assure you we take this responsibility very seriously.@ inner riff and we determined it is necessary to rescind coverage

and after a thorough investigation of the facts and compliance of state laws and regulations we follow practices and procedures designed to ensure fair processes for the individual. and as indicated, our use of recision is rare, less than one-half of 1% of individual insurance policies in 2008 were terminated or rescinded and in each case the effective customer was afforded the right of appeal. in conclusion, we look forward to working with this committee, the congress, state and federal regulators to continue to expand access to affordable health coverage in the individual market. thank you. >> thank you. mr. sassi your opening statement please. >> thank you chairman stupak, ranking member wilbon and members of the committee for inviting me to testify before you today. i am brian sassi, president ceo

of the consumer division of wellpoint. we understand the impact these decisions can have on individuals and families. we have put in place the theroux process with multiple steps to ensure that we are as there and accurate as we can be in making these difficult decisions. i want to emphasize that rescission is about stopping misrepresentation that contribute to the spiraling healthcare costs. by some estimates healthcare fraud in the u.s. exceeds $100 billion, and now large enough to pay for covering nearly half the 47 million uninsured. recission as a tool employed by wellpoint and other health insurers to protect the vast majority of policyholders to provide accurate and complete information from subsidizing the cost of those who do not. the bottom line is rescission is about combatting caused her been by these issues. if we fail to address misrepresentation the cost of coverage would increase making coverage let's affordable for existing and future individual policyholders.

i would like to put this issue in context. while most people the war ended the age of 65 obtain health insurance through their employers some 50 million americans purchase coverage in a voluntary market. in a market where individuals can choose to purchase insurance at any time health insurers must medically underwrite applicants or current health risks. if an individual buys healthcare which only when he receives no-- need healthcare services the system cannot be sustained. well we appreciate that this is a critical personal issue individual market rescission impacts extremely small share of the individual market membership. and our experience we believe more than 99% of all applicants for individual coverage provide accurate and complete information. in fact as a percentage of new individual market in rome during 2008, we presented only one-tenth of 1% of individual policies that year.

health-insurance surfaced in the media in 2006 and 2007 generating public concern about what you are talking about today. armoring point today is the same as it was then, the voluntary market for health insurance requires we protect their members from costs associated with fraud and material misrepresentations. otherwise the market cannot be sustained. in response to the public concern of the practice of rescissions in 2006 wellpoint anew took a thorough review of our policies and procedures. following the review wellpoint with the first insurer to announce the establishment of a brady of robust consumer protections that ensure recisions are handled as accurately and appropriately as possible. these protections include one, reading application review committee, which is staffed by a physician that makes a decision decisions, to cup, establishing a single point of contact for members undergoing a recession investigation m3, establishing

an appeal process for applicants to disagree with our regional determination, which includes a review by an application review committee not involved in the original decision and then in 2008, wellpoint was the first in the industry to offer a binding external independent third-party review process for rescissions. we have put all these protections in place with multiple stetz because the cover millions of americans and want to be as fair and accurate as we can be. some have asserted that health insurers provided systematic reward for the employees regarding decisions. this is absolutely not the case that wellpoint. i want to assure the committee that there is no wellpoint policy to factor in the number of decisions or the dollar amount of unpaid claims and an evaluation of employee performance or in calculating the employee's salary or bonuses. in response to policymaker interest and in acting consumer protections related to rescission wellpoint is proposing a set of regulations

with new consumer protections. i about lion decent my written testimony to the subcommittee. in addition the health insurance industry has proposed a set of comprehensive interrelated reforms to the individual health insurance market as a whole. the centerpiece of this proposal is the elimination of underwriting combined with an effective enforceable personal coverage requirements. in other words insurers sill to all applicants regardless of preexisting conditions as long as everyone enters the risk pool by purchasing in maintaining coverage. this would render the practice of recission unnecessary. our proposals are examples of how we are working to find common ground on these issues so we can make quality affordable healthcare available to all americans. thank you for the opportunity to discuss this issue on our proposals with you and i look forward to your questions. >> thank you. ms. pollitz your opening statement please. >> thank you mr. chairman and members of the committee. i study private health insurance and its regulation of georgetown

the. thank you for holding this hearing today on health insurance riches and. is a series issue but was importance and the problems explorative they can teaches broader lessons that will be important for healthcare reform. the individual market is a difficult one as we all know and because it is small and voluntary an vulnerable to adverse selection there has been a lot of resistance to enacting a lot of incremental reforms to govern practices in the marketplace however with the enactment of hip but in 1996 the congress did that to apply when import rule broadly to all health-insurance including individual health insurance and that is the belove guaranteed renewability. prior to hipaa individuals and small employers to buy health insurance to make claims would sometimes have a covers canceled and hipaa sought to fix that by requiring and i quote except as provided in this section a health insurance issue with that provides individual health insurance coverage to an

individual who shall renew or continue to enforce such coverage at the option of the individual. only narrow exceptions to guarantee ernabel dear permitted gambit prospective policyholders behavior the policy can only be renewed or discontinued, can be renewed or discontinued only of individual moves out of the service area fails to pay their premiums or commits fraud. congress relies on state to adopt and enforce hipaa protections and the federal government is supposed to direct wind force when states do not. red states implemented hipaa they adopted the renewability rule but other conflicting provisions in state law remained unchanged. in particular laws governing so-called contest ability. continue to permit insurers to engage in's claims underwriting and present policies or deny claims based on reasons other than fraud and failure to pay premiums for the state was create a window usually two years, when claims made under policy can be invested to determine whether they may be

for a preexisting condition. after that period a policy can be rescinded or claim denied only on the basis of fraud but during the window, if they claim submitted by a new policyholder the original application for coverage is reinvestigated and if any even unintentional material misstatement or a mission is discovered consumers may lose their health insurance. that conflicts with hipaa. clearly when it comes to's claims underwriting protection against fraud it is important but there's evidence some insurance companies are not nearly as careful as they should be in their initial medical underwriting and relying instead on's claims underwriting to catch their mistakes later. applications for coverage may ask broad, vague and confusing questions use technical terms that make it very difficult for consumers to answer accurately and completely. or, policies that, other follow-up that should occur in the initial underwriting may not. for example, if a 62-year-old

submits an application indicating absolutely no health problems or health histories, that the application may be considered in coverage issued without further investigation at the time of application. market competition and profitability create pressures on medical underwriters to do their jobs more quickly and cheaply. however if medical underwriting is allowed in health insurance, it has to be completed up front before coverage is issued because the recent sub-prime mortgage scandal where banks issued mortgages without adequate screening of consumers' financial status offers an analogy. win insurers issue medically underwritten coverage without carefully screening and applicants shall status and rely on's claims investigations to avoid incurring a loss consumers are vulnerable. how extensive is this problem? it is hard to say. the industry has offered its own estimates but official they are lacking and that is troubling because the federal governor has not contracted this issue. at a hearing of the government

oversight committee last year it wins for the bush administration testified she had not acted on press reports of inappropriate decisions are ethan looked into them because she did not appear aware, appear to be aware of complex and state law and she testified she had only four people on her staff who worked part time on hipaa on private insurance issues. in conclusion mr. chairman this investigation into the health insurance rescission has trained a spotlight on an important question. if the congress enacts a law or an entire healthcare reform proposal, how would you know if that law is being followed? it is fundamentally important that along with federal protections for health insurance you also enact reporting requirements on health insurers and health plans so that regulators can have access to complete and timely data about how the market is working in order to monitor compliance with the law. congressman the laura has introduced a bill to create an office of, the federal office of

health insurance oversight that establishes such reporting requirements on insurers and that appropriates resources so the federal government and state insurance departments together can carry out those responsibilities. i hope congress will follow her leadership and make adequate oversight enforcement resources part of healthcare reform. >> thank you and thank you all for your testimony. we will go to questions. mr. sassi, let me ask you this. you threw a bunch of statistics gaddus but i was looking at the state of california alone and it seems to me if i remember correctly in july 2008 anthem lacrosse which is a subsidiary of wellpoint paid a 10,000-dollar fine and had to reinstate 1,770 rescinded policies and then in february of 09 once again california and then across had to pay 15 million-dollar fine to reinstate over 2300 rescinded

policies and then another settlement, the 5 million another 450 so it seems like in the last year you have had to reverse 4500 decisions and pay a fine of $30 million just in one state. is that true? >> i don't believe the numbers are exactly accurate. but, the premise is accurate. the issue of rescission circuits and the media particularly in california i believe in those six and seven in shortly thereafter one of our regulators initiated a, and audits, a shoed audit findings. we disputed the majority of those findings and our response has appended to that audit report. the regulators subsequently did change. >> according to the department of management of health in july 08, last year, july 17, 2008 you entered into an

agreement with california. that is over 1700 people in a 10 million-dollar fine and in february 2009 california department of insurance also put uttar ripley's-- release they paid 50 million-dollar fine and had to provide reinstates 2500 people so according to my map that is just over $4,025,000,000 in fines, right? >> yeah, there was not a 50 million-dollar fine to the department of insurance. irregardless of fact, companies enter into-- individuals enter into settlements. >> let me ask you this, why don't you just that these policies before you ever collect the premium? why do you go to these policies and make sure there are no problems before you enter the people? only one state requires you to do that and that is connecticut, right?

>> chairman, we to investigate ã@ @ @ @ @ @ @ @ @ gu)rdn#@ @ @ that would trigger an underwriter to investigate. >> let me ask you this. in the book right there and i

believe it is tab number lupton, that is our document. you gave us wellpoint provided a list of conditions that automatically lead to an investigation post underwriting, okay? and for wellpoint, the list of conditions that trigger a recession investigation includes diseases ranging from heart disease and high blood pressure to diabetes and even pregnancy, so what did these conditions have in common that would cause you to investigate patience with these conditions for a possible recession? you have 1400 different conditions which would trigger, according to your documents, trigger an investigation. >> chairman and investigation does not mean that rescission actually occurs. for example in 2008, there were over 16,000 fustigation and 92% of this were dismissed. in no action was taken. >> right but what you have 14 different investigations to

trigger an investigation? what is the common theme that would trigger an investigation? >> i would say there is no common theme other then these are conditions that have the applicants disclosed their knowledge of the condition that the time of initial underwriting. we may have taken a different underwriting action so that is what the investigation really is about, is to determine that the applicant have the condition, did they know about the condition? >> i thought you said they did prescreening before? >> we do. >> why would you have to go back? if you screen them before and there was no problem why would you have a list of 1400 divoting conditions that triggers investigation? if you are prescreening, if you are prescreening is good he would not need a list of 1400? >> there are those among us that are not truthful in completing their application. >> in 1400 different areas that applicants like?

or is it a cost issue? these are 1400 expensive areas, aren't they? >> rescission is not about cost. a pharmacy claim that is $20 could trigger something. >> if it is for a certain condition, right? heart is these? >> not necessarily. >> alright. my time is up. mr. walden. >> thank you mr. chairman. i would just like to ask each of the company's present, is it your company's policy to deny coverage to any applicant that discloses that he or she has had previous policies rescinded? you heard some of the witnesses today sade look, once look at rescinded, no company is going to write me again on an individual policy. is that correct, mr. sassi? >> i am personally aware of that policy.

>> mr. collins? >> sir, we do have that question on our application but i am not aware as to whether or not, what the underwriting guidelines are so we ask if you have been rescinded or decline by another carrier. >> but you don't know what happens with that information? >> no sir, i imagine it triggers an investigation but i don't know if there is an underwriting policy link to the. >> mr. hamm? >> yes we would not provide coverage in the situation. >> so, do you ever look to see if they rescission, the circumstances of ground and other companies rescinding of the policy? before you just-- if they check the box and says yeah i was rescinded in the past? >> our under wert-- underwriting guidelines are that we would not issue the policy. >> mr. collins, can somebody tell you, is that your

underwriting policy? the i don't know senator but i would be happy to give back with you on an answer. >> mr. sassi is that your company's policy? >> again i am not aware of the policy. i would be happy to research it and provide a response for the record. >> eula biss lucette here in heard the testimony of the prior witnesses and some of the information we have seen indicates there are mistakes made in rescinding policies at least from our standpoint and i think u.s. settled some cases along those lines. after hearing that testimony, do you think it should be our company's policy to just not issue a private insurance policy to somebody who has been rescinded by another company? should that be the policy of your company? >> well, as i stated for the record i am not aware that is a company policy. >> i stipulated that. >> a doctor should be considered

>> but i'm hearing at least from mr. hamm that it is your company's policy that they are rescinded by another company it is a no go coming to your company. that is correct, right? i heard you correctly. mr. collins, once you find out whether it is are not come at you think it ought to be? ..

investigated and considered. >> most of your company policies approved the decision to rescind if an applicant made any material misrepresentations or omissions in the applications and i understand that. how does your company ensure the applicant was aware of the condition or notation its? we have had testimony along those lines, and we have seen some in some of the files where they say you know, my doctor never told me that. and we have letters from physicians who say that's correct. i make notes of the time in the medical files. i didn't tell the patient that. where's the balance here? mr. hamm? >> we have a very fair and

thorough process determining if there was a material misrepresentation. the process revolves several layers of review and a review panel including a medical doctor. in the process we gather all the available information with respect to persons use of medical services including medical records as well as the information on their application. and we will do a detailed research and look at each situation based on the facts make a determination whether there was material misrepresentation when the policy was underwritten. >> do you look at the case files, do you look at the records, you communicate directly with the physician? >> we will communicate when it is necessary. >> to determine material misrepresentation? what happens if the physician says i never told a patient that? >> it's difficult to speak of i apathetic called the situation. depends on the fact of the time

i can tell you we do not rescinded policy of the applicant was not aware of the condition. >> mr. collins? >> senator, we afford the customer the right to appeal and we accept statements and information from the customer and physicians with regards to the circumstances of the recession and we would take that into account. i think this fair minded people would say if an individual did not know of a condition of was noted in the medical record then that would not be grounds for recision normally. >> mr. sassi? >> we also have a thorough process when we initiated the recision investigation we reach out to the member and share the information we do have and ask them to provide us with any coents or other relevant information and all of that information is used making a recommendation and all that information is provided to our application review committee that actually makes the revision

decision. we would not rescind a member that we could determine did not know of their condition. >> in mr. hamm's company a week and a half or two weeks ago started this independent third party review opportunity, correct? >> that is correct. we recently implemented that. >> and i commend you for that. that was a good move. in your company mr. sassi, do you have an independent review panel that an inch word could go to? >> no sir, we do not have an independent review panel. >> do you plan to go that route? is it something worth thinking about? >> it's under consideration, but we haven't made that decision. >> mr. sassi? >> ,, we were the first insurer to implement a third party review and implemented that in july, 2008. >> last july. my time is expired. thank you, mr. chairman. >> that is because california made you do it, right? >> it was not.

>> okay because in your opening statement you said you announced robust consumer protection so i want to know what is the difference between announcing implementation if you've implemented those robust consumer protections. had you implemented those robust consumer protections in your statement? >> yes, absutely. in my written testimony to the committee we outlined ten recommendations. we have implemented eight of the ten recommendations. >> eight of the tama, are there. okay. mr. hamm, you said you would not reject or rescinded contract of the policy holder had no knowledge but that was the raddatz case. he had no idea he had gallstones and an aneurysm and your company rejected him. >> mr. chairman, i would really like to comment on that case but due to privacy concerns i am not able to but i can tell you that in situations where we uncovered

that the individual was not aware of the condition we would not go forward with precision. >> do all of your clients and policyholders have to get a hold of the attorney general to get it done? that's what raddatz had to do a duty like him twice. >> we have a very detailed appeals process. in fact, after the three levels review and the entire committee voting for recision we notify the customer, we give them 15 days, we delayed the recision giving them an opportunity to respond with additional information and when it does come in we have a different underwriter look at the appeal and they may appeal as many times as they would like. >> raddatz only had two or three weeks to get his stem cell. >> we go through the process as fast as possible. >> i apologize i didn't see you there, you changed the color of your suit. i will go to your four questions. >> california was -- michigan

was still in the indian territory. we don't need to be overlooked. [laughter] we didn't win that argument though. normally, we are confronted with the question do we need new federal legislation? and the gentleman from the insurance industry have all human formally told us that if we will pass a federal mandate having everybody mandatory elite in the insurance pool that all of these problems will go away. what i find interesting, is you brought up a question that nobody has seemed to answer. in your testimony you point out in 1996, the hipaa revisions required individual health insurance policies that not only is it a guarantee of free nobility, but you say

continuation enforced. now do you interpret that phrase to mean the mom cancellation that we have been talking about? >> yes. >> and if so, if that is the law that has been in place since 1996 means why are we having this discussion? >> well i am not sure if i can answer the second question, but i think i should say i am not an attorney. i just read english and the words say continue will enforce and the only exceptions among the ones we are talking about today are fraud and that is inconsistent with what these other kind of post-claims underwriting guide lines or provisions that are in state law provide for, which say fraud is the only defense or the only reason for canceling after a two year period. savitt essentially new policyholders