>> i would now like the callers that impalla witnesses. in a second panel we have don hamm, executive officer of assurant self, mr. collins, owned by united health group. mr. brian sassi, am i saying that right? sassi who is the president and chief executive officer of wellpoint inc. and ms. karen pollitz who is the research professor georgetown university health policy institute. welcome to all of our witnesses. is the policy of the subcommittee to take your testimony under oath. please bid bison of the right and the rules of the house to be it buys the council during your testimony. kiewit to be represented by counsel during your testimony?

mr. hamm you would? any time during the questions if you want to get advice from counsel, just let us know and we will allow the. council cannot testify but the cannon fisa. mr. collins? mr. sassi? ms. pollitz? so then let me have you raise your right hand and take the oath. do you swear or affirm the testimony you are about to give is the truth, the whole truth and nothing but the truth in the matter pending before this committee? let the record reflect that the witnesses replied in the affirmative. they are now under the beginning with their opening statement. you have five minutes for an opening statement in you may submit a longer statement for inclusion in the record. mr. hamm if you don't mind will start with you, start from my left and go to the right. >> chairman stupack, congressman waldman, mears of the subcommittee i'm don hamm president and ceo of assurant health. welcome this opportunity to birds is a bait in the hearing today. is the dialogue 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 in congress are committed to finding the right place to address healthcare reform. if the system can be created where coverage is available to everyone and all americans required to participate, the process we are addressing today, recision, becomes the necessary because risk is shared among all. i passionately believe that all americans must have access to high-quality, affordable healthcare 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 their products and we are proud to provide them to thousands of americans. individual medical insurance is affordable and belongs to each consumer and these uncertain economic times individual

medical provides benefits to a growing population who do not receive a employee sponsored health coverage. that is why individual medical is so important. we work hard to ensure our health questions are simple, easy and straightforward kurds medical history is necessary so we can fairly assess the health risks of each applicant. the vast majority people complete the enrollment form accurately. the underwriting process depends on misinformation and we rely upon the consumers disclosures. people applying for an individual insurance are given multiple opportunities to verify correct and complete the information they provide. they are given ten days to notify us of any inaccurate information or to reject the coverage. at assurant talf we are acutely aware of how our coverage affects people's lives. it is the responsibility we take very seriously. unfortunately there are times when we discover information that was not disclosed during the enrollment process.

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 assume. ackeridge risk assessment keeps rates lower for all. assurant health this not want to rescind coverage. we are in fact in the business of providing healthcare coverage. we regret the necessity of even a single recision. the decision is never easy and that is why we follow a fair and thorough process that includes a number of careful review is. here is our system works. when we become aware of the condition that exists that prior to the application date and that information was not disclosed, a senior underwriter reduce the admitted information to determine if it was material to the underwriting decision. then the underwriting management verifies the analysis. fig mission was not material to the review is complete. if the omission was material the

underwriter makes a recommendation to a review panel which includes a least one physician. this review panel evaluates information and makes the decision. the amount of the potential claim is never disclosed to the underwriters or to the review panel. the decision to resendiz 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 isn't dissatisfied with the decision we provide multiple opportunities to appeal, which now includes an option to request the medical read you by an independent third party company. precision affects less than one-half of 1% 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 hell supports the principle that everyone in the united states deserts affordable healthcare and we see reform of the nation's healthcare system as a shared responsibility between doctors, consumers, health insurance and policymakers. the collectively can deliver effective solutions to provide coverage for all americans. that is why assurant health we will continue to participate in efforts to reform and improve healthcare in america. thank you. >> thank you mr. hamm. mr. collins, your opening statement please sir. >> good morning members of the subcommittee, thank you for inviting me to testify today. my name is richard collins, i and the ceo of golden rule insurance company. we are business that sells health insurance policies to individuals and their families. colgan roose the offering this at coverage for over 60 years. we seek to offer innovative and

affordable products to meet the diverts healthcare and financial needs of our customers. in our current healthcare 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, tecla in the fundamental drivers of healthcare costs rath, strengthening employer-based coverage and providing well targeted support for low-income families. to be effective, to be effective we believe the modernization of the individual market these contain all of the following elements. first of all, individuals must be required to obtain or maintain health coverage so that everyone who participates in both the benefits and the cost of the system. second, ensure 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 i want to emphasize this point. rates should not carry on health status and coverage should be guaranteed, regardless of preexisting medical conditions for those that maintain continuous coverage. there, though and middle income families should receive some form of subsidy to ensure they have the same access to care as all americans for gofourth, insurers should be able to offer a wide spectrum of plan designed to allow american families the flexibility to choose a plan that fits their budget and lastly, the treatment of individual insurance premiums should be on par with employer coverage. until a comprehensive reform is a cheap we believe the medical underwriting of individual policies will continue being

necessary. if these changes are instituted, most of the reason 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 with accomplices 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 the event. this decision not only has the financial impact on these families but raises the cost of healthcare for everyone. as you know the practice of

precision has long been recognized by the laws of virtually every state. precisionism common but unfortunate and a necessary recourse in the event of material in times of fraudulent misstatement or omission on an application. under our current reeves system failure to act on these cases is fundamentally unfair to those working families that play by the rules. because it severely, it would severely limit our ability to provide quality and affordable health insurance. inner riff and we determined it is necessary to rescind coverage and after a thorough investigation of the facts and compliance of state laws and regulations we follow practices and procedures designed to ensure fair processes for the individual. and as indicated, our use of recision is rare, less than one-half of 1% of individual insurance policies in 2008 were terminated or rescinded and in

each case the effective 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 coverage in the individual market. thank you. >> thank you. mr. sassi your opening statement please. >> thank you chairman stupak, ranking member wilbon and members of the committee for inviting me to testify before you today. i am brian sassi, president ceo of the consumer division of wellpoint. we understand the impact these decisions can have on individuals and families. we have put in place the theroux process with multiple steps to ensure that we are as there and accurate as we can be in making these difficult decisions. i want to emphasize that rescission is about stopping misrepresentation that contribute to the spiraling healthcare costs.

by some estimates healthcare fraud in the u.s. exceeds $100 billion, and now large enough to pay for covering nearly half the 47 million uninsured. recission as a tool employed by wellpoint and other health insurers to protect the vast majority of policyholders to provide accurate and complete information from subsidizing the cost of those who do not. the bottom line is rescission is about combatting caused her been by these issues. if we fail to address misrepresentation the cost of coverage would increase making coverage let's affordable for existing and future individual policyholders. i would like to put this issue in context. while most people the war ended the age of 65 obtain health insurance through their employers some 50 million americans purchase coverage in a voluntary market. in a market where individuals can choose to purchase insurance at any time health insurers must medically underwrite applicants or current health risks. if an individual buys healthcare which only when he receives no--

need healthcare services the system cannot be sustained. well we appreciate that this is a critical personal issue individual market rescission impacts extremely small share of the individual market membership. and our experience we believe more than 99% of all applicants for individual coverage provide accurate and complete information. in fact as a percentage of new individual market in rome during 2008, we presented only one-tenth of 1% of individual policies that year. health-insurance surfaced in the media in 2006 and 2007 generating public concern about what you are talking about today. armoring point today is the same as it was then, the voluntary market for health insurance requires we protect their members from costs associated with fraud and material misrepresentations. otherwise the market cannot be sustained. in response to the public concern of the practice of

rescissions in 2006 wellpoint anew took a thorough review of our policies and procedures. following the review wellpoint with the first insurer to announce the establishment of a brady of robust consumer protections that ensure recisions are handled as accurately and appropriately as possible. these protections include one, reading application review committee, which is staffed by a physician that makes a decision decisions, to cup, establishing a single point of contact for members undergoing a recession investigation m3, establishing an appeal process for applicants to disagree with our regional 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 stetz because the cover millions of americans and want

to be as fair and accurate as we can be. some have asserted that health insurers provided systematic reward for the employees regarding decisions. this is absolutely not the case that wellpoint. i want to assure the committee that there is no wellpoint policy to factor in the number of decisions or the dollar amount of unpaid claims and an evaluation of employee performance or in calculating the employee's salary or bonuses. in response to policymaker interest and in acting consumer protections related to rescission wellpoint is proposing a set of regulations with new consumer protections. i about lion decent my written testimony to the subcommittee. in addition the health insurance industry has proposed a set of comprehensive interrelated reforms to the individual health insurance market as a whole. the centerpiece of this proposal is the elimination of underwriting combined with an effective enforceable personal coverage requirements. in other words insurers sill to all applicants regardless of

preexisting conditions as long as everyone enters the risk pool by purchasing in maintaining coverage. this would render the practice of recission unnecessary. our proposals are examples of how we are working to find common ground on these issues so we can make quality affordable healthcare available to all americans. thank you for the opportunity to discuss this issue on our proposals with you and i look forward to your questions. >> thank you. ms. pollitz your opening statement please. >> thank you mr. chairman and members of the committee. i study private health insurance and its regulation of georgetown the. thank you for holding this hearing today on health insurance riches and. is a series issue but was importance and the problems explorative they can teaches broader lessons that will be important for healthcare reform. the individual market is a difficult one as we all know and because it is small and voluntary an vulnerable to adverse selection there has been

a lot of resistance to enacting a lot of incremental reforms to govern practices in the marketplace however with the enactment of hip but in 1996 the congress did that to apply when import rule broadly to all health-insurance including individual health insurance and that is the belove guaranteed renewability. prior to hipaa individuals and small employers to buy health insurance to make claims would sometimes have a covers canceled and hipaa sought to fix that by requiring and i quote except as provided in this section a health insurance issue with that provides individual health insurance coverage to an individual who shall renew or continue to enforce such coverage at the option of the individual. only narrow exceptions to guarantee ernabel dear permitted gambit prospective policyholders behavior the policy can only be renewed or discontinued, can be renewed or discontinued only of individual moves out of the service area fails to pay their premiums or commits fraud. congress relies on state to adopt and enforce hipaa

protections and the federal government is supposed to direct wind force when states do not. red states implemented hipaa they adopted the renewability rule but other conflicting provisions in state law remained unchanged. in particular laws governing so-called contest ability. continue to permit insurers to engage in's claims underwriting and present policies or deny claims based on reasons other than fraud and failure to pay premiums for the state was create a window usually two years, when claims made under policy can be invested to determine whether they may be for a preexisting condition. after that period a policy can be rescinded or claim denied only on the basis of fraud but during the window, if they claim submitted by a new policyholder the original application for coverage is reinvestigated and if any even unintentional material misstatement or a mission is discovered consumers may lose their health insurance. that conflicts with hipaa. clearly when it comes to's

claims underwriting protection against fraud it is important but there's evidence some insurance companies are not nearly as careful as they should be in their initial medical underwriting and relying instead on's claims underwriting to catch their mistakes later. applications for coverage may ask broad, vague and confusing questions use technical terms that make it very difficult for consumers to answer accurately and completely. or, policies that, 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 histories, that the application may be considered in coverage issued without 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 up front

before coverage is issued because the recent sub-prime mortgage scandal where banks issued mortgages without adequate screening of consumers' financial status offers an analogy. win insurers issue medically underwritten coverage without carefully screening and applicants shall status and rely on's 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 they are lacking and that is troubling because the federal governor has not contracted this issue. at a hearing of the government oversight committee last year it wins for the bush administration testified she had not acted on press reports of inappropriate decisions are ethan looked into them because she did not appear aware, appear to be aware of complex and state law and she testified she had only four people on her staff who worked part time on hipaa on private insurance issues. in conclusion mr. chairman this investigation into the health

insurance rescission has trained a spotlight on an important question. if the congress enacts a law or an entire healthcare reform proposal, how would 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. congressman the laura has introduced a bill to create an office of, the federal office of health insurance oversight that establishes such reporting requirements on insurers and that appropriates resources so the federal government and state insurance departments together can carry out those responsibilities. i hope congress will follow her leadership and make adequate oversight enforcement resources part of healthcare reform. >> thank you and thank you all for your testimony. we will go to questions.

mr. sassi, let me ask you this. you threw a bunch of statistics gaddus but i was looking at the state of california alone and it seems to me if i remember correctly in july 2008 anthem lacrosse which is a subsidiary of wellpoint paid a 10,000-dollar fine and had to reinstate 1,770 rescinded policies and then in february of 09 once again california and then across had to pay 15 million-dollar fine to reinstate over 2300 rescinded policies and then another settlement, the 5 million another 450 so it seems like in the last year you have had to reverse 4500 decisions and pay a fine of $30 million just in one state. is that true? >> i don't believe the numbers are exactly accurate. but, the premise is accurate.

the issue of rescission circuits and the media particularly in california i believe in those six and seven in shortly thereafter one of our regulators initiated a, and audits, a shoed audit findings. we disputed the majority of those findings and our response has appended to that audit report. the regulators subsequently did change. >> according to the department of management of health in july 08, last year, july 17, 2008 you entered into an agreement with california. that is over 1700 people in a 10 million-dollar fine and in february 2009 california department of insurance also put uttar ripley's-- release they paid 50 million-dollar fine and had to provide reinstates 2500 people so according to my map that is just over $4,025,000,000 in fines, right?

>> yeah, there was not a 50 million-dollar fine to the department of insurance. irregardless of fact, companies enter into-- individuals enter into settlements. >> let me ask you this, why don't you just that these policies before you ever collect the premium? why do you go to these policies and make sure there are no problems before you enter the people? only one state requires you to do that and that is connecticut, right? >> chairman, we to investigate the up against. we are varied vigorous and underwriting requirements. as we review an application we rely on the applicants to be truthful in completing and our parents have shown that over 99% of applicants are truthful and completing their applications. we rely on that.

>> wind you do the investigation? why are we getting these post underwriting going on? what does that occur? >> i would contend that we don't participate in's climate the ready. if there is a situation where the deray pharmacy claim was received or a pre-authorization for a hospital stay is received or a claim, that would hit a three specific diagnosis that could lead to potential fraud, that would trigger an underwriter to investigate. >> let me ask you this. in the book right there and i believe it is tab number lupton, that is our document. you gave us wellpoint provided a list of conditions that automatically lead to an investigation post underwriting, okay? and for wellpoint, the list of conditions that trigger a recession investigation includes diseases ranging from heart disease and high blood pressure to diabetes and even pregnancy,

so what did these conditions have in common that would cause you to investigate patience with these conditions for a possible recession? you have 1400 different conditions which would trigger, according to your documents, trigger an investigation. >> chairman and investigation does not mean that rescission actually occurs. for example in 2008, there were over 16,000 fustigation and 92% of this were dismissed. in no action was taken. >> right but what you have 14 different investigations to trigger an investigation? what is the common theme that would trigger an investigation? >> i would say there is no common theme other then these are conditions that have the applicants disclosed their knowledge of the condition that the time of initial underwriting. we may have taken a different underwriting action so that is what the investigation really is about, is to determine that the

applicant have the condition, did they know about the condition? >> i thought you said they did prescreening before? >> we do. >> why would you have to go back? if you screen them before and there was no problem why would you have a list of 1400 divoting conditions that triggers investigation? if you are prescreening, if you are prescreening is good he would not need a list of 1400? >> there are those among us that are not truthful in completing their application. >> in 1400 different areas that applicants like? or is it a cost issue? these are 1400 expensive areas, aren't they? >> rescission is not about cost. a pharmacy claim that is $20 could trigger something. >> if it is for a certain condition, right? heart is these? >> not necessarily.

>> alright. my time is up. mr. walden. >> thank you mr. chairman. i would just like to ask each of the company's present, is it your company's policy to deny coverage to any applicant that discloses that he or she has had previous policies rescinded? you heard some of the witnesses today sade look, once look at rescinded, no company is going to write me again on an individual policy. is that correct, mr. sassi? >> i am personally aware of that policy. >> 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 decline by another carrier. >> but you don't know what happens with that information? >> no sir, i imagine it triggers an investigation but i don't know if there is an underwriting

policy link to the. >> mr. hamm? >> yes we would not provide coverage in the situation. >> so, do you ever look to see if they rescission, the circumstances of ground and other companies rescinding of the policy? before you just-- if they check the box and says yeah i was rescinded in the past? >> our under wert-- underwriting guidelines are that we would not issue the policy. >> mr. collins, can somebody tell you, is that your underwriting policy? the i don't know senator but i would be happy to give back with you on an answer. >> mr. sassi is that your company's policy? >> again i am not aware of the policy. i would be happy to research it and provide a response for the record. >> eula biss lucette here in heard the testimony of the prior witnesses and some of the information we have seen indicates there are mistakes made in