the insurance industry kind of gets a do over and gets to look aãh@ @ @ @ @ @ @ @ @ @ @ @ @ @ r unless it is elevated to the level of fraud. >> that is correct. >> and i would ask the entire panel, are you aware of any court interpretation or any

question that has ever been raised as to the applicability of the section 27428 of the public health service act as it relates to the issue we are talking about today as to whether or not in fact does preclude cancellation for whatever we might call it, whether we call it post review underwriting -- >> con gutzman, may i speak to that? >> yes. >> this is a legal issue, but i do not believe recision is considered a monreal one. >> well, but it doesn't just stop when it says shall renew. it says or continue in force. i guess if you raise the phrase continue in force that means the same as renew then it would actually be a redundant phrase which the wall generally does not favor redundancy. has the suburban challenge,

ms. pollitz, anybody ever known of this being raised before? >> i have no knowledge. >> let me go into the second part of my question, and that is we then go to the states having their statutory period generally two years as has been pointed out for the review. but mr. hamm, you pointed out under your policies i believe you said you gave the potential customer ten days to review the application and notify the company of any errors and ten days to just say we don't want to have the policy in affect. are there any states that currently have in place a period of time for insurance companies to mandatory early review for these kind of miss statements? in other words, review the medical records other than the two-year period? do any states have a shorter timeframe?

>> i am not aware of that. we comply with all state statutes and i think it is almost all states we have attend a look where we send the customer a copy of the application, reminded them that they are attesting to the accuracy, ask them if they have any questions or changes, and then as part of the policy and welcome letter we reinforced the importance we received will be disclosed information appropriately. >> if something was went to be rejected based on information that was in an application or information of medical records that for whatever reason were not disclosed, it seems to me to years is a rather lengthy period of time, and in practical application, it seems even in that to your period it takes some other triggering mechanism to institute the review that there is no normally dictated review on the applications on

less something triggers it or brings it to your attention. should there be a time frame shorter than this to your period and should there be a review that takes place prior to the triggering act taking place? >> let me clarify that we do not post claims under light. we ask information of every single applicant of the company and 88% of the time we receive additional the information from them and we ask them to fully disclose all the information. it is only when we are aware subsequently that there was information that was omitted or inaccurate that we would investigate whether a recession would be made. >> but that would be the trigger an act. and you wouldn't know about that unless something in bye way of a pharmaceutical being prescribed or an office visit in the doctor's office or hospitalization -- >> that is correct.

>> when asking is as you give the policyholder ten days to figure out if it is correct should there be a comparable, maybe longer -- obviously i think longer -- period of time and which the company, without some triggering act, should be required to review the applications and say hey, we think there's something wrong or ask for additional information, rather than waiting until people get in a posture where they probably are on insurable at the time the issue is raised? >> something to discuss and give thought to. >> thank you, mr. chairman. >> mr. burgess for questions. >> thank you, mr. chairman. that's the last point of mr. deal's is excellent and likely would have eliminated the problem for at least one of the three witnesses we had in front of us this morning but let me just ask mr. hamm and mr. sassi, if you're to hear the witnesses of the individuals that

testified, what do you think after hearing that? is that something that -- and again, coming from this at the perspective as a customer of the insurance market at one time and maybe again in the future. i recognize the value that you bring and i want you to be able to continue to do the type of business that you do but you heard the opening comments of the chairman of the subcommittee this morning. there is a move afoot to do things in a way that would be very difficult for you to do business in the future and i for one would not like to see that happen but tell me what your impressions are after hearing the testimony that you heard. >> i would be glad to respond to that and i have to say i felt bad and i have a lot of empathy for the people impacted and i know in my own life i have dealt with the cancer and i just have a lot of sympathy and concern for the people and it's my hope that there will be changes made that this will no longer be

necessary. it's just that today when we have a voluntary system of insurance where people choose we have to collect information up front to underwrite, and if we didn't have that process, then people would wait until they had a health condition before applying for coverage and the rates would be much higher than today. i chaired the group that put forth proposals and in our proposal, we suggest that the country should move towards a guarantee issued environment with no pre-existing conditions being excluded as long as everyone is required to participat. if everyone participates there's no need for recision and increase for those covered. >> you have brought that up. what do you do with the segment of society that isn't going to participate? negative segment of the society will exist whether it's the individuals without the benefit of social security number, whenever that number is, 10 million, 12 million.

people who just don't comply. we live in a free country and they don't like mandates. but the people who don't conduct the with irs people are willing to fly under their radar. what then will these people be rate on whether or not they had a pre-existing condition or are they absorbed by the tax paying public who does play by the rules and pays their bills on time? >> we believe that the requirement to purchase insurance should be enforced. we believe those that don't have the means should be subsidized and we would look forward to working with congress to find a solution that is workable for all americans but i believe every american must have access to high-quality health care and we have to work together to find out how to make that happen. >> you and i will fundamentally disagree and the approach taken by congress with the development of the party program and medicare for the false initially rolling it out, creating programs people actually want

and that are actually useful will be a better way of going about that. the coverage rates for prescription drugs among the seniors now in excess of 90% of high satisfaction and clearly in my mind that is a better strategy than simply layering another mandate on the american people or the employers of america but i don't disagree something needs to happen and let me just take this to a different level and again i want to pose this question to all free and i would like an answer from all three on this. if there were a system of universal coverage without government intervention in the marketplace, is there a better way to accomplish the goal of universal coverage without that excess market manipulation by the government? insurance companies have used evers methods to deny or cancel policies of the individual market apparently it happens all so in other markets to the extent this has been allowed into law. the business interest almost

dictate the actions get some of us have argued if we let the market work you could make an innovative product for all. so here is my question. will you today publicly clearly come it right now regardless of what happens in washington, whatever decision we reached on health reform you will design a product for all populations regardless claims history but also economic status and i would like an answer to those questions individually for all populations regardless of claims history and all populations regardless of economic status what mr. hamm, why don't you go first and we will go down the road. >> i'm having a little difficulty following the question, sir. if i may understand specifically what you're asking. >> regardless what we do with individual or business mandate, an employer mandate maybe we don't do a mandate at all, but

you have within your power designed product so that all populations regardless of claims history could be covered would you be willing to do that? >> in the current system that wouldn't be feasible. we need an environment where all americans required to participate before we could get those assurances. >> so you would not be willing to alter business practices if there was a way to do that to provide coverage for a greater segment of the population even with claims history? >> if the reforms proposed by hipaa are adopted we would be glad to participate in the system but it is necessary that all -- pettis paid when they say a system where people choose we need to have the process of assessing risk at the time of the application. >> with respect reforms are not going to happen. you are going to get a plan as your chairman this morning. mr. collins, can you answer briefly would you be willing to design such a project?

>> but i would respectfully have to agree with mr. hamm a guaranteed issue product that would fit all people and affordable prices is economically practically impossible. but i would suggest is hipaa also create alternative coverage mechanisms for each and every state so each state is supposed to have higher risk or alternative coverage mechanism and these high risk pools have been underfunded some of the things that could be done right now today is to increase the amount of funding going into the high-risk pools so that people that have those series of issues otherwise uninsurable on the individual market have a place to go that is affordable and affords them the care that they need. >> on the issue of high risk pools i think the private sector is going to be required to make the contribution to that as well and that in the private-sector with citigroup insurance for individual markets there must be a product that is available to everyone regardless of their claims history.

yes they may require federal subsidy and state subsidy and guess the private sector may have to bring some to the table as well. mr. sassi -- >> last question mr. burgess, you are going on. >> regardless of claims history in the population would she be willing to make a product available? >> i have to agree with my colleagues in the current voluntary individual market, we couldn't guarantee issue policies where people could jump in and out of the insurance market. we have had experience of states that have implemented guarantee issue without enforceable personal coverage mandate and unfortunately that has resulted in significant cost increases that have to be borne by others in the individual markets so the answer would be no. >> mr. chairman, you've been generous with your time. again, i will stress this is going to take creative thinking

now sidewalks. i don't think you're going to get what you want in the proposal. you're going to get something like the chairman now live at the beginning and i would urge you to think creatively about this because this is the difficulty that leads us where we are today and i can't help you -- >> questions and speeches are over. >> i cannot help you if you are not willing to move. thank you. >> it is not my plan mr. chairman i would argue with you now, that's for another hearing. we are going to have votes in a each of you provided to the committee information relates to certain medical conditions that automatically triggers investigation in a possible ground recision. mr. sassi you had conditions that automatically triggers investigation. mr. hamm on behalf of assurance there are 2,000 trigger

investigations provided these include breast cancer, ovarian cancer and brain cancer. why does cancer trigger investigation? >> what triggers the@@@ @ @ @ @ application that would delay the process significantly delay in people's access and have a tremendous amount of cost to the product. the majority of applicants provide all the information

asked for a time of the application. >> so it's a cost issue. two costly to get the medical record. >> it would add to the premiums the customers would pay by a significant amount. >> does it cost $40 to get medical records? >> i am not familiar but it would deily the process. >> but is it went to be better to delay the process to make sure a person is injured as opposed to when they are going for cancer like mr. raddatz? >> the vast majority of customers provide appropriate information. >> said mr. raddatz by you delight him coverage, it? >> unfortunately i cannot comment on that particular case. >> mr. collins, asking the same question you insisted you also music computer ice system to identify cases to automatically investigate for possible rescissions but there is no one at your company who knew how the computer decides which files should be reviewed so, is it the case united has put the decision

of which patient will have the health care treatment interrupted by recession investigation in the hand of the computer that no one understands? >> no, sir, that is not true. i haven't been produced to the discussions between my staff and your staff on this issue. we have been trying to come to an understanding about how to best provide the data in a format that is easily understandable but let me just say -- >> can you say what conditions the computer considers for a possible investigation? >> no single factor is used to trigger an investigation so we look at the system looks as its screening claims that come in at the effective date of the policy, effective date of the procedure, severity, type of service and diagnose code, those are all factors that go into the algorithm -- >> the algorithm no one from the company could tell what you commit to produce whatever the

witnesses or documents are necessary to explain your algorithm, computer selection process, could you do that? >> yes, sir -- we are trying to put it in a format that would be acceptable to the committee. >> dr., professor pollitz do you see a common threat? heat got 1400 conditions, 2000 conditions in the computer that it can't explain. why do you think they have all these rescissions? >> i think the common thread is that if somebody makes a claim for anything serious in the first year there is an opportunity to go back to review the entire transaction to see if it's going to be withdrawn. i think that is just the common transaction and i think it is not consistent with your federal law and what ever else you may do going forward -- >> as to the hipaa law leave it

to the states and hipaa has to be enforced by the federal government cns, correct? >> that is correct. -- of the value of the lot depends on the enforcement of the law? >> yes it does and if there is a fine of $100 per day per affected individual for noncompliance with the law. >> let me ask each of the ceos this would you commit that your company would never rescind another policy unless there was intentional fraudulent misrepresentation in the application? >> i would not commit to that. >> how about you, mr. collins, would you commit to not rescind unless there is intentional fraudulent misrepresentation? >> no sir, we follow the state laws and regulations and we would not stipulate to that. that's not consistent with each state. >> how about you, mr. sassi, can you commit that you will not rescind thomas there is intentional fraudulent misrepresentation? >> i cannot, the law of the land and the majority of states. semidey think it is fair to

recent somebody for an innocent mistake? >> i think that playing the knowing standard is much more objective and -- >> on the first panel no one had the knowledge and they were all rescinded -- >> i'm sorry? >> on the first panel no one had a misrepresentation but they had their policies rescinded from ms. beaton all the way down to the witnesses not material misrepresentations. >> we are to determine the applicant didn't know about a specific condition we would not rescind. >> okay. ..

they were being treated for acne? does not bother you? >> yes sir, it does and we regret the necessity that that has to occur even a single time and we have made suggestions that would reform the system such so that would no longer be needed. >> well, i haven't heard your opening statement. i glanced at them and nyet not heard the first round of

questions. we understand the need to verify that people are telling the truth. we are not asking you guys or the insurance industry to automatically take somebody's word for it. i understand that. but, when i see advertisement at fur advertisement about, be a part of the family and we treelike our own family, and then somebody that doesn't have group coverage that takes out an individual policy and runs into some situation where they have a healthcare issue that requires a major claim early in the policy, if they operated in good faith in taking out the policy and you approved of them, i really don't think it is good business practice to go back and try to figure out a way to rescind that

policy. if nothing else, it is a false trade act, of falls trade practice truth in advertising. and, one of the duties of our constitution is a little thing called federal preemption. we have the authority on this committee to preempt state law if it is an interstate commerce and we can't preempts state law in intrastate commerce but we can in interstate commerce, and i don't think there is one vote on this committee for the practice of retroactively reviewing its policy to try to rescinded if you have a woman like my constituents, ms. beaton, who discovers that she is that breast cancer or you have somebody who needs a stem cell transplant, or even the young lady from california who just needed some blood work

done. i mean, we will back you up on fraud and misrepresentation but i don't think you are going to get a vote at all on rescissions that are not material to the claim being processed. i don't know that that is a question. it is just a statement, so if you would like to comment on that, i would certainly like to give you the opportunity to do it. >> no one cares to insert? >> i would just reinforce that rescission would only occur when the information was material to the initial, if the situation, if the information was material to the underwriting decision. >> only in that case. >> mr. chairman, i am going to yield back. >> could i follow up on that?

if it is material to the representation, let me ask you this. in your policy mr. hamm, and it is question number 14 on your questionnaire. your enrollment questionnaire. now tell me how you get a misrepresentation. within the last ten years, because you say you are insurance health enrollment questionnaires are simple, easy to understand, straightforward language so people can accurately report their medical history so, your question says within the last ten years as any proposed insured had any diagnosis, receive treatment for or consulted with a position concerning phlebitis, dia, cystitis, or glandular disorder? tell me, what is dia? >> i am not aware. >> how-- if you don't know what it is how would anyone filling

out their application know what it is? you don't even know what it is then idid the why. how about phlebitis or lympho then the path the. what is that? >> i don't know the answer to those questions. >> buse sincerely believe an average of the that would know what these words mean if you don't know and i don't know? >> sir i believe that is an application that is not currently used at this time. >> it is last year's application last year's application and, last year's application. have you change the application from last year? >> i am sorry sir. >> this is last year's application for goode did you change it in the last year? >> i am not aware if we have chains that the application. >> so as far as you know that is your current application. >> i believe our current application asks questions back to five years of the ten year might be different in mogadishu

today. >> it is the same question, dia do you don't know what it is. >> i do not know what that is. >> mr. deal. >> mr. barton i took your time. >> if this is the hypothetical but i just want to figure out what the answer is. i had a mild heart attack three i had a mild heart attack three years ago so i now take and i'm going to probably have to take those medications for the rest of my life. i am covered under a group plan, blue cross/blue shield of texas and it is available to every federal employee who lives in texas and mike coverage has been good. i have never had a problem. but let's say i quit the congress, and i going to business for myself and i try to get a private health plan like ms. beaton got when she switched jobs from being a nurse and went into business for herself.

on the application, i have to list the medications that i am taking, the fact that i had a heart attack, give the doctor that time, the location, but i broke my leg playing football in high school. i got a 250 lb-- i with a linebacker. if i forget to put all my application with your companies that i had my, this small bone in my left leg broken playing football in 1967, but i do put all my medications and my history of my heart attack, the fact that i omitted breaking my leg in 1967, is that a grounds to resent my claim, my policy later on? under your policies right now that your company has issued?

>> i admit that my big problem, tell you the medications, all the stuff but i flat forget that i broke my leg and was treated by dr., paid by the school district in 1967. >> congressmen barton, r underwriting guidelines really kind of dictate that. but it is my understanding of how are underwriting guidelines work is that since that condition would not be material and are underwriting decision because it happened so far in the past and was a non-serious nature that that would not have factored in to the underwriting. >> i understand you might not cover me because of my heart attack. i understand that, it would be totally within your company's right to say congressman barton had a heart attack in 2004 or 2005 and therefore we can issue him a policy. i understand that.