.

to 627,082 individual policies in third quarter of 2009. a high rate increase is a reduced pull. the dirty little secret drastically involves individual rates or justification to run

roughshod over consumers. blue cross blue shield has been trying to get away with these outrages, washington, connecticut and maine. states like texas have little we could do, we are often at the mercy of the insurance companies. making astronomical profits in individual markets, who do not have an option to obtain health insurance but on individual market has gone on too long. the secretary the ability to review health insurance premium increases, one step further by creating premiums at the federal level. they end up in the emergency

rooms forcing health care system and taxpayers to pay for their expenses. the insurance companies continue to see increase profits while making it impossible for individuals to gain access or ford a policy. these hearings highlight what we desperately need in insurance reform in our country. all individuals should have access to quality and affordable health insurance. mr. chairman, we are not seeing that in our country. otherwise insurance reform would be needed. in my district, 43% of my constituents who are working don't have insurance through employers who don't have a group plan so they have to go to the individual market and are priced out. i yield back my time. >> thank you, mr. chairman. many people think health-insurance reform doesn't matter to them because they already have health insurance. skyrocketing premiums and insurance company abuses,

however, revealed a different story. medical bills are the leading cause of personal bankruptcies in the united states today. in 2009, 60% of all people who declared personal bankruptcy did so because of their medical bills and 80% of those people actually had health-insurance, they just weren't covered. what came to be perfecting them was their families. people discovered they weren't covered. it is appalling that over the coming weeks and months when many americans sit down to pay their bills will open a letter from their health insurance company and informing them of their premiums will increase by $14, 22% or 39%. i spoke with a small retail business owner from massachusetts. she recently got a letter from

her insurance company saying her health insurance premium is jumping 32% from $494 per month to $652 and her husband had the same increase. this is essentially a 30% increase and she says to me personally my small business is struggling to survive and i am expected to pay an extra $158 for the same health plan. it is making it difficult economic situation even worse. they are doing the right thing and faithfully paying their health insurance premiums but it is becoming increasingly difficult when some insurance companies are jacking up premiums and experiencing huge profits. in the midst of this economic crisis well point, the parent company of and the blue cross

recorded a $2.3 billion increase in annual profits. that is a 91% increase compared to the company profits in 2008. did that jump in profits mean that wellpoint covered more medical costs? no. their contribution to medical expenses of their customers decrease by 1%. did this rise in profits lead to a reduction in premiums? no. and some blue cross is considering raising individual health-insurance premiums by as much as 39%. and sadly, and some blue cross is not an isolated case. last week health and human services secretary kathleen sibelius' released a report

showing health-insurance companies are raising premiums. this is important what we are talking about in this room. >> amid the reports of record-breaking profits in the insurance industry almost three million more people in this country lost their coverage. i want to thank you for having this oversight hearing on what proposes to be an extreme increase in insurance premiums. we are looking at what is happening in california but premium increases year after year are hurting american families and increasing the ranks of the uninsured exactly the opposite direction this country ought to be moving in. over the years i worked with wellpoint and i applaud the work they have done in diversity and wellness programs and other areas but i am prepared--alarmed by the increase in premiums. despite the reason they are fried do not see that they support the needs of these premium increases and i cannot support them. wellpoint is among the big five

who enjoyed a combined profit of $12.2 billion last year. i don't question the profits in the business but ordinary folks, clients and others are having to make unsustainable sacrifices to keep health insurance and make ends meet. i can not see why keeping the premiums where they are having been raised around 20% last year would be an even comparable sacrifice to wellpoint or its shareholders because it would still realize substantial profits. we welcome wellpoint's support for health care reform. in a very real way the past of legislation that we passed last year is a major part of the problem we are discussing today. it is time for a republican colleagues to stop blocking what we and other committees pass after long hearings and markups in which everyone was involved. anyone who goes to the white house tomorrow without a

determination to insure everyone to provide equitable health care to everyone including those living in the territories and reduce health-care costs should get out of the way and let others who will do what has to be done sit in their share. if there is anything wellpoint and those of us on this side of the aisle can agree on is that we might not be here having this hearing today if the president had signed the kind of legislation this house passed last year. i want to welcome those who are here to testify this morning, the customers of wellpoint and the officials from wellpoint. >> thank you. >> thanks for holding this hearing. i would like to be able to say i am shocked we are talking about this but sadly i am not. i understand this hearing focuses primarily on anthem.

cross in the california market unfortunately the situation is not unique. across this country millions of americans affecting individuals and businesses are being devastated by a shocking increasees in their health-insurance premiums. let's be clear, health insurance companies have been socking it to the american people and businesses for years. healthcare for america released report that found in 2009 the health insurance industry had record profits. let's just think about that. in 2009, a year when the average american family suffered unlike any year in recent history, health insurance companies still had record profits. and according to the report the five biggest for profit health insurance plans had combined profits of $12.2 billion in 2009, up 56% from the year

before. according to a health and human services report, over the last nine years profits at the largest insurance companies increased ten times faster than inflation. over the last decade the amount private insurance companies fell on administrative costs instead of paying claims and covering care, the amount they spent on administrative costs grew faster than what they spent on prescription drugs as well. premiums continue to skyrocket but consumers don't receive additional benefits or care. these increased premiums have to make untenable choices. they are forced to sit down and weigh their chances of getting cancer or getting hit by a bus against having to pay an insurance premium that is 30% higher. sometimes higher than their mortgage. choosing to pay a higher premium needs may not pay their heating bills or other basic necessities or send their children to

college or sometimes it means choosing if you can even call it a choice to not have health insurance. this is not a situation that should occur in the united states of america and that is why we have heard a lot about health care reform. the affordable health care for america act that was passed by the house contained and 85% medical loss ratio which would require insurance companies like anthem blue cross wellpoint to be held accountable to consumers when they do not spend enough of their premium revenue on actual health benefits. the days of health insurance companies putting profits before people need to be over. i am sad we're sitting here to discuss this today but the american people need answers and it is time for wellpoint to explain why they are raising premiums in this way, especially right now.

i yield back. >> mr. welch is here. >> thank you, mr. chairman. these premium increase requests are the latest effort on the part of the insurance industry to preserve and protect its business model and it is a business model that served them extremely well with record profits and record salaries but imposed harsh consequences on individuals in america and businesses that are prodding to provide health care to their citizens. it is not sustainable. there's nothing to talk about. how possibly can family or business scope with envelopes that arrive telling them that the cost of health care is going to increase 40%? anthem, wellpoint always has an excuse, always has an explanation that, quote, that is the cost of health care but what the insurance industry has done unfortunately with a good degree

of success is block any systemic reform which this country needs in order to have a health care system that is affordable and accessible. it is pretty astonishing when you look at what the premium increase has been, 26% from 2003 to 2008 for single policies, 33% for family policies. the ten largest had their profits balloon from $2.4 billion in 2003 to more in 2007. as a member from ohio was saying, the member paid to health providers has gone from 95% to 74%. that has enabled some companies to pay executive salaries in a range of $24 million. in my own small state of vermont when the ceo of blue cross left the got a $7.2 million golden parachute that came out of rate increases, businesses that were

struggling with the decision about whether they were going to cut workers or cut their benefits, decision our employers don't want to make. if i have a complaint about the insurance industry it is not the individual rate increases, it is the consistent effort to stand in the way of health care reform so the folks in this country, the businesses in this country can have some confidence they will get affordable and accessible health care. it is not about the insurance of the service industry, the insurance industry should be about being in the service of helping us have access to health care. i yield back. >> let but not least, opening statement please? >> when i saw the latest stories out of california about anthem blue cross's decision to raise rates, i knew, my constituents knew that this was not an

isolated incident. it is just the most recent example of what the insurance companies are doing to policyholders across the country. this committee has known for some time that arbitrary rate increases are a threat to health access. 12 of my colleagues and i successfully offered an amendment to the health reform bill to prevent excessive premium hikes like the one we now fee from anthem. we passed legislation requiring prior approval of large rate increases and i am glad the president has called for strong rate reregulation in his proposal for comprehensive reform and i look forward to in short what started as an amendment to this committee becomes law. i heard from my constituents asking that we not limit our investigation to california or anthem. they have sent me policy statements and renewal notifications highlighting years

of high premiums. they describe the tough choices to hide deductibles in an effort to maintain coverage and yet the increases keep coming and coming. illinois like 25 other states does not require rate approval of premium increases and no authority to reject or deny excessive rate increases. so my constituents are turning to me, to congress to act to protect them. in addition to those stories i heard cases showing these are not confined to the individual market from the community health center in my district and in the process of renewing their blue cross blue shield groups policy they are looking at across the board double-digit premium hikes this year and they are being forced to pay higher co-pay is for things like the emergency room visits. congress has taken repeated action to increase funding for community health centers. that money was intended to provide quality access to health care for our most tolerable

populations, not insurance co. premium hikes. families are making tough choices when faced with an unexpected 39% increase in their budget and their personal stories only emphasize the need for comprehensive health reform that brings greater access and affordability to our health care system. i would like to thank the witnesses for their participation in today's hearing. i appreciate the fact that miss issue from california is here. and ms. capt. had to step out. we have two hearings going on and members are going back and forth. members of the full committee who may not be a member of the subcommittee will be allowed to ask questions at a later time of witnesses. that includes opening statements

by members of the subcommittee. we have our first panel of witnesses before us. loren meissner and julie hendrickson from los angeles california and mr. jeremy arnold who is from los angeles, calif.. it is the policy of this subcommittee to take all testimony under oath. please be advised by the rules of the house that you are allowed to be advised by celts will during your testimony. do you wish to be represented or advised by counsel during testimony? all shaking their heads no. therefore i ask you to please rise and raise your right hand and take the oath. >> these were the testimony you are about to give is the truth, the whole truth and nothing but the truth? let the record reflect the witnesses have replied in the affirmative. they are under oath and will begin with an opening statement. i will ask mr. arnold if you

would not mind going first. pull that mike of, press the button, greenlight should go on. keep it fairly close to your voice in order to project your voice. begin, please. >> good morning mr. chairman, members of the committee. i am an anthem. cross policyholder who has been directly impacted by anthem's astonishing proposed rate increases in california. because i work as a self-employed writer and have an additional part-time job i have had to purchase individual health-insurance. two weeks ago anthem informed me that the premiums on my pp of 40 policy were going up 48% from 231 to $319 a month. this follows an increase exactly one year ago of 26% when my rates go up to 230 month.

my premiums are poised to rise to a level of 74% higher than barely over a year ago. this is outrageous. my benefits have not improved in any way and i don't go to the doctor that often. last year i went a handful of times and paid $1,250 in medical bills as per the terms of my policy anthem paid a balance of $1,600 in claims. far below the $2,700 in premiums i paid anthem. i took prescription drugs including a generic and brand-name medication to manage high cholesterol and blood pressure related to a mild heart condition that i developed and after i joined anthem. those 2009 drug costs were subject to a separate $500 brand name deductible. in its notice to me last month anthem offered to switch me to a plan with a lower increase in

premiums but one which does not include brand name drug coverage. that is unacceptable to me since i need that coverage to treat my condition. there are other anthem plans i could try to switch to. some of these require underwriting in which case my pre-existing condition would probably make me ineligible. some don't require underwriting but carry high deductibles, lower lifetime maximums and very poor prescription drug coverage. if anthem goes ahead with its desired rate increase i will not only be driven to one of these high deductible policies, i will have to hope i don't get sick or injured. hope is not an effective health care policy. hope is not what anthem is supposed to be selling. i eat right, i exercise, i take care of myself, i am generally a healthy person and i resent being squeezed in this way. anthem tries to justify these

rate hikes by citing rising medical costs. this is disingenuous. if insurance companies believe medical costs are out of control they should fight them rather than simply passing them off to ordinary americans. anthem and wellpoint's recent astronomical profits are repellant because there at the expense of breaking the backs of people like me. i have no problem with corporate profitmaking but i do have a problem with profiteering especially when it is on a level that penetrates so far into the economic and social well-being of our country that we americans are discouraged from pursuing dreams and starting businesses and are stuck in undesired jobs simply because we worry about losing our health insurance or being able to afford it for our employees. this is wrong. it is insane. it must be fixed by doing whatever it takes to pass

meaningful health reform now. it would be simplistic to think that anthem's corporate greed is the only problem here although it is a huge one that i believe requires stringent regulation. sharing the blame our hospitals and doctors raising rates far above what is defensible and legislature that is too be called into special interests and consumed with partisan rhetoric to take necessary action. all of these parties feed off of each other to conveniently and happily line their own pockets or win elections while blaming the other side and caring not a whit about the rest of us. in conclusion, i want to say to anthem and the insurance companies including wellpoint president andrew brawley, hospitals and medical providers and legislators on both sides of the aisle, i ask you all in words are as true today as they

were in 1953 when joseph welch first step them, have you no sense of decency at long last? have you left no sense of decency? thank you. >> thank you, mr. r. julie henriksen, your opening statement? pull the mike closer or we won't here you. >> good morning, members of the committee. i would like to say that i am honored and extremely encouraged at the invitation to come before the subcommittee to present my real-life situation regarding the most recent premium rate increase of my anthem blue cross individual health insurance policy. the new found urgency and spirit of determination with which these hearings are taking place give me a tremendous amount of both that the issue of health care reform is going to remain an enormous focus of attention

until a solution is found satisfactory to all. a little bit about myself. i am 54 years old. i have two teenage sons, one just turned 18 and is heading to college and britain who is 16 years old and a junior in high school. i am self employed in the field of architecture and imperial design specially during in hotel design. i have worked for 27 years. i make fairly good money and both my boys attend private school. i held blue cross individual family policies and zoning our own small business. it is designated a 1500 deductible. january 26 for see it a letter with a booklet attached stating

on march 1st of this year my monthly premium would be raised to $1,352 for the same policy. this is an increase of $310 per month or a 29.8% increase. will he must lead an annual $1,500 deductible for each two members of my family. which totals 3,000 and an annual expense of $4,500 for each week to members. that totals -- the yearly premium of $12,500 that i pay already. i have to tell you i never met the deductible each year. what is most concerning to me,

since my younger son was born with a heart condition. he was born with a small hole in his heart the size of a dime in his right and left atrium. the flap that opens and closes to allow blood to flow from the atrium to the rest of the body does not shut properly. it swings back into the atrium and in so doing allows a small amount of blood to flow into the heart with each beat. he had surgery when he was 3-1/2 years old which repaired the role in his heart at the same time the micro law was corrected to the extent that is categorized as a mild week. the flap needs to move back and forth so it can only be singed so far to correct a leak. he was seen by a pediatric cardiologist once a year for an ultrasound and an echocardiogram just to make sure than the league has not changed from mild

to moderate or severe. he is extremely healthy and is in no way hindered with any symptoms or restrictions when it comes to sports. he is on his school's tennis team and has played sports all his life. the reason i am held captive is because he has been insurance terms a pre-existing condition. sadly i am allowed the so-called privilege of staying with anthem blue cross and paying exorbitant and unreasonable premium hikes each year until i can't pay them any more. in the same written notice by anthem i was offered a downgrade to my policy to an annual $2,500 deductible for each member with a $5,000 annual out of pocket amount for each member at a cost of $1,089 per month. an additional increase of $47 to like current 1,042. i am allowed to downgrade until the term change in policy takes place and that involve the act

of underwriting which i do not want to happen. i should note here that if i were to accept this new monthly premium of $1,352 thereby retaining my same current policy, this amount would be shy just $92 of my monthly home mortgage payment which i refinanced this past summer. what worries me most is what it will be like for my son when he is 22 years old and our am no longer able to claim him as a dependent on my taxes. will he be included from any kind of policy because of his unforeseen heart condition when he was born? i have never written to any government officials or office before this and though my letter is just another among many in the storm of shock and outcry among anthem's premium increases i felt so compelled to do so for the very reasons stated above and the fact that in this economically depressed environment-the act of anthem

blue cross raising premium costs to individual policyholders for such high amounts truly unconscionable. not to make light of the situation before i to send a letter today in my industry stating i was raising my our lee consultant rates by almost 30% of would not be working. to conclude i find that even with all the disagreement in congress regarding the latest health care reform proposals amazingly i really still do have a positive outlook that our government officials can come up with a workable solution to the obvious and urgent need to change the direction of healthcare in this country. i thank you for the opportunity to be heard. >> thank you. >> good morning, thank you for inviting me to speak today. i have been an individual plan member of blue cross of california, and completed the will of for 17 years. i always tell what the company

directly. my income dropped substantially. i was paying a $500 monthly premium for anthem's plan. i called anthem in december to see what other plans were available. still have the necessary coverage. the anthem for rep was aware of my medical history and age. i was turning 49. -- the new monthly premium would be $5.20 higher than the other plan with less coverage. i paid the new premium until i spoke with friends about their plan. in october and called them again and asked how the plan would

brand our coverage different from the 1500 plan which they recommended to me in 2008. i was told the plan had a lower monthly premium, no deductible and higher co-pay but the main difference is it did not cover maternity which it didn't need any way. i switched plans again. at 49 a of an paying for maternity coverage of costly and unnecessary benefits. i thought anthem execs should know and i copied ben singer, the director of blue cross of california and senator boxer and congressman waxman. the only response was from congressman waxman. ..

>> this is only one of many reasons why we need healthcare reform. i read that anthem's explanation for increasing rates by up to

39% was rising medical costs. in one respect anthem is right. it shouldn't cost $20 for a hospital to administer an aspirin. but then anthem's executive salaries did not appear to be suffering. how much money goes to lobbyists trying to prevent healthcare reform? the same reform that anthem indicates is necessary to keep healthcare costs from rising. my issue with the anthem is shared by many and is just a symptom of a broken system. we have a system where prevention and wellness are not encouraged, nor embraced. for example, because i was turning 50 my doctor prescribed a bone density test. anthem blue cross did not cover one nickel of that test even though that test could determine if i had a propensity for osteoporosis. penny wise, pound foolish that it is obvious to healthcare industry needs to be regulated. we saw what the regulation did to the cost of utilities in california. we saw what the lack of regulation has done on a global level to our financial and banking system.

it's having the same effect on healthcare system. if the city of west hollywood where i live can regulate how much landlords can raise the red each year to keep rent stabilized, why can't the federal government regulate how much insurance companies can raise their rates per year in order to stabilize premiums? i believe we should all be able to buy healthcare coverage. if someone can afford to pay the private insurance, great, but if not there's got to be a public not-for-profit alternatives without having to move to canada, england or france. some representatives in congress have stated we don't need a public option. i say to them, i just want what you have, nothing newer and nothing less. to make him in churches like marriage. you expect the insured to be with you in sickness and in health. that's why we buy insurance. if the insurer can't live up to this expectation than perhaps they need to get out of the

business of insuring. i also want to just reply that i am an american, and i support obama's health plan. and i just wanted to make that clear. thank you. >> thank you, and thank you all for your testimony and for coming here today. we're going to start with questions. we will start with the chairman of the full committee, mr. waxman. >> i appreciate the testimony each of you has given. this might even get your constituent. i don't know the other two witnesses are also constituents. i do know that wellpoint is a constituent of mine as well, and i want to do what's right for all of my constituents, but it's not right to have insurance companies deal with ever increasing costs by shifting those costs onto the beneficiaries, their customers. because that's what they're doing. if you have a brand name drug they won't cover.

you have to pay for it, if you want it. if you want insurance, they figure out a way to increase your rates to keep the policy you already have. this is the problem with individual insurance. what we have, as federal employees, is we can choose between a number of different plans and they can't turn us down. and they can't charge us more if we have pre-existing medical conditions. we get coverage because the costs are spread among all of the insured. that's true of federal employees, members of congress, for a lot of people that work for large employers that provide coverage, but the three of you are not in that situation. you have your own business, part-time judge, you have your own activities so you have to go in the individual market. those are the people for the most part who don't have insurance coverage because they can't afford it. and it looks like you may not have insurance coverage yourselves if you don't pay these increased rates, or they

give you another alternative. wellpoint let you go into another plan that costs more and covers less. what a deal. it doesn't hold down the cost of care. it simply makes you have to pay more of it. but that's not what you want from in charge. you want insurance to cover at least their share of the costs, and you'd also like them to negotiate better prices. to hold down healthcare costs overall. i don't see any evidence of holding down costs except shifting them onto you. let's look at a situation that you are facing, ms. meister. you're talking much our current plan. you have a ppo that you have to pay a percentage of your medical costs. and you have -- used brand name drug as well as generic medications, after you meet your deductible. is that a correct statement of the plan you have, generally? >> yes and the brand drugs, they

don't come in generic. specs and you can get a check for those where you need a name drugs. your toes in your opening statement you take your medication to treat chronic asthma. these are not in generic form, so if you go along with what you're being told by anthem, you'd have to switch to a plan within for your coverage, or attempt to pay the higher monthly premiums. that's the way they've got you in the squeeze, isn't it? >> that is correct. >> have you decided which are going to? >> i decide i'm going to take the lower coverage with a generic brand and i'll pay out of pocket for the brand medication. >> mr. arnold, you have the same health insurance plan as miss much. they propose to increase your costs by 38% as well. or you could switch to a plan that covers generic medications only come is that right? >> that's correct, or i could switch to a plan that also covers branding, but one that has a much our deductible overall.

>> faced with this kind of a problem, you've got a turbo choice to make. have you decide what choice you will make? >> at the moment i'm in a wait-and-see attitude because i know these propose increases have been put on hold until may 1, but if nothing changes i will probably switch to one of the very high deductible policies. >> and they would be very happy because that's what they would like you to do. you we just had to be more of your costs. mr. chairman, these witnesses may clear the alternative plans anthem is offering to its policyholders provide dramatically less coverage, for marginally less money. it's the only option is able to consumers at the individual market is to pay outrageous monthly premiums or switch to a plan that doesn't meet their needs, and it's another example of why we need reforms in the individual market. all of us here say we care about this. we want to have insurance reforms, that's what we are told.

but you can't reform the insurance system without providing some standard policy so you can compare policies. you have such arbitrariness in the kinds of policies that you have available to you. and you can't really figure out which would needs are because from year to year it changes and it goes up. what we need is for insurance companies do have to provide insurance for everybody and spread those costs. and to do that we have to make sure everybody is covered. and to make sure that everybody is covered, we have to help people who can't afford their coverage. and we have to tell the insurance companies they can't deny you that coverage. that's what we find our differences. as we tried to deal with health reform. we've got to do with the problem in a broader way than, say, let's do away with pre-existing conditions. the republican proposal doesn't even do that. they would put people with pre-existing conditions and a

special group where they pay higher rates, higher premiums. and they would be treated differently. we've got to standardize insurance and make sure that people have access to it. that's a president obama has been trying to do. were going to go to a summit to mark that the president has called for the democrats and republicans. i hope we can work on this in a bipartisan basis that they should be a democratic or republican issue, but we will see tomorrow whether we can look for common ground rather than hear the accusations back and forth that we want to socialize medicine or we're going to create death penalty on our were cutting back on people in the elderly, and then yet we find the lack of cooperation to find a solution to this problem. i hope we don't let another opportunity go by and wait another 15 years before we tackle the problem again. you can't afford and the american people can't afford it either. thank you, mr. chairman. >> thank you, mr. chairman.

mr. burgess for questions, please, five minutes. >> thank you, mr. chairman. in the interest of bipartisanship and comity, i feel i need to respond to some of the lectures that we've been getting this morning. mr. chairman, referring to mr. waxman interpretation, i would be offended as to chairman of the committee if the committee passes a bill and the senate passes its bill, i didn't like -- for enough, the senate passes a bill, billy didn't like, was starkly different from this committee's bill but nevertheless they did what they intended to do. and then the proper process is for the two sides to get together, house and senate i'm talking about, not republicans and democrats. but the house and senate to reconcile the differences and call it a conference report and this is part of our normal procedure. but now we have a situation where the white house functions as the conference with no input that i'm aware of from your cell for esther stupak board

ms. durango or mr. miller of chairman of the education workforce committee, the white house put together this conference report and now we will be required at some point to vote on that, and deal with it through a process called reconciliation which is a little arcane but it means you don't have to have quite so many supporters to get this done. and if the american people were behind what we were doing it wouldn't be this difficult. you can look at polls however you want, but 60 percent of the american people don't like what we are doing. 20 percent of the people are in favor of congress generally, and 45 percent of people are in favor of the president. with these sorts of numbers it is difficult to do something this massive in the form of restructuring. another issue that you made, you brought up the federal employee health benefits from a trip plan.

had worked more on making the individual market look more like the erisa protected market under employee sponsored insurance, that are so beholden to things like state lines, perhaps we could have delivered something that was meaningful for someone in the individual market. i've been in the individual market. i know it's sometimes tough to find a plan you want. i've had a deal children in the individual market. i've had to keep up with things that they chose not to but i felt was important. we do have regulation in the individual market. it occurs at the state level right now. that may be a bad thing, maybe it needs to be at the national level but i just looked through the federal employee health benefit plan book. i get a better deal because my residence is in taxes than i would in california, and certainly a better deal than i would get in new jersey.

maybe i don't want a national regulator whose going to base everything on an area that is really not germane to where i live. so we do have to be sensitive to the fact the states are different. now we passed a bill twice in 108 and 109th congress that would have allowed aggregations of small businesses across state lines, so called association health plans, that would have -- the reason there is not pre-existing conditions and the federal employee health benefits plan is not because was that something is better for cells, is because the pool is so big, there is only federal employees which may be a good thing or a bad thing, we could argue about that but there are so many federal employees that school is so large a pre-existing conditions actually don't enter into the equation. what we could do for writers across the country, for example, our architects across the country, let every architect by into an association plan where all the other architects buy into it, we'll doors, whatever

kind of association you want to make. and suddenly you have a pool that has the marketshare of a company like verizon that sells employees and buys insurance for them. mr. arnold, i think you brought up about the affordability of the premium, and have you -- and i don't know your income and i'm not going to ask you, but have you looked at the house passed bill and calculated what your premium would be? >> no. >> the house passed bill, and i'm not lecturing you here, i just want to make you aware. the house passed bill is a good deal for someone who is unemployed and has no insurance. it provides access that has never existed in the past. your premium under the house passed bill, and again i don't know how much you make and i'm not going to ask you to tell us, but for someone who makes at

350 percent of the federal poverty level, the annual premium -- i misplaced that the annual premium would be right at $4200 a year. so little but more than what you are paying right now. 350 percent of the federal poverty level is a good salary. i don't know how it works out in california cost of living, but it is just a little under $38,000 a year for a single individual. i don't know what you're married or not. again, i'm not going to ask you. but to point out that yes, you brought up a significant point that we need to pay attention to that your premium has increased significantly under anthem. and we're going to ask anthem to justify they have done in the california market, but i do want you to understand with the house passed bill that not everyone in your situation depending upon income, someone who earns

400 percent of the federal poverty level, which is $43,000 a year, would be paying $5400 in annual premium as a single individual. in the house passed plan. only two rating bands for younger and older, no tobacco ratings, so there are some things in the house passed bill that might not improve affordability in your situation, and that is really what we're talking about here because anthem has effected the affordability of your policy. i we give anything to know, tranny, which are going to be charged for your bone density. but i would also suggest and i think your doctor was right to recommend it. and if your doctor recommend it when you are 65 years of age, yes, it would be covered under medicare but your doctor would only be paid $40 for the privilege of providing you that service. again, i don't know what your doctor was proposing to charge. i suspect it was more than $40, but i don't know that.

after you turn 65 under the big public option that we now call medicare, if your doctor charge of more than $40 for the procedure, my cost is $200, -- >> pajamas time has expired. >> your doctor would be violating the law to charge a judicial. we will give up some things it with the house passed bill. that's why it's so important for us to get it right. not let the white house assumed the duties of the conference. >> the gentleman's time has expired. >> i told you, you would regret having me here. >> i have sat in his journal come and i've listened to you for ever, and i know you always go over. i know i have to be diligent. i know i have to keep on you. i feel sorry for these witnesses because they are self-employed. they took time off of their jobs, probably a loss of money to come in and give us the courtesy of asking them questions. you never asked them a question choice feel sorry for her witnesses.

>> i got valuable information i could've gone anywhere else. >> yeah, well it's amazing. it's my turn for question. let me just a couple of things. this committee, this subcommittee in the last three years have held hearings on underinsured, on recessions, on purging of small businesses, and i asked for this hearing because as i said, in my opening michigan are posted 56% rate increase. i would have liked to have this hearing in l.a. we have had hearings in indiana. i will go anywhere in the country to hold hearings on healthcare because i think consumers in this country are being bankrupt by health insurance. and i want to see health insurance past. the reason for this hearing and it is a coincidence, we set the send when we're doing things things we did know the white house was going to do a summit on health insurance, but i will go anywhere with this subcommittee in any district and hold the series because i think they're valuable. when michigan proposed a 56% increase for our people, i had

the e-mail cycle that finds him at 30 to 39% increase for the small business people, much like that and we have here today. people just can't afford. we're all truly one injury or one illness away from bankruptcy. but let me ask this question. yesterday we did a hearing on toyota, and 10 years ago if i would have bought a car and i buy one now today i get all kinds of extra bills and whistles. whether it is toyota, general motors whatever. mr. arnold, ms. henriksen, ms. meister, hatcher insurance given you more bells and whistles as you've seen these increases? mr. arles, yours would've 74% the last two years. ms. henriksen, icu increased about $31,000 before you even start tapping into anything. ms. meister, you're just trying to keep the drugs that will keep you breathing. had using increases and benefits as these prices have gone up? >> no, less benefits.

>> yes, also less from a. last year in fact when my rates were raised 26%, anthem also increased my prescription drug co-pay for both brand name and generic. >> ms. edwards and? >> no, i haven't, and sometimes when i open my statement from them after going to a doctor or something i'm shocked that they didn't cover that. you know, it's things like that, but i haven't calculated exactly the change. >> you mentioned your son that had the heart issue there. is there any length -- how long will they continue to hold this like a preexisting condition like you mentioned -- >> probably the rest of his life. he will always have a heart condition. >> which has thus far required him to see a cardiologist. >> yes fine. he is completely fine. i mean, you know, like i

explained, you can only saint jude so far and it can't be completely corrected. so he will always have a condition in his heart. but he can only stay on my insurance until i claim him as a dependent. >> the other thing of looking at this file, and wellpoint and tranforty are in california. when we're looking at one of the e-mails that the vice president or one of the individual pricing state says, jim has asked brian to price five or six downgrade options to be made available and conjunction with the upcoming rate action, many this increase. in another e-mail the company's regional vice president and actuarial, brian carley, proposes that wellpoint create five or six california look-alike plans, look-alike plans for california with a benefit or to remove to create a downgrade option upon renewal. my question, and i guess i will

direct you to ms. meister, how does it make you feel to know that part of anthem's business plan is to reduce or stick your healthcare coverage being offered to you on downgrade options to switch during the annual renewal? how you going to be able to afford your medications the? i mean, this is what's been happening the last few years. i've had to downgrade because the prices have gotten too high. so i will have to pay for my medications through my savings, through -- >> what you think that cost will be for your brand name drug if you're going to go to generics? what will that out of pocket be, do you know? >> yes, accolade is $100, and i have to buy that every month. >> one hundred dollars for 30 day supply? >> yes. >> aren't. ms. henriksen, anthem i believe you said offered to switch you to a similar plan to the one you have now, which would, with higher deductibles. what's your opinion on the

scaleback's? >> pardon me speaker is what your opinion on, get less coverage and have to pay more? >> i figure i don't have a choice. i can't afford the premiums that they are stating for the existing policy that i have now. so i have a call into my agent, and you know, he's going to go over options for me, but i know from talking to him almost a year ago that because of my sons are condition i can only, i can only ground down great so far until he has to be underwritten and i don't want to do that. so you know, i would probably go with the downgrade of the $2500 deductible and the 5000 out of pocket. you know, because it is $47 more than my existing payment but it's not $310 more. >> what is the breaking point that you can no longer afford it at all? >> i think it is in same as it is now. >> you said it's almost as high

as your mortgage know? >> yes, it's $92 less than my mortgage payment. >> mr. arnold, i know you've had a 74% increase in your premium rates according to testimony. obviously, your insurance hasn't gotten better. do you believe anthem is trying to push customers off to plans with less comprehensive coverage and in the plans that very meet their needs so they just drop coverage altogether? >> now. i mean i think the reason that plans are going up or because healthy people are dropping it altogether because they are like me, they are getting priced out of the. i am generally a healthy person. i have a pre-existing condition but it is getting so high, it went up to $800 a month i would have to drop it. that i couldn't afford, no way. but that's an extreme for just to prove the point, i mean, 319 a month which they want to raise it to is their very difficult for me. that 231 i've had for the last year i have not been happy with, but i have managed to do it even

though last year was a pretty tough year in this economy and my income was lower last year that was the year before. so yeah, they are trying to push people like me out. >> my time has expired. thank you all for being here. mr. gingrey, questions, please. >> mr. chairman, thank you and i will be fairly brief. and i wanted to direct my first question to ms. meister. ms. meister, you mentioned in your testimony kind of in your closing that you want just what members of congress, members of the house and senate have, nothing more, nothing less. i want to just say to you, and to the other witnesses, that i agree with you. i agree with you that i think the american people in every state should have that opportunity. and when the healthcare reform bill was first marked up in this

committee, h.r. 3200, we spent hours and several days, in fact, several weeks marking up that bill and amending it and making some suggestions for a minute on both sides of the aisle. in fact, two amendments that i had in particular that i think you'll like, and i would like to ask your opinion on it, was that all americans have what we have, members of congress. and that amendment, unfortunately, went down pretty much straight partyline. and i followed up with that and said, well, you know, if there is a public option, i think your testimony talked about a public option, as you know right now there is no public option in any of the bills, but in this committee there was, h.r. 3200 there was a robust public option as i'm sure you know. and so my admin that was well okay, if the public option is so good, maybe it is.

then lets it show good faith in it and that every member of congress have sent and indeed the present administration and their families signed up for the public option. and that also failed on straight partyline vote. i'd like to know your opinion and maybe other members of the panel, what they think of that. those to recommendation. smack i am very willing to pay for insurance. i just want to pay something that's affordable and that actually covers me. from we have medicare. i thought the plan that extended medicare to 55, down to 55, was a good idea. and have those people between 55 and 64 pay for the plan. so i don't know what else to say that i want to have to be spending the next 15 years of my life looking forward to being 65 so i can get medicare. >> well, yes.

certainly i understand your point there, but you do realize that i'm sure you do, that medicare has currently has an unfunded liability over the next 50 years of 35 trillion, that is with a tea, $35 trillion so to add that many more millions of people between age 55 and 64 when we can't even meet the obligations we currently have. you know, that was the problem with that proposal. >> i have seen the country support a bailout for the banks and for the car companies. i'd like to see the bailout the american people. >> yet, i wanted to, i think you'll be pleased to know i voted against that bailout for the car countries that i thank you for bringing that up. mr. arnold, let me shift to you for a minute. in regard to the meaningful health reform, you mentioned that. by meaningful health reform, would you include in that

medical liability reform? >> absolutely i would. i think that ideas on both sides of the aisle, there are good ideas on both sides. just to address what you just said a moment ago about the public option and so forth, the reason that you explicated the reason. you said it was partyline vote. it's politics. the party does not currently in power does not want to get the party that currently is in power and the president a victory of any sort. so parties and politicians and parties -- >> mr. r., reclaim my time because i just have a brief few seconds let. absolutely i think that we ought to give the president the opportunity to do it in a bipartisan way. and that's why when we have this meeting tomorrow, at the blair house, the healthcare summit, i feel sure that the members on the republican side, from the house and senate, maybe dr. coburn or dr. brown so, representing healthcare in

particular as a profession will offer that and i look forward to the present hopefully hope a copy because as california as a pretty well-known and legislation back in the late '70s, i think it was micro, and it is work that it has work. and fortunately california legislation has ruled any of that unconstitutional. so i am glad that you support medical liability reform. mr. chairman, i see my time has expired and i will yield back. >> did you want to finish and answers because i would like a brief only to finish what i'm saying. i thank mr. gingrey for what he said, and i taken at his word and i would hope that you would encourage all of your parties and colleagues to operate in good faith and not to use words a responsibly words like socialism and death penalty and so on and so forth that you hear

from parties and politicians and from parties and media commentators, because they are completely not an accurate description of the issues that are at stake. thank you. >> ms. degette for questions. >> thank you, mr. arnold, for clarified a statement. i think what you said is important, and help everybody listens to it. it seems to me and listening to all three of your testimony, aside from the fact that you are buying insurance on the individual market, the other problem that each of you has is either yourselves or family member with a pre-existing condition that pretty much limits you from trying to shop around and buy cheap for insurance that is that correct, mr. arnold be? yes. ms. henriksen? ms. meister? and understand, ms. henriksen, when you are talking, i told my staff, i said, i feel like this is me because i'm like you, i have two daughters, 20 and 16. and like you, my younger god has

a pre-existing condition which she will have for her whole life. not only does that, even though i am in the federal employees injured system, i'm still limited in shopping around because i am underwriting. but what i most a fight about with her is when she graduates from college and starts trying to bite insurance on her own, she's going to have an impossible time buying a policy, especially as a young person who was just turning off in the labor market that will cover her preexisting condition. i'm sure you've thought about that, too, with your son. >> that scares me immensely. and with businesses eliminating all insurance group plans in things like that, i mean, in my industry, hardly anybody has a. there's a lot of consultants, that i don't see how he will be able to pay for an individual policy with a pre-existing condition. when he is working.

>> right. so here's my question for all three of you. if you could go on some kind of in church exchange that allowed anybody to go in and buy from different insurance companies, and the people in that exchange so you could choose between competition between different insurance companies, and they couldn't exclude you or your kids because of a pre-existing condition, do you think that would help you with your insurance choices, mr. arnold? >> it sounds like it might, yes. >> ms. henriksen? >> yes, i believe that it is free enterprise i guess, and you are allowed the privilege of shopping for almost anything else, why shouldn't it be insurance, to? >> ms. meister? >> yes because we're being penalized for being individuals and having individualized plans. >> ms. meister, i would ask you about something because you said you thought it was a good idea if they extended medicare down to age 55. and with every passing year that

idea sounds better to me, too. but we do whether those proposals didn't you say we're going to pay for people to have medicare. they would actually have to buy in? >> absolutely. >> and you would be willing to buy into medicare is what you're saying? >> absolutely. >> i just wanted to go for that. i just want to do one more thing with his, because i think there's been some miscommunication about insurance companies selling insurance across state lines. were you aware that right now insurance companies can sell insurance across state lines? but if they do that they have to comply with the laws of the state where they are selling? mr. arnold, were you aware of that? >> no, action i was not. >> i wasn't either. >> know. >> what happens right now, different state like california or colorado or iowa or georgia, any other states, they can sell

insurance across state lines, but if they do that they have to give people the insurance coverage that no states require. so like if california says you have to cover maternity benefits, or you have to cover prostate cancer screening, or something else, then they have to do that. but with a proposal that some from the other side of the aisle have made is to say people could sell insurance across state lines, but they would only have to comply with the law of the state where they are incorporated. be sort of like you know how all corporation, not all but a lot of corporations and corporate in delaware because though state laws are very favorable to corporations. so they could incorporate in a state which had very slow requirements for coverage. and i want to talk to you about that, ms. henriksen, because you have to kids. would it help you to buy a very low cost plan, but one that

didn't offer very many coverages for you, like mammography or some screenings for your kid? would that help you? >> i guess i would have to see specifically what they were. >> yet to expect but like i said, we are so lucky, too often of us be healthy. we never go to the doctor. we have very little costs incurred, you know, through insurance. so it would be interesting to see what i could eliminate and what i would then need. i could pick and choose i just. >> you could pick and choose, but you wouldn't want to buy a plan that would barely cover anything if you got sick. >> no. >> ms. meister, would you want to buy a plan that wouldn't cover the specific medications that you needed to? >> i would have to work it out and see, you know, actually figure out the financial side of it and see how much my medications cost me per year and how much i'm been covered.

i mean, even now i have a deductible for the brand. i believe it is $500. and tell back aches and it's of four months into the year. >> okay. thank you. >> thank you. mr. braley for questions? before mr. green could settle their. >> thank you, mr. chairman. i begin my opening remarks, because i believe that health insurance reform is a key part of comprehensive healthcare reform. and i'm so glad this review are here today because you help put a human face on what's wrong with healthcare and health insurance delivery in this country right now. 17 townhome is back in my district last summer, and what i learned is that people who oppose healthcare reform and especially the healthcare reform we have been talking about really don't want to talk about the human face of healthcare. 's i want to spend a few moments talking to you about that.

one of the people who came up to me and my last town hall meeting with the house healthcare bill. and then said, after the meeting, congressman, i need your help. i said what can i do? is that my brother was just diagnosed with non-hodgkin's lymphoma and he lives in the northern part of your district. the closest place went to get treatment is at the mayo clinic in rochester, minnesota, but he can't get treatment their because they are not in his insurance plans provider network. another young woman interviewed me during the healthcare debate, it was a classmate of my two sons. sat down to interview me and the first thing i noticed about her was she had a cleft palette. and during her interview, she told me that she was so excited because her parents had almost saved up enough money for her last surgery. and i looked at her and i said, isn't that covered by your insurance policy? and she said no. is defined as cosmetic surgery under my plan. so a woman, 21 years old, born

with a birth defect just like cystic fibrosis or so will palsy, which are covered under healthcare policies, has gone 21 years with a birth defect that limits her ability to deeds, to talk and most important, her self-esteem. the last one of want to talk about is my nephew son tucker write what talked about before in these hearings. tucker was 18 months old when he was diagnosed with liver cancer. had two-thirds of his liver removed, has had enormous medical costs. and thank god, he is still alive. but he will almost certainly reach his lifetime cap under his private health policy by the time he's 18. he will almost certainly have another bout of cancer before he turns 18. his parents are doing fundraisers to cover the uninsured medical costs, both of them worked full-time and have good health insurance. and yet, if his parents want to change jobs, they would not be able to because of the exclusion

for preexisting conditions. all three of you have lived this in your own lives, so i want to ask you, ms. meister, you have chronic asthma. you talked about that. if you opted to terminate your policy with anthem and purchase an individual insurance policy, to get a more reasonable deductible or premium, you would have to go additional medical underwriting. correct? >> i would imagine so. >> because that's the way this works. and given your chronic asthma, do you think that would be a problem for you in getting additional coverage? >> i mean, personally i work out everyday. i live a very healthy life, but on paper, that's a different story. >> and ms. henriksen come you talked about your sons problem with the condition with a hole in his heart when you fill out any application for underwriting purposes, you are required to go through your family's health history, and that would appear?

>> yes. >> does that concern you? >> completely. >> mr. arnold, you were the one who concluded your compelling remarks with a smack down to all of us about doing what is right. and you also have been affected by this because these are the types of things that make it frustrating for people to get private insurance because of this can be so daunting, is the experience that you've had consistent with what the other witnesses and some of the people we've been talking about face everyday and try to get healthcare coverage? >> absolutely so, yes. yes. i won't repeat everything that they just said, but ms. meister just said about being underwritten again and preexisting condition either not being covered or causing the base rate on that policy to be marked up by my insurance agent told me 20 to 100% because of that condition. these are the kinds of things that can happen.

>> mr. chairman, health insurance is supposed to help us when we're sick, not punish us for required medical care. and i think what we've heard today reinforces the need to get health reform done now. we as a country cannot afford to wait any longer. passing meaningful healthcare legislation that eliminates this qualification based on preexisting conditions is absolutely essential so that every american can have access to quality conference of health insurance, and ideal to back. >> thank you, mr. buddy. i should note that represented hill is with us. is a member of our committee. witty hearing on recessions down his district earlier this year in indiana. like i said earlier we would be happy to go where we need to go to do these hearings because i think it's important we put a human face on the cost of health insurance. we have votes coming up. i will try to get through this panel if we can. mr. green, you are up for questions, please. >> i appreciate my colleague from iowa's questions on your responses. i want to look at from a

different tack because if you have trouble with rate regulation or insurance regulation in california, in texas we've never had any regulation. it is literally the free market. having been involved as a state legislator in trying to do with fairness for my constituents and purchasing individual policies and having a son who are the same problem, in his small business trying to find a policy, he couldn't find one. one, because in high school he was diagnosed as polite as. no one wanted to write him. except for $2000 a month. he has done through an hmo or ppo, where he can get at least for his two boys there and his wife because he just couldn't do it. so province in individual markets and oversight whether it is in california or texas or virginia or anywhere, and that's the issue. that's what i want the lack of oversight or ability to look at what these premium increases, you all are getting ready to

experience, my concern and this is something that members of congress have to defend when we travel anywhere, and believe me we have to watch we are traveling. i want to ask questions in addition to paying their top executives handsomely between 2002008 wellpoint spent over $27 million, 100 executive retreats, all off company premises. the democratic caucuses here action at our retreat here at the capital. 55 of these retreats over half the cost were over $100,000. to put that in perspective, the media income in the united states in 2008 was $52,000. and so you can see over half of the retreats were over $100,000 so it was well over a media income. in 2007, wellpoint spent $3.7 million to host 782 attendees and broker agency that at the lavish resort and spa in arizona for five days. and like to put a picture up of

thatli. later that year wellpoint set 154 attendees to the four seasons resort in hawaii for a four-day broker event that caused the company $850,000. has over 5000 per person. if we can put that slide is there. in 2008 during the height of the recession, wellpoint beta for $1.31.3 million to host 360 attendees at the four seasons hotel in san diego. and if we could put that slide up there. ms. henriksen, do you think the companies are struggling to keep up with a rising healthcare costs will be able to send thousands of employees and agents on lavish retreats such as these? >> no, definitely not. i would like to don't what they are doing at these retreats. >> mr. arnold? >> of course not.

>> ms. meister? >> no. >> what is your reaction to the images and figures? because i know am i constituents would be if i was at those locations you can sense you ultimately paying the freight are asked to pay the freight doesn't make you wonder if your hard earned premiums have endured we going to pay for the small retreats and a golf getaway? >> i was thinking i wish i was an executive at wellpoint. >> mr. chairman, it seems unconscionable with the spending record that would reach deeper into the pockets of the policyholders at a time of so many americans are struggling to stay afloat. and also seems to be that any company that can afford to send 100 hundreds of employees to these retreats all over the world can afford to maintain reasonable and affordable premium rates for its customers. that's what bothers me on the individual market, we don't see that regulation and oversight on the state level. and that's why maybe on a national level, i don't

president obama earlier this week announced that. there are parts of his bill that i have problems with, or his suggestion. but one of the things i like it if we're going to sell insurance across state lines to individuals, whether in houston, texas, or san diego or anywhere else, i would like to see there is some oversight. on what they're doing with that money to justify those premium increases. and thank you, mr. chairman. >> thank you mr. green. continued with questions, ms. sutton? >> thank you, mr. chairman. and thank you for your compelling testimony. i think that your story speaks to the stories of many americans across the country. including my constituents. to follow up on my colleague, mr. green's questioning, i just like to talk about about the executives at wellpoint. not only do we see the lavish retreats that, you know, pictures that were reflected on the screen. we also know that as premium

rates increase and become more and more inflated and health insurance coverage slips further out of reach for people just like you, it's important to ask where are the revenues going, not only to retreats, but also to executive salaries. wellpoinwellpoint has stated publicly that these most recent premium increases were necessitated by rising medical costs and a shrinking risk pool. that it needs these rate increases in order to stay afloat. and i understand that companies do need to turn a profit. we all understand that. but what i don't understand is how wellpoint can claim that these increases, rate hikes that are literally bankrupting its policyholders, are necessary to stay in business. especially when we see what we see. when it is spending millions upon millions of dollars, saving its top executives. data received by the committee show that wellpoint paid its executives over $347 million in 2007 and 2008 alone.

in 2008, wellpoint paid $150 million to 85 senior executives, compensating 39 executives over $1 million each. that year, when executive made $9,000,000,000.2 executives made over $4 million. i guess i'm just like to ask you, our witnesses, and policyholders how you feel about a portion of your premium payments bankrolling multi-million-dollar salaries in these tough times. ms. meister, do you believe a company that can afford to pay a single executive nearly $10 million in wonder has a right to demand higher premiums from you so that it can quote keep up with a market for? >> no, i don't. and i agree with something ms. henriksen said that she said if i raise my rates like they raise our rates, i would have clients. and that's the same in my business. you know, there's reasonable and then there is just outrageous. >> thank you. ms. henriksen?

>> well, not to be funny but it makes me sick to think that all this money is going to executives in this economy, when sony people are struggling. you know, my industry is really struggling. there are no new hotels being built. there are no, you know, residential, there are no building going on. i suffer because of that. >> and mr. arnold? >> i of course, too, think it is unconscionable. and i believe the number i read was that in the last quarter, wellpoint had a profit of over $4 billion. even if we cut the net is still an incredibly healthy profit. so it just takes, as i said in my testimony, profiteering versus profit making that there is a difference. profit-making is fine. it is down the -- profiteering,

when it affects people like us in the way that it has is just wrong. it speaks to a lack of decency. and decency may not be -- uncertain lack of decency may not be illegal but it is wrong. that's i think it requires government intervention and regulation. >> thank you. i think you all make the case very well. i for one don't think a company that's paying its executives more than $100 billion a year has any right asking americans to subsidize these outrageou inf increased premiums and stripped-down coverage. it's not like you are getting more for what you pay. thanks. >> yield back to? >> the gentle lady hasn't yielded back. where three votes on the floor, and the first vote is the rule to allow debate to begin on antitrust exemption if we're going to take it away from the insurance industry. so it is a rather critical vote. and it is basically down party lines. so i'm going to recess for hopefully we're back here in 20,

25 minutes. and i would like this panel to stay if can. i would like you to stay because michigan ask and i know mr. ho, ms. capps and others had questions just, we would like you to stay. let's try to be back here in about 20, let's call it 25 minutes. 25 minutes, so we're in recess until 12:25. [inaudible conversations] [inaudible conversations] [inaudible conversations]

>> thanks are coming back on what. all the members. let's resume this hearing. when i left i think michigan ask, you are up for questions if i remember correct the. thanks to the panel again for staying. >> thank you, mr. chairman, and thank you, panel. it occurred to me that this panel would only take place of the industrialized nations the united states of america. that in every other industrialized country, they have made the threshold decision that healthcare would be provided in some fashion, maybe to the public sector, often entirely through the private sector, but still to all of their people. the other thing that occurred to me when we look at all three of you, and i guess i would have to add your son, we are talking

about essentially healthy, high functioning individuals, not a bunch of sick people, which underscores, you know, it's hard to reach hard at any age at all without having some sort of preexisting condition. i had, and i don't know where they just disappear to hear, this is from blue shield of california. it's a little old, 2006, a three-page, for column list. it says applicants who have any of these conditions listed below may be declined without medical record review. things like adoption in progress, how about that? breast microcalcifications. i mean, you know, lots of women

have that. diabetes with hypertension, we were talking about diane is the daughter, who has pregnancy of self, spouse or significant other. varicose veins, be a preexisting condition that would deprive people of, you know, no, you can't have this, this in insurance. i wanted to see if we could put up, on the screen, the committee recently learned that these recent premium increases may only be the tip of the iceberg. is anyone here to put up the internal -- there we go. wellpoint analysis of what potential rate increases would do for them. these are various scenarios. the first scenario calculates,

they call them as a f. those are really rate caps. if they left it unchanged. that is, the rates unchanged. the second scenario actually proposes to lower the rate caps to 37%, which is two percentage points lower than the rates that anthem filed with the department of insurance. and the third proposes, and i quote, to remove these rate caps completely. the scenario would result, they say, at a maximum of 228.4 percent for certain plants. and had the scenario been implemented over 27,000 customers would have received a 228% increase. the fact that they would even

consider and do the scenario, to me, it is just incredibly shocking. and i guess my conclusion is that we cannot just leave the insurance companies in the drivers seat deciding how they will regulate themselves according to rates. what our bill did, and what the president's bill does is establish rate review that could actually prohibit some of these rate increases. and i wanted to hear your feelings about that. >> as i said before we need to have a maximum percentage put on of how much insurance companies can raise the rates each year, just like some cities have read stable asian. there will be stabilization of insurance rates. >> let me also say some states

to do. i am a state that does not, one of the 25 states that doesn't do any rate regulation whatsoever right now. . . >> that would, if that's true, that would force them to change their ways as well.

and just very quickly, what you said about unregulated insurance premiums keep rising, it's true. i mean, my rates went up 26% last year, 38% now. why should i have any reason to believe they won't try and raise them another 40% next year? i mean, it's logical to think that they would. >> thank you. member of the full committee, ms. eshoo, do you have questions of this panel? and thanks for being here. >> thank you, mr. chairman, for having this hearing. i appreciate the opportunity to participate, and i'm very glad that we have the rules that allow members from other subcommittees to be able to join you. this is a very important hearing. i want to thank the witnesses. so many members have said you really put the human face on this, and while my questions are not directly for you, but rather the executive, i just thought

that i would enter for the record i did write to ms. braly, the president and ceo of wellpoint, after the news came out about the rate hikes up to 39%. but i think that it's, it's a telling thing that anthem blue cross, the unit, in an e-mail message urged their employees to oppose health care reform. and that e-mail is reported to have said that reform proposals would, quote, cause tens of millions of americans to lose their private coverage. and it seems to me that this panel is right on the edge. given what the increases were. so i think that more than anything the else you've helped to separate, you know, the pretty call rhetoric -- political rhetoric that has gone across the country and really what the facts are. because this is your life.

i mean, you're speaking of real-life experiences. i can't think of a better panel to have come in and testified. this case is not over. i think that there are -- i know that there are many of us that to our last breath will fight for the kinds of reforms that need to take place both many the health insurance industry and health care as well because this simply cannot be sustained. not individuals, not families, not local governments, not state governments, not the federal government and not businesses either. so thank you for traveling across the country to testify. i, i admire your spirit, and i like the way you just keep following up with members and saying it the way it is. that's not often the case with witnesses, so we thank you. thank you, mr. chairman, i'm going to have to leave for my intel committee meeting, but i

thank you again for your legislative hospitality. thank you. >> thank you. well, that concludes questions of members of the panel and of the committee, so i want to this panel for coming. let me just say one thing, mr. arnold, i don't want to get into the health care debate because i think it's more important we hear from you. we've with had enough health care debates, we need to act it and move legislation along. but there were some questions about your premium, what you would pay and what you'd pay underneath the house bill as it was passed. i think mr. burgess asked you some questions along that. those numbers you were quoting from were from the congressional budget office, and that would take place in 2016, and they're not what your current premium would be. plus underneath the house bill you'd have a full plethora of services, you wouldn't be denied because of pre-existing illness

or injury, there's a number of benefits in the house bill so just to clarify the record, that number is thrown out to be more than your current policy would be in 2016, and we don't know what your policy would be in 2016 from anthem at the rate we're going. just a clarification. again, let me thank this panel. >> mr. chairman, all due respect -- >> all due respect are i'll let you go for a minute. >> that was on the numbers published last year. the chairman's correct because none of the benefits are going to -- the taxes, of course, would go into effect on day one. also just a point of clarification, mr. arnold, you made the comment just a moment ago that providers were raising rates irresponsibly. do you have an example for us of a provider that's raised rates irresponsibly? >> i don't, but i think your next witness, ms. braly, will say over and over again --

>> and i am ready for that, i just needed to know if you had some information that i needed to be aware of. >> no, i don't personally have specific examples of that. >> most doctors in my state and i suspect california's the same way, our prices are set by the insurance companies which in turn are set by congress with medicare rates, and private insurance pays a percentage of what medicare's maximum allowable fee schedule is even for those procedures not covered, like childbirth. i do intend to question ms. braly about that -- >> will the gentleman yield to me? >> be happy to -- >> medicare sets rates for the whole country, and it turns out medicare could be less than what private insurance pays in any particular area, but the private insurance companies negotiate the rates, presumably, with the doctors and other health care providers. they and medicare are faced with ever-increasing costs in health care. that is a fact.

it doesn't mean that anybody's doing anything wrong, but the system is costing more and more money. and one of the things we try to do in health reform is not only reform the insurance system so we don't have people who have to fight on an individual basis to get any opportunity to buy insurance at a fair amount, but we try to hold down health care costs overall, and that's important. i just wanted to raise that point, thank you. and join with the chairman in thanking these witnesses for being here. you've been terrific. thank you so much. >> thank you again, we'll dismiss this panel and thanks for your testimony. i'd now like to call up our second panel of witnesses. on our second panel, we have angela braly, president and ceo,wellpoint. cynthia miller, executive vice president and integration

management officer of wellpoint. welcome. it's the policy of this committee -- signs down, please. >> pardon? >> before we get going the, we're not going to allow signs while we're trying to conduct this hearing, okay? yeah. no, no, just put 'em away. just put 'em away. all right, very good. thank you. it's the policy of this subcommittee to take all testimony under oath. please be advised that you have the right to be advised by counsel during your testimony. do you wish to be represented or advised by counsel? >> no. >> okay. i'm going to ask you to, please, rise, raise your right hand, take the oath. do you swear or affirm the testimony you're about to give to be the truth, the whole truth and nothing but the truth in the matter pending before this committee?

>> i do. >> you are now under oath. we have an opening statement, it will be five minutes long. if you would like to submit a longer statement for inclusion in the record, we'll be happy to submit it. we do have your testimony. but, ms. braly, if you don't mind, we'll start with you. >> yes. >> just pull that up. there we go, great. >> okay. thank you, mr. chairman and members of the subcommittee, for this opportunity to discuss rising health care costs and the need for sustainable health care reform. this is a very important week for all americans, and i'm sure you join me in hoping that tomorrow's health summit will be the beginning of a truly constructive, positive process in which every american can have confidence. i'm especially pleased to have been invited to speak with you because i understand the burden that rising health care costs put on families. because of our role in health care, it is often insurers who have to deliver the bad news regarding spiraling health care

costs. there is nothing i would like to do better than be able to report to our members that the medical cost trend is going down. that's why i appreciate the opportunity to explain why health care costs are rising not only in california, but across the country. the increases we're seeing in california are due to factors that we've been sounding the alarm about for years. the rise in health care costs and healthy people opting out of the system when other issues arise such as the tough economic times we're experiencing today. these factors led to the rate increases you've seen from our company and others in california. rising health care costs are driven by many factors including hospitals and other health care providers charging higher rates, new medical technology, underpayment by government programs, the growth in chronic diseases and conditions like obesity, and in aging

population. these increases are generally compounded when younger, healthier members drop their insurance. leaving those who most need health care to foot the bill. these issues are particularly acute in california where our experience has been that medical inflation is in the double digits. also in california we're required to offer coverage through two guaranteed issue programs which by themselves lost almost $70 million in 2009. those are important programs that serve an important purpose, but their costs are ultimately borne by other members in california. unless a legislative proposal addresses the fundamental issue of rising health care costs, it cannot be considered sustainable health care reform. unfortunately, the leading proposals being discussed in washington don't do enough to control cost and don't do enough to get everyone into the system.

we've put forward substantive proposals on both these fronts. my testimony submitted to the committee includes our specific suggestions on reform, but let me highlight just three. first, congress could address defensive medicine and inappropriate care by including meaningful medical malpractice reform in the legislation. second, congress could also require that the principles of evidence-based medicine be used to guide how payments are made. while this may seem like a technical issue, it's these kinds of reforms that can have a lasting impact on quality and cost. third, in reforming the health insurance market congress must enact policies that insure a broad and stable risk pool as they impose other requirements on the marketplace. we know that every facet of the health care system -- hospitals, clinicians, manufacturers, drug companies, payers and we as americans -- contributes to the

growth in health care costs and all need to be called upon to reduce these costs. out of every dollar the nation spends on health care, less than one penny goes to health plan profits. isn't it time to ask, what are we going to do about the other 99 cents? unfortunately, the deals made with the drug companies, hospitals, physician groups and labor unions let the legislative proposals considered thus far without the most important part, the core solution for lower-cost, higher-quality health care. rising costs frustrate all of us. it's a serious problem that deserves not only a serious discussion, but meaningful action. wellpoint is eager to continue to participate in both. while it may be tempting to shift the blame to insurers for rising health care costs, to do so would be the triumph of sound bites over substance. insurers are among the least

profitable part of the health care system, and the part that helps the most in making it meaningful reduction in health care costs. insurance industry margins are dwarfed by the margins of others in health care. real reform needs to focus on the areas where systematic savings could be realized. the elephant in the room is the growth of health care spending. despite the attention we've garnered in this debate, we're the tail on the elephant, and we need to address the elephant. thank you for the opportunity to be here today. this is a critical time for our country and for the health care debate, and i look forward to discussing with you ways in which we can work together to control rising health care costs. >> thank you, ms. braly. ms. miller? >> i have no -- >> oh, you're not going to do an -- okay. let me ask this question, let me ask about wellpoint's motivations in increasing premiums.

i've sort of mentioned it and others have mentioned it, wellpoint's executives -- and in a way, ms. be braly, the profits were not a motivating factor in raising premiums in california. in written testimony you indicated you were disappointed that the critics cited profits as a primary reason that companies were increasing the costs of premiums. so let me ask you this, right there is a document book. on tab 13, please, take a look at tab 13. if we could put it up on the screen. it's an e-mail that was sent on october 7th in response to a voice mail, in fact, i think ms. miller, i think you're the one who left the message, a senior corporate actuarial wrote, the average increase is 23% and is intended to return california to a target profits of 7%. versus 5% this year. so my question is, were you attempting to raise profits to 7% then in california by increasing the premiums? was that the purpose behind this e-mail?

>> i think cindy miller was going to respond to that -- >> okay. it was to her, right. >> yes. it's important to understand that that e-mail was during the process of setting the rates, and it only refers to part of our california individual business. i think it makes reference to the fact that we had a 5% profit in that -- >> previous year, right? >> in 2009. that, in fact, did not turn out to be the case. we lost money in the individual market in 2009 on our california business. and the profit that we have in, targeted in the rate increases that we have asked to implement for 2010 -- >> okay. but you're -- >> is less than 2%. >> but the e-mail basically says we've got to get to 7%, got to increase our premiums 7% so we can add that profit. >> right. the e-mail was sent on october 7th, the rates weren't filed this november 7th -- >> okay. well, then let me ask you -- >> the medical claims continued to -- >> let me ask you one about

november 22nd. two -- go to tab number 22. on it, it's an e-mail of november 2nd. and you said you filed on november 7th from brian curly. i mentioned him earlier. wellpoint's regional vice president and actuarial wrote, note, we're asking for premiums that would put us 40 million favorable. one week earlier mr. curly informed brian sassy that if we get the increases on time, we will see an op-gain upside of 30 million after downgrades and rate cap. i guess my concern is we say public my we're -- publicly we're not increasing rates to increase our profits, but yet these e-mails sort of indicate that you have to have a minimum increase in order to maintain profit. go ahead. >> again, it's important to remember what i just said which

is we lost money in the individual market in california in 2009. and that's not a sustainable business market. so certainly we are talking about profit increases in absolute dollars, but again, when you look at the profit margin that is built into the rates for 2010, it's less than a 2% profit margin. >> well, okay. but, look, we've seen your internal corporate documents that you use a variety of accounting mechanisms to sort of manipulate the profit figure thes. look, we've seen at least five different accounting measures, the methods include pretax income, posttax revenue, operating gains, underwriting margins and profits. if i remember correctly, wellpoint at the end of 2009 in the last quarter, the last 90 days, their profit was $2.7 billion or something like that, right? >> well, let me speak to that because the fourth quarter of '09 was the quarter in which we sold our pharmacy benefit

management company, and that's a company we had had and invested in for years, and our belief was that by selling that company ask partnering with express grips which is a pharmacy benefit management company -- >> okay. >> -- we could do the important thing that many of these panelists describe which is getting lower-cost trucks for our member -- drugs for our members, by that combination. and those earnings now are, you know, no longer part of our company because we've sold that. so when you look at our total earnings for 2009 and look at our net margin which is an appropriate measure to look at other elements -- >> sure. >> -- we were at 4.8%. >> that was your margin. what does that equal in real dollars in 2009? >> that was about $2.835 billion. >> okay. 2.8 billion, that was your profit in 2009 which is a year that everyone would consider was a horrible year economically in this country. and hopefully 2010 will be

better, but what i'm concerned about is our hard-working americans are asking to increase your premiums to the wealth of wellpoint's investors. i mean, look, yesterday -- you had the hearing yesterday in california, right? on rate increase? and anthem president, president margolin -- is that the way you say that? defended a profit margin during the hearing and said it should be about 2.5 to 5% is a figure that he said would be acceptable. in fact, he said, we have no interest in profit beyond the range i describe to you, 2.5-5% is reasonable in appropriate profits. but when your policy holders are taking a hit like the last panel we've seen, you know, it's that group of basically self-employed people, they've taken 30, 40, 50% hit, but it seems like every year you've not to have a

profit. is it reasonable to expect every year companies are going to have profits and we've got to have at least -- it'd be great if we could garon every business 2.5-5% profit. >> you know, actually over the five-year period our profit margin has declined. we continue to get more efficient as a company and as a business, and we are working hard to reduce health care costs and improve access to high quality, affordable health care. so it is, it is important to be a business that sustains, that we have an appropriate profit, and we think a 4.8% margin on a relative basis is very efficient. and when you look at that compared to others in the health care system, you know, biotech companies are 23% profits, pharmaceutical companies are in the 20% profits, we have a chart in our written testimony describing that even community-based hospital margins are in the 6.9% profit marbegin.

so we are part of the health care system that is driving to get more affordable health care for our members. >> the only way we're going to get more affordable is to knock off these profits that are being paid for by the average american. i mean, i don't mind you making a profit but at the end of the year, 2009 a horrible year, you still made 2.something billion dollars and that's not enough? >> we serve 34 million americans across the country, and we feel that it is appropriate for our business to be sustained so that we can be there for those members when they incur those health care costs. we want to be solvent as an organization and be able to continue to invest in ways in which we can get to a more affordable, higher quality health care equation. >> sure. and i don't mean to inject a health care debate into this whole deal, but that's why so many of us believe in the public option. you're killing the average consumer. they can't afford any more. we've got to put an option up there. today we're doing the antitrust

exemption, hopefully that helps. my time is way over. many burgess, please, for questions. >> thank you. i appreciate having an actual actuary at the table. i presume you prepared some actuarial findings and presented those to the state board of insurance, is that correct? >> yes. my team does, by law, is required to do rate filings in which we certify that the rates meet the law and are reasonable. in addition, we had an independent outside actuarial firm, probably the most respected firm in the country, also verify that they thought our rates were reasonable and appropriate and met the law. >> and those went to state regulators? there yes. >> when was that? >> our filing was on november 7th. the regulators -- sorry, the independent actuary reviewed the filing in mid november and issued a letter on december 15th that they believed our rates were appropriate. >> is it possible for you to provide h committee with a copy

of that letter? do we have that in our evidence binder somewhere? >> i believe so. >> we could get a copy of that letter or we already have it? >> we may already have it. it's not in the evidence binder. >> okay. then what was the response of the state regulators to the actuarial information they were provided? that this was outrageous? how dare you? >> by law the state is supposed to respond within 30 days to the filing. we heard nothing from the state until actually christmas eve, and on christmas eve we got a question, several questions from the actuary about one of the products, our smart sense product, and the filing for that. we responded to those questions and then we heard nothing else from the department of insurance until the news broke of the rate increases in the l.a. times. >> i see. you know, you had to know this was going to be trouble. [laughter] you know, 39% rate increase in this climate? you know what we've been doing

up here the last year? you know what's happening at the white house tomorrow? >> yes. >> you knew this was going to be in trouble. you did the report on christmas eve, they passed a bill in the senate, so you knew the landscape into which you were entering, correct? >> correct. >> did you make a judgment as to whether or not this was the best time to do this? there you know, it's always a challenging issue to raise rate, and to address the issue many have brought up, you know, our desire is to have more members. our goal is to continue to serve members and have more members. it's not easy, it's difficult to continue to have to raise rates. the process was underway. clearly, the rates had been filed. we had had this certification -- >> i don't want to interrupt you, but i'm going to run out of time, and you see how mean he is. on tab 18 where we talk about the rate increases, we also talk in an e-mail about a cushion to allow for negotiation margin

expansion. kind of sounds like what we do with appropriators, we ask for twice what we need hoping we'll get half of what we ask for. so did you file this with a cushion, this 9%? >> cindy can speak to that specifically. i think it's important to note when crow look at the individual products in california because of our participation in the hipaa and a high-risk pool option, we did have in 2009 a 68.9 million dollar loss when combine with the the individuals who buy the product in the open market, our loss was about $10 million altogether. so when we price this product for the rates for 2010 that were filed with the department, they assumed we would have a margin of about 2.4% or an after-tax margin of about 1.4%. >> and you felt that even though you knew you were going to get significant negative publicity

because of those facts, you us would be able to justify what the rates were? >> you know, the rates -- >> you knew you were going to get bad publicity, right? there it's a difficult situation, and even to break even the rates would have been in the 20s in terms of overall average, the overall average. and we were concerned which is why we also capped the rates at the top end of 39% because we did not want rates for individuals to go in excess of that cap. >> i'm going to run out of time and i must ask because it's come up already, do you have doctors who are uncon shop my raising their rates in your network? >> you know -- >> my experience with most insurance companies was we took what you gave us. we really didn't negotiate, you know, all respect to the chairman, medicare sets the rates, you guys come in and say, we'll pay a percentage of medicare, take it or leave it, and that is the so-called negotiation that we went through. is california substantially different from texas? >> no. we can talk about what the trend

is with the physician trend various the hospital trend -- versus the hospital trend, and the pharmaceutical -- >> thank you. the hospital and pharmaceutical trend is a much more significant driver. if you took all reimbursement off the table, you'd have a one-time savings of anywhere between 5-18%. that's not the biggest driver in your, in your book of business, i suspect. >> we think the physician trend is around 6% in california. the hospital trend is 10 and the pharmacy trend is 13. >> and, of course, all of the expenditures do flow through generally the physician, that is the physician has a right to write the scrip, so although they're a very small part of the actual cash outlay, they do control -- they tend to be a driver or a con trick to have of costs. i've always wondered why we try to ratchet down physician payment, doctors are normal people in that if you say we're

going to ramp dhet it down, we try to do more to catch up. therefore, we see more patients, order more tests, write more prescriptions. have you guys ever looked at a corporate level of maybe if we pay doctors differently, we could actually get control of this cost curve? >> absolutely. we think the partnership with doctors is the key to changing the reimbursement system so that we're paying for outcomes -- >> you know the representative in california, pete stark, will not allow that sort of interaction to occur, right? that partnership between doctors, insurers and hospitals? >> i think that's an important part of the future of the reimbursement system, to partner with doctors, to look at different ways to reimburse -- >> but we can't. under stark laws we'll all go to jail, so that's off the table s. there any other way we can do