think u.s. settled some cases along those lines. after hearing that testimony, do you think it should be our company's policy to just not issue a private insurance policy to somebody who has been rescinded by another company? should that be the policy of your company? >> well, as i stated for the record i am not aware that is a company policy. >> i stipulated that. >> a doctor should be considered >> but i'm hearing at least from mr. hamm that it is your company's policy that they are rescinded by another company it is a no go coming to your company.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 are not come at you think it ought to be? ..

investigated and considered. >> most of your company policies approved the decision to rescind if an applicant made any

material misrepresentations or omissions in the applications and i understand that. how does your company ensure the applicant was aware of the condition or notation its? we have had 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's correct. i make notes of the time in the medical files. i didn't tell the patient that. where's the balance here? mr. hamm? >> we have a very fair and thorough process determining if there was a material misrepresentation. the process revolves several layers of review and a review panel including a medical doctor. in the process we gather all the available information with respect to persons use of medical services including medical records as well as the information on their application. and we will do a detailed

research and look at each situation based on the facts make a determination whether there was material misrepresentation when the policy was underwritten. >> do you look at the case files, do you look at the records, you communicate directly with the physician? >> we will communicate when it is necessary. >> to determine material misrepresentation? what happens if the physician says i never told a patient that? >> it's difficult to speak of i apathetic called the situation. depends on the fact of the time i can tell you we do not rescinded policy of the applicant was not aware of the condition. >> mr. collins? >> senator, we afford the customer the right to appeal and we accept statements and information from the customer and physicians with regards to the circumstances of the recession and we would take that into account. i think this fair minded people

would say if an individual did not know of a condition of was noted in the medical record then that would not be grounds for recision normally. >> mr. sassi? >> we also have a thorough process when we initiated the recision investigation we reach out to the member and share the information we do have and ask them to provide us with any comments or other relevant information and all of that information is used making a recommendation and all that information is provided to our application review committee that actually makes the revision decision. we would not rescind a member that we could determine did not know of their condition. >> in mr. hamm's company a week and a half or two weeks ago started this independent third party review opportunity, correct? >> that is correct. we recently implemented that. >> and i commend you for that. that was a good move. in your company mr. sassi, do

you have an independent review panel that an inch word could go to? >> no sir, we do not have an independent review panel. >> do you plan to go that route? is it something worth thinking about? >> it's under consideration, but we haven't made that decision. >> mr. sassi? >> ,, we were the first insurer to implement a third party review and implemented that in july, 2008. >> last july. my time is expired. thank you, mr. chairman. >> that is because california made you do it, right? >> it was not. >> okay because in your opening statement you said you announced robust consumer protection so i want to know what is the difference between announcing implementation if you've implemented those robust consumer protections. had you implemented those robust consumer protections in your statement? >> yes, absolutely. in my written testimony to the committee we outlined ten

recommendations. we have implemented eight of the ten recommendations. >> eight of the tama, are there. okay. mr. hamm, you said you would not reject or rescinded contract of the policy holder had no knowledge but that was the raddatz case. he had no idea he had gallstones and an aneurysm and your company rejected him. >> 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 where we uncovered that the individual was not aware of the condition we would not go forward with precision. >> do all of your clients and policyholders have to get a hold of the attorney general to get it done? that's what raddatz had to do a duty like him twice. >> we have a very detailed appeals process. in fact, after the three levels review and the entire committee

voting for recision we notify the customer, we give them 15 days, we delayed the recision giving them an opportunity to respond 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. >> raddatz only had two or three weeks to get his stem cell. >> we go through the process as fast as possible. >> i apologize i didn't see you there, you changed the color of your suit. i will go to your four questions. >> california was -- michigan was still in the indian territory. we don't need to be overlooked. [laughter] we didn't win that argument though. normally, we are confronted with the question do we need new federal legislation? and the gentleman from the insurance industry have all human formally told us that if

we will pass a federal mandate having everybody mandatory elite in the insurance pool that all of these problems will go away. what i find interesting, is you brought up a question that nobody has seemed to answer. in your testimony you point out in 1996, the hipaa revisions required individual health insurance policies that not only is it a guarantee of free nobility, but you say continuation enforced. now do you interpret that phrase to mean the mom cancellation that we have been talking about? >> yes. >> and if so, if that is the law that has been in place since 1996 means why are we having this discussion? >> well i am not sure if i can answer the second question, but

i think i should say i am not an attorney. i just read english and the words say continue will enforce 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 guide lines or provisions that are in state law provide for, which say fraud is the only defense or the only reason for canceling after a two year period. savitt essentially new policyholders can never 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, material just means it matters. it doesn't man was fraudulent. it just means it matters to the insurance industry. that can become the basis for challenging coverage. sometimes coverage is rescinded, sometimes it is terminated going

forward. summary and chores will present a policy because they don't want to get into arguments with doctors and hospitals to get the money back so they cancel the policy going forward and sometimes a pre-x. >> none of the five exceptions to that the discussions here unless it is elevated to the level of fraud. >> that is correct. >> 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 the section 27428 of the public health service act as it relates to the issue we are talking about today as to whether or not in fact does preclude cancellation for whatever we might call it, whether we call it post review

underwriting -- >> con gutzman, may i speak to that? >> yes. >> this is a legal issue, but i do not believe recision is considered a monreal one. >> well, but it doesn't just stop when it says shall renew. it says or continue in force. i guess if you raise the phrase continue in force that means the same as renew then it would actually be a redundant phrase which the wall generally does not favor redundancy. has the suburban challenge, ms. pollitz, anybody ever known of this being raised before? >> i have no knowledge. >> let me go into the second part of my question, and that is we then go to the states having their statutory period generally two years as has been pointed out for the review.

but mr. hamm, you pointed out under your policies i believe you said you gave the potential customer ten days to review the application and notify the company of any errors and ten days to just say we don't want to have the policy in affect. are there any states that currently have in place a period of time for insurance companies to mandatory early review for these kind of miss statements? in other words, review the medical records other than the two-year period? do any states have a shorter timeframe? >> i am not aware of that. we comply with all state statutes and i think it is almost all states we have attend a look where we send the customer a copy of the application, reminded them that they are attesting to the accuracy, ask them if they have any questions or changes, and then as part of the policy and welcome letter we reinforced the importance we received will be

disclosed information appropriately. >> if something was went to be rejected based on information that was in an application or information of medical records that for whatever reason were not disclosed, it seems to me to years is a rather lengthy period of time, and in practical application, it seems even in that to your period it takes some other triggering mechanism to institute the review that there is no normally dictated review on the applications on less something triggers it or brings it to your attention. should there be a time frame shorter than this to your period and should there be a review that takes place prior to the triggering act taking place? >> let me clarify that we do not post claims under light. we ask information of every

single applicant of the company and 88% of the time we receive additional the information from them and we ask them to fully disclose all the information. it is only when we are aware subsequently that there was information that was omitted or inaccurate that we would investigate whether a recession would be made. >> but that would be the trigger an act. and you wouldn't know about that unless something in bye way of a pharmaceutical being prescribed or an office visit in the doctor's office or hospitalization -- >> that is correct. >> when asking is as you give the policyholder ten days to figure out if it is correct should there be a comparable, maybe longer -- obviously i think longer -- period of time and which the company, without some triggering act, should be required to review the applications and say hey, we think there's something wrong or ask for additional information, rather than waiting until people

get in a posture where they probably are on insurable at the time the issue is raised? >> something to discuss and give thought to. >> thank you, mr. chairman. >> mr. burgess for questions. >> thank you, mr. chairman. that's the last point of mr. deal's is excellent and likely would have eliminated the problem for at least one of the three witnesses we had in front of us this morning but let me just ask mr. hamm and mr. sassi, if you're to hear the witnesses of the individuals that testified, what do you think after hearing that? is that something that -- and again, coming from this at the perspective as a customer of the insurance market at one time and maybe 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 do 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. >> i would be glad to respond to that and i have to say i felt bad and i have a lot of empathy for the people impacted and i know in my own life i have dealt with the cancer and i just have a lot of sympathy and concern for the people and it's my hope that there will be changes made that this will no longer be necessary. it's 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 higher than today. i chaired the group that put

forth proposals and in our proposal, we suggest that the country should move towards a guarantee issued environment with no pre-existing conditions being excluded as long as everyone is required to participate. if everyone participates there's no need for recision and increase for those covered. >> you have brought that up. what do you do with the segment of society that isn't going to participate? negative segment of the society will exist whether it's the individuals without the benefit of social security number, whenever 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. but the people who don't conduct the with irs people are willing to fly under their radar. what then will these people be rate on whether or not they had a pre-existing condition or are they absorbed by the tax paying

public who does play by the rules and pays their bills on time? >> we believe that the requirement to purchase insurance should be enforced. we believe those that 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 and we have to work together to find out how to make that happen. >> you and i will fundamentally disagree and the approach taken by congress with the development of the party program and medicare for the false initially rolling it out, creating programs people actually want and that are actually useful will be a better way of going about that. the coverage rates for prescription drugs among the seniors now in excess of 90% of high satisfaction and clearly in my mind that is a better strategy than simply layering another mandate on the american people or the employers of america but i don't disagree something needs to happen and let me just take this to a

different level and again i want to pose this question to all free and i 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 the goal of universal coverage without that excess market manipulation by the government? insurance companies have used evers methods to deny or cancel policies of the individual market apparently it happens all so in other markets to the extent this has been allowed into law. the business interest almost dictate the actions get some of us have argued if we let the market work you could make an innovative product for all. so here is my question. will you today publicly clearly come it right now regardless of what happens in washington, whatever decision we reached on health reform you will design a product for all populations regardless claims history but

also economic status and i would like an answer to those questions individually for all populations regardless of claims history and all populations regardless of economic status what mr. hamm, why don't you go first and we will go down the road. >> i'm having a little difficulty following the question, sir. if i may understand specifically what you're asking. >> regardless what we do with individual or business mandate, an employer mandate maybe we don't do a mandate at all, but you have within your power designed product so that all populations regardless of claims history could be covered would you be willing to do that? >> in the current system that wouldn't be feasible. we need an environment where all americans required to participate before we could get those assurances. >> so you would not be willing to alter business practices if there was a way to do that to

provide coverage for a greater segment of the population even with claims history? >> if the reforms proposed by hipaa are adopted we would be glad to participate in the system but it is necessary that all -- pettis paid when they say a system where people choose we need to have the process of assessing risk at the time of the application. >> with respect reforms are not going to happen. you are going to get a plan as your chairman this morning. mr. collins, can you answer briefly would you be willing to design such a project? >> but i would respectfully have to agree with mr. hamm a guaranteed issue product that would fit all people and affordable prices is economically practically impossible. but i would suggest is hipaa also create alternative coverage mechanisms for each and every state so each state is supposed to have higher risk or alternative coverage mechanism and these high risk pools have

been underfunded some of the things that could be done right now today is to increase the amount of funding going into the high-risk pools so that people that have those series of issues otherwise uninsurable on the individual market have a place to go that is affordable and affords them the care that they need. >> on the issue of high risk pools i think the private sector is going to be required to make the contribution to that as well and that in the private-sector with citigroup insurance for individual markets there must be a product that is available to everyone regardless of their claims history. yes they may require federal subsidy and state subsidy and guess the private sector may have to bring some to the table as well. mr. sassi -- >> last question mr. burgess, you are going on. >> regardless of claims history in the population would she be willing to make a product available? >> i have to agree with my colleagues in the current

voluntary individual market, we couldn't 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 enforceable personal coverage mandate and unfortunately that has resulted in significant cost increases that have to be borne by others in the individual markets so the answer would be no. >> mr. chairman, you've been generous with your time. again, i will stress this is going to take creative thinking now sidewalks. i don't think you're going to get what you want in the proposal. you're going to get something like the chairman now live at the beginning and i would urge you to think creatively about this because this is the difficulty that leads us where we are today and i can't help you -- >> questions and speeches are over. >> i cannot help you if you are not willing to move. thank you. >> it is not my plan mr.

chairman i would argue with you now, that's for another hearing. we are going to have votes in a each of you provided to the committee information relates to certain medical conditions that automatically triggers investigation in a possible ground recision. mr. sassi you had conditions that automatically triggers investigation. mr. hamm on behalf of assurance there are 2,000 trigger investigations provided these include breast cancer, ovarian cancer and brain cancer. why does cancer trigger investigation? >> what triggers the investigation -- >> why does cancer a trigger? >> why cancer triggers investigation are the types of medical conditions of chronic nature where there's a high probability that the condition would have a pre-existing that time the application. it isn't based on the cost of

the claim. it's based on the medical condition and in fact the people that make the decision decision are not aware of the cost of claim. it's all about -- >> if it's the medical conditions did before you sign them up why don't you get all the medical records? why don't you find it then? why don't you wait until there is a claim? >> if we were to receive all the medical records of the time of application that would delay the process significantly delay in people's access and have a tremendous amount of cost to the product. the majority of applicants provide all the information asked for a time of the application. >> so it's a cost issue. two costly to get the medical record. >> it would add to the premiums the customers would pay by a significant amount. >> does it cost $40 to get medical records? >> i am not familiar but it would deily the process. >> but is it went to be better to delay the process to make sure a person is injured as opposed to when they are going

for cancer like mr. raddatz? >> the vast majority of customers provide appropriate information. >> said mr. raddatz by you delight him coverage, it? >> unfortunately i cannot comment on that particular case. >> mr. collins, asking the same question you insisted you also music computer ice system to identify cases to automatically investigate for possible rescissions but there is no one at your company who knew how the computer decides which files should be reviewed so, is it the case united has put the decision of which patient will have the health care treatment interrupted by recession investigation in the hand of the computer that no one understands? >> no, sir, that is not true. i haven't been produced 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 -- >> can you say what conditions the computer considers for a possible investigation? >> no single factor is used to trigger an investigation so we look at the system looks as its screening claims that come in at the effective date of the policy, effective date of the procedure, severity, type of service and diagnose code, those are all factors that go into the algorithm -- >> the algorithm no one from the company could tell what you commit to produce whatever the witnesses or documents are necessary to explain your algorithm, computer selection process, could you do that? >> yes, sir -- we are trying to put it in a format that would be acceptable to the committee. >> dr., professor pollitz do you see a common threat? heat got 1400 conditions, 2000 conditions in the computer that it can't explain.

why do you think they have all these rescissions? >> i think the common thread is that if somebody makes a claim for anything serious in the first year there is an opportunity to go back to review the entire transaction to see if it's going to be withdrawn. i think that is just the common transaction and i think it is not consistent with your federal law and what ever else you may do going forward -- >> as to the hipaa law leave it to the states and hipaa has to be enforced by the federal government cns, correct? >> that is correct. -- of the value of the lot depends on the enforcement of the law? >> yes it does and if there is a fine of $100 per day per affected individual for noncompliance with the law. >> let me ask each of the ceos this would you commit that your

company would never rescind another policy unless there was intentional fraudulent misrepresentation in the application? >> i would not commit to that. >> how about you, mr. collins, would you commit to not rescind unless there is intentional fraudulent misrepresentation? >> no sir, we follow the state laws and regulations and we would not stipulate to that. that's not consistent with each state. >> how about you, mr. sassi, can you commit that you will not rescind thomas there is intentional fraudulent misrepresentation? >> i cannot, the law of the land and the majority of states. semidey think it is fair to recent somebody for an innocent mistake? >> i think that playing the knowing standard is much more objective and -- >> on the first panel no one had the knowledge and they were all rescinded -- >> i'm sorry? >> on the first panel no one had a misrepresentation but they had their policies rescinded from ms. beaton all the way down to