. >> a group of health insurance executives testified today at this capitol hill hearing. congressmen and question them about their profits,

administrative costs, and denial of coverage for pre-existing medical conditions. dennis kucinich cheers this hearing of the oversight subcommittee. it is three hours. >> the committee will now come to order. today is the second of the subcommittee's two-day hearings, examining how the bureaucracy of the private health insurance industry influences the relationship between physicians and their patiencts. yesterday, the subcommittee heard testimony from

individuals, doctors, whistle- blowers, and policy analysts, all of whom related their experiences with and opinions about the private health insurance bureaucracy and its impact on health care in america. today, the subcommittee will hear testimony from top executives of the six largest health insurance companies in the united states. i want to welcome the witnesses and thank them for their presence here. we look forward to hearing from them. without objection, the chair and drank -- ranking minority member will have five minutes to make opening statements, following by opening statements not to exceed three minutes by any other member who seeks recognition. without objection, members and witnesses may have 5 legislative days to submit a written

statement or extraneous materials for the record. ous materials for the record. i want to add that the house has adjourned for the weekend, and while generally that means that there would be very few members here, i think there are a number of members that have expressed an interest. you may see them come in throughout the course of the hearing. but good afternoon, and thank you very much for your presence before this subcommittee. yesterday we received testimony from the daughter of a man whose bone marrow transplant was delayed an agonizing 126 days while authorization from his insurer was denied and sustained on appeal. she asks, would there have been

a different end to my dad's story if he had been given approval of the first transplant request in april 2006? would he be alive today? we don't know. what we do know are his chances for survival certainly did not increase because -- and she was talking about the insurer -- built the bureaucratic road blocks that changed the course of my father's treatment and made him wait for his potentially life-saving bone marrow transplant. we also heard from the father of a two-year-old who was born with a severe cognitive disorder. he's had to struggle to get the coverage his premiums pay for. recounting the toll on his family that the repeated delays and denials of care for his daughter caused by his health insurer, this is what he told us. he said, the stress of constantly having to hold the hmo and the agents to their

agreed-upon obligations has relegated me to the role of my daughter's care manager, and all too often rob me of my role as sydney's loving daddy. the experiences of these individuals are the tip of an iceberg. court and state regulatory records are replete with recent findings of wrongful denial and delay of health care by private health insurance bureaucrats. hundreds of thousands of people have been wrongly denied health care coverage, hassled with unnecessary documentation requests, under paid claims ripped off by fixed databases that underpaid claims. the actions of insurance company bureaucrats and causing needless delays and denials of coverage for prescribed treatment can be as detrimental as the disease itself. now, this was the conclusion of

the ohio supreme court when it upheld the largest jury award in ohio's history against anthem for denying life-saving treatment to esther dardinger. here's what the court said in that decision. then came the bureaucracy. anthem had worn the dardingers down as surely as the cancer had. like the cancer, they followed their own course on caring, object li oblivious what it destroyed, seeking only to have its own way. regulatory actions and jury awards do not tell the whole story since these measures consist only of instances in which insurers were caught and punished for a violation. there is no record of the silent suffering that our constituents endure without filing a complaint or lawsuit.

recently, however, the research of the california nurses' association published payment data maintained by the california department of managed health care. they found that claim denials by health insurers operating in california averaged 21% in the period 2002 to june 2009. unfortunately, we learned yesterday from another witness that there is no comprehensive data source on all health care coverage that has been denied, substituted or delayed. in this absence of transparency, health care institutions promote the image that they encourage healthy living. all the insurance companies here today wanted to be represented by their top doctors. had we allowed that, their preferred representatives would have been consistent with the coverage they continue to deny,

but it would have been inconsistent with what health insurance continues to represent. what is your business model? whether the doctor agrees with a pre authorization is in large part a business decision, it's not a medical one. they carefully chart the medical loss ratio, which we're all familiar with, the elr. the dollars that health insurers spend on medical coverage, that they continue to be a key indicator of what the insurer spends on medical health care and there by is a predict or of medical probability. according to a former executive, one of the nation's largest for-profit insurers, quote, investors want that mlr to keep shrinking. if they see an insurance company has not done what meets their expectations with the medical loss ratio, they will punish them. i've seen a company's stock price fall 20% in a single day

when it did not meet wall street's expectation with the medical ratio. they have developed a sophisticated bureaucracy to avoid paying for expensive treatment. they're developing products with high co-payments so they don't have to pay health bills. there are rescisions in which they revoke a policy after receiving premiums in which it was filed. they cause them to become insolvent at the start of the illness. finally, private health insurance companies are charging higher rates and earning huge profits by not covering people who are very sick. that's what wall street wants to see. we have testimony from the six largest private insurers in the nation who are here to explain to this committee and congress how you can reconcile the

demands of wall street which are quite significant and severe sometimes. demands of wall street with the health care needs of your policyholders. that's what we're going to be exploring today. so with that, i'm going to recognize the distinguished ranking member of this subcommittee, mr. joe mcguire. >> thank you, mr. chairman, for holding this hearing. yesterday we heard some heartbreaking stories of families dealing with severe illnesses and the mountains of paperwork they were forced to wade through when trying to get coverage. in my opinion, those decisions should be between doctors, patients and their families. that constituents come into our office and say their child got sick and their insurance got canceled. practices like this are in excusable. it is precisely these instances when people most need coverage. individuals who have been acting

in good faith, paying their premiums and have upheld their contractual responsibilities in fact should be covered and get coverage. we heard of health care rescisions. rescisions should only occur when there is a material fact or breach of contract. all state regulators and consumers should try to prevent these occurrences. what can we do to make sure all americans have access to coverage? my friends on the other side believe more and bigger government is the answer. i think americans instinct actively realize that trading some challenges with the bureaucracy of the federal government is not the solution. instead we should keep currently what's in the system and try to insure what's not working. first, all americans must have access. second, that coverage should be truly owned by the patient. third, we must improve the health care delivery structure,

a and finally, they must try to rein in the cost. i'm glad our witnesses can be here today. i look forward to hearing their testimony. thank you, mr. chairman. >> i want to thank my colleague from ohio we have a bipartisan effort here on these hearings, and i always appreciated the perspective. and also the fact that you sometimes offer a contrary point of view which is needed to get to the truth, so thank you. we have the privilege of having the chairman of the full committee here. and i'm sure all members would agree that it is our responsibility when the chairman of the full committee shows up to provide the chairman of the full committee with an opportunity to be recognized. and so at this time, i want to thank mr. towns for the support he has given this subcommittee in our effort to get to the

bottom of some of these serious health care issues, and thank you for your support in the whole range of concerns the american people have. the chair recognizes the chairman of full committee, mr. towns, of new york. >> thank you very much. i would like to thank you, chairman and ranking member jordan for holding this important hearing on unfair practices engaged in by private health insurance carriers. let me begin by saying i agree with president obama's statement last week to the joint session that private for-profit health insurance companies perform valuable services to their subscribers and our nation. i hope president obama rightfully calls for health care

recognition, that he limits discrimination because of age and gender so that seniors and women will pay the same coverage as others, prevents insurance companies from dropping coverage when people are sick and need it most. caps out on pocket expenses so people do not become broke when they become sick. and eliminates additional charges for preventative care such as mammograms. in many states, insurance companies can simply cancel person's insurance if any existing medical condition is not listed on the application. and this can happen whether the person is even aware of the condition or not. we hear repeated reports that insurance companies limit benefits simply drop or deny coverage for

doing this at the same time that their executives are receiving millions and millions of dollars in compensation packages. businesses cannot provide the employees with coverage due to their own eagerness to make a profit. on the other hand, patients are afraid to disclose health conditions and might even be forced to lie in order to receive medical treatment. some patients suffered greatly as their health the bonds without necessary medical treatments. s without necessary medical treatment. these insurance carriers' practices are unacceptable and must be reformed. i believe insurance carriers must be held accountable. if a company sells insurance, it

must provide insurance coverage. when claims are made in that regard, it is essential that congress enact health care legislation that includes provisions designed to ensure accountability and strong enforcement. mr. chairman, i applaud you and mr. jordan for the work you're doing, and members of this committee, but i want you to know that we have a lot of work to do. because as we look and see in terms of what people are going through, we must reform it and we must reform it in a positive way. on that note, i yield back on the balance of my time. >> the chair recognizes mr. foster who was here even before everybody else. we'll go to mr. cummings, then. >> thank you very much, mr. chairman. mr. chairman, thank you, again,

for holding this hearing. and i want to thank our panelists for being here this afternoon. yesterday we heard chilling testimony socked into the conscience. after hearing that testimony, it was very difficult for me to sleep, about what insurance companies do to regular, everyday people like the people that i represent. we heard from a mr. potter, wendell potter, and let me just give you some of the words he said. he said for weeks now, and i quote, we've been hearing industry executives say the same things and making the same assurances. i'm sure you will hear the same refrain tomorrow. this time, though, the industry is bigger, richer and stronger. and it has a much tighter grip on our health care system than ever before. in the 15 years since the

insurance companies killed the clinton plan, the industry has consolidated to the point that it is now dominated by cartel, for-profit, large insurers. the average family doesn't even understand how wall street dictates, determine whether they will be offered coverage and whether they can keep it and how much they'll be charged for it. but, in fact, wall street plays, and i continue to quote, a powerful role. the top party of for-profit companies is to drive up the value of their stock. stocks fluctuate based on company's quarterly reports which are discussed every three months in conference calls with invest orz and analysts. continuing the quote, on wall street, investors and analysts look for two key figures: earnings per share and the medical loss ratio or medical

dental ratio as some people call it. that is the number between what people pay out for claims and the difference between costs of providing coverage. what they're saying is too many people are paying loyally year after year after year, but when they want the insurance company to pay, the insurance companies quite often slap nthem in the face. they say, no, we're going to give you a rescision. we are going to fine the preexisting condition so we can save money. but one of the things that was most chilling was the testimony that came when they told us that quite on these panels and these insurance companies get together and they wait out while they're trying to get a decision and quite often they wait so they can die. that's what we heard in here

yesterday. and i said to them at that time that if that is the case, then that is fraud and it is criminal. and we, as a country, can do better than that. i look forward to the testimony, mr. chairman, and with that i yield back. >> thank you, gentlemen. the chair recognizes mr. tierney of massachusetts. >> thank you, mr. chairman, i don't intend to take my full five minutes except to note you've all heard a little about the testimony we've been hearing from individuals, and i hope you take a moment rather than reading any pro forma statements you may have heard to explain that how insurance rates have risen, insurance companies are putting less money into actual medical care and more profits into the executives and underwriting. when it gets to underwriting, i think we'd like to hear why it

is that other executives came to congress and said they would not do away with such practice like rescision where somebody is ill and getting treatment only to find that the company reaches back and tells them to disqualify for some reason. or why it is you won't stop the practice of pre-conditions or why you put the caps on coverage. this leads congress to assume that the only thing we have for consumers is to put a cap on for wall street's self interest. there are new plans coming out, voluntary benefits, limited medical benefits. voluntary usually means employees will pay 100% of the preem jumiums and the employers nothing. maybe some lab work or x-rays, maybe a few doctor visits, but the premiums are paid entirely

by the employees. those premiums are usually 50% less than major medical plans and the employees get left holding the bag because they're not really covered in the end. i know some of you companies are sponsoring a medical conference next month proposing those types of plans. i want you to address how it is that helps small businesses. you say you're doing it because you can't afford it, but you're the ones that set the rates, driving them into poverty, these small business employees. my small business isn't impressed with it, and they don't want to go that direction. they want their employees to have good, solid coverage. i look forward to the testimony and maybe a discussion afterwards that maybe the direction we're going into in private health care industry, and maybe you can convince us that it's not essential we do something in terms of regulation and competition to put a stop to those practices that really haven't shown or reflected well on your industry. i yield back.

thank you, mr. chairman. >> if there are no further opening statements, we will proceed to receive testimony from the witnesses before us today. i want to start by introducing our first panel. mr. richard collins, welcome, mr. collins. mr. collins is the senior vice president of underwriting, pricing and health care economics at united health care group. he also serves as ceo of golden rule insurance company and president of united health one. united health care's individual line of business, he served in his capacity since july 2005. mr. collins also manages the individual business of security company, and pacificcare.

next, mr. brian sassy. welcome, thank you for being here. mr. sassy is president and ceo of the consumer business unit for well point, inc. responsible for the company senior, state-sponsored and individual under 65 businesses. previously, mr. sassy was president of blue cross of california. and chief executive officer of its life and health affiliate. he also served as vice president of operations, and strategic initiatives for blue cross of california. and general manager of small group accounts for the west region for wellpoint, incorporated, the parent company of blue cross of california. thank you. miss patricia a. farrell. welcome, miss farrell. miss farrell is senior vice president of national international business solutions for aetna, incorporated. leading divisions which provide health insurance for the federal

government, tricare and state medicaid programs, and other businesses in the u.s. and abroad. previously, she was the senior vice president of aetna specialty products and medicaid. >>. this included aetna dental, life, disability, long-term care and voluntary products. and aetna's medicaid and children's health insurance program business. miss farrell has also served as senior vice president for strategic planning. mr. james h. bloom. is that the correct pronunciation? bloom. mr. james h. bloom. mr. bloom is senior vice president, chief financial officer and treasurer for humana incorporated. he has primary responsibility to supervise all accounting, actuarial, analytical, financial, tax, risk management, treasury and investor relations activities for that company. thank you for being here.

mr. thomas richards. appreciate your attendance here, mr. richards. mr. richards is senior vice president for product management, and new product development for cigna health care and cigna's choice link subsidiary which provides customer benefits and online enrollment. previously, mr. richards ran cigna's stop loss business, which provides reinsurance to middle market and national segment customers. during his career, mr. richards has held a variety of project managements, including the marketing department where he designed and brought to market preferred provider organization products. and finally, miss colleen lettinmeletti lettinment . executive vice president and chief operating officer of health care service corporations.

where she is responsible for its internal operations. as well as numerous divisions of the company, including subscriber services, government services, enterprise information strategy and management and financial services, among others. previously, miss retin was president and chief operating officer of blue cross and blue shield of minnesota. 20 years of experience in the health insurance field. she was also the co creator of the minnesota health information exchange, the national motto for sharing electronic health information. i want to thank you, miss retin, for appearing. and i want to thank all of the witnesses for appearing before our subcommittee today. i have to say, in just these first few minutes, in this looking out at you and in looking at your accomplishments, and in the insurance industry, this hearing is not in any -- and any of the questions that are asked, this isn't about anything personal. we respect who you are. but the institutions that you represent are here to be questioned today and challenged

today. and we're going to need your cooperation and understanding your business model. now, with that, i will proceed to the swearing in. it's the the policy of the committee on oversight and government reform to swear in all witnesses before they testify. i would ask that you please rise, each of the witnesses, and raise your right hand. do you solemnly swear to tell the truth, the whole truth, and nothing but the truth? let the record reflect that each of the witnesses stood and raised their right hand and answered in the affirmative. you may be seated. >> mr. chairman? >> yes, mr. cummings. >> mr. chairman, just point of information. mr. chairman, you just swore in the witnesses. should a witness fail to be truthful with this committee, is

there a penalty connected with that? >> >> staff attorneys have just handed this to me. this is pretty pro forma for any congressional hearing. where witnesses testify and swear under oath. there's two sections covered. one is 18 us c-section 1001, which relates to knowingly and willfully falsifying any statement. there are provisions in this for penalties that include fine and

imprisonment. the -- there's another section. i was given 2 usc section 94 that relates to committee and congressional procedure if anyone fails to answer any questions pertinent. we would -- we would have to, according to this, certify through the house of representatives the facts as we see them to the united states attorneys office. so, you know, it's a standard operating procedure in this committee, mr. cummings, that, you know, we expect witnesses to tell the truth, but if they don't, there are penalties under law. >> thank you, very much, mr. chairman. >> yeah. let's go to opening statements. mr. collins, you may begin with your opening statement.

thank you. and make sure that mike is close, so we can hear what you have to sayment. >> thank you. chairman kucinich, ranking member jordan, and members of the subcommittee, my name is richard collins, underwriter of pricing and health care economics for united health care, also the ceo of golden rule insurance company, united health group company that provides individual health insurance to individuals and their families. today i'll start with some revant facts about united health group, our industry, and try to demonstrate how we are improving the quality of health care by reducing costs and scream lining the administration. first, united health group provides high-quality health services and products for more than 7 million people, and in partnership with 5,000 doctors, 5,000 hospitals, and 600,000 doctors across all 550 states. >> second, we apply committed men and women. these people work hard to

improve the health care and well-being of our health plan members. third, we have prudently managed our finances during these challenging economic times, and combat the promises that we make to our stakeholders. fourth, our industry is already one of the most highly regulated in the united states. united health group has long advocated for comprehensive, bipartisan health care reform. we have proposed constructive changes that would ensure rates do not vary because of health status and gender, and would guarantee coverage regardless of preexisting conditions. for those that maintain continuous coverage. these reforms would also require that individuals obtain and maintain health insurance coverage so that everyone participates in both the benefits and the costs of the system. discussions of administration processes and health begin with benefits of a strong provider network. our members receive great value from our extensive network,

which includes more than 85% of the physicians and hospitals in the united states. we perform periodic credential reviews to make sure that network physicians and hospitals continue to meet standards of quality. our members receive negotiated savings and discounts when they are cared for by one of our contracted providers. a key element to the success of this network is health information technology that we use to increase the speed and accuracy of claim processing. we pay more than 250 million claims annually, and more than 95 are processed on our primary commercial platform within ten days. in fact, over 80% are processed automatically. across our entire business, we have identified 100,000 physicians through our premium designation program that consistently deliver quality in accordance with evidence-based standards. and they do so at costs 10 to 20% below their peers. these physicians use data, efficient practice management,

and evidence-based medicine to guide and consistently improve patient care. this network system extends to doctors and hospitals that are best at managing complex medical conditions, such as organ transcript plants, cancer, and congenital heart disease. this helps the sickest patients receive the best possible care, often resulting in better outcomes and often at prices at savings as much as 60%. partnerships with physicians and hospitals are critical to streamlining the administrative processes and providing greater value to our members. to that end, we have established two national and numerous local physician advisory committees. they provide us with feedback and help us ensure that we maximize the health care quality, and minimize the administrative burden. we are also introducing innovative and practical tools that allow doctors and nurses and other health care providers to spend more time with their patients and less on paperwork. for instance, our e-sink program

synchronizes a person's medical history to help identify gaps in care they should be receiving. electronic medical records and e-prescribing technology help physicians practice better medicine through clinical decision support, and reduce administrative costs through automation and web-based transactions. in conclusion, united health group provides critical services and support at every point in the health care delivery system. we are privileged to serve our members and take seriously our responsibilities to serve americans in this socially sensitive area of health care. through innovative technology and programs, as well as close collaboration with the provider community, we are successfully improving quality, reducing costs, and making the administration of health care more efficient. thank you, mr. chairman. >> thank you, mr. collins. mr. sasse, you're recognized for five minutes. you may proceed. >> thank you, chairman kucinich,

ranking member jordan and members of the subcommittee for allowing me to testify today. i'm brian sassy. well point provides information benefits to 35 million people across the country, representing almost one in nine americans. we recognize we have the ability to help change health care for the better. and with this ability comes a responsibility to our members and to all americans to advance health care quality, safety and affordability. i look forward to discussing how wellpoint helps create health care value for our customers. at wellpoint, we developed evidence-based medical policy based on the latest clinical research. our nurses and other health care professionals support our members to ensure that care is safe, necessary and timely and looking to the future, we continue to explore new ways to reward value over volume and stress safety, efficiency and patient satisfaction. one of the areas under discussion in the current health care reform debate is health plan and administrative costs. last year,

pricewaterhousecoopers conducted analysis of how the typical health insurance premium dollar is spent. my written testimony includes a chart that shows that 87 cents of every premium dollar is paid out to cover the cost of health care claims. of the remaining 13 cents, 6 cents goes towards taxes, other government payments, claims processing, and other administrative costs. 4 cents go to consumer services, such as care coordination, disease prevention, chronic care management, provider support and marketing. and only 3 cents of premium dollars remains for profit or surplus. i understand the subcommittee is interested in knowing how we determine medical policy, and how our medical policy relates to how we process our members' health care claims. our medical policies reflect input from premier academic institutions, and experts within the medical profession, as well as considering the standards of care within our local communities. these medical policies are

available online to all providers, and to the public at large. last year, wellpoint received 380 million claims, and we processed 97% of those in 30 days. the subcommittee's letter asked for some information on deferral of claims. i should note that we do not defer claims. what happens sometimes is that claims are pending as we await additional information or conduct additional reviews. some common reasons for pending claims are that premiums have not been paid, that the claim is incomplete, such as missing diagnosis codes, or when members have health coverage -- other health coverage ma may be primary. the subcommittee's letter also asked about administrative costs. our administrative costs include a variety of initiatives designed to promote the health and well-being of our members. for instance, wellpoint employees, thousands of health professionals, including nurses, dieticians, social workers and pharmacists, among others. these professionals speak with thousands of members each day,

encouraging them to learn more about their conditions, and how they can better manage their care. our health professionals help members schedule necessarily follow-up care and specialist care, remind them to pick up important prescriptions, and serve as a valuable resource to our members 24 hours a day, seven days a week. another example of is our clinical research subsidiary, health corps, which has produced note worthy studies on best practices for treating low back pain, high cholesterol, asthma, to name just a few. we take these recommendations and share them with physicians to help them improve our members' health. health care also works with the fda and cdc to improve drug safety, and helps these agencies monitor emerging drug safety issues in real-time. my written testimony includes more detail of these types of initiatives, which are typically not included in government-run

programs. efforts like these funded out our administrative expenses are critical to our ability to follow through on our primary commitment, which is to improve the lives of the people we serve in the health of our communities. in closing, i would like to assure the subcommittee that wellpoint supports responsible health care reform. but reform must go beyond the insurance marketplace to address systemwide challenges and associated costs. changing how we finance health care without changing how we deliver health care would be incomplete reform at best. i appreciate the opportunity to testify before you today and to respond to your questions. >> thank you, mr. sassi. the chair recognizes miss farrell. you may proceed for five minutes. >> good afternoon. my name is pat farrell, and i'm a senior vice president at aetna. aetna is one of of the nation's leading insurance companies, providing medical, dental, pharmacy, disability, life insurance and other health benefits. we provide those products and

services in all 50 states, and we provide those products and services to 37 million americans. i'm proud to have worked at aetna for over 20 years in a variety of capacities. on behalf of the thousands of employees at aetna, i look forward to talking to you today about the value we bring to the health care system. and in discussing aetna's commitment to reforming the health care system. the end of today is a health care solutions company that help americans manage their health care and get the most out of their health care dollar. since 2005, aetna has called for a major fundamental reform of the insurance market so that all-americans have guaranteed access to affordable coverage with no exclusions for preexisting conditions. this, combined with the requirement that everyone have insurance coverage and financial assistance for those who can't afford it, and who need it will get and keep everyone covered in our system. i expect that many of the issues

we'll discuss today will illustrate the need for reform. aetna is committed to health reform that addresses access, affordability, and quality. we operate in a dynamic and highly competitive marketplace. our business can only be successful when health care consumers are confident that we can provide the greatest value for their health care dollar, and helping them improve or maintain their health care status. our employees come to work every day, doctors, nurses, and customer service professionals, with the same commitment to make sure our members get the best health care coverage possible. much of our focus during the health care reform debate has been on building what works well in the employer-sponsored market today, while addressing the problems in the small group market and in the individual marketplace. these solutions, which now seem to be broadly accepted, should go a long way to addressing the problem of access to health insurance.

but we strongly believe that for health care reform to be enduring and affordable in a nation, we must address the underlying problem of rising health care costs. health care costs drive insurance premiums. not the other way around. over the last decade, health care costs have risen about 7.5%. and premiums have risen that very same amount. it's fundamental to our discussion today to understand the value that aetna brings to the health care system. and how our business practices are focused on empowering consumers and health care providers, to make the best decisions possible. we process hundreds of millions of claims every year, and getting them right every single time is our goal. we recognize that even a small percentage of problems represent real issues for our customers. and for our providers. when we do get it wrong, we have processes in in place to help get it back on track, quickly. the aetna is driving innovation

to improve the lives and the health of our members. in just the past four years, we have invested over $1.8 billion in health information technology. for example, some of that investment went to having personal health records that can empower consumers' decisions around their health. finally, we're also leaders in promoting wellness and prevention, and the management of chronic diseases. refocussing our system to prevent disease, and promote wellness can lead to better health for all americans, and is positively impact costs systemwide. i believe the competitive marketplace has played and should continue to play an important role in fostering the innovation that's necessary for our country to achieve true and widespread quality and affordability in our health care system. thank you, and i look forward to continuing to work with congress to pass health care reform this year. >> thank you, miss farrell. the chair recognizes mr. bloom.

>> thank you, mr. chairman. >> make sure that mic is close. we want to hear you. >> better now? >> go ahead. >> i am a senior vice president, and i was chief financial officer in charge of humana, ind. he meant that is headquartered in louisville, kentucky, offering health benefit plans for employer groups, government programs, and individuals. we have 10.3 million medical members and 6.8 billion special to members. in all 50 states and washington d.c. and in puerto rico. humana employees 20,000, 600 employees and contracts with nearly 400,000 positions around the country. matter, and i will briefly summarize a few key points here. every aspect of humana's operations is governed by

federal and/or state laws and regulations. and humana continues to boast support and advocate for responsible health system reform. we believe that doing nothing somebody -- doing nothing is not an option. we believe that all-americans should have affordable, quality health coverage. it's essential that everyone participate in the health system with subsidies for those who can't afford coverage. and in return, coverage should be guaranteed and not based on preexisting conditions or health status. to ensure affordability, reform must focus on improving health outcomes, reducing variations in care, and reducing costs. humana also supports america's health insurance plans comprehensive reform plan, which provides for universal coverage with insurance rating reforms. these reforms voluntarily offered will obviate the need for business practices put in place because there currently is no requirement that individuals

have health insurance coverage. the subcommittee has specifically requested that we comment on our processes for both coverage determination and processing claims, as well as the physician feedback on these processes. for 2009, humana ranked number one among national payers as the easiest to do business for both doctors and hospitals. specifically, athenna health found humana to have the lowest denial rate among all major payers. in contrast, medicare part b program ranked fifth. humana also ranked as the fastest payer to physicians. with the medicare part b program, again, ranking in fifth place. the subcommittee also asked how we address that humana makes coverage decisions. let me summarize. coverage decisions are based on evidence-based medical criteria, developed and approved by

physicians. under our policy, a nurse or a nonclinician can authorize any service that's under review. however, only a licensed board certified physician medical director can issue a denial based on a medical criterion. to the extent that a practicing physician disagrees with the decision, there are timely, internal appeal processes allowing peer to peer input. these grievance and appeal processes are governed by state and federal regulations. internal appeal decisions can be further appealed to an independent, external review entity whose decision is binding on humana. humana has worked effectively over the past few years to streamline and simplify our administrative practices. we have partnered closely with hospitals and physicians who care for our members, and our members themselves. here's one example. an industry leading multipair,

multi-use electronic medical provider information exchange. humana co founded availty with the blues of florida. it fulfills the presidents and congress's call for a workable health care information technology super highway. it has standardization, speed, accuracy, transparency, and results in significant cost savings. today, across the country, 50,000 physicians, 1,000 hospitals, 100 million members, and 1,000 payers, including public payers, access or connect with availty every year. this results in -- this will result this year in approximately 600 million transactions. availty, what it does is provide seamless provider interactions and improves patient safety, saving money. it it is digitized. most of the nonstandard administrative processes that providers have complained about for years. and for those who use

e-prescribing, preventible adverse drug events have been reduced by 61%. and most importantly, there are no charges to providers for using availty. in closing, mr. chairman, let me say that humana is committed to work closely with the administration and congress to increase the likelihood that measures designed to solve the most significant problems in our health care system become the focal points of responsible and real health reform efforts. i look forward to your questions. thank you, very much. >> thank you, mr. bloem. the chair recognizes mr. richards. you may proceed for five minutes. thank you. >> chairman kucinich, ranking member jordan, and members of the subcommittee, i appreciate the opportunity to address the subcommittee. and to discuss the issues raised in your letter to mr. hemway on august 26th. my name is tom richards, senior vice president of product for cigna corporation, based in philadelphia. at the outset, i want to emphasize, on behalf of the

26,000 cigna employees, that we support health care reform that provides security, affordability and stability for all americans. we believe such a goal is achievable by strengthening the current system to include both a personal coverage requirement and a helping hand for those who can't afford coverage. we support guaranteed coverage for everyone, and no exclusion for any preexisting condition. we support reforms in the way premiums are calculated, without taking into consideration health status or gender. we support providing subsidies to individuals who have difficulty affording health insurance, including subsidies to small businesses. we support administrative standardization and simplification. we support a focus on health and wellness. further, we support the establishment of exchanges to provide a choice of plan options for all americans. we also support reimbursement reforms to the current fee for service delivery system. it's also important that you understand cigna's role in health care.

while we have some in insurance business, nearly 80% is administrative services only. this means we administer the programs for employers in it accordance with their policies and pay claims for them. it is not risk-based, as would be traditional insurance. these employers are self-insuring and the claim payments come out of their employer funds. there is no financial incentive for our employees to accept or deny claims. at cigna, in 2008, 89 cents of each premium dollar was spent on medical care. our support for reform is aligned with what we stand for as a company. our mission is to improve the health, well-being and sense of security of the customers we serve. our results demonstrate our focus on health improvement. competitive data from the 2008 state of health care quality report shows this difference. against a baseline of standard care provided by doctors and hospitals and a fee for service unmanaged situation, we have better results. if you turn to figure one on page 4 of my rain testimony,

you'll see a chart that reflects these results. all of our coverages, be all of our coverage policies follow best practices, and are evidence-based, which means they're based on the most recently published scientific evidence. we consider safety and effectiveness. it's important to note that cost is not a factor, unless there are multiple items or services with equivalent safety and effectiveness. we are very proud to employ over 3,000 clinicians. these doctors and nurses make decisions about clinical policy, review medical necessity, and advocate for individuals. they make the system easier to understand. they help our customers navigate the health care system when they need help. and they literally save lives. we have included the words of several of these individuals in our written testimony telling you how we have helped them. in 2008, cigna processed approximately 91 million claims for payment. more than 90 million of these claims were paid without question. i call your attention to figure 2 on page 10 of the written

testimony. of the approximately 1 million claims that did require prior authorization, all but.08% were aprofd on initial review. what that means, is that cigna, more than 99.9% of the time, the person received the care that the doctor recommended, and the services were covered. at cigna, all medical coverage decisions are made by doctors and is nurses. and is ultimately, the chief medical officers are responsible for all coverage decisions. we recognize the doctor/patient relationship is critical, and do everything we can to enhance it. let me cite just a few examples. first, cigna is simplifying and reducing administrative complexities from are payment methodologies and claim processing to problem resolution and education. second, cigna's further innovating our payment methodologies. example of this is cigna's patient-centered medical home initiative, such as the one we have with dartmouth hitchcock.

we improve continuity, and coordination of care, quality of care for patients and lower medical costs for everyone. at cigna, we focus on helping people improve their health. we believe the health care is a shared responsibility of the individual, the private sector, the medical community and the government. such a shared responsibility is right for individuals, families and the country as a whole. we look forward to how we can work together to improve the health and wellness and quality of care for all americans. mr. chairman, this concludes my remarks. >> thank you, very much, mr. richards. the chair recognizes miss retin. thank you. please proceed for five minutes. >> good afternoon, mr. chairman. ranking member jordan and members of the sub the in. i'm colleen retan, the executive vice president and chief operating officer of health care service corporation. we are a mutual legal reserve corporation that does business as the bluecross blueshield plans in illinois, new mexico,

oklahoma and texas. by way of background, hcsc is the largest customer-owned health insurance company in the nation. we are not investor-owned. we are a customer-owned mutual. we have a work force of more than 16,000 employees serving 12.3 million members through our blue cross plans in those four states. our mission is to promote the health and wellness of health care for our members in the communities that we serve through accessible, cost effective, high-quality care. prior to joining hcsc in 2008, i was the president and chief operating officer of bluecross blueshield of minnesota. that stay's largest health insurer, and they are not for profit health plan. i have 28 years of experience in the blue cross system. the areas of accountable i have within hcsc is for management of our describer services division, which processes member claims

and handles health care inqui inquiri inquiries. i'm also responsible for information technology, finance and actuarial functions. we certainly recognize and share the public's concern with the current health care system, but fundamentally, we believe in the strength and the value of the american health care system. we believe that insurers, like hcsc, are uniquely positioned to help foster and inform improvements to the health care system. and we really welcome the opportunity to serve in that role. hcsc has been an of advocate of health care reform. we support the proposition that health insurance companies are prior to to offer coverage to all applicants, regardless of their current health status, coupled with a personal responsibility for all americans to obtain and maintain coverage. second, we support subsidies for those americans who cannot afford health care coverage. third, we support health and wellness initiatives that focus

on the prevention of chronic illness. and finally, we support initiatives that promote effective care and treatment and for information technologies that improve quality and provide value for every health care dollar. we're pleased to share with the subcommittee some examples of how hcsc has incorporated evidence-based approach into medical policy into two key tenets that underpin the core values of our company. and that of access and quality. my written statement outlines our approach in each of these areas in greater detail, but a few items are just worth noting before the discussion today. first, our members need access to proven medical care. our belief is that the interest of our members are of primary importance to our company. the members we serve provide the reason for our existence and the rationale for the resources with which we operate. secondly, but equally important, is to continually improve the quality of care.

another of our guidant principles is our belief that we as representatives of our members have an obligation to provide leadership in the health care field. we're promoting evidence based medicine around proven health care services. and we also work closely with a broad network of doctors and hospitals to invest in data sharing technology that works to improve clinical decision-making, and these efforts help improve quality and ensure that doctors and hospitals treat patients effectively and get paid efficiently. hcsc is expanding access and i am brofg quality of care for all americans on behalf of the company and it's members, i thank the subcommittee for the opportunity to discuss these important issues today.

>> thank you free testimony. we will proceed for 10 minutes each, and after that each member will have five minutes. we may have several rounds. we will see how it goes. i want to share with members of the panel, members of congress generally like to get answers and if you are able to give as a brief answer that covers the territory, that is fine. if you start to go on and on, i do not want to appear confrontational, but i may have to encourage you to hurry up your answer or i may even have to cut you off. i want you to know that we are here to get answers. and we need your help. . . so without objection, i'll begin. i just want to add one other thing. we may be joined by other members of congress who are not members of this committee of many. that's not unusual. and without objection, if it other members of the -- choose to come here from either side of aisle, even though they're not

on this committee, without objection, we'll permit them to sit in, to participate and to ask questions. so with that, i'd like to start so with that, i'd like to start the questioning with mr. sas of wellpoint. sir, in your testimony, you state, quote, last year wellpoint received 380 million claims and processed 97% of them within 30 days. now, i'm looking at the arithmet arithmetic, and if the arithmetic is correct, it means you did not pay within 30 days over 11 million claims. would you tell the subcommittee what is the value in it dollars to wellpoint of the 11 million claims that were not paid in that time period? >> i -- chairman, i don't know the value of that. >> can you provide the subcommittee with such information? there has to be a way to calculate it. >> i'm not sure, because that is at a point in time. the vast majority of those claims, most likely were paid at

a future point, either on the 31st day, or if we had requested additional information that was provided and then subs kwoently paid. >> maybe then you could chart out, 30 days, 60, 90 -- businesses operate that way, of course, 120. and if you could provide us information with what was the average cost of each claim that you did not immediately pay. it would be helpful. you could look at it as a cost or a value. but -- yeah, and we'll follow up with written questions, so we can keep going. >> okay. thank you. >> we're not going to -- belabor that. mr. sassi, on 2008 earnings conference call with wall street, your ceo said the following, quote, we will not sacrifice profitability for membership. as you know, wellpoint was forced to pay $15 million last year to settle claims or charges by the california department of insurance that you removed coverage from 2,330 members

after they submitted claims for expensive medical care. now, i'm going to submit for the record the article from the settlement from the "los angeles times" from february of this year. wellpoint settled and paid a $10 million fine for removing coverage from 1,770 members of its hmos in california. mr. sassi, is dropping members just when they need health care what your ceo meant when she said that she wouldn't sacrifice profitability for membership? >> absolutely not. >> what did she mean, then? >> i believe what was meant was that we would not reduce prices artificially to essentially buy membership in the open marketplace. >> and mr. sassi, what characteristics did those 2,330 individuals have in common that resulted in if wellpoint's decision to drop members just as their medical bills threatened to reduce wellpoint's

profitability? >> that settlement pertained to a settlement agreement that we reached with the department of managed health care, and the department of insurance in california, relative to rekigss in the individual marketplace. i'm sure you're aware that companies agree to settle lawsuits or situations for a variety of reasons. and -- >> but, you know, you're in front of a congressional committee here. there is -- unless your counsel is advising you that you can't answer that question, you should answer the question. >> i did answer the question, sir. >> well, you didn't really say what characteristics those individuals had in common. that resulted in in wellpoint's decision to drop members, just as their medical bills threatened to reduce wellpoint's propertiability. you did not answer the question. i would just ask you to answer the question. >> those members were rescinded in the individual market, because they materially misrepresented their medical

history on their insurance application at the time that they applied for coverage. >> okay. now, how did wellpoint discipline the executives who committed the practices that led to the enforcement action against you? is it. >> well, we did not admit -- we did not agree with the findings of the department of managed health care. that's on public record. they did issue a report. we did append a report to that. the settlement, you know, we agreed to settle with the department of managed health care -- >> okay, i understand. >> to put the issue behind us. >> mr. collins, in united health care group's social responsibility report in 2008, your ceo writes, quote, the businesses of united health group are fundamentally organized around advancing our mission of helping people live healthier lives, unquote. now, if your business is fundamentally organized around that mission, will you explain

united health care's slm of charges last year that is specific-care subsidiary wrongfully denied claims in california, paid claims incorrectly, lost documents, failed to acknowledge claims in a timely manner, and hassle its members with multiple requests tore documentation that was previously provided. >> yes, sir. we are vigorously contesting the findings of the state. i do not contest that there is room for improvement in our california operations. we've put a lot of resources into improving our operations, and we glad to have convenience to our membership. but i don't think our aspiration to provide products, services, and financing of the health care of americans, as inconsistent,

now he, inconsistent with our behavior. >> okay. that's -- that's fine. i mean, you've -- you've answered that question. but in 2007, what was the compensation of the top executives at pacificcare? >> well, in 2007, sir, pacificcare was a wholly owned subsidiary of united health care, so would have been you wanted health group. >> was the compensation possibly millions? >> well, i don't have those numbers off the top of my head. >> will you provide them to this committee? >> absolutely. they're public record in our 10k, sir. >> so other members may have this question, but i think it would be great if each of you could provide us that compensation information of officers. and also, information about bonuses and incentives received by pacificcare, executives and employees that would have rewarded the denial of claims in california in if 2006, 2007. we want to see if there is any connection there, and we need

that information. if -- if you can cooperate and provide it. >> i'm confident, sir, that there was no bonuses awarded for denial of claims or other activity that was illegal. and as i said before, we are vigorously contesting the findings of the department and the characterization of the actions there as denial of claims. >> thank you, mr. collins. mr. richards of cigna, on page 8 of your written testimony, you state, we do not consider costs in establishing coverage policy in our decisions to provide access to care. but we heard from a former senior executive with cigna yesterday who told us cigna has meetings every quarter which are called town hall meetings. internal town hall meetings in which executives go over the past quarter's financial statements and talk about how they can tighten utilization to lower the share of cigna's premium income spent on medical expenses. isn't it true that cigna has

held internal town hall meetings in which those topics are discussed. >> it's absolutely true we communicate with our employees to reinforce our mission and talk about financial results. >> and those town hall meetings are videotaped, are they not, and audio taped? >> i do not believe they're videotaped. we certainly audiotape them so that individual employees who are not able to attend -- >> but there are audiotapes available. >> yes, there are. >> i would like you to provide this subcommittee with copies of those audiotapes and any videotapes that you have. our staff will work with you to achieve the owe. >> again, what i would like to emphasize, mr. chairman, those internal meetings are to communicate to our employees. >> i understand. and we -- i understand that they are. and we're -- >> no. >> we'll be in touch with you regarding our request that we get those audiotapes. now i just would like to request with this question for each and every one of you. the premise of this hearing is that health insurers wield strong influence in the kind of

care, whether there's care, for their policyholders who become very sick. according to the american cancer society, and this is a quote, cancer patients and survivors may delay or forego care in the face of cost sharing that they find difficult to afford. a recent study found that 5% of nonelderly adults with private health insurance who have been diagnosed with a chronic condition such as cancer reported they went without needed care in 2006. american cancer society saying this. i want to give you a chance to express for the record what you think on this -- about this question. and really with a simple yes or no answer. and we're going to go down the line, and i want you to answer this question. do you believe that a health insurer's refusal to pay for a patient's cancer treatment can directly or indirectly cause

harm or death to that patient? i'm going to ask the question one more time. do you believe that a health insurer's refusal to pay for a patient's cancer treatment can directly orrin directly cause harm or death to that person? i would like to go right down the line, mr. collins, and just give me a simple answer. go all the way down the line, and then my question time is completed. mr. collins. yes, sir. >> pardon? >> yes, sir. >> mr. sassi. yes, sir. >> miss farrell. >> yes. >> mr. bloem. >> yes. >> mr. richards? >> yes. but cigna only allows clinicicians to make coverage decisions, and those coverage decisions are only based on ex terrible, scientific evidence. >> the answer is yes, okay. miss reitan. >> yes, sir. >> okay. i want to thank each much you for your candor. the chair recognizes for ten minutes mr. jordan of ohio.

you may proceed. >> thank you, mr. chairman. i appreciate the chairman's having this hearing. i appreciate the chairman's intensity and passion he brings to any debate. but i fundamentally disagree with sort of the underlying premise here, the idea that because there has been some -- as i stated in my opening statement, that there's been some problems with the way private insurance works, that somehow that should cause us to move to a government-run system. i fundamentally disagree with that. frankly, i think the majority of americans, as pointed out over the last several months, and any poll you look the at here of recent date is -- would say the same thing. so i haven't really -- kind of two focuses here in the few minutes that i have with you. and, again, i appreciate you being here. one, i want to get the facts, and then i want to get at this idea that i think is fundamental to real reform and what needs to happen in this country. and that is a health care system that empowers the patient. there's a great -- i think a

great article in this month's atlantic which talks about the idea that it's always somebody else who is paying. and when somebody else is paying, that's what -- i mean, i think miss farrell said it well. she said insurance premiums don't drive health care costs. health care costs drive insurance premiums. we've got to get a health care cost. and that only happens when the consumer, the patient, the family, the small business owner out there, has a better handle on what's happening, more transparency, so they can figure this out and make some real market, real market-type decisions. so let me start with this. one of the things we heard yesterday, again, in an effort to get to the facts. one of the things we heard yesterday was from the panel we had, 57% of every dollar is all that goes towards health care -- of the premiums that you take in. and so we heard about the cartels, and i'm actually looking now at a piece the journal ran this monday, and

they actually talk about an example in alabama where it was 92%, according to what's hpg in the state of alabama, where one insurer -- bluecross blueshield of alabama has 70% of the market share. so i would like to know, do you agree with that 57% figure, and if not, what it is in each of your companies' situation? we'll just go down the list. so mr. collins? >> thank you, congressman jordan. the statistics side to mr. stassi's testimony come from a pricewaterhousecoopers study that cites 83 cents on a dollar, that's a credible study, a recent study. there is another study that just came out from sherlock and company just in the last few weeks, which core ran rates the price waterhouse study. >> what do you say? what do you pay? >> well, sir -- >> of every dollar you take in, how much goes for patient care? >> that's not a real simple

answer to -- >> is it 57%? >> no, it's consistent with the findings in the sherlock and pricewaterhousecoopers -- >> have you done an internal investigation? do you know what -- do you have a good idea what united would be? >> sir, it's the -- the loss ratio for 2008 was approximately 83%. 83 1/2% for the company. but that's across a wide spectrum of businesses. >> mr. sassi, wellpoint? >> same question? >> yeah. >> okay. the loss ratio for wellpoint plans overall is directionally similar to what i quoted as pricewaterhousecoopers. >> okay. >> but as i also stated, loss ratio is just the calculation of premium, less claims that are paid. and as i also indicated in my testimony, there are a number --

a fair amount of administrative costs that we pay to help manage chronic care, chronic continues conditions. we pay out of our administrative cost for disease management programs for asthma, heart disease, diabetes, copd, to help those 50% of americans that have chronic illness manage their cost, and that's typically not included in the lost ratio. that's included in administrative expense. so if you're looking for a wholistic, what do we spend -- >> numbers fire -- >> yeah, it's north of that number. >> i understand. i understand. >> so congressman, at aetna, we spend 84 cents on the dollar directly on medical claims. we do spend a fire amount on administration, relative to innovations in the health care industry, making sure that we are providing our members and our problems with the most recent totals and technologies,

and is information in order to, as you said, give them the tools to make them understand what positives they purchased, what's in those policies. >> good. >> so they can make better decisions on of behalf of themselves and their families. >> ranking member jordan, we pay between 83 and 85%. >> same here. >> for the last seven years. last year was the upper end of the range, around 84.. >> ranking member of jordan, first signal last year the number was 89 cents, the number has gone up each of the last five years. >> good. >> our medical care ratio at hcsc is approximately 84%. >> okay. let me move to another one. according to the congressional research service, each year, 1 billion chambers are submitted to medicare, and 10% of those claims are denied. when you think about 10%, that's a lot.

if i got the numbers right when you went through your testimony, i just oh jotted these down, united, you have 70 million. humana, two different dus thingses, but i told 16. cigna 46, and hcsc 12.3 million. so how does your denial rate compare to what the government currently does with the medicare program? >> congressman, i'm not prepared to answer that question today. i really just don't have those numbers available. i would like -- >> how many claims do you have a year? i understand medicaid -- older population will be significantly more claims, but 70 million claimed to 45 million in medicare, how many claims do you get a year? >> i don't know exactly. on our primary processing pla form where the vast majority are tested, as i stated in my testimony, 250 million claims. >> 250 million, okay. >> ranking member jordan, we

processed -- we received 380 million claims. the number i read was the aamount we produced in 30 days. >> 97% in 30 days. i got that. we heard stories yesterday, so there have to be some that are denied. you do you know what percentage are denied? >> i don't have that number. >> is it more than 10%? >> i don't have that number. i'm sorry. >> miss farrell? >> we process approximately 407 million claims annually at aetna. and if you look at the reasons why clichls -- claims are denied, i think what you're trying to get at is the reason that something might be denied for medical necessity, and at aetna, less than one half of 1 percent of claims are denied, because of medical reasons. >> thank you. >> ranking member jordan, i cited the atheetha health study

which i commentsed we ranked first in terms of the lowest denial rate. our denial rate in that survey was 5.7%. >> okay. >> the government -- medicare part program -- >> was fifth -- >> that had an 8.7% denial rate for fifth place. >> okay. >> ranking member jordan at cigna, we have about 91 million claims we processed last year, and again, 99.9% of those were proved for the cover. so it of would have been .1% that we're not through to coverage. >> good. hcsc processes 560 -- 560,000 claims a day, and we deny for the medical necessity coverage 3/10 of a percent. >> wonderful. mr. bloem, in your testimony, you talked about some things you were doing to make it easier for

the folks who you go business with, people you ensure, to deal with this -- and that's one thing you hear from folks. you know, in their own lives, you get the statement of benefits and try to figure out what the heck it says. i think if a lot of americans are like me, they look and it f it says it's not a bill, they kind of file it away and not worry about it too much. but you talked about some things you're doing. i would like for you to elaborate a bill bit on that, because one thing we hear from health care professionals, they don't like the reimbursement rate they get, but in some ways it's not as cumbersome as some of the other things you have to deal with. so i'm curious as to what you're doing to make it easier for people to deal with and figure out what's going on. and, again, getting did i idea of powering the patient. >> i would just like to quickly summarize. first of all, when we talk about the problems that have existed between the various assistances, obviously we have three people involved.

we hav we have us as the payer, we have the member and we have the provider. so to make things simpler and to make things easier, what we have done as -- in florida, but now throughout the country, is come up with a joint venture that we have with a number of companies that helps providers get instant adjudication, real-time adjudication in terms of what members responsibilities -- what ours are. trying to provide certainty for all our constituencies. the other thing -- >> so the providers are liking it, and the patients are like it. >> because it's electronic and it basically tells people when they go to the doctor, this is what is going to be expected of you, this is what humana is going to pay, the provider is going to charge. we also have a document called a smart summary that we mail to 10 million of the 10.3 million members we have every quarter. and it basically tells all of the claims that they've had, what those claims are for, what doctors, what hospitals they

went to. what pharmacy, what drugs their taking. it gives them sort of a quick summary of what their situation was for that quarter. much like you get with maybe investment accounts you have. i would be very happy to bring this. reich a quarterly statement. . >> yes. so that people understand that they can begin to have the knowledge that you're talking about in order to take effective control of their health status and is their insurance. thank you. >> ten minutes to go. goes fast, mr. chairman. thank you all. >> hi. i think my colleague from ohio. we have been joined by two other members and before we go to mr. cummings, i'll introduce mr. shack from illinois, and also the distinguished chairman of judiciary, john conniers, who is the author of -- he's the author of hr 676, and i'm alwayshr-676 pleased to work with him on that. mr. conyers, we are honored by your presence here, and we are

going to go to -- as well as mr. shock's presence, and we are going to go mr. cummings for your questions. >> thank you very much, mr. chairman i want to know which of you if any, and we will go down the line give bonuses for folks who are denied coverage, straight down the line. >> we don't issue bonuses for people that deny coverage, sir. >> is it a part of their evaluation? and i will ask each one of you the same question, it is part of the evaluation, those -- is there any kind of incentives with regard to evaluations regarding denial of coverage? that is to claims. >> i'm sorry, congressman, without going back and doing research on that topic, i really could not tell you that responsive answer to that question. >> you don't know the answer to that question, is that what you are telling me?

>> yes, sir. >> all right. >> i the yoel thaw wellpointe does not have any policies in place to reward people for denying people. >> and there is no rewards policy in effect and you do not do that? >> it is my understanding we do not do that. >> what about physicians? >> there are no metrics surrounding denying care. >> mrs. farrell? >> at aetna, we have no financial incentives tied to the decision-making employees. >> i know you said physicians, but what about employees? >> well, physicians are the only ones who can actually -- >> in other words, do they ever? >> physicians are the only ones who can ever make that decision-making. >> did you ever have that policy of making incentives for denying claims? >> you say ever, i can't speak forever. >> to your knowledge, have you snefr. >> no, not to my knowledge.

>> i see your lawyers trying to advise you, and you can confer because -- are you all right with that, lawyers? >> during my tenure of 8 1/2 years, no. >> cigna has no financial incentives for denying coverage. >> alt cscs there is no bonuses paid for denial of care. >> then today and yesterday apparently there is some other insurance companies then, because the testimony we got yesterday was just the opposite to that, but we will go forward. very interestingly, when you all were answering mr. jordan's question, you talking about this whole idea of claims, and mr. richards, you and your oral testimony and the written testimony seem and was very proud i think that you should be, i think, of when you said that over 99% of the claims are covered and people are receiving

the services that the doctor recommended. is that correct? >> that is correct. >> now, mr. richards, when you say claim, what do you mean by that? >> when i refer to that i am talking about the determination of whether the particular procedure is covered. >> in other words, those are services that were already done, is that right? >> actually a lot of times a physician, the individual's physician would check with us prior to the procedure being done under what is called a prior authorization to see if the procedure would be covered. >> so you are including when you look at this and giving thus figure, you are telling us that in those cases before services were rendered, you include those, and you include those after services were rendered that you paid quote claims. is that what you mean by claims? because i want to make sure that we, as, you know, going from the same page, because the testimony we got yesterday is that, you know, the industry has a

definition for claims, and claims means some services that have already been rendered. and then you are talking about denial, but a lot of the problems that we heard yesterday were things leading up to that where the doctor calls. we had one doctor say yesterday that he had to literally double his number of employees sdwrous deal with getting authorizations to do procedures, so just answer my question, so when you say 99.9%, what do you mean? >> i mean of the claims that we get, 99.9% of those are approved without any need for appeal. i think -- first of all, i appreciate congressman the chance to clarify this, because i don't think it is well understood by the public. cigna and i suspect other insurance companies get submitted a lot of claims that are duplicates or are that for people that are not insured by

cigna. >> are those included in this definition? >> they are not included. >> so if for instance a doctor submitted a duplicate claim, we'd already received one. >> okay. goit the duplicate. see i want to make sure we have -- the definition has changed already. so -- >> well, i understand the committee is interested in both what insurance companies are doing relative to medical coverage which is how i was answering the question, but i also understand that you are very interested in the administrative procedures so i am trying to clarify that. fraud and abuse would be another reason why a claim might be denied and for instance i know that is extremely important to medicare and the office of the inspector generals, so we for instance did not pay 215 million claims for fraud and abuse, and again, these are situations where the individual has already received the care, but that the doctor or provider is inappropriately billing for

that. >> when you say duplicate, you mean somebody who has been denied and this they try again? >> no, due to a billing error we would have already for instance paid the claim and submitted again. sometimes things cross in the mail, congressman. >> is that the only other thing that may not be included in the denial rate? >> i think that those are the major categories, the only thing i might mention is in california, there's a fair number of doctors in california who operate under a prepayment mechanism where we pay them a certain amount per month to cover the care for our customers, so that prepaid, the way that prepayment works is that we pay them whether the individuals seek care from that doctor that month or not. we occasionally do get claims from the doctors erroneously for care we have paid in the prepayment, and in that case those claims also would fot be paid. >> the gentleman's time has expired, and the chair

recognizes the congressman from illinois, mr. shock, and you may proceed for five minutes. >> thank you, mr. chairman and thank you to the distinguished panel for being here and i have half of the time of the chair and the ranking members, so i will try to make it quick. it seems as we discuss health care and the rising costs of health care, the focus seems to be on, you know, who is paying for it, and to me, it does not matter whether you are a state government or federal government providing medicare or private business or individual paying for it privately, the issue is the huge rising cost. my question to you in the private pay business, with your respective organizations, i am assuming when you negotiate rates to the provider, you ask for some justification of costs, and what there seems to be very little discussion about is the rise in costs, and some of that is true operating cost, in other

words, new x-rays or new mris or new technologies, staff, and some of the rising cost is also a cost shift. in other words, the great debate this year is whether or not we should cut medicare rates by 16%, and we seem to pat ourselves on the back when we leave and say, well, we staved off cuts again this year. well, we may have staved off cuts, but we didn't adequately reimburse the providers for the true increase in their cost and thereby requiring them to shift the cost into the private pay industry, so my question to each of you have any of you within your organization looked at the increase in reimbursement rates this you all are required to pay thus raising your premium rates, what percent of that is a true cost increase in terms of costs to the recipient and what percent of that cost increase is because of cost shifting as a result of the state and federal government not adequately paying

for their patients. mr. collins? >> thank you for the question, congressman. the trend in unit costs so that the negotiated rates that we have with providers and doctors has been running in the range of 4.5 to 6% for many years now in excess of cpi. i didn't know the exact percentage of what the costs are due to cost shifting, but according to a recent millieman and roberts the accounting or actuarial firm, $80 billion are cost shifted from medicare and medicaid programs to the private sector. the american hospital association and the ama have both published statistics that show that medicaid programs on average pay less than 90% of the costs and that medicare pays

less than 100% of the costs. so there is a cost shifting that has been a constant pressure on unit costs in the private sector. and it is a, it is a ongoing and major driver of unit cost in inflation and health care on the private side >> you said that your premiums went up on the average of 4 to 6%? >> unit cost trend over time in the industry has been running around 4% to 6% over a long period of time with the annual -- just the unit cost. other components of inflation are utilization increases, new technologies, those sorts of things, but straight unit cost has been running 4% to 6%. >> have you looked at what percent of that is the cost to do business and what percentage of it is a shift? >> i am sorry, sir, i cannot answer that precise question, but $80 billion over the private sector is a significant amount of money. >> yes.

>> congressman, i would agree with mr. collins' comments. milliman did publish that study and estimated that $88 billion is being cost shifted to the private sector from medicare and medicaid which is an overall increase for commercial customers of 10% or the study says $1,600 per covered member. it would be very difficult for us to identify on a facility by facility, doctor by doctor, understanding their entire cost structure what goes into that to identify at that level, but i believe that the millieman study is correct. >> because i am tight on time, i want to know if -- i understand provider by provider, it is not possible, but have you looked and done independent study on a sampling pool of providers on what their justification and increase in cost is? >> congressman, first of all, i do agree with the underpayment

by medicare and medicaid is absolutely huge problem for hospitals and doctors and it has definitely increasing medical inflation. cigna has done some analysis of the disparity in the rates between medicare and medicaid and commercial rates, and i don't have it with me, but we would be happy to provide that analysis of the average rates to the committee. >> i only have a couple, and yellow is what? two minutes or one minute? okay. one other question, because i am going to be cut off here. i wish i had more time. it seems to me again as we talk about controlling costs, i found it very interesting that i met with the consulate general of canada, and he's very much supportive of their canadian health care system, but one thing that i thought was interesting in the discussion is that he said, you know, congressman schock, he said it is too easy in your country to sue doctors. i sat back and said, what? he said our health care system

in canada would not continue to function if comprehensive tort reform were not a part of the health care plan when we passed it in our country. my question, obviously my view on this is that we shouldn't wait for a single-payer system in our country to have comprehensive tort reform as a part of reducing not only the premiums that the health care community pays, but more importantly the unnecessary medicine that is ordered as a result. my question to you, again, is whether or not within your respective companies that you have looked at the amount of reimbursed care that you give through the insurers folks, what percentage of that is done through defensive medicine as a result of the fear of these physicians being sued. >> i actually don't have the data with me, but i know that the blue cross blue shield association has done work on this exact issue, so we would be happy to submit that in

follow-up. >> could you provide us a copy of that? >> yes, w shgyes, we would be h this. >> anyone else? >> tort reform would be helpful, because the absence of tort refort increases the intensity of procedures that doctors perform which is one key aspect of utilization which is what you talked about before. if i may, i would like to go back to the question about cost shifting with government programs. one of the things that happens with medicare and medicaid is that they lower reimbursement rates in an effort to get more efficiency out of the health care system. that in part, does happen. but when it doesn't fully pay for the reimbursements, then what happens is that there is a cost shift, and the commercial segment, the commercial products pay for the shortfall that is not made up by efficiency that is made by those reimbursement cuts which is estimated to be $1,500 for a familyf four who

has private health insurance and if you look at the total cost of private health insurance, that is a major component of it. thank you. >> thank you. and thank you, chairman, for your generosity. >> we are glad that you are on this committee and we appreciate your participation. the chair, i will recognize, the distinguished member of the judicial committee mr. conyers, and you may proceed. >> thank you for this permission, chairman kucinich, and i want to thank you for the hearing. these are distinguished, experienced members of the health insurance industry, and i'm sure that their testimony has been very important as we work toward a reform of health care, and i also want to commend

the ranking republican member aaron schock who is carving out quite a record of distinction for himself, and i am glad he is here with us as well. mrs. farrell, what do you think that, what is your feeling about the public option and how do you think it fits into health care reform as you see it, ma'am? >> my view of the public option is that i think that we really need to focus our efforts on what problems we are trying to solve around access and quality and affordability, and then ask ourselves at the end of that whether or not a public plan would actually progress us further down the path than some of the bills that have already

been put in place. you know, i do believe that -- >> could you pull the mike a little bit closer, please? >> yes. one of the things that is concerning about a public plan which the congressman schock was referencing is the cost shift. if a public plan were to reimburse at medicare or medicaid rates, there would be quite a cost shift to the commercial segment which would in turn result in increaseded costs in the commercial sector and therefore increased premiums, which is really antithetical to what we are trying to achieve in health care reform. >> now sh, mr. richards, it was impression that the public option would be designed to save money not cost more money, and that it would provide a choice

between citizens as to whether they wanted a private insurance plan of which there are literally hundreds or would they want a public plan? is that your impression? >> well, congressman, cigna supports many of the reforms being debated in the debate in both the senate and in the house, including personal coverage requirements, guaranteed coverage, the elimination of pre-existing conditions, and the reform of payment mechanisms. we believe that if those reforms are enacted, then a government-run plan is not necessary. >> so -- so, mr. sassy, if you agree with that last comment, then you don't want any competition in the insurance, health insurance field, right? >> well, i think that it is our position that there is a lot of

competition today in the health insurance industry. there are over 1,300 health insurers in the country that compete for business. the challenge is that when the government could come in and have the ability to set reimbursement rates that it creates an unlevel playing field between private industry and the government, and that certainly it has the potential to exacerbate the cost shift that already occurs between medicare and medicaid and the private sector. we also fear that as a result of that, since we don't have, and we would not have a level playing field since the insurers are subject to taxes and other types of expenses, that lower reimbursements coupled with taxes would create a level playing field.

>> well, with this unanimity against the public option, we are putting in a provision that everybody's got to get insurance, and if you cannot afford it, guess who will pay for it? the government. and you are talking about the public option will cost, someone is talk about it, not you, but how could one public option destabilize 1,300 private insurance companies? >> our company agrees with the statement that was made earlier that when you implement some of the reforms that are being discussed, that require insurers to offer insurance to

>> could you pull your microphone up closer prove >> there are low income individuals who will need some subsidy in order to be able to afford health care coverage. if you pass a reform with all of those elements, we will have a better functioning health care system today and have the ability to put it plans that are affordable over time. >> couldn't a public option accomplish that? >> we don't feel is needed. >> why not? >> those reforms have never been in existence in the united states so bypassing them we think that will significantly improve the health care system and make it more accessible and more affordable. system, and make coverage both more accessible and more

affordabl affordable. >> well sh-- >> may i have a second? >> well, we have a public option in the v.a. the veterans administration is essentially a public option, so we do have one here in this country. >> well, what about medicare? who do you think runs that? >> exactly. >> well, let me -- i am not doing too well on these questions, mr. chairman. nobody seems to -- >> i would suggest that the chair is -- mr. conniers is doing very well with the questions and i think that the answers that we may be having difficulty dealing with here, but your questions are just fine. >> well, let me try -- well, let

me try mr. collins. have you ever heard of a universal single payer health care system? >> yes, sir, i have heard of the concept. >> and have you feelings about it? >> yes, sir. i clearly am a partisan for the having a private health care, a robust private health care sector. i believe that the private health care sector brings a lot of value to the overall system that we have here, and of course, we have a robust public system with medicare and medicaid and the v.a. system, and tricare and those are all components of the public system. i believe that the private system is important, because it brings innovation, and it brings energy, and it brings change and it brings ideas that are often used in the public sector system as well. i think that we can have both a private and public system. we can build on what is good in the public system.

and the private system, and use those things to improve the private system as well, sir. >> well, that is encouraging then. then why not -- let's try the single-payer system. hr-676, and that is mostly public system. what is wrong with it? >> i'm not actually familiar with that bill, if it is a single-payer system, it would be the end of the private system as we know it i believe. >> is that true, mr. bleum? couldn't -- does that mean the private system goes out if you have a single payer system? >> i think that the primary concern, congressman s the fact that we mentioned before with respect to the cost shift. the medicare and the government programs, the v.a., all of those programs have lower rates of

reimbursement so that in the entire system not all of the costs are being covered by not the proportional costs of the care that those programs, that those programs give are being borne by the government, and so there is a shift as i mentioned to congressman schock of $1,500 of a family of four every year. so one valid concern would be that if all of, there was a single payer and all of the costs were borne by the government, then there would be none of the innovations that any of the others have discussed. it would be the end of the commercial, but then the government would then have to absorb all of that other costs in that would make it more expensive for everyone. there is also, i want to remind everybody what was said to, was said about the value what the

private sector provides. >> but what about the cost increases that the health industries are imposing upon people with health care? not only in their premiums, but also in the pharmacy prescriptions that are being raised -- i mean, you talk about cost shifting. do you, ladies and gentlemen, are representing companies that keep raising the cost of premiums every single year. and yet, you are worried about somebody else shifting cost. >> mr. conyers the time has expired, but, you know, each one of you that wishes to respond to his question, please do so and i would urge any or all of you to do it. someone care to respond? >> could we start, ms. farrell,

could you help me understand how i can increase my sympathy for health insurance companies? >> ms. farrell? >> the way we look at premium increases every year and the way they are calculated is based on the underlying increase in medical costs. and so -- >> so you have to do it? >> but the profits are greater -- and the only people i can think of that make more profits than the industry that you six represent is oil and pharmacy. >> the gentleman's time has expired. >> oh, i'm sorry. okay. >> we are grateful that you are here. >> thank you very much. >> and the chair recognizes mr. kennedy. we are grateful that you are here, mr. kennedy, and we are grateful for your family's

lifelong commitment to health care for all americans. thank you. thank you, mr. chairman. to the panel, as my former colleague was just talking about, the public option, and given the environment right now in congress with respect to the political viability of a public option, i wanted to get to how we are going to implement savings in the event that a public option is not passed. i am in strong favor of public option and i want that on the record, but i understand that the political reality of what is going on right now this congress shows that may or may not happen, and if that doesn't happen, i want to hear today what the insurance companies are going to do to step up to the plate to be sure that we don't waste a lot of time before we

put into place what will be the alternative to a public option, and that is perhaps a trigger of the public option which means that we are going to have to wait for us to show that insurance companies aren't doing their job before a public option then gets kicked into place. of course, that is, you know, an ugly kind of scenario, because it is basically saying, okay, we are going to wait until things go wrong before we fix them. and that presupposes that things are going to go wrong, so obviously we don't want things to go wrong. what i would like to hear from you is, you know, we hear a lot of talk about different tools in health care that will save money and improve quality and efficiency, and we are all familiar with the inefficiencies in the current system that lead not only to wasted dollars and

poor health outcomes for the patients, but also huge administrative headaches and red tape for patients. health care information technology as i know is one of the tools we talk about in achieving efficiencies, but another area where we could generate savings and quality improvements is through a process called improvement tools such as value stream mapping and flat mapping. we talk about how to make a clinical improvements to improve efficiency so to save money, but what do you see for these as potential to save money through the process of administrative improvements, and wh can -- what can be done to incentivize the use of these tools in not only making clinical improvements, but also making improvements in

the whole process of administrative making and cutting out a lot of that red tape that everybody always acknowledges is a big cumbersome part of your business. can you tell us how do we incentivize in government a way for you to do the right thing? >> congressman, i think that there are many things that the private sector can work with government on. i think that you brought up an important element, health information technology. there are certainly, my company wellpointe is interested in implementing insurance technology and examples include e-prescribing, and making sure that making available to doctors the ability via a pda to prescribe, to check for

drug-to-drug interactions, to get personal information -- >> we know all that. we know all about i.t. and what it can do, but -- i am short on time, but how can we ensure when you have an i.t. system, that it is an i.t. system that is working to the maximum effect. we all know that i.t. can work, but we know it is not going to do a lot of good with the buzz words of e-prescribing and doctor, you know, supported-protocols and all of that stuff, it is not going to do well if you don't have a way of monitoring whether the system is actually running efficiently, and the doctor says to go out for these five referrals and they go out front and the administrative clerk gives them three of the five. now, who picks up that it was only three of the five. how do you measure whether or not your system is working up to speed? who is going to be testing to make sure that you are doing the job in terms of getting the most efficiency out of your i.t.

system? >> well, i think that each company owns that for their own i.t. areas, but it is a shared responsibility. >> you see, that is the problem. that is a problem. because you can't have all of these proprietary systems out, there and everybody thinks they have a new-age i.t. thing going, and then, you know, they have all got different systems for, oh, we are going to try to do this process more efficiently here and this process here, when we don't have standards. we have basic metrics for clinical care, but where are the metrics for making sure that you are going to do the best administratively. we can do all of the protocols in the world when you come into the e.r. and say, wash your hands, get this glove, get that glove and cooperate this way and which want this person to be treated so they don't get an infection, but what i want to know, is what are you doing to standardize so that no matter what i.t. system or health

system, we know that you all are doing, you know, not your own proprietary thing, but whatever proprietary thing is doing, it is good housekeeping seal of approval proprietary system that is squeezing out every bit of waste and duplication and redundancy that is out there. how do we know that it is really going to be working to the best effect that it is supposed to be? >> the gentleman's time has expired, but one of the witnesses may respond, if they care to. anyone? i think that mr. kennedy raised some important points and the follow-up discussion that staff has with the panel, we will explore that. thank you, mr. kennedy. we are now going to go to round two of questions. just a little bit of housekeeping here. in the last round of questions, i'd asked mr. richards for information about his town hall

meetings. you know about all of our town hall meetings, and we want to know about yours, and so you have internal town hall meetings and the audiotapes as well as copies of all the meetings and memoranda of the meetings and actions decided on the meetings and you will hear from us in a for mamal way, but we want you know that we will be looking for that information announced from chair here. yield. the chairman yield? >> one quick question, we will ask so we are not singling you out. we will ask everyone to produce the same information. we will try to find out to organize your troops on the issue of cost reduction. >> thank you, chairman. >> mr. kennedy? >> in response to the questions,

if all of them could get back to me on the actual tangible recommendations as i pointed out to what we could do to standardize incentives for them to have a widespread adoption. >> i thank mr. kennedy. this is not solely an investigative subcommittee. as long as we have this system, i would imagine you already have some good ideas. aetna is the third largest for- profit insurers, but your current management returned your company to profitability by shunning members. isn't that true? . . ger profits with

fewer premium payers, isn't that true? >> are you referring to back in the late 1990s and early 2000s? >> that you have made, and there is a point at which you shed some members, and the profits some members, and the profits st >> there was a point in our history where we were as an enterprise not profitable, and one of the reasons, the big reason why we were not profitable is that we had underestimated medical costs. >> oh, i'm sure. >> that is exactly the point. so how much customers did you have to lose in order to return to profitability? >> i don't recall, it was not looked at in terms of how many members we had to lose, but looked at in terms of what is the underlying rate of medical cost and how do we price appropriately there? >> "forbes" magazine said about

$8 million and we will put na in the record. does that have an estimate of how much medical expenses the company avoided by shedding those policy holders? >> i don't believe it was looked at that way, but relative to the underlying medical costs. >> well, can you determine for us, and look at the internal memoranda at your actuarials and you should be able to figure out how much money you saved by shedding 8 million policy holders. >> i can look at that and provide that information to you. >> i would appreciate it, because almost all of those 8 million people received their health insurance through employers and they lost their aetna health insurance when aetna raised the prices of the group plan beyond what the employers could pay. isn't that true? >> i would say if they left us, it was beyond that which they thought it was a reasonable premium, yes. >> and your ceo has spoken publicly about the significant investment in sophisticated

technology and he started at the start of his leadership that the i.t. investments helped aetna identify employers for repricing. so i'm wondering, could you tell the subcommittee if aetna picks employers to shed by for example the type of occupation workers performed? >> no, that is not the way that we would do that? >> the age in the plan, the age of the workers? >> so, you are asking about the underwriting practices? >> and do you -- does your i.t. system identify people by age, and do you pick employers to shed by the age of the workers in the plan? >> our i.t. system does not identify people by age. the way it works is that an employer will provide us with a list of their employees, and along with that list would be other requirements in order to

understand write each one of those. >> can it identify how long someone has been in the system? >> it would identify how long they have been a member at aetna, yes. >> okay. do you pick employers to shed by claims' histories of the workers in the plants such as frequency of emergency room visits or clusters of disease like cancer. >> could you repeat the question? >> i'm trying to explore how employers get shed. do you look at claims histories of workers in a plan? for example, if someone visits an emergency room frequently or is there a number of people with cancers or do you make decisions based on some of those principles? are any of those programmed into the information technology? >> no. we never drop a member, because of an increase in their medical costs. >> so, do you have -- like some will be a report that will be

just spit out that says, uh-huh, cluster of diseases here, cancer, high cost, out. >> no. >> that does not happen. >> it does not happen. >> and you don't screen by location or zip codes for whether there might be -- or do you? do you screen by locations or zip code? >> one of the ways we price our business is to look at geography, because there are significant cost variations by geography across the united states today. >> are those cost variations determined by among other things epidemiological factors? >> they are determined by looking at the underlying costs by geography and there can be significant variations just towns away from one another, and that is one of the things that we look at. >> my time has expired on this round, but what i would like to do, ms. farrell, so we can better understand the relationship between your

information technology and how it serves as a tool for decision-making, if you could provide this subcommittee with a narrative so that we can come to an understanding of the relationship between the data that you gather and the way it is used as a tool for your decision-making with respect to your customers and whether they will continue to have policies. this would do shedding, recisions, and even -- and any use of information technology that would be used to shed any of those 8 million customers. and you know, since we are trying to be fair to each and every one of you, this subcommittee is going to ask each and every one of you by letter to provide that information. the information technology that you have, and how does it help,

you know, does it help you to decide which customers to shed, and how does it do that? okay. my time has expired. we are going to go to mr. schock and you have five minutes. you may proceed. >> thank you, mr. chairman, and i guess in response to some of the concerns raised i would only say that, you know, i think that most of us agree or at least i agree with the comments that were made earlier that health care premium costs are a function of reimbursement rates, and so, it is disingenuous to compare a government plan to private plan when a private plan cannot control for costs and a government plan can. in other words, in a truly static system where all reimbursement rates are set at a medicare or medicaid reimbursement level, the system then would be forced to control

their costs either by reducing quality or reducing options. i think that for those of us who share the concern of the movement towards a single-payer system, it is clearly focused on the quality of the care that the patient will receive and continuing the progress that this country and this health care system has made over those countries with a different plan in in terms of the innovation and technology here in the country. ki only speak to my experience prior to being in the congress which is the state legislature in illinois and i witnessed firsthand what happened in illinois under then rob blagojevich's health care proposal which was all kids, which did similar to what the majority wants to do here, which is basically offer health care, a government plan for all kids in the state of illinois regardless of income. i saw firsthand in my

legislative office individuals who had children insured, individuals who were dually employed by an employer who offered a private health care plan and who opted for savings of anywhere from $50 to $70 a month to take their child out of the private plan and enroll them in the all kids medicaid reimbursement level health care plan. now, it did two things. number one, i had a very poor legislative district, 40,000 voters and 20,000 of them on food stamps. the people living in poverty who otherwise had access to their care, their access dried up and went away. today, there is not a dentist in the city of peoria, illinois, that will take an all kids' patient. second, it ballooned the deficit within the state of illinois'

medicaid program, all kids program, a wnld renow nine months late in the reimbursement levels and i throw this out as a case in point example and mic microcosm in the country where we have tried competition against private insured, and second, and to that point, i don't buy the concept that the solution to greater quality, greater access and lower costs is the government. to that point though, i think we need to do a better job of providing if we understand that we are trying to control costs, and if everyone accepts the fact that health care premiums rising are making it more difficult for businesses to provide health insurance, for individuals to provide health insurance, how do we lower the health care premium cost? well, then we have to lower the request for services. and the rates we are paying back.

so my question is how do we give the tools to the consumer? because it is my view right now as consumers if i have a private play health care plan whether it is provided to me as an individual or whether it is provided to me by my employer, i don't have the tools necessary, and there is a lot of competition and i am digressing, but there is a lot of talk about health insurance being compared to automobile insurance, but the biggest difference in automobile insurance is that if my car gets in a wreck, i am going to do one of two things, go around to get two or three estimates and not to pay for it out of pocket, but because i know when i turn in the automobile expenses, my automobile insurance rates are going to go up. that connection doesn't seem to be there while it is true, but the connection doesn't seem to be in the mind of the patient as he or she accesses the health care system. so what tools can you in the insurance industry give to consumers? how can we look at maybe reforming the way in which people buy their health care,

not the premium, but rather that actual service how the buy it. i understand you can't do it with emergency care, but if i go in, and i live in a relatively large city of 150,000 people, and a lot of places offer mris and each one of those locations charges a different rate. yet, that information is not readily available to me as a consumer, and i think that is a part and parcel to us doing a better job of controlling the costs that go and drive up health care premiums, so if you could answer that question, i'd appreciate it. what are you doing now and what could we be doing to give those tools better to consumers? >> the gentleman's time has expired, but the witnesses can answer the question. go ahead. >> congressman, i can answer that for my company wellpointe, several years we embarked on a journey to increase the transparency so that consumers more easily compare the prices of commonly-used services within

their geographic area, because you are right. there is a large disparity between an mri in one part of the city and another part of the city and a cost for commonly knee replacements in one part of the city versus others, so we created anthem care compare which is a website to analyze the top 40 elective type procedures and a member can go into the website and type in the zip code and it will identify different providers in the area and the costs associated that would be charged by the different facilities for those areas, plus we try and tie in as much quality, public quality available information available to the members so that if you are considering having your knee replaced at a certain facility, and how often do they do that procedure and what are the success race and the readmission rate for that.

we have rold have rolled it outf the markets across the country and now providing that service to many blue cross blue shield plans across the country. that is one example of how to increase the transparency. >> congressman, you mentioned mris which is a great example because in some geographies the cost of an mri can vary by 100% or more. it allows us to do that. there are some that do not allow us to share the transparency. the vast majority do. the other thing i would say is you need to provide the incentives to individuals. i think they are a great example of working with cign toa work on equality and transparency. -- and cigna to work with

equality and transplanted. they can send people for probie behavior its whether that is now easing -- for appropriately heather whether that is not smoking or exercising. >> i think you for your presence here. he wanted the follow-up questions, we will make sure they both to the committee. you brought that issue. i want to take the liberty of pointing out that when you brought of the issue about car insurance, that is one of the debate right now. e of car insurance, and compared to health insurance, i mean, that is like one of the debates right now. and just what occurs to me is

that if you wrecked your car, you can get a new car. if you wreck your health, you're dead. you know, unless you believe in reincarnation. mr. schock, thank you. the chair recognizes mr. cummings. >> you know, as i was sitting here listening to you all, i was saying to myself. boy, they sound real nice. i mean, it sounds like everything rosy and it is amazing the people who sat here yesterday. made us -- said some things that i thought were very damaging to the what you all do everyday.

i am not talking about you all individually, of course. and the thing i guess that i'm just sort of wondering about and they made a big deal of this whole denial of claims. i specifically asked them the question about whether they felt that things were worse or better since the clintons tried to get through health care reform, and they said that they were far worse. we are guard to denial of claims. and so, mrs. farrell, i am going to go to you, because for one reason, because you have said something that interested me. you had talked a little bit earlier about claims that there were no, there was no one, that only -- well, maybe it was several of you said that only doctors deny claims. is that right? so you all are telling me that there are no other non-medical

people who make decisions that a person cannot get a certain treatment paid for. is that what you are telling many e >> just to clarify. what i said is that there are no medical decisions or no medical denials that are made by somebody who is not a physician. you can deny a claim for a non-medical reason, and that decision can be made obviously by a nonclinician. >> and so i take it that those kinds of decisions made everyday by nonmedical people? >> nonmedical decisions, yes, can be made by nonmedical people. but if it is medical-related, it is made by a physician. >> and so, a claim, and a claim is for service, and i want to make sure that the definitions are right again, this is for services already rendered. a claim is for -- i see you shaking your head, mr. bloems that right? >> we are as a group struggling

with the definition of denial of a claim is. to me, when i cited what the survey said on about us, a claim -- there are basically three kinds of claims. and the first kind has been really enunciated here which is when you get a duplicate claim and rendered service, as you said and then get a claim and then another claim comes in and you have probably paid the first one. in the denial rate in the numbers of the 5.4 and the 8.7 that medicare part b has, in those claims the biggest cause is duplicate claims, and the next kind of claim is for experimental or investigational which there was no preauthorization which was discussed earlier. and the last kind is where the employer has through the policy terms decided we are not going to cover that kind of a claim, that kind of process. that kind of a procedure.

now, the other thing that we are struggling when you are asking questions, i believe you are also talking about coverage determination whether people have coverage in advance of when services are covered. >> okay. i got to ask you this. i understand that a person can have the treatment preauthorized and get a preauthorization number and get treatment and still, the payment for that same procedure may be denied. is that true? >> in a coverage determination, there is an initial decision made about whether this procedure is covered. that in our company like in the case of ms. farrell's case, that is done on a denial of coverage for medical reasons is only done by a licensed board certified medical director. >> and so, none of you all then nobody up here has anyone who

denies a person treatment? in other words, that is -- in other words, how many of you all deny folks any of you do, have people who you give bonuses to or give financial incentive for denial of treatment? nobody. >> right. i answered before, neither, none. >> none. okay. i just think that -- i think that the based upon the testimony that we got yesterday, the testimony was clear that there are many, many instances that where insurance companies are basically intentionally and maybe coverage, if you want to call it coverage or claims or whatever holding back decisions and literally waiting for certain things to happen and sadly in some instances, death, and then, and the person is denied one way or another. so, as the chairman says, here,

the difference of an automobile, the person dies. that's sad, sad situation. >> the chair recognizes mr. conyers and you may proceed for five more minutes. >> thank you for your generosity, mr. kucinich. ms. farrell, are you aware of the report from health care for america now on july 15th, that reported that profits at the ten largest publicly traded insurance companies rose 428% from 2000-2007? >> i am not aware of this specific report that you are referencing, but aetna's profits for every dollar we take in, we pay about and make about five cents in profit and pay about 84

cents in medical claims. >> well, what about you, mr. richards, are you aware of this report? >> i'm not aware of that report, but i do know that if you look at cigna's total profits globally we make about $1.66 per customer per month. >> i see. mr. sassi, have you ever heard of this statement? >> i am not aware of that report either. >> okay. >> and ms. reiten, have you heard of this? >> we wouldn't be in there because we are a noninvestor company. >> i know mr. collins has. >> well, i have seen that report in the newspaper,+++[véüh?pl2#÷g

i am not familiar with that study. let me comment on my company. >> i do not want to comment on their company. you are not familiar with the statement. >> i'm not familiar? >> no, you are not. >> how long have you been in the business? >> i have been my company since the beginning of 2001. >> heady ever heard of health care for americans now? >> no, i have not. >> well, let me ask you this.

are you familiar with a recent study of the american medical association than 94% of the insurance market in the united states are highly concentrated? 94% of the insurance markets in the united states are highly concentrated? >> i'm not -- i would -- >> you're not familiar? >> not with those statistics. it's not an unfamiliar statistic in terms some markets don't have a lot of competition. >> well, do you contest this finding of them? >> i don't know enough to contest or affirm. >> okay. let's go down the line, again. miss farrell, you're a

student -- you subscribe to ama journals. >> i am not aware of that study. >> you have never heard of it. >> richards you have never heard of it? >> no, i have not. >> let me ask, to save time, has anybody ever heard of it? has anybody heard of the ama? >> yes. >> yes. >> all right. well, let me ask you about this. have you ever heard of the statement that's been made public and to my knowledge, never contested that the ten largest companies in health insurance, the ceos compensations totalled $118.6 million.

an average of $11.9 million per ceo. let's save some time. anybody ever heard of that before? nobody. well. you want a citation for it? not particularly. okay. all right. let me ask you this, miss farrell, what is your annual compensation per year? >> my annual compensation is something that is very private to me and something that i would be happy to submit -- >> wait a minute. you don't want to tell me? is that what you are saying? >> i consider my compensation to be very private. i would be happy to submit it to the committee in writing. >> but you don't want to say it publicly? >> no, because i consider it to be private.

>> before you came, we asked the witnesses to submit information about their compensation in writing. it's a choose not to answer at this committee meeting, but they will present it to us in writing. >> okay. >> we can still get that information. >> that's fair. does anybody here -- i've never had a hearing where six executives of health insurance were all on the same panel. this is a new experience for me. do any of you want to tell me what your annual compensation is for the record without having to submit it in write iing? >> if the witnesses care to respond, you can do that. if you don't, we certainly want you to submit it in writing. >> what do you want to tell me. >> i make $728,000 in salary.

>> okay, i appreciate that. what do you want to tell me mr. bloom. >> mine is $545,000 a year. it's a matter of public record. >> sure. i thank you for that. what do you want to tell me would be happy to submit it in writing. >> before you go to mr. kennedy, i want it understood that you have agreed to submit this information to the committee as long as we have that agreement, that is fine. you can choose to answer it now or answer it in writing. it is clear the your choice. -- cearly yo -- clearly your choice. >> pajamas bringing of a point. i think folks here are working

in a field that is perfectly legal and set up by our society to learn what they are doing. there is nothing wrong with that. what is wrong is that last year the head of cigna earned $11 million. if you are going to talk about where the money is coming from, it is coming from denied claims. the head of the united health group earned 119 -- earned $9.4 million. these are public records. you do not have to ask anybody here. i am sure they love to be called senior executives, but frankly, i think they hope to be senior executives with those kind of pay scales. the point is we are trying to make the point that the industry is allowing for at these kind of exorbitant pay at the top of which begs the question that it

is an allowable industry. we need to know kind of what this is a matter of where the dollars are coming from. people are paying premiums and getting rejected for health care. dollars are coming from when people are paying the premiums and getting rejected for health care. i'd appreciate the questions you are asking, i also understood the fact these individuals here have every right to say and do what they are doing -- >> mr. kennedy, if i may. his time is expired. however, we will now go to you mr. kennedy, if you want to yield anytime back to him. you can proceed for five minutes and we're going to go one more round after that, then be done. >> okay. i'd like to go back to the whole idea of how -- if insurance has

thus far not gotten around to figuring out ways to help the government or society change reimbursement reform. if we had known for years our system is upsidedown, all we pay for is sick care rather than health care, if there are simple ways for us to keep people from being frequent fliers in our emergency rooms, if we just did x, y and z and that would lessen the pressure on you to charge your customers exorbitant premiums, then why haven't you, in your industry, taken upon yourself to be the biggest advocates for insurance reform over the last 20 years?

furthermore, what i don't get is back home, like most of my businesses for the most part are passive when it comes to their insurance premiums. they let their insurance carriers dictate to them, here is your premium this year. it's the insurance companies that work for the company they are subscribing for. they have been hired to do their policies for. so, i just don't, for the life of me understand why if it's in the interest of their clients to reduce premium costs why insurers in this country haven't been at the forefront of the health care debate saying listen, here are the ways we can restructure the health care market based upon a capitalistic system where by it pays to have better care at reduced costs. that's what i can't figure out,

mr. chairman. if it's really about making money, we know there's plenty of money to be made. why can't they build a better mouse trap to make money and also save money? and give us the answers? you know, we're just trying to do what i think is consistent with what they are trying to do. that's lower cost and build quality. they are the experts. they are in the private sector. why aren't they giving it to us? why do i have to sit up here and ask about things that i am not that educated about because my staff person puts it in front of me and they are going to promise to put it to me on value based streamlining and engineering. it can't apply to health care. all of these kind of thing that is we are going to have to put in law to enforce insurance companys to bring their costs

down. what do we have to put that into law? i'm sure they don't want to be regulated more than they are. tell us why. we are being pressured to bring the deficit down. we have an enormous deficit that's going to swallow up our money. taxpayers are going crazy. they are getting on our tail for having a big deficit. health care is one of the biggest nuts we have going forward. help us. one way or another money is going to have to be streamlined. it's going to be done at the expense of our consumers, which we don't want or efficiently with quality in mind so people don't get their health care cut because we haven't been on the forefront of making the right decisions that help their continue in a more sufficient way. maybe you could comment on why you don't think you have ahead

of the game in terms of getting better reinforcement. why does the government have to do all the incentivizing for health. why haven't you been out there for years doing this stuff? >> congressman, i would love to respond to your question. first of all, there are things we can do personally. at cigna, we do things to improve the health of our custome customers. for instance, we have a gaps and care program. we monitor to see if they are getting the care they need. somebody who had a heart attack, we outreach the individual's doctor and the individual and say shouldn't this person be on a beta-blocker because for most people, it's appropriate. if they don't take the drug, they are likely to have another

heart attack. we are actually increasing pharmaceutical claims for the better health of the individual. it's something we can do and do do today. relative to the payment reform question, again, cigna is working with a variety of health care professionals. i referenced hitchcock in new hampshire. we are working with five other entities in the country for payment reform. we have a patient center where primary doctor coordinates the care. it's a complex system. if somebody is sick, they have a lot of different doctors. having a primary care person look at the care is very important. a lot of primary care doctors can't afford to do that because of the rates medicare pays them. it's tough to do that. the medical home is a promising pilot we are trying where we are paying extra money to allow them

the time to coordinate the care. i think there are things we can do individually and in partnership with health care professionals and things it government needs to help on as well. cigna and the industry have supported reforms for a variety of things we have mentioned at the committee today. we need government to work with us to help reform as well. we look forward to working with you. >> my point is it works. why are we piloting it? we are doing it because we are slow walking something that works. it's been demonstrated again and again. it makes so much common sense. it's like the trigger thing. we are doing what's inevitable, but it's going to take an extra four or five years before we take it to scale because there's too many financial interests we are going to have to tiptoe

around to get it implemented. if you stood up and said hey, we know medical homes are about making more efficient, giving the dock and gate keeper more time. 80% of the dollars spent on 20% of the people. they are the highest users of health care. it's where we get the most money. let's do it. boom. let's go. the reason we slow down is because of inertia. everyone is trying to protect their turf. at the end of the day, we are going to hit the wall. when we do, everyone else who is well off is going to be fine. people in the middle and the bottom are going to be hurt. >> the gentleman's time expired awhile ago, but everyone in this room and everyone watching knows how important what you just said

is. we're wondering if there's a response? does the industry care to respond to what mr. kennedy said and what he's providing as a wake up call here? does anyone care to respond? >> we're going to have another round, then wrap it up. anyone want to respond to mr. kennedy. >> chairman kucinich. for the record, we'll submit proposals with the administration of $500 billion of potential savings -- >> over what period of time? >> over a period of time from 2010 to 2019. we'll submit the report to the committee as part of the record. >> how much was that, again? >> $540 billion, sir. >> okay. that would be helpful.

anyone who wants to submit similar information so ordered. we appreciate you doing that. i just want to say that as we go to the final round of questions here, i'm sure that the insurance company executives that are here recognize that everything is changed with respect to health care in america. you are facing a totally new environment than when you started your careers in health care. 47 million people uninsured. as you know, many people are losing everything they have because they can't afford to pay their hospital bills. many of those people had insurance. so, today, we are talking about this business model. but, we also have to understand, we have great respect for you

being here. we also have a great understanding of your position and your political power. let me give you an example. the insurance companies are so powerful that you are able to take hr-676, medicare for all off the table. right at the beginning of the discussion. for either party. both parties, took it off the table. 85 members of congress that signed on to it. we drafted it. 86, thank you. but, the point is, that you are able to exert your opinion. it lashes with your business model. we understand that you are very influential here. based on your influence, we are seeing the so-called public

option that would provide competition. we understand you feel it wouldn't be productive. based on your influence, the public option looks like it's going to be very difficult to get into a final bill. of course, the industry has had an influence on shaping triggers and co-ops. what mr. kennedy had to say is so important. where his comments lead to is that you should be thinking about the fact that the business model you have could end up being -- could end up killing the goose that laid your golden egg. you may be reaching an end point as to how much medical loss ratio you can go before people start to say what's going on he here. how far can your executives go making millions of dollars a

year while people's claims are being denied. you say there's no connection, but the public make as connection. there is a continuation of insurance care where by 30 million people would be potentially covered by h.r. 3200 prada the dow public option, 30 million people we pushed into -- 32 under. without a public option, 3 -- 30 million people would be pushed into private plans. it is extraordinary. i would hope that you start to

think about a different model of business and social responsibility. the insurance industry because of changes in the global climate it is going to take enormous hits in coastal areas over the next 40 years. on health care, he may eventually want to think about what is going to be like when you wind and your health care products. frankly, i think sooner or later -- whether this decade or another, you are moving toward a condition where it no people going to be uninsured premiums are going to be out of the reach of more americans. they are going to put it on you. you know that. i did not call you today to

embarrass you. that is not my intention at all. we need to get information about how your business model works. to embarrass you, it's not my intention at all. we need information about how your business model works. we understand, you are not charitable organizations. it's not why you were formed. you're responsible to shareholders. if your ratio changes, wall street punishes you, too. is this business model sufficient to provide health care to the american people? there's a collision here. you happen to be at a time and place where the collision is happening. i'm going to ask a final question as i wrap up my time here. yesterday, we received testimony from aaron ackley of montana. aaron's father, william, his

obituary is part of the record. he had a request for a bone marrow transplant. it was denied coverage on four occasions. it caused a delay in cancer treatment. he ended up die frg the cancer. aaron told this committee he had been enrolled in medicare. had he been enrolled in medicare, he would have received his bone marrow transplant right away. government run medicare provides health to senior citizens, standardized forms, a minimum cost. a fraction of yours. i'd like to go down the line and answer this question. isn't it true that your reason for not adopting the medicare standards as your own is that you could not deny payment for

expensive treatments like the one i referred to. mr. collins? >> i can't answer that. i'm not familiar with the medicare guidelines. >> like him, i am not familiar -- >> miss farrell. >> i'm not familiar, either. >> nor myself. >> our chief medical officer used to be the chief medical officer of cms. had he been here, i'm sure he could have answered it. >> i'm glad you are here because i got a chance to ask about your town hall meetings and i'm really interest ed in that. >> i have the same problem everyone else mentioned, one of our chief medical officers could have answered that question. >> see, i mean, you know -- you

may not be as familiar with the medicare standards, i'll accept that answer. but i think you understand why i asked the question. we are trying to get to the genesis of the business model here. how do you make money? many americans believe insurance companies make money not providing health care. your first obligation is to the stockholders, shareholders, then you have an obligation down the ro road. you have to have an obligation. you pay. you have a good batting average. mr. conyers, do you have five more minutes for questions? >> i'm so nearly exhausted, i hardly have anything else to say. but to thank you for this meeting and to thank our witnesses for holding up.

but, you know, it's been made public that the american medical association sort of come out for the obama approach. you all have heard about that? have you? no? yes, no? okay. you don't know if ama is with obama or not. what about your companies? have your companies said anything one way or the other about obama's strategy of health reform? anybody? you don't know. >> congressman, cigna came out as others in the industry and supported many aspects of the president's plan. >> okay. let me put it more delicately. are there parts of the obama

hr-3200 approach that you are -- that your company is for and other parts you may not be in full accord with? is that fair enough? everybody shakes their head. there are parts you can go along with and some parts, obviously public option is not one of your favorite parts of the bill, where ever it may appear. there may be other things. but there are things you like. >> there are many things we like, yes. >> pardon? >> there are many things we like. >> well, thank you. let me ask you about the baucus bill. you got a reaction. did he make a little impression on you or somewhat favorable?

how does that resinate with your company -- >> congressman, from csigma's standpoint, we are still reviewing the details of that bill. >> yeah, but, so am i. we all got the news at the same time. it's been on television, newspapers, commentators, doctors. come on. i mean, how long do you have to -- how much study do you -- >> there's no legislative language that's been shared yet. we are studying what's been released. >> really? >> that's my understanding, yes. >> but, he's been preaching about his bill and copying headlines all over the place. you say there's been nothing specif specific. there's a bill out. it's got the chairman of the

finance committee in the senate. well, i tell you what, could you -- i know you have a lot of assignments coming here today. could you let me know when you -- when your companies have examined it sufficiently to let me know what you think of it? okay. all right. thank you very much. now, finally, we had testimony in the judiciary committee under subcommittee chairwoman linda sanchez from doctors that there were 1 million medical bankruptcies in the united states. that is personal bankruptcies

caused by medical bills. ever hear of that? nobody has heard of that? okay. well, i can't ask you to comment on that. hypothetically, if you heard and learned about that, would that cast some concern on you about the problems that individuals are going through when the largest cause of individual bankruptcies in the united states are due to medical bill that is people couldn't afford? you'd be concerned? may i send you some things? you're sending us a lot of things. can i send you more information about that subject? okay. thank you mr. chairman for your

generosity. >> i want to thank the gentleman. finally, congressman kennedy, you may proceed for five minutes. >> thank you mr. chairman. thank you for holding this. thank you all for your patience there afternoon. i would ask all of you, if you would just give me an affirmative in working with my office and closing a loophole that appeared in last year's well stone mental health act bill. we imply it's all insurers for mental health benefits. it seems as though college students, health insurance plans do not have the -- it's not applicable to college students because they are not technically

employees of the university. so, the bill talks about this as covering employee based health insurance plans. you can see the wrinkle there. as a result, students aren't considered employees and are not subject to the requirement -- the insurance companies who insure students aren't subject to paradi-. because suicide is the third largest cause of death, i would ask all of you now, would you be willing to work with me to close the loophole in the bill with language that says it spirit of the law that applies to all of you is insurers, the kids who need it the most, get that coverage as mandated under the well stone parody bill.

>> cigna supported the bill and would be happy to work with you to close the loophole. >> that would be great. william gardner and my office, if you would be in touch with him. we want to make sure it's facilitated in the bill so the kids don't get disrupted in their health insurance coverage. obviously, i had a lot of other things. i wanted to make sure you tidy that up. thank you, mr. chairman. >> thank you very much mr. kennedy and mr. conniers for remaining. this has been a hearing of the domestic policies subcommittee of the oversight and government reform committee. we have gone over three hours now and the witnesses have been much appreciated in your

presence there. the title of today's hearing, between you and your doctor, the private health insurance beaurocracy. i feel as mr. kennedy implied, we barely scratched the surface here. i hope the witnesses understand and hope you feel that this committee treated you fairly. there's no browbeating here or trick questions, no attempt to try to force you to give an answer over something that you are not ready to do at this moment. that's the way we are going to continue to proceed. we are fact finding investigative and going to try to get information from the industry so we can understand your business model better. while i try to conduct the hearings in an impartial way, away from the hearings, i'm a strong advocate with the bill i

wrote with john conniers. i don't let it interfere with the conduct of the meeting. i want you to put your point on the record. while you are treat ed fairly here, we are hopeful that you are going to treat the american people fairly. i think as we maybe you can become aware of why we have such great concerns and why there is a national movement right now to really move away from remodels the heston to life using. -- that you have spent your life using. this is a great time in the country. people of losing their jobs and investments and security. you are at the point where it is a flash point. let us see if there is a way that we can find the best way to serve the american people. that is why we are in congrs.