there are some actions we shouldn't allow insurance exearns to do. playing gotcha must stop. insurance companies cannot wait until customers are sick or filing claims to verify their medical history and decide whether or not they want them as a customer. this is what they're supposed to be doing when they sign the member up. if they have unclear information on the application then the plan should not use subsequently acquired information on a basis of rescinding coverage. the company should conduct its due diligence at the time the application is filled in and submitted. rescission should not be a license to find loopholes by investigating someone's medical history whenever they file a claim well after being accepted for coverage. . not if the company hurried through the application process. not if the company blindly accepted most applicants.

and not if the company gladly collected their money with no questions asked. this is inappropriate, and it should be stopped. i understand that companies just like the federal government need ways to protect themselves from insurance fraud. which does occur. some applicants willfully lie on the application to get insurance and pay lower premiums. this increases the cost of coverage for the insurers and other policyholders. when a company discovers this behavior and believes recision is the appropriate action, the burden must rest on the insurer. burden must rest on the insurer. the company should prove the insured failed to disclose material information that he or she was aware of at the time of the contract that would have resulted in different contracts altogether. after all, the company has the money, employees and resources to meet that burden. they're the ones making the assertion and they're the ones ultimately denying the coverage. it's not enough for companies just to send a letter to the insured stating an investigation into their files has begun and if they choose to, send in any additional information to the company.

the company needs to attempt to communicate directly with the insured, his or her doctor, and review all pertinent information to prove the insured did make a material misstatement. the majority requested all case files that resulted in recision in 2007 in four states. four united this was 206 case files. for wellpoint this was 742 case files. to date the committee has received more than 650 of these case files. my staff had the opportunity to review several of these files, including working all weekend. in some there is a documentation or evidence that the insured intentionally withheld pertinent medical information that would have affected their coverage. in others it's unclear whether the applicant was even aware of the condition or notation cited by an investigator in an old medical chart as evidence to rescind. today three individual policyholders will explain their stories and illustrate how they were unaware of conditions,

symptoms or other possible diagnoses that were written in a medical chart that never expressed to the patient. you have to ask yourself, can the person make a material omission or a misstatement if he or she was not aware of a fact. i don't think so. but if i'm wrong, i want the companies to explain it to me. 2008, 2009, these companies entered into settlement agreements with rescinded policyholders and providers in some topping tens of millions of dollars. some of the companies remained in litigation with other rescinded policyholders. i also recognize some of these companies have initiated internal reforms. these include steps to improve their application process, improve communication with the insured during the investigation, and recision process, and offer independent third-party review of recision decisions if requested by the policyholder. i want to know what appropriate actions congress can take and what else these companies can do better to insure that all americans have access to health care coverage.

health care reform is coming. and we need to have a better understanding of the individual health insurance market and its practices. we need to figure out first and foremost how to make quality health insurance affordable and reliable while keeping protections in place to combat insurance fraud. i hope as this process moves forward we work in a bipartisan way to provide a system that achieves the ultimate goal of getting those who need medical care the attention they need. thank you. >> mr. waxman, an opening statement, please? >> thank you very much, mr. chairman. today we're going to hear the results of a year-long congressional investigation into abuses in the individual insurance market. we began this investigation last year when i served as chairman of the house oversight committee, and we continued it this year with chairman stupak's leadership as the chairman of the oversight subcommittee of energy and commerce. as part of this investigation, we conducted a 50-state survey

of insurance commissioners. and we sent document requests to some of the largest companies that offer individual health insurance. we received more than 116,000 pages of documents, and our staff talked with many policyholders who had their insurance policies canceled after they became ill. some of them are here today to testify. and i thank them very much for being here. overall, what we've found is that the market for individual health insurance in the united states is fundamentally flawed. one of the biggest problems is that most states allow individual health insurance policies to deny coverage to people with pre-existing conditions. so if you lose your job, and you can't qualify for a government program like medicare or medicaid, it's nearly impossible

to get health insurance if you're sick or have an illness. this creates a perverse incentive. in the united states, insurance companies compete based on who is best at avoiding people who need life-saving health care. and this incentive manifests itself in a wide variety of controversial practices by the insurance companies. when we know that if people apply for insurance policies, and they put down that they have some pre-existing condition, they're going to be denied. but what we've found is that when people with individual policies become ill, and then they submit their claims for expensive treatments, that insurance company launches an investigation. they scour the policyholder's original insurance application, and the person's medical records to find any discrepancy, any omission, or any misstatement that could allow them to cancel

the policy. they try to find something, anything, so they can say that this individual was not truthful in that original application. it doesn't even have to relate to the medical care the person is seeking, and often it doesn't. they might need chemotherapy for lymphoma, but when the insurance companies find that your coverage was based on a failure to disclose gall stones, they want to cancel your policy, after the fact. it may come as a surprise to most people, but the insurance companies believe they are entitled to cancel the policies even when these omissions or discrepancies are completely unintentional. and they believe that they have the right to cancel policies even when someone else, like an agent, who sold the policy was responsible for the discrepancy in the first place. in addition, they can terminate

coverage not just for the primary policyholder, but they go to terminate the policies for the entire family, including innocent children who did nothing wrong. some insurance companies launched these investigations every single time a policyholder becomes ill with a certain condition. in other words, if you happen to have ovarian cancer, you should prepare -- be prepared to be investigated. it's the same with other conditions, such as leukemia. in the written statements for today, the three insurance companies downplap the significance of these practices, arguing that recisions are relatively rare. but these three companies save more than $300 million over the past five years as a result of recisions. and i'm sure they view this amount as significant. more importantly, however, these terminations are extremely

significant to the tens of thousands of people who needed health care and couldn't get it during these five years because their policies were rescinded. in my opinion, of course, the solution to these problems is to pass comprehensive health reform legislation, and based on the written testimony, i think the three insurance companies testifying here today agree with that assessment. but until that happens, insurance companies deny people coverage, if they have a pre-existing condition, and then afterwards if they gave them the coverage for insurance, they want to see if there's some reason they can rescind it after the fact, after they've already given out the insurance to see if they can re sipped that policy. i think it's shocking. it's inexcusable. it's a system that we have in place, and we've got to stop. mr. chairman, i'm pleased that you're holding this hearing and

i thank you for the time allotted me. >> mr. barton, for opening statement, please? >> thank you, mr. chairman. this is my month for witnesses from texas. last week we had the owner of carlisle chevrolet. today we have miss robin beaton, who is a citizen of walksahatchie. so i want to extend to her the very best wishes and let her and the other two panelists on this first panel know that there's nothing to be afraid of. you speak for tens of thousands, if not hundreds of thousands of american citizens. and the country is very interested through the auspices of this hearing to hear your story. we appreciate all three of you being here. this is an important hearing. it addresses part of the need to reform our health care system. we're going to hear today about a problem under the current system that can occur in the handling of individual health

insurance policies when claims are actually submitted for coverage under those policies. as i just said, i want to extend a warm welcome to our first panel of witnesses, each of you has a personal story that you wish to share. and we know that it's a story that is worth hearing. we also know that it takes courage to testify. and as i just said, there's nothing to be afraid of at this hearing today. we hear of problems as congressmen and women, when our constituents tell us what those problems actually are. today we're going to hear from one of my constituents, miss robin beaton. no one should have to go through what she's had to go through the last several years. in june of last year, she was diagnosed with an aggressive form of breast cancer. and her doctor said she needed immediate surgery. the friday before the monday that she was to undergo a double mastectomy, she received a

letter from her carrier, blue cross of texas, that rescinded her insurance policy. the letter stated that the company would not pay for the surgery. the letter further informed miss beaton that an investigation into her claim for benefits with the company had thoroughly reviewed her medical records, that she submitted when she applied for the coverage, and that they discovered that she had misinformed them on several pieces of information. one of them was that she didn't list her weight accurately. and the other, that she failed to disclose some medication that she had taken for a pre-existing heart condition. the record will show she was not taking that medication at the time she submitted her initial application for coverage. robin's claim in june of 2008 was not for weight control. it was not for a heart condition.

it was for cancer surgery. double mastectomy, for breast cancer. yet her policy was rescinded three days before that surgery was scheduled to take place. it was bad enough that she had to deal with the trauma of breast cancer, but to be denied coverage right before potentially life-saving surgery, quite frankly, is something that no human being should have to undergo. she had no insurance and no way to pay for her scheduled surgery. so obviously it was postponed. she called my office. my staff west to work. they had several conference calls with officials of blue cross/blue shield. in those conference calls, blue cross and blue shield was unyielding. they were adamant. it went to the council, the general council of blue cross/blue shield. and that individual said there was no way they were going to reinstate her coverage. never take no for an answer.

i called the president of blue cross/blue shield. i appealed to him personally. gave him the facts as i knew them, and he promised that he would personally investigate mrs. beaton's case. and he further promised that if the facts were as she said, and i said, that her coverage would be reinstated. good to his word, the president called me back within four hours and said that ms. beaton's coverage would be reinstated. however, precious time was lost. luckily for robin, she was finally able to get the surgery. not through blue cross/blue shield, though, as i understand it. she's now undergoing chemotherapy because the cancer has spread to her lymph nodes. but she is still with us, thank god. and she's here today to tell us her personal story.

her situation is what caused me to draft an amendment to the breast cancer bill last year to protect people like robin by prohibiting decisions of health insurance if nondisclosure information is not related to the claim. not related to the claim an inadvertent. there is no reason that somebody should have their health insurance revoked because of an inadvertent it mission that is not related to the claim that is submitted to the health insurance company. this bill passed the house last year but died in the senate. it is and we introduced and hopefully will be passed this year. i support the right of an applicant to request a third- party independent review of an insurance -- ensures decision prior to pending or deny payments of claims.

i understand there is another side to the story. i understand there are people who try to scam insurance companies. i understand there is a rule of reason, but again if somebody in a virtual -- inadvertently omitted something, that claim should be paid if it is not related to the omission. promote honesty on behalf of the insured and the insurers. congress needs to be confident that there are consumer protections in place to protect people like robin beaton, as well as procedures for companies to protect themselves from insurance fraud. companies need to have open and clear rules on when they terminate policies. applicants need to be truthful when applying for coverage. every american, and this is something that members on both sides of the aisle supports, needs to have access to affordable, quality health care. this is an important hearing towards that goal, mr. chairman.

and i thank you for holding it. i also think that we should give special consideration to one of our panelists here on the dias. the gentlelady from chicago injured herself yesterday. and has a broken leg. and yet she is here today at this health care hearing. so we appreciate you being here. >> if the chairman would. and for natally with good health insurance. i'm happy about that, too. >> and again, thank you, mr. chairman, for holding this hearing. >> thank you, mr. burton. and thank you again in helping us obtain witnesses for this hearing. mr. dingle for an opening statement, please. >> thank you, mr. chairman. i commend you for holding this hearing on the rather vicious practice of post-claims underwriting. and the detrimental effect that such practices have on hundreds of americans. and i want to thank the

witnesses for appearing in what i hope will be an inform a tiff hearing today on which the committee may begin some actions to correct what appears to be a very serious abuse. i remember mr. barton, the way we worked together on this in your outrage last year when we were addressing similar questions. health care costs have risen sharply. in response to this insurance providers who have taken drastic measures to reduce costs and improve profit margins. unfortunately the health insurance industry has attempted to do soy giving in to unscrupulous industry practices, including the practice of post-claims underwriting. i want to be clear, i have no sympathy for individuals who intentionally misrepresent their health status in the applications they submit for health insurance coverage. these actions are dishonest, and have a negative impact on the

cost of health care for everyone else. and they are clearly wrongdoing. they should be punished. however, i have far less sympathy for health care providers, and insurance providers who have made it a customary practice to exploit current laws meant to protect individuals, or to take advantage of the most vulnerable americans in order to turn a profit. they do this by seeing to it that they avoid risk as opposed to practicing good insurance practices. as we've seen time and time again, insurance providers have made a living out of refusing to compete on quality, and chooses instead to compete by avoiding financial obligations at all costs. in the current market, health insurance providers are allowed to pick and choose whom they will cover in the individual market. we have allowed this cherry picking or cream skimming to go

on for years. but when we weren't looking, the industry decided to up the ante. in some cases, industry underwrote countless claims for individuals they cherry picked and then began to quietly punish those individuals when they got sick and used their insurance for its intended purpose, to cover major medical claims. in some cases, industry didn't just drop the individual policyholder, but retroactively re sippeded the contract as if the agreement had failed to exist. they refused to pay hospitals, doctors or nurses, but sought reimbursement for services rendered. to our witnesses, who are appearing this morning to share their personal experience with post-claims underwriting, we will work to insure these practices come to a sharp end. to the ceos testifying this morning, i would like them to know this. we don't regulate for the fun of

it. we regulate when the private sector refuses to honor its commitments to the american public. as we work to reform the nation's health care system, we will work to reform the current health insurance market. we will work to insure such reform will prohibit insurers from excludeing pre-existing conditions or engaging in any other unfair and discriminatory practice. we will also work to ensure these reforms include fair grievance and a fields mechanisms, very much lacking in the insurance world today, and will ensure information transparency and plan disclosure. these new reforms alone will not fix the problems. we will also have to work to ensure that there is strong oversight on both federal and state levels. furthermore, the -- these insurance industry practices are precisely the reason why we need a public health insurance option

included in our proposal to reform the health care system. a public plan that leads by example, and competes through quality and innovation, rather than unfair industry practices is what is needed to keep the private industry in the insurance business honest. thank you, mr. chairman. >> thank you, mr. dingell. mr. ging r, yerks? >> mr. chairman, thank you. generally insurance is a form of risk management that allows individuals to pay a monthly premium in exchange for a company taking on their financial risk in the event of a health care or catastrophic loss. health insurance, on the other hand, is not typical insurance for a monthly premium individuals purchase health insurance to financially support them in the event of a catastrophic incident, such as a broken lig, as the lady from

chicago just recently experienced. or surgery. patients also use their insurance for such things as doctor visits or monthly prescriptions. in some respects, health insurance has become the means by which patients see their providers and they receive treatment. primary responsibility for regulating the individual health insurance market rests with the state regulators. however, in the health insurance portability and accountability act of 1996, hipaa, congress made very clear that an individual insurance policyholder has a right to guaranteed renewability. an insurer must renew on continue an individual's existing coverage unless some specific exception is met. those exceptions include a policyholder moving out of a network plan service area. or if the policyholder intentionally, intentionally

misrepresents material facts concerning their condition when contracting with the insurer. i believe it is unfair for an individual to be denied coverage for a claim when he or she has been upfront about their condition. the play by the rules of the contract. they paid their premiums on a regular timely basis. only to be denied coverage when a health care incident arises. as described by my colleague, mr. walden, what we would call post-claims underwriting. the impact it has on patients and their loved ones can be devastating. i have actually personally experienced that in my own family. and it literally took an act of congress to change that. with these thoughts in mind, i look forward to the testimony of our witnesses today. i want to thank the entire panel, this first panel, particularly, as well as the second panel for coming in today

and sharing your stories with us. and mr. chairman, i look forward to the hearing. and to the questions. and at this time i yield back. >> mr. green of texas for an opening statement, please. >> thank you, mr. chairman. and i think all of us appreciate you calling this hearing today, because like my ranking member from texas talked about, we deal with this all the time through our constituents. as a state legislator in texas we've had the same problem for many years. and i appreciate you bringing this out. and hopefully we'll address this in our health care reform. i want to thank our witnesses for being here today. most individuals in the country have health -- or insurance through their employer. medicare or medicaid. but millions of americans do not have insurance through their employers, or through the public market so they turn to individual insurance market to purchase insurance policies. individuals who purchase insurance through an individual market must go through an application process and include any mental, physical or chronic

conditions. insurance companies are supposed to review those applications and review the applicant's medical history before approving the individual for coverage. oftentimes medical history never occurs and the insurance companies will cover individuals, who have conditions they would not necessarily cover. these individuals believe their coverage and when it's current, when they submit a claim they often find themselves subject to that medical history investigation and dropped from their insurance and liable for all claims under the policy. in other instances individuals submit a claim for serious illness such as cancer and find themselves subject to a medical history investigation, and dropped from their policy because the insurance company claims the individual did not disclose a medical condition when filling out their initial application. both these instances leave the individual without health insurance coverage and uninsurable because they have to report having their coverage rescinded. individuals who are undergoing medical treatment for conditions such as cancer are dropped from their coverage, often face life and death situations because the

insurance company does not want to pay for their treatments. i can't imagine the pain and suffering of these individuals go through at the expense of an industry seeking healthy patients to make a profit. a few states, including texas, have taken actions to prevent companies from post-claims underwriting. we need to examine the individual market and ensure individuals never have to face their coverage for simply using their coverage. mr. chairman, again, i thank you for calling this hearing. i yield back my time. >> mr. burgess, three minutes for an opening statement, sir. >> let me say at the outset, i do believe in the individual markets. i believe it has a place in this country. and indeed, i was a client and a customer in the individual market for my family's coverage. for a period of time. but i also believe that the barriers that we, the federal government, the congress puts in place on the individual market sometimes creates unnecessary difficulties for the people who

sell on the individual market or the people who wish to be their customers. but no one can defend, and i certainly cannot defend the practice of denying coverage after the fact. and i cannot be comforted by the fact, or the statements that are made that this is in fact an infrequent occurrence, because as the cases in front of us at the witness table demonstrate this morning, there is no acceptable minimums to denying coverage after the fact when the coverage was dully paid for. and entered into in an honest fashion, and then only when the coverage was required, was it found to be not there. now, i don't think anyone on either side of the dias believes anyone would lie about something on a medical history. maybe fudge weight a little bit. maybe the number of times we actually go to the gym or what we actually do there. but no one would willfully do that. the question before us today is

do people intentionally lie to manipulate companies in order to give coverage when they know they have a preexisting condition and the legal jargon we apply to that is recision. and should insurance companies post-procedure be allowed to terminate individual contracts based upon the omissions of the disclosure of a preexisting condition, whether it was intent on behalf of the individual seeking coverage or noflt. i'm troubled by that inability to distinguish between those who act with fraud and those who honestly answer broad, vague or confusing questions on the contracts to obtain health coverage. those are not equivalent conditions. an omission without intent does not signify fraud, and no insurance company who hides filling out their requests for insurance shouldn't be protect. intent is crucial because those who act fraudulently should not be protected by the law nor should it be our desire to do so. it is interesting to me that all of the insurance companies today th w