work those things out in advance as we have in most hearings in the past. >> i agree. >> 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 cares are covered. unfortunately that sigh of relief may turn into a frenzied panic if the friday before a monday a patient is to undergo a double mastectomy she receives a call from her insurance company saying her insurance has been canceled will no longer pay any claims. this is what happened to one of our witnesses here today, [ applause ] robin beaton. we'll also hear from mr. horton and mr. raddatz where the threat or actual termination of insurance policies cause pain, frustration and great expense. we may be here to discuss valid

uses for procedural aspects of recisions, 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're 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. recisions 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 recision 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're the ones making the assertion and they're the ones ultimately denying the coverage. it's not enough for companies just to send a letter to the insured stating an investigation

into their files 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 case files that resulted in recision in 2007 in four states. four united this was 206 case files. 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 a documentation or evidence that the insured intentionally withheld pertinent medical information that would have affected their coverage. in others it's 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 that never expressed to the patient. you have to ask yourself, can the 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'm wrong, i want the companies to explain it to me. 2008, 2009, these companies entered into settlement agreements with rescinded policyholders and providers in some topping tens of millions of dollars. some of the companies remained 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 recision process, and offer independent third-party review of recision 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 insure 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 quality health insurance affordable and reliable while keeping protections in place to combat insurance fraud. i hope as this process moves forward we work in a bipartisan way to provide a system that achieves the ultimate goal of getting those who need medical care the attention they need. thank you. >> mr. waxman, an opening statement, please? >> thank you very much, mr. chairman. today we're going to hear the results of a year-long 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 canceled after they became ill. some of them are here today to testify. and i thank them very much for being here. overall, what we've 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 pre-existing conditions. so if you lose your job, and you can't qualify for a government

program like medicare or medicaid, it's nearly impossible to get health insurance if you're 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 life-saving health care. and this incentive manifests itself in a wide variety of controversial practices by the insurance companies. when we know that if people apply for insurance policies, and they put down that they have some pre-existing condition, they're going to be denied. but what we've found is that when people with individual policies become ill, and then they submit their claims for expensive treatments, that insurance company launches 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 even have to relate to the medical care the person is seeking, and often it doesn't. they might need chemotherapy for lymphoma, but when the insurance companies find that your coverage was based on a failure to disclose gall stones, 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 launched 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 prepare -- be prepared to be investigated. it's the same with other conditions, such as leukemia. in the written statements for today, the three insurance companies downplap the significance of these practices, arguing that recisions are relatively rare. but these three companies save more than $300 million over the past five years as a result of recisions. and i'm sure they view this