[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]




                               BEFORE THE


                                 OF THE

                        HOUSE OF REPRESENTATIVES


                             FIRST SESSION


                             JULY 27, 2009


                           Serial No. 111-58

      Printed for the use of the Committee on Energy and Commerce




74-091                    WASHINGTON : 2012
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                 HENRY A. WAXMAN, California, Chairman
JOHN D. DINGELL, Michigan            JOE BARTON, Texas
  Chairman Emeritus                    Ranking Member
EDWARD J. MARKEY, Massachusetts      RALPH M. HALL, Texas
RICK BOUCHER, Virginia               FRED UPTON, Michigan
FRANK PALLONE, Jr., New Jersey       CLIFF STEARNS, Florida
BART GORDON, Tennessee               NATHAN DEAL, Georgia
BOBBY L. RUSH, Illinois              ED WHITFIELD, Kentucky
ANNA G. ESHOO, California            JOHN SHIMKUS, Illinois
BART STUPAK, Michigan                JOHN B. SHADEGG, Arizona
ELIOT L. ENGEL, New York             ROY BLUNT, Missouri
GENE GREEN, Texas                    STEVE BUYER, Indiana
DIANA DeGETTE, Colorado              GEORGE RADANOVICH, California
  Vice Chairman                      JOSEPH R. PITTS, Pennsylvania
LOIS CAPPS, California               MARY BONO MACK, California
MICHAEL F. DOYLE, Pennsylvania       GREG WALDEN, Oregon
JANE HARMAN, California              LEE TERRY, Nebraska
TOM ALLEN, Maine                     MIKE ROGERS, Michigan
CHARLES A. GONZALEZ, Texas           JOHN SULLIVAN, Oklahoma
JAY INSLEE, Washington               TIM MURPHY, Pennsylvania
TAMMY BALDWIN, Wisconsin             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas                  MARSHA BLACKBURN, Tennessee
ANTHONY D. WEINER, New York          PHIL GINGREY, Georgia
JIM MATHESON, Utah                   STEVE SCALISE, Louisiana
G.K. BUTTERFIELD, North Carolina     
CHARLIE MELANCON, Louisiana          
JOHN BARROW, Georgia                 
BARON P. HILL, Indiana               
DORIS O. MATSUI, California          
DONNA M. CHRISTENSEN, Virgin         
JERRY McNERNEY, California
PETER WELCH, Vermont                 

              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
MIKE DOYLE, Pennsylvania             TIM MURPHY, Pennsylvania
JAN SCHAKOWSKY, Illinois             MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
JOHN D. DINGELL, Michigan (ex 

                             C O N T E N T S

Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
Hon. Baron P. Hill, a Representative in Congress from the State 
  of Indiana, opening statement..................................     4
Hon. John A. Yarmuth, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     5


Peggy Raddatz, Relative of Policyholder, La Grange, Illinois.....     7
    Prepared statement...........................................     9
Patricia Reilling, Policyholder, Louisville, Kentucky............    11
    Prepared statement...........................................    16
Robin Beaton, Policyholder, Waxahachie, Texas....................    20
    Prepared statement...........................................    23
Richard Collins, Chief Executive Officer, Golden Rule Insurance 
  Company, Unitedhealth Group....................................    39
    Prepared statement...........................................    41
Brian A. Sassi, President And Chief Executive Officer, Consumer 
  Business, Wellpoint, Inc.......................................    44
    Prepared statement...........................................    47
Carol Cutter, Commissioner, Indiana Department of Insurance......    53
    Prepared statement...........................................    55
Eleanor Kinney, Co-Director, William S. and Christine S. Hall 
  Center for Law and Health, Indiana University School of Law....    58
    Prepared statement...........................................    60

                           Submitted Material

Document binder..................................................    85



                         MONDAY, JULY 27, 2009

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:00 a.m., in 
the Hoosier Room, University Center North Building at Indiana 
University Southeast Campus, 4201 Grant Line Road, New Albany, 
Indiana, the Hon. Bart Stupak [chairman of the subcommittee] 
    Member present: Representative Stupak.
    Also present: Representatives Hill and Yarmuth.
    Staff present: Michael Gordon, Chief Investigative Counsel; 
Ali Golden, Investigator; Paul Jung, Public Health 
Investigator; and Sean Hayes, Minority Oversight Counsel.


    Mr. Stupak. This meeting will come to order.
    Today we have a hearing entitled ``Terminations of Health 
Policies by Insurance Companies: State Perspectives and 
Legislative Solutions.''
    Before we begin the hearing, I would like to thank 
Congressman Hill, a member of the full Energy and Commerce 
Committee, for housing us today here in Indiana. In addition, I 
want to welcome Congressman Yarmuth across the river in 
    It is our general practice at subcommittee hearings that 
non-members of the subcommittee do not make opening statements 
or question witnesses. I believe it is appropriate that we 
deviate from this practice today. I ask unanimous consent that 
Congressmen Hill and Yarmuth be permitted to make opening 
statement, if they choose, and to question witnesses during 
today's hearing. Hearing no objection, that will be the order.
    The chair will now be recognized for a five-minute opening 
statement. Other members of the subcommittee will be recognized 
for a three-minute opening statement. I will begin.
    This hearing of the Subcommittee on Oversight and 
Investigations has commenced here in Indiana at the request of 
our friend Congressman Baron Hill. We are pleased to be here 
for this hearing on abuses in the health insurance industry. I 
would like to thank Congressman Hill and his staff for 
requesting this hearing and housing us here today.
    Congressman Hill has been a leader on health care, and I 
can tell you from firsthand experience that he has been working 
diligently in Congress and on our Energy and Commerce Committee 
to look out for the people of Indiana. Thank you for having us 
here today, Baron.
    I would also like to welcome our friend Congressman John 
Yarmuth, who is from across the river in Kentucky. Congressman 
Yarmuth has been a key player in many issues in his position on 
the Ways and Means Committee, and we are delighted that he is 
here with us today.
    Let me also thank Indiana University for hosting us today. 
It is critical that Congress understand the concerns of local 
communities as we develop national health care policies, and we 
do that precisely through field hearings like the one we have 
here today, where we can go out and hear directly from people 
on matters of urgent concern.
    Today's hearing is about a horrendous practice that some 
insurance companies engage in called ``rescission.'' Here is 
how it works. When you apply for health insurance, you fill out 
an application. The forms ask about all of your preexisting 
conditions and health history, and sometimes they are extremely 
complicated. These insurance companies typically require access 
to all of your health records as well.
    The problem is that these insurance companies do not review 
these applications very carefully when you submit them. They 
wait. They let you pay your premiums, they let you go along and 
keep paying for years, creating a false sense of security that 
you will be covered if something terrible ever happens.
    When something does happen, however, when you develop a 
deadly disease, when you need expensive medical care, or when 
you have to go to a hospital for critical treatment, these 
insurance companies don't honor their agreements. Instead, they 
mobilize a team of investigators to go back through your 
original application.
    They scour years and years of your medical records to find 
some technicality, some error or omission, some box that wasn't 
checked when it should have been. And when they find it, they 
cancel your health insurance. They refuse to pay. And there you 
are in the hospital left waiting for potentially life-saving 
medical care that you may never receive.
    What is outrageous about this practice is that these 
insurance companies cancel policies even for people who didn't 
do anything wrong. The omissions on their applications relate 
to conditions that their doctors may have never told them 
about. They relate to conditions that insurance companies' own 
agents told them not to write down. And many times they relate 
to conditions that are completely unrelated to the illness or 
disease they are now seeking treatment for.
    Our subcommittee has been conducting a year-long 
investigation into this abusive practice. We have reviewed more 
than 116,000 pages. We have reviewed more than 116,000 pages of 
documents from three of the largest health insurance 
companies--Assurant, United Health Group, and WellPoint. And we 
learned that these three companies retroactively terminated 
nearly 20,000 policies over the past five years based on 
omissions on applications that were identified only after 
people became ill. These rescissions resulted in savings to the 
companies of more than $300 million.
    Last month we held a hearing in Washington, D.C. with these 
three companies, and I asked their CEOs to stop canceling 
health insurance for innocent policyholders. Amazingly, they 
refused. Let me show you a clip from that hearing. It will take 
a minute to put up there.
    [Video presentation begins.]
    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 policies.
    Mr. Stupak. How about you, Mr. Sassi? Would you commit that 
your company will never rescind another policy unless there was 
intentional fraudulent misrepresentation?
    Mr. Sassi. No, I can't commit to that.
    Mr. Stupak. Each of these three companies simply refused to 
stop canceling innocent policyholders' contracts. Now, it is 
one thing to cancel coverage for someone who commits insurance 
fraud, but it is another thing to cancel coverage for people in 
the middle of a health care crisis based on innocent mistakes 
or technicalities. It is simply not fair for insurance 
companies to collect record profits and award their executives 
billions of dollars while they are denying innocent people the 
health insurance they pay for.
    Facing with this damning testimony, we concluded that the 
only way to stop these insurance companies was to change the 
law. So our Energy and Commerce Committee has drafted health 
reform legislation that will prohibit this practice of 
rescission once and for all.
    Our bill will protect consumers in a couple of ways. First, 
we will prohibit insurance companies from rescinding coverage 
unless there is clear and convincing evidence of fraud during 
the application process. Second, we guarantee that consumers 
have an independent and third-party review of any rescission.
    We have asked the insurance companies back today to see if 
they have had a change of heart and to find out what they think 
of our legislation. We have also invited Indiana's Insurance 
Commissioner, Carol Cutter, to hear if the State of Indiana 
supports ending this terrible practice, as well as Professor 
Eleanor Kinney, the co-director of Indiana Law School's Center 
for Law and Health.
    I also want to extend a personal thanks to both Peggy 
Raddatz and Robin Beaton, who traveled here today from Illinois 
and Texas to tell us their stories about how these insurance 
companies improperly rescinded their health insurance. I also 
want to thank Patricia Reilling from Louisville, Kentucky for 
testifying today about how her policy was recently terminated 
by her insurance company.
    Let me point out that Ms. Beaton's case highlights that 
this is not a partisan issue. This is not a Democratic or 
Republican issue. When Ms. Beaton's insurance company canceled 
her health insurance, she called her local congressman, Joe 
Barton, who happens to be the ranking Republican member of our 
committee. To his immense credit, Congressman Barton intervened 
on Ms. Beaton's behalf, and made sure the insurance committee 
reinstated her coverage.
    Ms. Beaton, I know you regard Mr. Barton as a hero for 
coming to your rescue. I am not sure if you heard what 
Congressman Barton said at our hearing in Washington about your 
case, so let me show you, and here is what he said.
    [Video presentation begins.]
    Mr. Barton. I think I speak for every member of the 
committee on both sides of the aisle 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. If a citizen acts in good faith, we expect the 
insurance companies who take their money to act in good faith 
    Mr. Stupak. I couldn't have said it better myself.
    That is the end of my opening statement. Let me next turn 
to Congressman Baron Hill. Thank you again for hosting us, and 
you will be recognized for an opening statement, please.


    Mr. Hill. Thank you, Bart. I want to begin by thanking 
Congressman Stupak for taking the time to come to the place 
where God himself was born in Southern Indiana. It is good to 
have you here in Hoosier State, and we are delighted that you 
are carrying on these hearings. Hopefully, you will be able to 
get some results, and people all across our great country will 
get relief from some of the questionable practices that I have 
been hearing about.
    I also would like you to know that Congressman Stupak is 
from Michigan, and I am going to be spending a lot of time in 
your great State, Congressman Stupak, because my youngest 
daughter this Wednesday travels to Ann Arbor to attend medical 
school at the University of Michigan. So I am looking forward 
to that as well.
    I have heard Congressman Stupak talk about this issue of 
post-claims underwriting or health insurance rescission, what 
transpired at the hearing held on this issue in Washington, 
D.C. I am very interested to hear what our witnesses have to 
say today in light of that hearing, and some of the things that 
they have said that they would not do as a company in response 
to Congressman Stupak's questions about whether or not they 
would change their ways of looking at the claims.
    And I would also like to thank all of the witnesses for 
taking the time to participate in this hearing. This hearing 
could not be more timely. I hope it sheds light on some of the 
serious ills of our current health care system.
    Health care reform is certainly the topic of conversation 
right now. Today, I am going to be going back to meet with the 
committee chairman and the White House and other members of the 
Energy and Commerce Committee who are dealing with this most 
important issue, so that we can have health care for all 
    So I am glad we are holding such an important hearing right 
here in New Albany. This issue of health insurance rescission 
is, quite honestly, shocking. I can't imagine what I would do 
if this happened to someone in my family, and I think that is 
how we need to approach health care reform.
    Put yourself in other people's shoes. This issue is 
particularly distressing, because these folks aren't trying to 
trick the system. They are trying to do the right thing by 
being covered. And then, to have the rug pulled out from 
underneath them is not acceptable.
    This is also a completely bipartisan issue, as Congressman 
Stupak has already spoken about. The most vocal critic of this 
practice is the Republican ranking member of the Energy and 
Commerce Committee, Congressman Joe Barton.
    And I want to repeat what has already been said. In fact, 
Congressman Barton said this today, this morning, and also said 
it during the hearing, or not Congressman Barton but 
Congressman Stupak was quoting Congressman Barton. ``I think I 
speak for every member of the committee on both sides of the 
aisle 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.''
    So I thank everybody for coming today, and I look forward 
to hearing more testimony from our witnesses. Hopefully, we 
will be able to get some resolution to this very serious 
    Thank you.
    Mr. Stupak. Thank you.
    Mr. Yarmuth, your opening statement, please. And it is a 
pleasure to have you here as a member of the Ways and Means 
Committee. And now you are an honorary member of the Energy and 
Commerce Committee.


    Mr. Yarmuth. Thank you very much, Mr. Chairman, and thank 
you for extending the courtesies of the subcommittee to me. 
Thank you for holding this hearing.
    This hearing is important for a number of reasons. I think 
the foremost reason it is critical is that as we debate 
insurance reform and health care reform, we end up talking 
about a lot of dollars and a lot of abstract theories and a lot 
of macroeconomic implications. But at its very core, this is a 
debate about human beings, and this is a debate about humans 
and their families and their need and their right to have 
quality health care coverage that they can afford.
    So I am very appreciative of the three witnesses--Ms. 
Beaton, Ms. Raddatz, and Ms. Reilling--for being willing to 
come here and tell their stories, because unfortunately their 
stories are not atypical. Their stories are all too common, and 
we are proud to have them. It is very valuable to have a human 
face put on the issues that we are discussing today.
    Secondly, we will hear a lot about coverage and the 
uninsured today, and what is important to note is--and I think 
this hearing is important because it will point out a number of 
the reasons why people end up uninsured. It is not because they 
don't want to have insurance. It is because they are put in 
positions where, through no fault of their own, they are cast 
in a market where they cannot either afford or even buy at any 
cost the insurance that they need.
    And we will hear a lot of discussion about profits. I know, 
for instance, that over the last--well, for seven years, from 
2000 to 2007, the profits of the 10 largest insurance companies 
rose over 400 percent. I don't think that the cost of health 
care rose over 400 percent. I know it didn't. I know salaries 
didn't rise over 400 percent. And when you connect what we 
have--the subjects we will hear today, the stories we will hear 
today, to both issues of profitability and to the inability of 
Americans to afford insurance, it will be very clear.
    And, finally, I think these hearings are important, because 
as we discuss the need for a public option in health care 
reform, a public option that will compete with private 
insurers, as President Obama says ``to keep them honest,'' I 
think it will be abundantly clear after these hearings why 
keeping the insurance companies honest is a mandatory element 
of what we are trying to do in Congress for the American people 
right now.
    So I applaud the subcommittee for holding this hearing, and 
I am happy to be a part of it.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Yarmuth.
    Let us call our first panel of witnesses forward. On our 
first panel we have Ms. Robin Beaton, who is a policyholder 
from Waxahachie, Texas. Ms. Beaton, if you want to come 
forward. Ms. Peggy Raddatz of LaGrange, Illinois, who is a 
sister of the late policyholder, Otto Raddatz. And Ms. Patricia 
Reilling, who is a policyholder from Louisville, Kentucky. If 
she would come forward, please.
    OK. This is a congressional hearing. Our statements, 
questions, and answers to our questions are recorded and will 
be part of the official record of the Energy and Commerce 
Committee. It is the policy of the 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 any of you wish to be advised by counsel? You are all 
shaking your head in a no manner, so I figure that is no. OK. 
Then, I am going to ask you to take the oath.
    [Witnesses sworn.]
    Let the record reflect that the witnesses have replied in 
the affirmative. You are now under oath, beginning with your 
opening statement. We will have an opening statement. You may 
submit a longer statement for the record, and it will be 
included in the official transcript.
    Ms. Beaton, do you want to start? No. Ms. Raddatz, would 
you like to start?

                       WAXAHACHIE, TEXAS


    Ms. Raddatz. I would be happy to, Chairman. Once again, 
thank you very much for inviting me here today. My name is 
Peggy Raddatz, and I am appearing here today to testify on 
behalf of my brother, Otto S. Raddatz. My brother was 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, as so many small business owners do 
in this country.
    On the application he indicated he had kidney stones and 
that he smoked. He also listed all physicians who 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 
weight. His wife, Marie Raddatz, urged him to see a doctor. In 
September of 2004, my 59 year-old brother was diagnosed with 
Stage 4 Non-Hodgkins-type lymphoma. The very next day he began 
an intensive course of chemotherapy treatments.
    Due to the very aggressive type of cancer that my brother 
had, a mantel zone lymphoma, he was given six more rounds of 
chemotherapy by January of 2005. This was a very difficult time 
for him. Because he was going through intensive chemotherapy, 
he found it difficult to work, and as a result difficult to 
continue to manage his business as a restaurant owner.
    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. In the midst of his chemo treatments, Otto received 
a phone call and letter from Fortis Insurance Company stating 
his insurance was canceled. He was devastated. I remember the 
day very well.
    My very strong brother who was always together, my older 
brother, was just totally distraught. And he called me, his 
sister, who happens to be attorney. He was rescinded all the 
way back to the acceptance date of August 7, 2004, which meant 
he basically had no health insurance whatsoever. This meant 
none of his cancer treatments would be covered at all going all 
the way back to the beginning when he first got cancer.
    Most importantly, he would not be able to receive the stem 
cell transplant that he needed to save his life. My brother 
only had a very small window of time in which to receive a stem 
cell transplant. He needed to be scheduled within the next 
three to four weeks or else he wasn't going to receive it, 
because there would be no point to receive it. He would simply 
worsen and die.
    My brother was told he was canceled during what the Fortis 
Insurance Company called a ``routine review'' during which they 
claimed to discover a material failure to disclose on the part 
of my brother Otto. Apparently, in 2000, his doctor had--his 
family doctor had done a CT scan which showed an aneurysm and 
gall stones. My brother was never told of either one of these 
conditions, nor was he ever treated for them and he never 
reported any symptoms whatsoever for these conditions.
    After months of preparation, both mentally and physically, 
the stem cell transplant could not be scheduled. My brother's 
hopes for being a cancer survivor were totally dashed. His 
prognosis was only a matter of months without the procedure.
    When I called the hospital to see if, as his sister, an 
attorney, I could schedule the stem cell transplant for him, I 
was callously told, ``Unless your brother brings in cash, he is 
not going to get the procedure without his insurance any 
    My brother, who was very, very ill, and was given only a 
few months to live, was accused by the Fortis Insurance Company 
of falsely stating his health insurance history, despite the 
fact that he had no knowledge of ever having any gall stones or 
aneurysms whatsoever.
    Luckily, I am an attorney and was able to aggressively 
become involved in solving this life-threatening situation for 
him. I contacted the Illinois Attorney General's office and 
received immediate and daily assistance from Dr. Babs Waldman, 
the Medical Director of their Health Insurance Bureau.
    During their investigation, they located the doctor who 
ordered the CT scan. He had no recollection whatsoever of 
disclosing the information to my brother about an aneurysm and 
gall stones, or of ever treating him for it. After two appeals 
by the Illinois Attorney General's office, Fortis Insurance 
Company overturned their original decision to rescind my 
brother's coverage, and he was reinstated without any lapse.
    Without the help of the Illinois Attorney General's office, 
this would not have been possible whatsoever. What the Fortis 
Insurance Company did was unethical. To deny a dying person 
necessary medical treatment, based upon medical conditions a 
patient has never had any knowledge of, has never complained 
about, and has never even been treated for, is cruel.
    It is our family's hope that this information will benefit 
other patients who are in need of life-saving medical 
treatments, and who do not have knowledge or means necessary to 
fight against the health insurance companies. It is, further, 
our desire to expose these practices of the Fortis Insurance 
Company, so that others who are so deathly ill as my brother 
was do not suffer as the victims of these insurance companies.
    Thank you very much.
    [The prepared testimony of Peggy Raddatz follows:]

    Mr. Stupak. Thank you, Ms. Raddatz.
    Ms. Reilling, would you like to testify? You might want to 
pull that mic up. Thank you, and thank you for coming.


    Ms. Reilling. Good morning, Mr. Chairman, and members of 
Congress. My name is Patricia Reilling.
    I opened an art gallery in 1987, and in 1990 I took out a 
group health insurance plan with Anthem through the Kentucky 
Retail Federation. In 1994, my policy was changed to a one-
person group, and I have had the same coverage, with slight 
changes on occasion, until June 30 of this year. I received a 
letter from Anthem at the beginning of June informing me that 
my coverage would end on June 30, 2009, and that was the first 
time I had heard anything about it.
    To be honest, I hadn't even opened that letter for at least 
four or five days, because I had also received the information 
I get from my insurance agent every year around this time 
telling me about the renewal rates for the coming year. And 
this time the letter was very positive and said there were no 
change in the rates, I would have the same rates, and that was 
just great.
    And I also received a bill for my July premium, so I had 
opened those, and so I wasn't really thinking that this letter 
from Anthem was going to be anything that, you know, was very 
    So when I opened that, I was just--I was totally shocked, 
and it didn't make much sense to me. And I called the agent, 
and then we started talking about it. But if you don't mind, I 
would like to back up a little bit and tell you some of the 
background concerning my health and the reason that it has been 
so devastating for me.
    I have always been really healthy. I hadn't been in a 
hospital since my son was born, which was several years ago. 
And I could be in a room full of people that had the flu, I 
mean there could be hundreds, and I wouldn't even get the 
sniffles. And I did have a bad back. I mean, I have a bad back, 
and I at one time had some tests, and I see a pain management 
doctor about three or four times a year, and I am on 
prescriptions meds for this. That is the only thing in these 
actually almost 20 years that I have been with Anthem.
    Other than that, I usually describe myself as being healthy 
as a horse, which is not really flattering, but it is pretty 
much true, until March of 2008 when I discovered a lump in my 
breast. After visiting my primary care physician, I went for a 
mammogram and ultrasound. And when the technician was finished, 
she said she had to check with the radiologist to see if she 
had everything she needed.
    After a couple of minutes, much to my dismay she was not 
the one who came back in, but it was the doctor who came in and 
sat down on the table to explain that they had found lumps in 
both breasts, and that he was absolutely certain that they 
weren't cysts, and that I needed to go to a general surgeon 
right away for biopsies.
    So even before the surgeon performed the biopsies, he told 
me that he was certain that it was cancer, and that he would 
need to remove both breasts. He did the biopsies, but he had 
difficulty locating one of the tumors, and he needed to do one 
of the biopsies again, so he ordered an MRI.
    Well, I very soon, to my amazement, received a letter from 
Anthem that denied the MRI with the explanation that nothing--
something to this effect, that nothing in my health background 
or my family history indicated that I would be likely to have 
cancer. And considering the fact that I don't even know 
anything about my family history, I thought that was really 
    So I ended up having to go through another biopsy, which 
was really painful, because the doctor ended up having to do a 
lot of hunting and digging because the point was that he 
couldn't find it in the first place. So the outcome, of course, 
was that I did have cancer in both breasts. So April 7, I had 
the bilateral mastectomies. I made a rather long but full 
recovery, and on December 2, 2008, I was admitted to Baptist 
East Hospital again for reconstructive surgery, and I was there 
for about five days.
    And after the last drain was removed at my plastic 
surgeon's office, and I am probably being a little graphic, but 
a lot has happened, and if you all don't mind I don't, so it 
was around January 7 that I returned to her office. And on the 
14th--that was when they took the last drain out.
    On the 14th, when I went back, it was very obvious that I 
had a very serious abdominal infection, and she wanted to admit 
me to the hospital right then. I couldn't, because I had had a 
little breakfast, so the next morning at 5:00 a.m. I was at the 
hospital and I was admitted for emergency abdominal surgery for 
a very invasive case of MRSA staph infection, which I had 
contracted during the reconstructive surgery in December.
    The incision from my December surgery was reopened, and my 
abdomen was flushed with antibiotic fluid, and the incision was 
closed. And then, two days later I had another emergency 
surgery, and, again, the same thing happened, they flushed my 
abdomen out. But I was so ill and had gone in so ill that they 
had to give me blood transfusions and potassium, and I was 
pretty much at death's door.
    And this time they actually had to remove the interior part 
of my navel and sew up my belly button, which this is--I am 
using really intricate medical terms here, but this is what 
she--how she described it to me, because this infection had 
eaten away all of the interior part of my navel. And I remained 
in the hospital for seven days, and went home, had to stay with 
a relative for a week because I couldn't take care of myself.
    And, basically, I have not regained my strength since that 
time. It has flared up in a major way about three times since 
then, every time I go off the antibiotics. Now the area where 
the abdominal muscles were attached during my reconstruction 
surgery have all been comprised from this infection, and they 
no longer support my innards, again using the most 
sophisticated medical terms. And I really can't stand for more 
than 15 or 20 minutes. So the infectious disease doctor feels 
that the infection is deeply embedded in the scar tissue and is 
going to require surgery in order to clear that up.
    So because of the MRSA staph infection, I have never been 
able to complete my surgeries for my cancer. And now even the 
surgery that I had has been compromised, and that is going to 
have to be redone. And, obviously, with no insurance, that is 
impossible. So I can't even get rid of this infection, because 
I don't have any coverage.
    I was told that recovery from this reconstructive surgery 
should be about six weeks. I have been totally out of 
commission for eight months, have not been able to work, and I 
work for myself. That, combined with the recovery time for the 
mastectomies, that has actually--it has been really 
    The MRSA was difficult enough to deal with, but when I 
received notification that my insurance had been canceled with 
barely a month's notice, the world came crashing down. My 
medications alone--and this is generic medications--are close 
to $2,000 a month.
    So they said--I had an appointment--just to give you an 
example, I had an appointment with an infectious disease doctor 
to see her again, and when I went to see her at her office they 
told me that it would cost me $280, because I didn't have 
insurance. So they made an appointment with her for me at the 
clinic, because she is with U of L.
    And my appointment was at 9:00. I didn't see her until well 
after 11:00. I didn't get out of there until after 12:00, and 
it was not at all the same as when I saw her in her private 
    The reason I mention it is because I have always been a 
very compassionate person, and I have always tried to put 
myself in someone else's shoes. But I have certainly been 
getting an in-depth education in the difference between the 
haves and the have-nots. This has all been a really eye-opening 
    You can imagine it is not easy to stand up in front of the 
world and tell some of the most intimate details of your life, 
but never in my wildest dreams did I imagine that I would find 
myself in this situation. I started out with a successful 
career as a copywriter, I ran a manufacturing company in New 
York, and then I opened my art gallery, and all it took was for 
me to get sick to have everything come crashing down.
    If I hadn't gotten the staph infection, things would have 
been a little tight for a while, but life would have gone on. 
As it is now, I have gone from driving a Mercedes and traveling 
around the world and going to New York to get my hair done to 
spending every waking moment calling agency after agency trying 
to get assistance from pharmaceutical companies to get my 
prescriptions, trying to find out who can help me pay my 
utility bills, and who knew that even food stamps are on 
plastic these days. I used to sell my clothes in consignment 
stores; now that is where I buy them.
    I guess one of the points I would like to make is that it 
can happen to almost anybody. If you get sick and you lose your 
insurance, you can be in serious trouble in an amazingly short 
period of time.
    I have had this same policy with Anthem for nearly 20 
years. After having that policy, 15 years of which was 
considered--I was considered a one-person group, and I never 
missed a payment--I really can't understand how I could receive 
a letter that gave me less than 30 days after they canceled me.
    So I called my agent who told me that Anthem was no longer 
going to allow one-person groups, which I thought was a little 
odd since I have been a one-person group for almost 15 years. 
So I started calling around. I also thought since I was in the 
middle of cancer treatment, and this MRSA, I couldn't 
understand how I could be dropped.
    So I called the insurance company, and I finally reached 
someone who wouldn't give me an answer, never said anything 
about their policy of canceling one-person groups, but they 
said that they had sent me a letter in April and that they had 
sent me a letter in May, and they told me that I would have 
been given an opportunity to at least dispute this, but they 
had not heard anything from me. Consequently, I was canceled.
    Well, I never got the letter. So I called my agent, and she 
said, ``Oh, yes, I knew about that. But I knew that you 
wouldn't be able to afford the policy,'' the conversion policy, 
which was more than double what I was paying. ``So I didn't 
call you. I didn't let you know about it.''
    Maybe I wouldn't have been able to afford that. I wouldn't 
have. But I would have at least had time to try to look for an 
option. I would have had time to try to get in touch with 
pharmaceutical companies to get the drugs. And she did forward 
the letters to me, and they never did send them to me. Those 
letters were addressed to the agent. They were never addressed 
to me. They said, ``Dear Customer,'' but the addresses on the 
letters were both the insurance agent.
    And, actually, the information in the letters, that never 
said anything about canceling one-person groups either. Nowhere 
in any of these conversations did it say anything about that. 
So it didn't--it just--she had taken good care of me for almost 
20 years, but I don't know what happened through all of this. 
But the fact that the results of an error like this being so 
monumentally disastrous and without recourse can obviously be 
acceptable to the insurance companies seems not only 
unbelievable but, quite honestly, inexcusable to me.
    In my appeal to the insurance company, all I asked was that 
they continue my coverage until my treatment could be 
concluded, and their answer said something about--oh, and this 
came from the president of the company, the president of 
Anthem. She said that she hoped that my health would improve 
and that I would regain my previous lifestyle, and she said 
that there was nothing they could do about their policies.
    How they expected me to return to my good health and 
lifestyle I don't know, but maybe I should have asked to speak 
to the psychic who knew that my family's health background had 
predetermined that I wouldn't have cancer. I don't know.
    But I just wanted to thank President Obama and all of our 
Congressmen and their hard-working staff members for their time 
and efforts to make changes in our system, so that this type of 
thing will become a bad memory.
    Just to add a light note. When I was typing this up the 
night before last, I got a phone call. And I looked at my 
caller ID and it said Anthem Blue Cross/Blue Shield. Now this 
is 26 days after I have been dumped by the company. And it is--
for a minute this Pollyana that lives inside me is thinking, 
``Oh my gosh, they are calling me and they are going to 
reinstate me.''
    Then, the realist in me says, ``You are an idiot. That 
isn't possible.'' And this lovely recording of this woman's 
voice comes on and says, ``Have you had a mammogram lately?'' 
And I am thinking this is really adding insult to injury. And 
it goes on and asks about other tests and how it is very 
important for me to do these preventatively and everything. And 
I thought, if only you were a real person and I could say, ``I 
would love to have these other tests, but I don't have 
    So thank you very much.
    [The prepared testimony of Patricia Reilling follows:]

    Mr. Stupak. Thank you for your testimony.
    Ms. Beaton, your testimony, please.

                   STATEMENT OF ROBIN BEATON

    Ms. Beaton. Mr. Chairman, members of the committee----
    Mr. Stupak. Can you just pull that mic up? It is hard to 
hear you. I know you have a soft voice.
    Ms. Beaton. Is that good?
    Mr. Stupak. That is better. Thank you.
    Ms. Beaton. Mr. Chairman, members of the committee, I am 
very honored to be here today to share my story. My name is 
Robin Beaton. I was registered nurse for 30 years. I had group 
insurance and was in very good health. I retired from nursing 
and opened a small antique business. My father always taught 
our family how very important insurance was. So at my 87 year-
old Dad's insistence, I obtained an individual health policy 
with Blue Cross and Blue Shield in December 2007.
    In May of 2008, I went to a dermatologist for pimples. A 
word was written on my chart, which was interpreted incorrectly 
as meaning precancerous. In June 2008, I was diagnosed with 
invasive HER-2 genetic breast cancer. This is a very aggressive 
form of breast cancer. In the beginning, I was told I needed 
immediate surgery. The doctor said my tumor was two 
centimeters. Two centimeters is like probably that big. The 
doctor said that he would perform a lumpectomy. When you don't 
have a large tumor, you get to have a lumpectomy. In the 
beginning, I was going to have a lumpectomy.
    Blue Cross and Blue Shield precertified me for the surgery 
and for the hospital stay. The Friday before the Monday I was 
to have my surgery, Blue Cross and Blue Shield called me on the 
telephone and they told me that my chart was red-flagged. What 
does ``red-flagged'' mean? That means that they are going to 
investigate you. They were doing it due to the dermatologist's 
report, due to the pimple report.
    My dermatologist called Blue Cross directly to report that 
this was only pimples, it was nothing related to cancer. He 
asked Blue Cross and Blue Shield to please not hold up my 
cancer surgery. Blue Cross and Blue Shield the next day stated 
that they were launching a five-year medical investigation into 
my medical history. This would take approximately two to three 
    I was frantic. I was totally alone as my family lives in 
Jacksonville, Florida. The hospital wanted a $30,000 deposit, 
and I knew I could not pay for surgery myself. I had no idea 
what to do. I had no idea where to turn or exactly what to do 
to get surgery. I met a lady who told me, she said, ``You need 
to call your congressman, Joe Barton, for help.''
    I called Joe Barton's office and told him of my situation. 
Joe Barton's office went to work immediately to help me. The 
next day I received a letter from Blue Cross and Blue Shield 
permanently canceling my insurance, stating that my insurance 
was canceled back to the date that it began.
    Can you imagine having to walk around for months with 
cancer growing inside your body and having no insurance? Joe 
Barton and Christy Townsend worked non-stop every day calling 
Blue Cross and Blue Shield trying to get my insurance 
reinstated, so that I could have my cancer surgery. They had no 
success at this point.
    I began going everywhere looking for help--county 
hospitals, agencies, foundations, anywhere that I could go 
where people would listen to me tell my story and see if I 
could get help. I was placed on a waiting list. When you have 
aggressive invasive breast cancer, you don't have time for 
waiting. My medical records were lost three times at the county 
hospital. The process was unending, searching for help.
    The sad thing is Blue Cross and Blue Shield took my high 
premiums, and the very, very first time that I ever filed a 
claim with them, the very first time, and was suspected of 
having cancer, they took action against me, searching high and 
low for a reason to cancel my policy, so they would not have to 
pay for my cancer.
    A nurse who attends my church, her main job is eight hours 
a day she reads medical charts, and what she does is she looks 
for reasons for Blue Cross and Blue Shield to cancel insurance. 
When she heard about my story, what they had done to me, she 
came to me and she said, ``I am so sorry this happened to 
you.'' She said, ``I am just so sorry.''
    Blue Cross and Blue Shield has control over life and over 
death. People have to be able to count on what they pay for. 
Blue Cross and Blue Shield will do anything to get out of 
paying for cancer--anything. The sad fact is anyone with a 
catastrophic illness not part of a group stands a much higher 
chance of being canceled and left out in the cold without 
    I go to a cancer support group every week, and have since I 
very first found out I had cancer. Four of the girls in my 
group had their insurance canceled. Two of them have had to 
declare bankruptcy. It is very difficult to speak out, because 
I live in fear every day that my insurance will be canceled 
    I looked everywhere for help, and no one-no one--would help 
me. No help was found until Joe Barton and Christy Townsend, 
after working a very, very long time, got my insurance 
reinstated. After being diagnosed in June 2008 with aggressive 
invasive breast cancer, I was placed back on the surgeon's 
waiting list to get my cancer surgery. My tumor grew from two 
to seven centimeters. Instead of having a small lumpectomy, I 
had to have a radical double mastectomy, and I had to have all 
of my lymph nodes taken out, every one of them.
    Delaying cancer treatment only worsens the condition, 
costing more to treat, treatment much more intensive, and 
treatment not being as effective. Also, the outcome is not as 
good. Once you have cancer, you always have cancer. It is a 
neverending battle.
    I go to chemotherapy every three weeks, and I will do this 
for the next year. Last week I had my second surgery, a two and 
a half hour surgery, which was very hard, to be cut on again. I 
had that just last week.
    Cancer is expensive, and no one wants to pay for it. This 
is America. People who purchase individual policies and pay 
their premiums on time, they deserve to receive what they have 
paid for. I pray with all my heart that no one has go through 
the sheer agony that I have endured for this last year. I did 
not deserve to have my insurance canceled. Blue Cross set out 
to get rid of me. They searched high and they searched low 
until they found enough to cancel me.
    I owe my life to Joe Barton and his staff. I gave up. I 
completely gave up. But they never gave up. They never gave up 
on helping me. Only because of them was I able to get help. 
That was the only reason I got help. If it wasn't for them, I 
would be dead today.
    I pray that you will listen to my story and help people 
like me who are powerless against big insurance companies.
    And I thank you so much for what you all are doing. I just 
admire you all so much, and I thank you for listening to me.
    Thank you.
    [The prepared testimony of Robin Beaton follows:]

    Mr. Stupak. Thank you, Ms. Beaton.
    We are going to go to questions for this panel. Let me 
    Ms. Beaton, when your insurance policy was rescinded, you 
needed a mastectomy to save your life, is that correct?
    Ms. Beaton. I needed first a lumpectomy in the very 
beginning. I forgot to say that. When I went to Washington, 
truly honestly I was only going to have to have a lumpectomy, 
which is where they go in and remove the small tumor. But due 
to the waiting, I had to go from a lumpectomy to a double 
radical mastectomy and the lymph nodes. So that is how much my 
cancer spread.
    Mr. Stupak. So in that delay, you were going for a 
lumpectomy, you ended up having a double mastectomy.
    Ms. Beaton. Yes. Everything.
    Mr. Stupak. What would have happened if Congressman Barton 
was not able to get your insurance reinstated? What would you 
have done? Would you have had the surgery?
    Ms. Beaton. I went to the county hospital, and they placed 
me on their waiting list to get a mastectomy, to get a 
lumpectomy at first and then it turned into a mastectomy. But 
anyway, at the county hospital you have to wait. And to be 
honest with you, they lost my records three times, and they 
never called me back. In other words, I kept calling, and I 
kept calling.
    Mr. Stupak. So you don't know how long you would have had 
to wait for the county hospital----
    Ms. Beaton. I had to wait--I probably would have waited a 
long time, a lot longer, to get my--I probably wouldn't have 
    Mr. Stupak. You also stated in your opening statement four 
of the women in your cancer support group had their insurance 
canceled because of cancer. Two of the four had to declare 
    Ms. Beaton. Yes.
    Mr. Stupak. Without using any names here, can you tell us 
any details about their specific interactions with their 
insurance companies?
    Ms. Beaton. Yes. Both of them had individual policies, and 
both of them had paid their premiums. One girl had her 
insurance for almost six years, and the other girl had her 
insurance for three years. And just the moment that she put in 
the first claim for cancer, they started doing an 
investigation. It was almost like repeating my story over.
    And they did an investigation into her history, and they 
found a little tiny thing she forgot to write down on her 
application. And they rescinded her insurance, canceled her, 
you know. She had to go apply for the Safe Health--both of them 
were on Safe Health.
    So that is the sad thing--when private insurance gets rid 
of people, eventually they will get help, but the taxpayer is 
going to have to pay for it. And that is exactly what happened. 
Both of them were on disability and on I guess you would call 
it Medicaid or Medicare. And I have to listen to--every week I 
hear them talking about the terrible time they are having, and 
they have both lost their house, they have lost their home.
    Mr. Stupak. To be on Medicaid, if you are under 65, as all 
of us know up here because we deal with it all the time, you 
either have to spend down and have very little assets or you 
have to be at least disabled for two years before you can even 
qualify for Medicare. If you had to wait two years and become 
disabled in order to qualify for Medicare to pay for your 
surgery, you probably wouldn't be here today.
    Ms. Beaton. No. One of the girls has brain cancer, and the 
other has breast cancer, which spread to her lungs. So, you 
know, if I went around the room and told you all the people in 
my cancer group and the stories, those are just the four most 
significant ones. But every one of them has had trouble with 
their insurance companies, getting them to pay for stuff, not 
wanting to pay for scans, and just the cost of cancer is just 
    Mr. Stupak. Well, you were a nurse, Ms. Raddatz is an 
attorney, Ms. Reilling is a professional person, who is 
obviously quite successful. We have a rather sophisticated 
panel here, and it seems like each of you had to intervene in a 
certain way to--probably more acuity or more knowledge on how 
the system works in order to get your insurance or get some 
form of coverage.
    Ms. Raddatz, if you may, that binder right in front of you, 
the brown one, Tab Number 5, I want to ask you a question about 
your brother. Tab 5 is a letter your brother sent to the 
Illinois Attorney General after his health insurance was 
rescinded, and this was right before he was supposed to have 
the bone marrow transplant, correct?
    Ms. Raddatz. That is correct. It was a stem cell 
transplant, yes.
    Mr. Stupak. In there he writes, ``I have been through 
chemotherapy, and I am being prepared for a stem cell 
transplant within three or four weeks. This is an urgent 
matter. Please help me so I can have my transplant as 
scheduled. Any delay could threaten my life.''
    So in your brother's case he needed this transplant to save 
his life, is that correct?
    Ms. Raddatz. That is correct.
    Mr. Stupak. And if the rescission stood, in other words if 
his policy was not reinstated, would he have been able to get 
that transplant?
    Ms. Raddatz. No.
    Mr. Stupak. So the insurance company's decision was 
literally a matter of life and death for him?
    Ms. Raddatz. It absolutely was, because there was a very 
small window of opportunity for him to have it. And he couldn't 
just go shopping for another method of having it. At the last 
hearing, someone brought that up. ``Well, how come you didn't 
try to get some alternative means of treatment?'' Well, this is 
a stem cell transplant. There are only certain doctors that do 
this, and, first of all, you prepare for this for months with a 
very specific protocol. It is a very sophisticated procedure. 
It is a life-saving procedure; thank goodness that it exists 
and that it is saving people's lives.
    But you have to do it within that window of opportunity. If 
you don't do it, he would have died.
    Mr. Stupak. So, then, you intervened with the Attorney 
General, and the Attorney General wrote a couple of letters. 
And finally, after the second or third letter, they reinstated 
his policy, because he was denied for something he had no 
knowledge of, correct?
    Ms. Raddatz. That is absolutely correct.
    Mr. Stupak. OK. And your brother, unfortunately, died. But 
did the stem cell transplant extend his life?
    Ms. Raddatz. It certainly did. If he didn't receive the 
stem cell transplant, after, like I said, he was told he 
wasn't--I mean, imagine you are told that you are dying, that 
you only have a few months to live, but there is a doctor who 
can give you a stem cell transplant and help you, and he is 
preparing you for it.
    And so you are somewhat hopeful that your life will be 
extended, and now all of a sudden, no insurance, no stem cell 
transplant. Yes, he had the stem cell transplant eventually, 
and it extended his life approximately three and a half years, 
which, you know, he did pass away just 12 hours short of his 
64th birthday on January 6 of this year.
    But those three and a half years, to myself and our family, 
were precious. We spent the last 30 days with him in the 
hospital every day, and those last 30 days, for anyone who has 
ever been in that situation, every month--every year, every 
month, every day, every hour is precious, for your loved one 
and for your family. And it was successful. And as a matter of 
fact, he was preparing to have a second stem cell transplant 
when he did pass away.
    Mr. Stupak. Thank you.
    Ms. Reilling, you were with Anthem insurance for 20 years?
    Ms. Reilling. Yes.
    Mr. Stupak. And Anthem is really--is our ballpoint 
insurance company?
    Ms. Reilling. Yes. I think they were fairly recent with----
    Mr. Stupak. And of those approximately 20 years, 15 you 
were in this single-person group policy?
    Ms. Reilling. Yes.
    Mr. Stupak. Did they ever tell you this single-person group 
policy was coming to an end, they were changing their policies 
on single-person group policies?
    Ms. Reilling. No. As I said, supposedly, these letters that 
were supposedly sent to me in April and May, but when I did see 
those, which were sent to me in June after the fact from my 
agent, they never said anything about them either.
    Mr. Stupak. Well, were those letters addressed to your 
agent or to you?
    Ms. Reilling. To the agent. They referred to me, but they 
were never sent to me. And they did not say anything about that 
    Mr. Stupak. So you weren't rescinded. They failed to renew 
your policy.
    Ms. Reilling. Oh, no, they canceled me.
    Mr. Stupak. Right.
    Ms. Reilling. They said, ``You will be canceled as of June 
    Mr. Stupak. And then, they offered you a single, individual 
policy, correct?
    Ms. Reilling. Well, yes, because we applied for another 
policy that was--my agent applied for something that would have 
been a reasonable policy, knowing that they were--she knew that 
they would not allow me to have that, because I was going to 
try to get a State policy, which is like a high-risk pool.
    Mr. Stupak. Sure.
    Ms. Reilling. So they--but they didn't allow--they did deny 
me that.
    Mr. Stupak. So that you----
    Ms. Reilling. But they didn't tell me why.
    Mr. Stupak. Did you submit an application for an individual 
    Ms. Reilling. Yes.
    Mr. Stupak. And you were denied?
    Ms. Reilling. They said, ``We would love to give you 
insurance. We are pleased to give you insurance. However, we 
will not give you the insurance that you applied for, the 
policy that you applied for. However, we would be glad to give 
you this other policy,'' which is close to $1,300--well, one 
that was close to $1,200 a month and one that was close to 
$1,300 a month, which is--with a $2,500 deductible, which is 
totally out of my reach.
    And the reasons that they gave for denying me the policy 
that I applied for make no sense whatsoever, and they actually 
didn't tell me.
    Mr. Stupak. Do you believe they failed to renew your policy 
because they are closing this single-person group policy status 
they had, or do you believe it is because you were sick?
    Ms. Reilling. That makes no sense. I had it for almost 15 
years. The only thing that--to me, I almost never made any 
claims. I mean, the only thing was is I had this ongoing 
treatment for my back that, as I said, I only went to the 
doctor every three to four months, and that was because I had 
to do that to get my medications renewed. And other than that, 
I haven't been sick for as long as I can remember.
    Mr. Stupak. So you didn't cost them any money until the 
last year.
    Ms. Reilling. No. And I totaled it up, and I know that I 
have spent well over $200,000 on my premiums. And even with my 
surgeries, they are still way ahead.
    And I did want to mention something that had to do with 
what Ms. Beaton said. When she was talking about the fact that 
if--if the insurance companies would approve some of these 
things that are asked for, it would save them money. There was 
a test that my oncologist had me go for, and it actually 
allowed them--the results of that test allowed me to not have 
chemotherapy, which was a wonderful, wonderful thing for me. It 
is a new test. It is a relatively new test. It is expensive. It 
is $2,000-something.
    However, it saved the company, because had I not had that 
test, I was definitely going to have to have chemotherapy and 
possibly radiation. They would not--no, it was close to $3,000. 
The insurance company denied payment for it, and we are still 
fighting it, and this goes back to 2008. They are still denying 
it. They paid something like $750, and they will not pay any 
more, and we have had, you know, time after time we are trying 
    Mr. Stupak. Sure.
    Ms. Reilling [continuing]. Go through that. So when you 
talked about the cost effectiveness, somebody is not paying 
attention, because, yes, that is an expensive test, but it is 
preventing much more expensive treatment. So it doesn't make 
any sense.
    And the other thing is is the infection that I have now, 
that is--I can't see my son, because he is diabetic, and he has 
an insulin pump, which has a needle going into his stomach. So 
this staph infection is threatening to him, so I can't be 
around my son. I have a grandson, who is so afraid of the swine 
flu, that now when he hears about this I can't see him.
    And I can't go on with my life, because I can't treat this 
infection. So it is just--it is crazy that you can't go on with 
your life if you do not have your insurance. And I am being--
you know, I never--I didn't do anything wrong.
    Mr. Stupak. Sure. So it is not just a financial, but as we 
have seen from each of you, the emotional toll it takes on 
families is tremendous. And each of you brought forth a form of 
cancer that your brother had or you had personally.
    And in documents obtained by the committee--I said we have 
looked at over 116,000 documents, and it shows that cancer is 
one of the conditions that automatically triggers an 
investigation by these insurance companies, whether it is 
Assurant or WellPoint or any of these. In fact, here is a list 
of Assurant's. There is about 1,400 different codes they use. 
So once you apply for it, it then triggers it in their 
computers. Then, they go through and scour and try to find some 
reason to deny you, because of an expense. And you have 1,400 
by one company, 2,000 codes by another, so that----
    Ms. Reilling. The wording of----
    Mr. Stupak [continuing]. Pretty much means you have----
    Ms. Reilling. The wording of why they denied me this new 
policy that I tried to apply for, they said ``ongoing treatment 
for'' and then----
    Mr. Stupak. They list it.
    Ms. Reilling [continuing]. They used--well, no, they 
wouldn't say what it was. They mentioned my back, but of course 
they have been treating me for that for over 20 years. Then, 
they said--I don't remember the word, it is in papers that I 
gave you all, but conditions, something like ``unnamed 
    Well, the only other condition is the MRSA staph, which I 
got when I was in the hospital----
    Mr. Stupak. Right.
    Ms. Reilling [continuing]. And cancer. It seems that it is 
not right for them to deny me that. And the MRSA, the thing 
that is frightening to me, is this has already been eating away 
at my insides. I mean, they have done emergency surgeries for 
that. You know, so the longer I go not being able to have a 
surgery that is supposed to help get rid of that, the longer I 
am at risk of it going ahead and just munching its way through 
to my insides. And it is very frightening, not to mention the 
fact that I can't do anything, and I can't work and I can't 
make a living.
    So, you know, with just the strike of a pen, they can 
totally ruin people's lives.
    Mr. Stupak. Thank you.
    Mr. Hill, questions, please.
    Mr. Hill. Thank you, Mr. Chairman. And, again, I want to 
thank the chairman for coming to Indiana to hold these hearings 
to try to get to the bottom of the problems that we are having 
in health care.
    I am going to have to leave around noon, which is a little 
earlier than when the committee is going to have to adjourn, 
because I am traveling back to Washington today, as a member of 
the Energy and Commerce Committee, to carry on discussions 
about what we should be doing with this bill that is before us.
    One of the things that is a given is the fact that when we 
pass health care--and I believe that we will, although it is 
going to be a struggle to do it. The legislative process grinds 
slowly. But one of the things that we will be addressing is 
preexisting conditions. So when we pass health care, we will no 
longer have to have meetings like we are having, committee 
meetings right now, because your situation will not be relevant 
anymore, because preexisting conditions will no longer be an 
    And that is one of the most important reasons why we need 
to pass health care legislation this year. Everybody has a 
story to tell. I have my own story. My youngest daughter, 
Libby, has a blood disorder. She is 22 years of age, and she is 
heading off to Michigan Medical School. And she very soon is 
going to be on her own. She is on our policy now.
    What will happen to her now that she has this preexisting 
condition when she has to buy her own insurance policy? We are 
all very nervous about it. And so unless we get a company or 
somebody that accepts preexisting conditions, she is going to 
be out of luck. And so we all--the three of us here, and the 
members of Congress, realize the importance of passing 
legislation that is going to correct this inequity.
    Now, having said that, I do have a few questions. Ms. 
Beaton, you say that you obtained an individual policy with 
Blue Cross and Blue Shield in December of 2007. And then, in 
May 2008, which is approximately five months later, you were 
diagnosed with acne, which was precancerous.
    Ms. Beaton. But it wasn't precancerous. It was just a 
misinterpretation of a word. But what it did to them is it red-
flagged my chart. In other words, it brought suspicion on me, 
because the word. The doctor--he was the nicest man. He called 
Blue Cross and Blue Shield directly, and he begged them, he 
said, ``Please,'' he said, ``this is a misunderstanding.'' He 
said, ``This lady came to see me for pimples or acne.'' He 
said, ``She doesn't have anything related to cancer.''
    Mr. Hill. And who said that?
    Ms. Beaton. Dr. Kent Afergutten.
    Mr. Hill. This is your dermatologist?
    Ms. Beaton. Yes, sir.
    Mr. Hill. OK. And then, the insurance company told you on 
the Friday before you were to have cancer surgery that ``They 
were launching a five-year medical investigation into my 
medical history, and this would take approximately three 
    Ms. Beaton. Yes.
    Mr. Hill. Did that delay your surgery?
    Ms. Beaton. Absolutely. It delayed it from June until 
October 2, because what I had to do is I had to provide them 
every doctor, every hospital, every pharmacy, anything I had 
that was related to my medical history for the last five years. 
And can you imagine having to go back in your medical history 
for five years? You know, you don't remember things. Because 
they said if I forgot one thing, if there was one thing that I 
forgot, that I didn't disclose, that I would automatically be 
    So I searched, and, I mean, I went through all of my 
records. It took me like weeks to do that. And I gave them 
every pharmacy I had ever been to, because I don't use always 
the same pharmacy, I go to different pharmacies. I had to give 
them every pharmacy, every doctor, every hospital, every 
emergency room I had ever been to. And then, what they do is 
they write--they have to get permission from you to get it. 
They get your medical records, and they go through with a fine-
tooth comb those medical records.
    So, yes, it took from June when I was supposed to have my 
surgery, June, July, August, September, October 2 I had my 
surgery. And just like I said, the most significant thing is, 
if you can look on a picture how big two centimeters is, how 
small it is, to know that I was going to have to have a 
lumpectomy, and then to have to have both of your breasts 
removed and all of the lymph nodes, I will never be able to do 
anything with this arm again, like have blood drawn, have IVs, 
or anything out of this arm for the rest of my life. So, yes, 
it affected me with all of my heart.
    My tumor grew, it spread, and, you know, you never know, 
but if they could have done my surgery really quickly, perhaps 
none of that would have happened.
    Mr. Hill. OK. Who made the decision to delay your surgery?
    Ms. Beaton. Blue Cross and Blue Shield.
    Mr. Hill. Did the hospital not want to, or the doctors not 
want to, perform the surgery because it was in doubt whether or 
not you had coverage or not?
    Ms. Beaton. Yes. They said that I would have to pay a 
$30,000 deposit, and I didn't have that kind of money, and 
neither did my mother and father. So they wanted a big deposit, 
and I didn't have it.
    Mr. Hill. So the matter got worse, and then you had to call 
upon Joe Barton to help you get it fixed and he did.
    Ms. Beaton. He did. If you only knew how hard he worked 
every day. He went all the way to the president of Blue Cross 
and Blue Shield. He called them every day on the speakerphone 
and talked to them, and every time they called he would call me 
and say, ``No luck. We haven't had any luck, but we are still 
trying. We are not giving up.'' They gave me a report every 
day, so I wouldn't give up.
    To be honest with you, I did give up. I gave up. I went to 
the county hospital. I applied to Susan G. Komen Breast 
Foundation. I applied at Promise House. I applied anywhere I 
could to get help, and their funds are limited everywhere you 
go, because there are so many people who have breast cancer 
these days. So I was very limited in the help that I could 
    Mr. Hill. OK.
    Ms. Beaton. I was on different waiting lists.
    Mr. Hill. Ms. Raddatz, your brother's cancer treatment, was 
it delayed at all?
    Ms. Raddatz. It was not delayed, no.
    Mr. Hill. OK. But you had to go through several hoops in 
order to get--make sure that he was going to have coverage.
    Ms. Raddatz. Oh, yes. I mean, when we got the news that it 
was canceled, we were just horrified. I can't even tell you how 
upsetting that was, because it was all scheduled. I mean, it 
was ready to be scheduled--excuse me--but he had done all of 
the protocols, he was ready to go. And so I literally was not 
working at my law practice for weeks. I was at my office, but 
daily I was working on solving my brother's health insurance 
rescission problem. And I was--I am attorney, and I still 
didn't know how to solve it straight up.
    Mr. Hill. Right.
    Ms. Raddatz. It took me several weeks, and many, many phone 
calls to other attorneys, judges, experts, and finally we made 
it to our Attorney General's office. And I understand in 
Illinois we are very lucky to have the Health Services Section 
in our Attorney General's office, Lisa Madigan's office. There 
are many states that do not have those services available for 
citizens to go to.
    And even if it is available, most people, when they get 
that type of news, they don't know what to do. They are sick. 
Their spirits are low. A lot of them are not working. They 
don't know what to do, and they don't know where to turn. And 
many of these people just give up.
    Mr. Hill. OK. Ms. Reilling, in reading through your 
testimony and listening to your testimony, I am making the 
assumption that Anthem did pay for some of your treatment.
    Ms. Reilling. Yes.
    Mr. Hill. And that somewhere midway through all of your 
treatments they decided to cancel you.
    Ms. Reilling. Yes.
    Mr. Hill. And the reason that they gave for canceling you 
is that the policy was not going to be offered anymore.
    Ms. Reilling. Well, to my knowledge, I was not given any 
reason, because I never received the letters that they 
supposedly sent. So I just suddenly got a letter on around June 
1 that said, ``Your policy will be ending--we will be canceling 
your policy as of June 30.''
    Mr. Hill. OK.
    Ms. Reilling. I had no explanation.
    Mr. Hill. Do you have insurance now?
    Ms. Reilling. No.
    Mr. Hill. None at all.
    Ms. Reilling. No.
    Mr. Hill. Do all three of you feel like that the insurance 
companies were manipulating the reasons as to deny coverage to 
you all?
    Ms. Beaton. Absolutely.
    Mr. Hill. Now, that is an opinion of course.
    Ms. Beaton. Absolutely.
    Mr. Hill. But you all three feel that way. And, Ms. Beaton, 
do you have any insurance coverage now?
    Ms. Beaton. I only have insurance because of one reason.
    Mr. Hill. Joe Barton.
    Ms. Beaton. That is the only reason.
    Mr. Hill. OK. Thank you.
    Ms. Beaton. They didn't want to give me back my insurance. 
He told me that--I had never met Mr. Barton. I met him for the 
very first time in Washington. He helped me not even knowing 
who I was, just because I was a constituent in his area. And 
the first time I met him I just broke down and said, ``I could 
never thank you enough for helping me.'' But he went all the 
way to the top and he told me, he said, ``They did not want to 
reinstate you.'' He said, ``I really had to fight them.'' He 
told me that.
    Ms. Raddatz. May I respond?
    Mr. Hill. Sure, Ms. Raddatz.
    Ms. Raddatz. Yes. Not only--we also know after our last 
hearing in Washington that now, knowing all of this 
information, they still agree that they will continue their 
practices of rescinding. So it didn't really matter that we 
already--Ms. Beaton and myself told these stories, and many 
other stories were told to them in person in Washington, D.C. 
last month, they still admitted that they would just continue 
those practices.
    So, you know, until Congress stops them from doing it, they 
are just going to keep going on, because they know it is legal 
right now for them to do that. It is legal for them to rescind 
people who are dying and take away their insurance policies 
after good American citizens have paid their hard-working 
dollars. In my brother's case, he was paying $900 a month for 
his policy. And it is OK for them to do that.
    And not only have they done it, but they came right out in 
Congress and in front of the whole world on C-SPAN and said, 
``We are just going to keep doing it.'' So they are basically 
saying, ``Look, Congress, either stop us from doing it or we 
are just going to keep doing it, because that is what we do. We 
make our--that is how we make our living. We make our livings 
by rescinding people and making more money.''
    Mr. Stupak. That is a good point.
    And as Congressman Hill indicated, he is going to have to 
leave a little early here, because he has got to go back. We 
are trying to do health insurance--or I should say health 
coverage for all Americans through our Energy and Commerce 
    Congressman Yarmuth, who is going to be going back, is 
going to ask questions next. They already passed it through 
Ways and Means Committee, but the Energy and Commerce Committee 
is the main policy, health policy for the Congress, and we have 
been working on this.
    We were actually supposed to do one of these hearings last 
week, as you know, Ms. Raddatz, in Chicago. We had to cancel 
because of health care meetings. We thought about canceling 
this one, but I couldn't do that twice to you, so we kept this 
hearing going. I will stay and keep this hearing going. I know 
Mr. Hill is going to go back and protect our interest, and we 
have a lot of questions.
    If my memory serves me correct, it is Section 162 which 
would prevent rescissions without an independent third-party 
review. But I think after this hearing, and after our next 
panel, I think we have to go even further and put a time limit 
as to when that review would take place, so many days, and a 
few other things. So these hearings not only helps us, but, 
unfortunately, it is a very busy time for all of us with health 
    And, Congressman Hill, by the end of the year I think you 
will see at least enactment of a national health insurance plan 
to cover all Americans, where preexisting injuries would not be 
a condition to eliminate people's coverage, and will do 
something with this rescission.
    But with that, let me turn it to Congressman Yarmuth for 
questions, please.
    Mr. Yarmuth. Thanks, Mr. Chairman. I am just going to ask a 
couple of brief questions.
    Ms. Beaton, you talked about your cancer support group and 
the four women who are with you in that, and two of them have 
gone bankrupt and they had had their coverage canceled. Were 
the situations similar? Were these all cases of rescission as 
far as you know?
    Ms. Beaton. Yes, every one of them was.
    Mr. Yarmuth. Were they able to--are they currently insured 
at all? They are not insured?
    Ms. Beaton. Not at all. They all are on state assistance, 
every one of them. Every one of--the one girl lost her house, 
and now she is living in government-subsidized housing. She had 
a nice house, and she lost her house. She lost everything and 
has to live in government housing now.
    Mr. Yarmuth. Did they receive their treatment in any way, 
or were they--did they rely on charitable care or something?
    Ms. Beaton. They relied on charitable care, which is like 
mine. They didn't get immediate care; they had to wait. And 
when you go through a county hospital around Dallas, there are 
so many people there, you wouldn't even believe. Every time you 
go to a clinic appointment it is the whole day. You go--no 
matter if you have an 8:00 appointment, you wait all day long 
with a room just like this big just full of people. You can't 
even imagine how long you have to wait.
    And then, when you get in a room, you finally think you are 
going to get to see the doctor, well, guess what, you wait 
another couple of hours. So it is an all-day thing. There is no 
way you can work. There is no way you can keep a regular job or 
do regular things, because your whole time is going to waiting 
to see a doctor. It is a very bad situation.
    Mr. Yarmuth. Congressman Barton was able to keep your 
coverage in force. Has there been a change in your premium 
rates since then?
    Ms. Beaton. Yes, they went up quite a bit. They went up. 
They said it wasn't anything related to that. They said that 
they were going up on everybody's policy, but they sent me a 
letter, and, yes, they went up. Right away they went up.
    Mr. Yarmuth. How much did they go up, do you remember?
    Ms. Beaton. It was like $200 a month. And it was already a 
real high premium, because of my age. I am 59.
    Mr. Yarmuth. Right.
    Ms. Beaton. So to me it was a lot of money. It was all I 
could do. And to be honest with you, I never would have--when 
Mr. Barton called and told me my insurance was reinstituted, 
you know what I told him? I said, ``I don't want it. I don't 
want it back.'' I said, ``I have lost my trust.''
    And by that time, I had applied to a state program, and I 
had gotten accepted for the state program where they pay 100 
percent for women with breast and cervical cancer, and I told 
him, I said, ``I don't want Blue Cross and Blue Shield back.'' 
I said, ``Why should I want them back? What they did to me, 
what they cost me.'' But he told me, he said, ``You will never 
be able to have insurance again. You will be uninsurable 
because of the cancer.'' He said, ``Take it back.'' He said, 
``It is your last chance in your life to get regular 
    So because of his great wisdom, I only took it back because 
of him, because I lost every bit of my trust. I hated them.
    Mr. Yarmuth. Ms. Reilling, we have a copy of a letter that 
you received on July 1 of this year, just a few weeks ago, 
offering you the alternative individual coverage, and 
stipulating the reasons that you were denied coverage and 
denied your application, which I assume was to resume your one-
person group insurance coverage, is that right?
    Ms. Reilling. No. Actually, my agent, she just kind of 
ignored that whole thing and acted like--she is the one who 
told me that Anthem was discontinuing one-person groups. I 
never heard it--I have never heard it from the company, so she 
    Mr. Yarmuth. For an individual policy.
    Ms. Reilling [continuing]. For an individual policy, but 
one that was close to what I was paying, and that was what they 
    Mr. Yarmuth. And they denied that.
    Ms. Reilling. And they offered me one that was----
    Mr. Yarmuth. One that was more expensive and mentioned----
    Ms. Reilling. A whole lot more expensive.
    Mr. Yarmuth [continuing]. The preexisting conditions and 
your treatment for protected health information, it says in the 
    Ms. Reilling. Yes.
    Mr. Yarmuth [continuing]. Under Tab 23. I understand why 
they didn't want to put it in the letter, because that--it is 
your personal information, even though to you it might have not 
been a congressional----
    Ms. Reilling. But the only----
    Mr. Yarmuth [continuing]. So they want to protect you.
    Ms. Reilling [continuing]. Thing it could be, though, is 
the cancer and the MRSA.
    Mr. Yarmuth. Right.
    Ms. Reilling. Because that is the only thing I have been 
treated for.
    Mr. Yarmuth. Right. Do you know if this offer--the offer 
that they made, whether there would be any exclusions as to 
    Ms. Reilling. No, because, as I said, I didn't even----
    Mr. Yarmuth. Couldn't afford it anyway.
    Ms. Reilling. I didn't know about any of this, and my agent 
just turned it down. And, actually, she was only applying for 
it as a means to getting me to apply for Kentucky Access, which 
required--it wasn't enough for me to just have been dropped by 
the insurance company, I had to have applied and been denied, 
which is why I have gone so long without insurance.
    However, when I found out what the rates are for Kentucky 
Access, I can't afford those either. It is $800 a month, and 
that is a public--I mean, a State program.
    Mr. Yarmuth. Right. OK. Thank you very much.
    Thanks to all of you for telling your stories. They were, 
again, very important in putting a face on the types of 
situations that we are trying to correct and on efforts to 
reform health care delivery and insurance in the country. 
Appreciate it.
    I yield back. Thanks, Mr. Chairman.
    Mr. Stupak. Thanks, Mr. Yarmuth.
    We had asked Assurant Health Insurance to come. They 
refused. I do not want to use the subpoena power, even though 
this committee has it. But, Ms. Raddatz, that was your 
brother's health insurance, but I want to ask a question 
anyway, if I could.
    Your brother's individual health policy was Fortis, which 
is really Assurant Health. Is that right?
    Ms. Raddatz. Yes, that is correct.
    Mr. Stupak. OK. I would like to play a television ad that 
Assurant is running across the country right now and get your 
reaction to it. Would you show us that ad, please?
    [Video presentation begins.]
    ``Female Speaker: My employer doesn't offer medical 
insurance. So we needed an affordable health plan that fit our 
family's needs.
    Female Speaker: When I started my own business, I didn't 
think I could afford health insurance. I just wanted to be able 
to see my personal doctor once a year.
    Male Speaker: When I retired, we were years away from 
    Female Speaker: But we still needed protection. What if 
something serious happened?
    Female Speaker: So a friend recommended Assurant Health. We 
were able to protect our entire family. They even have a dental 
    Female Speaker: I saved hundreds of dollars by only paying 
for benefits I want. I even got a 50 percent discount just for 
being healthy.
    Male Speaker: We have got $6 million in medical coverage, 
and can even see the specialist we choose.
    Female Speaker: Without a referral.
    Male Speaker: For over 100 years, Assurant Health has been 
meeting the needs of individuals like you. Plans start under 
$100 per month.
    Male Speaker: Call now and speak with your local agent, 
Carl Heath, Jr., for your no obligation quote. Call 1-410-288-
0772 now.''
    Mr. Stupak. In this ad, it shows people who might need 
insurance, as they say in the ad, ``like you,'' a family, small 
business owner, retiree, and they all look relatively healthy. 
But what the ad never mentions is that Assurant will not 
provide insurance to people with preexisting conditions, 
because these people get too expensive and it would reduce 
their profits.
    So let me ask you, from your experience, does this company 
have an interest in keeping sick policyholders on its rolls? 
Ms. Raddatz?
    Ms. Raddatz. In keeping sick policyholders?
    Mr. Stupak. Yes.
    Ms. Raddatz. Absolutely not. All they want are healthy 
people, so that they can collect insurance premiums and not 
have to pay out any claims. They don't want sick people. When 
you become sick, they cancel and rescind your policy. And so as 
they state in the commercial, how dare they? What if something 
serious happens? Something did serious happen to my brother, 
and they rescinded him.
    Mr. Stupak. Let me show you another clip on another 
Assurant TV ad.
    [Video presentation begins.]
    ``Male Speaker: Unlike other health insurance companies 
that focus on corporations and treat everyone the same, 
Assurant Health is there for the individual. So if you need 
health insurance, call the number on your screen, visit our Web 
site, or contact your local agent.
    Male Speaker: Call now to find out''----
    Mr. Stupak. They say they are not treating everyone the 
same, and they are there for the individual. Were they there 
for your brother Otto?
    Ms. Raddatz. Absolutely not.
    Mr. Stupak. Do you find these ads misleading about how 
Assurant covers individuals?
    Ms. Raddatz. I would say they are misleading, they are 
upsetting. I would say to people, ``Run, do not buy insurance 
with a company that doesn't stand behind the people that need 
    Mr. Stupak. And as I said, there is 1,400 reasons or 
excuses why they cancel you once you become sick.
    Let me ask you, Mr. Baron, Hill, do you have any further 
    Ms. Beaton. Can I say something real quick?
    Mr. Stupak. One minute.
    Mr. Hill, questions?
    Mr. Hill. The only question I might have is--maybe this is 
for the representatives from the insurance companies, but my 
guess is that once you are denied insurance coverage, it is 
almost impossible for another insurance company to pick you up. 
I don't know if you have had that experience or not, Ms. 
Beaton. I know you----
    Ms. Beaton. They never pick you up. Never. Never.
    Mr. Hill. There is just like a zero chance for you being 
able to get coverage.
    Ms. Beaton. Right. Have you ever been refused insurance? 
They ask that on the questionnaire. It is one of the questions 
they ask you. If you have ever been refused insurance or 
canceled, they just kick you right out.
    Mr. Hill. OK.
    Ms. Beaton. All I wanted to say is I admire you so much for 
getting those commercials. I wish you would have brought the 
Texas Blue Skies Blue Cross/Blue Shield commercial that has 
been airing every day, about 15 times a day. I want to just 
puke every time I hear it. They have you humming a little tune, 
you know, about America and blue skies and everything is 
wonderful, ``We will always be here for you,'' and every time I 
listen to that commercial on TV, how they are spending millions 
of dollars for those commercials, I just say--I want to say, 
``You are lying. You are liars.''
    You know, they are spending all that money on Blue Skies 
commercials. Sometime you can get one of those Blue Skies' 
commercials for Blue Cross/Blue Shield and it will make you 
sick to your stomach.
    Mr. Stupak. Well, there is no doubt the--from 2000 to 2007, 
according to SEC filings, the profits for insurance companies 
has gone from $2.4 billion to $12.9 billion. That is a 428 
percent increase during the last seven years. And we see it on 
the backs of people like you, and so hopefully we do get 
national health care, so we don't have to worry about that.
    Let me, once again, thank this panel for your heartfelt 
testimony. Thank you for traveling here at your expense to be 
with us.
    Ms. Beaton, have a safe trip back to Texas; Ms. Raddatz, 
back to Illinois; and, Ms. Reilling, back to Kentucky. Thank 
you very much for being here.
    Ms. Raddatz. Thank you all for caring enough to do this. 
Thank you so much.
    Mr. Stupak. Thank you. We will dismiss this panel.
    Ms. Reilling. Thank you.
    Ms. Beaton. Thank you.
    Mr. Stupak. I would now like to call our second panel of 
witnesses. On our second panel we have Mr. Richard Collins, who 
is the Chief Executive Officer at Golden Rule Insurance 
Company, which is owned by UnitedHealth Group; Mr. Brian Sassi, 
who is Chief Executive Officer for Consumer Business at 
WellPoint, Incorporated; Ms. Carol Cutter, who is the 
Commissioner of the Indiana Department of Insurance; Professor 
Eleanor Kinney, who is a Professor of Law at Indiana University 
in Indianapolis.
    Thank each and every one of you for coming and for adding 
to today's hearing. As I told the last panel, it is the policy 
of this Committee to take all testimony under oath. Please be 
advised you have the right under the rules of the House to be 
advised by counsel during your testimony. If you wish to be 
represented by counsel?
    [Witness responses.]
    Mr. Stupak. Let the record reflect each indicated they did 
not wish to be represented by counsel at this time. If at any 
time during your testimony you wish to consult with counsel, 
you can. Counsel cannot testify, but you can consult with them 
before answering a question.
    Since you are all standing, please raise your right hand 
and take the oath.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect that the witnesses 
replied in the affirmative. You are now under oath. We will now 
hear your 5-minute opening statement. You may submit a longer 
statement, extra documents, for inclusion in the official 
hearing record.
    Mr. Collins, if you don't mind, we will start with you, go 
from my left to right.
    Mr. Collins. Yes, sir. Thank you, sir.
    Mr. Stupak. Thank you.

                         SCHOOL OF LAW


    Mr. Collins. Chairman Stupak, Congressman Hill, Congressman 
Yarmuth, and members of the Subcommittee, thank you for 
inviting me today as we continue our dialogue on individual 
health insurance.
    My name is Richard Collins. And I am the CEO of Golden Rule 
Insurance Company, a UnitedHealth Group business that provides 
health insurance policies to individuals and their families. 
Golden Rule is headquartered in Indianapolis and employs 750 
individuals in the State of Indiana. It has been offering this 
important coverage option for more than 60 years.
    As part of our continuing commitment to the outstanding 
workforce of the State of Indiana, we recently completed the 
initial phase of a new 24,000-square foot, state-of-the-art 
customer care center in Vincennes. The center currently employs 
90 individuals with the capacity for 300 additional full or 
part-time jobs.
    Our company mission is to improve the health and well-being 
of all Americans. In the individual insurance market, we 
accomplish this by offering innovative and affordable products 
that meet the diverse health care and financial needs of our 
    We also have a responsibility to treat all of our customers 
fairly, and I can assure you we take this responsibility very 
seriously. In our current system of health care delivery, the 
individual insurance market operates primarily for families who 
do not have access to group coverage or to government health 
benefit plans, such as Medicare.
    Unfortunately and for a variety of reasons, some 
individuals choose not to purchase private health insurance 
until they have a significant health event. This decision not 
only has an enormous physical and financial impact on these 
individuals and their families but raises the cost of health 
care for everyone.
    We have long advocated that this country needs 
comprehensive health insurance reform that includes modernizing 
the delivery system, tackling the fundamental drivers of health 
care cost growth, strengthening employer-based coverage, and 
providing well-targeted support for low and middle-income 
    To be effective, we believe modernization of the individual 
insurance market needs to contain all of the following 
elements. First, individuals must be required to obtain and 
maintain health insurance coverage so that everyone 
participates in both the benefits and the costs of the system.
    Second, insurers should be able to set rates within the 
limited parameters of age, geography, family size, and benefit 
design just as they do in the group insurance market. However, 
let me emphasize this point. Rates should not vary based on 
health status, and coverage should be guaranteed, regardless of 
preexisting conditions for those that maintain continuous 
    Third, low and middle-income families should receive some 
form of subsidy to ensure that they have access to the same 
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 for individual insurance premiums should be on par 
with employer-sponsored coverage.
    Until comprehensive reform is achieved, we believe that the 
medical underwriting of individual insurance policies will 
continue to be necessary. If these changes are instituted, most 
of the reasons for individual medical underwriting of 
individual health insurance as well as most of the reasons that 
individual policies are rescinded or terminated would cease to 
    As you know, the practice of rescission has been recognized 
by the laws of virtually every state. Rescission is an 
unfortunate but necessary recourse in the event of a material 
and at times intentional or fraudulent misstatement or omission 
on an insurance application.
    Our use of rescission is rare. Less than one-half of 1 
percent of all of individual insurance contracts in 2008 were 
terminated or rescinded. And in each case the affected customer 
was afforded the right to appeal. Our practice is to rescind 
coverage only in the event an applicant made a knowing material 
misrepresentation or omission on the application for insurance.
    In the event that we determine it is necessary to rescind 
coverage after a thorough investigation of the facts and in 
compliance with existing stare laws and regulations, we follow 
practices and procedures designed to ensure a fair and 
transparent process for the individual.
    Under our current system, failure to act on these cases 
would be fundamentally unfair to individuals and working 
families that play by the rules, and it would further limit our 
ability to provide quality and affordable health care for every 
American. And affordability is by far the biggest barrier to 
    We look forward to working with the Subcommittee and the 
Congress and state and federal regulators on ways to continue 
to expand access to affordable health insurance coverage in the 
individual market. Thank you.
    [The prepared statement of Richard Collins follows:]

    Mr. Stupak. Thank you.
    Mr. Sassi, your opening statement, please, sir?

                    STATEMENT OF BRIAN SASSI

    Mr. Sassi. Thank you Chairman Stupak and members of the 
Committee for inviting me to testify before you today. I am 
Brian Sassi. And I am President and CEO of the Consumer 
Division of WellPoint.
    There seems to be a lot of confusion about why an insurance 
company might rescind a policy. Some have said that insurers 
rescind policies because they don't feel like paying when 
someone gets sick. This is simply not true. The decision is 
about controlling corporate fraud and material 
misrepresentations that contribute to spiraling health care 
    At WellPoint, we do not rescind a policy coverage just 
because someone on the policy gets sick. My company employs 
over 42,000 people nationwide: 4,500 here in Indiana and 1,300 
across the river in Kentucky. For anyone to suggest that I or 
my fellow associates, each of us with our own personal 
experiences with illness, would rescind a person's coverage 
just because he or she got sick is an unfair accusation. I 
hope, Mr. Chairman, that as you complete your inquiry, you will 
be able to help correct this misperception.
    We take contract rescissions very seriously because we 
understand the impact these decisions can have on families and 
individuals. 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. And to be clear, 
we do not rescind policies based on a condition for which the 
policyholder was unaware at the time that he or she had applied 
for coverage.
    I want to emphasize that rescission is about controlling 
fraud and material misrepresentations that contribute to 
spiraling health care costs. By some estimates, health care 
fraud in the U.S. exceeds $100 billion per year, an amount 
large enough to pay for covering nearly half of the 47 million 
uninsured in this country.
    Rescission is one tool employed by WellPoint and other 
health insurers to protect the vast majority of policyholders 
who provide accurate and complete information from subsidizing 
the costs for those who do not. The bottom line is that 
rescission is about combating costs 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 in this country who are under the age of 
65 receive coverage through their employers, 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 the policies that year.
    Here in Indiana, the issue of rescission in health 
insurance also affects an extremely small number of 
individuals. In 2008, we enrolled over 66,000 new individual 
market members but rescinded only 116 individuals.
    Rescission is a longstanding insurance contract remedy in 
America. The concerns regarding rescission surfaced in the 
California media in 2006, generating the public concern which 
we are discussing here today. Our main point today is the same 
as it was then. A voluntary insurance 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, WellPoint in 2006 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: creating an application review 
committee, which includes 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 initial 
decision. And 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 of 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.
    In response to policy-maker interest in enacting consumer 
protections related to rescission, WellPoint is proposing a set 
of rescission regulations with new consumer protections. I have 
outlined these in my written testimony.
    In addition, the health insurance industry has proposed a 
set of comprehensive and interrelated reforms 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. This would render the practice of rescission 
    We appreciate that the health care reform bills under 
consideration in the House envision such a system. However, 
unless Congress creates a strong and effective personal 
coverage requirement and allows younger individuals to receive 
sufficient discounts, many only buy coverage when they need 
services, which will dramatically drive up the costs for 
    As currently written, the health care legislation under 
consideration in the House does not accomplish this. We would 
welcome the opportunity to work with you to find common ground 
on this issue to make certain that these insurance market 
reforms achieve the object so that we can make quality, 
affordable health coverage available for all Americans.
    Thank you for the opportunity to discuss this issue and 
these proposals with you. I look forward to your questions.
    [The prepared statement of Brian Sassi follows:]

    Mr. Stupak. Thank you, Mr. Sassi.
    Ms. Cutter, your opening statement, please?

                   STATEMENT OF CAROL CUTTER

    Ms. Cutter. Thank you, Mr. Chairman.
    Chairman Stupak, Representative Hill, Representative 
Yarmuth, thank you for the opportunity for the Indiana 
Department of Insurance to make comments today in terms of 
procedures we follow that are set up according to State 
legislature rules and law, also through our HIPAA process that 
was passed by the federal government back in 1996.
    As you know, individual health policies are legal contracts 
that contain certain provisions. And all insurers who write 
policies in Indiana must include those particular provisions in 
their form filings and are submitted to our department for 
review before that contract or policy is allowed to be sold or 
offered to any consumer residing in Indiana.
    These provisions have been adopted over the years by our 
State legislature and tend to be fairly consistent among the 50 
states. The National Association of Insurance Commissioners, 
which is a trade association for insurance commissioners 
throughout the State, also helps state departments of insurance 
develop language for statutes and regulations or models for the 
language that may be used for guidance as well.
    There are thirteen provisions currently in Indiana code. 
They are the entire contract, time limit on certain defenses or 
incontestability, grace period, reinstatement, notice of claim, 
claim forms, proofs of loss, time of payment of claims, the 
actual payment of claims, physical examinations and autopsy, 
legal actions, change of beneficiary, and guaranteed 
renewability provisions.
    Of these provisions, the second one, which is that time 
limit on certain defenses or incontestability, is the provision 
that prohibits an insurer from denying a claim or voiding 
coverage once the policy has been in effect for 2 years or more 
from the date of issue, unless fraud has occurred.
    Thus, an insurer is allowed to rescind coverage only within 
the 2-year window following issuance of that policy for any 
misstatement or preexisting condition that wasn't indicated on 
the application for coverage.
    HIPAA supports this very same action within the 
``guaranteed renewability of individual health coverage'' 
wherein it states that an insurer may non-renew or discontinue 
coverage due to nonpayment of premium, fraud or intentional 
misrepresentation of material fact, or withdrawal of the 
insurer from the marketplace, if the insured moves outside the 
service network, or there is a termination of membership in the 
association that offered the insurance. So in Indiana, we 
follow not only the laws under the State legislature that have 
been given to us but also under the federal HIPAA law.
    There are no provisions in Indiana code which disallow the 
rescission or specify the procedures under which that event is 
to function. However, Indiana does have two alternatives that 
allow insurers to offer individual policies that do contain 
exclusions for specific conditions, called waivers, if the 
applicant chooses to accept it. This allows people who would 
normally be declined for coverage or refuse coverage the 
ability to pick a policy that may have a waiver for a health 
condition that that applicant does not believe would be 
recurring in the future.
    A second safety net that Indiana offers is the Indiana 
Comprehensive Health Insurance Association, which is our State 
risk pool, which does open its doors to anyone who is refused 
coverage by an insurer in the State of Indiana or have a 
condition that is considered uninsurable by an individual 
    Our policy analysts within the department also review the 
language contained in any applications that are used by 
insurers to issue health policies to make certain that there 
are no all-inclusive, have you ever, or other questions using 
medical terminology too complex for the average consumer to 
understand. No insurer may use an application without our 
stamped approval of that form.
    Indiana's statutes do not require insurers to report the 
number of policies rescinded as part of their annual 
statements. So our involvement with rescissions begins when the 
insured files a complaint with our Consumer Protection Area.
    We then investigate the actions surrounding the rescission 
to see if there has been any inappropriate behavior on the part 
of the insurer. Last year in Indiana, of the 6,000 complaints 
we investigated, 14 of those complaints were for rescission of 
individual health policies. Of those 14 rescissions, 2 of them 
were for a medical condition for which the claim that had 
occurred was not related to that particular angle mentioned.
    And so alternative arrangements were made for the insurer 
to provide coverage for that person, instead of actually 
rescinding the coverage. Generally, the rescission complaints 
we have reviewed over the last few years were most always based 
upon the same medical condition for which the insured had 
submitted a claim but, for some reason, had not revealed that 
information on the application of coverage.
    As noted in prior testimony before this Subcommittee, 
insurers have established outside review procedures when a 
rescission occurs, which does give the policyholder the 
opportunity to question those actions and retain coverage or 
receive a waiver rider for that condition. The department's 
Consumer Protection Unit is specifically described and used for 
a safety net for consumers who fall into these sorts of 
    Another concept, which Mr. Collins just referred to and I 
believe the Subcommittee is considering, would be the change on 
an individual health contract to a guarantee issue basis, with 
an accompanying coverage, mandate for coverage, which would 
eliminate the need for medical histories for applicants under 
any circumstances.
    We believe that the insurers currently have the legal 
ability to perform medical reviews within that 2-year 
contestability period to protect the other policyholders from 
fraudulent claims payments or higher premiums. We are always 
open to discussions for any improvements that could be made in 
the rescission process itself.
    Thank you for your time.
    [The prepared statement of Carol Cutter follows:]

    Mr. Stupak. Thank you.
    And, Professor Kinney, your statement, please.


    Ms. Kinney. Thank you. Thank you, Chairman Stupak, Mr. 
Hill, Mr. Yarmuth. It is an honor for me to be here to testify 
today. And I will try to be a little bit briefer than my 
statement, which has already been submitted for the record.
    I was asked by Mr. Gordon to kind of look at Indiana and 
the situation generally. In Indiana, the task force at Indiana 
University while the Indiana University Health Reform Faculty 
Study Group did do an in-depth study of the situation in 
Indiana with respect to health coverage.
    I fear that the situation with requiring people to rely on 
the private market is increasingly--specifically, I think there 
are situations where we are losing health insurance coverage 
through employment. And, in particular, we have witnessed a 
fairly precipitous drop of insurer-sponsored coverage over the 
years. And we find that employers compared to other states 
offer less insurance.
    Also, with the economic times, people are losing jobs in 
Indiana, like other states. And, thus, they have to rely on the 
private individual insurance market for their health insurance. 
And this puts people with serious conditions or health problems 
in a difficult position when it comes to getting adequate 
health insurance coverage. And I think it is one reason why we 
need comprehensive health reform, which I think all of us 
uniformly believe is the case.
    One would say, ``Well, somebody with a health problem 
creating an existing condition can go to the Indiana 
Comprehensive Health Insurance Association.'' And, indeed, they 
can, but on page 3 of my testimony, I have put together a chart 
of what that would cost for somebody in Marion County, which is 
Indianapolis; and Venderburgh County, which is down in 
Evansville on the coast.
    I don't know about your all's financial circumstances, but 
I would find that having to pay some of these premiums 
prohibitively expensive. And then if you look at the 
information on the plans which were available on the Web site, 
you get health insurance coverage that is pretty skimpy in 
terms of the co-insurance involved. In other words, there is 
lots of money that would have to be paid out of pocket before 
benefits chip in. So it is questionable in my judgment whether 
this is really a sufficient answer to the problem of people 
with serious health insurance problems.
    We have also done work in the Center for Law and Health in 
the past that shows that these kinds of practices with 
insurance companies have occurred and people with serious 
illness have experienced cancellation of insurance policies. 
And I have got that research on page 4 of my testimony.
    It is clear that HIPAA, which I think, in part, was 
designed to address the problem of non-renewal and 
cancellation, really hasn't done the job when it comes for 
    I think that strategies for reform, which I was also asked 
to address, must address the unfair aspects of the process of 
rescission and post-claims underwriting.
    In review, in getting ready to come here today, I looked at 
the National Association of Insurance Commissioners' principles 
on health reform. And one of their principles on health reform 
quoted on page 6 of my testimony is addressing adverse 
selection. And I think it is very important to appreciate that 
adverse selection is an important problem in the private health 
insurance market. And it is not realistic for us to assume that 
that is not an important problem for insurers. It will be 
addressed if we have comprehensive health insurance with 
individual mandate.
    And, finally, I would commend the Committee, not only for 
H.R. 3600 and the provisions in that bill intended to address 
rescission practices and post-claim underwriting, but for the 
tremendous job in laying out issues associated with this very, 
very difficult condition.
    I think that you have done a good job with increasing the 
evidentiary standard that would be applied in making a 
rescission decision as well as require external review. I am 
interested to see that insurers that have testified here today 
have also talked about external review.
    Another provision you might want to think about that I see 
has been bantered around in the NAIC model of long-term care, 
health insurance regulations of long-term care, insurance 
regulations, is a prohibition against post-claims underwriting. 
It seems to me that if an insurance company has the chart for a 
specific period of time, it might be closer than a shorter 
period of 2 years, then they ought to be able to look at the 
chart, see if they want to provide a policy and let the 
policyholder know that they are not going to be able to be 
there for them in the event of another serious illness.
    Thank you. I will take your questions.
    [The prepared statement of Eleanor Kinney follows:]

    Mr. Stupak. Well, thank you, Professor.
    And before I turn to my two colleagues, let me just ask one 
quick question. Mr. Collins, on behalf of Golden Rule Insurance 
Company and UnitedHealth Group, would you commit today that 
your company will never rescind another policy unless there is 
a potential fraud misrepresentation in the application?
    Mr. Collins. We would commit that we will not rescind a 
policy if there is a knowing and material misrepresentation or 
omission on a health insurance policy.
    Mr. Stupak. So, in other words, your answer is no?
    Mr. Collins. No, sir. There is quite a bit of overlap in 
those two standards between knowing and intending. The standard 
that we follow is a knowing material omission, misstatement 
    Mr. Stupak. So if I just forget to check a box, I can be 
rescinded, right?
    Mr. Collins. Well, our----
    Mr. Stupak. That is an omission.
    Mr. Collins. Well, sir, our applications are designed to 
elicit relevant information needed to underwrite a policy form.
    Mr. Stupak. Anyone who went through applications in 
Washington could explain it, the terms.
    Mr. Collins. Sir, I can explain the terms of ours. I 
believe you are referring to somebody else who testified.
    Mr. Stupak. So to my question of intentional fraud, unless 
there is intentional fraud, you reserve the right to rescind an 
application for whatever reason your policy states?
    Mr. Collins. We follow state laws.
    Mr. Stupak. Every state is a little different.
    Mr. Collins. And we have an obligation to our policyholders 
to honestly fill out the application, to fill out the 
application completely. Our people made it up. We have a 
condition excluded from coverage or some who are even designed 
to treat them the same as people who did not fill out an 
application completely or remain during this representation in 
the application.
    Mr. Stupak. My concern is that your definition of knowing 
is you assume you know everything in your medical records for 
the last 5 years. Lay people really don't.
    So let me go to Mr. Sassi. Are you willing to commit that 
WellPoint today that your company will never rescind another 
policy unless there is intentional fraud, misrepresentation in 
the application?
    Mr. Sassi. Like Mr. Collins, WellPoint follows state law. 
In the vast majority of states in this country----
    Mr. Stupak. It is a very simple----
    Mr. Sassi. No, it isn't, sir.
    Mr. Stupak [continuing]. ``Yes'' or ``No'' answer.
    Mr. Sassi. Well, it is not a simple question because with 
the misrepresentations of the law. And so in most states, it is 
a no-win standard. And if someone knowingly misrepresents their 
health status and it is material to whether we could offer a 
policy, then we will rescind that but only if it is material in 
the interim and it is not just----
    Mr. Stupak. Even if it is unintentional, just because they 
knowingly missed something, you could rescind them, right?
    Mr. Sassi. If it is material, then it would have not 
already covered----
    Mr. Stupak. Sure. If they knowingly----
    Mr. Sassi. If someone has been unaware of their medical 
    Mr. Stupak. Sure.
    Mr. Sassi [continuing]. Then we would not rescind.
    Mr. Stupak. You have 1,400 codes to trip up people, right? 
These are your codes. Don't you have 1,400 codes which trigger 
a review of an application post-underwriting, as the professor 
    Mr. Sassi. I would contend that we do not participate in 
post-claim underwriting.
    Mr. Stupak. You have 1,400 codes that trigger a review of 
policies, right? You have 1,400 and Assured has 2,000 different 
codes. Once you trigger one of those codes, there is an 
automatic review to try to get out and rescind that policy?
    Mr. Sassi. Not necessarily, only if it is----
    Mr. Stupak. But there are 1,400 codes, right? Can you say 
``Yes'' or ``No'' to that?
    Mr. Sassi. Yes. And there are----
    Mr. Stupak. OK.
    Mr. Sassi [continuing]. Tens of thousands of medical 
    Mr. Stupak. Mr. Hill for a question, please?
    Mr. Hill. Thank you, Mr. Chairman. I have got a few 
questions for you particularly, Mr. Sassi, but I also have a 
general question I want to ask.
    Do either one of you offer incentives to your employees 
when they are able to find some reason they need to file this 
    Mr. Collins. Absolutely not, Congressman.
    Mr. Sassi. WellPoint does not have a policy to offer 
incentives or a pay/borrow system to employees.
    Mr. Hill. How would you respond to the one woman who said 
that she had a friend of hers in church whose job it was to 
find reasons we cancel policies? Any explanation of that? She 
gave her testimony under oath. So it has to be an accurate 
    Mr. Collins. Well, sir, I really can't explain Ms. Beaton's 
testimony about the practices of Health Care Services 
Corporation, which is a Chicago-based Blue Cross/Blue Shield 
parent company with Blue Cross in Texas.
    Mr. Hill. You don't have anybody on staff to look at this 
kind of thing, do you?
    Mr. Collins. Well, sir, we have processes, as all insurance 
companies do, including group insurance companies, to monitor 
for preexisting conditions that may or may not be covered under 
our policies.
    Mr. Hill. Well, let me ask the question a different way, 
then. That person sends in a claim, whatever it might be, heart 
surgery, cancer, whatever it is. When they send in that claim, 
is there a person in your company that begins a review of that 
person's medical records before they pay that claim?
    Mr. Collins. There is not a person that starts an 
investigation based on a single item that comes into the 
company. No, sir.
    Mr. Hill. Mr. Sassi.
    Mr. Sassi. We do have people that look for fraud and 
situations that----
    Mr. Hill. After a claim is filed?
    Mr. Sassi. Well, we do not have departments of people that 
just review claims to determine fraud. In the individual 
market, we do exclude coverage for certain preexisting 
conditions if those conditions exist. So we do have checks and 
    Mr. Hill. I think your answer is yes, you do do an 
investigation of that person's medical records after a claim is 
    Mr. Sassi. Yes. An investigation does not turn into a 
rescission in the individual market. Over 92 percent of 
rescission investigations are closed with no action.
    Mr. Hill. And, Mr. Collins, that is not your policy? Is 
that what you are saying?
    Mr. Collins. Well, my point was, sir, that based on a 
single data point, we are not doing investigations. We clearly 
will review claims for applicability to the policy, whether 
they are covered in the policy.
    There are extensive computerized claim reviews that happen. 
Throughout the industry, whether it is group insurance, whether 
it is individual insurance, there are--every claim goes through 
a computerized system that reviews the appropriateness of the 
claim and whether the claim is eligible, whether the person is 
eligible, the provider is eligible who is submitting the claim.
    Mr. Hill. Let me ask the question in a third way. Does a 
claim trigger an investigation?
    Mr. Collins. There are many ways that rescission 
investigations could start. Sometimes rescissions are started 
with a call from a provider, a precertification call. Sometimes 
it is because a claim is submitted, but there are multiple 
ways, multiple routes in which we get intelligence that there 
is a claim that may have been preexisting, which may or may not 
have been disclosed on an application.
    Mr. Hill. And is a claim one of those triggers?
    Mr. Collins. There are multiple aspects that we look at, 
but a claim----
    Mr. Hill. Is a claim one of them?
    Mr. Collins. Yes, sir.
    Mr. Hill. Mr. Sassi, you are the CEO of WellPoint's 
consumer business. And your company has provided the Committee 
with thousands of pages of documents relating to policies you 
rescinded. I would like to ask about several policies you 
rescinded here in Indiana.
    In the case you identified as case number 59-71-7, 
WellPoint rescinded an Indiana resident's health insurance 
because he failed to disclose a condition called chronic 
obstructive pulmonary disease, or COPD. Are you aware of this 
    Mr. Sassi. I am not aware of the specific case.
    Mr. Hill. Mr. Sassi, these are documents you provided to 
the Committee. These are from your own files. Our staff has 
been going back and forth with your team about this case for 
weeks. Are you now saying you don't know anything about it?
    Mr. Sassi. I am aware that WellPoint has provided the 
requested documents to the Committee. I have personally not 
reviewed those documents. I am aware that there is a high level 
    Mr. Hill. Let me ask you this. The doctor in this case 
proved that WellPoint made a mistake. Why did the policyholder 
have to go out and hire a lawyer to convince you to reinstate 
the policy? Why didn't you believe the doctor?
    Mr. Sassi. Again, I know nothing about the details of the 
    Mr. Hill. OK. Well, you know, I wish I could stay and ask 
questions. It is obvious that the claims procedure does trigger 
investigations. And you had people that are going through the 
very small details of a person's medical history in order to 
find a way of denying that claim. I think it is rather obvious.
    Mr. Chairman, let me thank you for coming to Indiana to 
hold this hearing. It is very important that we get to the root 
of a lot of reasons that have been offered here as to why 
claims are denied.
    We appreciate your leadership in this particular issue. 
Again, we appreciate you coming here to Indiana.
    Mr. Stupak. Thank you, Congressman. And we look forward to 
seeing you back later today.
    Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Chairman Stupak.
    Let's just ask. Chairman Stupak showed you and you 
acknowledged it, that there are 1,400 diagnostic codes that 
would prompt a retroactive review of the insured. And you said 
there were 20,000 diagnostic codes?
    Mr. Sassi. There are thousands.
    Mr. Yarmuth. Thousands more than the 1,400. What would 
distinguish the 1,400 codes that prompt a review from the rest 
of them? Is there a common distinction?
    Mr. Sassi. I would say they are codes. And this is 
particularly in the individual insurance market, where we 
receive information after a policy is issued. And our claims 
system would if a claim was received--it could be a pharmacy 
claim, a $20 pharmacy claim--that pertained to either a chronic 
condition that a member might have or some type of ongoing 
condition that would prompt us to investigate whether it was a 
preexisting condition or not and whether that was disclosed to 
us or not on the application.
    Mr. Yarmuth. Would it be fair to say--and if not, would you 
correct me?--that the distinction would be that these are 
diagnoses that would require relatively expensive and long-term 
    Mr. Sassi. I would say not in all cases because many 
pharmacy claims that come in for meds are for----
    Mr. Yarmuth. I'm talking about the condition itself, not 
the actual individual claim. What we were talking about here--
and Jim Stupak has a list. I have a list of Blue Cross in 
California, for instance. And it is individual plans, table of 
diagnoses, subject to retroaction review.
    And it is not a list of 1,400. It is a list of two pages 
long. I am sure there is a third, three pages long. And it is 
things like diabetes, neoplasms, or cancers, schizophrenic 
disorders, asthma, rheumatoid arthritis, emphysema, chronic 
renal failure, not anything like chicken pox. These are things 
reading across this list that would require lengthy, expensive 
    Would you say that is true? I mean, would a diagnosis in a 
child of chicken pox prompt a retroactive view of the claim or 
the medical history?
    Mr. Sassi. Most likely not, but from looking at that list, 
I would say not every condition is necessarily an expensive 
condition. Many people have these conditions and for very 
little cost.
    Mr. Yarmuth. I am not sure it has been said at this 
hearing, but I know that it came out at a hearing in Washington 
that over the past 5 years, there have been approximately 
20,000 rescission cases that saved according to insurance 
company data $300 million. That averages out. My math is $15 a 
    If you were to have a situation like some of the ones we 
heard here today--we had two cases of breast cancer on the 
panel before us, before you. Sir, could you give us an 
estimate, either one, Mr. Collins, Mr. Sassi, of what the 
average expenditure for treatment of the cases that you heard 
today might be?
    Mr. Collins. Not off the top of my head, Congressman. No, 
    Mr. Yarmuth. Could you give me a range?
    Mr. Collins. The range, sir, is like--I really couldn't, 
sir, give you a reasonable estimate.
    Mr. Yarmuth. Would you think that $15,000 is probably as 
little as in the case of breast cancer the cost of a double 
mastectomy and the ensuing chemotherapy and in some cases 
reconstructive surgery? Would you say that those situations 
would cost substantially more than $15,000?
    Mr. Collins. For all of those conditions together, yes, 
    Mr. Yarmuth. So the odds are that if there were 20,000 
rescission cases over the last 5 years, the actual savings to 
the insurance companies, even though they might not be able to 
calculate it because a lot of it is prospective, could be 
substantially more than $300 million. In fact, it could be in 
the billions of dollars.
    I will ask it another way. Is it unusual for a cancer 
regimen, a treatment regimen, to be in the hundreds of 
thousands of dollars?
    Mr. Collins. No, sir.
    Mr. Yarmuth. Right. I think the problem that a lot of us 
have is we look at the insurance company profits over the last 
few years in light of the rest of the indicators in the 
economy, we see WellPoint's profits having increased in 7 years 
by something like 1,300 percent from 200 and some million to 3. 
something billion and United HealthCare's profits increasing 
over 500 percent in the same period of time. And we hear cases 
of rescission in which we know that literally hundreds of 
thousands of dollars per case could have been saved.
    And we question whether this is a policy that is being 
implemented, Mr. Sassi, as you said, to be shared to those 
people who don't knowingly misrepresent the policies and 
whether it is strictly a financial consideration.
    And, I mean, we know that the premium increases of 100 
percent in the individual market over that same period of time 
do not particularly relate to costs in the economy. They don't 
relate to salary increases.
    So I would say that we are trying to decide what to do. You 
know, I am very pleased to see that we have a pretty good 
consensus of the fact that we need to do many of the things 
that we are talking about doing in Congress.
    I would basically say, to what can we attribute these 
incredible profit margins when we are trying to deal with 
making sure that individuals such as the ones we saw here are 
given the care that they need and that they contracted for?
    Mr. Sassi. Well, I can't speak to the numbers because I 
haven't seen the numbers, but going back 7 years, I think the 
large increase in profit numbers is not comparing necessarily 
apples to apples.
    Seven years ago, WellPoint was a much, much smaller 
company. The last 7 years, we have merged with several other 
companies. And so I think that would account for much of which 
you--in fact, the last 7 years, our profit margins have not 
been going that well.
    Mr. Yarmuth. Mr. Collins, would you like to comment on that 
as well?
    Mr. Collins. Yes, sir. UnitedHealth Group has grown via 
acquisition, much as WellPoint has. And I think that the point 
that Mr. Sassi made around the comparability of numbers over 
time is one of those things.
    UnitedHealth Group is one of the largest health care 
organizations in the United States. We touch 70 million 
American consumers. And we grow value to the system. And people 
pay us for the value that we add to the system.
    We help pull down costs. We help organize the care, the 
delivery of care. We are involved in just about every aspect of 
delivery. And most of the innovation that has come forward in 
the past 30 or 40 years around health care delivery has been 
financed by and facilitated by the health insurance industry.
    So I think that as one of America's largest businesses, we 
are entitled to a healthy profit margin. And we have been very 
prudent about our investments through this financial turmoil 
that we have had. And the company has got a good, sound balance 
sheet. It is in good shape to take care of the customers that 
meet its commitments. And we don't apologize for that.
    Mr. Yarmuth. Let me just ask two quick questions, Mr. 
Chairman. And then I will yield back my time.
    In light of what you have said, you indicated that there 
has been a fairly substantial concentration going on in the 
insurance market over the last decade. Is that a fair 
characterization of what you said?
    So that when opponents of what we are trying to do in 
Congress say, ``Well, there is already substantial competition 
out there in the market,'' what you are saying is that 
competition has diminished over the last decade. Is that true?
    Mr. Sassi. I would say that there has been a fair amount of 
consolidation within the health insurance industry, but, as the 
Nation's largest health insurer, insurance company, we still 
have on average only 30 percent market share. In the vast 
majority of our markets, there is healthy competition amongst 
literally tens, sometimes hundreds of----
    Mr. Yarmuth. You have 30 percent of the market share in the 
country. And UnitedHealth has how much?
    Mr. Collins. I don't know off the top of my head.
    Mr. Yarmuth. A substantial amount, right? And this 
represents substantial competition in your minds? I think your 
company in Kentucky controls 59 percent of the market. Do you 
consider that a healthy, competitive environment or are you 
just good at it?
    Mr. Collins. One of our toughest competitors is located 
right here in Louisville: Humana.
    Mr. Yarmuth. Thank you for that shout-out, yes.
    Mr. Collins. On the front lines, sir, I mean, there is 
quite a bit of competition. In fact, there has been a large 
number of new entrants into the individual health insurance 
    And I would urge the members of the Committee if they had a 
moment just to go to ehealthinsurance.com and put in your Zip 
code and see what pops up. You will find that there is a wide 
variety of carriers. There is great transparency in the 
individual market in terms of price and product. And there is a 
lot of competition in this marketplace. We have had a lot of 
new entrants.
    Mr. Yarmuth. I would be interested, and I will do that.
    One final question. When you have somebody who has been in 
your individual market for 10 years and they have been paying 
premiums for 10 years and they end up like one of our former 
panelists and they have a serious illness and their policy ends 
up being subject to rescission, how is that handled? How do you 
handle all the premiums they have been paying you for all of 
those years?
    Mr. Sassi. WellPoint would not rescind the policy after 2 
years. So if someone had been paying a premium for 10 years, we 
would not look at that, irregardless of----
    Mr. Yarmuth. They were not the subject of rescission. OK. 
What if they fell within the 2-year period, if they have been 
paying for 2 years? What would you do with their premiums?
    Mr. Sassi. Well, as I outlined in my testimony, we have a 
very thorough process where we review. We reach out to the 
members to see if there is any additional information the 
member could provide. We share the information that we have. It 
goes to a committee that is established with the doctor that 
makes the decision and multiple appeal processes, including 
binding third party appeal and a third party review.
    Mr. Yarmuth. That is all wonderful. What I am saying is if 
you decide to rescind their policy, they have been paying for 
20 months and then you rescind their policy, what happens to 
the premiums they have been paying?
    Mr. Sassi. The premiums would be refunded less any claims 
that were paid.
    Mr. Yarmuth. OK. Is that the same policy you would have, 
Mr. Collins?
    Mr. Collins. We refund 100 percent of the premiums on the 
    Mr. Yarmuth. OK. That is all I had, Mr. Chairman. Thank 
    Mr. Stupak. Thank you, Mr. Yarmuth. Thanks again for 
joining us. Thanks.
    Well, let me ask this question just on competition. You say 
there is so much competition between you, between the insurance 
companies. Isn't it true that the insurance companies are not 
subject to antitrust laws?
    Mr. Collins. I am not prepared to answer that question, 
    Mr. Stupak. Maybe Mr. Sassi?
    Mr. Sassi. I am not an attorney.
    Mr. Stupak. So when the Energy and Commerce Committee does 
the markup of H.R. 3200, the national health care bill, when I 
offer my amendment to take away the antitrust exemption for 
insurance companies, you have no objection to that?
    Mr. Collins. Sir, my testimony was I am not prepared to 
testify on that. And I am really not an expert in antitrust 
matters in any way, shape, or form.
    Mr. Stupak. It is only the insurance industry and Major 
League Baseball that are not subject to antitrust laws. 
Therefore, you can set the profits wherever you want. And we 
would have no recourse.
    Competition. The average health insurance premium for 
Indiana employers and employees went from $6,628 in 2000 to 
over $12,153 in 2007. In that group, 116 percent were 
individuals and 75 percent for employers. Doesn't that account 
for the huge profits you had?
    Mr. Sassi. I think that probably accounts for an increase 
in health care costs.
    Mr. Stupak. Well, accounting for the increase in health 
care costs has been why would your profits according to SEC go 
from 2.4 billion to 12.9 billion?
    And if you take WellPoint, Mr. Sassi, your profits 
increased from 226 million in 2000 to 3.45 billion? To me, that 
is a 1,380 percent increase. So it can't be health care costs. 
It has got to be the record premiums you are charging people.
    Mr. Sassi. Well, as I have previously testified, looking 
back at the starting points, WellPoint was a much different 
company. And we have grown dramatically through acquisitions of 
other companies.
    Mr. Stupak. Sure.
    Mr. Sassi. So I don't think it is an apples to apples 
    Mr. Stupak. Sure, but you said that the reason why premiums 
went up is because health care costs so much nowadays, costs so 
much to deliver health care. Then if that is the case, you 
would be paying out more money, and your profits would be less. 
You wouldn't be having a 1,380 percent increase.
    Mr. Sassi. Chairman, the point that I was trying to make is 
that 7 years ago, we were a company of a million members. And 
now we are a company that insures over 35 million members----
    Mr. Stupak. Sure.
    Mr. Sassi [continuing]. With a combination of many 
    Mr. Stupak. Sure. But you said the reason why you had to 
charge, you went from $6,600 to $12,000, was because health 
care costs went up. But, of course, corresponding is the fact 
that your profits also went up 1,380 percent when the cost of 
health care basically went up 116 percent. There is quite a 
disparity there, no matter how many people you cover. If you 
cover more people, you would have more costs.
    Let me ask you this question. The American Insurance Plans 
wrote us a letter. Are you both a member of AHIP, America's 
Health Insurance Plan?
    Mr. Collins. Yes.
    Mr. Sassi. Yes.
    Mr. Stupak. I want to ask a question about no longer doing 
rescissions without intentional fraud. You know, I know today 
you sort of danced around it. After I asked a question in 
Washington, the AHIP wrote a letter, said, ``Well, the 
companies focused their responses on specific legal standard 
referenced in the question. They will not rescind an 
individual's coverage on the basis of a preexisting medical 
condition which the policyholder was unaware of at the time he 
or she applied for coverage.''
    So will you commit today that you will not rescind an 
individual's coverage on the basis of a preexisting medical 
condition which the policyholder was unaware of? Will you 
commit to that today, Mr. Sassi?
    Mr. Sassi. Yes. I previously testified to that this 
    Mr. Stupak. You, too, Mr. Collins?
    Mr. Collins. Yes, sir. That is the knowing standard I was 
testifying to earlier.
    Mr. Stupak. OK. Then it goes on to say, ``And are you 
committing that you will only rescind the policy to the 
policyholder as materially misrepresenting their knowledge, 
health status or history?''; so a material misrepresentation. 
Is that correct? You do that?
    Mr. Collins. Yes, sir, material misrepresentation or 
omission on the application.
    Mr. Stupak. Is that your standard, too?
    Mr. Sassi. Yes, that is our standard.
    Mr. Stupak. OK. So we are making some progress. Let me ask 
you this. Mr. Sassi, Mr. Hill asked you a number of questions 
about victims of rescission here in Indiana.
    And our Committee also asked you questions and asked for 
your cooperation so we could contact them. In fact, last week 
we sent you a letter listing four cases here in Indiana. And 
they were case number 59-717-60, number 65-86, number 67-20, 
and number 65-83. And we asked you to send these people a 
letter and ask them to contact the Committee. And you refused, 
saying that you could not do that.
    Why did you refuse to contact these policyholders?
    Mr. Sassi. It is our understanding that the request being 
asked of us would have violated HIPAA.
    Mr. Stupak. How would it violate HIPAA when the insurance 
company is contacting their policyholder?
    Mr. Sassi. Again, I am not an attorney. And I believe that 
our attorneys were working closely with the Committee staff to 
determine if and how we could comply with your request.
    Mr. Stupak. Well, we checked with CRS and everyone else 
that under privacy laws, your company, WellPoint, clearly falls 
within the definition of a covered entity. And you are 
permitted to use or disclose an individual's protected health 
information to the individual. It was up to the individual to 
contact us.
    So would you contact those folks and have them contact our 
    Mr. Sassi. I will take that under advisement and speak with 
our legal team.
    Mr. Stupak. OK. Maybe we will have to use our--let me ask 
you this, then. The Reilling case, Ms. Reilling who was here, 
why did you cancel her out? Do you still offer these one-group 
policies, these one-person group policies?
    Mr. Sassi. Chairman, Ms. Reilling's case, here today was 
the first that I had heard of that case. While she was 
testifying, we did do some research. And Ms. Reilling was 
covered under an employee policy issued by Kentucky Retail 
    Mr. Stupak. Correct.
    Mr. Sassi. So it was an employer plan. And apparently the 
eligibility rules of that employer plan indicate that groups 
must have two members. And so it is my understanding that the 
association, Kentucky Retail Federation, does not insure groups 
of one.
    Mr. Stupak. Are you saying Kentucky Retail Federation told 
you to cancel Ms. Reilling's?
    Mr. Sassi. They are the policyholder.
    Mr. Stupak. Really? So for the last 15 years when you 
allowed Ms. Reilling to have this policy, did Kentucky Retail 
Federation pay that premium?
    Mr. Sassi. Chairman, again, this is the first I am hearing 
about this. We would be happy to investigate the situation----
    Mr. Stupak. Mr. Sassi.
    Mr. Sassi [continuing]. And provide something for the 
    Mr. Stupak. You are under oath.
    Mr. Sassi. Yes.
    Mr. Stupak. You are not here telling us that Kentucky 
Retail Federation was responsible for providing Ms. Reilling a 
policy. You were. You didn't go through Kentucky Retail 
Federation to provide a policy or even to contact Ms. Reilling 
on her policy.
    Everything, every document you have had, everything you 
have seen--and if you did your due diligence, everything is 
between your insurance company and Ms. Reilling or your 
insurance company and Ms. Reilling's agent. There is no 
Kentucky Federation.
    Mr. Sassi. Chairman, again, based on my limited 
understanding of the situation, my understanding is that Ms. 
Reilling was covered under a policy issued----
    Mr. Stupak. Do you still write single-person group 
    Mr. Sassi. I believe other associations. Associations do 
have that option.
    Mr. Stupak. So you still write single-person policy 
    Mr. Sassi. I can't definitively say. Again, I would be 
happy to research the matter and provide a response for the 
    Mr. Stupak. Well, you did for her for 15 years. So why was 
she canceled? Was it because she was sick in the last year?
    Mr. Sassi. Chairman, unfortunately, you have exhausted my 
knowledge of the situation. Again, I would be happy to research 
it and provide a response for the record.
    Mr. Stupak. OK. You said federal privacy laws prevented you 
from contacting your own policyholders to contact our Committee 
if they so choose. Under Ms. Reilling's case, federal law, 
HIPAA, prevents you from canceling a contract that is in 
effect. You can't go back and cancel it under HIPAA law.
    So why did you cancel it? It seems like you rely on federal 
law when it is in your best interest, but when it is not in 
your interest, you don't follow federal law.
    Mr. Sassi. Again, my understanding is that Ms. Reilling was 
covered under an employer contract.
    Mr. Stupak. For 15 years.
    Mr. Sassi. It has eligibility requirements. And, again, I 
would be happy to research it. I don't know if----
    Mr. Stupak. So, Professor, under HIPAA, could they cancel 
Ms. Reilling's policy?
    Ms. Kinney. I would be reluctant to answer without all of 
the facts, but the purpose of HIPAA is to enable people to 
maintain their policy.
    Mr. Stupak. And then HIPAA says you can't cancel unless you 
    Ms. Kinney. Unless you have the statutory standard that is 
included in your excellent supplemental report and basically 
intentional misrepresentation or failure to pay the premium.
    Mr. Stupak. Right. And she was able to. In fact, they even 
sent Ms. Reilling a renewal. They sent her a renewal, and then 
they sent her a rescission, all in the same month. But HIPAA 
prohibits insurance companies from rescinding or otherwise 
discontinuing individual insurance coverage unless there's been 
a fraud or intentional misrepresentation of a material fact by 
the applicant.
    Ms. Kinney. The problem with HIPAA is that I think it 
doesn't go far enough. It does not address rescissions. A 
rescission is when you have the contract that existed in the 
first place.
    Mr. Stupak. Sure.
    Ms. Kinney. It is like an annulment versus a divorce.
    Mr. Stupak. She wasn't rescinded. She was just failed to 
renew. And HIPAA goes on to state that ``A health insurance 
issuer that provides individual health insurance coverage to an 
individual shall''--it is mandatory----
    Ms. Kinney. Right, but HIPAA----
    Mr. Stupak [continuing]. ``Renew or continue in force such 
coverage at the option of the individual,'' Ms. Reilling.
    Ms. Kinney. Right.
    Mr. Stupak. So under HIPAA, the failure to renew here since 
they did it for 15 years straight puts you in violation of law.
    Ms. Kinney. It would be my view that they are in violation 
of the law having seen what is before us before.
    Mr. Stupak. Let me ask you this, Professor, if I may. In 
your chart, page 3----
    Ms. Kinney. Yes.
    Mr. Stupak [continuing]. It is interesting when I was 
looking at it. It looks like basically from a child until age 
60, the premiums for women are always higher until you hit 60. 
Then finally the men have a higher premium. Now, I understand 
there are child-bearing years in there, but is there any reason 
for that or is that just coincidence?
    Ms. Kinney. I would really have to give that to 
underwriting and actuarial science, which always is a 
mysterious process. And I think that these are determined based 
on the experiences that the insurance industry generally has 
with people in this age, sex, and so forth.
    Mr. Stupak. You agree with me, though, these four plans 
laid out until age 60, women pay higher premiums than men?
    Ms. Kinney. Right. I saw that, too. I mean, I was putting 
this together basically Thursday, Friday. And I was kind of 
struck by that observation, too.
    Mr. Stupak. Well, let me go back to Mr. Collins and Mr. 
Sassi since our first panel was all women. I am not trying to 
come to conclusions here, but do you charge women more? Do they 
have greater health risks than men as a general rule, Mr. 
    Mr. Collins. In Golden Rule's actuarial duties, the 
individual policies that we sell, if you stacked up the 
policyholders through age 65, men would pay slightly more than 
women over the course of a lifetime if you took 1 policyholder 
for each age and laid them out.
    Mr. Stupak. Right. But of the 60, women pay higher 
according to the professor's chart. Is there a reason for that?
    Mr. Collins. Well, that is the Indiana high-risk pool that 
you are looking at. I don't think it----
    Ms. Cutter. Yes.
    Mr. Stupak. Yes, you are right.
    Ms. Cutter. Mr. Chairman, if I may?
    Mr. Stupak. Sure.
    Ms. Cutter. That is from the Indiana Comprehensive Health 
Insurance Association. Those actuarial bases are established by 
a national firm called Millimen.
    Mr. Stupak. Right.
    Ms. Cutter. And they use data from multiple areas to 
determine what the prices should be for individual contracts in 
Indiana based on geography, age, gender, that sort of thing.
    Mr. Stupak. Surely. Didn't it strike you as funny as the 
Insurance Commissioner that up to age 60, women pay more than 
    Ms. Cutter. Women generally pay more for health insurance 
during those child-bearing years from about 20 up until about 
50. And then it starts to more even out, as you have noticed, 
that by age 60, then, the men are tending to catch up.
    The other thing that----
    Mr. Stupak. Well, I guess I would agree with that up to 
maybe 19 to 40-45, but even as a child, it seems like it is the 
boys who are jumping off roofs. It is not young girls. Why 
would they pay more or why between 50 and 60, they would pay 
    Ms. Cutter. I would have to look at the actuarial data that 
Millimen has collected in order to generate those pricings. But 
most of the time, women tend to be more careful about their 
health than men tend to be until they get into those upper 
ages, when, unfortunately, our bodies just don't work as well 
as they had 20 or 30 years previously. And I think that is the 
point at which men's health starts to catch up in terms of cost 
with women's health.
    We would be glad to get that information from Millimen, Mr. 
Chairman, if you would like to have that.
    Mr. Stupak. Let me ask you this question, if I may. I want 
to make sure I understood this right. So if I write an 
insurance policy in Indiana, an individual policy, after 2 
years, I can't rescind it, no matter what?
    Ms. Cutter. That is correct. The incontestability clause 
only addresses the first 2 years of a policy. I believe Mr. 
Sassi made a comment earlier in his testimony where you asked 
him if somebody had paid a premium for 10 years and, all of a 
sudden, you found out there was something wrong with the 
policy, you couldn't cancel it. His answer to that was no.
    Mr. Stupak. OK. So there is no rescission after 2 years. 
Have you investigated rescission practices here in Indiana?
    Ms. Cutter. We have. We have had 14 of those investigated 
for the year 2008.
    Mr. Stupak. So 14. And what were those reasons for 
rescinding those 14?
    Ms. Cutter. There are multiple reasons. Generally speaking, 
as I said earlier, they were for a claim that was related to a 
critical condition that had not been revealed on the 
application by the applicant.
    Mr. Stupak. So intentionally not renewed or 
unintentionally? It made no difference?
    Ms. Cutter. There were about three or four of those cases 
where we concluded similar circumstances to Ms. Raddatz's 
testimony, where there was information that the doctor had 
indicated in medical records that the patient was completely 
unaware of. And, therefore, in those circumstances, rescission 
was withdrawn or other terms are transforming with that at the 
10-4 coverage with the weight for a particular provision.
    Mr. Stupak. Let me ask you this. In your testimony, you 
said, ``Our policy analysts also review the language contained 
in any applications used for individual health policies to make 
certain that there are no all-inclusive or have you ever or 
questions using medical terminology too complex for the average 
consumer to understand. No insurer may use an application 
without our stamped approval on that form.'' Is that correct?
    Ms. Cutter. Yes, sir, it is.
    Mr. Stupak. The binder right there, the red book right 
there, would you take a look at it in tab number 18? That is 
actually tab number 18 is actually AMBIEN's individual 
application kit. And if you go to page--I believe it is page--
let me find it here--page 8, start with question, it looks 
like, 16 there on that form. It says, ``In the last 5 years, 
have you had an illness, physical injury persisting or new 
physical and/or health problems not mentioned elsewhere in this 
application that you have not been evaluated for that you plan 
to have evaluated by a licensed health practitioner?''
    It sounds like this sort of question is sort of an all-
inclusive, ``Have you ever?'' type question.
    Ms. Cutter. Well, it is limited to a time element of 5 
years looking back.
    Mr. Stupak. OK. So it is everything you had in 5 years.
    Ms. Cutter. Exactly. We don't like questions that say, 
``Have you ever?'' just as you had stated.
    Mr. Stupak. OK. So you don't like that question, but they 
do have that in there, right?
    Ms. Cutter. Well, giving a time limit that we will allow 
them to say, ``In the last 5 years, has anything else happened 
to you that hasn't been previously asked?''
    Mr. Stupak. So if you ever had a common cold, you should 
put that down, too, in the last 5 years? I am not trying to be 
flippant, but----
    Ms. Cutter. No. I totally understand.
    Mr. Stupak. OK. Well, then, another question--and here is 
where I am on page 16 because you have got to help me out with 
this one.
    Ms. Cutter. On page 16?
    Mr. Stupak. I am sorry. Question 16 on page 8.
    Ms. Cutter. All right.
    Mr. Stupak. ``Within 5 years, have you ever been diagnosed 
with or treated for any of the following?'' and ``Kelosi's 
enditis, Oucher's disease, pneumocystic carinii pneumonia, and 
sploridia''? What are those?
    Ms. Cutter. Those are diseases that if you had had a 
diagnosis for, you were going to know that disease.
    Mr. Stupak. Sure. Can you tell me what they are? I mean, I 
might have it and no one ever told me.
    Ms. Cutter. I can tell you what several of them are. I 
can't tell you what every single one of them is.
    Mr. Stupak. Well, what is Kelosi's enditis?
    Ms. Cutter. You would ask the one that I don't know.
    Mr. Stupak. Well, you don't even know what the common name 
of it is? Is it like tendinitis? I don't know.
    Ms. Cutter. No. I think----
    Mr. Stupak. Do we know what----
    Ms. Cutter. I think it is much more serious than----
    Mr. Stupak. OK. How about Oucher's disease? What is that?
    Ms. Cutter. I don't know that one either. Hemophilia I 
know, muscular dystrophy, multiple sclerosis.
    Mr. Stupak. Oh, yes. Yes. I think we all know those.
    Ms. Cutter. Right, right.
    Mr. Stupak. But there are about six terms there I have no 
idea. But isn't your job to weed these out to make sure it is a 
common understanding so we don't make a misrepresentation on 
the application forms, we don't get behind?
    Ms. Cutter. Absolutely it is our job and my----
    Mr. Stupak. Can you go back and look at this application 
and see if there is something we should do to improve upon it?
    Ms. Cutter. My point would be that those specific 
conditions that are listed are so unusual that you are not 
going to have one of those without a doctor having made a 
diagnosis about that particular condition because they are 
relatively serious conditions.
    Mr. Stupak. Sure. So you are saying because one of those 
words is on there, someone might have said that to me, I should 
know it, right? And I should know what the illness is?
    Ms. Cutter. I would say if you have been given a diagnosis 
by a physician for one of those conditions, you would be well-
aware of that condition.
    Mr. Stupak. I see. OK. Do you support on rescission the 
Connecticut approach, which basically prohibits post-claims, 
underwriting? Companies must do their underwriting up front. Do 
you support that idea?
    Ms. Cutter. I would certainly entertain that idea. Our 
concern would be what kind of time line that would involve 
because I have to tell you very honestly that most physicians' 
offices--and not that I blame them for this--insurance papers 
are the last thing that they will deal with in a physician 
    Mr. Stupak. Well, do you think it is fair you would be 
accepting, insurance companies accept, your premiums while they 
don't know if they are going to accept it or not? Shouldn't 
they have all of the information up front?
    Ms. Cutter. I think that there probably is a deeper level 
of information that could be collected up front. I would agree 
absolutely with that.
    Mr. Stupak. How about the fact that in Connecticut, the 
State insurance commissioner reviews all rescissions and makes 
a decision within 15 days? State Insurance Commission and the 
party have to make a decision within 15 days. Do you think that 
is fair?
    Ms. Cutter. We would be actually open to that sort of 
    Mr. Stupak. OK. Is there an appeal process in Indiana? If I 
get rescinded, who do I appeal to?
    Ms. Cutter. The Department of Insurance. And we investigate 
the rescission circumstances and have the ability to work with 
the insurers to either overturn that rescission or make other 
arrangements for the policyholder to have coverage.
    Mr. Stupak. Mr. Sassi, you said that WellPoint has an 
appeal process, right?
    Mr. Sassi. Yes.
    Mr. Stupak. How come Ms. Reilling wasn't given an appeal 
process when you canceled her insurance?
    Mr. Sassi. We do have an appeal process. Again, I am 
unfamiliar with the details in Ms. Reilling's case. Everyone 
covered under insurance has an appeal process and particularly 
for rescissions in the individual market. As I detailed in my 
    Mr. Stupak. Right.
    Mr. Sassi [continuing]. We have multiple levels of appeal 
    Mr. Stupak. That is why I am confused. You canceled Ms. 
Reilling without any appeal process. The letter just says: You 
are out of luck. We will offer you something else, but we are 
not going to offer you that.
    Mr. Sassi. Again, my understanding is Ms. Reilling was not 
covered under an individual insurance policy. She was covered 
under an employer group policy.
    Mr. Stupak. So if you are covered underneath a group 
policy, you don't get an appeal process?
    Mr. Sassi. No. We do. All of our policyholders do have an 
appeal process, grievance and appeal.
    Mr. Stupak. Then she should have an appeal process, right?
    Mr. Sassi. Absolutely.
    Mr. Stupak. Well, take a look at the binder there, number 
23 right there. I don't see anywhere it says she has an appeal 
process. It says, ``Thank you for considering us. We have been 
around for over 60 years. We have helped people in the 
community get coverage. We are writing to your application. We 
deny you. We will offer you something else.''
    Mr. Sassi. Well, I think----
    Mr. Stupak. ``And if you have life insurance, you are 
denied also.'' But I don't see anywhere it says any kind of 
appeal process or anything.
    Mr. Sassi. Well, I think this letter does not pertain to 
her losing eligibility in her group insurance policy. She would 
have an appeal process with her group policy. It looks like--
and, again, this is the first time I am looking at this--that 
this is the declamation for individual insurance.
    Mr. Stupak. So you are saying that she would have gotten a 
letter that describes an appeal process when you denied her her 
coverage? Somewhere it would have said she would have gotten an 
appeal, ``You have a right to an appeal''?
    Mr. Sassi. Well, if she was covered under the association 
    Mr. Stupak. Right.
    Mr. Sassi [continuing]. As I understand----
    Mr. Stupak. Right.
    Mr. Sassi [continuing]. The employer, I believe, was 
responsible for providing the appeal rights.
    Mr. Stupak. The Kentucky Federation of Business had to 
provide her her appeal rights. Why wouldn't you? You are the 
insurance company.
    Mr. Sassi. Well, it is an employer plan. And appeal rights 
are covered in all of our member----
    Mr. Stupak. She is her own employer. She was an employer. 
So how would she tell herself to appeal?
    Mr. Sassi. Again, she was a member of a larger group.
    Mr. Stupak. Kentucky Retail Federation and Better Business. 
So the federation had to tell her her appeal rights? How would 
they know your appeal rights? Wouldn't you know your appeal 
rights? Wouldn't your company know? You are expecting----
    Mr. Sassi. All members have access to appeal rights. It is 
in the member certificates that we issue to members.
    Mr. Stupak. Let me ask you this, then. I mentioned section 
162. That is the section in the pertinent part of the health 
care bill we are marking up in committee. When I say ``marking 
up,'' we are amending it and altering it and maybe change it as 
it goes to the full floor of the U.S. House of Representatives 
for a vote.
    Basically what the bill says is a health insurance insurer 
may rescind health insurance coverage only upon clear and 
convincing evidence of fraud. So would you agree with that, Mr. 
Sassi, that they can only rescind based on clear and convincing 
evidence of fraud?
    Mr. Sassi. Well, when looking at the House bill----
    Mr. Stupak. Right.
    Mr. Sassi [continuing]. That is before you today, looking 
at rescission in the context of eliminating medical 
underwriting, having a guarantee issue in the individual 
market, coupled with effective and enforceable personal 
coverage requirement, we do agree with the rescission 
statements that are in the bill.
    On a stand-alone basis, that is taking pieces out of 
context, but we do agree with the premise. Coupled with 
elimination of that preliminary thing in an enforceable 
personal coverage requirement, yes, we would agree with what is 
in the bill.
    Mr. Stupak. Mr. Collins, do you agree with what is in the 
    Mr. Collins. Well, sir, we would certainly agree in the 
context of health care reform agenda that the House is pursuing 
that includes enforceable mandate, subsidies for low-income 
people. It is important that the pool of people who are outside 
of coverage be as small as possible and that we get as many 
people covered as we can in order to make this work effectively 
because affordability is the primary barrier to access.
    Mr. Stupak. Right, but I am not asking about affordability. 
I am asking about health insurance insurers may rescind health 
insurance coverage only upon clear and convincing evidence of 
fraud. Would you agree with that?
    Mr. Collins. Well, sir, I would agree with the overall 
context of health care reform, that that is a workable 
standard, yes, sir.
    Mr. Stupak. OK. Well, then the legislation has another 
provision that requires insurance companies to provide ``the 
individual with notice of such proposed rescission and an 
opportunity for review by an independent external third 
party.'' Do you agree with that?
    Mr. Collins. Well, sir, there is a host of--most states 
have some sort of external third party review requirements in 
place today for claim review, for claims that are denied, and--
    Mr. Stupak. Well, this is for rescission. So would you 
agree that there should be----
    Mr. Collins. Well, I am drawing an analogy, sir.
    Mr. Stupak. OK.
    Mr. Collins. I think that those processes work fairly well 
for us.
    Mr. Stupak. So you have no problem with that, then?
    Mr. Collins. Certainly in the context of reform, it would 
be a valuable service to the public, sir.
    Mr. Stupak. Mr. Sassi, do you agree it should be an 
independent third party review?
    Mr. Sassi. In 2008, WellPoint already implemented an 
independent third party review. So we have no issue with this.
    Mr. Stupak. Why didn't Ms. Reilling get an independent 
third party review, then, if you had it in there as a company 
policy since 2008? She was denied here in this month, June.
    Mr. Sassi. Again, Ms. Reilling was not covered under an 
individual insurance policy.
    Mr. Stupak. So only individuals have third party review. If 
I am a part of a group, don't I get third party review?
    Mr. Sassi. Currently. That was a change we made to our 
rescission practices in the individual market.
    Mr. Stupak. So if you are a group, you are out of luck?
    Mr. Sassi. You have other appeal rights.
    Mr. Stupak. OK. I have to go through my employer to find 
out what they are or does your company tell us what they are?
    Mr. Sassi. We issue certificates of coverage that detail 
the benefits in each of our plans. And each of those 
certificates of coverage has appeal rights.
    Mr. Stupak. Professor, it sounds like we are playing 
semantics here. Are we in a way?
    Ms. Kinney. Well, I mean, different classifications do have 
meanings, but it does seem that the witness earlier that Ms. 
Reilling had appeal rights. They ought to have been fairly 
clearly expressed to her and accessible.
    Mr. Stupak. One of the things I have asked the Committee to 
do is have an amendment ready that not only do you have only 
rescission based on an intentional fraud and proven by clear 
and convincing evidence but also have an independent third 
party review but give it 30 days. Is that reasonable? 
Connecticut has 15 days.
    I guess I am trying to stop this post writing after 30 days 
and also have an independent review done within 30 days because 
if you are waiting for your bone marrow transplant, you don't 
have a lot of time.
    Ms. Kinney. Well, you might have an expedited process for 
that kind of a review. For example, with Medicare appeals 
processes, they have an expedited process for appealing 
coverage decisions that are life-threatening ostensibly.
    But here I think that the insurance industry should be able 
to investigate a policy, but they need to do it in my judgment 
in a shorter period of time and not be permitted for 2 years to 
engage in what is basically post-claim underwriting.
    Now, I think what gets to us and however you address it but 
what seems offensive to many is the ability to go back and 
review a chart and review statements looking for some kind of 
factor that would give rise to a conclusion that there had been 
a known misrepresentation.
    I think that that is the practice that we really need to go 
after and to clarify what is knowing. And also I thought maybe 
coming over this morning that you might put in some kind of 
requirement that a decision based on a review of medical 
record--if the insurance company has the medical record, they 
have it for 3 months, then they need to look at the medical 
record in that period of time and make a decision about whether 
that complies with the policy up front before even any claims 
were submitted.
    Mr. Stupak. Yes. It seemed like before they take your 
premium, they should give you some determination based upon the 
records, correct?
    Ms. Kinney. Right. I suppose that the rationale would be 
that if you then--you know, once you take a premium, you do 
have insurance and that that speeds up the process of getting 
insurance. And you might have a situation where you have a 
delay in coverage if you have too many requirements up front.
    But, as I understand it, another aspect of the insurance 
industry, you can issue riders and temporary insurance to cover 
that time. It seems to me a problem that does have a solution.
    Mr. Stupak. Is it fair to say that at your Center for Law 
and Health or Health and Law, if you have a health insurance 
policy and you are terminated, is it fair to say it is very, 
very difficult to get insurance coverage?
    Ms. Kinney. I think that the testimony and the information 
that has been garnered in these hearings suggest that is the 
case. And certainly in our research we did years ago, which it 
is probably a little dated, but once you have been canceled, it 
is hard to get insurance.
    Mr. Stupak. All right. Let me just take a look at one more 
thing here. Mr. Sassi, you said that the first time you heard 
about Ms. Reilling's case was today. Will you commit that you 
will have the company take a look at that and make sure that 
Ms. Reilling's rights were protected before you terminated that 
    Mr. Sassi. Yes, sir.
    Mr. Stupak. OK. Well, I want to thank you all for coming. 
That is going to conclude our questioning today. I want to 
thank all of the witnesses for coming today and your testimony.
    The Committee rules provide that members have 10 days to 
submit additional questions for the record. I will ask 
unanimous consent that contents of the document binder will be 
entered into the record provided the Committee staff may redact 
any information that has business propriety or relates to 
privacy concerns or is law enforcement-sensitive. Without 
objection, the documents will be entered into the record.
    [The information appears at the conclusion of the hearing.]
    Mr. Stupak. That concludes the hearing of the Subcommittee. 
Thank you all for coming. Thank you for participating. And 
thank you for being good hosts here in Indiana.
    [Whereupon, at 1:00 p.m., the foregoing matter was 
    [Material submitted for inclusion in the record follows:]