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


 
    TERMINATION OF INDIVIDUAL HEALTH POLICIES BY INSURANCE COMPANIES

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

                                HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             JUNE 16, 2009

                               __________

                           Serial No. 111-50


      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



                  U.S. GOVERNMENT PRINTING OFFICE
73-743                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202�09512�091800, or 866�09512�091800 (toll-free). E-mail, gpo@custhelp.com.  


                    COMMITTEE ON ENERGY AND COMMERCE

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

                                  (ii)
              Subcommittee on Oversight and Investigations

                    BART STUPAK, Michigan, Chairman
BRUCE L. BRALEY, Iowa                GREG WALDEN, Oregon
  Vice Chairman                        Ranking Member
EDWARD J. MARKEY, Massachusetts      ED WHITFIELD, Kentucky
DIANA DeGETTE, Colorado              MIKE FERGUSON, New Jersey
MICHAEL F. DOYLE, Pennsylvania       TIM MURPHY, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois       MICHAEL C. BURGESS, Texas
MIKE ROSS, Arkansas
DONNA M. CHRISTENSEN, Virgin 
    Islands
PETER WELCH, Vermont
GENE GREEN, Texas
BETTY SUTTON, Ohio
JOHN D. DINGELL, Michigan (ex 
    officio)
  
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Bart Stupak, a Representative in Congress from the State of 
  Michigan, opening statement....................................     1
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     4
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     6
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     7
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................     9
Hon. Phil Gingrey, a Representative in Congress from the State of 
  Georgia, opening statement.....................................    10
Hon. Gene Green, a Representative in Congress from the State of 
  Texas, opening statement.......................................    11
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    12
Hon. Betty Sutton, a Representative in Congress from the State of 
  Ohio, opening statement........................................    13
Hon. Janice D. Schakowsky, a Representative in Congress from the 
  State of Illinois, opening statement...........................    14
Hon. Bruce L. Braley, a Representative in Congress from the State 
  of Iowa, opening statement.....................................    15

                               Witnesses

Wittney Horton, Policyholder, Los Angeles, California............    17
    Prepared statement...........................................    20
Peggy Raddatz, Relative of Policyholder, La Grange, Illinois.....    25
    Prepared statement...........................................    27
Robin Beaton, Policyholder, Waxahachie, Texas....................    29
    Prepared statement...........................................    31
Don Hamm, Chief Executive Officer, Assurant Health, Assurant.....    47
    Prepared statement...........................................    49
Richard Collins, Chief Executive Officer, Golden Rule Insurance 
  Company, UnitedHealth Group....................................    56
    Prepared statement...........................................    58
Brian A. Sassi, President and Chief Executive Officer, Consumer 
  Business, WellPoint, Inc.......................................    62
    Prepared statement...........................................    64
Karen Pollitz, Research Professor, Georgetown University Health 
  Policy Institute...............................................    69
    Prepared statement...........................................    71

                           Submitted Material

Document binder..................................................    97

 
    TERMINATION OF INDIVIDUAL HEALTH POLICIES BY INSURANCE COMPANIES

                              ----------                              


                         TUESDAY, JUNE 16, 2009

                  House of Representatives,
      Subcommittee on Oversight and Investigations,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:08 a.m., in 
Room 2123 of the Rayburn House Office Building, Hon. Bart 
Stupak [chairman of the subcommittee] presiding.
    Members present: Representatives Stupak, Braley, 
Schakowsky, Green, Sutton, Dingell, Waxman (ex officio), 
Walden, Deal, Burgess, Gingrey and Barton (ex officio).
    Staff present: Karen Lightfoot, Communications Director, 
Senior Policy Advisor; Theodore Chuang, Chief Oversight 
Counsel; Mike Gordon, Deputy Chief Investigative Counsel; Scott 
Schloegel, Investigator, Oversight and Investigations, Daniel 
Davis, Professional Staff Member; Ali Golden, Investigator; 
Jennifer Owens, Special Assistant; Jennifer Berenholz, Deputy 
Clerk; Lindsay Vidal, Special Assistant; Julia Elam, Fellow; 
Paul Jung, Public Health Service Detailee; Karen Christian, 
Counsel; Krista Rosenthall, Counsel; Alan Slobodin, Chief 
Counsel for Oversight; and Sean Hayes, Counsel.

  OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Stupak. This meeting will come to order.
    Today we have a hearing entitled ``Terminations of 
Individual Health Policies by Insurance Companies.'' The 
chairman, the ranking member and the chairman emeritus will 
have 5 minutes for an opening statement. Other members of the 
subcommittee will be recognized for 3 minutes.
    Before we begin, I am going to ask unanimous consent that 
the contents of our document binder be entered into the record 
provided that the committee staff may redact any information 
that is business proprietary, relates to privacy concerns or is 
law enforcement-sensitive. Without objection, the documents 
will be entered into the record and we will ask that a copy of 
our document binder be placed at the front table in case 
witnesses wish to refer to it.
    I am going to begin opening statements. I will start with 
my opening statement for 5 minutes.
    Every night across America, more than 45 million Americans 
go to sleep without health insurance coverage. They do so in 
fear of a nightmare scenario of developing a catastrophic 
illness and being unable to pay for treatment. It is this fear 
that has caused many hardworking Americans who are not covered 
by an employer or government-sponsored health care plan to 
purchase individual health insurance policies. But those 
Americans fortunate enough to afford individual health care 
coverage are not immune from the nightmare scenario. That is 
because a practice called health insurance rescission.
    Here is what happened to one victim of rescission. Otto 
Raddatz was a 59-year-old restaurant owner from Illinois who 
was diagnosed with an aggressive form of non-Hodgkin's 
lymphoma, a cancer of the immune system. He underwent intensive 
chemotherapy and was told that he had to have a stem cell 
transplant in order to survive. With coverage provided by his 
individual insurance policy, he was scheduled to have the 
procedure performed. But then his insurance company suddenly 
told him it was going to cancel his insurance coverage. Otto 
could not pay for the transplant without health insurance. The 
stem cell transplant surgery was cancelled. The insurance 
company told him that it found when he applied for his 
insurance, he had not told the company about a test that had 
shown that he might have gallstones and an aneurysm, or 
weakness of the blood vessel wall. In fact, Otto's doctor had 
never told him about these test results. He didn't have any 
symptoms, and these conditions did not have anything to do with 
his cancer, but the insurance company was going to rescind his 
policy, effectively tearing up the contract as if it never 
happened and it would not pay for his stem cell transplant.
    Otto made a desperate plea to the Illinois Attorney 
General's Office seeking help to get his insurance company to 
reverse its decision. He told them, and I quote, ``I was 
diagnosed with non-Hodgkin's lymphoma. It is a matter of 
extreme urgency that I receive my transplant in 3 weeks. This 
is an urgent matter. Please help me so I can have my transplant 
scheduled. Any delay could threaten my life.'' The Illinois 
Attorney General's Office launched an investigation, confirmed 
that Otto's doctor had never even told him about the test 
findings and sent two letters to press the insurance company to 
reinstate his policy. The company relented and Otto received 
his stem cell transplant. He was able to live 3 more years 
before passing away earlier this year.
    Otto was one of the lucky ones. This committee has 
concluded an investigation into the practice of health 
insurance rescission and results are alarming. Over the past 5 
years almost 20,000 individual insurance policyholders have had 
their policies rescinded by three insurance companies who will 
testify today: Assurant, United Health Group and WellPoint. 
From a review of case files, the committee has identified a 
variety of abuses by insurance companies including conducting 
investigation with an eye toward rescission in every case in 
which a policyholder submits a claim relating to leukemia, 
breast cancer or any of a list of 1,400 serious or costly 
medical conditions, rescinding policies based on an alleged 
failure to disclose a health condition entirely unrelated to 
the policyholder's current medical problem, rescinding policies 
based on policyholder's failure to disclose a medical condition 
that their doctors never told them about, rescinding policies 
based on innocent mistakes by policyholders in their 
applications, and rescinding coverage for all members of a 
family based on a failure to disclose medical condition of one 
family member.
    The investigation has also found that at least one 
insurance company, WellPoint, evaluated employee performance 
based in part on the amount of money its employees saved the 
company through retroactive rescissions of health insurance 
policies. According to documents obtained by the committee, one 
WellPoint official was awarded a perfect score of five for 
exceptional performance based on having saved the company 
nearly $10 million through rescissions. These practices reveal 
that when an insurance company receives a claim for an 
expensive lifesaving treatment, some of them will look for a 
way, any way, to avoid having to pay for it. This is eerily 
similar to what we found last year in our investigation of 
long-term-care health insurance policies where unscrupulous 
salespeople would sell policies to seniors, then change or 
revoke the policies once the enrollee was locked into a plan 
and making payments.
    The companies who engage in these rescission practices 
argue that they are entirely legal, and to an extent, they are, 
but that goes against the whole point of insurance. When times 
are good, the insurance company is happy to sign you up and 
take your money in the form of premiums but when times are bad 
and you are afflicted with cancer or some other life-
threatening disease, it is supposed to honor its commitment and 
stand with you in your time of need. Instead, some of these 
companies use a technicality to justify breaking its promise at 
a time when patients are too weak to fight back.
    I would also like to mention and compliment the staff on 
their supplemental information regarding the individual health 
insurance market. It is attached to my opening statement and 
will be part of the record.
    Today we will hear from victims of this practice of 
rescissions as well as three of the leading companies that 
engage in it. We hope to learn more about this problem so that 
we in Congress perhaps through a comprehensive national health 
care reform bill can curb abuses and put an end to this 
unconscionable practice once and for all.
    I would next like to now turn to my ranking member, Mr. 
Walden from Oregon, for an opening statement, please.
    Mr. Walden. Thank you, Mr. Chairman. Before I give my 
opening statement, I just want to clarify something. You 
indicated in your opening statement you do plan to put this 
supplemental information in the record?
    Mr. Stupak. Yes, sir. I am going to attach it as part of my 
opening statement. This is the supplemental information 
regarding the individual health insurance market dated June 16. 
I realize a lot of members haven't had time to look at it. I 
know they were putting it together last night. In the last 
couple days they went through about 50,000 pages, and it just 
helps members for questioning so I wanted to put it in there 
because it is supplemental, and members can use it in 
questioning witnesses.
    Mr. Walden. OK. I misunderstood what you were saying then. 
I thought you told me you weren't going to put it in since the 
minority didn't see this until 9:20 this morning.
    Mr. Stupak. Right. I wasn't going to put it in as part of 
the document binder so I will put it as part of my opening 
statement and then it is attributable to me and the majority 
side and not the minority side, because as you had indicated, 
it is on committee stationery and Mr. Barton had not had time 
to see it so I did not want to say that Mr. Barton approved so 
I just made it part of my opening statement.
    Mr. Walden. I appreciate that.
    Mr. Stupak. Thank you.
    Mr. Walden. I hope in the future we can work those things 
out in advance as we have in most hearings in the past.
    Mr. Stupak. I agree.

  OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Today's hearing is the second in a series of 
hearings investigating the individual health insurance market. 
Approximately 16 million Americans have individual health 
insurance policies. Once people apply and are issued their 
insurance cards, they breathe a sigh of relief and figure their 
health care is covered. Unfortunately, that sigh of relief may 
turn into a frenzied panic if the Friday before the Monday a 
patient is to undergo a double mastectomy she receives a call 
from her insurance company saying her insurance has been 
cancelled and they will no longer pay any claims. This is what 
happened to one of our witnesses here today, Ms. Robin Beaton 
from Texas, Ranking Member Barton's constituent. We will also 
hear from Mrs. Horton and Mrs. Raddatz where the threat or 
actual termination of insurance policies caused pain, 
frustration and great expense.
    While we may be here to discuss valid uses for and 
procedural aspects of rescissions, medical underwriting and 
other corporate practices, there are some actions we should no 
longer allow insurance companies to do. Playing gotcha with 
policyholders who have serious illnesses and huge expenses must 
stop. Insurance companies cannot wait until customers are sick 
or filing claims to verify their medical history and decide 
whether or not they want them as a customer. This is what they 
are supposed to be doing when they sign the member up. If the 
company does not conduct a review of unclear or incomplete 
information on the application, then the plan should not use 
subsequently acquired information as a basis for rescinding 
coverage. This practice is known as post-claims underwriting. 
The company should conduct its due diligence at the time the 
application is filled out and submitted prior to issuing 
coverage. Rescission should not be a license to find loopholes 
by investigating someone's medical history whenever they file a 
claim well after being accepted for coverage, not if the 
company hurried through the application process, not if the 
company blindly accepted most applicants and not if the company 
gladly collected their money with no questions asked. This is 
inappropriate and it should be stopped.
    I understand that companies just like the federal 
government need ways to protect themselves from insurance 
fraud, which does occur. Some applicants willfully lie on the 
application to get insurance and pay lower premiums. This 
increases the cost of coverage for the insurers and other 
policyholders. When a company discovers this behavior and 
believes rescission is the appropriate action, the burden must 
rest on the insurer. The company should prove the insured 
failed to disclose material information that he or she was 
aware of at the time of the contract that would have resulted 
in different contracts altogether. After all, the company has 
the money, employees and resources to meet that burden. They 
are the ones making the assertion and they are the ones 
ultimately denying the coverage. It is not enough for companies 
just to send a letter to the insured stating that an 
investigation into their file has begun, and if they choose to 
send in any additional information to the company. The company 
needs to attempt to communicate directly with the insured, his 
or her doctor and review all pertinent information to prove the 
insured did make a material misstatement.
    The majority requested all cases files that resulted in 
rescission in 2007 in four States. For United, this was 206 
case files, for Assurant, this was 321 case files, and for 
WellPoint, this was 742 case files. To date, the committee has 
received more than 650 of these case files. My staff had the 
opportunity to review several of these files including working 
all weekend. In some, there is documentation or evidence that 
the insured intentionally withheld pertinent medical 
information that would have affected their coverage. In others, 
it is unclear whether the applicant was even aware of the 
condition or notation cited by an investigator in an old 
medical chart as evidence to rescind.
    Today three individual policyholders will explain their 
stories and illustrate how they were unaware of conditions, 
symptoms or other possible diagnoses that were written in a 
medical chart but never expressed to the patient. So you have 
to ask yourself, can a person make a material omission or a 
misstatement if he or she was not aware of a fact? I don't 
think so. But if I am wrong, I want the companies to explain it 
to me.
    In 2008 and 2009, these companies entered into settlement 
agreements with rescinded policyholders and providers in sums 
topping tens of millions of dollars. Some of the companies 
remain in litigation with other rescinded policyholders. I also 
recognize some of these companies have initiated internal 
reforms. These include steps to improve their application 
process, improve communication with the insured during the 
investigation and rescission process and offer independent 
third-party review of rescission decisions if requested by the 
policyholder.
    I want to know what appropriate actions Congress can take 
and what else these companies can do better to ensure that all 
Americans have access to health care coverage. Health care 
reform is coming and we need to have a better understanding of 
the individual health insurance market and its practices. We 
need to figure out first and foremost how to make qualify 
health insurance affordable and reliable while keeping 
protections in place to combat insurance fraud. I hope that as 
this process moves forward we work in a bipartisan way to 
design a system that achieves the ultimate goal of getting 
those who need medical care the attention they need. Thank you.
    Mr. Stupak. Thank you, Mr. Walden.
    Mr. Waxman for an opening statement, please.

OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, Mr. Chairman.
    Today we are going to hear the results of a yearlong 
Congressional investigation into abuses in the individual 
insurance market. We began this investigation last year when I 
served as chairman of the House Oversight Committee and we 
continued it this year with Chairman Stupak's leadership as the 
chairman of the Oversight Subcommittee of Energy and Commerce. 
As part of this investigation, we conducted a 50-State survey 
of insurance commissioners and we sent document requests to 
some of the largest companies that offer individual health 
insurance. We received more than 116,000 pages of documents and 
our staff talked with many policyholders who had their 
insurance policies cancelled after they became ill. Some of 
them are here today to testify, and I thank them very much for 
being here.
    Overall, what we found is that the market for individual 
health insurance in the United States is fundamentally flawed. 
One of the biggest problems is that most States allow 
individual health insurance policies to deny coverage to people 
with preexisting conditions. So if you lose your job and you 
can't qualify for a government program like Medicare or 
Medicaid, it is nearly impossible to get health insurance if 
you are sick or have an illness. This creates a perverse 
incentive. In the United States, insurance companies compete 
based on who is best at avoiding people who need lifesaving 
health care, and this incentive manifests itself in a wide 
variety of controversial practices by the insurance companies 
when we know that when people apply for insurance policies and 
they put down that they have some preexisting condition, they 
are going to be denied. But what we found is that when people 
with individual policies become ill and then they submit their 
claims for expensive treatments, then insurance companies 
launch an investigation. They scour the policyholder's original 
insurance application and the person's medical records to find 
any discrepancy, any omission or any misstatement that could 
allow them to cancel the policy. They try to find something, 
anything so they can say that this individual was not truthful 
in that original application. It doesn't have to even relate to 
the medical care the person is seeking and often it doesn't. 
You might need chemotherapy for lymphoma, but then when the 
insurance companies find that your coverage was based on a 
failure to disclose gallstones, well, they want to cancel your 
policy after the fact. It may come as a surprise to most people 
but the insurance companies believe they are entitled to cancel 
the policies even when these omissions or discrepancies are 
completely unintentional and they believe that they have the 
right to cancel policies even when someone else like an agent 
who sold the policy was responsible for the discrepancy in the 
first place.
    In addition, they can terminate coverage not just for the 
primary policyholder but they go to terminate the policies for 
the entire family including innocent children who did nothing 
wrong. Some insurance companies launch these investigations 
every single time a policyholder becomes ill with a certain 
condition. In other words, if you happen to have ovarian 
cancer, you should be prepared to be investigated. It is the 
same with other conditions such as leukemia.
    In the written statements for today, the three insurance 
companies downplay the significance of these practices, arguing 
that rescissions are relatively rare. But these three companies 
saved more than $300 million over the past 5 years as a result 
of rescissions, and I am sure they view this amount as 
significant. More importantly, however, these terminations are 
extremely significant to the tens of thousands of people who 
needed health care and couldn't get it during these 5 years 
because their policies were rescinded.
    In my opinion, of course, the solution to these problems is 
to pass comprehensive health reform legislation and based on 
the written testimony I think the three insurance companies 
testifying here today agree with that assessment. But until 
that happens, insurance companies deny people coverage if they 
have a preexisting condition and then afterwards if they gave 
them the coverage for insurance they want to see if there is 
some reason they can rescind it after the fact, after they have 
already given out the insurance to see if they can rescind that 
policy. I think it is shocking. It is inexcusable. It is a 
system that we have in place and we have got to stop.
    Mr. Chairman, I am pleased that you are holding this 
hearing and I thank you for the time allotted to me.
    Mr. Stupak. Thank you, Mr. Waxman.
    Mr. Barton for an opening statement, please.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman.
    This is my month for witnesses from Waxahachie, Texas. Last 
week we had Mr. Frank Blankenbecker, who is the owner of 
Carlisle Chevrolet in Waxahachie. Today we have Ms. Robin 
Beaton, who is a citizen of Waxahachie. So I want to extend to 
her my very best wishes and let her and the other two panelists 
on this first panel know that there is nothing to be afraid of. 
You speak for tens of thousands if not hundreds of thousands of 
American citizens, and the country is very interested through 
the auspices of this hearing to hear your story, so we 
appreciate all three of you being here.
    This is an important hearing. It addresses part of the need 
to reform our health care system. We are going to hear today 
about a problem under the current system that can occur in the 
handling of individual health insurance policies when claims 
are actually submitted for coverage under those policies. As I 
just said, I want to extend a warm welcome to our first panel 
of witnesses. Each of you has a personal story that you wish to 
share and we know that it is a story that is worth hearing. We 
also know that it takes courage to testify, and as I just said, 
there is nothing to be afraid of at this hearing today.
    We hear of problems as Congressmen and -women when our 
constituents tell us what those problems actually are. Today we 
are going to hear from one of my constituents, Ms. Robin 
Beaton. No one should have to go through what she has had to go 
through the last several years. In June of last year, she was 
diagnosed with an aggressive form of breast cancer and her 
doctor said that she needed immediate surgery. The Friday 
before the Monday that she was to undergo a double mastectomy, 
she received a letter from her carrier, Blue Cross of Texas, 
that rescinded her insurance policy. The letter stated that the 
company would not pay for the surgery. The letter further 
informed Ms. Beaton that an investigation into her claim for 
benefits when the company had thoroughly reviewed her medical 
records that she submitted when she applied for the coverage 
and that they discovered that she had misinformed them on 
several pieces of information. One of them was that she didn't 
list her weight accurately, and the other, that she failed to 
disclose some medication that she had taken for a preexisting 
heart condition. The record will show that she was not taking 
that medication at the time that she submitted her initial 
application for coverage. Robin's claim in June of 2008 was not 
for weight control, it was not for a heart condition, it was 
for cancer surgery, a double mastectomy for breast cancer, yet 
her policy was rescinded 3 days before that surgery was 
scheduled to take place. It was bad enough that she had to deal 
with the trauma of breast cancer but to be denied coverage 
right before potentially lifesaving surgery quite frankly is 
something that no human being should have to undergo. She had 
no insurance and no way to pay for her scheduled surgery. So 
obviously it was postponed.
    She called my office. My staff went to work. They had 
several conference calls with officials of Blue Cross/Blue 
Shield. In those conference calls, Blue Cross and Blue Shield 
was unyielding. They were adamant. It went to the counsel, the 
general counsel of Blue Cross/Blue Shield and that individual 
said there was no way they were going to reinstate her 
coverage. Never take no for an answer. I called the president 
of Blue Cross/Blue Shield. I appealed to him personally, gave 
him the facts as I knew them, and he promised that he would 
personally investigate Ms. Beaton's case, and he further 
promised that if the facts were as she said and I said, that 
her coverage would be reinstated. Good to his word, the 
president called me back within 4 hours and said that Ms. 
Beaton's coverage would be reinstated. However, precious time 
was lost. Luckily for Robin, she was finally able to get the 
surgery, not through Blue Cross/Blue Shield though, as I 
understand it. She is now undergoing chemotherapy because the 
cancer has spread to her lymph nodes, but she is still with us, 
thank God, and she is here today to tell us her personal story.
    Robin's situation was what caused me to draft an amendment 
to Representative DeLauro's breast cancer bill last year to 
protect people like Robin by prohibiting rescissions of health 
insurance if non-disclosure of information is not related to 
the claim, not related to the claim and inadvertent. There is 
no reason on God's green earth that somebody ought to have 
their health insurance revoked because of some inadvertent 
omission that is not related to the claim that is being 
submitted to the health insurance company. This bill with my 
amendment passed the House last year but it died in the Senate. 
It has been reintroduced and hopefully it will pass this year. 
I support the right of an applicant to request a third-party 
independent review of an insurer's rescission prior to pending 
or denying payments of claims. I understand that there is 
another side to this story. I understand that there are people 
that do try to scam insurance companies. I understand that 
there is a rule of reason, but again, if somebody inadvertently 
omits something or there is something that is not material to 
the claim, that claim in my opinion should be paid, end of 
story.
    As we head towards reforming health care, it is important 
that we promote honesty on behalf of the insured and the 
insurers. Congress needs to be confident that there are 
consumer protections in place to protect people like Robin 
Beaton as well as procedures for companies to protect 
themselves from insurance fraud. Companies need to have open 
and clear rules on when they terminate policies. Applicants 
need to be truthful when applying for coverage. Every American, 
and this is something that members on both sides of the aisle 
support, needs to have access to affordable, quality health 
care.
    This is an important hearing towards that goal, Mr. 
Chairman, and I thank you for holding it. I also think that we 
should give special condition to one of our panelists here on 
the dais. The gentlelady from Chicago injured herself yesterday 
and has a broken leg and yet she is here today at this health 
care hearing, so appreciate Ms. Schakowsky here.
    Ms. Schakowsky. And fortunately with good health insurance, 
so I am happy about that too.
    Mr. Barton. And again, thank you, Mr. Chairman, for holding 
this hearing.
    Mr. Stupak. Thank you, Mr. Barton, and thank you again for 
helping us obtain witnesses for this hearing.
    Mr. Dingell for an opening statement, please.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell. Thank you, Mr. Chairman, and I commend you for 
holding this hearing on the rather vicious practice of post-
claims underwriting and the detrimental effect that such 
practices have on hundreds of Americans, and I want to thank 
the witnesses for appearing in what I hope will be an 
informative hearing today on which the committee may begin some 
actions to correct what appears to be a very serious abuse, and 
I remember, Mr. Barton, the way we worked together on this and 
your outrage last year when we were addressing similar 
questions.
    Health care costs have risen sharply. In response to this, 
insurance providers have taken drastic measures to reduce costs 
and to improve profit margins. Unfortunately, the health 
insurance industry is attempting to do so by giving in to 
unscrupulous industry practice including the practice of post-
claims underwriting. I want to be clear. I have no sympathy for 
individuals who intentionally misrepresent their health status 
in the applications they submit for health insurance coverage. 
These actions are dishonest and have a negative impact on the 
cost of health care for everyone else, and they are clearly 
wrongdoing and they should be punished. However, I have far 
less sympathy for health care providers and insurance providers 
who have made it a customary practice to exploit current laws 
meant to protect individuals and to take advantage of the most 
vulnerable Americans in order to turn a profit. They do this by 
seeing to it that they avoid risk as opposed to practicing good 
insurance practices.
    As we have seen time and time again, insurance providers 
have made a living out of refusing to compete on quality and 
choosing instead to compete by avoiding financial obligations 
at all costs. In the current market, health insurance providers 
are allowed to pick and choose whom they will cover in the 
individual market. We have allowed this cherry picking or cream 
skimming to go on for years, but when we weren't looking the 
industry decided to up the ante. In some cases, industry 
underwrote countless claims for individuals that cherry picked 
and then it began to quietly punish those individuals if they 
got sick and used their insurance for its intended purpose, to 
cover major medical claims. In some cases, industry didn't just 
drop the individual policyholder but retroactively rescinded 
the contract as if the agreement had failed to exist. They 
refused to pay hospitals, doctors and nurses that sought 
reimbursement for services rendered.
    To our witnesses who are appearing this morning to share 
their personal experience with post-claims underwriting, we 
will work to ensure these practices come to a sharp end. To the 
CEOs testifying this morning, I would like them to know this: 
We don't regulate for the fun of it. We regulate when the 
private sector refuses to honor its commitments to the American 
public. As we work to reform the Nation's health care system, 
we will work to reform the current health insurance market. We 
will work to ensure such reform will prohibit insurers from 
excluding preexisting conditions or engaging in any other 
unfair and discriminatory practice. We will also work to ensure 
these reforms include fair grievance and appeals mechanisms, 
very much lacking in the insurance world today, and will ensure 
information transparency and plan disclosure. These new reforms 
alone will not fix the problems. We will also have to work to 
ensure that there is strong oversight on both the federal and 
state level. Furthermore, these insurance industry practices 
are precisely the reason why we need a public health insurance 
option included in our proposal to reform the health care 
system, a public plan that leads by example and competes 
through quality and innovation rather than unfair industry 
practices is what is needed to keep the private industry in the 
insurance business honest.
    Thank you, Mr. Chairman.
    Mr. Stupak. Thank you, Mr. Dingell.
    Next for a 3-minute opening statement, Mr. Gingrey.

  OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Gingrey. Mr. Chairman, thank you.
    Generally, insurance is a form of risk management that 
allows individuals to pay a monthly premium in exchange for a 
company taking on their financial risk in the event of a health 
care catastrophic loss. Health insurance, on the other hand, is 
not typical insurance. For a monthly premium, individuals 
purchase health insurance to financially support them in the 
event of a catastrophic incident such as a broken leg, as the 
gentlelady from Chicago just recently experienced, or major 
surgery. Patients also use their insurance for such things as 
doctor visits or monthly prescriptions. In many respects, 
health insurance has become the means by which patients see 
their providers and they receive treatment.
    Primary responsibility for regulating the individual health 
insurance market rests with the State regulators. However, in 
the Health Insurance Portability and Accountability Act of 
1996, HIPAA, Congress made very clear that an individual 
insurance policyholder has a right to guarantee renewability. 
In other words, an insurer must renew or continue an 
individual's existing coverage unless some specific exception 
is made. Those exceptions include a policyholder moving out of 
a network plan service area, or if the policyholder 
intentionally misrepresents a material fact concerning their 
condition when contracting with the insurer.
    I believe it is unfair for an individual to be denied 
coverage for a claim when he or she has been upfront about 
their condition. They played by the rules of the contract. They 
paid their premiums on a regular timely basis only to be denied 
coverage when a health care incident arises as described by my 
colleague, Mr. Walden, what we would call post-claims 
underwriting. The impact it has on patients and their loved 
ones can be devastating. I have actually personally experienced 
that in my own family and it literally took an act of Congress 
to change that.
    With these things in mind, I look forward to the testimony 
of our witnesses today. I want to thank the entire panel, this 
first panel particularly, as well as the second panel for 
coming in today and sharing your stories with us, and Mr. 
Chairman, I look forward to the hearing and to the questions, 
and at this time I yield back.
    Mr. Stupak. Thank you, Mr. Gingrey.
    Mr. Green of Texas for an opening statement, please.

   OPENING STATEMENT OF HON. GENE GREEN, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Green. Thank you, Mr. Chairman, and I think all of us 
appreciate you calling this hearing today because like my 
ranking member from Texas talked about, we deal with this all 
the time through our constituents, and as a State legislator in 
Texas, we have had that same problem for many years, and I 
appreciate you bringing this out and hopefully we will address 
this in our health care reform. I want to thank our witnesses 
for being here today.
    Most individuals in the country have health insurance 
through their employer, Medicare or Medicaid. But millions of 
Americans do not have insurance through their employers or 
through the public market so they turn to the individual 
insurance market to purchase insurance policies. Individuals 
who purchase the insurance through the individual market must 
go through an application process and supply their medical 
history including any mental, physical or chronic conditions. 
Insurance companies are supposed to review those applications 
and review the applicant's medical history before approving the 
individual for coverage. Oftentimes this medical history never 
occurs and the insurance companies will cover individuals who 
have conditions they would not necessarily cover. These 
individuals believe their coverage is current and when they 
submit a claim they often find themselves subject to that 
medical history investigation and dropped from their insurance 
and liable for all claims under the policy. In other instances, 
individuals submit a claim for a serious illness such as cancer 
and find themselves subject to a medical history investigation 
and dropped from their policy because the insurance company 
claims the individual did not disclose a medical condition when 
filling out their initial application. Both these instances 
leave the individual without health insurance coverage and 
uninsurable because they have to report having their coverage 
rescinded. Individuals who are undergoing medical treatment for 
conditions such as cancer are dropped from their coverage often 
face life-and-death situations because the insurance company 
does not want to pay for their treatments. I can't imagine the 
pain and suffering that these individuals go through at the 
expense of an industry seeking healthy patients to make a 
profit.
    A few States, including Texas, have taken actions to 
prevent insurance companies from post-claims underwriting. As 
we are working through health reform, we need to examine the 
individual market and ensure individuals never have to face 
losing their coverage for simply using their coverage, and Mr. 
Chairman, again, I thank you for calling this hearing. I yield 
back my time.
    Mr. Stupak. Thank you, Mr. Green.
    Mr. Burgess for 3-minute opening statement, please, sir.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman, for the 
consideration.
    Let me just say at the outset, I do believe in the 
individual market. I believe it has a place in this country. 
Indeed, I was a client and a customer in the individual market 
for my family's coverage for a period of time. And I also 
believe that the barriers that we, the federal government, the 
Congress puts in place on the individual market sometimes 
creates unnecessary difficulties for the people who sell in the 
individual market or the people who wish to be their customers. 
But no one can defend, and I certainly cannot defend the 
practice of denying coverage after the fact and I cannot be 
comforted by the fact or the statements that are made that this 
is in fact an infrequent occurrence because as the cases in 
front of us at the witness table demonstrated this morning, 
there is no acceptable minimum to denying coverage after the 
fact when the coverage was duly paid for and entered into in an 
honest fashion and then only when the coverage was required was 
it found to be not there.
    Now, I don't think anyone on either side of the dais 
believes that anyone would ever lie about something on a 
medical history, maybe fudge your weight a little bit, maybe 
the number of times we actually go the gym or what we actually 
do there, but no one would willfully do that. The question 
before us today is, do people intentionally lie in order to 
manipulate companies into giving them coverage when they know 
that they have a preexisting condition, and the legal jargon 
that we apply to that is rescission, and should insurance 
companies post procedure be allowed to terminate individual 
contracts based upon the omission of disclosure of a 
preexisting condition irrespective of whether it was 
intentional on behalf of the individual seeking coverage or 
not, and I am troubled by that inability to distinguish between 
those who intentionally act with fraud and those who honestly 
answer broad, vague or confusing questions on the contracts to 
obtain health coverage. Those are not equivalent conditions. An 
omission without intent does not signify fraud and no insurance 
company who hides behind filling out their request for 
insurance as a strict liability should be protected. Intent is 
crucial because those who act fraudulently should not be 
protected by the law nor should it be our desire to do so.
    It is interesting to me that all of the insurance companies 
today that we are going to hear from on our panel today are 
private for-profit companies, but Ms. Beaton's insurer, whose 
case proved near intractable until her Member of Congress got 
involved, was Blue Cross and Blue Shield, and I wonder, Mr. 
Chairman, why Blue Cross and Blue Shield is not in one of our 
panels today. Clearly as a nonprofit company, they would not 
have a purely profit-driven motive to engage in this type of 
behavior. So theirs is perhaps particularly curious and I think 
there are a number of questions that we would like to pose to a 
company that does in fact function as a nonprofit. It is the 
responsibility of each insurance company whether for profit or 
not for profit to do their due diligence before the contracts 
are entered into and not use rescission as an excuse for lazy 
or incomplete underwriting.
    Thank you, Mr. Chairman. I will yield back the balance of 
my time.
    Mr. Stupak. Thank you, Mr. Burgess.
    Ms. Sutton for opening statement, please.

  OPENING STATEMENT OF HON. BETTY SUTTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Ms. Sutton. Thank you, Chairman Stupak, for holding this 
critical hearing.
    Simply put, rescission of coverage by insurance companies 
puts dollars ahead of the lives of Americans, and I am not 
exaggerating when I say that insurance accountability is 
something that I have fought and advocated for at every stage 
of my professional life. During my time as a representative in 
the Ohio General Assembly, I worked on behalf of Ohioans to 
ensure that when benefits were promised, benefits were given. 
And now I am here in Congress to continue that fight.
    Rescission of coverage is a problem that we in Congress are 
seeking to eliminate and it is our hope, you have heard from 
the comments here, that when we have finished reforming our 
health care system, coverage discrimination will be a thing of 
the past, but today it is still a problem that exists and must 
be eliminated. When a health insurance policy rescission 
occurs, it creates waves throughout the entire health care 
system. Make no mistake, these decisions deprive people of 
needed care. They deprive hospitals and doctors of the 
reimbursement they have earned for their service. For some, a 
rescission is a costly process that can result in a doctor or 
hospital having to seek payment from the individual. For 
others, it means a delay in access to a lifesaving procedure or 
treatment. That is unacceptable.
    Today we will hear from citizens, and I thank you all for 
coming to provide your testimony and your stories about your 
lives that have been turned upside down by the insurance 
industry policy of rescission. We will hear from executives who 
will tell us that in the name of uncovering insurance fraud and 
corruption, they had no choice but to remove these 
beneficiaries from their rolls. But I think the testimony of 
the people who have lived through this trauma will tell a 
different story.
    The number if uninsured in this country is now thought to 
be 47 million. It is a major flaw in our country that so many 
people go without their basic right to have health care 
coverage and millions more who have insurance still don't get 
the care they need when they need it. It is hard to understand 
how we allow those who are legitimately covered to join the 
ranks of the uninsured due to the stroke of a pen or the 
decision of an insurance company executive.
    Unfortunately, Mr. Chairman, I have another hearing that is 
going on simultaneously with this one so will be shuttling back 
and forth, but I want the panelists to know that I will be 
listening carefully to the testimony, both for myself and for 
the people of Ohio that I am so honored to represent, and I 
thank you all again for coming and I thank you, Mr. Chairman, 
for your attention to this matter.
    Mr. Stupak. Thank you, Ms. Sutton, and that is a good 
reminder. Members will be coming back and forth as there is a 
committee two floors up. The Telecommunications and Internet 
Subcommittee is also meeting, and in that vein, Congresswoman 
Donna M. Christensen, who is a member of this subcommittee, has 
submitted her opening statement for the record. Without 
objection, it will be entered into the record.
    Next I will turn to Ms. Schakowsky for an opening 
statement, please, and you can tell us how you broke your leg.
    Ms. Schakowsky. Well, I wish there was a dramatic story, 
Mr. Chairman, although it was in a fairly dramatic place. I did 
go to Guantanamo Bay yesterday and fell and ended up breaking 
my foot in two places. I hope soon with the help of the 
attending physicians I will have a boot or a cast or something. 
That was just yesterday, and I----
    Mr. Stupak. Well, we wish you well and thanks for being 
here.

       OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 
     REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS

    Ms. Schakowsky. And I am grateful that I do have good 
health insurance to cover that.
    I appreciate today's hearing examining one of the truly 
egregious practices occurring in the individual health 
insurance market. I want to extend a special welcome to Ms. 
Peggy Raddatz from my home State from La Grange. I thank you 
for being here and sharing your family's story with us. I know 
it isn't always easy to discuss personal matters but you 
certainly are helping us to make better health care policies, 
and I thank all the witnesses for helping us.
    When a consumer goes to buy a health insurance policy, they 
examine their options and they try to identify the best policy 
to meet the health care needs of their family and at no time do 
they ever imagine that once they buy a policy they might get 
sick and their insurance will simply rescind their policy and 
leave them without coverage but with a high pile of bills. The 
practice of post-claims underwriting in the private market is 
wrong and we should prohibit it. Let us face it is, it is 
already hard enough for an individual or small business owner 
to find health insurance. In my State of Illinois, there is no 
requirement that insurers take all comers, and I have heard 
from constituents over and over again who are unable to find a 
policy really at any price. Those who do get through the 
insurance industry gauntlet know that they are not home free. 
They know they may face high out-of-pocket costs, denial of 
doctor-prescribed treatments, prior approval requirements, caps 
on services and other devices that are designed to limit the 
insurance company payments. But few know that when they need 
care the insurance company that has been collecting their 
premiums may now go back and comb through their personal 
history in order to find an excuse not to pay just when the 
policyholder needs the coverage the most.
    There are some who argue that rescissions are used to stop 
fraud on the part of enrollees who misrepresent their health 
histories in order to obtain coverage. One has to wonder why we 
would put up with a health care system in which people have to 
hide their illnesses in order to get access to care, but we 
also know that this isn't about that. It is most often about a 
company looking for an undisclosed headache 10 years ago in 
order to deny coverage for a brain tumor today. The practices 
of the private insurance market have less to do with the 
consumer and a lot to do with company profits. As we move 
forward with health care reform, we have to put an end to 
practices that discourage patients from seeking out care. 
Insurance coverage should be a pathway, not a barrier to care.
    Mr. Chairman, I look forward to working with you to improve 
care coverage, refocus our attention on patients, and I really 
again thank our witnesses for being here today, and with that, 
I yield back.
    Mr. Stupak. Thank you.
    Mr. Braley for an opening statement, please.

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF IOWA

    Mr. Braley. Thank you, Mr. Chairman. This is a very 
important hearing but I would like to start by talking about 
the very concept that we are here to discuss because the term 
''post-claims underwriting'' is an oxymoron. Insurance 
companies are structured into different departments. They have 
an underwriting department and a claims department, and the 
underwriting department is supposed to do pre-issuance risk 
assessment to determine whether an individual policy is worth 
the company investing in that person as a health care risk. The 
claims department is designed to respond to requests for 
coverage after a policy has been issued. So the very theory we 
are here to talk about today isn't even supposed to exist in a 
rational health care delivery system, and it wouldn't exist if 
we had a rational health care delivery system. But when you 
read news stories where the CEO of one private health insurance 
company is sitting on stock options valued at $1.6 billion, it 
shouldn't come as a shock to any of us that we are sitting here 
today hearing these horror stories of patients who have been 
caught up in an inefficient, unsustainable private health 
insurance delivery system.
    And Ms. Raddatz, I wish that every claims examiner at every 
insurance company and every underwriter who gets engaged in 
post-claims underwriting determinations had to go through what 
you went through and the other witnesses who are here today 
because one of the most profound experiences I have had in my 
life was spending about a month at a pediatric oncology unit at 
the University of Iowa Hospitals and Clinics when I was in the 
Big Brothers/Big Sisters program and my little brother was 
diagnosed with acute large-cell non-Hodgkin's lymphoma and 
spend time every day watching young patients with no hair, with 
IVs in their arms or in their chests going into a port, walking 
around and taking care of each other much better than our 
health care industry takes care of patients in their time of 
need, and it is a slander on the names of the health care 
professionals who do everything they can to keep patients like 
your brother, like my little brother alive when we don't give 
them the support that they need after they have invested their 
hard-earned dollars by paying premiums to a health care 
insurance company who turns their back on the patient in their 
hour of need, and that is why I am a strong supporter of the 
public health insurance option and I am proud that my 
colleagues on this committee, Chris Murphy and Peter Welch, 
have joined me in introducing the Choices bill to give health 
insurance patients a public health insurance option with no 
discrimination so we don't have to go through these nightmares 
anymore.
    With that, I yield back.
    Mr. Stupak. Well, thank you, and that concludes the opening 
statements of all members. One of our witnesses had to step out 
just for a moment so let us stand in recess for just 5 minutes 
and we come right back in about 5 minutes, OK? We will give 
everyone a chance to stretch their legs and we will be in 
recess for 5 minutes.
    [Recess.]
    Mr. Stupak. This hearing will come back to order.
    As I stated before we had the brief recess there, that 
concludes the opening statements by members of the subcommittee 
and now I would like to call upon our first panel of witnesses. 
On our first panel, we have Robin Beaton, who is a policyholder 
from Waxahachie, Texas; Ms. Peggy Raddatz from La Grange, 
Illinois, who is the sister of the late policyholder, Otto 
Raddatz; and Ms. Wittney Horton, who is a policyholder from Los 
Angeles, California. Welcome, all of you. Thank you for coming.
    It is the policy of this subcommittee to take all testimony 
under oath. Please be advised that you have the right under the 
rules of the House to be advised by counsel during your 
testimony. Do you wish to be represented by counsel during your 
testimony? You are all shaking your heads no, so OK. Then I am 
going to ask to please rise and raise your right hand and to 
take the oath.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect that the witnesses 
replied in the affirmative. They are now under oath. We will 
hear a 5-minute opening statement from each of you. Ms. Beaton, 
would you like to start first with an opening?
    Ms. Beaton. I would like to be last.
    Mr. Stupak. You would like to be last. Ms. Horton, do you 
mind going first?
    Ms. Horton. No.
    Mr. Stupak. Would you pull that mic forward and turn on the 
green--there should be a green button there. Pull that mic 
forward. It doesn't pick up as well as it should.
    Ms. Horton. Can you hear me now?
    Mr. Stupak. I can hear you. Thank you.

    TESTIMONY OF WITTNEY HORTON, POLICYHOLDER, LOS ANGELES, 
CALIFORNIA; PEGGY RADDATZ, RELATIVE OF POLICYHOLDER, LA GRANGE, 
  ILLINOIS; AND ROBIN BEATON, POLICYHOLDER, WAXAHACHIE, TEXAS

                  TESTIMONY OF WITTNEY HORTON

    Ms. Horton. Good morning, ladies and gentlemen. I want to 
start by thanking the committee for this opportunity to testify 
this morning. I am very pleased that Congress has decided to 
take a close look at rescission so that it can understand just 
how damaging this practice has been to so many people across 
the country.
    When Blue Cross cancelled my coverage, I had no idea what 
rescission meant, but now after my life has been turned upside 
down for the past 4 years, I have come to understand what a 
despicable practice it is. Insurance companies require you to 
fill out an application that is deliberately confusing and they 
don't do anything to make sure you understood the questions or 
that you supplied all the information they need to decide 
whether they want to insure you or not. They just accept you 
and accept your premium checks. It is after you see a doctor 
that everything changes.
    When your doctors file claims, the insurance company starts 
looking for reasons not to pay them. They dig through your 
medical records and compare what they find to the information 
you put down on the application. It is called post-claims 
underwriting, and in California where I live, it is illegal, 
but insurers ignore the law, and when they find a discrepancy 
or an omission, they rescind the policy and refuse to pay any 
of your medical bills, even for routine treatment or treatment 
they previously authorized.
    Blue Cross's decision to rescind my insurance was 
devastating to my husband and me, and I consider myself one of 
the lucky ones. As the lead plaintiff in a class-action lawsuit 
against Blue Cross, I represent 6,000 Californians who are all 
stripped of their insurance by Blue Cross. You can't imagine 
how horrifying some of those stories are.
    Blue Cross rescinded some of these people right after they 
had undergone open-heart surgery or were receiving chemotherapy 
treatment for cancer. Some of these people were left with 
hundreds of thousands in unpaid medical bills. One thing we all 
have in common, we all were left to somehow stay healthy and 
fend for ourselves after Blue Cross walked away from its 
promise to provide health insurance.
    I sought insurance with Blue Cross in 2005 because my 
parents raised me to believe that health insurance was an 
absolute necessity that should never be taken for granted. I 
work in the film industry in Los Angeles, California, where 
employment is generally temporary and done on a freelance 
basis. So for me and many others in the industry, individual 
coverage is a necessity. At the time I applied for coverage, I 
had just left a temporary staffing agency for Sony Pictures to 
go to work on a specific movie. When I made the move, I had to 
give up the stability of my group health care plan. So I 
immediately sought out individual health care coverage.
    When I applied for coverage with Blue Cross, I wanted to 
make sure that I did everything correctly to ensure that there 
would be no problems. I filled out the application to the best 
of my ability, even though it was long and confusing. I wrote 
down everything I could remember about my health history 
including hypothyroidism, a condition I have had since I was 
18. I even listed the contact information for my treating 
doctor. Then I turned my application in to my insurance broker. 
She told me everything looked good and sent it in to Blue Cross 
and they quickly accepted my application. I was only 27 at the 
time.
    Two months later, I went to my endocrinologist for a 
checkup. I had routine blood work performed and the doctor's 
office sent the bill to Blue Cross. I received a letter back 
from Blue Cross shortly afterwards saying that they wanted all 
of my medical records from both my endocrinologist and my 
gynecologist. I consented, having nothing to hide. A couple of 
months later in June of 2005, I received a letter from Blue 
Cross stating they were rescinding my insurance because I 
didn't disclose on the application that I had taken the drug 
Glucophage and because of irregular menstruation. I had taken 
Glucophage the previous year but was no longer taking it when I 
filled out the application. My doctor had prescribed it hoping 
that it might help me lose weight, but it did not. I stopped 
taking the medication when I saw that it was not working for 
me.
    In its rescission letter, Blue Cross said it would have 
never accepted me for coverage if it had known that I had 
polycystic ovaries. This letter was the first time I had ever 
heard about this condition. I later learned that polycystic 
ovaries, or PCOS, as it is known, is a diagnosis of exclusion 
and very difficult to prove. Doctors often proceed on 
suspicions of a person having it without actually having proven 
it. This is what happened in my case. My doctor suspected I 
might have PCOS, wrote it down in her notes, then told me she 
was prescribing Glucophage for weight management. I never knew 
what she wrote down in her notes because she never told me.
    After I was rescinded, I had two of my doctors write 
letters to Blue Cross telling them this but they didn't care. 
They just wrote back that they were upholding their decision to 
rescind. After being rescinded, I showed my original 
application to my sister and her husband, both radiologists, to 
ask them what I could have possibly done wrong in filling out 
the application. They felt that the application was worded in 
such a way as to be purposely confusing and that it asked the 
same question in multiple ways to trip people up. I am a 
college graduate and no dummy, and I still couldn't make sense 
of Blue Cross's tricky application.
    The worst part about my rescission is that I have been 
unable to get insurance anywhere else. I applied for individual 
insurance through Blue Shield but on their application they ask 
if the applicant has ever had insurance rescinded. When they 
learned that I had, they informed me that they would not accept 
me for coverage. Every insurance company asks if you have ever 
had health care coverage rescinded. For the rest of my life I 
will never be able to get individual coverage again because of 
Blue Cross. As someone who works in an industry that relies on 
individual coverage plans, this is a really big deal. Since my 
rescission, I have had to take jobs that I do not want and put 
my career goals on hold to ensure that I can find health 
insurance. Fortunately, after my husband and I got married, I 
was able to gain coverage through his company's group health 
care plan. However, if he ever loses his job or I don't have 
employment with a company that offers group health insurance, I 
might have to go without.
    As I mentioned before, I consider myself one of the lucky 
ones. I don't have large outstanding medical bills and I am 
relatively healthy. In fact, I was able to pay my doctors back 
for the blood work and office visits that Blue Cross refused to 
pay. But many people who have been rescinded are far less 
fortunate, and as the lead plaintiff against Blue Cross, I feel 
an obligation to speak for them as well. What Blue Cross has 
done to us is wrong and they must not be permitted to continue 
getting away with it. Americans desperately need health care 
reform. As my experience shows, owning an insurance policy does 
not necessarily equal access to health care. If insurance 
companies are not prevented from canceling or restricting 
coverage after patients get sick, insurance policies are not 
worth the paper they are printed on.
    Insurance companies are making record profits by collecting 
premiums in exchange for the promises that they make to be 
there when people need them. Make them keep that promise. Thank 
you.
    [The prepared statement of Ms. Horton follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.001
    
    [GRAPHIC] [TIFF OMITTED] T3743A.002
    
    [GRAPHIC] [TIFF OMITTED] T3743A.003
    
    [GRAPHIC] [TIFF OMITTED] T3743A.004
    
    [GRAPHIC] [TIFF OMITTED] T3743A.005
    
    Mr. Stupak. Thank you, Ms. Horton.
    Ms. Raddatz, and on behalf of Otto Raddatz, would you like 
to give your opening statement? And thank you for being here.

                   TESTIMONY OF PEGGY RADDATZ

    Ms. Raddatz. Thank you, very much Mr. Chairman, and thank 
you to all the members of the committee for all your kind words 
and your wonderful statements.
    My name is Peggy Raddatz and I am appearing here today to 
testify on behalf of my brother, Otto S. Raddatz. My brother 
was a business owner of a restaurant that he ran with his wife, 
Marie. He purchased a health insurance policy from Fortis 
Insurance Company in August of 2003. On the application, he 
indicated he had kidney stones and smoked. He also listed all 
physicians who had treated him. Otto's health application with 
Fortis was accepted and his coverage began in August of 2003. A 
year later, my brother found himself inexplicably losing a 
large amount of weight. His wife, Marie Raddatz, urged him to 
see a doctor.
    In September of 2004, my 59-year-old brother at the time 
was diagnosed with stage IV non-Hodgkin's-type lymphoma. The 
very next day, he began an intensive course of chemotherapy 
treatments. Due to the aggressive type of cancer Otto had, 
being mantel zone lymphoma, he was given six more rounds of 
chemotherapy by January of 2005. He suffered a lot during this 
period of time and was often unable to work. Otto was referred 
to a specialist in stem cell transplantation and for high-dose 
chemotherapy. Otto began more chemotherapy for purposes of 
preparing him for a stem cell transplant. These treatments were 
long and difficult in nature. In the midst of the chemo 
treatments, Otto received a phone call and letter from Fortis 
Insurance Company stating his insurance was cancelled.
    It was rescinded all the way back to the effective date of 
August 7, 2004, which was before his diagnosis for cancer. This 
meant none of his cancer treatments would be covered at all. 
Most importantly, he would not be able to receive the stem cell 
transplant needed to save his life. My brother only had a very 
small window of time in which to have the stem cell transplant. 
He needed to be scheduled within the next three to four weeks 
or he would not be able to have the transplant at all and his 
life would be ended very shortly. My brother was told he was 
cancelled during what they called a routine review during which 
they claimed to discover a material failure to disclose, as 
they stated in their letter. Apparently in 2000, his treating 
doctor had done a CT scan which showed a small aneurysm and 
some very insignificant gallstones. My brother was never told 
of either one of these conditions nor was he ever treated for 
them, nor did he ever report any symptoms from them either.
    After months of preparation, the stem cell transplant could 
not be scheduled. My brother's hope for being a cancer survivor 
was dashed. His prognosis was only a matter of months without 
the procedure. By this time, he could no longer work and 
ultimately had to sell his restaurant because of it.
    Mr. Stupak. Wait a minute.
    Ms. Raddatz. Thank you, Mr. Chairman.
    When I called the hospital to see if I could schedule the 
stem cell transplant for him because he was in such a weakened 
state both physically and emotionally, I was callously told 
unless your brother brings in cash and a bundle of it, he is 
not going to get the procedure without insurance. My brother 
was accused by Fortis Insurance Company of falsely stating his 
health history, despite the fact that he had no knowledge of 
ever having any gallstones or aneurysms. Luckily, I am attorney 
and I was able to aggressively become involved in solving this 
life-threatening situation. I got on the phone and literally 
made dozens of phone calls day after day after day. I put my 
personal work aside and worked on this literally round the 
clock calling people. I finally was told to contact the 
Attorney General's Office and received immediate and daily 
assistance from the Illinois Attorney General's Office and from 
Dr. Babs Waldman, the medical director of their Health Bureau. 
I cannot thank them enough for their daily assistance in 
support of myself and my brother through this difficult time.
    During their investigation, they located the doctor who 
ordered the CT scan. He was not only retired, he was on a 
fishing trip at the time, and through their unbelievable 
resolve, they were able to get a hold of him on the fishing 
trip and he had no recollection--he recalled my brother and his 
treatment of my brother but he had no recollection of ever 
disclosing the information to my brother or treating him for 
gallstones or for a small aneurysm. After two appeals by the 
Illinois Attorney General's Office, Fortis Insurance Company 
finally overturned their original decision to rescind my 
brother's coverage and he was reinstated without lapse. This is 
after weeks of constant phone calls between myself and the 
Attorney General's Office and we were literally scrambling hour 
by hour to get this accomplished so that my brother wouldn't 
lose his 3- to 4-week window of opportunity that he had 
prepared for and lose his opportunity to have the procedure.
    What Fortis Insurance Company did was unethical. To deny a 
dying person necessary medical treatment based upon medical 
conditions a patient never had knowledge of, never complained 
about or never been treated for is cruel. It is the hope of our 
family that this information will benefit other patients who 
are in need of lifesaving medical treatments and who do not 
have the knowledge or means necessary to fight against the 
health insurance companies. It is further our desire to expose 
these practices of Fortis Insurance Company so that others do 
not have to suffer as victims, as my brother did.
    Thank you very much, Mr. Chairman, and thank you so much, 
members of the committee, for all your efforts.
    [The prepared statement of Ms. Raddatz follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.006
    
    [GRAPHIC] [TIFF OMITTED] T3743A.007
    
    Mr. Stupak. Thank you.
    Ms. Beaton, would you like to give your opening statement 
now? Take your time.

                   TESTIMONY OF ROBIN BEATON

    Ms. Beaton. Mr. Chairman and members of the committee, I am 
very honored to be here to share my story.
    My name is Robin Beaton. I am 59 years old. I was a 
registered nurse for 30 years. I had insurance. I was in good 
health. I retired from nursing, started my own small business, 
obtained a personal individual policy from Blue Cross and Blue 
Shield in December 2007. In May 2008, I went to a dermatologist 
for acne, pimples. A word was written down my chart, which was 
considered to mean precancerous. In June 2008, I was diagnosed 
with invasive HER-2 genetic breast cancer, a very aggressive 
form of this cancer. I needed a double mastectomy immediately. 
Blue Cross and Blue Shield precertified me for my surgery and 
for a hospital stay.
    The Friday before I was to have my double mastectomy, Blue 
Cross and Blue Shield called me by telephone and told me that 
my chart was red flagged. What does that mean, I said. They 
said that due to the dermatologist's report, that was what red 
flagged my chart in the beginning, that I would not be able to 
have my surgery on Monday and they launched a 5-year medical 
investigation into my medical history for the last 5 years. I 
had to give them every hospital, every doctor, every----
    Mr. Stupak. Take your finger off. There you go.
    Ms. Beaton. I had to give them every pharmacy, every 
doctor, every hospital and they threatened me that if I left 
anything out, that it would be really bad, so I truly tried 
everything in the world I could to list every single doctor, 
everywhere I had ever been. I immediately got in touch with the 
dermatologist. He immediately called Blue Cross and Blue Shield 
and he begged them. He said this is a misunderstanding. He said 
this is not precancerous. He said all she has is acne, pimples. 
He said please don't hold up her cancer surgery for this. He 
begged them. He was the nicest man. Anyway, I was frantic. I 
did not know what to do. I didn't know how to pay for my 
surgery. The hospital wanted a $30,000 deposit and I was by 
myself. I didn't have that kind of money.
    I turned to the only person that I had to turn to, and that 
was Joe Barton, my Congressman. The next day I get a letter 
canceling my insurance, rescinding it to the first day that 
they had covered me. Can you imagine having to walk around with 
cancer growing in your body with no insurance? It is the most 
terrible thing in the world to not have anybody to turn to, not 
have anywhere to go. So I just can't even say how bad it was. 
The sad thing is, Blue Cross and Blue Shield took my high 
premiums. The very first time I ever had a claim, the very 
first time and was suspected of cancer, they took action 
against me searching high and low. They turned over every 
single thing they could in my medical history to pull out 
anything that would cause any suspicion on me so they didn't 
have to pay for my cancer.
    A nurse who attends my church works full time for Blue 
Cross and Blue Shield. She looks through medical records 
searching for reasons to cancel people. She came to me and she 
said I feel so bad, she said, I just can't even tell you how 
sorry I am this has happened to you. Blue Cross and Blue Shield 
has control over life and over death. People have to be able to 
count on what they have paid for, count on having insurance. 
Blue Cross and Blue Shield will do anything to get out of 
paying for cancer, anything. Sad fact is, anyone with a 
catastrophic illness who is not a part of a group who has an 
individual policy stands a really high chance of getting 
cancelled, left out in the cold with no insurance. I go to a 
cancer support group every week. Four girls in my cancer 
support group have had their insurance canceled, and two of 
those girls have had to declare bankruptcy because of cancer.
    It is very difficult for me to speak out. My insurance 
could be cancelled again. I live in fear every day of my 
insurance company. I looked everywhere for help. No one found 
anything to help me until Joe Barton and Krista Townsend after 
working for a really, really long time. Every day they worked 
hard. I had given up hope. I didn't have any hope left and they 
never gave up hope. They did everything they could to help me 
and they got my insurance reinstated.
    After being diagnosed in June 2008 with aggressive breast 
cancer, I was placed back on a list to get a mastectomy, which 
I finally got to have my cancer surgery October 2, 2008. My 
tumor grew from 2 to 3 centimeters all the way to 7. I had to 
have all my lymph nodes removed in my arm, everything. Delaying 
cancer treatment, it only worsens the condition, costing more 
to treat and treatment is much more intensive. Also, the 
outcome is not as good. I go to chemotherapy every 3 weeks and 
I will have to be going for the next year. Cancer is expensive 
and no one wants to pay for cancer. I pray no one has to go 
through the sheer agony that I have had to ensure for one year. 
I did not deserve to have my insurance cancelled. Blue Cross 
and Blue Shield set out to get rid of me. They searched high 
and low until they found enough to cancel me and they did. I 
owe my life to Joe Barton. I pray that you will listen to my 
story and help people like me who are powerless against the big 
insurance companies. And today when I met Mr. Barton, that was 
the very first time I ever met him. He helped me not even 
knowing me, just because as a good man he just helped me. But I 
went everywhere. I went to the county hospital, I went 
everywhere looking for help, and you just get on a waiting 
list, and when you get on a waiting list your cancer grows.
    So I just want to thank you all for listening to me and 
just please do something about it because I couldn't even tell 
you the people I know that have been through this. It is a 
horrible thing to go through. Thank you all so much.
    [The prepared statement of Ms. Beaton follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.008
    
    [GRAPHIC] [TIFF OMITTED] T3743A.009
    
    Mr. Stupak. Thanks, Ms. Beaton.
    Now we will turn for questions and I will begin. We will go 
for 5 minutes on questions. We will probably go a round or two 
per panel.
    For our three panelists here, I would like to get your 
thoughts on some information the committee gathered about the 
economics of rescissions for insurance companies. The three 
CEOs who will testify after you have all made the case that 
their companies use rescission as a tool to rule out fraud by 
those who apply for coverage. But at the same time, we find 
these companies have also reported savings of an estimated $300 
million as a result of the rescissions from 2003 to 2007. That 
doesn't include all their subsidiaries and doesn't include all 
their files. But that is what we have come up with. And like I 
said, this figure doesn't include the savings gained by 
avoiding future medical costs of rescinded policyholders. So 
let me ask each of you, do you believe that the insurance 
companies use rescissions primarily as a fraud prevention tool 
or as a cost-savings instrument that will help them boost their 
corporate profits? Ms. Horton.
    Ms. Horton. I think it is all about the money.
    Mr. Stupak. Ms. Raddatz.
    Ms. Raddatz. It is absolutely about the money.
    Mr. Stupak. Ms. Beaton.
    Ms. Beaton. Absolutely indeed. Try to use it, they will 
just keep on taking your money.
    Mr. Stupak. Well, each of you, as I have listened to your 
testimony, Ms. Beaton, you were an R.N., Ms. Raddatz, you are 
an attorney, and Ms. Horton, you had family members who were in 
the medical field, radiologists. You seem like a little bit 
more--you had access to people who could help you on this. What 
happens in your groups and people you have talked with, what 
happens to people who don't have that kind of support 
mechanisms within their family? What happens to them? Ms. 
Horton?
    Ms. Horton. They fall through the cracks. You know, there 
is nothing--even having radiologists in my family, you know, I 
had the opportunity to consult them before filling out the 
application. They live cross country. They have children. They 
work all the time, you know, and I don't know what those people 
would do.
    Mr. Stupak. Ms. Raddatz.
    Ms. Raddatz. As I stated in my testimony, my brother was 
very fortunate because of the fact that I have education and I 
know lots of people, and even all the attorneys that I know and 
judges who I went to to ask for help did not know what to do in 
this situation other than go through the court system. 
Unfortunately, when you have cancer or you are in a position 
where your life is shortened to a matter of months, you can't 
go through the court system because you don't have the time to 
do that. And what do people do? They do--many, many people 
throughout the United States do nothing because they don't have 
the ways or the means or the knowledge to take the steps 
necessary. They don't know all the--I know hundreds of 
attorneys. I have been practicing a lengthy period of time. 
They don't know all those people I know. So what do they do? 
They get the letter and they don't get the treatment that they 
need and many of these people die, and they think that is the 
way it is supposed to be because they just don't know what to 
do. And I believe honestly that the insurance companies depend 
upon that lack of knowledge and lack of laws, federal laws in 
place, and that is one of the ways that they encourage their 
profits.
    Mr. Stupak. Ms. Beaton, do you want to add anything on 
that?
    Ms. Beaton. I was going to say that a lot of people in my 
cancer group, they get letters like this. They just give up. 
They fade away and they die.
    Mr. Stupak. Well, you were fortunate, Ms. Beaton. You had 
our ranking member, Mr. Congressman Barton, who intervened or 
else you might not be with us here today. Was it clear to you 
in dealing with the insurance company that if you didn't have a 
U.S. Congressman working on your behalf that your insurance 
wouldn't have been reinstated?
    Ms. Beaton. There is not doubt in the world that they would 
have even given me the blink of an eye if it hadn't been for 
him, and I just could never tell you how he worked. If you only 
knew how many hours he worked. They called me every day just 
working hours and hours and hours. This took a long time. This 
was like a many, many months' process. This didn't just happen 
overnight. So for his office to take that kind of a dedication 
to me, you know, I will be forever grateful. If I live and 
don't die of cancer, you know, it will be because of them. So 
only because of my Congressman, only because of him did I get 
help for my cancer. If it wasn't for that, it never would have 
happened.
    Mr. Stupak. Ms. Raddatz, sort of parallel to Ms. Beaton 
there, in your brother's case, the Illinois Attorney General's 
Office and Dr. Babs Waldman intervened and actually had to 
write two letters to the insurance company. In fact, one of 
them is at tab number 4 in the document binder there if you 
care to look at it. But the Attorney General's Office wrote, 
and I quote, ``I find the behavior on the part of Fortis Health 
to be extremely troubling, if not unethical. Clearly there is 
no justification for rescinding this gentleman's insurance 
beyond avoiding the cost of his future treatment. To rescind, 
terminate his policy at this point is not only devastating but 
probably fatal to Mr. Raddatz.'' And then in the second letter, 
the company finally reversed its decision. So how did your 
brother know to enlist the assistance of the attorney general? 
Was that through you?
    Ms. Raddatz. Yes, it was absolutely through myself, and 
like I said, even I had difficulty in finding that outlet. It 
took me a while to get to the Attorney General's Office but we 
are fortunate in the State of Illinois to have a Health Bureau 
in Lisa Madigan, Attorney General's Office. We are very, very 
lucky to have an aggressive unit and they are available for the 
citizens of the State of Illinois who go through the same 
situation that my brother did. But again, most people, you 
know, do not have the knowledge that I have, and by the way, it 
took two appeals to them. The first time she wrote the letter, 
they said no. So it took a further letter to them before they 
did, you know, reverse their decision.
    Mr. Stupak. Thank you.
    Mr. Barton for questions.
    Mr. Burgess. Mr. Chairman, may I ask a question?
    Mr. Stupak. No, it is Mr. Barton's turn unless he wants to 
yield you time.
    Mr. Barton. I will be happy to----
    Mr. Burgess. It is just purely a technical question. As a 
doctor, I get nervous with so many lawyers around me. There is 
an active----
    Mr. Stupak. You should feel secure.
    Mr. Burgess. It is less than secure. It is the opposite of 
secure.
    As I understand it, there is an active class-action suit of 
one of the witnesses before us this morning?
    Mr. Stupak. In California, I believe, it has been going on 
for some time. I think Ms. Horton is maybe a plaintiff in that 
action.
    Mr. Burgess. Well, the speech and debate clause 
notwithstanding, are we subjecting ourselves to possible 
subpoena to testify in that court by our questions here today 
or our opening statements here today?
    Mr. Stupak. No, but if you wish to, we could arrange it.
    Mr. Burgess. No, I don't want a trip to California. That is 
the last thing I want. Again----
    Mr. Stupak. No, I think we are OK. We are not asking 
anything about the nitty-gritty of the lawsuit or anything like 
that. This is a committee investigation, and we would be 
exempt.
    Mr. Burgess. Can counsel answer that question for us?
    Mr. Stupak. Do either one of you care to comment on it? We 
are in an official setting. This is an official hearing of the 
U.S. Congress. Speech and debate protection certainly helps us 
but I don't think any of us are going to ask about the class-
action suit. Yes, the speech and debate clause certainly 
applies.
    Mr. Burgess. I thank the chairman.
    Mr. Stupak. Mr. Barton, questions, please.
    Mr. Barton. Thank you, Mr. Chairman.
    I want to again thank each of the three witnesses. I want 
to make a comment on what Ms. Beaton said about myself. There 
are 435 Congressmen and every one of us, our job is to help 
constituents. I have four full-time caseworkers. Mr. Wright, to 
my left here, was my district director at the time. I had 
Kristi and Debra and Jody and Ron, Linda Gillespie, all of them 
intervened for you. I came in at the very end and talked to the 
president but, you know, not just myself but every Member of 
Congress, we help hundreds and sometimes thousands of people 
every year. Your case just happened to be life and death and we 
put a lot of extra effort into it because we knew how important 
it was to get you health care as quickly as possible. But it is 
not just me, it is every Member of Congress that tries to serve 
our constituents.
    My first question will be to the gentlelady down to the far 
right. You said that your application, they asked several 
questions several different ways and they were very tricky. Is 
it your understanding that that is a standard practice in the 
individual insurance market? Do they start out with the 
intention of setting you up so that later on they may 
disqualify you? Is that your opinion?
    Ms. Horton. Yes, that is my opinion. You know, I believe 
that they ask you the same question several times so that if 
you disclose it in one area and then don't realize that you 
need to disclose it again, that they can somehow say then that 
you have, you know, committed fraud.
    Mr. Barton. Are you aware since your lawsuit if they have 
made some changes to that questionnaire?
    Ms. Horton. I believe that was one of the things they were 
trying to negotiate with Blue Cross, was changing the 
application, but I don't know what the status of it is.
    Mr. Barton. My next question is to the gentlelady there in 
the middle. Your brother, has he had his stem cell transplant?
    Ms. Raddatz. He did indeed receive the stem cell 
transplant. It was extremely successful. It extended his life 
approximately 3\1/2\ years. He did pass away January 6, 2009, 
and he was about to have a second stem cell transplant. 
Unfortunately, due to certain situations, his donor became ill 
at the last minute and so he did pass away on January 6. But 
again, it extended his life nearly 3\1/2\ years and at his age, 
each day meant everything to him and each day that we had him 
was wonderful, and my daughter, who is behind me, and I and his 
wife and his other brother, Richard, we spent the last 30 days, 
every single day with him at his side, and like I say, there 
couldn't be any better memorial to my brother than what this 
committee is doing because life is so precious and in spending 
those last moments of his life with him for 30 days, at the end 
we realized how important this work you are doing is and we 
just want to say again from our family, thank you all so much. 
We know with Mr. Gordon here that you have been working round 
the clock 7 days a week and very, very hard, and Mr. Gordon, 
thank you and your staff for all your hard work. Thank you.
    Mr. Barton. Ms. Beaton, what have your doctors told you 
your condition would have been had you had the mastectomy 
immediately as originally scheduled? Would you have had to 
undergo the chemotherapy and is it probable that the cancer 
would have spread to the lymph nodes as it apparently has?
    Ms. Beaton. They said that every day that I put off the 
surgery was a really, you know, day that the cells just 
multiplied and grew, and I think there is a strong chance that 
in the beginning that maybe I didn't have to have--I could have 
had a lesser surgery and not have had my lymph nodes taken out. 
I would have had to have chemo but maybe not for quite as long 
a period of time.
    Mr. Barton. If it is personal--it is personal--you don't 
have to tell us, but would you tell us as much as you can about 
your prognosis right now? Is the expectation positive for your 
chemotherapy and cancer remission or is it still up in the air?
    Ms. Beaton. It is still up in the air.
    Mr. Barton. Mr. Chairman, my time is about expired. I am 
going to yield back. I think I speak for every member of the 
committee on both sides of the aisle, we want to hear from the 
insurance companies in the next panel, but it is clear that if 
in fact there is a practice of going in after the fact and 
canceling policies on technicalities, we have got to do 
whatever is possible to prevent that. I think a company does 
have a right to make sure that there is no fraudulent 
information but it is obvious to me that--I will guarantee you 
in Ms. Beaton's case there was no fraud intended, and I am 
convinced with the other two witnesses that they were being 
truthful and honest also, and if a citizen acts in good faith, 
we should expect the insurance companies who take their money 
to act in good faith also. And I will tell you, Ms. Beaton, we 
will monitor your case and we will stay in touch with Blue 
Cross/Blue Shield of Texas and so long as you do what you are 
supposed to do, I will guaran-damn-tee you they will do what 
they are supposed to do.
    With that, Mr. Chairman, I will yield back.
    Mr. Stupak. Thank you, Mr. Barton.
    Ms. Schakowsky for questions, please.
    Ms. Schakowsky. Thank you, Mr. Chairman, and after hearing 
the testimony, I want to thank the witnesses even more for 
sharing this.
    I wanted to talk about rescissions for unrelated medical 
conditions. I understand that they scour the records to find 
anything but, Ms. Beaton, let me understand what happened to 
you. After your insurance policy began, you developed breast 
cancer and the insurance company decided to investigate your 
application but it didn't find any evidence that you had breast 
anything before you got your policy, did it?
    Ms. Beaton. No.
    Ms. Schakowsky. So it was rescinded because essentially of 
pimples, right? Is that what you're saying?
    Ms. Beaton. They rescinded because of--what it all started 
with was the red flag. What that means is something suspicious, 
so they red flag you. Then they go back and they just cut your 
chart apart, and what they found was on my weight, I think I 
put down--I said what woman is going to tell you what she 
really weighs, you know. I weighed more than what I put down, 
and they said that they might not have given me a policy 
because I was overweight. And the second thing was, I had--in 
my early years I had a previous fast beating of my heart and I 
didn't have a problem with that anymore, but anyway, that was 
brought up. Everything they could possibly dig up in my whole 
life history got brought up, unrelated to the cancer, nothing 
related to the cancer.
    Ms. Schakowsky. So if we lie about our weight at all, we 
better look out, huh?
    Ms. Beaton. They will get you.
    Ms. Schakowsky. I better change my driver's license.
    Ms. Raddatz, it sounds like your brother had a similar 
experience. He signed up for an insurance policy, then was 
stricken with an aggressive form of lymphoma, and the insurance 
company, which is now part of Assurant, investigated his 
application but it didn't find any evidence that your brother 
had cancer before his insurance policy, right?
    Ms. Raddatz. That is correct.
    Ms. Schakowsky. So----
    Ms. Raddatz. He did not have cancer prior to--at the time 
he signed up, he did not have cancer.
    Ms. Schakowsky. So it rescinded his policy based on alleged 
misstatement about gallstones and you said aneurysm, which is 
what? A weak blood vessel, right? Does that have anything to do 
with anything?
    Ms. Raddatz. Nothing whatsoever.
    Ms. Schakowsky. And he didn't----
    Ms. Raddatz. The gallstones actually, like I said, he never 
even knew he had gallstones. He actually wrote down he had 
kidney stones and was treated for kidney stones. So when he got 
that letter, he thought that was an error, oh, they must have 
meant the kidney stones, but he disclosed that he did have 
kidney stones and they knew that when they gave him the 
insurance. He never knew he had minor gallstones, never to his 
death was ever treated for any gallstones, and was never 
treated for any aneurysm.
    Ms. Schakowsky. So in addition then to having an unrelated 
medical condition, it was something he didn't know about at 
all. So when we hear, as perhaps we will, about fraud from the 
insurance companies, he even mentioned kidney stones that he 
didn't have, are you saying?
    Ms. Raddatz. He did have kidney stones and he did disclose 
those and was treated for those, and he was given insurance 
despite the fact that he had kidney stones. But had they not 
been able to find his doctor, who was retired and on a fishing 
trip in another State, they still might not have believed him 
because he had no knowledge of it. Luckily, they were able to 
find the doctor, who was able to say oh, yes, I never discussed 
those issues with him, I never treated him for those, they were 
very minor and they appeared on a CT scan but we never engaged 
in any treatment for those whatsoever and I never disclosed 
them to him.
    Ms. Schakowsky. But ultimately even that, didn't it take 
the attorney general to get it changed?
    Ms. Raddatz. Oh, yes, it did, it absolutely did. Like I 
said, Lisa Madigan, the Attorney General's Office, and Dr. Babs 
Waldman were wonderful and their staff were just incredible. 
They were working daily on this file because they knew that the 
clock was ticking every day and their investigations were----
    Ms. Schakowsky. But what I am asking is, even if they found 
the doctor on the fishing trip and the doctor had said what he 
thought, that wasn't enough apparently?
    Ms. Raddatz. It wasn't. At that point they still wrote a 
letter saying no, too bad, it was a material lack of 
disclosure, and Dr. Waldman had to contact them again and 
discuss it further.
    Ms. Schakowsky. And Ms. Horton, your situation is that your 
policy was rescinded because you were seeking some insurance 
coverage, or how did that work for you?
    Ms. Horton. I was seeking the policy when I was going over 
from a group health insurance plan.
    Ms. Schakowsky. So this is just a denial from the beginning 
because of----
    Ms. Horton. I was accepted and then the first time I went 
to see a doctor I received a letter from Blue Cross stating 
that they wanted all of my medical records, and it was a bill 
for just routine blood work. It was to test my T4 level, which 
is your thyroid hormone, and so it was routine blood work that 
anyone who has an underactive thyroid, which I disclosed, would 
get and I had paid almost three times more in premiums than 
they needed to pay out and they still sent me to this, you 
know, post-claims underwriting department where they went 
through my medical records, they found, you know, a mention of 
something in her notes that she never disclosed to me, and both 
of my doctors wrote letters in support of the fact that they 
had not discussed the condition with me that they suspected I 
had but could prove.
    Ms. Schakowsky. So we know that--it seems obvious that 
anything that might relate to cancer treatment they are going 
to scour the records. In your case, it might have been 
something about the blood work that you were having?
    Ms. Horton. In my case, it just proves that there is no 
condition too small that they are willing to send you to this 
department for. You know, I did not have anything even close to 
life-threatening nor as expensive as some of the people on the 
panel, and it just shows you that you can't be too young or you 
can't be too healthy for them to send you to this department.
    Ms. Schakowsky. Thank you, Mr. Chairman.
    Mr. Stupak. Mr. Burgess for questions, please.
    Mr. Burgess. Thank you, Mr. Chairman.
    Ms. Beaton, let me ask you, Blue Cross and Blue Shield came 
back to you after finding out you needed the surgery and said 
that they were taking your insurance and the date of rescission 
was dated back to the date of enactment of the insurance. Is 
that correct?
    Ms. Beaton. I am kind of hard of hearing.
    Mr. Burgess. Your rescission was effective on 12/07, which 
was the date that the insurance was initiated. Is that correct?
    Ms. Beaton. Right. They gave me back all my premiums.
    Mr. Burgess. OK. That was going to be my question. They 
refunded the----
    Ms. Beaton. I never cashed the check because Mr. Barton 
told me never to cash it and I never did. They rescinded all my 
money back to the day that they said--in simple language, they 
wanted nothing to do with me. They gave me back every penny 
that I had ever given them and they considered never being 
insured by them.
    Mr. Burgess. And Ms. Raddatz, what about in your brother's 
situation? Was there a refund of premium back to the date of 
the rescission?
    Ms. Raddatz. Yes, they didn't actually get to that point 
because it got resolved before they refunded the money but they 
sent a letter stating yes, you are rescinded to the date of the 
original contract, which was before my brother had any cancer 
treatments at all, and $200,000 back, so my brother would have 
to pay out of pocket over $200,000 in medical expenses.
    Mr. Burgess. But they never got to the point where they 
sought that refund from your brother?
    Ms. Raddatz. Well, again, the $200,000 was the amount that 
his medical bills----
    Mr. Burgess. So those were subsequent bills?
    Ms. Raddatz. Right. That would have been what he would have 
had to pay out because they were rescinding their contract and 
so they were then stating we are rescinding all the way back to 
the original date of the contract so you have never had any 
insurance at all for the entire time you have had cancer. You 
now have no insurance.
    Mr. Burgess. So that was actually--that retroactive 
pronouncement also dealt with the money that they had used to 
pay for his cancer treatment to date. Is that correct?
    Ms. Raddatz. That is correct.
    Mr. Burgess. Now, in your brother's situation also, I think 
you said that he was told he would have to have a certain sum 
of money or he couldn't get the bone marrow transplant. Is that 
correct?
    Ms. Raddatz. That is correct.
    Mr. Burgess. But that wasn't the insurance company that 
told him that, that was the medical facility?
    Ms. Raddatz. That was the hospital coordinator. When I 
called to literally beg her to schedule the stem cell 
transplant because my brother was on pins and needles being 
ill, going through aggressive chemotherapy and readying himself 
for this transplant, which is a long step-by-step procedure 
medically, then they wouldn't schedule him because the 
insurance company said he is no longer insured so we will not 
schedule you for your stem cell transplant that you were 
supposed to have within the next 3 weeks, we will not schedule 
you. So I got on the phone and literally begged her, and no.
    Mr. Burgess. Let me ask you a question. It doesn't really 
have to do with the subject of the hearing today but it figures 
into the larger discussion that we are having. Was any other 
plan delineated for you then, another option you might have 
would be medical school at Northwestern or Cook County or were 
there any other options discussed?
    Ms. Raddatz. No, there really weren't because my brother's 
doctor was one of the most renowned doctors in the whole world 
on the specific routine of treatment and he had a very specific 
type of cancer that really had to be treated by that doctor in 
that hospital at that time, and you can't just say well, OK, 
you can have it a couple months down the road or you can wait. 
I mean, again, the Attorney General's Office realized 
thankfully because it is headed by a doctor, medical doctor, 
that time was of the essence.
    Mr. Burgess. It is just that I can recall multiple times 
when I was in practice you come up on these situations and you 
find a way to make it work for the patient. I guess I am a 
little frustrated in your situation in that you were 
essentially allowed or offered no other option. I appreciate 
the fact that particularly for that type of non-Hodgkin's 
lymphoma that it may require very, very specialized type of 
care. My frustration is as a physician, I just cannot tell you 
the times that I found another hospital or another way to make 
it happen and not wait the lengths of time that you all are 
discussing.
    Ms. Beaton, in Tarron County, I mean, there is a county 
hospital. Was that ever--did anyone ever try to help you 
through that tangle to try to get any care through John Peter 
Smith?
    Ms. Beaton. I couldn't qualify for that, but what I did do 
is, I moved in with my sister in Cedar Hill for a while so I 
could declare residency and went to Parkland Hospital, the 
Dallas county hospital, tried to get help there. You get on a 
waiting list for a mastectomy. And three or four times I went 
there and they lost my medical records. They said why are you 
here. I said I am here, I have cancer, I need to get a 
mastectomy. They said we will put you on the waiting list. 
Well, I do believe with all my heart that today my name still 
wouldn't be up on the waiting list because they never even 
contacted me back, but I am thankful to say that in trying to 
get help, like you said, going to all the county hospitals, 
applying for the State programs, doing all that kind of stuff, 
Mr. Barton got my insurance reinstated and I was able to have 
insurance with the original doctor who I wanted to have 
insurance with.
    Mr. Burgess. Sure, and I appreciate that and I think that 
is--I believe in continuity of care and I believe that is 
important, and again, the other aspect is not really a part of 
our discussion today but it is part of our broader discussion 
as we talk about strategies for the future. I want to thank 
every one of our panelists for being here today. Ms. Horton, I 
didn't get to you. It is not because I was afraid to get to 
you, I just didn't have an opportunity, but thank you too for 
your testimony as well. It was all very important today.
    Thank you, Mr. Chairman. I will yield back.
    Mr. Stupak. Mr. Gingrey for questions, please.
    Mr. Gingrey. Mr. Chairman, thank you, and I am going to 
direct my question to Ms. Beaton.
    Am I pronouncing that right?
    Ms. Beaton. It doesn't matter, Beaton, Beaton.
    Mr. Gingrey. Ms. Beaton, we of course heard and listened 
very intensely to your testimony and quite compelling, and I 
wanted to take one quote from your written testimony and I 
think you said when you get on a waiting list, cancer grows, 
and I think that was in reference to the fact as you just 
testified to Dr. Burgess that you were on that waiting list at 
the county hospital. There was an alternative but thank God 
that your Congressman and my colleague, Joe Barton, was able to 
intervene and you were able to get the care at the private 
hospital and by your physician that you trusted and that you 
wanted to do the surgery. This statement that you made is 
absolutely right. I don't know if you know it, but I am a 
physician too, an OB/GYN doctor before being elected to 
Congress, and your statement is a profound one indeed: when you 
get on a waiting list, cancer grows. And when we look at 
statistics of countries where you routinely get put on a 
waiting list like the U.K. and others, in particular in the 
treatment of breast cancer, in our country where hopefully you 
don't get put on a waiting list when you have breast cancer, 
you get operated on quickly, the 5-year overall survival rate 
for breast cancer is 98 percent. But in the U.K. system where 
you frequently get put on a waiting list, the 5-year survival 
rate for breast cancer is 78 percent. That is a significant 
change, and as you described to us, that 2-centimeter mass grew 
to 7 centimeters and lo and behold you have to have your lymph 
nodes removed and I guess some of those were positive by the 
time you finally got operated on. Is that the case?
    Ms. Beaton. Yes.
    Mr. Gingrey. Well, with that information, let me just ask 
you this question, and it relates to you in particular but it 
relates to everybody in general, and I would appreciate your 
thoughts on ways that you think that we can strengthen the 
private market so that other people, anyone with chronic 
illness can find affordable health insurance or do you think we 
should turn over our health care system lock, stock and barrel 
to the compassion and efficiency of our federal bureaucracy?
    Ms. Beaton. All I can say is that I did go many, many 
different places trying to get help and I spent hours and quit 
working and did all my focusing, instead of focusing on getting 
well and focusing on my cancer, I focused on trying to get 
treatment, and I went to every hospital in Dallas. I went to 
county hospital, I went to Fort Worth, I went everywhere, and I 
don't know how to fix it but all I know is there something 
terribly wrong with the health care system because when you go 
to big hospitals and there is so many people there waiting for 
help, I went to all the clinics. I sat with all the people that 
I just--you can't even imagine how many people are there 
waiting for help. You spend hours and hours. You probably spend 
the whole day trying to see a doctor. I did that. I did that 
for weeks and never got help. So and the bad thing about that 
is, when you go to different hospitals they give you different 
opinions. Every time I went to a different hospital, my tumor 
was a different size. Every time I went to another hospital, 
one person wanted to do one thing, one person wanted to do 
another. You get a difference in diagnosis, a difference in 
treatment plans. So who do you listen to, who do you know to 
listen to? And I don't know how to fix it but all I know is, 
when you have to go through this like every one of us has been 
through what we have been through, you just realize that it is 
something that is broken.
    Mr. Gingrey. Ms. Beaton, I am going to reclaim my time 
because I just have a few seconds left, but I really thank you 
for that testimony, and I think you are absolutely right. There 
is something that needs to be fixed, something is broken, and 
when we hear from the second panel from the insurance 
companies, I am going to make some suggestions to them how we 
can fix this system, but it is my firm belief, Ms. Beaton, the 
other two, Ms. Horton, Ms. Raddatz, that we can fix this system 
without, as I say, turning it over lock, stock and barrel to a 
federal bureaucracy that routinely is going to ration and put 
people on the waiting list. But we will get into that later and 
I want to thank all three of you for being here today and 
giving us such compelling testimony.
    Mr. Stupak. We will go to Mr. Walden, but please don't 
accept Mr. Gingrey's description of a possible health care plan 
for the Nation based upon those comments. Some of us on the 
other side see it a little differently. But Mr. Walden for 
questions, please.
    Mr. Walden. Thank you, Mr. Chairman. I appreciate the 
opportunity. I had to step out to another hearing I am involved 
in upstairs but I read your testimony this morning and so I 
appreciate what you have been through, although none of us can 
really understand what it is like to be in your shoes or that 
of your loved ones. It is not a good thing.
    We have two physicians here, both Dr. Gingrey and my 
colleague from Texas, Dr. Burgess, and I think that is good to 
have. I hope at some point, given some CMS's role in overseeing 
HIPAA that perhaps we could have the federal agency that also 
has a role in this to come before our subcommittee as well to 
find out their take on what is happening.
    Ms. Horton, you stated that you think the applications are 
deliberately confusing. I have looked through some of those, 
and I understand what you mean. Could you be a little more 
specific the kinds of questions that you found difficult and 
confusing?
    Ms. Horton. I haven't looked at the application in 4 years 
since I first filled it out so I can't be super specific but I 
do remember them, you know, after looking at it again with my 
sister and brother-in-law, they both said you would have to be 
a doctor or a lawyer in order to figure out the application and 
fill it out to 100 percent accuracy.
    Mr. Walden. How would each of you improve that application 
process? Because it seems to me that that is kind of the crux 
of the argument here is, there are things that you didn't know 
that were on your medical records or your loved one's medical 
records that they didn't know. I don't know you ever disclaim 
knowledge of something you have no knowledge of. That to me is 
one point here. And then the second is to know as a layperson 
if you are on some medication years ago and you haven't been 
taking it, it would be easy to forget that, I would think, or 
perceive that you no longer have whatever that was that you 
took the medication for so you don't note it or you forgot it, 
and yet, you know, we also know there are cases of fraud and 
those people that were like you with individual policies paying 
more because people were deliberately trying to get on the 
rolls, and our files that we got from the companies indicate 
that too. So I am trying to figure out, how do we get a balance 
here where people like you and your loved ones aren't rescinded 
from coverage and yet find this balance and it seems to get 
back to the initial application process, the review of those 
applications and then better understanding for those of us who 
may be signing up for that type of health insurance, so I am 
curious, how would you fix at least that part of the process? 
Anyone want to tackle that?
    Ms. Raddatz. I would just state that the insurance company 
at the time you apply for insurance and you disclose your 
doctors, they should be the ones that have to do the 
investigations. If they don't do the proper investigation at 
the time you apply, they shouldn't have the right to go back 
years later. You know, there is a 2-year window for the 
insurance companies by which they can do their investigations. 
No, that is wrong. They should have to investigate before they 
give you your insurance. They have all the opportunity to 
investigate then. You disclose your doctors, let them get the 
records, let them look at and comb the records at that time. 
Why are they doing that later on when people----
    Mr. Walden. When you have a big claim.
    Ms. Raddatz. Pardon me? Absolutely. I mean, if that isn't 
intentional, what is? They want to save money and wait until 
you have claims before they spend the investigative money to do 
what they should do at the beginning. So all this time they 
haven't done their job. They are taking the consumer's money 
and the consumer thinks I am insured, but I am not insured and 
that is not right. That law needs to be changed.
    Mr. Walden. Ms. Beaton, do you want to comment on that?
    Ms. Beaton. Yes. Just like myself, I asked could I have a 
physical. I wanted to have a physical for insurance and they 
said no, we don't do that. So I even offered to let them have a 
physical on me, which to me that would be a good thing. You 
know, that way if there is anything they don't want, they don't 
have to take you.
    Mr. Walden. We have that in Medicare, I think.
    Ms. Beaton. They don't do that at all, so they don't want 
to spend the money for a physical to give it to you to rule you 
out then so you don't get your hopes up and think you have 
insurance.
    Mr. Walden. OK.
    Ms. Horton. I completely agree with what Ms. Raddatz said, 
and I just wanted to add, you know, after this practice 
happens, which hopefully we are going to stop it from happening 
in the first place, but then when your physicians write letters 
on your behalf and aid you in appealing to these insurance 
companies, the fact that they give no weight whatsoever to what 
these physicians who have been treating you for years say, it 
is totally unconscionable.
    Mr. Walden. I was reading through some of those examples of 
people who, you know, were rescinded and their physician says 
the patient would have no idea of this, it is a note I put in 
the file I never shared with them, and that doesn't seem right. 
Would it be helpful--and I realize I have run over my time 
here, but would it be helpful if there were also--it seems like 
there is yes and no columns on these forms. Given that I don't 
think any of you are physicians, would it be helpful if there 
maybe was an unsure, don't know column as well that you could 
check which then I would think if I am the insurer would cause 
me to go ah, there may be something here I should look at 
further. Because, I mean, the insurers, if you read through 
their testimony, they make the case that look, it is a very 
small percentage, although it is a very painful percentage--I 
am just telling you what they are telling us--small percentage. 
If we did everyone, it would slow down people getting access to 
insurance, blah, blah, blah. And so they are saying, you know, 
we go investigate those where we have cause or an issue. That 
is something we will get into on the next panel. But, you know, 
there is this notion that is a very small segment of the 
population and so, you know, to get people covered they go this 
direction.
    Ms. Horton. I don't believe that it is a very small segment 
of the population. I believe that they send anyone who sends in 
a claim to this post-claims underwriting department, and I have 
heard many people who formerly worked, you know, at insurance 
companies talk about these secret, you know, specific units 
that are designed to find errors or omissions or whatever you 
want to call them in people's records so that they can go back 
and save money.
    Mr. Walden. And I think we actually get some of that 
testimony from our final witness from Georgetown that says it 
may be a small percentage but it is perhaps a big percentage of 
the claim costs.
    Ms. Raddatz. And I would just like to say, those are the 
people you know of. There are many people out there who lose 
their insurance and then go on Medicaid, go on welfare, go 
without insurance. You are not aware of who those are. Those 
are their numbers. Those aren't the consumer's numbers. We 
don't really know how many people are out there, and you know 
what? I don't care if there is just the three of us. That is 
too many. One too many who dies because an insurance company 
cancelled their insurance is one too many.
    Mr. Walden. Ms. Beaton, any final comment? I just wondered 
if you had any final comment on that point. It is OK if you 
don't.
    Ms. Beaton. I am real hard of hearing. What did you say?
    Mr. Walden. I just wondered if you had any final comment.
    Ms. Beaton. Oh, I just agree with both of what they said 
and I know so many people in my cancer group that I wish could 
be here to talk to you, that you wouldn't believe their 
stories. So it is common practice and you will never know how 
common it is, and when they hire nurses to investigate who sit 
there their whole shift doing nothing but review medical 
records looking for things to get rid of people, and that just 
shows you right there.
    Mr. Walden. Indeed. Thank you very much.
    Thank you, Mr. Chairman, for your indulgence.
    Mr. Stupak. Thank you. I ask unanimous consent that a 
statement from Rosa DeLauro, Member, be placed in the record.
    [The information was unavailable at the time of printing.]
    Mr. Stupak. Let me just ask a question. You know, we have 
focused sort of on what happened to you three as we should and 
rightfully so but, you know, we found close to 20,000 cases in 
looking where there were rescissions over the last few years 
from three insurance companies here who will be testifying on 
the next panel, like a spouse gets in a bicycle accident and 
had some fractured bones and they denied it because her husband 
had back surgery. What bearing that had on the lady's fractures 
is beyond me. But that is what we are seeing. But Ms. Beaton, 
one thing I want to ask you, in your testimony you stated, and 
I am going to quote now, that you ``live with fear every day of 
my insurance company.'' What are you afraid your insurance 
company might do?
    Ms. Beaton. Without a doubt, some day they will cancel me. 
Some day Mr. Barton won't be there to protect me, and you know, 
I am young and they will find something to get rid of me. 
Somehow I won't have insurance. Some day I will be--out of Blue 
Cross and Blue Shield's record they will find a way to get rid 
of me, and coming here today I think will just about maybe do 
it.
    Mr. Stupak. So if your lost your insurance, you are afraid 
you would never get insurance from another company since you 
have been rejected once?
    Ms. Beaton. If I lost my insurance what?
    Mr. Stupak. Are you afraid you would not be able to pick up 
another individual health insurance policy?
    Ms. Beaton. I am uninsurable. The only way I could ever get 
insurance, through being a registered nurse I could go back to 
work in a hospital and be covered under a group. They could not 
deny you that way. I have done a lot of research about that. 
But as far as the individual policy, for the rest of my life I 
am uninsurable.
    Mr. Stupak. Because of your preexisting condition?
    Ms. Beaton. Because of my cancer. Once you have cancer, you 
are uninsurable forever.
    Mr. Stupak. Thank you.
    I apologize, Mr. Deal, I didn't see you there, but 5 
minutes for questions.
    Mr. Deal. That will teach me to wear a light-colored suit. 
Thank you, Mr. Chairman, and I just simply wanted to express my 
appreciation to the witnesses for coming today. Certainly none 
of us condone abuses within the system, and you have pointed 
out some of those that appear to be in that category, and I 
know that it took a great deal of effort on your part to come 
and we appreciate your courage and we appreciate your time that 
you have devoted to it. I do not have any questions of you. I 
think your testimony speaks for itself.
    Thank you, Mr. Chairman. I yield back.
    Mr. Stupak. Well, that was pretty quick. Well, let me thank 
this panel for their testimony, their heartfelt testimony, and 
thank you for shedding some light on this and bringing a human 
face to a very serious problem. Thank you all for coming and 
thank you for your testimony.
    I would now like to call up our second panel of witnesses. 
On our second panel, we have Don Hamm, who is the chief 
executive officer of Assurant Health; Mr. Richard Collins, who 
is the chief executive officer at Golden Rule Insurance 
Company, which is owned by United Health Group; Mr. Brian 
Sassi--am I saying that right?
    Mr. Sassi. Sassi.
    Mr. Stupak. Sassi, who is president and chief executive 
officer at WellPoint Incorporated, and Ms. Karen Pollitz, who 
is the research professor at Georgetown University Health 
Policy Institute. Welcome, all our witnesses. It is the policy 
of this subcommittee to take all testimony under oath. Please 
be advised that you have the right under the rules of the House 
to be advised by counsel during your testimony. Do you wish to 
be represented by counsel during your testimony?
    Mr. Hamm. Yes, if necessary.
    Mr. Stupak. Mr. Hamm, you would?
    Mr. Hamm. Yes, if necessary.
    Mr. Stupak. OK. So if any time during the questions if you 
want to get advice from counsel, just let us know and we will 
allow you. Counsel can't testify but they can advise you. Mr. 
Collins?
    Mr. Collins. No, sir.
    Mr. Stupak. Mr. Sassi.
    Mr. Sassi. No, sir.
    Mr. Stupak. Ms. Pollitz.
    Ms. Pollitz. No.
    Mr. Stupak. So you are already standing. Let us raise your 
right hand and we will take the oath.
    [Witnesses sworn.]
    Mr. Stupak. Let the record reflect that the witnesses 
replied in the affirmative. They are now under oath beginning 
with your opening statement. You have 5 minutes for an opening 
statement. You may submit a longer statement for inclusion in 
the record. Mr. Hamm, if you don't mind, I will start with you, 
start from my left and go to our right.

   TESTIMONY OF DON HAMM, CHIEF EXECUTIVE OFFICER, ASSURANT 
  HEALTH, ASSURANT; RICHARD COLLINS, CHIEF EXECUTIVE OFFICER, 
  GOLDEN RULE INSURANCE COMPANY, UNITEDHEALTH GROUP; BRIAN A. 
    SASSI, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CONSUMER 
    BUSINESS, WELLPOINT, INC.; AND KAREN POLLITZ, RESEARCH 
    PROFESSOR, GEORGETOWN UNIVERSITY HEALTH POLICY INSTITUTE

                     TESTIMONY OF DON HAMM

    Mr. Hamm. Chairman Stupak, Congressman Walden, members of 
the subcommittee, I am Don Hamm, president and CEO of Assurant 
Health. I welcome this opportunity to participate in the 
hearing today. It is through dialog like this that we can 
continue to address one of the most challenging issues of our 
time, providing health insurance coverage for all Americans.
    We appreciate that this subcommittee and Congress are 
committed to finding the right ways to address health care 
reform. If a system can be created where coverage is available 
to everyone and all Americans are required to participate, the 
process we are addressing today, rescission, becomes 
unnecessary because risk is shared among all. I passionately 
believe that all Americans must have access to high-quality, 
affordable health care regardless of their income or their 
health status, and I am proud to lead a great company that 
provides health coverage to individuals and families in 45 
States. People need our products and we are proud to provide 
them to thousands of Americans.
    Individual medical insurance is portable and belongs to 
each consumer. In these uncertain economic times, individual 
medical provides benefits to a growing population who do not 
receive employee-sponsored health coverage. That is why 
individual medical is so important. We work hard to ensure our 
health questions include simple, easy and straightforward 
language. A correct medical history is necessary so we can 
fairly assess the health risk of each applicant. The vast 
majority of people complete the enrollment form accurately. The 
underwriting process depends on this information and we rely 
upon consumers' disclosures. People applying for individual 
insurance are given multiple opportunities to verify, correct 
and complete the information they provide. They are given 10 
days to notify us of any inaccurate information or to reject 
the coverage.
    As Assurant Health, we are acutely aware of how our 
coverage affects people's lives. It is a responsibility we take 
very seriously. Unfortunately, there are times when we discover 
information that was not disclosed during the enrollment 
process, and when this information is brought to our attention, 
we ask additional questions to determine if the information 
would have been material to the underwriting risk we assumed. 
Accurate risk assessment keeps rates lower for all.
    Assurant Health does not want to rescind coverage. We are 
in fact in the business of providing health care coverage. We 
regret the necessity of even a single rescission. The decision 
is never easy, and that is why we follow a fair and thorough 
process that includes a number of careful reviews. Here is how 
our system works. When we become aware of a condition that 
existed prior to the application date and that information was 
not disclosed, a senior underwriter reviews the omitted 
information to determine if it was material to the underwriting 
decision. Then the underwriting manager verifies the analysis. 
If the omission was not material, the review is complete. If 
the omission was material, the underwriter makes a 
recommendation to a review panel, which includes at least one 
physician. This review panel evaluates the information and 
makes a decision. The amount of the potential claim is never 
disclosed to the underwriters or to the review panel. The 
decision to rescind is only made when the undisclosed 
information would have made a material difference to the 
underwriting decision based on our guidelines. The consumer is 
given the opportunity to provide additional information before 
coverage is rescinded. This information is evaluated and a 
decision is made. If the consumer is dissatisfied with the 
decision, we provide multiple opportunities to appeal, which 
now includes an option to request a medical review by an 
independent third-party company.
    Rescission affects less than one-half of 1 percent of the 
people we cover. Yet it is one of many necessary protections 
for affordability and viability of the individual health 
insurance in the United States. Assurant Health supports the 
principle that everyone in the United States deserves 
affordable health care and we see reform of our Nation's health 
care system as a shared responsibility between doctors, 
consumers, health insurers and policymakers who collectively 
can deliver effective solutions to provide coverage for all 
Americans, and that is why at Assurant Health we will continue 
to participate in efforts to reform and improve health care in 
America. Thank you.
    [The prepared statement of Mr. Hamm follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.010
    
    [GRAPHIC] [TIFF OMITTED] T3743A.011
    
    [GRAPHIC] [TIFF OMITTED] T3743A.012
    
    [GRAPHIC] [TIFF OMITTED] T3743A.013
    
    [GRAPHIC] [TIFF OMITTED] T3743A.014
    
    [GRAPHIC] [TIFF OMITTED] T3743A.015
    
    [GRAPHIC] [TIFF OMITTED] T3743A.016
    
    Mr. Stupak. Thank you, Mr. Hamm.
    Mr. Collins, your opening statement, please, sir.

                  TESTIMONY OF RICHARD COLLINS

    Mr. Collins. Good morning, Chairman Stupak, Ranking Member 
Walden, members of the subcommittee, thank you for inviting me 
to testify today. My name is Richard Collins. I am the CEO of 
Golden Rule Insurance Company. We are a UnitedHealth Group 
business that sells health insurance policies to individuals 
and their families. Golden Rule has been offering this 
important coverage for over 60 years. We seek to offer 
innovative and affordable products to meet the diverse health 
care and financial needs of our customers.
    In our current health care delivery system, the individual 
insurance market operates primarily for families who do not 
have access to group insurance or government benefit programs. 
We have long advocated that our country needs comprehensive 
reform that includes modernizing our delivery system, tackling 
the fundamental drivers of health care cost growth, 
strengthening employer-based coverage, and providing well-
targeted support for low-income families. To be effective, we 
believe the modernization of the individual market needs to 
contain all the following elements.
    First of all, individuals must be required to obtain and 
maintain health coverage so that everyone participates in both 
the benefits and the costs of the system. Second, insurers 
should be able to set rates within limited parameters of age, 
geography, family size and benefit design, just as they do in 
the group market. However, and I want to emphasize this point, 
rates should not vary on health status and coverage should be 
guaranteed regardless of preexisting medical conditions for 
those that maintain continuous coverage. Third, low- and 
middle-income families should receive some form of subsidiary 
to ensure they have the same access to care as all Americans. 
Fourth, insurers should be able to offer a wide spectrum of 
plan designs to allow American families the flexibility to 
choose a plan that fits their budget, and lastly, the tax 
treatment of individual insurance premiums should be on par 
with employer coverage.
    Until comprehensive reform is achieved, we believe the 
medical underwriting of individual policies will continue to be 
necessary. If these changes are instituted, most of the reasons 
for individual medical underwriting as well as most of the 
reasons for rescissions and terminations of policies would 
cease to exist. Our company mission is to improve the health 
and well-being of all Americans. In the individual market, we 
accomplish this by covering as many consumers as possible with 
quality health insurance. We also work to keep our products 
affordable to accomplish our mission because the primary 
barrier to access is affordability. We understand that we have 
a responsibility to treat all of our policyholders fairly and I 
assure you, we take this responsibility very seriously.
    Unfortunately, for a variety of reasons, some people choose 
not to purchase individual health insurance until they have a 
significant health event. This decision not only has enormous 
physical impact and financial impact on these families but 
raises the cost of health care for everyone. As you know, the 
practice of rescission has long been recognized by the laws of 
virtually every State. Rescission is uncommon but unfortunate 
and a necessary recourse in the event of material and at times 
intentional or fraudulent misstatement or omission on an 
insurance application. Under our current system, failure to act 
on these cases is fundamentally unfair to those working 
families that play by the rules because it would severely limit 
our ability to provide quality and affordable health insurance. 
In the rare event that we determine it is necessary to rescind 
coverage and after a thorough investigation of the facts and in 
compliance with State laws and regulations, we follow practices 
and procedures designed to ensure a fair and transparent 
process for the individual. And as I indicated, our use of 
rescission is rare. Less than one-half of 1 percent of all 
individual insurance policies in 2008 were terminated or 
rescinded and in each case the affected customer was afforded 
the right of appeal.
    In conclusion, we look forward to working with this 
committee, the Congress, State and federal regulators to 
continue to expand access to affordable health insurance 
coverage in the individual market. Thank you.
    [The prepared statement of Mr. Collins follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.017
    
    [GRAPHIC] [TIFF OMITTED] T3743A.018
    
    [GRAPHIC] [TIFF OMITTED] T3743A.019
    
    [GRAPHIC] [TIFF OMITTED] T3743A.020
    
    Mr. Stupak. Thank you.
    Mr. Sassi, your opening statement, please.

                    TESTIMONY OF BRIAN SASSI

    Mr. Sassi. Thank you, Chairman Stupak, Ranking Member 
Walden and members of the committee for inviting me to testify 
before you today. I am Brian Sassi. I am the president and CEO 
of the consumer division of WellPoint.
    We take contract rescissions very seriously because we 
understand the impact these decisions can have on individuals 
and families. We have put in place a thorough process with 
multiple steps to ensure that we are as fair and as accurate as 
we can be in making these difficult decisions. I want to 
emphasize that rescission is about stopping fraud and material 
misrepresentation that contribute to the spiraling health care 
costs. By some estimates, health care fraud in the United 
States exceeds $100 billion, an amount large enough to pay for 
covering nearly half the 47 million uninsured. Rescission is a 
tool employed by WellPoint and other health insurers to protect 
the vast majority of policyholders who provide accurate and 
complete information from subsidizing the cost of those who do 
not. The bottom line is that rescission is about combating cost 
driven by these issues. If we fail to address fraud and 
material misrepresentation, the cost of coverage would 
increase, making coverage less affordable for existing and 
future individual policyholders.
    I would like to put this issue in context. While most 
people who are under the age of 65 obtain health insurance 
through their employers, some 15 million Americans purchase 
coverage in the voluntary individual market. In a market where 
individuals can choose to purchase insurance at any time, 
health insurers must medically underwrite applicants for 
current health risk. If an individual buys health coverage only 
when he or she needs health care services, the system cannot be 
sustained. While we understand and appreciate that this is a 
critical personal issue, individual market rescission impacts 
an extremely small share of the individual market membership. 
In our experience, we believe that more than 99 percent of all 
applicants for individual coverage provide accurate and 
complete information. In fact, as a percentage of new 
individual market enrollment during 2008, we rescinded only one 
tenth of 1 percent of individual policies that year.
    The issue of rescission in health insurance surfaced in the 
media in 2006 and 2007, generating the public concern that we 
are here talking about today. Our main point today is the same 
as it was then: a voluntary market for health insurance 
requires that we protect our members from costs associated with 
fraud and material misrepresentations. Otherwise the market 
cannot be sustained.
    In response to the public concern over the practice of 
rescissions, in 2006 WellPoint undertook a thorough review of 
our policies and procedures. Following that review, WellPoint 
was the first insurer to announce the establishment of a 
variety of robust consumer protections that ensure rescissions 
are handled as accurately and as appropriately as possible. 
These protections include, one, creating an application review 
committee which is staffed by a physician that makes rescission 
decisions; two, establishing a single point of contact for 
members undergoing a rescission investigation; and three, 
establishing an appeal process for applicants who disagree with 
our original determination which includes a review by an 
application review committee not involved in the original 
decision. And then in 2008, WellPoint was the first in the 
industry to offer a binding, external, independent third-party 
review process for rescissions.
    We have put all these protections in place with multiple 
steps because we cover millions of Americans and want to be as 
fair and as accurate as we can be. Some have asserted that 
health insurers provide a systematic reward for employees 
regarding rescissions. This is absolutely not the case at 
WellPoint. I want to assure the committee that there is no 
WellPoint policy to either factor in the number of rescissions 
or the dollar amount of unpaid claims in the evaluation of 
employee performance or in calculating employees' salary or 
bonuses.
    In response to policymaker interest in enacting consumer 
protections related to rescission, WellPoint is proposing a set 
of rescission regulations with new consumer protections, and I 
have outlined these in my written testimony to the 
subcommittee. In addition, the health insurance industry has 
proposed a set of comprehensive and interrelated forms to the 
individual health insurance market as a whole. The centerpiece 
of this proposal is the elimination of medical underwriting 
combined with an effective and enforceable personal coverage 
requirement. In other words, insurers sell to applicants 
regardless of preexisting conditions as long as everyone enters 
the risk pool by purchasing and maintaining coverage. This 
would render the practice of rescissions unnecessary. Our 
proposals are examples of how we are working to find common 
ground on these issues so that we can make quality, affordable 
health care available to all Americans.
    Thank you for the opportunity to discuss this issue and our 
proposals with you. I look forward to your questions.
    [The prepared statement of Brian Sassi follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.021
    
    [GRAPHIC] [TIFF OMITTED] T3743A.022
    
    [GRAPHIC] [TIFF OMITTED] T3743A.023
    
    [GRAPHIC] [TIFF OMITTED] T3743A.024
    
    [GRAPHIC] [TIFF OMITTED] T3743A.025
    
    Mr. Stupak. Thank you.
    Ms. Pollitz, your opening statement, please.

                   TESTIMONY OF KAREN POLLITZ

    Ms. Pollitz. Thank you, Mr. Chairman, members of the 
committee. I am Karen Pollitz and I study private health 
insurance and its regulation at Georgetown University. Thank 
you for holding this hearing today. Health insurance rescission 
is a serious issue of utmost importance. In addition to the 
devastation that it visits on people, the problems explored 
today can teach us lessons that will be important for health 
care reform.
    The individual market is a difficult one, as we all know, 
and because it is small and voluntary and vulnerable to adverse 
selection, there has been a lot of resistance to enacting a lot 
of incremental reforms to govern practices in this marketplace. 
However, with the enactment of HIPAA in 1996, the Congress did 
act to apply one important rule broadly to all health insurance 
including individual health insurance, and that is the rule of 
guaranteed renewability. Prior to HIPAA, individuals and small 
employers who bought health insurance and then made claims 
would sometimes have their coverage cancelled and HIPAA sought 
to fix that by requiring, and I quote ``except as provided in 
this section, a health insurance issuer that provides 
individual health insurance coverage to an individual shall 
renew or continue in force such coverage at the option of the 
individual. Only narrow exceptions to guaranteed renewability 
are permitted and with respect to policyholders' behavior, the 
policy can be renewed or discontinued only if the individual 
moves out of the service area, fails to pay their premium or 
commits fraud.''
    Congress relies on States to adopt and enforce HIPAA 
protections and the federal government is supposed to directly 
enforce when States do not. As States implemented HIPAA, they 
adopted the guaranteed renewability rule but other conflicting 
provisions in State law remained unchanged. In particular, laws 
governing so-called contestability periods continue to permit 
insurers to engage in post-claims underwriting and to rescind 
policies or deny claims based on reasons other than fraud and 
failure to pay premiums. State laws create a window, usually 
two years, when claims made under a policy can be investigated 
to determine whether they may be for a preexisting condition. 
After the period of incontestability, a policy can be rescinded 
or a claim denied only on the basis of fraud, but during the 
window, if a claim is submitted by a new policyholder, the 
original application for coverage is reinvestigated, and if 
any, even unintentional, material misstatement or omission is 
discovered, consumers may lose their health insurance. That 
conflicts with HIPAA.
    Now, clearly, when it comes to post-claims underwriting, 
protection against fraud is important but there is evidence 
that some insurance companies are not nearly as careful as they 
should be in their initial medical underwriting and rely 
instead on post-claims underwriting to catch their mistakes 
later. Applications for coverage may ask broad, vague or 
confusing questions, use technical terms and make it very 
difficult for consumers to answer accurately and completely, or 
other follow-up that should occur in the initial underwriting 
may not. For example, if a 62-year-old submits an application 
indicating absolutely no health problems or health history that 
application may be considered and coverage issued without any 
further investigation at the time of application. Market 
competition and profitability create pressures on medical 
underwriters to do their jobs more quickly and cheaply. 
However, if medical underwriting is allowed in health 
insurance, it has to be completed upfront before coverage is 
issued. The recent subprime mortgage scandals where banks 
issued mortgages without adequate screening of consumers' 
financial status offers an analogy. When insurers issue medical 
underwritten coverage without carefully screening an 
applicant's health status and rely on post-claims 
investigations to avoid incurring a loss, consumers are 
vulnerable. How extensive is this problem? It is hard to say. 
The industry has offered its own estimates but official data 
are lacking, and that is troubling. The federal government has 
not kept track of this issue. At a hearing of the Government 
Oversight Committee last year, a witness for the Bush 
Administration testified that she had not acted on press 
reports of inappropriate rescissions or even looked into them. 
She did not appear to be aware of conflicts in current State 
law and she testified she had only four people on her staff who 
worked part time on HIPAA private insurance issues.
    In conclusion, Mr. Chairman, this investigation into health 
insurance rescission has trained a spotlight on an important 
question. If the Congress enacts a law or an entire health care 
reform proposal, how will you know if that law is being 
followed? It is fundamentally important that along with federal 
protections for health insurance, you also enact reporting 
requirements on health insurers and health plans so that 
regulators can have access to complete and timely data about 
how the market is working in order to monitor compliance with 
the law. Congresswoman DeLauro has introduced a bill to create 
a federal office of health insurance oversight that establishes 
such reporting requirements on insurers and that appropriates 
resources so that the federal government and State insurance 
departments together can carry out those responsibilities. I 
hope the Congress will follow her leadership and make adequate 
oversight and enforcement resources part of health care reform.
    [The prepared statement of Karen Pollitz follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.026
    
    [GRAPHIC] [TIFF OMITTED] T3743A.027
    
    [GRAPHIC] [TIFF OMITTED] T3743A.028
    
    [GRAPHIC] [TIFF OMITTED] T3743A.029
    
    [GRAPHIC] [TIFF OMITTED] T3743A.030
    
    [GRAPHIC] [TIFF OMITTED] T3743A.031
    
    [GRAPHIC] [TIFF OMITTED] T3743A.032
    
    [GRAPHIC] [TIFF OMITTED] T3743A.033
    
    Mr. Stupak. Thank you, and thank you all for your 
testimony. We will go to questions.
    Mr. Sassi, let me ask you this because you threw a bunch of 
statistics at us, but I was just looking at the State of 
California alone, and it seems to me if I remember correctly, 
in July of 2008 Anthem Blue Cross, which is a subsidiary of 
WellPoint, paid a $10,000 fine and had to reinstate 1,770 
rescinded policies, and in February of 2009 once again 
California Anthem Blue Cross, again, one of your subsidiaries, 
had to pay a $15 million fine and reinstate over 2,300 
rescinded policies, and then another settlement, $5 million and 
another 450. So it seems like in the last year you have had to 
reverse 4,500 rescissions and pay a fine of $30 million just in 
one State. Is that true?
    Mr. Sassi. I don't believe the numbers are exactly 
accurate, but the premise is accurate. The issue of rescission 
first surfaced in the media, particularly in California, I 
believe, in 2006 and 2007, and shortly thereafter one of our 
regulators initiated an audit, issued audit findings. We 
disputed the majority of those findings, and our response is 
appended to that audit report. The regulator subsequently did 
change----
    Mr. Stupak. Well, according to California Department of 
Management and Health, in July of 2008, last year, July 17, 
2008, you entered into an agreement with California to----
    Mr. Sassi. Yes. We----
    Mr. Stupak [continuing]. Over 1,700 people and, what, a $10 
million fine, and in February 2009, California Department of 
Insurance also put out a release indicating that you paid a $15 
million fine and had to reinstate 2,300 people. So according to 
my math, that is just over 4,000 and $25 million in fines, 
right?
    Mr. Sassi. Yes, I think there wasn't a $15 million fine to 
the Department of Insurance. Irregardless of that, you know, 
companies enter into settlement----
    Mr. Stupak. Let me ask you this----
    Mr. Sassi [continuing]. Agreements for a variety of 
reasons.
    Mr. Stupak. Let me ask you this, and I will ask all three 
of you. Why don't you just vet these policies before you ever 
collect the premium? Why don't you just go through these 
policies and make sure there is no problems with it before you 
insure the people? Only one State requires you to do that, and 
that is Connecticut, right?
    Mr. Sassi. Chairman, we do investigate the applicants. We 
have very rigorous underwriting requirements. As we review an 
applicant's application, we rely on the applicants to be 
truthful in completing, and our experience has shown that over 
99 percent of applicants are truthful in completing their 
applications.
    Mr. Stupak. So when do you do the----
    Mr. Sassi. We rely on that.
    Mr. Stupak. When do you do the investigation then? Why are 
we getting this post-underwriting going on? Why does that 
occur?
    Mr. Sassi. Well, I would contend that we don't participate 
in post-claim underwriting.
    Mr. Stupak. Really? Well, let me ask you this----
    Mr. Sassi. If there is a situation where either a pharmacy 
claim was received or a pre-authorization for a hospital stay 
is received or a claim that is received that would hit either a 
specific diagnosis that could lead to potential fraud, that 
would trigger an underwriter to investigate.
    Mr. Stupak. Well, let me ask you this. In the book right 
there, and I believe it is tab number 11, that is our document. 
You gave us--WellPoint provided the committee with a list of 
conditions that automatically lead to an investigation post 
underwriting, OK? And for WellPoint, the list of conditions 
that trigger rescission investigation includes diseases ranging 
from heart disease and high blood pressure to diabetes and even 
pregnancy. So what do these conditions have in common that 
would cause you to investigate patients with these conditions 
for a possible rescission? You have 1,400 different conditions 
which would trigger, according to your documents, which will 
trigger an investigation.
    Mr. Sassi. Chairman, an investigation does not mean that a 
rescission actually occurs. For example, in 2008, there were 
over 16,000 investigations triggered. Ninety-two percent of 
those were dismissed and no action was taken.
    Mr. Stupak. Right, but why do you have 1,400 different 
conditions which trigger an investigation? What is the common 
theme amongst these 1,400 that would trigger an investigation?
    Mr. Sassi. I would say there is no common theme other than 
these are conditions that had the applicant disclosed their 
knowledge of a condition at the time of initial underwriting, 
we may have taken a different underwriting action, and so that 
is what the investigation really is about, is to determine did 
the applicant have the condition, did they know about the 
condition----
    Mr. Stupak. Well, I thought you said you did pre-screening 
before, you screened them before.
    Mr. Sassi. We do, but in many of these----
    Mr. Stupak. Why would you have to go back? If you screened 
them before and there wasn't a problem, then why would you have 
a list of 1,400 different conditions that trigger an 
investigation? If you pre-screen, if your pre-screening is 
good, you wouldn't need a list of 1,400, would you?
    Mr. Sassi. But unfortunately, there are those among us that 
are not truthful in completing their application.
    Mr. Stupak. So in the 1,400 different areas they lie? The 
applicants lie? Or is it a cost issue? These are 1,400 
expensive areas, aren't they?
    Mr. Sassi. Rescission is not about cost. A pharmacy claim 
that is $20 could trigger something.
    Mr. Stupak. Sure, if it is for a certain condition, right? 
Heart disease?
    Mr. Sassi. No, not necessarily.
    Mr. Stupak. All right. My time is up. Mr. Walden.
    Mr. Walden. Thank you, Mr. Chairman.
    I would just like to ask each of the companies present, is 
it your company's policy to deny coverage to any applicant that 
discloses that he or she has had had previous policies 
rescinded? You heard some of the witnesses today say look, once 
I get rescinded, no company is going to write me again on an 
individual policy. Is that correct, Mr. Sassi.
    Mr. Sassi. I am personally unaware of that policy.
    Mr. Walden. Mr. Collins.
    Mr. Collins. Sir, we do have that question on our 
application but I am not aware as to whether or not what the 
underwriting guidelines are so we ask if you have been 
rescinded or declined by another carrier.
    Mr. Walden. But you don't know what happens with that 
information?
    Mr. Collins. No, sir. I imagine it triggers an 
investigation but I don't know if there is an underwriting 
policy that is directly linked to that that is a black and 
white policy.
    Mr. Walden. Mr. Hamm.
    Mr. Hamm. Yes, we would not provide coverage in that 
situation.
    Mr. Walden. So do you ever look to see if a rescission--the 
circumstances around another company's rescinding of a policy 
before you just--I mean, if they check the box and say yes, I 
was rescinded in the past----
    Mr. Hamm. Our underwriting guidelines are that we would not 
issue that policy.
    Mr. Walden. Wow. Mr. Collins, is that your underwriting? 
Can somebody tell you if that is your underwriting policy too?
    Mr. Collins. I don't know, sir, but I would be happy to get 
back to you with an answer on that.
    Mr. Walden. And Mr. Sassi, is that your company's policy?
    Mr. Sassi. Again, I am not aware of the policy. I would be 
happy to research it and provide a response for the record.
    Mr. Walden. You obviously sat here and heard the testimony 
of the prior witnesses, and some of the information we have 
seen indicates there are mistakes made in rescinding policies, 
at least from our standpoint, and I think you have settled some 
cases along those lines. After hearing that testimony, do you 
think it should be your company's policy to just not issue a 
private insurance policy to somebody who had been rescinded by 
another company? Should that be the policy of your company?
    Mr. Sassi. Well, as I stated for the record, I am not aware 
that that is a company policy.
    Mr. Walden. And I stipulate that. Should it be?
    Mr. Sassi. I think that is a factor that should be 
considered.
    Mr. Walden. But I am hearing, at least from Mr. Hamm, that 
it is your company's policy that if they were rescinded by 
another company, it is a no go coming to your company. That is 
correct, right? I heard you correctly. Mr. Collins, once you 
find out whether it is or not, do you think it ought to be?
    Mr. Collins. Well, sir, I think we should investigate the 
circumstances.
    Mr. Walden. I do too. I mean, if somebody did lie on a 
prior form, that is one thing. If they are truthful on your 
form, though, should that--because they made a mistake in the 
past, should they never be forgiven? They never have a shot at 
health insurance again? I mean, let us take Ms. Horton's case. 
You heard her situation. You heard her fear. So she will never 
get offered coverage again. Is that right?
    Mr. Sassi. I agree, it should be something that should be 
investigated and considered.
    Mr. Walden. Most of your company policies approve a 
decision to rescind if an applicant made any material 
misrepresentations or omissions in the application. I 
understand that. How does your company ensure the applicant was 
aware of the condition or notation found in his or her medical 
records? We have had some testimony along those lines and we 
have seen some in some of the files where they say, you know, 
my doctor never told me that, and we have letters from 
physicians who say that is correct, I make notes all the time 
in the medical files, I didn't tell the patient that. Where is 
the balance here, Mr. Hamm.
    Mr. Hamm. We have a very fair and thorough process of 
determining if there was a material misrepresentation. The 
process involves several layers of review and a review panel 
including a medical doctor, and in that process we gather all 
the available information with respect to a person's use of 
medical services including medical records as well as the 
information on their application and we will do detailed 
research and look at each situation based on the facts, make a 
determination whether there was a material misrepresentation 
when the policy was underwritten.
    Mr. Walden. So do you look at the case files? Do you look 
at the medical records? Do you communicate directly with the 
physician?
    Mr. Hamm. We will communicate when it is necessary.
    Mr. Walden. Well, but to determine the material 
misrepresentation. I mean, what happens in a case where the 
physician says I never told the patient that?
    Mr. Hamm. It is difficult to speak of a hypothetical 
situation, it depends on the facts of each time, but I can tell 
you that we would not rescind a policy if the applicant was not 
aware of the condition.
    Mr. Walden. Mr. Collins.
    Mr. Collins. Sir, we afford the customer the right to 
appeal and we accept statements and information from the 
customer and their physicians with regards to the circumstances 
of the rescission, and we would take that into account. I think 
that fair-minded people would say that if an individual did not 
know of a condition that was noted in the medical record, then 
that would not be grounds for a rescission normally.
    Mr. Walden. Mr. Sassi.
    Mr. Sassi. We also have a thorough process when we initiate 
a rescission investigation. We do reach out to the member and 
share with them the information that we do have and ask them to 
provide us with any comments or other relevant information, and 
all of that information is used in making a recommendation, and 
all that information is provided to our application review 
committee that actually makes the rescission decision. We would 
not rescind a member that we could determine did not know of 
their condition.
    Mr. Walden. And Mr. Hamm's company I know a week and a half 
or 2 weeks ago started this third-party independent review 
opportunity, correct?
    Mr. Hamm. That is correct. We recently implemented that.
    Mr. Walden. And I commend you for that. I think that is a 
good move.
    Mr. Collins and Mr. Sassi, do you have a similar sort of 
independent review panel that an insured could go to and make 
their case?
    Mr. Collins. No, sir, we do not have an independent review 
panel.
    Mr. Walden. Do you plan to go that route? Is that something 
you are thinking about?
    Mr. Collins. It is under consideration but we haven't made 
that decision, sir.
    Mr. Walden. Mr. Sassi.
    Mr. Sassi. Congressman, we were the first insurer to 
implement an independent third-party review and we implemented 
that in July of 2008.
    Mr. Walden. OK, so last July. All right. My time is 
expired. Thank you, Mr. Chairman.
    Mr. Stupak. Well, thanks. On that third-party review, that 
was because California made you do it, right?
    Mr. Sassi. No, absolutely not. It was not a requirement.
    Mr. Stupak. Because in your opening statement, you said you 
had announced robust consumer protections, so I want to know 
what is the difference between announcing implementation, I 
wanted to see if you had implemented those robust consumer 
protections. Have you implemented those robust consumer 
protections you mentioned in your opening statement?
    Mr. Sassi. Yes, absolutely. In my written testimony to the 
subcommittee, we have outlined ten recommendations. We have 
implemented eight of those ten recommendations.
    Mr. Stupak. So eight of the ten are there. OK.
    Mr. Hamm, you said you would not reject or rescind a 
contact for a policyholder if the policyholder had no knowledge 
of it. Well, that is the Raddatz case. That was our last case. 
That was Otto Raddatz. He didn't have any idea he had 
gallstones and an aneurysm, and your company rejected him.
    Mr. Hamm. Mr. Chairman, I would really like to comment on 
that case, but due to privacy concerns I am not able to, but I 
can tell you that in situations when we uncover that the 
individual was not aware of the condition, we would not go 
forward with the rescission.
    Mr. Stupak. But do all your clients or policyholders have 
to get a hold of the attorney general of their State to get it 
done? I mean, that is what Raddatz had to do and you denied him 
twice.
    Mr. Hamm. We have a very detailed appeals process. In fact, 
after the three levels review and the entire committee voting 
for a rescission, we notify the customer. We give them 15 days. 
We delay the rescission, giving them an opportunity to respond 
back to us with additional information, and when it does come 
in we have a different underwriter look at the appeal and they 
may appeal as many times as they would like.
    Mr. Stupak. Raddatz only had 2 or 3 weeks to get his stem 
cell----
    Mr. Hamm. We go through the process as fast as possible.
    Mr. Stupak. And I apologize again, Mr. Deal. I didn't see 
you there. You have to change the color of your suit. I will go 
to you for questions, please.
    Mr. Deal. I am going to have to remind the chairman, 
Georgia was the fourth state admitted to this union when 
Michigan was still Indian territory. We don't need to be 
overlooked. Thank you, though. We didn't win that argument, 
though.
    Normally, we are confronted here with the question of, do 
we need new federal legislation, and the gentlemen from the 
insurance industry have all uniformly told us that if we will 
pass a federal mandate of having everybody mandatorily in the 
insurance pool, that all of these problems will go away. What I 
find interesting, Ms. Pollitz, is that you brought up a 
question that nobody has seemed to answer. In your testimony, 
you point out that in 1996 the HIPAA provisions required that 
in individual health insurance policies, that not only is it a 
guarantee of renewability, but you say continuation in force. 
Now, do you interpret that phrase to mean the non-
cancellability that we have been talking about here, and if so, 
if that is what the law that has been in place since 1996 
means, why are we having this discussion?
    Ms. Pollitz. Well, I am not sure if I can answer that 
second question, but I think I should say I am not an attorney, 
I just read English, and the words say continue in force, and 
the only exceptions among the ones we are talking about today 
are fraud, and that is inconsistent with what these other kind 
of post-claims underwriting guidelines or provisions that are 
in State law provide for, which say that fraud is the only 
defense or the only reason for canceling after a 2-year period 
so that essentially new policyholders can't ever quite be sure 
if they are really covered. The insurance industry kind of gets 
a do-over and gets to look again, and any material omission, 
whether--material just means it matters. It doesn't mean that 
it was fraudulent. It doesn't mean--it just means that it 
matters to the insurance industry. That can become the basis 
for challenging coverage. Sometimes coverage is rescinded, 
sometimes it is terminated going forward. Some insurers won't 
rescind a policy because they don't want to get an argument 
with doctors and hospitals who may already have been paid to 
try to get that money back and so they will just cancel the 
policy going forward. But with respect to cancellation and 
rescission, I think the Congress spoke on this in 1996----
    Mr. Deal. And none of the five exceptions to that fit the 
discussions here unless it is elevated to the level of fraud.
    Ms. Pollitz. That is correct.
    Mr. Deal. And I would ask the entire panel, are you aware 
of any court interpretation or any question that has ever been 
raised as to the applicability of this section 2742(a) of the 
Public Health Service Act as it relates to the issue we are 
talking about here today as to whether or not it in fact does 
preclude cancellation for whatever we might call it, whether we 
call it post-review underwriting?
    Mr. Hamm. Congressman, may I speak to that?
    Mr. Deal. Yes.
    Mr. Hamm. This is a legal issue but I don't believe that 
rescission is considered a non-renewal.
    Mr. Deal. Well, but it doesn't just stop when it says 
``shall renew.'' It says ``or continue in force.'' I guess if 
you read that phrase ``or continue in force'' to mean the same 
as renew, then it would actually be a redundant phrase, which 
the law generally does not favor redundancy. Has this ever been 
challenged? Does anybody know if it has ever been raised 
before?
    Mr. Collins. I have no knowledge, sir.
    Mr. Deal. Well, let me go then to the second part of my 
question, and that is, we then go to the States having their 
statutory periods, generally 2 years as has been pointed out, 
for review, but Mr. Hamm, you pointed out that under your 
policies, I believe you said that you give the potential 
customer 10 days to review the application and to notify the 
company of any errors in 10 days to just say we don't want to 
have the policy in effect. Are there any States that currently 
have in place a period of time for insurance companies to 
mandatorily review for these kinds of misstatements, in other 
words, review the medical records within a given time other 
than the 2-year period? Do any States have a shorter time 
frame?
    Mr. Hamm. I am not aware of that. We comply with all 
applicable State statues, and I think it is almost all States 
we have a 10-day free look where we send the customer a copy of 
their application, remind me that they are attesting to the 
accuracy of it, ask them if they have any questions or changes, 
and then as part of the policy, in the welcome letter we 
reinforce the importance that we receive all the disclosed 
information appropriately.
    Mr. Deal. If, though, something was going to be rejected 
based on information that was in an application or information 
in the medical records that we for whatever reason have not 
disclosed, it seems to me that 2 years is a rather lengthy 
period of time, and in practical application, it seems that 
even in that 2-year period it takes some other triggering 
mechanism to institute the review, that there is no normally 
dictated review of the applications unless something triggers 
it or brings it to your attention. Should there be a time frame 
shorter than this 2-year period and should there be a review 
that takes place prior to a triggering act taking place?
    Mr. Hamm. Let me clarify that we do not post-claims 
underwrite. We ask information of every single applicant to the 
company, and 88 percent of the time we receive additional 
information from them and we ask them to fully disclose all 
their information. It is only when we are aware subsequently 
that there was some information that was omitted or inaccurate 
that we would investigate whether a rescission should be made.
    Mr. Deal. But that would be that triggering act and you 
wouldn't know about that unless something by way of a 
pharmaceutical being prescribed or an office visit in the 
doctor's office or a hospitalization.
    Mr. Hamm. That is correct.
    Mr. Deal. What I am asking is, just as you give the 
policyholder 10 days to review the application to figure out if 
it is correct, should there be a comparable, maybe longer, 
obviously I think longer, period of time in which the company 
without some triggering act should be required to review the 
applications and say hey, we think there is something wrong or 
ask for additional information rather than waiting until people 
get in a posture where they probably are uninsurable at the 
time the issue is raised?
    Mr. Hamm. It is something to discuss and give some thought 
to.
    Mr. Deal. Thank you, Mr. Chairman.
    Mr. Stupak. Mr. Burgess for questions.
    Mr. Burgess. Thank you, Mr. Chairman, and that last point 
of Mr. Deal's I think is an excellent one and likely would have 
eliminated the problem for at least one of the three witness 
that we had in front of this morning.
    Let me just ask Mr. Hamm, Mr. Collins, Mr. Sassi, you were 
here and you heard the testimony this morning of the three 
individuals who testified. What do you think after hearing 
that? Is that something that--and again, I am coming at this 
from the perspective of someone who supports the individual 
insurance market. I was a customer of the individual insurance 
market at one time. I may be again in the future. I recognize 
the value that you bring, and I want you to be able to continue 
to do the type of business that you do but you heard the 
opening comments of the chairman of the subcommittee this 
morning. There is a move afoot to do things in a way that would 
be very difficult for you to business in the future and I for 
one would not like to see that happen, but tell me what your 
impressions are after hearing the testimony that you heard this 
morning.
    Mr. Hamm. I would be glad to respond to that, Congressman, 
and I have to say, I really felt bad. You know, I have a lot of 
empathy for the people that are impacted, and I know in my own 
life I have dealt with the cancer and I just have a lot of 
empathy and concern for the people and it is my hope that there 
will be changes made, that this will no longer be necessary. It 
is just that today when we have a voluntary system of insurance 
where people choose, we have to collect information up front to 
underwrite, and if we didn't have that process, then people 
would wait until they had a health condition before applying 
for coverage and the rates would be much, much, much higher 
than they are today. I chaired a group that put forth reform 
proposals, and in our proposal we suggest that the country 
should move toward a guarantee issue environment with no 
preexisting conditions being excluded as long as everyone is 
required to participate. If everyone participates, then there 
is no need for rescission and the price would not increase for 
those currently covered.
    Mr. Burgess. You brought that up. What do you do with the 
segment of society that is just not going to participate? I 
mean, there will be--that segment of society will exist whether 
it is the individuals who are in this country without the 
benefit of a Social Security number, whatever that number is, 
10 million, 12 million, people who just don't comply. We live 
in a free country and they don't like mandates. Look at the 
people who don't comply with the mandate of the IRS right now 
knowing the penalties that are out there waiting for them if 
they get caught, so people are perfectly willing to fly beneath 
the radar. What then? Will these people be rated on whether or 
not they had a preexisting condition or are they just absorbed 
then by the larger taxpaying public who does play by the rules 
and pays their bills on time?
    Mr. Hamm. We believe that the requirement to purchase 
insurance should be enforced. We believe that those who don't 
have the means should be subsidized, and we would look forward 
to working with Congress to find a solution that is workable 
for all Americans, but I believe every American must have 
access to high-quality health care. We have to work together to 
find out how we can make that happen.
    Mr. Burgess. Well, you and I will fundamentally disagree on 
that point, and I think the approach that was taken by Congress 
in the development of the Part D program in Medicare for all 
the faults initially rolling it out, creating problems that 
people actually want that are actually useful for people will 
be a better way of going about that. The coverage rates for 
prescription drugs amongst seniors now is in excess of 90 
percent with a very high satisfaction rate, and clearly in my 
mind, at least, that is a better strategy than simply layering 
another mandate on the American people or the employers of 
America. But I don't disagree with you that something needs to 
happen, and let me just take this to a different level, and 
again, I want to pose this question to all three and I really 
would like an answer from all three on this.
    If there were a system of universal coverage without 
government intervention in the marketplace, is there a better 
way to accomplish our goal of universal coverage without that 
excess market manipulation by the government? Insurance 
companies have used adverse selection methods to deny or cancel 
policies in the individual market. Apparently it happens also 
in other markets. To the extent that this has been allowed in 
law, the business interests almost dictate those actions, yet 
some of us have argued that if we let the market work, you can 
make an innovative product for all. So here is my question. 
Will you today publicly and clearly commit right now that 
regardless of what happens in Washington, whatever decision 
that we reach on health reform, that you will design a product 
for all populations regardless of claims history but also 
economic status? And I would like an answer to those questions 
individually, a product for all populations regardless of 
claims history and all populations regardless of economic 
status. Mr. Hamm, why don't you go first and then we will just 
go down the row.
    Mr. Hamm. I am having a little difficulty following your 
question, sir. If I may understand specifically what you are 
asking?
    Mr. Burgess. Regardless of what we do, whether we do an 
individual or business mandate, employer mandate, maybe we 
don't do a mandate at all, but you have it within your power to 
design a product so that all populations regardless of claims 
history could be covered. Would you be willing to do that?
    Mr. Hamm. In the current system, that would not be 
feasible. We need to have an environment where all Americans 
are required to participate before we could give those 
assurances.
    Mr. Burgess. So you would not be willing to alter business 
practices if there were a way to do that to provide coverage 
for a greater segment of the population, even with a claims 
history?
    Mr. Hamm. If the reforms proposed by AHIP are adopted, then 
we would be very glad to participate in the system, but it is 
necessary that all participate. When it is a system where 
people choose, we need to have the process of assessing risk at 
the time of the application.
    Mr. Burgess. With all respect, the reforms proposed by AHIP 
are not going to happen. You are going to get a plan as your 
chairman outlined here this morning.
    Mr. Collins, can I get you to answer briefly? Would you be 
willing to design such a product?
    Mr. Stupak. Briefly. We are going to have votes here.
    Mr. Collins. Sir, I would respectfully have to agree with 
Mr. Hamm that a guarantee issue product that would fit all 
people at affordable prices is economically practically 
impossible. What I would suggest is that HIPAA also creates 
alternative coverage mechanisms for each and every State, so 
each State is supposed to have a high-risk pool or an 
alternative coverage mechanism, and these high-risk pools have 
been woefully underfunded so one of the things that could be 
done right now today is to increase the amount of funding going 
into those high-risk pools so that people that have serious 
health issues and are otherwise uninsurable in the individual 
market have a place to go that is affordable and affords them 
the care that they need.
    Mr. Burgess. And on the issue of high-risk pools, I think 
the private sector is going to be required to make a 
contribution to that as well and that you all in the private 
sector, whether it be group insurance or individual market, 
there must be a product that is available to everyone 
regardless of their claims history. Yes, they may require a 
federal subsidiary. Yes, they may require a State subsidiary, 
and yes, the private sector may have to bring something to the 
table as well.
    Mr. Sassi, let me ask you----
    Mr. Stupak. All right, that is it. Last question, Mr. 
Burgess. You are just going on.
    Mr. Burgess. Let me ask you then just to answer the 
question----
    Mr. Stupak. Last one.
    Mr. Burgess [continuing]. I posed to the others. Regardless 
of the claims history and the population, would you be willing 
to make a product available?
    Mr. Sassi. I have to agree with my colleagues here that in 
the current voluntary individual market, we could not guarantee 
issue policies where people could jump in and out of the 
insurance market. We have had experience of States that have 
implemented guarantee issue without an effective, enforceable 
personal coverage mandate, and unfortunately, that has resulted 
in significant cost increases that have to be borne by others 
in the individual market. So the answer would be no.
    Mr. Burgess. Mr. Chairman, you have been very generous with 
your time. Again, I would just stress that this is going to 
take creative thinking outside the box. I don't think you are 
going to get what you want in the AHIP proposal. You are going 
to get more something that looks like what the chairman 
outlined to you at the beginning, and I would urge you to think 
creatively about this problem because this is the difficulty 
that leads us to where we are here today, and I can't help 
you----
    Mr. Stupak. OK, questions or speeches are over.
    Mr. Burgess [continuing]. If you are not willing to move on 
this issue, and thank you, Mr. Chairman. I will yield back.
    Mr. Stupak. We hope the chairman's, not my plan, but our 
side plan does work. We do hope that. I won't argue it with you 
now. That is for another hearing.
    Maybe we can get another round in. We are going to have 
votes here in a few minutes. Now, each of you provided to the 
committee information that relates to certain medical 
conditions that automatically trigger an investigation into 
possible grounds for rescission. Mr. Sassi, I left off with 
you. You had 1,400 different conditions that automatically 
trigger an investigation. Mr. Hamm, on behalf of Assurant, 
there are 2,000 conditions that trigger an investigation that 
you provided to the committee. These include breast cancer, 
ovarian cancer and brain cancer. Why does cancer trigger an 
investigation?
    Mr. Hamm. What triggers the investigation----
    Mr. Stupak. No, why does cancer trigger an investigation?
    Mr. Hamm. I will answer. What triggers the investigation 
are the types of medical conditions of a chronic nature where 
there is a high probability that the condition would have 
preexisted at the time of the application. It is not based on 
the cost of the claim. It is based on the medical condition. In 
fact, the people that make the rescission decision are not 
aware of the cost of the claim. It is all about----
    Mr. Stupak. If it is the medical condition, then before you 
sign them up, why don't you get all the medical records? Why 
don't you find it then? Why do you wait until there is a claim?
    Mr. Hamm. If we were to receive all the medical records at 
the time of application, that would delay the process 
significantly, delaying people's access to health care, and 
would add a tremendous amount of cost to the product. The vast 
majority of applicants provide all the information that is 
asked for at the time of application.
    Mr. Stupak. So it is a cost issue? It is too costly to get 
the medical records?
    Mr. Hamm. It would add to--yes, it would add to the 
premiums that our customers would pay by a significant amount.
    Mr. Stupak. So what does it cost, $40 to get medical 
records?
    Mr. Hamm. I am not familiar with the cost but I would also 
delay the process.
    Mr. Stupak. But isn't it better to delay the process to 
make sure a person is insured as opposed to pulling them when 
they are going through cancer like Mr. Raddatz?
    Mr. Hamm. The vast majority of our customers provide the 
appropriate information.
    Mr. Stupak. So did Mr. Raddatz but you still denied him 
coverage, right?
    Mr. Hamm. I unfortunately cannot comment on that particular 
case.
    Mr. Stupak. Mr. Collins, in asking the same question of 
United, you insisted that you also use a computerized system to 
identify cases to automatically investigate for possible 
rescission but there is no one at your company who knew how the 
computer decides which files should be reviewed. So is it the 
case that United has put the decision of which patients will 
have their health care treatment interrupted by a rescission 
investigation in the hands of a computer that no one 
understands?
    Mr. Collins. No, sir, that is not true. I haven't really 
been privy to the discussions between my staff and your staff 
on this issue. We have been trying to come to an understanding 
about how to best provide the data in a format that is easily 
understandable, but let me just say----
    Mr. Stupak. Can you tell us what conditions the computer 
considers for a possible rescission investigation?
    Mr. Collins. No single factor is used in our process to 
trigger an investigation so we look at--the system looks as it 
is screening claims that come in at the effective date of the 
policy, the effective date of the procedure, the severity, the 
type of service and the diagnosis code. Those are all factors 
that go into the algorithm that pulls cases out for screening.
    Mr. Stupak. Well, the algorithm, no one from your company 
could tell us. Will you commit to us today to produce whatever 
witnesses or documents are necessary to explain your algorithm, 
your computer selection process? Could you do that? Will you 
commit to do that?
    Mr. Collins. Yes, sir. We are----
    Mr. Stupak. We are still trying to figure it out.
    Mr. Collins. We are trying to put it in a format that would 
be acceptable to the committee, sir.
    Mr. Stupak. Dr. Pollitz--Professor Pollitz, do you see a 
common thread here among the conditions? You have 1,400 
conditions, 2,000 conditions and a computer that it can't 
explain that does rescission. Why do you think they have all 
these rescission?
    Ms. Pollitz. I think the common thread is that if somebody 
makes a claim for anything serious in their first year, there 
is an opportunity to go back and review the entire transaction 
to see if it is going to be withdrawn. I think that is just the 
common transaction, and I think it is not consistent with your 
federal law, and whatever else you may do going forward----
    Mr. Stupak. But as to the HIPAA law, basically we leave it 
up to the States, and HIPAA has to be enforced by the federal 
government, CMS, right?
    Ms. Pollitz. That is correct, the ultimate enforcement.
    Mr. Stupak. So the value of the law only depends on the 
enforcement of the law?
    Ms. Pollitz. Yes, it does, and there is a fine of $100 per 
day per affected individual for noncompliance with the law that 
can be levied.
    Mr. Stupak. Let me ask each of our CEOs this question, 
starting with you, Mr. Hamm. Would you commit today that your 
company will never rescind another policy unless there was 
intentional fraudulent misrepresentation in the application?
    Mr. Hamm. I would not commit to that.
    Mr. Stupak. How about you, Mr. Collins? Would you commit 
not to rescind any policy unless there is intentional 
fraudulent misrepresentation?
    Mr. Collins. No, sir. We follow the State laws and 
regulations and we would not stipulate to that. That is not 
consistent with each State's laws.
    Mr. Stupak. How about you, Mr. Sassi? Would you commit that 
your company will never rescind another policy unless it was 
intentional fraudulent misrepresentation?
    Mr. Sassi. No, I can't commit to that. The intentional 
standard is not the law of the land in the majority of States.
    Mr. Stupak. Well, do you think it is fair to rescind 
somebody for an innocent mistake?
    Mr. Sassi. Well, I think applying a knowing standard is a 
much more objective and----
    Mr. Stupak. Well, our first panel, none of them had any 
knowledge of it and they were all rescinded, right?
    Mr. Sassi. I am sorry?
    Mr. Stupak. Our first panel, none of them knowingly made a 
misrepresentation but they were all rescinded, their policies 
from Ms. Beaton all the way down to our witnesses there. They 
weren't material misrepresentations, right?
    Mr. Sassi. It is our policy if we determine that the 
applicant did not know about a specific condition, we would not 
rescind.
    Mr. Stupak. So like Ms. Horton there, you wouldn't have 
rescinded her?
    Mr. Sassi. I can't speak to the specifics of Ms. Horton's 
case. I am not familiar with the specifics. I am sorry.
    Mr. Stupak. Mr. Barton for questions, please.
    Mr. Barton. Thank you. I want to thank our witnesses for 
being here. This is a difficult situation. But I listened when 
you all answered Chairman Stupak's question about unintentional 
omissions, and to your credit you were honest that you would 
reserve the right to still rescind some of these policies. 
Doesn't it bother you that people are going to die because you 
insist on reviewing a policy that somebody took out in good 
faith and forgot to tell you that they were being treated for 
acne? Doesn't that bother you?
    Mr. Hamm. Yes, sir, it does, and we regret the necessity 
that that has to occur even a single time, and we have made 
suggestions that would reform the system such that that would 
no longer be needed.
    Mr. Barton. Well, you know, I haven't heard your opening 
statements, I glanced at them, and I haven't heard the first 
round of questions. We understand the need to verify that 
people are telling the truth. We are not asking you guys, the 
insurance industry, to automatically take somebody's word for 
it. I mean, I understand that. But when I see advertisement 
after advertisement about be a part of the family and we treat 
you like, you know, our own family, and then somebody who 
doesn't have group coverage takes out an individual policy and 
runs into some situation where they have a health care issue 
that requires a major claim early in the policy, if they 
operate in good faith in taking out the policy and you approve 
them, I really don't think it is good business practice to go 
back and try to figure out a way to rescind that policy. If 
nothing else, it is a false trade practice, truth in 
advertising, and one of the beauties of our Constitution is a 
little thing called federal preemption. We have the authority 
on this committee to preempt State law if it is interstate 
commerce. Now, we can't preempt State law in intrastate 
commerce but we can in interstate commerce, and I don't think 
there is one vote on this committee for the practice of 
retroactively reviewing a policy to try to rescind it if you 
have a woman like my constituent, Ms. Beaton, who discovers 
that she has breast cancer or you have somebody who needs a 
stem cell transplant or even the young lady from California who 
just needed some blood work done. We will back you up on fraud 
and misrepresentation but I don't think you are going to get a 
vote at all on rescissions that are not material to the claim 
being processed. I don't know that that is a question. That is 
just a statement. If you would like to comment on that, I would 
certainly like to give you the opportunity to do it.
    Mr. Stupak. No one cares to answer?
    Mr. Hamm. I would just reinforce that rescission would only 
occur when the information was material to the initial--if the 
information was material to the underwriting decision, only in 
that case.
    Mr. Barton. Mr. Chairman, I am going to yield back. I mean, 
I would----
    Mr. Stupak. Could I follow up on that?
    Mr. Barton. Sure.
    Mr. Stupak. Well, if it is material to the representation--
let me ask you this. In your policy, Mr. Hamm, it states, and 
it is question number 14 on your questionnaire, your enrollment 
questionnaire. Now, tell me how you get a misrepresentation. 
Within the last 10 years--this is what it says--because you 
said Assurant Health's enrollment questionnaires are simple, 
easy to understand, straightforward language, so people can 
easily and accurately report their medical history. So your 
question says, within the last 10 years, has any proposed 
insured had any diagnosis, received treatment for or consulted 
with a physician concerning phlebitis, TIA, cystitis, 
lymphadenopathy, glandular disorder. So tell me, what is TIA?
    Mr. Hamm. I am not aware. I believe----
    Mr. Stupak. If you don't know what it is, how would anyone 
filling out your application know what it is? So there is 
grounds to deny them right there. You don't even know what it 
is and neither do I. How about phlebitis or lymphadenopathy? 
How about lymphadenopathy? What is that?
    Mr. Hamm. I don't know the answer to those questions.
    Mr. Stupak. Do you sincerely believe that an average 
applicant would know what these words mean if you don't know 
and I don't know?
    Mr. Hamm. Sir, I believe that is an application that is not 
currently used at this time. I would like to----
    Mr. Stupak. It is last year's application. Yes, it is last 
year's application. Have you changed the application in the 
last year?
    Mr. Hamm. I am sorry, sir. I didn't hear you.
    Mr. Stupak. It is last year's application. Did you change 
it in the last year?
    Mr. Hamm. I am not aware if we have changed that 
application.
    Mr. Stupak. So far as you know, that is your current 
application?
    Mr. Hamm. But I believe that our current application asks 
questions back to 5 years, so the 10-year might be different 
than what we issue today. I would need to----
    Mr. Stupak. Well, it is the same questions, TIA, right, 
that you don't know what it is and----
    Mr. Hamm. I do not know what that is.
    Mr. Stupak. Mr. Deal.
    Mr. Barton. Mr. Chairman, I do have one question.
    Mr. Stupak. Sure, Mr. Barton. I took your time. I will 
yield to you.
    Mr. Barton. This is a hypothetical but I just want to 
figure out what the answer is. I had a mild heart attack 3 
years ago, so I now take six different medications every day 
and I am going to probably have to take those medications for 
the rest of my life. I am covered under a group plan, Blue 
Cross/Blue Shield of Texas and it is available to every federal 
employee who lives in Texas, and my coverage has been good. I 
have never had a problem. But let us say I quit the Congress 
and I go into business for myself and I try to get a private 
health plan like Ms. Beaton got when she switched jobs from 
being a nurse and went into business for herself. On the 
application, I have to list the medications that I am taking, 
the fact that I had a heart attack, give the doctor, the time, 
the location, but I broke my leg playing football in high 
school. I got a 250-pound fullback ran over a 150-pound 
linebacker. I was the linebacker. Now, if I forget to put on my 
application with your companies that I had the small bone in my 
left leg broken playing football in 1967, but I do put all my 
medications and my history of my heart attack, the fact that I 
omitted breaking my leg in 1967, is that a grounds to rescind 
my claim, my policy later on under your policies right now that 
your companies issue? I admit to my big problem, tell you the 
medications, all the stuff but I just flat forget that I broke 
my leg and was treated by a doctor paid by the Waco Independent 
School District in 1967.
    Mr. Sassi. Congressman Barton, our underwriting guidelines 
really kind of dictate that but it is my understanding of how 
our underwriting guidelines work is that since that condition 
would not be material in our initial underwriting decision 
because it happened so far in the past and was of a non-serious 
nature, that that would not have factored into the underwriting 
decision.
    Mr. Barton. And I understand you might cover me because of 
my heart attack. I understand that. It would bee totally within 
your company's right to say Congressman Barton had a heart 
attack in 2004 or 2005, therefore we can't issue him a policy. 
I understand that. My question is really about my leg injury 
from way back when. If I don't disclose that, does that 
disqualify me potentially on down the road? Mr. Collins?
    Mr. Collins. Sir, the application is looking for 
information going 10 years back so that----
    Mr. Barton. So that would not be material?
    Mr. Collins. That would not be material.
    Mr. Barton. Mr. Hamm.
    Mr. Hamm. The same answer as Mr. Collins.
    Mr. Barton. Thank you, Mr. Chairman.
    Mr. Stupak. Mr. Deal for questions, please.
    Mr. Deal. Thank you, Mr. Chairman.
    We are talking her in the private insurance market and I 
believe, Mr. Sassi, you said that somewhere in the 15 million 
range. Is that correct?
    Mr. Sassi. Correct.
    Mr. Deal. To you three gentlemen, do you also have policies 
that extent to ERISA-type coverage plans?
    Mr. Sassi. Yes. WellPoint insures one in nine Americans. 
The vast majority of our members are covered under ERISA plans.
    Mr. Deal. Mr. Collins.
    Mr. Collins. Yes, sir, the majority of our membership are 
also in group insurance plans which are covered under ERISA.
    Mr. Deal. Mr. Hamm.
    Mr. Hamm. The majority of our policies are individual. 
However, we do have some customers that are under ERISA.
    Mr. Deal. Does the same problem pertain in the ERISA 
marketplace as in this private insurance marketplace? Ms. 
Pollitz, you indicated you think it does.
    Ms. Pollitz. There is rescission in the small group market. 
It operates a little bit differently because that is a 
guaranteed issue market, but a similar process if a claim is 
submitted during the pre-X period. It is largely the 
eligibility of the members of the group and the family members 
of the group that will be reinvestigated to see if there is any 
way that the people who made the claim shouldn't have been on 
that policy in the first place.
    Mr. Deal. But the State periods like 2 years do not apply 
because it is an ERISA plan?
    Ms. Pollitz. Well, your pre-X rules are also much tighter 
in the small group market so Congress has said these questions 
about 10 years ago, 5 years ago, those don't matter in the 
small group market. You are only allowed to apply--an insurer 
is only allowed to apply preexisting condition for something 
that was actually treated or diagnosed in the six-month window 
prior to coverage taking effect. So anything that happened 
before that isn't even allowed to be considered, and if the 
person coming into the policy had prior group coverage, that 
gets credited against the pre-X so that can't be considered 
either. So it is mostly eligibility, and I have seen----
    Mr. Deal. I am going to try to be real quick here and I 
apologize for cutting you off. With regard to what needs to be 
done, in the event we don't get the major reform that you all 
have been talking about, anybody else is talking about, in the 
event it becomes something of trying to narrow a time window in 
which insurance companies have the right to review medical 
records, would it not be feasible that if we had electronic 
medical records that that would facilitate a more timely 
review? I would assume common sense would say that it would. 
Ms. Pollitz, do you foresee that consumer protection groups 
would oppose making those kind of personal medical records 
available for insurance companies to review in a timely fashion 
so that we would not hopefully have these situations to 
develop?
    Ms. Pollitz. They are already available for review.
    Mr. Deal. Well, we don't have the extent of electronic 
medical records that we all hope we will have.
    Ms. Pollitz. But the privacy rules that you have in force 
today under HIPAA say that medical underwriting is a 
permissible reason for disclosure of medical records.
    Mr. Deal. You would see no reason that anybody would raise 
that issue?
    Ms. Pollitz. It is already permitted under current law.
    Mr. Deal. The last thing, and this is more of a comment 
than anything else, I think the issue that Dr. Burgess 
discussed with you about those who are now being excluded 
because of preexisting conditions, et cetera. I think we all 
know that our high-risk pools are not effectively operated and 
certainly nonexistent in States like mine, for example. I think 
we need to be looking at a policy where we would maybe take 
those funds that are available for high-risk pools, some of 
which are not being utilize, put them into an environment in 
which we could perhaps with the sharing of some of those costs 
with the insurance industry bring these individuals into the 
pool with the additional revenue that would be available from 
federal sources. I just simply suggest that something we all 
need to be thinking about in my opinion. Thank you, Mr. 
Chairman. I yield back.
    Mr. Stupak. Mr. Burgess, do you want to question now or do 
you want to come back after votes? We only have 5 minutes, so I 
am going to have to hold you tight.
    Mr. Burgess. OK. You know me. I can be really brief.
    Mr. Stupak. I have never seen it yet, but go ahead if you 
want to try.
    Mr. Burgess. I will just ask all three of you briefly, you 
know, you have heard the discussion of the public option plan. 
What is your opinion of that?
    Mr. Hamm. I oppose the public plan option.
    Mr. Burgess. Mr. Collins.
    Mr. Collins. Sir, I believe that with the reforms that have 
been proposed, that we can make the market work much better 
without a public plan.
    Mr. Burgess. And Mr. Sassi.
    Mr. Sassi. We also oppose a public plan. We also feel 
that----
    Mr. Burgess. I don't want to be the one to have to break 
this to you, but the reality is, you are very likely to get a 
public plan. You are not likely to get the deal that was struck 
by AHIP down at the White House. I mean, I think you can see 
the handwriting on the wall. I would urge you to think outside 
the box on this one. There are ways that we can solve this 
problem without going to a public plan, in my opinion, and 
without leaving so many people uninsured, without leaving so 
many people fall through the cracks, as we heard this morning. 
Clearly the situation as it stands right now is unstable. It is 
untenable. We can't continue it. But you guys have got to be 
able to come to the table with some innovative thinking on how 
we provide coverage to that segment of the population that is 
particularly vulnerable and needs the coverage. We don't need 
to turn the whole system on its head just to cover that 10 or 
15 percent that is right now left out but that is what we are 
going to do if you don't help us with this, and the fallback 
position, I promise you, is a government-run plan and that is 
what you are going to get if we don't work together on this 
issue, so I appreciate you all being here today. Mr. Chairman, 
I appreciate the extra time and I am going to yield back.
    Mr. Stupak. OK, so you didn't have a question on the 
subject of today's hearing. OK. In all fairness to WellPoint, I 
said in my opening statement--and if you care to comment, 
please do. I said in my opening statement in the committee 
investigation, WellPoint evaluated employee performance based 
in part on the amount of money its employees saved the company 
through retroactive rescissions of health insurance policies. 
According to the documents obtained by the committee, one 
WellPoint official was awarded a perfect score of five for 
exceptional performance based on having saved the company 
nearly $10 million through rescissions. Do you care to comment 
on that? I think it is fair to give you an opportunity to 
comment on it.
    Mr. Sassi. Thank you, Chairman. During the process of 
collecting information requested by this committee, we did 
uncover two performance appraisals from 2003 that were isolated 
to one area within California that included one line each 
referring to retro savings and a dollar amount. They were in 
the context of a part of the performance appraisal with other 
metrics and they were part of a more comprehensive performance 
appraisal that was, I think, five to seven pages long. I 
reiterate my statement that WellPoint does not have a policy, 
it has not been our policy to systematically reward associates 
for performing rescissions, for tracking the number of 
rescissions or the dollar amounts.
    Mr. Stupak. But didn't both of those employees receive 
bonuses, somewhere between $600 to about $6,000, I think the 
range was?
    Mr. Sassi. My understanding is that those associates 
received within the average compensation that all WellPoint 
associates received for that given time period.
    Mr. Stupak. OK, so it is not the reviewers, all your 
employees--OK. With your profits, I guess you could give 
bonuses.
    All right. That concludes our hearing for today. The 
committee rules provide that members have 10 days to submit 
additional questions for the record. The record book has 
already been submitted for the record. We will redact any 
business proprietary or anything that relates to privacy 
concerns or is law enforcement-sensitive, so that will be 
entered into the record.
    That concludes our hearing. I thank all of our witnesses 
for coming, and that concludes this subcommittee hearing.
    [Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

    [GRAPHIC] [TIFF OMITTED] T3743A.034
    
    [GRAPHIC] [TIFF OMITTED] T3743A.035
    
    [GRAPHIC] [TIFF OMITTED] T3743A.036
    
    [GRAPHIC] [TIFF OMITTED] T3743A.037
    
    [GRAPHIC] [TIFF OMITTED] T3743A.038
    
    [GRAPHIC] [TIFF OMITTED] T3743A.039
    
    [GRAPHIC] [TIFF OMITTED] T3743A.040
    
    [GRAPHIC] [TIFF OMITTED] T3743A.041
    
    [GRAPHIC] [TIFF OMITTED] T3743A.042
    
    [GRAPHIC] [TIFF OMITTED] T3743A.043
    
    [GRAPHIC] [TIFF OMITTED] T3743A.044
    
    [GRAPHIC] [TIFF OMITTED] T3743A.045
    
    [GRAPHIC] [TIFF OMITTED] T3743A.046
    
    [GRAPHIC] [TIFF OMITTED] T3743A.047
    
    [GRAPHIC] [TIFF OMITTED] T3743A.048
    
    [GRAPHIC] [TIFF OMITTED] T3743A.049
    
    [GRAPHIC] [TIFF OMITTED] T3743A.050
    
    [GRAPHIC] [TIFF OMITTED] T3743A.051
    
    [GRAPHIC] [TIFF OMITTED] T3743A.052
    
    [GRAPHIC] [TIFF OMITTED] T3743A.053
    
    [GRAPHIC] [TIFF OMITTED] T3743A.054
    
    [GRAPHIC] [TIFF OMITTED] T3743A.055
    
    [GRAPHIC] [TIFF OMITTED] T3743A.056
    
    [GRAPHIC] [TIFF OMITTED] T3743A.057
    
    [GRAPHIC] [TIFF OMITTED] T3743A.058
    
    [GRAPHIC] [TIFF OMITTED] T3743A.059
    
    [GRAPHIC] [TIFF OMITTED] T3743A.060
    
    [GRAPHIC] [TIFF OMITTED] T3743A.061
    
    [GRAPHIC] [TIFF OMITTED] T3743A.062
    
    [GRAPHIC] [TIFF OMITTED] T3743A.063
    
    [GRAPHIC] [TIFF OMITTED] T3743A.064
    
    [GRAPHIC] [TIFF OMITTED] T3743A.065
    
    [GRAPHIC] [TIFF OMITTED] T3743A.066
    
    [GRAPHIC] [TIFF OMITTED] T3743A.067
    
    [GRAPHIC] [TIFF OMITTED] T3743A.068
    
    [GRAPHIC] [TIFF OMITTED] T3743A.069
    
    [GRAPHIC] [TIFF OMITTED] T3743A.070
    
    [GRAPHIC] [TIFF OMITTED] T3743A.071
    
    [GRAPHIC] [TIFF OMITTED] T3743A.072
    
    [GRAPHIC] [TIFF OMITTED] T3743A.073
    
    [GRAPHIC] [TIFF OMITTED] T3743A.074
    
    [GRAPHIC] [TIFF OMITTED] T3743A.075
    
    [GRAPHIC] [TIFF OMITTED] T3743A.076
    
    [GRAPHIC] [TIFF OMITTED] T3743A.077
    
    [GRAPHIC] [TIFF OMITTED] T3743A.078
    
    [GRAPHIC] [TIFF OMITTED] T3743A.079
    
    [GRAPHIC] [TIFF OMITTED] T3743A.080
    
    [GRAPHIC] [TIFF OMITTED] T3743A.081
    
    [GRAPHIC] [TIFF OMITTED] T3743A.082
    
    [GRAPHIC] [TIFF OMITTED] T3743A.083
    
    [GRAPHIC] [TIFF OMITTED] T3743A.084
    
    [GRAPHIC] [TIFF OMITTED] T3743A.085
    
    [GRAPHIC] [TIFF OMITTED] T3743A.086
    
    [GRAPHIC] [TIFF OMITTED] T3743A.087
    
    [GRAPHIC] [TIFF OMITTED] T3743A.088