fishing
trip and he had no recollection--he recalled my brother and his
treatment of my brother but he had no recollection of ever
disclosing the information to my brother or treating him for
gallstones or for a small aneurysm. After two appeals by the
Illinois Attorney General's Office, Fortis Insurance Company
finally overturned their original decision to rescind my
brother's coverage and he was reinstated without lapse. This is
after weeks of constant phone calls between myself and the
Attorney General's Office and we were literally scrambling hour
by hour to get this accomplished so that my brother wouldn't
lose his 3- to 4-week window of opportunity that he had
prepared for and lose his opportunity to have the procedure.
What Fortis Insurance Company did was unethical. To deny a
dying person necessary medical treatment based upon medical
conditions a patient never had knowledge of, never complained
about or never been treated for is cruel. It is the hope of our
family that this information will benefit other patients who
are in need of lifesaving medical treatments and who do not
have the knowledge or means necessary to fight against the
health insurance companies. It is further our desire to expose
these practices of Fortis Insurance Company so that others do
not have to suffer as victims, as my brother did.
Thank you very much, Mr. Chairman, and thank you so much,
members of the committee, for all your efforts.
[The prepared statement of Ms. Raddatz follows:]
[GRAPHIC] [TIFF OMITTED] T3743A.006
[GRAPHIC] [TIFF OMITTED] T3743A.007
Mr. Stupak. Thank you.
Ms. Beaton, would you like to give your opening statement
now? Take your time.
TESTIMONY OF ROBIN BEATON
Ms. Beaton. Mr. Chairman and members of the committee, I am
very honored to be here to share my story.
My name is Robin Beaton. I am 59 years old. I was a
registered nurse for 30 years. I had insurance. I was in good
health. I retired from nursing, started my own small business,
obtained a personal individual policy from Blue Cross and Blue
Shield in December 2007. In May 2008, I went to a dermatologist
for acne, pimples. A word was written down my chart, which was
considered to mean precancerous. In June 2008, I was diagnosed
with invasive HER-2 genetic breast cancer, a very aggressive
form of this cancer. I needed a double mastectomy immediately.
Blue Cross and Blue Shield precertified me for my surgery and
for a hospital stay.
The Friday before I was to have my double mastectomy, Blue
Cross and Blue Shield called me by telephone and told me that
my chart was red flagged. What does that mean, I said. They
said that due to the dermatologist's report, that was what red
flagged my chart in the beginning, that I would not be able to
have my surgery on Monday and they launched a 5-year medical
investigation into my medical history for the last 5 years. I
had to give them every hospital, every doctor, every----
Mr. Stupak. Take your finger off. There you go.
Ms. Beaton. I had to give them every pharmacy, every
doctor, every hospital and they threatened me that if I left
anything out, that it would be really bad, so I truly tried
everything in the world I could to list every single doctor,
everywhere I had ever been. I immediately got in touch with the
dermatologist. He immediately called Blue Cross and Blue Shield
and he begged them. He said this is a misunderstanding. He said
this is not precancerous. He said all she has is acne, pimples.
He said please don't hold up her cancer surgery for this. He
begged them. He was the nicest man. Anyway, I was frantic. I
did not know what to do. I didn't know how to pay for my
surgery. The hospital wanted a $30,000 deposit and I was by
myself. I didn't have that kind of money.
I turned to the only person that I had to turn to, and that
was Joe Barton, my Congressman. The next day I get a letter
canceling my insurance, rescinding it to the first day that
they had covered me. Can you imagine having to walk around with
cancer growing in your body with no insurance? It is the most
terrible thing in the world to not have anybody to turn to, not
have anywhere to go. So I just can't even say how bad it was.
The sad thing is, Blue Cross and Blue Shield took my high
premiums. The very first time I ever had a claim, the very
first time and was suspected of cancer, they took action
against me searching high and low. They turned over every
single thing they could in my medical history to pull out
anything that would cause any suspicion on me so they didn't
have to pay for my cancer.
A nurse who attends my church works full time for Blue
Cross and Blue Shield. She looks through medical records
searching for reasons to cancel people. She came to me and she
said I feel so bad, she said, I just can't even tell you how
sorry I am this has happened to you. Blue Cross and Blue Shield
has control over life and over death. People have to be able to
count on what they have paid for, count on having insurance.
Blue Cross and Blue Shield will do anything to get out of
paying for cancer, anything. Sad fact is, anyone with a
catastrophic illness who is not a part of a group who has an
individual policy stands a really high chance of getting
cancelled, left out in the cold with no insurance. I go to a
cancer support group every week. Four girls in my cancer
support group have had their insurance canceled, and two of
those girls have had to declare bankruptcy because of cancer.
It is very difficult for me to speak out. My insurance
could be cancelled again. I live in fear every day of my
insurance company. I looked everywhere for help. No one found
anything to help me until Joe Barton and Krista Townsend after
working for a really, really long time. Every day they worked
hard. I had given up hope. I didn't have any hope left and they
never gave up hope. They did everything they could to help me
and they got my insurance reinstated.
After being diagnosed in June 2008 with aggressive breast
cancer, I was placed back on a list to get a mastectomy, which
I finally got to have my cancer surgery October 2, 2008. My
tumor grew from 2 to 3 centimeters all the way to 7. I had to
have all my lymph nodes removed in my arm, everything. Delaying
cancer treatment, it only worsens the condition, costing more
to treat and treatment is much more intensive. Also, the
outcome is not as good. I go to chemotherapy every 3 weeks and
I will have to be going for the next year. Cancer is expensive
and no one wants to pay for cancer. I pray no one has to go
through the sheer agony that I have had to ensure for one year.
I did not deserve to have my insurance cancelled. Blue Cross
and Blue Shield set out to get rid of me. They searched high
and low until they found enough to cancel me and they did. I
owe my life to Joe Barton. I pray that you will listen to my
story and help people like me who are powerless against the big
insurance companies. And today when I met Mr. Barton, that was
the very first time I ever met him. He helped me not even
knowing me, just because as a good man he just helped me. But I
went everywhere. I went to the county hospital, I went
everywhere looking for help, and you just get on a waiting
list, and when you get on a waiting list your cancer grows.
So I just want to thank you all for listening to me and
just please do something about it because I couldn't even tell
you the people I know that have been through this. It is a
horrible thing to go through. Thank you all so much.
[The prepared statement of Ms. Beaton follows:]
[GRAPHIC] [TIFF OMITTED] T3743A.008
[GRAPHIC] [TIFF OMITTED] T3743A.009
Mr. Stupak. Thanks, Ms. Beaton.
Now we will turn for questions and I will begin. We will go
for 5 minutes on questions. We will probably go a round or two
per panel.
For our three panelists here, I would like to get your
thoughts on some information the committee gathered about the
economics of rescissions for insurance companies. The three
CEOs who will testify after you have all made the case that
their companies use rescission as a tool to rule out fraud by
those who apply for coverage. But at the same time, we find
these companies have also reported savings of an estimated $300
million as a result of the rescissions from 2003 to 2007. That
doesn't include all their subsidiaries and doesn't include all
their files. But that is what we have come up with. And like I
said, this figure doesn't include the savings gained by
avoiding future medical costs of rescinded policyholders. So
let me ask each of you, do you believe that the insurance
companies use rescissions primarily as a fraud prevention tool
or as a cost-savings instrument that will help them boost their
corporate profits? Ms. Horton.
Ms. Horton. I think it is all about the money.
Mr. Stupak. Ms. Raddatz.
Ms. Raddatz. It is absolutely about the money.
Mr. Stupak. Ms. Beaton.
Ms. Beaton. Absolutely indeed. Try to use it, they will
just keep on taking your money.
Mr. Stupak. Well, each of you, as I have listened to your
testimony, Ms. Beaton, you were an R.N., Ms. Raddatz, you are
an attorney, and Ms. Horton, you had family members who were in
the medical field, radiologists. You seem like a little bit
more--you had access to people who could help you on this. What
happens in your groups and people you have talked with, what
happens to people who don't have that kind of support
mechanisms within their family? What happens to them? Ms.
Horton?
Ms. Horton. They fall through the cracks. You know, there
is nothing--even having radiologists in my family, you know, I
had the opportunity to consult them before filling out the
application. They live cross country. They have children. They
work all the time, you know, and I don't know what those people
would do.
Mr. Stupak. Ms. Raddatz.
Ms. Raddatz. As I stated in my testimony, my brother was
very fortunate because of the fact that I have education and I
know lots of people, and even all the attorneys that I know and
judges who I went to to ask for help did not know what to do in
this situation other than go through the court system.
Unfortunately, when you have cancer or you are in a position
where your life is shortened to a matter of months, you can't
go through the court system because you don't have the time to
do that. And what do people do? They do--many, many people
throughout the United States do nothing because they don't have
the ways or the means or the knowledge to take the steps
necessary. They don't know all the--I know hundreds of
attorneys. I have been practicing a lengthy period of time.
They don't know all those people I know. So what do they do?
They get the letter and they don't get the treatment that they
need and many of these people die, and they think that is the
way it is supposed to be because they just don't know what to
do. And I believe honestly that the insurance companies depend
upon that lack of knowledge and lack of laws, federal laws in
place, and that is one of the ways that they encourage their
profits.
Mr. Stupak. Ms. Beaton, do you want to add anything on
that?
Ms. Beaton. I was going to say that a lot of people in my
cancer group, they get letters like this. They just give up.
They fade away and they die.
Mr. Stupak. Well, you were fortunate, Ms. Beaton. You had
our ranking member, Mr. Congressman Barton, who intervened or
else you might not be with us here today. Was it clear to you
in dealing with the insurance company that if you didn't have a
U.S. Congressman working on your behalf that your insurance
wouldn't have been reinstated?
Ms. Beaton. There is not doubt in the world that they would
have even given me the blink of an eye if it hadn't been for
him, and I just could never tell you how he worked. If you only
knew how many hours he worked. They called me every day just
working hours and hours and hours. This took a long time. This
was like a many, many months' process. This didn't just happen
overnight. So for his office to take that kind of a dedication
to me, you know, I will be forever grateful. If I live and
don't die of cancer, you know, it will be because of them. So
only because of my Congressman, only because of him did I get
help for my cancer. If it wasn't for that, it never would have
happened.
Mr. Stupak. Ms. Raddatz, sort of parallel to Ms. Beaton
there, in your brother's case, the Illinois Attorney General's
Office and Dr. Babs Waldman intervened and actually had to
write two letters to the insurance company. In fact, one of
them is at tab number 4 in the document binder there if you
care to look at it. But the Attorney General's Office wrote,
and I quote, ``I find the behavior on the part of Fortis Health
to be extremely troubling, if not unethical. Clearly there is
no justification for rescinding this gentleman's insurance
beyond avoiding the cost of his future treatment. To rescind,
terminate his policy at this point is not only devastating but
probably fatal to Mr. Raddatz.'' And then in the second letter,
the company finally reversed its decision. So how did your
brother know to enlist the assistance of the attorney general?
Was that through you?
Ms. Raddatz. Yes, it was absolutely through myself, and
like I said, even I had difficulty in finding that outlet. It
took me a while to get to the Attorney General's Office but we
are fortunate in the State of Illinois to have a Health Bureau
in Lisa Madigan, Attorney General's Office. We are very, very
lucky to have an aggressive unit and they are available for the
citizens of the State of Illinois who go through the same
situation that my brother did. But again, most people, you
know, do not have the knowledge that I have, and by the way, it
took two appeals to them. The first time she wrote the letter,
they said no. So it took a further letter to them before they
did, you know, reverse their decision.
Mr. Stupak. Thank you.
Mr. Barton for questions.
Mr. Burgess. Mr. Chairman, may I ask a question?
Mr. Stupak. No, it is Mr. Barton's turn unless he wants to
yield you time.
Mr. Barton. I will be happy to----
Mr. Burgess. It is just purely a technical question. As a
doctor, I get nervous with so many lawyers around me. There is
an active----
Mr. Stupak. You should feel secure.
Mr. Burgess. It is less than secure. It is the opposite of
secure.
As I understand it, there is an active class-action suit of
one of the witnesses before us this morning?
Mr. Stupak. In California, I believe, it has been going on
for some time. I think Ms. Horton is maybe a plaintiff in that
action.
Mr. Burgess. Well, the speech and debate clause
notwithstanding, are we subjecting ourselves to possible
subpoena to testify in that court by our questions here today
or our opening statements here today?
Mr. Stupak. No, but if you wish to, we could arrange it.
Mr. Burgess. No, I don't want a trip to California. That is
the last thing I want. Again----
Mr. Stupak. No, I think we are OK. We are not asking
anything about the nitty-gritty of the lawsuit or anything like
that. This is a committee investigation, and we would be
exempt.
Mr. Burgess. Can counsel answer that question for us?
Mr. Stupak. Do either one of you care to comment on it? We
are in an official setting. This is an official hearing of the
U.S. Congress. Speech and debate protection certainly helps us
but I don't think any of us are going to ask about the class-
action suit. Yes, the speech and debate clause certainly
applies.
Mr. Burgess. I thank the chairman.
Mr. Stupak. Mr. Barton, questions, please.
Mr. Barton. Thank you, Mr. Chairman.
I want to again thank each of the three witnesses. I want
to make a comment on what Ms. Beaton said about myself. There
are 435 Congressmen and every one of us, our job is to help
constituents. I have four full-time caseworkers. Mr. Wright, to
my left here, was my district director at the time. I had
Kristi and Debra and Jody and Ron, Linda Gillespie, all of them
intervened for you. I came in at the very end and talked to the
president but, you know, not just myself but every Member of
Congress, we help hundreds and sometimes thousands of people
every year. Your case just happened to be life and death and we
put a lot of extra effort into it because we knew how important
it was to get you health care as quickly as possible. But it is
not just me, it is every Member of Congress that tries to serve
our constituents.
My first question will be to the gentlelady down to the far
right. You said that your application, they asked several
questions several different ways and they were very tricky. Is
it your understanding that that is a standard practice in the
individual insurance market? Do they start out with the
intention of setting you up so that later on they may
disqualify you? Is that your opinion?
Ms. Horton. Yes, that is my opinion. You know, I believe
that they ask you the same question several times so that if
you disclose it in one area and then don't realize that you
need to disclose it again, that they can somehow say then that
you have, you know, committed fraud.
Mr. Barton. Are you aware since your lawsuit if they have
made some changes to that questionnaire?
Ms. Horton. I believe that was one of the things they were
trying to negotiate with Blue Cross, was changing the
application, but I don't know what the status of it is.
Mr. Barton. My next question is to the gentlelady there in
the middle. Your brother, has he had his stem cell transplant?
Ms. Raddatz. He did indeed receive the stem cell
transplant. It was extremely successful. It extended his life
approximately 3\1/2\ years. He did pass away January 6, 2009,
and he was about to have a second stem cell transplant.
Unfortunately, due to certain situations, his donor became ill
at the last minute and so he did pass away on January 6. But
again, it extended his life nearly 3\1/2\ years and at his age,
each day meant everything to him and each day that we had him
was wonderful, and my daughter, who is behind me, and I and his
wife and his other brother, Richard, we spent the last 30 days,
every single day with him at his side, and like I say, there
couldn't be any better memorial to my brother than what this
committee is doing because life is so precious and in spending
those last moments of his life with him for 30 days, at the end
we realized how important this work you are doing is and we
just want to say again from our family, thank you all so much.
We know with Mr. Gordon here that you have been working round
the clock 7 days a week and very, very hard, and Mr. Gordon,
thank you and your staff for all your hard work. Thank you.
Mr. Barton. Ms. Beaton, what have your doctors told you
your condition would have been had you had the mastectomy
immediately as originally scheduled? Would you have had to
undergo the chemotherapy and is it probable that the cancer
would have spread to the lymph nodes as it apparently has?
Ms. Beaton. They said that every day that I put off the
surgery was a really, you know, day that the cells just
multiplied and grew, and I think there is a strong chance that
in the beginning that maybe I didn't have to have--I could have
had a lesser surgery and not have had my lymph nodes taken out.
I would have had to have chemo but maybe not for quite as long
a period of time.
Mr. Barton. If it is personal--it is personal--you don't
have to tell us, but would you tell us as much as you can about
your prognosis right now? Is the expectation positive for your
chemotherapy and cancer remission or is it still up in the air?
Ms. Beaton. It is still up in the air.
Mr. Barton. Mr. Chairman, my time is about expired. I am
going to yield back. I think I speak for every member of the
committee on both sides of the aisle, we want to hear from the
insurance companies in the next panel, but it is clear that if
in fact there is a practice of going in after the fact and
canceling policies on technicalities, we have got to do
whatever is possible to prevent that. I think a company does
have a right to make sure that there is no fraudulent
information but it is obvious to me that--I will guarantee you
in Ms. Beaton's case there was no fraud intended, and I am
convinced with the other two witnesses that they were being
truthful and honest also, and if a citizen acts in good faith,
we should expect the insurance companies who take their money
to act in good faith also. And I will tell you, Ms. Beaton, we
will monitor your case and we will stay in touch with Blue
Cross/Blue Shield of Texas and so long as you do what you are
supposed to do, I will guaran-damn-tee you they will do what
they are supposed to do.
With that, Mr. Chairman, I will yield back.
Mr. Stupak. Thank you, Mr. Barton.
Ms. Schakowsky for questions, please.
Ms. Schakowsky. Thank you, Mr. Chairman, and after hearing
the testimony, I want to thank the witnesses even more for
sharing this.
I wanted to talk about rescissions for unrelated medical
conditions. I understand that they scour the records to find
anything but, Ms. Beaton, let me understand what happened to
you. After your insurance policy began, you developed breast
cancer and the insurance company decided to investigate your
application but it didn't find any evidence that you had breast
anything before you got your policy, did it?
Ms. Beaton. No.
Ms. Schakowsky. So it was rescinded because essentially of
pimples, right? Is that what you're saying?
Ms. Beaton. They rescinded because of--what it all started
with was the red flag. What that means is something suspicious,
so they red flag you. Then they go back and they just cut your
chart apart, and what they found was on my weight, I think I
put down--I said what woman is going to tell you what she
really weighs, you know. I weighed more than what I put down,
and they said that they might not have given me a policy
because I was overweight. And the second thing was, I had--in
my early years I had a previous fast beating of my heart and I
didn't have a problem with that anymore, but anyway, that was
brought up. Everything they could possibly dig up in my whole
life history got brought up, unrelated to the cancer, nothing
related to the cancer.
Ms. Schakowsky. So if we lie about our weight at all, we
better look out, huh?
Ms. Beaton. They will get you.
Ms. Schakowsky. I better change my driver's license.
Ms. Raddatz, it sounds like your brother had a similar
experience. He signed up for an insurance policy, then was
stricken with an aggressive form of lymphoma, and the insurance
company, which is now part of Assurant, investigated his
application but it didn't find any evidence that your brother
had cancer before his insurance policy, right?
Ms. Raddatz. That is correct.
Ms. Schakowsky. So----
Ms. Raddatz. He did not have cancer prior to--at the time
he signed up, he did not have cancer.
Ms. Schakowsky. So it rescinded his policy based on alleged
misstatement about gallstones and you said aneurysm, which is
what? A weak blood vessel, right? Does that have anything to do
with anything?
Ms. Raddatz. Nothing whatsoever.
Ms. Schakowsky. And he didn't----
Ms. Raddatz. The gallstones actually, like I said, he never
even knew he had gallstones. He actually wrote down he had
kidney stones and was treated for kidney stones. So when he got
that letter, he thought that was an error, oh, they must have
meant the kidney stones, but he disclosed that he did have
kidney stones and they knew that when they gave him the
insurance. He never knew he had minor gallstones, never to his
death was ever treated for any gallstones, and was never
treated for any aneurysm.
Ms. Schakowsky. So in addition then to having an unrelated
medical condition, it was something he didn't know about at
all. So when we hear, as perhaps we will, about fraud from the
insurance companies, he even mentioned kidney stones that he
didn't have, are you saying?
Ms. Raddatz. He did have kidney stones and he did disclose
those and was treated for those, and he was given insurance
despite the fact that he had kidney stones. But had they not
been able to find his doctor, who was retired and on a fishing
trip in another State, they still might not have believed him
because he had no knowledge of it. Luckily, they were able to
find the doctor, who was able to say oh, yes, I never discussed
those issues with him, I never treated him for those, they were
very minor and they appeared on a CT scan but we never engaged
in any treatment for those whatsoever and I never disclosed
them to him.
Ms. Schakowsky. But ultimately even that, didn't it take
the attorney general to get it changed?
Ms. Raddatz. Oh, yes, it did, it absolutely did. Like I
said, Lisa Madigan, the Attorney General's Office, and Dr. Babs
Waldman were wonderful and their staff were just incredible.
They were working daily on this file because they knew that the
clock was ticking every day and their investigations were----
Ms. Schakowsky. But what I am asking is, even if they found
the doctor on the fishing trip and the doctor had said what he
thought, that wasn't enough apparently?
Ms. Raddatz. It wasn't. At that point they still wrote a
letter saying no, too bad, it was a material lack of
disclosure, and Dr. Waldman had to contact them again and
discuss it further.
Ms. Schakowsky. And Ms. Horton, your situation is that your
policy was rescinded because you were seeking some insurance
coverage, or how did that work for you?
Ms. Horton. I was seeking the policy when I was going over
from a group health insurance plan.
Ms. Schakowsky. So this is just a denial from the beginning
because of----
Ms. Horton. I was accepted and then the first time I went
to see a doctor I received a letter from Blue Cross stating
that they wanted all of my medical records, and it was a bill
for just routine blood work. It was to test my T4 level, which
is your thyroid hormone, and so it was routine blood work that
anyone who has an underactive thyroid, which I disclosed, would
get and I had paid almost three times more in premiums than
they needed to pay out and they still sent me to this, you
know, post-claims underwriting department where they went
through my medical records, they found, you know, a mention of
something in her notes that she never disclosed to me, and both
of my doctors wrote letters in support of the fact that they
had not discussed the condition with me that they suspected I
had but could prove.
Ms. Schakowsky. So we know that--it seems obvious that
anything that might relate to cancer treatment they are going
to scour the records. In your case, it might have been
something about the blood work that you were having?
Ms. Horton. In my case, it just proves that there is no
condition too small that they are willing to send you to this
department for. You know, I did not have anything even close to
life-threatening nor as expensive as some of the people on the
panel, and it just shows you that you can't be too young or you
can't be too healthy for them to send you to this department.
Ms. Schakowsky. Thank you, Mr. Chairman.
Mr. Stupak. Mr. Burgess for questions, please.
Mr. Burgess. Thank you, Mr. Chairman.
Ms. Beaton, let me ask you, Blue Cross and Blue Shield came
back to you after finding out you needed the surgery and said
that they were taking your insurance and the date of rescission
was dated back to the date of enactment of the insurance. Is
that correct?
Ms. Beaton. I am kind of hard of hearing.
Mr. Burgess. Your rescission was effective on 12/07, which
was the date that the insurance was initiated. Is that correct?
Ms. Beaton. Right. They gave me back all my premiums.
Mr. Burgess. OK. That was going to be my question. They
refunded the----
Ms. Beaton. I never cashed the check because Mr. Barton
told me never to cash it and I never did. They rescinded all my
money back to the day that they said--in simple language, they
wanted nothing to do with me. They gave me back every penny
that I had ever given them and they considered never being
insured by them.
Mr. Burgess. And Ms. Raddatz, what about in your brother's
situation? Was there a refund of premium back to the date of
the rescission?
Ms. Raddatz. Yes, they didn't actually get to that point
because it got resolved before they refunded the money but they
sent a letter stating yes, you are rescinded to the date of the
original contract, which was before my brother had any cancer
treatments at all, and $200,000 back, so my brother would have
to pay out of pocket over $200,000 in medical expenses.
Mr. Burgess. But they never got to the point where they
sought that refund from your brother?
Ms. Raddatz. Well, again, the $200,000 was the amount that
his medical bills----
Mr. Burgess. So those were subsequent bills?
Ms. Raddatz. Right. That would have been what he would have
had to pay out because they were rescinding their contract and
so they were then stating we are rescinding all the way back to
the original date of the contract so you have never had any
insurance at all for the entire time you have had cancer. You
now have no insurance.
Mr. Burgess. So that was actually--that retroactive
pronouncement also dealt with the money that they had used to
pay for his cancer treatment to date. Is that correct?
Ms. Raddatz. That is correct.
Mr. Burgess. Now, in your brother's situation also, I think
you said that he was told he would have to have a certain sum
of money or he couldn't get the bone marrow transplant. Is that
correct?
Ms. Raddatz. That is correct.
Mr. Burgess. But that wasn't the insurance company that
told him that, that was the medical facility?
Ms. Raddatz. That was the hospital coordinator. When I
called to literally beg her to schedule the stem cell
transplant because my brother was on pins and needles being
ill, going through aggressive chemotherapy and readying himself
for this transplant, which is a long step-by-step procedure
medically, then they wouldn't schedule him because the
insurance company said he is no longer insured so we will not
schedule you for your stem cell transplant that you were
supposed to have within the next 3 weeks, we will not schedule
you. So I got on the phone and literally begged her, and no.
Mr. Burgess. Let me ask you a question. It doesn't really
have to do with the subject of the hearing today but it figures
into the larger discussion that we are having. Was any other
plan delineated for you then, another option you might have
would be medical school at Northwestern or Cook County or were
there any other options discussed?
Ms. Raddatz. No, there really weren't because my brother's
doctor was one of the most renowned doctors in the whole world
on the specific routine of treatment and he had a very specific
type of cancer that really had to be treated by that doctor in
that hospital at that time, and you can't just say well, OK,
you can have it a couple months down the road or you can wait.
I mean, again, the Attorney General's Office realized
thankfully because it is headed by a doctor, medical doctor,
that time was of the essence.
Mr. Burgess. It is just that I can recall multiple times
when I was in practice you come up on these situations and you
find a way to make it work for the patient. I guess I am a
little frustrated in your situation in that you were
essentially allowed or offered no other option. I appreciate
the fact that particularly for that type of non-Hodgkin's
lymphoma that it may require very, very specialized type of
care. My frustration is as a physician, I just cannot tell you
the times that I found another hospital or another way to make
it happen and not wait the lengths of time that you all are
discussing.
Ms. Beaton, in Tarron County, I mean, there is a county
hospital. Was that ever--did anyone ever try to help you
through that tangle to try to get any care through John Peter
Smith?
Ms. Beaton. I couldn't qualify for that, but what I did do
is, I moved in with my sister in Cedar Hill for a while so I
could declare residency and went to Parkland Hospital, the
Dallas county hospital, tried to get help there. You get on a
waiting list for a mastectomy. And three or four times I went
there and they lost my medical records. They said why are you
here. I said I am here, I have cancer, I need to get a
mastectomy. They said we will put you on the waiting list.
Well, I do believe with all my heart that today my name still
wouldn't be up on the waiting list because they never even
contacted me back, but I am thankful to say that in trying to
get help, like you said, going to all the county hospitals,
applying for the State programs, doing all that kind of stuff,
Mr. Barton got my insurance reinstated and I was able to have
insurance with the original doctor who I wanted to have
insurance with.
Mr. Burgess. Sure, and I appreciate that and I think that
is--I believe in continuity of care and I believe that is
important, and again, the other aspect is not really a part of
our discussion today but it is part of our broader discussion
as we talk about strategies for the future. I want to thank
every one of our panelists for being here today. Ms. Horton, I
didn't get to you. It is not because I was afraid to get to
you, I just didn't have an opportunity, but thank you too for
your testimony as well. It was all very important today.
Thank you, Mr. Chairman. I will yield back.
Mr. Stupak. Mr. Gingrey for questions, please.
Mr. Gingrey. Mr. Chairman, thank you, and I am going to
direct my question to Ms. Beaton.
Am I pronouncing that right?
Ms. Beaton. It doesn't matter, Beaton, Beaton.
Mr. Gingrey. Ms. Beaton, we of course heard and listened
very intensely to your testimony and quite compelling, and I
wanted to take one quote from your written testimony and I
think you said when you get on a waiting list, cancer grows,
and I think that was in reference to the fact as you just
testified to Dr. Burgess that you were on that waiting list at
the county hospital. There was an alternative but thank God
that your Congressman and my colleague, Joe Barton, was able to
intervene and you were able to get the care at the private
hospital and by your physician that you trusted and that you
wanted to do the surgery. This statement that you made is
absolutely right. I don't know if you know it, but I am a
physician too, an OB/GYN doctor before being elected to
Congress, and your statement is a profound one indeed: when you
get on a waiting list, cancer grows. And when we look at
statistics of countries where you routinely get put on a
waiting list like the U.K. and others, in particular in the
treatment of breast cancer, in our country where hopefully you
don't get put on a waiting list when you have breast cancer,
you get operated on quickly, the 5-year overall survival rate
for breast cancer is 98 percent. But in the U.K. system where
you frequently get put on a waiting list, the 5-year survival
rate for breast cancer is 78 percent. That is a significant
change, and as you described to us, that 2-centimeter mass grew
to 7 centimeters and lo and behold you have to have your lymph
nodes removed and I guess some of those were positive by the
time you finally got operated on. Is that the case?
Ms. Beaton. Yes.
Mr. Gingrey. Well, with that information, let me just ask
you this question, and it relates to you in particular but it
relates to everybody in general, and I would appreciate your
thoughts on ways that you think that we can strengthen the
private market so that other people, anyone with chronic
illness can find affordable health insurance or do you think we
should turn over our health care system lock, stock and barrel
to the compassion and efficiency of our federal bureaucracy?
Ms. Beaton. All I can say is that I did go many, many
different places trying to get help and I spent hours and quit
working and did all my focusing, instead of focusing on getting
well and focusing on my cancer, I focused on trying to get
treatment, and I went to every hospital in Dallas. I went to
county hospital, I went to Fort Worth, I went everywhere, and I
don't know how to fix it but all I know is there something
terribly wrong with the health care system because when you go
to big hospitals and there is so many people there waiting for
help, I went to all the clinics. I sat with all the people that
I just--you can't even imagine how many people are there
waiting for help. You spend hours and hours. You probably spend
the whole day trying to see a doctor. I did that. I did that
for weeks and never got help. So and the bad thing about that
is, when you go to different hospitals they give you different
opinions. Every time I went to a different hospital, my tumor
was a different size. Every time I went to another hospital,
one person wanted to do one thing, one person wanted to do
another. You get a difference in diagnosis, a difference in
treatment plans. So who do you listen to, who do you know to
listen to? And I don't know how to fix it but all I know is,
when you have to go through this like every one of us has been
through what we have been through, you just realize that it is
something that is broken.
Mr. Gingrey. Ms. Beaton, I am going to reclaim my time
because I just have a few seconds left, but I really thank you
for that testimony, and I think you are absolutely right. There
is something that needs to be fixed, something is broken, and
when we hear from the second panel from the insurance
companies, I am going to make some suggestions to them how we
can fix this system, but it is my firm belief, Ms. Beaton, the
other two, Ms. Horton, Ms. Raddatz, that we can fix this system
without, as I say, turning it over lock, stock and barrel to a
federal bureaucracy that routinely is going to ration and put
people on the waiting list. But we will get into that later and
I want to thank all three of you for being here today and
giving us such compelling testimony.
Mr. Stupak. We will go to Mr. Walden, but please don't
accept Mr. Gingrey's description of a possible health care plan
for the Nation based upon those comments. Some of us on the
other side see it a little differently. But Mr. Walden for
questions, please.
Mr. Walden. Thank you, Mr. Chairman. I appreciate the
opportunity. I had to step out to another hearing I am involved
in upstairs but I read your testimony this morning and so I
appreciate what you have been through, although none of us can
really understand what it is like to be in your shoes or that
of your loved ones. It is not a good thing.
We have two physicians here, both Dr. Gingrey and my
colleague from Texas, Dr. Burgess, and I think that is good to
have. I hope at some point, given some CMS's role in overseeing
HIPAA that perhaps we could have the federal agency that also
has a role in this to come before our subcommittee as well to
find out their take on what is happening.
Ms. Horton, you stated that you think the applications are
deliberately confusing. I have looked through some of those,
and I understand what you mean. Could you be a little more
specific the kinds of questions that you found difficult and
confusing?
Ms. Horton. I haven't looked at the application in 4 years
since I first filled it out so I can't be super specific but I
do remember them, you know, after looking at it again with my
sister and brother-in-law, they both said you would have to be
a doctor or a lawyer in order to figure out the application and
fill it out to 100 percent accuracy.
Mr. Walden. How would each of you improve that application
process? Because it seems to me that that is kind of the crux
of the argument here is, there are things that you didn't know
that were on your medical records or your loved one's medical
records that they didn't know. I don't know you ever disclaim
knowledge of something you have no knowledge of. That to me is
one point here. And then the second is to know as a layperson
if you are on some medication years ago and you haven't been
taking it, it would be easy to forget that, I would think, or
perceive that you no longer have whatever that was that you
took the medication for so you don't note it or you forgot it,
and yet, you know, we also know there are cases of fraud and
those people that were like you with individual policies paying
more because people were deliberately trying to get on the
rolls, and our files that we got from the companies indicate
that too. So I am trying to figure out, how do we get a balance
here where people like you and your loved ones aren't rescinded
from coverage and yet find this balance and it seems to get
back to the initial application process, the review of those
applications and then better understanding for those of us who
may be signing up for that type of health insurance, so I am
curious, how would you fix at least that part of the process?
Anyone want to tackle that?
Ms. Raddatz. I would just state that the insurance company
at the time you apply for insurance and you disclose your
doctors, they should be the ones that have to do the
investigations. If they don't do the proper investigation at
the time you apply, they shouldn't have the right to go back
years later. You know, there is a 2-year window for the
insurance companies by which they can do their investigations.
No, that is wrong. They should have to investigate before they
give you your insurance. They have all the opportunity to
investigate then. You disclose your doctors, let them get the
records, let them look at and comb the records at that time.
Why are they doing that later on when people----
Mr. Walden. When you have a big claim.
Ms. Raddatz. Pardon me? Absolutely. I mean, if that isn't
intentional, what is? They want to save money and wait until
you have claims before they spend the investigative money to do
what they should do at the beginning. So all this time they
haven't done their job. They are taking the consumer's money
and the consumer thinks I am insured, but I am not insured and
that is not right. That law needs to be changed.
Mr. Walden. Ms. Beaton, do you want to comment on that?
Ms. Beaton. Yes. Just like myself, I asked could I have a
physical. I wanted to have a physical for insurance and they
said no, we don't do that. So I even offered to let them have a
physical on me, which to me that would be a good thing. You
know, that way if there is anything they don't want, they don't
have to take you.
Mr. Walden. We have that in Medicare, I think.
Ms. Beaton. They don't do that at all, so they don't want
to spend the money for a physical to give it to you to rule you
out then so you don't get your hopes up and think you have
insurance.
Mr. Walden. OK.
Ms. Horton. I completely agree with what Ms. Raddatz said,
and I just wanted to add, you know, after this practice
happens, which hopefully we are going to stop it from happening
in the first place, but then when your physicians write letters
on your behalf and aid you in appealing to these insurance
companies, the fact that they give no weight whatsoever to what
these physicians who have been treating you for years say, it
is totally unconscionable.
Mr. Walden. I was reading through some of those examples of
people who, you know, were rescinded and their physician says
the patient would have no idea of this, it is a note I put in
the file I never shared with them, and that doesn't seem right.
Would it be helpful--and I realize I have run over my time
here, but would it be helpful if there were also--it seems like
there is yes and no columns on these forms. Given that I don't
think any of you are physicians, would it be helpful if there
maybe was an unsure, don't know column as well that you could
check which then I would think if I am the insurer would cause
me to go ah, there may be something here I should look at
further. Because, I mean, the insurers, if you read through
their testimony, they make the case that look, it is a very
small percentage, although it is a very painful percentage--I
am just telling you what they are telling us--small percentage.
If we did everyone, it would slow down people getting access to
insurance, blah, blah, blah. And so they are saying, you know,
we go investigate those where we have cause or an issue. That
is something we will get into on the next panel. But, you know,
there is this notion that is a very small segment of the
population and so, you know, to get people covered they go this
direction.
Ms. Horton. I don't believe that it is a very small segment
of the population. I believe that they send anyone who sends in
a claim to this post-claims underwriting department, and I have
heard many people who formerly worked, you know, at insurance
companies talk about these secret, you know, specific units
that are designed to find errors or omissions or whatever you
want to call them in people's records so that they can go back
and save money.
Mr. Walden. And I think we actually get some of that
testimony from our final witness from Georgetown that says it
may be a small percentage but it is perhaps a big percentage of
the claim costs.
Ms. Raddatz. And I would just like to say, those are the
people you know of. There are many people out there who lose
their insurance and then go on Medicaid, go on welfare, go
without insurance. You are not aware of who those are. Those
are their numbers. Those aren't the consumer's numbers. We
don't really know how many people are out there, and you know
what? I don't care if there is just the three of us. That is
too many. One too many who dies because an insurance company
cancelled their insurance is one too many.
Mr. Walden. Ms. Beaton, any final comment? I just wondered
if you had any final comment on that point. It is OK if you
don't.
Ms. Beaton. I am real hard of hearing. What did you say?
Mr. Walden. I just wondered if you had any final comment.
Ms. Beaton. Oh, I just agree with both of what they said
and I know so many people in my cancer group that I wish could
be here to talk to you, that you wouldn't believe their
stories. So it is common practice and you will never know how
common it is, and when they hire nurses to investigate who sit
there their whole shift doing nothing but review medical
records looking for things to get rid of people, and that just
shows you right there.
Mr. Walden. Indeed. Thank you very much.
Thank you, Mr. Chairman, for your indulgence.
Mr. Stupak. Thank you. I ask unanimous consent that a
statement from Rosa DeLauro, Member, be placed in the record.
[The information was unavailable at the time of printing.]
Mr. Stupak. Let me just ask a question. You know, we have
focused sort of on what happened to you three as we should and
rightfully so but, you know, we found close to 20,000 cases in
looking where there were rescissions over the last few years
from three insurance companies here who will be testifying on
the next panel, like a spouse gets in a bicycle accident and
had some fractured bones and they denied it because her husband
had back surgery. What bearing that had on the lady's fractures
is beyond me. But that is what we are seeing. But Ms. Beaton,
one thing I want to ask you, in your testimony you stated, and
I am going to quote now, that you ``live with fear every day of
my insurance company.'' What are you afraid your insurance
company might do?
Ms. Beaton. Without a doubt, some day they will cancel me.
Some day Mr. Barton won't be there to protect me, and you know,
I am young and they will find something to get rid of me.
Somehow I won't have insurance. Some day I will be--out of Blue
Cross and Blue Shield's record they will find a way to get rid
of me, and coming here today I think will just about maybe do
it.
Mr. Stupak. So if your lost your insurance, you are afraid
you would never get insurance from another company since you
have been rejected once?
Ms. Beaton. If I lost my insurance what?
Mr. Stupak. Are you afraid you would not be able to pick up
another individual health insurance policy?
Ms. Beaton. I am uninsurable. The only way I could ever get
insurance, through being a registered nurse I could go back to
work in a hospital and be covered under a group. They could not
deny you that way. I have done a lot of research about that.
But as far as the individual policy, for the rest of my life I
am uninsurable.
Mr. Stupak. Because of your preexisting condition?
Ms. Beaton. Because of my cancer. Once you have cancer, you
are uninsurable forever.
Mr. Stupak. Thank you.
I apologize, Mr. Deal, I didn't see you there, but 5
minutes for questions.
Mr. Deal. That will teach me to wear a light-colored suit.
Thank you, Mr. Chairman, and I just simply wanted to express my
appreciation to the witnesses for coming today. Certainly none
of us condone abuses within the system, and you have pointed
out some of those that appear to be in that category, and I
know that it took a great deal of effort on your part to come
and we appreciate your courage and we appreciate your time that
you have devoted to it. I do not have any questions of you. I
think your testimony speaks for itself.
Thank you, Mr. Chairman. I yield back.
Mr. Stupak. Well, that was pretty quick. Well, let me thank
this panel for their testimony, their heartfelt testimony, and
thank you for shedding some light on this and bringing a human
face to a very serious problem. Thank you all for coming and
thank you for your testimony.
I would now like to call up our second panel of witnesses.
On our second panel, we have Don Hamm, who is the chief
executive officer of Assurant Health; Mr. Richard Collins, who
is the chief executive officer at Golden Rule Insurance
Company, which is owned by United Health Group; Mr. Brian
Sassi--am I saying that right?
Mr. Sassi. Sassi.
Mr. Stupak. Sassi, who is president and chief executive
officer at WellPoint Incorporated, and Ms. Karen Pollitz, who
is the research professor at Georgetown University Health
Policy Institute. Welcome, all our witnesses. It is the policy
of this subcommittee to take all testimony under oath. Please
be advised that you have the right under the rules of the House
to be advised by counsel during your testimony. Do you wish to
be represented by counsel during your testimony?
Mr. Hamm. Yes, if necessary.
Mr. Stupak. Mr. Hamm, you would?
Mr. Hamm. Yes, if necessary.
Mr. Stupak. OK. So if any time during the questions if you
want to get advice from counsel, just let us know and we will
allow you. Counsel can't testify but they can advise you. Mr.
Collins?
Mr. Collins. No, sir.
Mr. Stupak. Mr. Sassi.
Mr. Sassi. No, sir.
Mr. Stupak. Ms. Pollitz.
Ms. Pollitz. No.
Mr. Stupak. So you are already standing. Let us raise your
right hand and we will take the oath.
[Witnesses sworn.]
Mr. Stupak. Let the record reflect that the witnesses
replied in the affirmative. They are now under oath beginning
with your opening statement. You have 5 minutes for an opening
statement. You may submit a longer statement for inclusion in
the record. Mr. Hamm, if you don't mind, I will start with you,
start from my left and go to our right.
TESTIMONY OF DON HAMM, CHIEF EXECUTIVE OFFICER, ASSURANT
HEALTH, ASSURANT; RICHARD COLLINS, CHIEF EXECUTIVE OFFICER,
GOLDEN RULE INSURANCE COMPANY, UNITEDHEALTH GROUP; BRIAN A.
SASSI, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CONSUMER
BUSINESS, WELLPOINT, INC.; AND KAREN POLLITZ, RESEARCH
PROFESSOR, GEORGETOWN UNIVERSITY HEALTH POLICY INSTITUTE
TESTIMONY OF DON HAMM
Mr. Hamm. Chairman Stupak, Congressman Walden, members of
the subcommittee, I am Don Hamm, president and CEO of Assurant
Health. I welcome this opportunity to participate in the
hearing today. It is through dialog like this that we can
continue to address one of the most challenging issues of our
time, providing health insurance coverage for all Americans.
We appreciate that this subcommittee and Congress are
committed to finding the right ways to address health care
reform. If a system can be created where coverage is available
to everyone and all Americans are required to participate, the
process we are addressing today, rescission, becomes
unnecessary because risk is shared among all. I passionately
believe that all Americans must have access to high-quality,
affordable health care regardless of their income or their
health status, and I am proud to lead a great company that
provides health coverage to individuals and families in 45
States. People need our products and we are proud to provide
them to thousands of Americans.
Individual medical insurance is portable and belongs to
each consumer. In these uncertain economic times, individual
medical provides benefits to a growing population who do not
receive employee-sponsored health coverage. That is why
individual medical is so important. We work hard to ensure our
health questions include simple, easy and straightforward
language. A correct medical history is necessary so we can
fairly assess the health risk of each applicant. The vast
majority of people complete the enrollment form accurately. The
underwriting process depends on this information and we rely
upon consumers' disclosures. People applying for individual
insurance are given multiple opportunities to verify, correct
and complete the information they provide. They are given 10
days to notify us of any inaccurate information or to reject
the coverage.
As Assurant Health, we are acutely aware of how our
coverage affects people's lives. It is a responsibility we take
very seriously. Unfortunately, there are times when we discover
information that was not disclosed during the enrollment
process, and when this information is brought to our attention,
we ask additional questions to determine if the information
would have been material to the underwriting risk we assumed.
Accurate risk assessment keeps rates lower for all.
Assurant Health does not want to rescind coverage. We are
in fact in the business of providing health care coverage. We
regret the necessity of even a single rescission. The decision
is never easy, and that is why we follow a fair and thorough
process that includes a number of careful reviews. Here is how
our system works. When we become aware of a condition that
existed prior to the application date and that information was
not disclosed, a senior underwriter reviews the omitted
information to determine if it was material to the underwriting
decision. Then the underwriting manager verifies the analysis.
If the omission was not material, the review is complete. If
the omission was material, the underwriter makes a
recommendation to a review panel, which includes at least one
physician. This review panel evaluates the information and
makes a decision. The amount of the potential claim is never
disclosed to the underwriters or to the review panel. The
decision to rescind is only made when the undisclosed
information would have made a material difference to the
underwriting decision based on our guidelines. The consumer is
given the opportunity to provide additional information before
coverage is rescinded. This information is evaluated and a
decision is made. If the consumer is dissatisfied with the
decision, we provide multiple opportunities to appeal, which
now includes an option to request a medical review by an
independent third-party company.
Rescission affects less than one-half of 1 percent of the
people we cover. Yet it is one of many necessary protections
for affordability and viability of the individual health
insurance in the United States. Assurant Health supports the
principle that everyone in the United States deserves
affordable health care and we see reform of our Nation's health
care system as a shared responsibility between doctors,
consumers, health insurers and policymakers who collectively
can deliver effective solutions to provide coverage for all
Americans, and that is why at Assurant Health we will continue
to participate in efforts to reform and improve health care in
America. Thank you.
[The prepared statement of Mr. Hamm follows:]
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Mr. Stupak. Thank you, Mr. Hamm.
Mr. Collins, your opening statement, please, sir.
TESTIMONY OF RICHARD COLLINS
Mr. Collins. Good morning, Chairman Stupak, Ranking Member
Walden, members of the subcommittee, thank you for inviting me
to testify today. My name is Richard Collins. I am the CEO of
Golden Rule Insurance Company. We are a UnitedHealth Group
business that sells health insurance policies to individuals
and their families. Golden Rule has been offering this
important coverage for over 60 years. We seek to offer
innovative and affordable products to meet the diverse health
care and financial needs of our customers.
In our current health care delivery system, the individual
insurance market operates primarily for families who do not
have access to group insurance or government benefit programs.
We have long advocated that our country needs comprehensive
reform that includes modernizing our delivery system, tackling
the fundamental drivers of health care cost growth,
strengthening employer-based coverage, and providing well-
targeted support for low-income families. To be effective, we
believe the modernization of the individual market needs to
contain all the following elements.
First of all, individuals must be required to obtain and
maintain health coverage so that everyone participates in both
the benefits and the costs of the system. Second, insurers
should be able to set rates within limited parameters of age,
geography, family size and benefit design, just as they do in
the group market. However, and I want to emphasize this point,
rates should not vary on health status and coverage should be
guaranteed regardless of preexisting medical conditions for
those that maintain continuous coverage. Third, low- and
middle-income families should receive some form of subsidiary
to ensure they have the same access to care as all Americans.
Fourth, insurers should be able to offer a wide spectrum of
plan designs to allow American families the flexibility to
choose a plan that fits their budget, and lastly, the tax
treatment of individual insurance premiums should be on par
with employer coverage.
Until comprehensive reform is achieved, we believe the
medical underwriting of individual policies will continue to be
necessary. If these changes are instituted, most of the reasons
for individual medical underwriting as well as most of the
reasons for rescissions and terminations of policies would
cease to exist. Our company mission is to improve the health
and well-being of all Americans. In the individual market, we
accomplish this by covering as many consumers as possible with
quality health insurance. We also work to keep our products
affordable to accomplish our mission because the primary
barrier to access is affordability. We understand that we have
a responsibility to treat all of our policyholders fairly and I
assure you, we take this responsibility very seriously.
Unfortunately, for a variety of reasons, some people choose
not to purchase individual health insurance until they have a
significant health event. This decision not only has enormous
physical impact and financial impact on these families but
raises the cost of health care for everyone. As you know, the
practice of rescission has long been recognized by the laws of
virtually every State. Rescission is uncommon but unfortunate
and a necessary recourse in the event of material and at times
intentional or fraudulent misstatement or omission on an
insurance application. Under our current system, failure to act
on these cases is fundamentally unfair to those working
families that play by the rules because it would severely limit
our ability to provide quality and affordable health insurance.
In the rare event that we determine it is necessary to rescind
coverage and after a thorough investigation of the facts and in
compliance with State laws and regulations, we follow practices
and procedures designed to ensure a fair and transparent
process for the individual. And as I indicated, our use of
rescission is rare. Less than one-half of 1 percent of all
individual insurance policies in 2008 were terminated or
rescinded and in each case the affected customer was afforded
the right of appeal.
In conclusion, we look forward to working with this
committee, the Congress, State and federal regulators to
continue to expand access to affordable health insurance
coverage in the individual market. Thank you.
[The prepared statement of Mr. Collins follows:]
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Mr. Stupak. Thank you.
Mr. Sassi, your opening statement, please.
TESTIMONY OF BRIAN SASSI
Mr. Sassi. Thank you, Chairman Stupak, Ranking Member
Walden and members of the committee for inviting me to testify
before you today. I am Brian Sassi. I am the president and CEO
of the consumer division of WellPoint.
We take contract rescissions very seriously because we
understand the impact these decisions can have on individuals
and families. We have put in place a thorough process with
multiple steps to ensure that we are as fair and as accurate as
we can be in making these difficult decisions. I want to
emphasize that rescission is about stopping fraud and material
misrepresentation that contribute to the spiraling health care
costs. By some estimates, health care fraud in the United
States exceeds $100 billion, an amount large enough to pay for
covering nearly half the 47 million uninsured. Rescission is a
tool employed by WellPoint and other health insurers to protect
the vast majority of policyholders who provide accurate and
complete information from subsidizing the cost of those who do
not. The bottom line is that rescission is about combating cost
driven by these issues. If we fail to address fraud and
material misrepresentation, the cost of coverage would
increase, making coverage less affordable for existing and
future individual policyholders.
I would like to put this issue in context. While most
people who are under the age of 65 obtain health insurance
through their employers, some 15 million Americans purchase
coverage in the voluntary individual market. In a market where
individuals can choose to purchase insurance at any time,
health insurers must medically underwrite applicants for
current health risk. If an individual buys health coverage only
when he or she needs health care services, the system cannot be
sustained. While we understand and appreciate that this is a
critical personal issue, individual market rescission impacts
an extremely small share of the individual market membership.
In our experience, we believe that more than 99 percent of all
applicants for individual coverage provide accurate and
complete information. In fact, as a percentage of new
individual market enrollment during 2008, we rescinded only one
tenth of 1 percent of individual policies that year.
The issue of rescission in health insurance surfaced in the
media in 2006 and 2007, generating the public concern that we
are here talking about today. Our main point today is the same
as it was then: a voluntary market for health insurance
requires that we protect our members from costs associated with
fraud and material misrepresentations. Otherwise the market
cannot be sustained.
In response to the public concern over the practice of
rescissions, in 2006 WellPoint undertook a thorough review of
our policies and procedures. Following that review, WellPoint
was the first insurer to announce the establishment of a
variety of robust consumer protections that ensure rescissions
are handled as accurately and as appropriately as possible.
These protections include, one, creating an application review
committee which is staffed by a physician that makes rescission
decisions; two, establishing a single point of contact for
members undergoing a rescission investigation; and three,
establishing an appeal process for applicants who disagree with
our original determination which includes a review by an
application review committee not involved in the original
decision. And then in 2008, WellPoint was the first in the
industry to offer a binding, external, independent third-party
review process for rescissions.
We have put all these protections in place with multiple
steps because we cover millions of Americans and want to be as
fair and as accurate as we can be. Some have asserted that
health insurers provide a systematic reward for employees
regarding rescissions. This is absolutely not the case at
WellPoint. I want to assure the committee that there is no
WellPoint policy to either factor in the number of rescissions
or the dollar amount of unpaid claims in the evaluation of
employee performance or in calculating employees' salary or
bonuses.
In response to policymaker interest in enacting consumer
protections related to rescission, WellPoint is proposing a set
of rescission regulations with new consumer protections, and I
have outlined these in my written testimony to the
subcommittee. In addition, the health insurance industry has
proposed a set of comprehensive and interrelated forms to the
individual health insurance market as a whole. The centerpiece
of this proposal is the elimination of medical underwriting
combined with an effective and enforceable personal coverage
requirement. In other words, insurers sell to applicants
regardless of preexisting conditions as long as everyone enters
the risk pool by purchasing and maintaining coverage. This
would render the practice of rescissions unnecessary. Our
proposals are examples of how we are working to find common
ground on these issues so that we can make quality, affordable
health care available to all Americans.
Thank you for the opportunity to discuss this issue and our
proposals with you. I look forward to your questions.
[The prepared statement of Brian Sassi follows:]
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Mr. Stupak. Thank you.
Ms. Pollitz, your opening statement, please.
TESTIMONY OF KAREN POLLITZ
Ms. Pollitz. Thank you, Mr. Chairman, members of the
committee. I am Karen Pollitz and I study private health
insurance and its regulation at Georgetown University. Thank
you for holding this hearing today. Health insurance rescission
is a serious issue of utmost importance. In addition to the
devastation that it visits on people, the problems explored
today can teach us lessons that will be important for health
care reform.
The individual market is a difficult one, as we all know,
and because it is small and voluntary and vulnerable to adverse
selection, there has been a lot of resistance to enacting a lot
of incremental reforms to govern practices in this marketplace.
However, with the enactment of HIPAA in 1996, the Congress did
act to apply one important rule broadly to all health insurance
including individual health insurance, and that is the rule of
guaranteed renewability. Prior to HIPAA, individuals and small
employers who bought health insurance and then made claims
would sometimes have their coverage cancelled and HIPAA sought
to fix that by requiring, and I quote ``except as provided in
this section, a health insurance issuer that provides
individual health insurance coverage to an individual shall
renew or continue in force such coverage at the option of the
individual. Only narrow exceptions to guaranteed renewability
are permitted and with respect to policyholders' behavior, the
policy can be renewed or discontinued only if the individual
moves out of the service area, fails to pay their premium or
commits fraud.''
Congress relies on States to adopt and enforce HIPAA
protections and the federal government is supposed to directly
enforce when States do not. As States implemented HIPAA, they
adopted the guaranteed renewability rule but other conflicting
provisions in State law remained unchanged. In particular, laws
governing so-called contestability periods continue to permit
insurers to engage in post-claims underwriting and to rescind
policies or deny claims based on reasons other than fraud and
failure to pay premiums. State laws create a window, usually
two years, when claims made under a policy can be investigated
to determine whether they may be for a preexisting condition.
After the period of incontestability, a policy can be rescinded
or a claim denied only on the basis of fraud, but during the
window, if a claim is submitted by a new policyholder, the
original application for coverage is reinvestigated, and if
any, even unintentional, material misstatement or omission is
discovered, consumers may lose their health insurance. That
conflicts with HIPAA.
Now, clearly, when it comes to post-claims underwriting,
protection against fraud is important but there is evidence
that some insurance companies are not nearly as careful as they
should be in their initial medical underwriting and rely
instead on post-claims underwriting to catch their mistakes
later. Applications for coverage may ask broad, vague or
confusing questions, use technical terms and make it very
difficult for consumers to answer accurately and completely, or
other follow-up that should occur in the initial underwriting
may not. For example, if a 62-year-old submits an application
indicating absolutely no health problems or health history that
application may be considered and coverage issued without any
further investigation at the time of application. Market
competition and profitability create pressures on medical
underwriters to do their jobs more quickly and cheaply.
However, if medical underwriting is allowed in health
insurance, it has to be completed upfront before coverage is
issued. The recent subprime mortgage scandals where banks
issued mortgages without adequate screening of consumers'
financial status offers an analogy. When insurers issue medical
underwritten coverage without carefully screening an
applicant's health status and rely on post-claims
investigations to avoid incurring a loss, consumers are
vulnerable. How extensive is this problem? It is hard to say.
The industry has offered its own estimates but official data
are lacking, and that is troubling. The federal government has
not kept track of this issue. At a hearing of the Government
Oversight Committee last year, a witness for the Bush
Administration testified that she had not acted on press
reports of inappropriate rescissions or even looked into them.
She did not appear to be aware of conflicts in current State
law and she testified she had only four people on her staff who
worked part time on HIPAA private insurance issues.
In conclusion, Mr. Chairman, this investigation into health
insurance rescission has trained a spotlight on an important
question. If the Congress enacts a law or an entire health care
reform proposal, how will you know if that law is being
followed? It is fundamentally important that along with federal
protections for health insurance, you also enact reporting
requirements on health insurers and health plans so that
regulators can have access to complete and timely data about
how the market is working in order to monitor compliance with
the law. Congresswoman DeLauro has introduced a bill to create
a federal office of health insurance oversight that establishes
such reporting requirements on insurers and that appropriates
resources so that the federal government and State insurance
departments together can carry out those responsibilities. I
hope the Congress will follow her leadership and make adequate
oversight and enforcement resources part of health care reform.
[The prepared statement of Karen Pollitz follows:]
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Mr. Stupak. Thank you, and thank you all for your
testimony. We will go to questions.
Mr. Sassi, let me ask you this because you threw a bunch of
statistics at us, but I was just looking at the State of
California alone, and it seems to me if I remember correctly,
in July of 2008 Anthem Blue Cross, which is a subsidiary of
WellPoint, paid a $10,000 fine and had to reinstate 1,770
rescinded policies, and in February of 2009 once again
California Anthem Blue Cross, again, one of your subsidiaries,
had to pay a $15 million fine and reinstate over 2,300
rescinded policies, and then another settlement, $5 million and
another 450. So it seems like in the last year you have had to
reverse 4,500 rescissions and pay a fine of $30 million just in
one State. Is that true?
Mr. Sassi. I don't believe the numbers are exactly
accurate, but the premise is accurate. The issue of rescission
first surfaced in the media, particularly in California, I
believe, in 2006 and 2007, and shortly thereafter one of our
regulators initiated an audit, issued audit findings. We
disputed the majority of those findings, and our response is
appended to that audit report. The regulator subsequently did
change----
Mr. Stupak. Well, according to California Department of
Management and Health, in July of 2008, last year, July 17,
2008, you entered into an agreement with California to----
Mr. Sassi. Yes. We----
Mr. Stupak [continuing]. Over 1,700 people and, what, a $10
million fine, and in February 2009, California Department of
Insurance also put out a release indicating that you paid a $15
million fine and had to reinstate 2,300 people. So according to
my math, that is just over 4,000 and $25 million in fines,
right?
Mr. Sassi. Yes, I think there wasn't a $15 million fine to
the Department of Insurance. Irregardless of that, you know,
companies enter into settlement----
Mr. Stupak. Let me ask you this----
Mr. Sassi [continuing]. Agreements for a variety of
reasons.
Mr. Stupak. Let me ask you this, and I will ask all three
of you. Why don't you just vet these policies before you ever
collect the premium? Why don't you just go through these
policies and make sure there is no problems with it before you
insure the people? Only one State requires you to do that, and
that is Connecticut, right?
Mr. Sassi. Chairman, we do investigate the applicants. We
have very rigorous underwriting requirements. As we review an
applicant's application, we rely on the applicants to be
truthful in completing, and our experience has shown that over
99 percent of applicants are truthful in completing their
applications.
Mr. Stupak. So when do you do the----
Mr. Sassi. We rely on that.
Mr. Stupak. When do you do the investigation then? Why are
we getting this post-underwriting going on? Why does that
occur?
Mr. Sassi. Well, I would contend that we don't participate
in post-claim underwriting.
Mr. Stupak. Really? Well, let me ask you this----
Mr. Sassi. If there is a situation where either a pharmacy
claim was received or a pre-authorization for a hospital stay
is received or a claim that is received that would hit either a
specific diagnosis that could lead to potential fraud, that
would trigger an underwriter to investigate.
Mr. Stupak. Well, let me ask you this. In the book right
there, and I believe it is tab number 11, that is our document.
You gave us--WellPoint provided the committee with a list of
conditions that automatically lead to an investigation post
underwriting, OK? And for WellPoint, the list of conditions
that trigger rescission investigation includes diseases ranging
from heart disease and high blood pressure to diabetes and even
pregnancy. So what do these conditions have in common that
would cause you to investigate patients with these conditions
for a possible rescission? You have 1,400 different conditions
which would trigger, according to your documents, which will
trigger an investigation.
Mr. Sassi. Chairman, an investigation does not mean that a
rescission actually occurs. For example, in 2008, there were
over 16,000 investigations triggered. Ninety-two percent of
those were dismissed and no action was taken.
Mr. Stupak. Right, but why do you have 1,400 different
conditions which trigger an investigation? What is the common
theme amongst these 1,400 that would trigger an investigation?
Mr. Sassi. I would say there is no common theme other than
these are conditions that had the applicant disclosed their
knowledge of a condition at the time of initial underwriting,
we may have taken a different underwriting action, and so that
is what the investigation really is about, is to determine did
the applicant have the condition, did they know about the
condition----
Mr. Stupak. Well, I thought you said you did pre-screening
before, you screened them before.
Mr. Sassi. We do, but in many of these----
Mr. Stupak. Why would you have to go back? If you screened
them before and there wasn't a problem, then why would you have
a list of 1,400 different conditions that trigger an
investigation? If you pre-screen, if your pre-screening is
good, you wouldn't need a list of 1,400, would you?
Mr. Sassi. But unfortunately, there are those among us that
are not truthful in completing their application.
Mr. Stupak. So in the 1,400 different areas they lie? The
applicants lie? Or is it a cost issue? These are 1,400
expensive areas, aren't they?
Mr. Sassi. Rescission is not about cost. A pharmacy claim
that is $20 could trigger something.
Mr. Stupak. Sure, if it is for a certain condition, right?
Heart disease?
Mr. Sassi. No, not necessarily.
Mr. Stupak. All right. My time is up. Mr. Walden.
Mr. Walden. Thank you, Mr. Chairman.
I would just like to ask each of the companies present, is
it your company's policy to deny coverage to any applicant that
discloses that he or she has had had previous policies
rescinded? You heard some of the witnesses today say look, once
I get rescinded, no company is going to write me again on an
individual policy. Is that correct, Mr. Sassi.
Mr. Sassi. I am personally unaware of that policy.
Mr. Walden. Mr. Collins.
Mr. Collins. Sir, we do have that question on our
application but I am not aware as to whether or not what the
underwriting guidelines are so we ask if you have been
rescinded or declined by another carrier.
Mr. Walden. But you don't know what happens with that
information?
Mr. Collins. No, sir. I imagine it triggers an
investigation but I don't know if there is an underwriting
policy that is directly linked to that that is a black and
white policy.
Mr. Walden. Mr. Hamm.
Mr. Hamm. Yes, we would not provide coverage in that
situation.
Mr. Walden. So do you ever look to see if a rescission--the
circumstances around another company's rescinding of a policy
before you just--I mean, if they check the box and say yes, I
was rescinded in the past----
Mr. Hamm. Our underwriting guidelines are that we would not
issue that policy.
Mr. Walden. Wow. Mr. Collins, is that your underwriting?
Can somebody tell you if that is your underwriting policy too?
Mr. Collins. I don't know, sir, but I would be happy to get
back to you with an answer on that.
Mr. Walden. And Mr. Sassi, is that your company's policy?
Mr. Sassi. Again, I am not aware of the policy. I would be
happy to research it and provide a response for the record.
Mr. Walden. You obviously sat here and heard the testimony
of the prior witnesses, and some of the information we have
seen indicates there are mistakes made in rescinding policies,
at least from our standpoint, and I think you have settled some
cases along those lines. After hearing that testimony, do you
think it should be your company's policy to just not issue a
private insurance policy to somebody who had been rescinded by
another company? Should that be the policy of your company?
Mr. Sassi. Well, as I stated for the record, I am not aware
that that is a company policy.
Mr. Walden. And I stipulate that. Should it be?
Mr. Sassi. I think that is a factor that should be
considered.
Mr. Walden. But I am hearing, at least from Mr. Hamm, that
it is your company's policy that if they were rescinded by
another company, it is a no go coming to your company. That is
correct, right? I heard you correctly. Mr. Collins, once you
find out whether it is or not, do you think it ought to be?
Mr. Collins. Well, sir, I think we should investigate the
circumstances.
Mr. Walden. I do too. I mean, if somebody did lie on a
prior form, that is one thing. If they are truthful on your
form, though, should that--because they made a mistake in the
past, should they never be forgiven? They never have a shot at
health insurance again? I mean, let us take Ms. Horton's case.
You heard her situation. You heard her fear. So she will never
get offered coverage again. Is that right?
Mr. Sassi. I agree, it should be something that should be
investigated and considered.
Mr. Walden. Most of your company policies approve a
decision to rescind if an applicant made any material
misrepresentations or omissions in the application. I
understand that. How does your company ensure the applicant was
aware of the condition or notation found in his or her medical
records? We have had some testimony along those lines and we
have seen some in some of the files where they say, you know,
my doctor never told me that, and we have letters from
physicians who say that is correct, I make notes all the time
in the medical files, I didn't tell the patient that. Where is
the balance here, Mr. Hamm.
Mr. Hamm. We have a very fair and thorough process of
determining if there was a material misrepresentation. The
process involves several layers of review and a review panel
including a medical doctor, and in that process we gather all
the available information with respect to a person's use of
medical services including medical records as well as the
information on their application and we will do detailed
research and look at each situation based on the facts, make a
determination whether there was a material misrepresentation
when the policy was underwritten.
Mr. Walden. So do you look at the case files? Do you look
at the medical records? Do you communicate directly with the
physician?
Mr. Hamm. We will communicate when it is necessary.
Mr. Walden. Well, but to determine the material
misrepresentation. I mean, what happens in a case where the
physician says I never told the patient that?
Mr. Hamm. It is difficult to speak of a hypothetical
situation, it depends on the facts of each time, but I can tell
you that we would not rescind a policy if the applicant was not
aware of the condition.
Mr. Walden. Mr. Collins.
Mr. Collins. Sir, we afford the customer the right to
appeal and we accept statements and information from the
customer and their physicians with regards to the circumstances
of the rescission, and we would take that into account. I think
that fair-minded people would say that if an individual did not
know of a condition that was noted in the medical record, then
that would not be grounds for a rescission normally.
Mr. Walden. Mr. Sassi.
Mr. Sassi. We also have a thorough process when we initiate
a rescission investigation. We do reach out to the member and
share with them the information that we do have and ask them to
provide us with any comments or other relevant information, and
all of that information is used in making a recommendation, and
all that information is provided to our application review
committee that actually makes the rescission decision. We would
not rescind a member that we could determine did not know of
their condition.
Mr. Walden. And Mr. Hamm's company I know a week and a half
or 2 weeks ago started this third-party independent review
opportunity, correct?
Mr. Hamm. That is correct. We recently implemented that.
Mr. Walden. And I commend you for that. I think that is a
good move.
Mr. Collins and Mr. Sassi, do you have a similar sort of
independent review panel that an insured could go to and make
their case?
Mr. Collins. No, sir, we do not have an independent review
panel.
Mr. Walden. Do you plan to go that route? Is that something
you are thinking about?
Mr. Collins. It is under consideration but we haven't made
that decision, sir.
Mr. Walden. Mr. Sassi.
Mr. Sassi. Congressman, we were the first insurer to
implement an independent third-party review and we implemented
that in July of 2008.
Mr. Walden. OK, so last July. All right. My time is
expired. Thank you, Mr. Chairman.
Mr. Stupak. Well, thanks. On that third-party review, that
was because California made you do it, right?
Mr. Sassi. No, absolutely not. It was not a requirement.
Mr. Stupak. Because in your opening statement, you said you
had announced robust consumer protections, so I want to know
what is the difference between announcing implementation, I
wanted to see if you had implemented those robust consumer
protections. Have you implemented those robust consumer
protections you mentioned in your opening statement?
Mr. Sassi. Yes, absolutely. In my written testimony to the
subcommittee, we have outlined ten recommendations. We have
implemented eight of those ten recommendations.
Mr. Stupak. So eight of the ten are there. OK.
Mr. Hamm, you said you would not reject or rescind a
contact for a policyholder if the policyholder had no knowledge
of it. Well, that is the Raddatz case. That was our last case.
That was Otto Raddatz. He didn't have any idea he had
gallstones and an aneurysm, and your company rejected him.
Mr. Hamm. Mr. Chairman, I would really like to comment on
that case, but due to privacy concerns I am not able to, but I
can tell you that in situations when we uncover that the
individual was not aware of the condition, we would not go
forward with the rescission.
Mr. Stupak. But do all your clients or policyholders have
to get a hold of the attorney general of their State to get it
done? I mean, that is what Raddatz had to do and you denied him
twice.
Mr. Hamm. We have a very detailed appeals process. In fact,
after the three levels review and the entire committee voting
for a rescission, we notify the customer. We give them 15 days.
We delay the rescission, giving them an opportunity to respond
back to us with additional information, and when it does come
in we have a different underwriter look at the appeal and they
may appeal as many times as they would like.
Mr. Stupak. Raddatz only had 2 or 3 weeks to get his stem
cell----
Mr. Hamm. We go through the process as fast as possible.
Mr. Stupak. And I apologize again, Mr. Deal. I didn't see
you there. You have to change the color of your suit. I will go
to you for questions, please.
Mr. Deal. I am going to have to remind the chairman,
Georgia was the fourth state admitted to this union when
Michigan was still Indian territory. We don't need to be
overlooked. Thank you, though. We didn't win that argument,
though.
Normally, we are confronted here with the question of, do
we need new federal legislation, and the gentlemen from the
insurance industry have all uniformly told us that if we will
pass a federal mandate of having everybody mandatorily in the
insurance pool, that all of these problems will go away. What I
find interesting, Ms. Pollitz, is that you brought up a
question that nobody has seemed to answer. In your testimony,
you point out that in 1996 the HIPAA provisions required that
in individual health insurance policies, that not only is it a
guarantee of renewability, but you say continuation in force.
Now, do you interpret that phrase to mean the non-
cancellability that we have been talking about here, and if so,
if that is what the law that has been in place since 1996
means, why are we having this discussion?
Ms. Pollitz. Well, I am not sure if I can answer that
second question, but I think I should say I am not an attorney,
I just read English, and the words say continue in force, and
the only exceptions among the ones we are talking about today
are fraud, and that is inconsistent with what these other kind
of post-claims underwriting guidelines or provisions that are
in State law provide for, which say that fraud is the only
defense or the only reason for canceling after a 2-year period
so that essentially new policyholders can't ever quite be sure
if they are really covered. The insurance industry kind of gets
a do-over and gets to look again, and any material omission,
whether--material just means it matters. It doesn't mean that
it was fraudulent. It doesn't mean--it just means that it
matters to the insurance industry. That can become the basis
for challenging coverage. Sometimes coverage is rescinded,
sometimes it is terminated going forward. Some insurers won't
rescind a policy because they don't want to get an argument
with doctors and hospitals who may already have been paid to
try to get that money back and so they will just cancel the
policy going forward. But with respect to cancellation and
rescission, I think the Congress spoke on this in 1996----
Mr. Deal. And none of the five exceptions to that fit the
discussions here unless it is elevated to the level of fraud.
Ms. Pollitz. That is correct.
Mr. Deal. And I would ask the entire panel, are you aware
of any court interpretation or any question that has ever been
raised as to the applicability of this section 2742(a) of the
Public Health Service Act as it relates to the issue we are
talking about here today as to whether or not it in fact does
preclude cancellation for whatever we might call it, whether we
call it post-review underwriting?
Mr. Hamm. Congressman, may I speak to that?
Mr. Deal. Yes.
Mr. Hamm. This is a legal issue but I don't believe that
rescission is considered a non-renewal.
Mr. Deal. Well, but it doesn't just stop when it says
``shall renew.'' It says ``or continue in force.'' I guess if
you read that phrase ``or continue in force'' to mean the same
as renew, then it would actually be a redundant phrase, which
the law generally does not favor redundancy. Has this ever been
challenged? Does anybody know if it has ever been raised
before?
Mr. Collins. I have no knowledge, sir.
Mr. Deal. Well, let me go then to the second part of my
question, and that is, we then go to the States having their
statutory periods, generally 2 years as has been pointed out,
for review, but Mr. Hamm, you pointed out that under your
policies, I believe you said that you give the potential
customer 10 days to review the application and to notify the
company of any errors in 10 days to just say we don't want to
have the policy in effect. Are there any States that currently
have in place a period of time for insurance companies to
mandatorily review for these kinds of misstatements, in other
words, review the medical records within a given time other
than the 2-year period? Do any States have a shorter time
frame?
Mr. Hamm. I am not aware of that. We comply with all
applicable State statues, and I think it is almost all States
we have a 10-day free look where we send the customer a copy of
their application, remind me that they are attesting to the
accuracy of it, ask them if they have any questions or changes,
and then as part of the policy, in the welcome letter we
reinforce the importance that we receive all the disclosed
information appropriately.
Mr. Deal. If, though, something was going to be rejected
based on information that was in an application or information
in the medical records that we for whatever reason have not
disclosed, it seems to me that 2 years is a rather lengthy
period of time, and in practical application, it seems that
even in that 2-year period it takes some other triggering
mechanism to institute the review, that there is no normally
dictated review of the applications unless something triggers
it or brings it to your attention. Should there be a time frame
shorter than this 2-year period and should there be a review
that takes place prior to a triggering act taking place?
Mr. Hamm. Let me clarify that we do not post-claims
underwrite. We ask information of every single applicant to the
company, and 88 percent of the time we receive additional
information from them and we ask them to fully disclose all
their information. It is only when we are aware subsequently
that there was some information that was omitted or inaccurate
that we would investigate whether a rescission should be made.
Mr. Deal. But that would be that triggering act and you
wouldn't know about that unless something by way of a
pharmaceutical being prescribed or an office visit in the
doctor's office or a hospitalization.
Mr. Hamm. That is correct.
Mr. Deal. What I am asking is, just as you give the
policyholder 10 days to review the application to figure out if
it is correct, should there be a comparable, maybe longer,
obviously I think longer, period of time in which the company
without some triggering act should be required to review the
applications and say hey, we think there is something wrong or
ask for additional information rather than waiting until people
get in a posture where they probably are uninsurable at the
time the issue is raised?
Mr. Hamm. It is something to discuss and give some thought
to.
Mr. Deal. Thank you, Mr. Chairman.
Mr. Stupak. Mr. Burgess for questions.
Mr. Burgess. Thank you, Mr. Chairman, and that last point
of Mr. Deal's I think is an excellent one and likely would have
eliminated the problem for at least one of the three witness
that we had in front of this morning.
Let me just ask Mr. Hamm, Mr. Collins, Mr. Sassi, you were
here and you heard the testimony this morning of the three
individuals who testified. What do you think after hearing
that? Is that something that--and again, I am coming at this
from the perspective of someone who supports the individual
insurance market. I was a customer of the individual insurance
market at one time. I may be again in the future. I recognize
the value that you bring, and I want you to be able to continue
to do the type of business that you do but you heard the
opening comments of the chairman of the subcommittee this
morning. There is a move afoot to do things in a way that would
be very difficult for you to business in the future and I for
one would not like to see that happen, but tell me what your
impressions are after hearing the testimony that you heard this
morning.
Mr. Hamm. I would be glad to respond to that, Congressman,
and I have to say, I really felt bad. You know, I have a lot of
empathy for the people that are impacted, and I know in my own
life I have dealt with the cancer and I just have a lot of
empathy and concern for the people and it is my hope that there
will be changes made, that this will no longer be necessary. It
is just that today when we have a voluntary system of insurance
where people choose, we have to collect information up front to
underwrite, and if we didn't have that process, then people
would wait until they had a health condition before applying
for coverage and the rates would be much, much, much higher
than they are today. I chaired a group that put forth reform
proposals, and in our proposal we suggest that the country
should move toward a guarantee issue environment with no
preexisting conditions being excluded as long as everyone is
required to participate. If everyone participates, then there
is no need for rescission and the price would not increase for
those currently covered.
Mr. Burgess. You brought that up. What do you do with the
segment of society that is just not going to participate? I
mean, there will be--that segment of society will exist whether
it is the individuals who are in this country without the
benefit of a Social Security number, whatever that number is,
10 million, 12 million, people who just don't comply. We live
in a free country and they don't like mandates. Look at the
people who don't comply with the mandate of the IRS right now
knowing the penalties that are out there waiting for them if
they get caught, so people are perfectly willing to fly beneath
the radar. What then? Will these people be rated on whether or
not they had a preexisting condition or are they just absorbed
then by the larger taxpaying public who does play by the rules
and pays their bills on time?
Mr. Hamm. We believe that the requirement to purchase
insurance should be enforced. We believe that those who don't
have the means should be subsidized, and we would look forward
to working with Congress to find a solution that is workable
for all Americans, but I believe every American must have
access to high-quality health care. We have to work together to
find out how we can make that happen.
Mr. Burgess. Well, you and I will fundamentally disagree on
that point, and I think the approach that was taken by Congress
in the development of the Part D program in Medicare for all
the faults initially rolling it out, creating problems that
people actually want that are actually useful for people will
be a better way of going about that. The coverage rates for
prescription drugs amongst seniors now is in excess of 90
percent with a very high satisfaction rate, and clearly in my
mind, at least, that is a better strategy than simply layering
another mandate on the American people or the employers of
America. But I don't disagree with you that something needs to
happen, and let me just take this to a different level, and
again, I want to pose this question to all three and I really
would like an answer from all three on this.
If there were a system of universal coverage without
government intervention in the marketplace, is there a better
way to accomplish our goal of universal coverage without that
excess market manipulation by the government? Insurance
companies have used adverse selection methods to deny or cancel
policies in the individual market. Apparently it happens also
in other markets. To the extent that this has been allowed in
law, the business interests almost dictate those actions, yet
some of us have argued that if we let the market work, you can
make an innovative product for all. So here is my question.
Will you today publicly and clearly commit right now that
regardless of what happens in Washington, whatever decision
that we reach on health reform, that you will design a product
for all populations regardless of claims history but also
economic status? And I would like an answer to those questions
individually, a product for all populations regardless of
claims history and all populations regardless of economic
status. Mr. Hamm, why don't you go first and then we will just
go down the row.
Mr. Hamm. I am having a little difficulty following your
question, sir. If I may understand specifically what you are
asking?
Mr. Burgess. Regardless of what we do, whether we do an
individual or business mandate, employer mandate, maybe we
don't do a mandate at all, but you have it within your power to
design a product so that all populations regardless of claims
history could be covered. Would you be willing to do that?
Mr. Hamm. In the current system, that would not be
feasible. We need to have an environment where all Americans
are required to participate before we could give those
assurances.
Mr. Burgess. So you would not be willing to alter business
practices if there were a way to do that to provide coverage
for a greater segment of the population, even with a claims
history?
Mr. Hamm. If the reforms proposed by AHIP are adopted, then
we would be very glad to participate in the system, but it is
necessary that all participate. When it is a system where
people choose, we need to have the process of assessing risk at
the time of the application.
Mr. Burgess. With all respect, the reforms proposed by AHIP
are not going to happen. You are going to get a plan as your
chairman outlined here this morning.
Mr. Collins, can I get you to answer briefly? Would you be
willing to design such a product?
Mr. Stupak. Briefly. We are going to have votes here.
Mr. Collins. Sir, I would respectfully have to agree with
Mr. Hamm that a guarantee issue product that would fit all
people at affordable prices is economically practically
impossible. What I would suggest is that HIPAA also creates
alternative coverage mechanisms for each and every State, so
each State is supposed to have a high-risk pool or an
alternative coverage mechanism, and these high-risk pools have
been woefully underfunded so one of the things that could be
done right now today is to increase the amount of funding going
into those high-risk pools so that people that have serious
health issues and are otherwise uninsurable in the individual
market have a place to go that is affordable and affords them
the care that they need.
Mr. Burgess. And on the issue of high-risk pools, I think
the private sector is going to be required to make a
contribution to that as well and that you all in the private
sector, whether it be group insurance or individual market,
there must be a product that is available to everyone
regardless of their claims history. Yes, they may require a
federal subsidiary. Yes, they may require a State subsidiary,
and yes, the private sector may have to bring something to the
table as well.
Mr. Sassi, let me ask you----
Mr. Stupak. All right, that is it. Last question, Mr.
Burgess. You are just going on.
Mr. Burgess. Let me ask you then just to answer the
question----
Mr. Stupak. Last one.
Mr. Burgess [continuing]. I posed to the others. Regardless
of the claims history and the population, would you be willing
to make a product available?
Mr. Sassi. I have to agree with my colleagues here that in
the current voluntary individual market, we could not guarantee
issue policies where people could jump in and out of the
insurance market. We have had experience of States that have
implemented guarantee issue without an effective, enforceable
personal coverage mandate, and unfortunately, that has resulted
in significant cost increases that have to be borne by others
in the individual market. So the answer would be no.
Mr. Burgess. Mr. Chairman, you have been very generous with
your time. Again, I would just stress that this is going to
take creative thinking outside the box. I don't think you are
going to get what you want in the AHIP proposal. You are going
to get more something that looks like what the chairman
outlined to you at the beginning, and I would urge you to think
creatively about this problem because this is the difficulty
that leads us to where we are here today, and I can't help
you----
Mr. Stupak. OK, questions or speeches are over.
Mr. Burgess [continuing]. If you are not willing to move on
this issue, and thank you, Mr. Chairman. I will yield back.
Mr. Stupak. We hope the chairman's, not my plan, but our
side plan does work. We do hope that. I won't argue it with you
now. That is for another hearing.
Maybe we can get another round in. We are going to have
votes here in a few minutes. Now, each of you provided to the
committee information that relates to certain medical
conditions that automatically trigger an investigation into
possible grounds for rescission. Mr. Sassi, I left off with
you. You had 1,400 different conditions that automatically
trigger an investigation. Mr. Hamm, on behalf of Assurant,
there are 2,000 conditions that trigger an investigation that
you provided to the committee. These include breast cancer,
ovarian cancer and brain cancer. Why does cancer trigger an
investigation?
Mr. Hamm. What triggers the investigation----
Mr. Stupak. No, why does cancer trigger an investigation?
Mr. Hamm. I will answer. What triggers the investigation
are the types of medical conditions of a chronic nature where
there is a high probability that the condition would have
preexisted at the time of the application. It is not based on
the cost of the claim. It is based on the medical condition. In
fact, the people that make the rescission decision are not
aware of the cost of the claim. It is all about----
Mr. Stupak. If it is the medical condition, then before you
sign them up, why don't you get all the medical records? Why
don't you find it then? Why do you wait until there is a claim?
Mr. Hamm. If we were to receive all the medical records at
the time of application, that would delay the process
significantly, delaying people's access to health care, and
would add a tremendous amount of cost to the product. The vast
majority of applicants provide all the information that is
asked for at the time of application.
Mr. Stupak. So it is a cost issue? It is too costly to get
the medical records?
Mr. Hamm. It would add to--yes, it would add to the
premiums that our customers would pay by a significant amount.
Mr. Stupak. So what does it cost, $40 to get medical
records?
Mr. Hamm. I am not familiar with the cost but I would also
delay the process.
Mr. Stupak. But isn't it better to delay the process to
make sure a person is insured as opposed to pulling them when
they are going through cancer like Mr. Raddatz?
Mr. Hamm. The vast majority of our customers provide the
appropriate information.
Mr. Stupak. So did Mr. Raddatz but you still denied him
coverage, right?
Mr. Hamm. I unfortunately cannot comment on that particular
case.
Mr. Stupak. Mr. Collins, in asking the same question of
United, you insisted that you also use a computerized system to
identify cases to automatically investigate for possible
rescission but there is no one at your company who knew how the
computer decides which files should be reviewed. So is it the
case that United has put the decision of which patients will
have their health care treatment interrupted by a rescission
investigation in the hands of a computer that no one
understands?
Mr. Collins. No, sir, that is not true. I haven't really
been privy to the discussions between my staff and your staff
on this issue. We have been trying to come to an understanding
about how to best provide the data in a format that is easily
understandable, but let me just say----
Mr. Stupak. Can you tell us what conditions the computer
considers for a possible rescission investigation?
Mr. Collins. No single factor is used in our process to
trigger an investigation so we look at--the system looks as it
is screening claims that come in at the effective date of the
policy, the effective date of the procedure, the severity, the
type of service and the diagnosis code. Those are all factors
that go into the algorithm that pulls cases out for screening.
Mr. Stupak. Well, the algorithm, no one from your company
could tell us. Will you commit to us today to produce whatever
witnesses or documents are necessary to explain your algorithm,
your computer selection process? Could you do that? Will you
commit to do that?
Mr. Collins. Yes, sir. We are----
Mr. Stupak. We are still trying to figure it out.
Mr. Collins. We are trying to put it in a format that would
be acceptable to the committee, sir.
Mr. Stupak. Dr. Pollitz--Professor Pollitz, do you see a
common thread here among the conditions? You have 1,400
conditions, 2,000 conditions and a computer that it can't
explain that does rescission. Why do you think they have all
these rescission?
Ms. Pollitz. I think the common thread is that if somebody
makes a claim for anything serious in their first year, there
is an opportunity to go back and review the entire transaction
to see if it is going to be withdrawn. I think that is just the
common transaction, and I think it is not consistent with your
federal law, and whatever else you may do going forward----
Mr. Stupak. But as to the HIPAA law, basically we leave it
up to the States, and HIPAA has to be enforced by the federal
government, CMS, right?
Ms. Pollitz. That is correct, the ultimate enforcement.
Mr. Stupak. So the value of the law only depends on the
enforcement of the law?
Ms. Pollitz. Yes, it does, and there is a fine of $100 per
day per affected individual for noncompliance with the law that
can be levied.
Mr. Stupak. Let me ask each of our CEOs this question,
starting with you, Mr. Hamm. Would you commit today that your
company will never rescind another policy unless there was
intentional fraudulent misrepresentation in the application?
Mr. Hamm. I would not commit to that.
Mr. Stupak. How about you, Mr. Collins? Would you commit
not to rescind any policy unless there is intentional
fraudulent misrepresentation?
Mr. Collins. No, sir. We follow the State laws and
regulations and we would not stipulate to that. That is not
consistent with each State's laws.
Mr. Stupak. How about you, Mr. Sassi? Would you commit that
your company will never rescind another policy unless it was
intentional fraudulent misrepresentation?
Mr. Sassi. No, I can't commit to that. The intentional
standard is not the law of the land in the majority of States.
Mr. Stupak. Well, do you think it is fair to rescind
somebody for an innocent mistake?
Mr. Sassi. Well, I think applying a knowing standard is a
much more objective and----
Mr. Stupak. Well, our first panel, none of them had any
knowledge of it and they were all rescinded, right?
Mr. Sassi. I am sorry?
Mr. Stupak. Our first panel, none of them knowingly made a
misrepresentation but they were all rescinded, their policies
from Ms. Beaton all the way down to our witnesses there. They
weren't material misrepresentations, right?
Mr. Sassi. It is our policy if we determine that the
applicant did not know about a specific condition, we would not
rescind.
Mr. Stupak. So like Ms. Horton there, you wouldn't have
rescinded her?
Mr. Sassi. I can't speak to the specifics of Ms. Horton's
case. I am not familiar with the specifics. I am sorry.
Mr. Stupak. Mr. Barton for questions, please.
Mr. Barton. Thank you. I want to thank our witnesses for
being here. This is a difficult situation. But I listened when
you all answered Chairman Stupak's question about unintentional
omissions, and to your credit you were honest that you would
reserve the right to still rescind some of these policies.
Doesn't it bother you that people are going to die because you
insist on reviewing a policy that somebody took out in good
faith and forgot to tell you that they were being treated for
acne? Doesn't that bother you?
Mr. Hamm. Yes, sir, it does, and we regret the necessity
that that has to occur even a single time, and we have made
suggestions that would reform the system such that that would
no longer be needed.
Mr. Barton. Well, you know, I haven't heard your opening
statements, I glanced at them, and I haven't heard the first
round of questions. We understand the need to verify that
people are telling the truth. We are not asking you guys, the
insurance industry, to automatically take somebody's word for
it. I mean, I understand that. But when I see advertisement
after advertisement about be a part of the family and we treat
you like, you know, our own family, and then somebody who
doesn't have group coverage takes out an individual policy and
runs into some situation where they have a health care issue
that requires a major claim early in the policy, if they
operate in good faith in taking out the policy and you approve
them, I really don't think it is good business practice to go
back and try to figure out a way to rescind that policy. If
nothing else, it is a false trade practice, truth in
advertising, and one of the beauties of our Constitution is a
little thing called federal preemption. We have the authority
on this committee to preempt State law if it is interstate
commerce. Now, we can't preempt State law in intrastate
commerce but we can in interstate commerce, and I don't think
there is one vote on this committee for the practice of
retroactively reviewing a policy to try to rescind it if you
have a woman like my constituent, Ms. Beaton, who discovers
that she has breast cancer or you have somebody who needs a
stem cell transplant or even the young lady from California who
just needed some blood work done. We will back you up on fraud
and misrepresentation but I don't think you are going to get a
vote at all on rescissions that are not material to the claim
being processed. I don't know that that is a question. That is
just a statement. If you would like to comment on that, I would
certainly like to give you the opportunity to do it.
Mr. Stupak. No one cares to answer?
Mr. Hamm. I would just reinforce that rescission would only
occur when the information was material to the initial--if the
information was material to the underwriting decision, only in
that case.
Mr. Barton. Mr. Chairman, I am going to yield back. I mean,
I would----
Mr. Stupak. Could I follow up on that?
Mr. Barton. Sure.
Mr. Stupak. Well, if it is material to the representation--
let me ask you this. In your policy, Mr. Hamm, it states, and
it is question number 14 on your questionnaire, your enrollment
questionnaire. Now, tell me how you get a misrepresentation.
Within the last 10 years--this is what it says--because you
said Assurant Health's enrollment questionnaires are simple,
easy to understand, straightforward language, so people can
easily and accurately report their medical history. So your
question says, within the last 10 years, has any proposed
insured had any diagnosis, received treatment for or consulted
with a physician concerning phlebitis, TIA, cystitis,
lymphadenopathy, glandular disorder. So tell me, what is TIA?
Mr. Hamm. I am not aware. I believe----
Mr. Stupak. If you don't know what it is, how would anyone
filling out your application know what it is? So there is
grounds to deny them right there. You don't even know what it
is and neither do I. How about phlebitis or lymphadenopathy?
How about lymphadenopathy? What is that?
Mr. Hamm. I don't know the answer to those questions.
Mr. Stupak. Do you sincerely believe that an average
applicant would know what these words mean if you don't know
and I don't know?
Mr. Hamm. Sir, I believe that is an application that is not
currently used at this time. I would like to----
Mr. Stupak. It is last year's application. Yes, it is last
year's application. Have you changed the application in the
last year?
Mr. Hamm. I am sorry, sir. I didn't hear you.
Mr. Stupak. It is last year's application. Did you change
it in the last year?
Mr. Hamm. I am not aware if we have changed that
application.
Mr. Stupak. So far as you know, that is your current
application?
Mr. Hamm. But I believe that our current application asks
questions back to 5 years, so the 10-year might be different
than what we issue today. I would need to----
Mr. Stupak. Well, it is the same questions, TIA, right,
that you don't know what it is and----
Mr. Hamm. I do not know what that is.
Mr. Stupak. Mr. Deal.
Mr. Barton. Mr. Chairman, I do have one question.
Mr. Stupak. Sure, Mr. Barton. I took your time. I will
yield to you.
Mr. Barton. This is a hypothetical but I just want to
figure out what the answer is. I had a mild heart attack 3
years ago, so I now take six different medications every day
and I am going to probably have to take those medications for
the rest of my life. I am covered under a group plan, Blue
Cross/Blue Shield of Texas and it is available to every federal
employee who lives in Texas, and my coverage has been good. I
have never had a problem. But let us say I quit the Congress
and I go into business for myself and I try to get a private
health plan like Ms. Beaton got when she switched jobs from
being a nurse and went into business for herself. On the
application, I have to list the medications that I am taking,
the fact that I had a heart attack, give the doctor, the time,
the location, but I broke my leg playing football in high
school. I got a 250-pound fullback ran over a 150-pound
linebacker. I was the linebacker. Now, if I forget to put on my
application with your companies that I had the small bone in my
left leg broken playing football in 1967, but I do put all my
medications and my history of my heart attack, the fact that I
omitted breaking my leg in 1967, is that a grounds to rescind
my claim, my policy later on under your policies right now that
your companies issue? I admit to my big problem, tell you the
medications, all the stuff but I just flat forget that I broke
my leg and was treated by a doctor paid by the Waco Independent
School District in 1967.
Mr. Sassi. Congressman Barton, our underwriting guidelines
really kind of dictate that but it is my understanding of how
our underwriting guidelines work is that since that condition
would not be material in our initial underwriting decision
because it happened so far in the past and was of a non-serious
nature, that that would not have factored into the underwriting
decision.
Mr. Barton. And I understand you might cover me because of
my heart attack. I understand that. It would bee totally within
your company's right to say Congressman Barton had a heart
attack in 2004 or 2005, therefore we can't issue him a policy.
I understand that. My question is really about my leg injury
from way back when. If I don't disclose that, does that
disqualify me potentially on down the road? Mr. Collins?
Mr. Collins. Sir, the application is looking for
information going 10 years back so that----
Mr. Barton. So that would not be material?
Mr. Collins. That would not be material.
Mr. Barton. Mr. Hamm.
Mr. Hamm. The same answer as Mr. Collins.
Mr. Barton. Thank you, Mr. Chairman.
Mr. Stupak. Mr. Deal for questions, please.
Mr. Deal. Thank you, Mr. Chairman.
We are talking her in the private insurance market and I
believe, Mr. Sassi, you said that somewhere in the 15 million
range. Is that correct?
Mr. Sassi. Correct.
Mr. Deal. To you three gentlemen, do you also have policies
that extent to ERISA-type coverage plans?
Mr. Sassi. Yes. WellPoint insures one in nine Americans.
The vast majority of our members are covered under ERISA plans.
Mr. Deal. Mr. Collins.
Mr. Collins. Yes, sir, the majority of our membership are
also in group insurance plans which are covered under ERISA.
Mr. Deal. Mr. Hamm.
Mr. Hamm. The majority of our policies are individual.
However, we do have some customers that are under ERISA.
Mr. Deal. Does the same problem pertain in the ERISA
marketplace as in this private insurance marketplace? Ms.
Pollitz, you indicated you think it does.
Ms. Pollitz. There is rescission in the small group market.
It operates a little bit differently because that is a
guaranteed issue market, but a similar process if a claim is
submitted during the pre-X period. It is largely the
eligibility of the members of the group and the family members
of the group that will be reinvestigated to see if there is any
way that the people who made the claim shouldn't have been on
that policy in the first place.
Mr. Deal. But the State periods like 2 years do not apply
because it is an ERISA plan?
Ms. Pollitz. Well, your pre-X rules are also much tighter
in the small group market so Congress has said these questions
about 10 years ago, 5 years ago, those don't matter in the
small group market. You are only allowed to apply--an insurer
is only allowed to apply preexisting condition for something
that was actually treated or diagnosed in the six-month window
prior to coverage taking effect. So anything that happened
before that isn't even allowed to be considered, and if the
person coming into the policy had prior group coverage, that
gets credited against the pre-X so that can't be considered
either. So it is mostly eligibility, and I have seen----
Mr. Deal. I am going to try to be real quick here and I
apologize for cutting you off. With regard to what needs to be
done, in the event we don't get the major reform that you all
have been talking about, anybody else is talking about, in the
event it becomes something of trying to narrow a time window in
which insurance companies have the right to review medical
records, would it not be feasible that if we had electronic
medical records that that would facilitate a more timely
review? I would assume common sense would say that it would.
Ms. Pollitz, do you foresee that consumer protection groups
would oppose making those kind of personal medical records
available for insurance companies to review in a timely fashion
so that we would not hopefully have these situations to
develop?
Ms. Pollitz. They are already available for review.
Mr. Deal. Well, we don't have the extent of electronic
medical records that we all hope we will have.
Ms. Pollitz. But the privacy rules that you have in force
today under HIPAA say that medical underwriting is a
permissible reason for disclosure of medical records.
Mr. Deal. You would see no reason that anybody would raise
that issue?
Ms. Pollitz. It is already permitted under current law.
Mr. Deal. The last thing, and this is more of a comment
than anything else, I think the issue that Dr. Burgess
discussed with you about those who are now being excluded
because of preexisting conditions, et cetera. I think we all
know that our high-risk pools are not effectively operated and
certainly nonexistent in States like mine, for example. I think
we need to be looking at a policy where we would maybe take
those funds that are available for high-risk pools, some of
which are not being utilize, put them into an environment in
which we could perhaps with the sharing of some of those costs
with the insurance industry bring these individuals into the
pool with the additional revenue that would be available from
federal sources. I just simply suggest that something we all
need to be thinking about in my opinion. Thank you, Mr.
Chairman. I yield back.
Mr. Stupak. Mr. Burgess, do you want to question now or do
you want to come back after votes? We only have 5 minutes, so I
am going to have to hold you tight.
Mr. Burgess. OK. You know me. I can be really brief.
Mr. Stupak. I have never seen it yet, but go ahead if you
want to try.
Mr. Burgess. I will just ask all three of you briefly, you
know, you have heard the discussion of the public option plan.
What is your opinion of that?
Mr. Hamm. I oppose the public plan option.
Mr. Burgess. Mr. Collins.
Mr. Collins. Sir, I believe that with the reforms that have
been proposed, that we can make the market work much better
without a public plan.
Mr. Burgess. And Mr. Sassi.
Mr. Sassi. We also oppose a public plan. We also feel
that----
Mr. Burgess. I don't want to be the one to have to break
this to you, but the reality is, you are very likely to get a
public plan. You are not likely to get the deal that was struck
by AHIP down at the White House. I mean, I think you can see
the handwriting on the wall. I would urge you to think outside
the box on this one. There are ways that we can solve this
problem without going to a public plan, in my opinion, and
without leaving so many people uninsured, without leaving so
many people fall through the cracks, as we heard this morning.
Clearly the situation as it stands right now is unstable. It is
untenable. We can't continue it. But you guys have got to be
able to come to the table with some innovative thinking on how
we provide coverage to that segment of the population that is
particularly vulnerable and needs the coverage. We don't need
to turn the whole system on its head just to cover that 10 or
15 percent that is right now left out but that is what we are
going to do if you don't help us with this, and the fallback
position, I promise you, is a government-run plan and that is
what you are going to get if we don't work together on this
issue, so I appreciate you all being here today. Mr. Chairman,
I appreciate the extra time and I am going to yield back.
Mr. Stupak. OK, so you didn't have a question on the
subject of today's hearing. OK. In all fairness to WellPoint, I
said in my opening statement--and if you care to comment,
please do. I said in my opening statement in the committee
investigation, WellPoint evaluated employee performance based
in part on the amount of money its employees saved the company
through retroactive rescissions of health insurance policies.
According to the documents obtained by the committee, one
WellPoint official was awarded a perfect score of five for
exceptional performance based on having saved the company
nearly $10 million through rescissions. Do you care to comment
on that? I think it is fair to give you an opportunity to
comment on it.
Mr. Sassi. Thank you, Chairman. During the process of
collecting information requested by this committee, we did
uncover two performance appraisals from 2003 that were isolated
to one area within California that included one line each
referring to retro savings and a dollar amount. They were in
the context of a part of the performance appraisal with other
metrics and they were part of a more comprehensive performance
appraisal that was, I think, five to seven pages long. I
reiterate my statement that WellPoint does not have a policy,
it has not been our policy to systematically reward associates
for performing rescissions, for tracking the number of
rescissions or the dollar amounts.
Mr. Stupak. But didn't both of those employees receive
bonuses, somewhere between $600 to about $6,000, I think the
range was?
Mr. Sassi. My understanding is that those associates
received within the average compensation that all WellPoint
associates received for that given time period.
Mr. Stupak. OK, so it is not the reviewers, all your
employees--OK. With your profits, I guess you could give
bonuses.
All right. That concludes our hearing for today. The
committee rules provide that members have 10 days to submit
additional questions for the record. The record book has
already been submitted for the record. We will redact any
business proprietary or anything that relates to privacy
concerns or is law enforcement-sensitive, so that will be
entered into the record.
That concludes our hearing. I thank all of our witnesses
for coming, and that concludes this subcommittee hearing.
[Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
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