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73–743 2012

TERMINATION OF INDIVIDUAL HEALTH POLICIES 

BY INSURANCE COMPANIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT AND 

INVESTIGATIONS 

OF THE

COMMITTEE ON ENERGY AND 

COMMERCE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED ELEVENTH CONGRESS 

FIRST SESSION 

JUNE 16, 2009 

Serial No. 111–50 

( 

Printed for the use of the Committee on Energy and Commerce 

energycommerce.house.gov 


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COMMITTEE ON ENERGY AND COMMERCE 

HENRY A. WAXMAN, California, Chairman 

JOHN D. DINGELL, Michigan 

Chairman Emeritus 

EDWARD J. MARKEY, Massachusetts 

RICK BOUCHER, Virginia 

FRANK PALLONE, JR., New Jersey 

BART GORDON, Tennessee 

BOBBY L. RUSH, Illinois 

ANNA G. ESHOO, California 

BART STUPAK, Michigan 

ELIOT L. ENGEL, New York 

GENE GREEN, Texas 

DIANA DEGETTE, Colorado 

Vice Chairman 

LOIS CAPPS, California 

MICHAEL F. DOYLE, Pennsylvania 

JANE HARMAN, California 

TOM ALLEN, Maine 

JANICE D. SCHAKOWSKY, Illinois 

CHARLES A. GONZALEZ, Texas 

JAY INSLEE, Washington 

TAMMY BALDWIN, Wisconsin 

MIKE ROSS, Arkansas 

ANTHONY D. WEINER, New York 

JIM MATHESON, Utah 

G.K. BUTTERFIELD, North Carolina 

CHARLIE MELANCON, Louisiana 

JOHN BARROW, Georgia 

BARON P. HILL, Indiana 

DORIS O. MATSUI, California 

DONNA M. CHRISTENSEN, Virgin Islands 

KATHY CASTOR, Florida 

JOHN P. SARBANES, Maryland 

CHRISTOPHER S. MURPHY, Connecticut 

ZACHARY T. SPACE, Ohio 

JERRY MCNERNEY, California 

BETTY SUTTON, Ohio 

BRUCE L. BRALEY, Iowa 

PETER WELCH, Vermont 

JOE BARTON, Texas 

Ranking Member 

RALPH M. HALL, Texas 

FRED UPTON, Michigan 

CLIFF STEARNS, Florida 

NATHAN DEAL, Georgia 

ED WHITFIELD, Kentucky 

JOHN SHIMKUS, Illinois 

JOHN B. SHADEGG, Arizona 

ROY BLUNT, Missouri 

STEVE BUYER, Indiana 

GEORGE RADANOVICH, California 

JOSEPH R. PITTS, Pennsylvania 

MARY BONO MACK, California 

GREG WALDEN, Oregon 

LEE TERRY, Nebraska 

MIKE ROGERS, Michigan 

SUE WILKINS MYRICK, North Carolina 

JOHN SULLIVAN, Oklahoma 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 

MARSHA BLACKBURN, Tennessee 

PHIL GINGREY, Georgia 

STEVE SCALISE, Louisiana 

(II)


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(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

BART STUPAK, Michigan, Chairman 

BRUCE L. BRALEY, Iowa 

Vice Chairman 

EDWARD J. MARKEY, Massachusetts 

DIANA DEGETTE, Colorado 

MICHAEL F. DOYLE, Pennsylvania 

JANICE D. SCHAKOWSKY, Illinois 

MIKE ROSS, Arkansas 

DONNA M. CHRISTENSEN, Virgin Islands 

PETER WELCH, Vermont 

GENE GREEN, Texas 

BETTY SUTTON, Ohio 

JOHN D. DINGELL, Michigan (ex officio) 

GREG WALDEN, Oregon 

Ranking Member 

ED WHITFIELD, Kentucky 

MIKE FERGUSON, New Jersey 

TIM MURPHY, Pennsylvania 

MICHAEL C. BURGESS, Texas 


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(V) 

C O N T E N T S 

Page 

Hon. Bart Stupak, a Representative in Congress from the State of Michigan, 

opening statement ................................................................................................ 1 

Hon. Greg Walden, a Representative in Congress from the State of Oregon, 

opening statement ................................................................................................ 4 

Hon. Henry A. Waxman, a Representative in Congress from the State of 

California, opening statement ............................................................................. 6 

Hon. Joe Barton, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 7 

Hon. John D. Dingell, a Representative in Congress from the State of Michigan, opening statement ....................................................................................... 9 

Hon. Phil Gingrey, a Representative in Congress from the State of Georgia, 

opening statement ................................................................................................ 10 

Hon. Gene Green, a Representative in Congress from the State of Texas, 

opening statement ................................................................................................ 11 

Hon. Michael C. Burgess, a Representative in Congress from the State of 

Texas, opening statement .................................................................................... 12 

Hon. Betty Sutton, a Representative in Congress from the State of Ohio, 

opening statement ................................................................................................ 13 

Hon. Janice D. Schakowsky, a Representative in Congress from the State 

of Illinois, opening statement .............................................................................. 14 

Hon. Bruce L. Braley, a Representative in Congress from the State of Iowa, 

opening statement ................................................................................................ 15 

WITNESSES

Wittney Horton, Policyholder, Los Angeles, California ........................................ 17 

Prepared statement .......................................................................................... 20 

Peggy Raddatz, Relative of Policyholder, La Grange, Illinois .............................. 25 

Prepared statement .......................................................................................... 27 

Robin Beaton, Policyholder, Waxahachie, Texas .................................................. 29 

Prepared statement .......................................................................................... 31 

Don Hamm, Chief Executive Officer, Assurant Health, Assurant ...................... 47 

Prepared statement .......................................................................................... 49 

Richard Collins, Chief Executive Officer, Golden Rule Insurance Company, 

UnitedHealth Group ............................................................................................ 56 

Prepared statement .......................................................................................... 58 

Brian A. Sassi, President and Chief Executive Officer, Consumer Business, 

WellPoint, Inc. ...................................................................................................... 62 

Prepared statement .......................................................................................... 64 

Karen Pollitz, Research Professor, Georgetown University Health Policy Institute ........................................................................................................................ 69

Prepared statement .......................................................................................... 71 

SUBMITTED MATERIAL

Document binder ...................................................................................................... 97 


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(1) 

TERMINATION OF INDIVIDUAL HEALTH 

POLICIES BY INSURANCE COMPANIES 

TUESDAY, JUNE 16, 2009 

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS, COMMITTEE ON ENERGY AND COMMERCE, Washington, DC. 

The subcommittee met, pursuant to call, at 10:08 a.m., in Room 

2123 of the Rayburn House Office Building, Hon. Bart Stupak 

[chairman of the subcommittee] presiding. 

Members present: Representatives Stupak, Braley, Schakowsky, 

Green, Sutton, Dingell, Waxman (ex officio), Walden, Deal, Burgess, Gingrey and Barton (ex officio). 

Staff present: Karen Lightfoot, Communications Director, Senior 

Policy Advisor; Theodore Chuang, Chief Oversight Counsel; Mike 

Gordon, Deputy Chief Investigative Counsel; Scott Schloegel, Investigator, Oversight and Investigations, Daniel Davis, Professional 

Staff Member; Ali Golden, Investigator; Jennifer Owens, Special 

Assistant; Jennifer Berenholz, Deputy Clerk; Lindsay Vidal, Special Assistant; Julia Elam, Fellow; Paul Jung, Public Health Service Detailee; Karen Christian, Counsel; Krista Rosenthall, Counsel; 

Alan Slobodin, Chief Counsel for Oversight; and Sean Hayes, Counsel. 

OPENING STATEMENT OF HON. BART STUPAK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. STUPAK. This meeting will come to order. 

Today we have a hearing entitled ‘‘Terminations of Individual 

Health Policies by Insurance Companies.’’ The chairman, the ranking member and the chairman emeritus will have 5 minutes for an 

opening statement. Other members of the subcommittee will be 

recognized for 3 minutes. 

Before we begin, I am going to ask unanimous consent that the 

contents of our document binder be entered into the record provided that the committee staff may redact any information that is 

business proprietary, relates to privacy concerns or is law enforcement-sensitive. Without objection, the documents will be entered 

into the record and we will ask that a copy of our document binder 

be placed at the front table in case witnesses wish to refer to it. 

I am going to begin opening statements. I will start with my 

opening statement for 5 minutes. 

Every night across America, more than 45 million Americans go 

to sleep without health insurance coverage. They do so in fear of 

a nightmare scenario of developing a catastrophic illness and being 


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unable to pay for treatment. It is this fear that has caused many 

hardworking Americans who are not covered by an employer or 

government-sponsored health care plan to purchase individual 

health insurance policies. But those Americans fortunate enough to 

afford individual health care coverage are not immune from the 

nightmare scenario. That is because a practice called health insurance rescission. 

Here is what happened to one victim of rescission. Otto Raddatz 

was a 59-year-old restaurant owner from Illinois who was diagnosed with an aggressive form of non-Hodgkin’s lymphoma, a cancer of the immune system. He underwent intensive chemotherapy 

and was told that he had to have a stem cell transplant in order 

to survive. With coverage provided by his individual insurance policy, he was scheduled to have the procedure performed. But then 

his insurance company suddenly told him it was going to cancel his 

insurance coverage. Otto could not pay for the transplant without 

health insurance. The stem cell transplant surgery was cancelled. 

The insurance company told him that it found when he applied for 

his insurance, he had not told the company about a test that had 

shown that he might have gallstones and an aneurysm, or weakness of the blood vessel wall. In fact, Otto’s doctor had never told 

him about these test results. He didn’t have any symptoms, and 

these conditions did not have anything to do with his cancer, but 

the insurance company was going to rescind his policy, effectively 

tearing up the contract as if it never happened and it would not 

pay for his stem cell transplant. 

Otto made a desperate plea to the Illinois Attorney General’s Office seeking help to get his insurance company to reverse its decision. He told them, and I quote, ‘‘I was diagnosed with non-Hodgkin’s lymphoma. It is a matter of extreme urgency that I receive 

my transplant in 3 weeks. This is an urgent matter. Please help 

me so I can have my transplant scheduled. Any delay could threaten my life.’’ The Illinois Attorney General’s Office launched an investigation, confirmed that Otto’s doctor had never even told him 

about the test findings and sent two letters to press the insurance 

company to reinstate his policy. The company relented and Otto received his stem cell transplant. He was able to live 3 more years 

before passing away earlier this year. 

Otto was one of the lucky ones. This committee has concluded an 

investigation into the practice of health insurance rescission and 

results are alarming. Over the past 5 years almost 20,000 individual insurance policyholders have had their policies rescinded by 

three insurance companies who will testify today: Assurant, United 

Health Group and WellPoint. From a review of case files, the committee has identified a variety of abuses by insurance companies 

including conducting investigation with an eye toward rescission in 

every case in which a policyholder submits a claim relating to leukemia, breast cancer or any of a list of 1,400 serious or costly medical conditions, rescinding policies based on an alleged failure to 

disclose a health condition entirely unrelated to the policyholder’s 

current medical problem, rescinding policies based on policyholder’s 

failure to disclose a medical condition that their doctors never told 

them about, rescinding policies based on innocent mistakes by policyholders in their applications, and rescinding coverage for all 


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members of a family based on a failure to disclose medical condition of one family member. 

The investigation has also found that at least one insurance company, WellPoint, evaluated employee performance based in part on 

the amount of money its employees saved the company through retroactive rescissions of health insurance policies. According to documents obtained by the committee, one WellPoint official was 

awarded a perfect score of five for exceptional performance based 

on having saved the company nearly $10 million through rescissions. These practices reveal that when an insurance company receives a claim for an expensive lifesaving treatment, some of them 

will look for a way, any way, to avoid having to pay for it. This is 

eerily similar to what we found last year in our investigation of 

long-term-care health insurance policies where unscrupulous salespeople would sell policies to seniors, then change or revoke the policies once the enrollee was locked into a plan and making payments. 

The companies who engage in these rescission practices argue 

that they are entirely legal, and to an extent, they are, but that 

goes against the whole point of insurance. When times are good, 

the insurance company is happy to sign you up and take your 

money in the form of premiums but when times are bad and you 

are afflicted with cancer or some other life-threatening disease, it 

is supposed to honor its commitment and stand with you in your 

time of need. Instead, some of these companies use a technicality 

to justify breaking its promise at a time when patients are too 

weak to fight back. 

I would also like to mention and compliment the staff on their 

supplemental information regarding the individual health insurance market. It is attached to my opening statement and will be 

part of the record. 

Today we will hear from victims of this practice of rescissions as 

well as three of the leading companies that engage in it. We hope 

to learn more about this problem so that we in Congress perhaps 

through a comprehensive national health care reform bill can curb 

abuses and put an end to this unconscionable practice once and for 

all. 

I would next like to now turn to my ranking member, Mr. Walden from Oregon, for an opening statement, please. 

Mr. WALDEN. Thank you, Mr. Chairman. Before I give my opening statement, I just want to clarify something. You indicated in 

your opening statement you do plan to put this supplemental information in the record? 

Mr. STUPAK. Yes, sir. I am going to attach it as part of my opening statement. This is the supplemental information regarding the 

individual health insurance market dated June 16. I realize a lot 

of members haven’t had time to look at it. I know they were putting it together last night. In the last couple days they went 

through about 50,000 pages, and it just helps members for questioning so I wanted to put it in there because it is supplemental, 

and members can use it in questioning witnesses. 

Mr. WALDEN. OK. I misunderstood what you were saying then. 

I thought you told me you weren’t going to put it in since the minority didn’t see this until 9:20 this morning. 


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Mr. STUPAK. Right. I wasn’t going to put it in as part of the document binder so I will put it as part of my opening statement and 

then it is attributable to me and the majority side and not the minority side, because as you had indicated, it is on committee stationery and Mr. Barton had not had time to see it so I did not want 

to say that Mr. Barton approved so I just made it part of my opening statement. 

Mr. WALDEN. I appreciate that. 

Mr. STUPAK. Thank you. 

Mr. WALDEN. I hope in the future we can work those things out 

in advance as we have in most hearings in the past. 

Mr. STUPAK. I agree. 

OPENING STATEMENT OF HON. GREG WALDEN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OREGON 

Mr. WALDEN. Today’s hearing is the second in a series of hearings investigating the individual health insurance market. Approximately 16 million Americans have individual health insurance policies. Once people apply and are issued their insurance cards, they 

breathe a sigh of relief and figure their health care is covered. Unfortunately, that sigh of relief may turn into a frenzied panic if the 

Friday before the Monday a patient is to undergo a double mastectomy she receives a call from her insurance company saying her insurance has been cancelled and they will no longer pay any claims. 

This is what happened to one of our witnesses here today, Ms. 

Robin Beaton from Texas, Ranking Member Barton’s constituent. 

We will also hear from Mrs. Horton and Mrs. Raddatz where the 

threat or actual termination of insurance policies caused pain, frustration and great expense. 

While we may be here to discuss valid uses for and procedural 

aspects of rescissions, medical underwriting and other corporate 

practices, there are some actions we should no longer allow insurance companies to do. Playing gotcha with policyholders who have 

serious illnesses and huge expenses must stop. Insurance companies cannot wait until customers are sick or filing claims to verify 

their medical history and decide whether or not they want them as 

a customer. This is what they are supposed to be doing when they 

sign the member up. If the company does not conduct a review of 

unclear or incomplete information on the application, then the plan 

should not use subsequently acquired information as a basis for rescinding coverage. This practice is known as post-claims underwriting. The company should conduct its due diligence at the time 

the application is filled out and submitted prior to issuing coverage. 

Rescission should not be a license to find loopholes by investigating 

someone’s medical history whenever they file a claim well after 

being accepted for coverage, not if the company hurried through 

the application process, not if the company blindly accepted most 

applicants and not if the company gladly collected their money with 

no questions asked. This is inappropriate and it should be stopped. 

I understand that companies just like the federal government 

need ways to protect themselves from insurance fraud, which does 

occur. Some applicants willfully lie on the application to get insurance and pay lower premiums. This increases the cost of coverage 

for the insurers and other policyholders. When a company discovers 


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this behavior and believes rescission is the appropriate action, the 

burden must rest on the insurer. The company should prove the insured failed to disclose material information that he or she was 

aware of at the time of the contract that would have resulted in 

different contracts altogether. After all, the company has the 

money, employees and resources to meet that burden. They are the 

ones making the assertion and they are the ones ultimately denying the coverage. It is not enough for companies just to send a letter to the insured stating that an investigation into their file has 

begun, and if they choose to send in any additional information to 

the company. The company needs to attempt to communicate directly with the insured, his or her doctor and review all pertinent 

information to prove the insured did make a material 

misstatement. 

The majority requested all cases files that resulted in rescission 

in 2007 in four States. For United, this was 206 case files, for 

Assurant, this was 321 case files, and for WellPoint, this was 742 

case files. To date, the committee has received more than 650 of 

these case files. My staff had the opportunity to review several of 

these files including working all weekend. In some, there is documentation or evidence that the insured intentionally withheld pertinent medical information that would have affected their coverage. 

In others, it is unclear whether the applicant was even aware of 

the condition or notation cited by an investigator in an old medical 

chart as evidence to rescind. 

Today three individual policyholders will explain their stories 

and illustrate how they were unaware of conditions, symptoms or 

other possible diagnoses that were written in a medical chart but 

never expressed to the patient. So you have to ask yourself, can a 

person make a material omission or a misstatement if he or she 

was not aware of a fact? I don’t think so. But if I am wrong, I want 

the companies to explain it to me. 

In 2008 and 2009, these companies entered into settlement 

agreements with rescinded policyholders and providers in sums 

topping tens of millions of dollars. Some of the companies remain 

in litigation with other rescinded policyholders. I also recognize 

some of these companies have initiated internal reforms. These include steps to improve their application process, improve communication with the insured during the investigation and rescission 

process and offer independent third-party review of rescission decisions if requested by the policyholder. 

I want to know what appropriate actions Congress can take and 

what else these companies can do better to ensure that all Americans have access to health care coverage. Health care reform is 

coming and we need to have a better understanding of the individual health insurance market and its practices. We need to figure 

out first and foremost how to make qualify health insurance affordable and reliable while keeping protections in place to combat insurance fraud. I hope that as this process moves forward we work 

in a bipartisan way to design a system that achieves the ultimate 

goal of getting those who need medical care the attention they 

need. Thank you. 

Mr. STUPAK. Thank you, Mr. Walden. 

Mr. Waxman for an opening statement, please. 


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OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. WAXMAN. Thank you very much, Mr. Chairman. 

Today we are going to hear the results of a yearlong Congressional investigation into abuses in the individual insurance market. 

We began this investigation last year when I served as chairman 

of the House Oversight Committee and we continued it this year 

with Chairman Stupak’s leadership as the chairman of the Oversight Subcommittee of Energy and Commerce. As part of this investigation, we conducted a 50-State survey of insurance commissioners and we sent document requests to some of the largest companies that offer individual health insurance. We received more 

than 116,000 pages of documents and our staff talked with many 

policyholders who had their insurance policies cancelled after they 

became ill. Some of them are here today to testify, and I thank 

them very much for being here. 

Overall, what we found is that the market for individual health 

insurance in the United States is fundamentally flawed. One of the 

biggest problems is that most States allow individual health insurance policies to deny coverage to people with preexisting conditions. 

So if you lose your job and you can’t qualify for a government program like Medicare or Medicaid, it is nearly impossible to get 

health insurance if you are sick or have an illness. This creates a 

perverse incentive. In the United States, insurance companies compete based on who is best at avoiding people who need lifesaving 

health care, and this incentive manifests itself in a wide variety of 

controversial practices by the insurance companies when we know 

that when people apply for insurance policies and they put down 

that they have some preexisting condition, they are going to be denied. But what we found is that when people with individual policies become ill and then they submit their claims for expensive 

treatments, then insurance companies launch an investigation. 

They scour the policyholder’s original insurance application and the 

person’s medical records to find any discrepancy, any omission or 

any misstatement that could allow them to cancel the policy. They 

try to find something, anything so they can say that this individual 

was not truthful in that original application. It doesn’t have to even 

relate to the medical care the person is seeking and often it doesn’t. 

You might need chemotherapy for lymphoma, but then when the 

insurance companies find that your coverage was based on a failure 

to disclose gallstones, well, they want to cancel your policy after 

the fact. It may come as a surprise to most people but the insurance companies believe they are entitled to cancel the policies even 

when these omissions or discrepancies are completely unintentional 

and they believe that they have the right to cancel policies even 

when someone else like an agent who sold the policy was responsible for the discrepancy in the first place. 

In addition, they can terminate coverage not just for the primary 

policyholder but they go to terminate the policies for the entire 

family including innocent children who did nothing wrong. Some 

insurance companies launch these investigations every single time 

a policyholder becomes ill with a certain condition. In other words, 

if you happen to have ovarian cancer, you should be prepared to 


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be investigated. It is the same with other conditions such as leukemia. 

In the written statements for today, the three insurance companies downplay the significance of these practices, arguing that rescissions are relatively rare. But these three companies saved more 

than $300 million over the past 5 years as a result of rescissions, 

and I am sure they view this amount as significant. More importantly, however, these terminations are extremely significant to the 

tens of thousands of people who needed health care and couldn’t 

get it during these 5 years because their policies were rescinded. 

In my opinion, of course, the solution to these problems is to pass 

comprehensive health reform legislation and based on the written 

testimony I think the three insurance companies testifying here 

today agree with that assessment. But until that happens, insurance companies deny people coverage if they have a preexisting 

condition and then afterwards if they gave them the coverage for 

insurance they want to see if there is some reason they can rescind 

it after the fact, after they have already given out the insurance 

to see if they can rescind that policy. I think it is shocking. It is 

inexcusable. It is a system that we have in place and we have got 

to stop. 

Mr. Chairman, I am pleased that you are holding this hearing 

and I thank you for the time allotted to me. 

Mr. STUPAK. Thank you, Mr. Waxman. 

Mr. Barton for an opening statement, please. 

OPENING STATEMENT OF HON. JOE BARTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BARTON. Thank you, Mr. Chairman. 

This is my month for witnesses from Waxahachie, Texas. Last 

week we had Mr. Frank Blankenbecker, who is the owner of Carlisle Chevrolet in Waxahachie. Today we have Ms. Robin Beaton, 

who is a citizen of Waxahachie. So I want to extend to her my very 

best wishes and let her and the other two panelists on this first 

panel know that there is nothing to be afraid of. You speak for tens 

of thousands if not hundreds of thousands of American citizens, 

and the country is very interested through the auspices of this 

hearing to hear your story, so we appreciate all three of you being 

here. 

This is an important hearing. It addresses part of the need to reform our health care system. We are going to hear today about a 

problem under the current system that can occur in the handling 

of individual health insurance policies when claims are actually 

submitted for coverage under those policies. As I just said, I want 

to extend a warm welcome to our first panel of witnesses. Each of 

you has a personal story that you wish to share and we know that 

it is a story that is worth hearing. We also know that it takes courage to testify, and as I just said, there is nothing to be afraid of 

at this hearing today. 

We hear of problems as Congressmen and -women when our constituents tell us what those problems actually are. Today we are 

going to hear from one of my constituents, Ms. Robin Beaton. No 

one should have to go through what she has had to go through the 

last several years. In June of last year, she was diagnosed with an 


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aggressive form of breast cancer and her doctor said that she needed immediate surgery. The Friday before the Monday that she was 

to undergo a double mastectomy, she received a letter from her carrier, Blue Cross of Texas, that rescinded her insurance policy. The 

letter stated that the company would not pay for the surgery. The 

letter further informed Ms. Beaton that an investigation into her 

claim for benefits when the company had thoroughly reviewed her 

medical records that she submitted when she applied for the coverage and that they discovered that she had misinformed them on 

several pieces of information. One of them was that she didn’t list 

her weight accurately, and the other, that she failed to disclose 

some medication that she had taken for a preexisting heart condition. The record will show that she was not taking that medication 

at the time that she submitted her initial application for coverage. 

Robin’s claim in June of 2008 was not for weight control, it was not 

for a heart condition, it was for cancer surgery, a double mastectomy for breast cancer, yet her policy was rescinded 3 days before 

that surgery was scheduled to take place. It was bad enough that 

she had to deal with the trauma of breast cancer but to be denied 

coverage right before potentially lifesaving surgery quite frankly is 

something that no human being should have to undergo. She had 

no insurance and no way to pay for her scheduled surgery. So obviously it was postponed. 

She called my office. My staff went to work. They had several 

conference calls with officials of Blue Cross/Blue Shield. In those 

conference calls, Blue Cross and Blue Shield was unyielding. They 

were adamant. It went to the counsel, the general counsel of Blue 

Cross/Blue Shield and that individual said there was no way they 

were going to reinstate her coverage. Never take no for an answer. 

I called the president of Blue Cross/Blue Shield. I appealed to him 

personally, gave him the facts as I knew them, and he promised 

that he would personally investigate Ms. Beaton’s case, and he further promised that if the facts were as she said and I said, that 

her coverage would be reinstated. Good to his word, the president 

called me back within 4 hours and said that Ms. Beaton’s coverage 

would be reinstated. However, precious time was lost. Luckily for 

Robin, she was finally able to get the surgery, not through Blue 

Cross/Blue Shield though, as I understand it. She is now undergoing chemotherapy because the cancer has spread to her lymph 

nodes, but she is still with us, thank God, and she is here today 

to tell us her personal story. 

Robin’s situation was what caused me to draft an amendment to 

Representative DeLauro’s breast cancer bill last year to protect 

people like Robin by prohibiting rescissions of health insurance if 

non-disclosure of information is not related to the claim, not related 

to the claim and inadvertent. There is no reason on God’s green 

earth that somebody ought to have their health insurance revoked 

because of some inadvertent omission that is not related to the 

claim that is being submitted to the health insurance company. 

This bill with my amendment passed the House last year but it 

died in the Senate. It has been reintroduced and hopefully it will 

pass this year. I support the right of an applicant to request a 

third-party independent review of an insurer’s rescission prior to 

pending or denying payments of claims. I understand that there is 


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another side to this story. I understand that there are people that 

do try to scam insurance companies. I understand that there is a 

rule of reason, but again, if somebody inadvertently omits something or there is something that is not material to the claim, that 

claim in my opinion should be paid, end of story. 

As we head towards reforming health care, it is important that 

we promote honesty on behalf of the insured and the insurers. Congress needs to be confident that there are consumer protections in 

place to protect people like Robin Beaton as well as procedures for 

companies to protect themselves from insurance fraud. Companies 

need to have open and clear rules on when they terminate policies. 

Applicants need to be truthful when applying for coverage. Every 

American, and this is something that members on both sides of the 

aisle support, needs to have access to affordable, quality health 

care. 

This is an important hearing towards that goal, Mr. Chairman, 

and I thank you for holding it. I also think that we should give special condition to one of our panelists here on the dais. The 

gentlelady from Chicago injured herself yesterday and has a broken 

leg and yet she is here today at this health care hearing, so appreciate Ms. Schakowsky here. 

Ms. SCHAKOWSKY. And fortunately with good health insurance, 

so I am happy about that too. 

Mr. BARTON. And again, thank you, Mr. Chairman, for holding 

this hearing. 

Mr. STUPAK. Thank you, Mr. Barton, and thank you again for 

helping us obtain witnesses for this hearing. 

Mr. Dingell for an opening statement, please. 

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF MICHIGAN 

Mr. DINGELL. Thank you, Mr. Chairman, and I commend you for 

holding this hearing on the rather vicious practice of post-claims 

underwriting and the detrimental effect that such practices have 

on hundreds of Americans, and I want to thank the witnesses for 

appearing in what I hope will be an informative hearing today on 

which the committee may begin some actions to correct what appears to be a very serious abuse, and I remember, Mr. Barton, the 

way we worked together on this and your outrage last year when 

we were addressing similar questions. 

Health care costs have risen sharply. In response to this, insurance providers have taken drastic measures to reduce costs and to 

improve profit margins. Unfortunately, the health insurance industry is attempting to do so by giving in to unscrupulous industry 

practice including the practice of post-claims underwriting. I want 

to be clear. I have no sympathy for individuals who intentionally 

misrepresent their health status in the applications they submit for 

health insurance coverage. These actions are dishonest and have a 

negative impact on the cost of health care for everyone else, and 

they are clearly wrongdoing and they should be punished. However, I have far less sympathy for health care providers and insurance providers who have made it a customary practice to exploit 

current laws meant to protect individuals and to take advantage of 


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the most vulnerable Americans in order to turn a profit. They do 

this by seeing to it that they avoid risk as opposed to practicing 

good insurance practices. 

As we have seen time and time again, insurance providers have 

made a living out of refusing to compete on quality and choosing 

instead to compete by avoiding financial obligations at all costs. In 

the current market, health insurance providers are allowed to pick 

and choose whom they will cover in the individual market. We 

have allowed this cherry picking or cream skimming to go on for 

years, but when we weren’t looking the industry decided to up the 

ante. In some cases, industry underwrote countless claims for individuals that cherry picked and then it began to quietly punish 

those individuals if they got sick and used their insurance for its 

intended purpose, to cover major medical claims. In some cases, industry didn’t just drop the individual policyholder but retroactively 

rescinded the contract as if the agreement had failed to exist. They 

refused to pay hospitals, doctors and nurses that sought reimbursement for services rendered. 

To our witnesses who are appearing this morning to share their 

personal experience with post-claims underwriting, we will work to 

ensure these practices come to a sharp end. To the CEOs testifying 

this morning, I would like them to know this: We don’t regulate for 

the fun of it. We regulate when the private sector refuses to honor 

its commitments to the American public. As we work to reform the 

Nation’s health care system, we will work to reform the current 

health insurance market. We will work to ensure such reform will 

prohibit insurers from excluding preexisting conditions or engaging 

in any other unfair and discriminatory practice. We will also work 

to ensure these reforms include fair grievance and appeals mechanisms, very much lacking in the insurance world today, and will 

ensure information transparency and plan disclosure. These new 

reforms alone will not fix the problems. We will also have to work 

to ensure that there is strong oversight on both the federal and 

state level. Furthermore, these insurance industry practices are 

precisely the reason why we need a public health insurance option 

included in our proposal to reform the health care system, a public 

plan that leads by example and competes through quality and innovation rather than unfair industry practices is what is needed to 

keep the private industry in the insurance business honest. 

Thank you, Mr. Chairman. 

Mr. STUPAK. Thank you, Mr. Dingell. 

Next for a 3-minute opening statement, Mr. Gingrey. 

OPENING STATEMENT OF HON. PHIL GINGREY, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF GEORGIA 

Mr. GINGREY. Mr. Chairman, thank you. 

Generally, insurance is a form of risk management that allows 

individuals to pay a monthly premium in exchange for a company 

taking on their financial risk in the event of a health care catastrophic loss. Health insurance, on the other hand, is not typical 

insurance. For a monthly premium, individuals purchase health insurance to financially support them in the event of a catastrophic 

incident such as a broken leg, as the gentlelady from Chicago just 

recently experienced, or major surgery. Patients also use their inVerDate Mar 15 2010 09:03 Jun 29, 2012 Jkt 073743 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 E:\HR\OC\73743.XXX 73743

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surance for such things as doctor visits or monthly prescriptions. 

In many respects, health insurance has become the means by 

which patients see their providers and they receive treatment. 

Primary responsibility for regulating the individual health insurance market rests with the State regulators. However, in the 

Health Insurance Portability and Accountability Act of 1996, 

HIPAA, Congress made very clear that an individual insurance policyholder has a right to guarantee renewability. In other words, an 

insurer must renew or continue an individual’s existing coverage 

unless some specific exception is made. Those exceptions include a 

policyholder moving out of a network plan service area, or if the 

policyholder intentionally misrepresents a material fact concerning 

their condition when contracting with the insurer. 

I believe it is unfair for an individual to be denied coverage for 

a claim when he or she has been upfront about their condition. 

They played by the rules of the contract. They paid their premiums 

on a regular timely basis only to be denied coverage when a health 

care incident arises as described by my colleague, Mr. Walden, 

what we would call post-claims underwriting. The impact it has on 

patients and their loved ones can be devastating. I have actually 

personally experienced that in my own family and it literally took 

an act of Congress to change that. 

With these things in mind, I look forward to the testimony of our 

witnesses today. I want to thank the entire panel, this first panel 

particularly, as well as the second panel for coming in today and 

sharing your stories with us, and Mr. Chairman, I look forward to 

the hearing and to the questions, and at this time I yield back. 

Mr. STUPAK. Thank you, Mr. Gingrey. 

Mr. Green of Texas for an opening statement, please. 

OPENING STATEMENT OF HON. GENE GREEN, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. GREEN. Thank you, Mr. Chairman, and I think all of us appreciate you calling this hearing today because like my ranking 

member from Texas talked about, we deal with this all the time 

through our constituents, and as a State legislator in Texas, we 

have had that same problem for many years, and I appreciate you 

bringing this out and hopefully we will address this in our health 

care reform. I want to thank our witnesses for being here today. 

Most individuals in the country have health insurance through 

their employer, Medicare or Medicaid. But millions of Americans do 

not have insurance through their employers or through the public 

market so they turn to the individual insurance market to purchase insurance policies. Individuals who purchase the insurance 

through the individual market must go through an application 

process and supply their medical history including any mental, 

physical or chronic conditions. Insurance companies are supposed 

to review those applications and review the applicant’s medical history before approving the individual for coverage. Oftentimes this 

medical history never occurs and the insurance companies will 

cover individuals who have conditions they would not necessarily 

cover. These individuals believe their coverage is current and when 

they submit a claim they often find themselves subject to that medical history investigation and dropped from their insurance and liaVerDate Mar 15 2010 09:03 Jun 29, 2012 Jkt 073743 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 E:\HR\OC\73743.XXX 73743

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ble for all claims under the policy. In other instances, individuals 

submit a claim for a serious illness such as cancer and find themselves subject to a medical history investigation and dropped from 

their policy because the insurance company claims the individual 

did not disclose a medical condition when filling out their initial 

application. Both these instances leave the individual without 

health insurance coverage and uninsurable because they have to 

report having their coverage rescinded. Individuals who are undergoing medical treatment for conditions such as cancer are dropped 

from their coverage often face life-and-death situations because the 

insurance company does not want to pay for their treatments. I 

can’t imagine the pain and suffering that these individuals go 

through at the expense of an industry seeking healthy patients to 

make a profit. 

A few States, including Texas, have taken actions to prevent insurance companies from post-claims underwriting. As we are working through health reform, we need to examine the individual market and ensure individuals never have to face losing their coverage 

for simply using their coverage, and Mr. Chairman, again, I thank 

you for calling this hearing. I yield back my time. 

Mr. STUPAK. Thank you, Mr. Green. 

Mr. Burgess for 3-minute opening statement, please, sir. 

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF TEXAS 

Mr. BURGESS. Thank you, Mr. Chairman, for the consideration. 

Let me just say at the outset, I do believe in the individual market. I believe it has a place in this country. Indeed, I was a client 

and a customer in the individual market for my family’s coverage 

for a period of time. And I also believe that the barriers that we, 

the federal government, the Congress puts in place on the individual market sometimes creates unnecessary difficulties for the 

people who sell in the individual market or the people who wish 

to be their customers. But no one can defend, and I certainly cannot defend the practice of denying coverage after the fact and I cannot be comforted by the fact or the statements that are made that 

this is in fact an infrequent occurrence because as the cases in 

front of us at the witness table demonstrated this morning, there 

is no acceptable minimum to denying coverage after the fact when 

the coverage was duly paid for and entered into in an honest fashion and then only when the coverage was required was it found to 

be not there. 

Now, I don’t think anyone on either side of the dais believes that 

anyone would ever lie about something on a medical history, maybe 

fudge your weight a little bit, maybe the number of times we actually go the gym or what we actually do there, but no one would 

willfully do that. The question before us today is, do people intentionally lie in order to manipulate companies into giving them coverage when they know that they have a preexisting condition, and 

the legal jargon that we apply to that is rescission, and should insurance companies post procedure be allowed to terminate individual contracts based upon the omission of disclosure of a preexisting condition irrespective of whether it was intentional on behalf of the individual seeking coverage or not, and I am troubled 


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by that inability to distinguish between those who intentionally act 

with fraud and those who honestly answer broad, vague or confusing questions on the contracts to obtain health coverage. Those 

are not equivalent conditions. An omission without intent does not 

signify fraud and no insurance company who hides behind filling 

out their request for insurance as a strict liability should be protected. Intent is crucial because those who act fraudulently should 

not be protected by the law nor should it be our desire to do so. 

It is interesting to me that all of the insurance companies today 

that we are going to hear from on our panel today are private forprofit companies, but Ms. Beaton’s insurer, whose case proved near 

intractable until her Member of Congress got involved, was Blue 

Cross and Blue Shield, and I wonder, Mr. Chairman, why Blue 

Cross and Blue Shield is not in one of our panels today. Clearly as 

a nonprofit company, they would not have a purely profit-driven 

motive to engage in this type of behavior. So theirs is perhaps particularly curious and I think there are a number of questions that 

we would like to pose to a company that does in fact function as 

a nonprofit. It is the responsibility of each insurance company 

whether for profit or not for profit to do their due diligence before 

the contracts are entered into and not use rescission as an excuse 

for lazy or incomplete underwriting. 

Thank you, Mr. Chairman. I will yield back the balance of my 

time. 

Mr. STUPAK. Thank you, Mr. Burgess. 

Ms. Sutton for opening statement, please. 

OPENING STATEMENT OF HON. BETTY SUTTON, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO 

Ms. SUTTON. Thank you, Chairman Stupak, for holding this critical hearing. 

Simply put, rescission of coverage by insurance companies puts 

dollars ahead of the lives of Americans, and I am not exaggerating 

when I say that insurance accountability is something that I have 

fought and advocated for at every stage of my professional life. 

During my time as a representative in the Ohio General Assembly, 

I worked on behalf of Ohioans to ensure that when benefits were 

promised, benefits were given. And now I am here in Congress to 

continue that fight. 

Rescission of coverage is a problem that we in Congress are seeking to eliminate and it is our hope, you have heard from the comments here, that when we have finished reforming our health care 

system, coverage discrimination will be a thing of the past, but 

today it is still a problem that exists and must be eliminated. 

When a health insurance policy rescission occurs, it creates waves 

throughout the entire health care system. Make no mistake, these 

decisions deprive people of needed care. They deprive hospitals and 

doctors of the reimbursement they have earned for their service. 

For some, a rescission is a costly process that can result in a doctor 

or hospital having to seek payment from the individual. For others, 

it means a delay in access to a lifesaving procedure or treatment. 

That is unacceptable. 

Today we will hear from citizens, and I thank you all for coming 

to provide your testimony and your stories about your lives that 


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have been turned upside down by the insurance industry policy of 

rescission. We will hear from executives who will tell us that in the 

name of uncovering insurance fraud and corruption, they had no 

choice but to remove these beneficiaries from their rolls. But I 

think the testimony of the people who have lived through this trauma will tell a different story. 

The number if uninsured in this country is now thought to be 47 

million. It is a major flaw in our country that so many people go 

without their basic right to have health care coverage and millions 

more who have insurance still don’t get the care they need when 

they need it. It is hard to understand how we allow those who are 

legitimately covered to join the ranks of the uninsured due to the 

stroke of a pen or the decision of an insurance company executive. 

Unfortunately, Mr. Chairman, I have another hearing that is 

going on simultaneously with this one so will be shuttling back and 

forth, but I want the panelists to know that I will be listening carefully to the testimony, both for myself and for the people of Ohio 

that I am so honored to represent, and I thank you all again for 

coming and I thank you, Mr. Chairman, for your attention to this 

matter. 

Mr. STUPAK. Thank you, Ms. Sutton, and that is a good reminder. Members will be coming back and forth as there is a committee two floors up. The Telecommunications and Internet Subcommittee is also meeting, and in that vein, Congresswoman 

Donna M. Christensen, who is a member of this subcommittee, has 

submitted her opening statement for the record. Without objection, 

it will be entered into the record. 

Next I will turn to Ms. Schakowsky for an opening statement, 

please, and you can tell us how you broke your leg. 

Ms. SCHAKOWSKY. Well, I wish there was a dramatic story, Mr. 

Chairman, although it was in a fairly dramatic place. I did go to 

Guantanamo Bay yesterday and fell and ended up breaking my 

foot in two places. I hope soon with the help of the attending physicians I will have a boot or a cast or something. That was just yesterday, and I—— 

Mr. STUPAK. Well, we wish you well and thanks for being here. 

OPENING STATEMENT OF HON. JANICE D. SCHAKOWSKY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF ILLINOIS 

Ms. SCHAKOWSKY. And I am grateful that I do have good health 

insurance to cover that. 

I appreciate today’s hearing examining one of the truly egregious 

practices occurring in the individual health insurance market. I 

want to extend a special welcome to Ms. Peggy Raddatz from my 

home State from La Grange. I thank you for being here and sharing your family’s story with us. I know it isn’t always easy to discuss personal matters but you certainly are helping us to make better health care policies, and I thank all the witnesses for helping 

us. 

When a consumer goes to buy a health insurance policy, they examine their options and they try to identify the best policy to meet 

the health care needs of their family and at no time do they ever 

imagine that once they buy a policy they might get sick and their 


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insurance will simply rescind their policy and leave them without 

coverage but with a high pile of bills. The practice of post-claims 

underwriting in the private market is wrong and we should prohibit it. Let us face it is, it is already hard enough for an individual 

or small business owner to find health insurance. In my State of 

Illinois, there is no requirement that insurers take all comers, and 

I have heard from constituents over and over again who are unable 

to find a policy really at any price. Those who do get through the 

insurance industry gauntlet know that they are not home free. 

They know they may face high out-of-pocket costs, denial of doctorprescribed treatments, prior approval requirements, caps on services and other devices that are designed to limit the insurance company payments. But few know that when they need care the insurance company that has been collecting their premiums may now go 

back and comb through their personal history in order to find an 

excuse not to pay just when the policyholder needs the coverage the 

most. 

There are some who argue that rescissions are used to stop fraud 

on the part of enrollees who misrepresent their health histories in 

order to obtain coverage. One has to wonder why we would put up 

with a health care system in which people have to hide their illnesses in order to get access to care, but we also know that this 

isn’t about that. It is most often about a company looking for an 

undisclosed headache 10 years ago in order to deny coverage for a 

brain tumor today. The practices of the private insurance market 

have less to do with the consumer and a lot to do with company 

profits. As we move forward with health care reform, we have to 

put an end to practices that discourage patients from seeking out 

care. Insurance coverage should be a pathway, not a barrier to 

care. 

Mr. Chairman, I look forward to working with you to improve 

care coverage, refocus our attention on patients, and I really again 

thank our witnesses for being here today, and with that, I yield 

back. 

Mr. STUPAK. Thank you. 

Mr. Braley for an opening statement, please. 

OPENING STATEMENT OF HON. BRUCE L. BRALEY, A 

REPRESENTATIVE IN CONGRESS FROM THE STATE OF IOWA 

Mr. BRALEY. Thank you, Mr. Chairman. This is a very important 

hearing but I would like to start by talking about the very concept 

that we are here to discuss because the term ’’post-claims underwriting’’ is an oxymoron. Insurance companies are structured into 

different departments. They have an underwriting department and 

a claims department, and the underwriting department is supposed 

to do pre-issuance risk assessment to determine whether an individual policy is worth the company investing in that person as a 

health care risk. The claims department is designed to respond to 

requests for coverage after a policy has been issued. So the very 

theory we are here to talk about today isn’t even supposed to exist 

in a rational health care delivery system, and it wouldn’t exist if 

we had a rational health care delivery system. But when you read 

news stories where the CEO of one private health insurance company is sitting on stock options valued at $1.6 billion, it shouldn’t 


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come as a shock to any of us that we are sitting here today hearing 

these horror stories of patients who have been caught up in an inefficient, unsustainable private health insurance delivery system. 

And Ms. Raddatz, I wish that every claims examiner at every insurance company and every underwriter who gets engaged in postclaims underwriting determinations had to go through what you 

went through and the other witnesses who are here today because 

one of the most profound experiences I have had in my life was 

spending about a month at a pediatric oncology unit at the University of Iowa Hospitals and Clinics when I was in the Big Brothers/ 

Big Sisters program and my little brother was diagnosed with 

acute large-cell non-Hodgkin’s lymphoma and spend time every day 

watching young patients with no hair, with IVs in their arms or 

in their chests going into a port, walking around and taking care 

of each other much better than our health care industry takes care 

of patients in their time of need, and it is a slander on the names 

of the health care professionals who do everything they can to keep 

patients like your brother, like my little brother alive when we 

don’t give them the support that they need after they have invested 

their hard-earned dollars by paying premiums to a health care insurance company who turns their back on the patient in their hour 

of need, and that is why I am a strong supporter of the public 

health insurance option and I am proud that my colleagues on this 

committee, Chris Murphy and Peter Welch, have joined me in introducing the Choices bill to give health insurance patients a public 

health insurance option with no discrimination so we don’t have to 

go through these nightmares anymore. 

With that, I yield back. 

Mr. STUPAK. Well, thank you, and that concludes the opening 

statements of all members. One of our witnesses had to step out 

just for a moment so let us stand in recess for just 5 minutes and 

we come right back in about 5 minutes, OK? We will give everyone 

a chance to stretch their legs and we will be in recess for 5 minutes. 

[Recess.] 

Mr. STUPAK. This hearing will come back to order. 

As I stated before we had the brief recess there, that concludes 

the opening statements by members of the subcommittee and now 

I would like to call upon our first panel of witnesses. On our first 

panel, we have Robin Beaton, who is a policyholder from 

Waxahachie, Texas; Ms. Peggy Raddatz from La Grange, Illinois, 

who is the sister of the late policyholder, Otto Raddatz; and Ms. 

Wittney Horton, who is a policyholder from Los Angeles, California. 

Welcome, all of you. Thank you for coming. 

It is the policy of this subcommittee to take all testimony under 

oath. Please be advised that you have the right under the rules of 

the House to be advised by counsel during your testimony. Do you 

wish to be represented by counsel during your testimony? You are 

all shaking your heads no, so OK. Then I am going to ask to please 

rise and raise your right hand and to take the oath. 

[Witnesses sworn.] 

Mr. STUPAK. Let the record reflect that the witnesses replied in 

the affirmative. They are now under oath. We will hear a 5-minute 


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opening statement from each of you. Ms. Beaton, would you like to 

start first with an opening? 

Ms. BEATON. I would like to be last. 

Mr. STUPAK. You would like to be last. Ms. Horton, do you mind 

going first? 

Ms. HORTON. No. 

Mr. STUPAK. Would you pull that mic forward and turn on the 

green—there should be a green button there. Pull that mic forward. 

It doesn’t pick up as well as it should. 

Ms. HORTON. Can you hear me now? 

Mr. STUPAK. I can hear you. Thank you. 

TESTIMONY OF WITTNEY HORTON, POLICYHOLDER, LOS ANGELES, CALIFORNIA; PEGGY RADDATZ, RELATIVE OF POLICYHOLDER, LA GRANGE, ILLINOIS; AND ROBIN BEATON, 

POLICYHOLDER, WAXAHACHIE, TEXAS 

TESTIMONY OF WITTNEY HORTON 

Ms. HORTON. Good morning, ladies and gentlemen. I want to 

start by thanking the committee for this opportunity to testify this 

morning. I am very pleased that Congress has decided to take a 

close look at rescission so that it can understand just how damaging this practice has been to so many people across the country. 

When Blue Cross cancelled my coverage, I had no idea what rescission meant, but now after my life has been turned upside down 

for the past 4 years, I have come to understand what a despicable 

practice it is. Insurance companies require you to fill out an application that is deliberately confusing and they don’t do anything to 

make sure you understood the questions or that you supplied all 

the information they need to decide whether they want to insure 

you or not. They just accept you and accept your premium checks. 

It is after you see a doctor that everything changes. 

When your doctors file claims, the insurance company starts 

looking for reasons not to pay them. They dig through your medical 

records and compare what they find to the information you put 

down on the application. It is called post-claims underwriting, and 

in California where I live, it is illegal, but insurers ignore the law, 

and when they find a discrepancy or an omission, they rescind the 

policy and refuse to pay any of your medical bills, even for routine 

treatment or treatment they previously authorized. 

Blue Cross’s decision to rescind my insurance was devastating to 

my husband and me, and I consider myself one of the lucky ones. 

As the lead plaintiff in a class-action lawsuit against Blue Cross, 

I represent 6,000 Californians who are all stripped of their insurance by Blue Cross. You can’t imagine how horrifying some of those 

stories are. 

Blue Cross rescinded some of these people right after they had 

undergone open-heart surgery or were receiving chemotherapy 

treatment for cancer. Some of these people were left with hundreds 

of thousands in unpaid medical bills. One thing we all have in common, we all were left to somehow stay healthy and fend for ourselves after Blue Cross walked away from its promise to provide 

health insurance. 


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I sought insurance with Blue Cross in 2005 because my parents 

raised me to believe that health insurance was an absolute necessity that should never be taken for granted. I work in the film industry in Los Angeles, California, where employment is generally 

temporary and done on a freelance basis. So for me and many others in the industry, individual coverage is a necessity. At the time 

I applied for coverage, I had just left a temporary staffing agency 

for Sony Pictures to go to work on a specific movie. When I made 

the move, I had to give up the stability of my group health care 

plan. So I immediately sought out individual health care coverage. 

When I applied for coverage with Blue Cross, I wanted to make 

sure that I did everything correctly to ensure that there would be 

no problems. I filled out the application to the best of my ability, 

even though it was long and confusing. I wrote down everything I 

could remember about my health history including hypothyroidism, 

a condition I have had since I was 18. I even listed the contact information for my treating doctor. Then I turned my application in 

to my insurance broker. She told me everything looked good and 

sent it in to Blue Cross and they quickly accepted my application. 

I was only 27 at the time. 

Two months later, I went to my endocrinologist for a checkup. I 

had routine blood work performed and the doctor’s office sent the 

bill to Blue Cross. I received a letter back from Blue Cross shortly 

afterwards saying that they wanted all of my medical records from 

both my endocrinologist and my gynecologist. I consented, having 

nothing to hide. A couple of months later in June of 2005, I received a letter from Blue Cross stating they were rescinding my insurance because I didn’t disclose on the application that I had 

taken the drug Glucophage and because of irregular menstruation. 

I had taken Glucophage the previous year but was no longer taking 

it when I filled out the application. My doctor had prescribed it 

hoping that it might help me lose weight, but it did not. I stopped 

taking the medication when I saw that it was not working for me. 

In its rescission letter, Blue Cross said it would have never accepted me for coverage if it had known that I had polycystic ovaries. This letter was the first time I had ever heard about this condition. I later learned that polycystic ovaries, or PCOS, as it is 

known, is a diagnosis of exclusion and very difficult to prove. Doctors often proceed on suspicions of a person having it without actually having proven it. This is what happened in my case. My doctor 

suspected I might have PCOS, wrote it down in her notes, then told 

me she was prescribing Glucophage for weight management. I 

never knew what she wrote down in her notes because she never 

told me. 

After I was rescinded, I had two of my doctors write letters to 

Blue Cross telling them this but they didn’t care. They just wrote 

back that they were upholding their decision to rescind. After being 

rescinded, I showed my original application to my sister and her 

husband, both radiologists, to ask them what I could have possibly 

done wrong in filling out the application. They felt that the application was worded in such a way as to be purposely confusing and 

that it asked the same question in multiple ways to trip people up. 

I am a college graduate and no dummy, and I still couldn’t make 

sense of Blue Cross’s tricky application. 


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The worst part about my rescission is that I have been unable 

to get insurance anywhere else. I applied for individual insurance 

through Blue Shield but on their application they ask if the applicant has ever had insurance rescinded. When they learned that I 

had, they informed me that they would not accept me for coverage. 

Every insurance company asks if you have ever had health care 

coverage rescinded. For the rest of my life I will never be able to 

get individual coverage again because of Blue Cross. As someone 

who works in an industry that relies on individual coverage plans, 

this is a really big deal. Since my rescission, I have had to take 

jobs that I do not want and put my career goals on hold to ensure 

that I can find health insurance. Fortunately, after my husband 

and I got married, I was able to gain coverage through his company’s group health care plan. However, if he ever loses his job or 

I don’t have employment with a company that offers group health 

insurance, I might have to go without. 

As I mentioned before, I consider myself one of the lucky ones. 

I don’t have large outstanding medical bills and I am relatively 

healthy. In fact, I was able to pay my doctors back for the blood 

work and office visits that Blue Cross refused to pay. But many 

people who have been rescinded are far less fortunate, and as the 

lead plaintiff against Blue Cross, I feel an obligation to speak for 

them as well. What Blue Cross has done to us is wrong and they 

must not be permitted to continue getting away with it. Americans 

desperately need health care reform. As my experience shows, owning an insurance policy does not necessarily equal access to health 

care. If insurance companies are not prevented from canceling or 

restricting coverage after patients get sick, insurance policies are 

not worth the paper they are printed on. 

Insurance companies are making record profits by collecting premiums in exchange for the promises that they make to be there 

when people need them. Make them keep that promise. Thank you. 

[The prepared statement of Ms. Horton follows:] 


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Mr. STUPAK. Thank you, Ms. Horton. 

Ms. Raddatz, and on behalf of Otto Raddatz, would you like to 

give your opening statement? And thank you for being here. 

TESTIMONY OF PEGGY RADDATZ 

Ms. RADDATZ. Thank you, very much Mr. Chairman, and thank 

you to all the members of the committee for all your kind words 

and your wonderful statements. 

My name is Peggy Raddatz and I am appearing here today to 

testify on behalf of my brother, Otto S. Raddatz. My brother was 

a business owner of a restaurant that he ran with his wife, Marie. 

He purchased a health insurance policy from Fortis Insurance 

Company in August of 2003. On the application, he indicated he 

had kidney stones and smoked. He also listed all physicians who 

had treated him. Otto’s health application with Fortis was accepted 

and his coverage began in August of 2003. A year later, my brother 

found himself inexplicably losing a large amount of weight. His 

wife, Marie Raddatz, urged him to see a doctor. 

In September of 2004, my 59-year-old brother at the time was diagnosed with stage IV non-Hodgkin’s-type lymphoma. The very 

next day, he began an intensive course of chemotherapy treatments. Due to the aggressive type of cancer Otto had, being mantel 

zone lymphoma, he was given six more rounds of chemotherapy by 

January of 2005. He suffered a lot during this period of time and 

was often unable to work. Otto was referred to a specialist in stem 

cell transplantation and for high-dose chemotherapy. Otto began 

more chemotherapy for purposes of preparing him for a stem cell 

transplant. These treatments were long and difficult in nature. In 

the midst of the chemo treatments, Otto received a phone call and 

letter from Fortis Insurance Company stating his insurance was 

cancelled. 

It was rescinded all the way back to the effective date of August 

7, 2004, which was before his diagnosis for cancer. This meant 

none of his cancer treatments would be covered at all. Most importantly, he would not be able to receive the stem cell transplant 

needed to save his life. My brother only had a very small window 

of time in which to have the stem cell transplant. He needed to be 

scheduled within the next three to four weeks or he would not be 

able to have the transplant at all and his life would be ended very 

shortly. My brother was told he was cancelled during what they 

called a routine review during which they claimed to discover a 

material failure to disclose, as they stated in their letter. Apparently in 2000, his treating doctor had done a CT scan which 

showed a small aneurysm and some very insignificant gallstones. 

My brother was never told of either one of these conditions nor was 

he ever treated for them, nor did he ever report any symptoms 

from them either. 

After months of preparation, the stem cell transplant could not 

be scheduled. My brother’s hope for being a cancer survivor was 

dashed. His prognosis was only a matter of months without the 

procedure. By this time, he could no longer work and ultimately 

had to sell his restaurant because of it. 

Mr. STUPAK. Wait a minute. 

Ms. RADDATZ. Thank you, Mr. Chairman. 


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When I called the hospital to see if I could schedule the stem cell 

transplant for him because he was in such a weakened state both 

physically and emotionally, I was callously told unless your brother 

brings in cash and a bundle of it, he is not going to get the procedure without insurance. My brother was accused by Fortis Insurance Company of falsely stating his health history, despite the fact 

that he had no knowledge of ever having any gallstones or aneurysms. Luckily, I am attorney and I was able to aggressively become involved in solving this life-threatening situation. I got on the 

phone and literally made dozens of phone calls day after day after 

day. I put my personal work aside and worked on this literally 

round the clock calling people. I finally was told to contact the Attorney General’s Office and received immediate and daily assistance from the Illinois Attorney General’s Office and from Dr. Babs 

Waldman, the medical director of their Health Bureau. I cannot 

thank them enough for their daily assistance in support of myself 

and my brother through this difficult time. 

During their investigation, they located the doctor who ordered 

the CT scan. He was not only retired, he was on a fishing trip at 

the time, and through their unbelievable resolve, they were able to 

get a hold of him on the fishing trip and he had no recollection— 

he recalled my brother and his treatment of my brother but he had 

no recollection of ever disclosing the information to my brother or 

treating him for gallstones or for a small aneurysm. After two appeals by the Illinois Attorney General’s Office, Fortis Insurance 

Company finally overturned their original decision to rescind my 

brother’s coverage and he was reinstated without lapse. This is 

after weeks of constant phone calls between myself and the Attorney General’s Office and we were literally scrambling hour by hour 

to get this accomplished so that my brother wouldn’t lose his 3- to 

4-week window of opportunity that he had prepared for and lose 

his opportunity to have the procedure. 

What Fortis Insurance Company did was unethical. To deny a 

dying person necessary medical treatment based upon medical conditions a patient never had knowledge of, never complained about 

or never been treated for is cruel. It is the hope of our family that 

this information will benefit other patients who are in need of lifesaving medical treatments and who do not have the knowledge or 

means necessary to fight against the health insurance companies. 

It is further our desire to expose these practices of Fortis Insurance 

Company so that others do not have to suffer as victims, as my 

brother did. 

Thank you very much, Mr. Chairman, and thank you so much, 

members of the committee, for all your efforts. 

[The prepared statement of Ms. Raddatz follows:] 


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Mr. STUPAK. Thank you. 

Ms. Beaton, would you like to give your opening statement now? 

Take your time. 

TESTIMONY OF ROBIN BEATON 

Ms. BEATON. Mr. Chairman and members of the committee, I am 

very honored to be here to share my story. 

My name is Robin Beaton. I am 59 years old. I was a registered 

nurse for 30 years. I had insurance. I was in good health. I retired 

from nursing, started my own small business, obtained a personal 

individual policy from Blue Cross and Blue Shield in December 

2007. In May 2008, I went to a dermatologist for acne, pimples. A 

word was written down my chart, which was considered to mean 

precancerous. In June 2008, I was diagnosed with invasive HER– 

2 genetic breast cancer, a very aggressive form of this cancer. I 

needed a double mastectomy immediately. Blue Cross and Blue 

Shield precertified me for my surgery and for a hospital stay. 

The Friday before I was to have my double mastectomy, Blue 

Cross and Blue Shield called me by telephone and told me that my 

chart was red flagged. What does that mean, I said. They said that 

due to the dermatologist’s report, that was what red flagged my 

chart in the beginning, that I would not be able to have my surgery 

on Monday and they launched a 5-year medical investigation into 

my medical history for the last 5 years. I had to give them every 

hospital, every doctor, every—— 

Mr. STUPAK. Take your finger off. There you go. 

Ms. BEATON. I had to give them every pharmacy, every doctor, 

every hospital and they threatened me that if I left anything out, 

that it would be really bad, so I truly tried everything in the world 

I could to list every single doctor, everywhere I had ever been. I 

immediately got in touch with the dermatologist. He immediately 

called Blue Cross and Blue Shield and he begged them. He said 

this is a misunderstanding. He said this is not precancerous. He 

said all she has is acne, pimples. He said please don’t hold up her 

cancer surgery for this. He begged them. He was the nicest man. 

Anyway, I was frantic. I did not know what to do. I didn’t know 

how to pay for my surgery. The hospital wanted a $30,000 deposit 

and I was by myself. I didn’t have that kind of money. 

I turned to the only person that I had to turn to, and that was 

Joe Barton, my Congressman. The next day I get a letter canceling 

my insurance, rescinding it to the first day that they had covered 

me. Can you imagine having to walk around with cancer growing 

in your body with no insurance? It is the most terrible thing in the 

world to not have anybody to turn to, not have anywhere to go. So 

I just can’t even say how bad it was. The sad thing is, Blue Cross 

and Blue Shield took my high premiums. The very first time I ever 

had a claim, the very first time and was suspected of cancer, they 

took action against me searching high and low. They turned over 

every single thing they could in my medical history to pull out anything that would cause any suspicion on me so they didn’t have to 

pay for my cancer. 

A nurse who attends my church works full time for Blue Cross 

and Blue Shield. She looks through medical records searching for 

reasons to cancel people. She came to me and she said I feel so bad, 


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she said, I just can’t even tell you how sorry I am this has happened to you. Blue Cross and Blue Shield has control over life and 

over death. People have to be able to count on what they have paid 

for, count on having insurance. Blue Cross and Blue Shield will do 

anything to get out of paying for cancer, anything. Sad fact is, anyone with a catastrophic illness who is not a part of a group who 

has an individual policy stands a really high chance of getting cancelled, left out in the cold with no insurance. I go to a cancer support group every week. Four girls in my cancer support group have 

had their insurance canceled, and two of those girls have had to 

declare bankruptcy because of cancer. 

It is very difficult for me to speak out. My insurance could be 

cancelled again. I live in fear every day of my insurance company. 

I looked everywhere for help. No one found anything to help me 

until Joe Barton and Krista Townsend after working for a really, 

really long time. Every day they worked hard. I had given up hope. 

I didn’t have any hope left and they never gave up hope. They did 

everything they could to help me and they got my insurance reinstated. 

After being diagnosed in June 2008 with aggressive breast cancer, I was placed back on a list to get a mastectomy, which I finally 

got to have my cancer surgery October 2, 2008. My tumor grew 

from 2 to 3 centimeters all the way to 7. I had to have all my 

lymph nodes removed in my arm, everything. Delaying cancer 

treatment, it only worsens the condition, costing more to treat and 

treatment is much more intensive. Also, the outcome is not as good. 

I go to chemotherapy every 3 weeks and I will have to be going for 

the next year. Cancer is expensive and no one wants to pay for cancer. I pray no one has to go through the sheer agony that I have 

had to ensure for one year. I did not deserve to have my insurance 

cancelled. Blue Cross and Blue Shield set out to get rid of me. They 

searched high and low until they found enough to cancel me and 

they did. I owe my life to Joe Barton. I pray that you will listen 

to my story and help people like me who are powerless against the 

big insurance companies. And today when I met Mr. Barton, that 

was the very first time I ever met him. He helped me not even 

knowing me, just because as a good man he just helped me. But 

I went everywhere. I went to the county hospital, I went everywhere looking for help, and you just get on a waiting list, and when 

you get on a waiting list your cancer grows. 

So I just want to thank you all for listening to me and just please 

do something about it because I couldn’t even tell you the people 

I know that have been through this. It is a horrible thing to go 

through. Thank you all so much. 

[The prepared statement of Ms. Beaton follows:] 


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Mr. STUPAK. Thanks, Ms. Beaton. 

Now we will turn for questions and I will begin. We will go for 

5 minutes on questions. We will probably go a round or two per 

panel. 

For our three panelists here, I would like to get your thoughts 

on some information the committee gathered about the economics 

of rescissions for insurance companies. The three CEOs who will 

testify after you have all made the case that their companies use 

rescission as a tool to rule out fraud by those who apply for coverage. But at the same time, we find these companies have also reported savings of an estimated $300 million as a result of the rescissions from 2003 to 2007. That doesn’t include all their subsidiaries and doesn’t include all their files. But that is what we have 

come up with. And like I said, this figure doesn’t include the savings gained by avoiding future medical costs of rescinded policyholders. So let me ask each of you, do you believe that the insurance companies use rescissions primarily as a fraud prevention tool 

or as a cost-savings instrument that will help them boost their corporate profits? Ms. Horton. 

Ms. HORTON. I think it is all about the money. 

Mr. STUPAK. Ms. Raddatz. 

Ms. RADDATZ. It is absolutely about the money. 

Mr. STUPAK. Ms. Beaton. 

Ms. BEATON. Absolutely indeed. Try to use it, they will just keep 

on taking your money. 

Mr. STUPAK. Well, each of you, as I have listened to your testimony, Ms. Beaton, you were an R.N., Ms. Raddatz, you are an attorney, and Ms. Horton, you had family members who were in the 

medical field, radiologists. You seem like a little bit more—you had 

access to people who could help you on this. What happens in your 

groups and people you have talked with, what happens to people 

who don’t have that kind of support mechanisms within their family? What happens to them? Ms. Horton? 

Ms. HORTON. They fall through the cracks. You know, there is 

nothing—even having radiologists in my family, you know, I had 

the opportunity to consult them before filling out the application. 

They live cross country. They have children. They work all the 

time, you know, and I don’t know what those people would do. 

Mr. STUPAK. Ms. Raddatz. 

Ms. RADDATZ. As I stated in my testimony, my brother was very 

fortunate because of the fact that I have education and I know lots 

of people, and even all the attorneys that I know and judges who 

I went to to ask for help did not know what to do in this situation 

other than go through the court system. Unfortunately, when you 

have cancer or you are in a position where your life is shortened 

to a matter of months, you can’t go through the court system because you don’t have the time to do that. And what do people do? 

They do—many, many people throughout the United States do 

nothing because they don’t have the ways or the means or the 

knowledge to take the steps necessary. They don’t know all the— 

I know hundreds of attorneys. I have been practicing a lengthy period of time. They don’t know all those people I know. So what do 

they do? They get the letter and they don’t get the treatment that 

they need and many of these people die, and they think that is the 


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way it is supposed to be because they just don’t know what to do. 

And I believe honestly that the insurance companies depend upon 

that lack of knowledge and lack of laws, federal laws in place, and 

that is one of the ways that they encourage their profits. 

Mr. STUPAK. Ms. Beaton, do you want to add anything on that? 

Ms. BEATON. I was going to say that a lot of people in my cancer 

group, they get letters like this. They just give up. They fade away 

and they die. 

Mr. STUPAK. Well, you were fortunate, Ms. Beaton. You had our 

ranking member, Mr. Congressman Barton, who intervened or else 

you might not be with us here today. Was it clear to you in dealing 

with the insurance company that if you didn’t have a U.S. Congressman working on your behalf that your insurance wouldn’t 

have been reinstated? 

Ms. BEATON. There is not doubt in the world that they would 

have even given me the blink of an eye if it hadn’t been for him, 

and I just could never tell you how he worked. If you only knew 

how many hours he worked. They called me every day just working 

hours and hours and hours. This took a long time. This was like 

a many, many months’ process. This didn’t just happen overnight. 

So for his office to take that kind of a dedication to me, you know, 

I will be forever grateful. If I live and don’t die of cancer, you know, 

it will be because of them. So only because of my Congressman, 

only because of him did I get help for my cancer. If it wasn’t for 

that, it never would have happened. 

Mr. STUPAK. Ms. Raddatz, sort of parallel to Ms. Beaton there, 

in your brother’s case, the Illinois Attorney General’s Office and 

Dr. Babs Waldman intervened and actually had to write two letters 

to the insurance company. In fact, one of them is at tab number 

4 in the document binder there if you care to look at it. But the 

Attorney General’s Office wrote, and I quote, ‘‘I find the behavior 

on the part of Fortis Health to be extremely troubling, if not unethical. Clearly there is no justification for rescinding this gentleman’s 

insurance beyond avoiding the cost of his future treatment. To rescind, terminate his policy at this point is not only devastating but 

probably fatal to Mr. Raddatz.’’ And then in the second letter, the 

company finally reversed its decision. So how did your brother 

know to enlist the assistance of the attorney general? Was that 

through you? 

Ms. RADDATZ. Yes, it was absolutely through myself, and like I 

said, even I had difficulty in finding that outlet. It took me a while 

to get to the Attorney General’s Office but we are fortunate in the 

State of Illinois to have a Health Bureau in Lisa Madigan, Attorney General’s Office. We are very, very lucky to have an aggressive 

unit and they are available for the citizens of the State of Illinois 

who go through the same situation that my brother did. But again, 

most people, you know, do not have the knowledge that I have, and 

by the way, it took two appeals to them. The first time she wrote 

the letter, they said no. So it took a further letter to them before 

they did, you know, reverse their decision. 

Mr. STUPAK. Thank you. 

Mr. Barton for questions. 

Mr. BURGESS. Mr. Chairman, may I ask a question? 


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Mr. STUPAK. No, it is Mr. Barton’s turn unless he wants to yield 

you time. 

Mr. BARTON. I will be happy to—— 

Mr. BURGESS. It is just purely a technical question. As a doctor, 

I get nervous with so many lawyers around me. There is an active—— 

Mr. STUPAK. You should feel secure. 

Mr. BURGESS. It is less than secure. It is the opposite of secure. 

As I understand it, there is an active class-action suit of one of 

the witnesses before us this morning? 

Mr. STUPAK. In California, I believe, it has been going on for 

some time. I think Ms. Horton is maybe a plaintiff in that action. 

Mr. BURGESS. Well, the speech and debate clause notwithstanding, are we subjecting ourselves to possible subpoena to testify in that court by our questions here today or our opening statements here today? 

Mr. STUPAK. No, but if you wish to, we could arrange it. 

Mr. BURGESS. No, I don’t want a trip to California. That is the 

last thing I want. Again—— 

Mr. STUPAK. No, I think we are OK. We are not asking anything 

about the nitty-gritty of the lawsuit or anything like that. This is 

a committee investigation, and we would be exempt. 

Mr. BURGESS. Can counsel answer that question for us? 

Mr. STUPAK. Do either one of you care to comment on it? We are 

in an official setting. This is an official hearing of the U.S. Congress. Speech and debate protection certainly helps us but I don’t 

think any of us are going to ask about the class-action suit. Yes, 

the speech and debate clause certainly applies. 

Mr. BURGESS. I thank the chairman. 

Mr. STUPAK. Mr. Barton, questions, please. 

Mr. BARTON. Thank you, Mr. Chairman. 

I want to again thank each of the three witnesses. I want to 

make a comment on what Ms. Beaton said about myself. There are 

435 Congressmen and every one of us, our job is to help constituents. I have four full-time caseworkers. Mr. Wright, to my left here, 

was my district director at the time. I had Kristi and Debra and 

Jody and Ron, Linda Gillespie, all of them intervened for you. I 

came in at the very end and talked to the president but, you know, 

not just myself but every Member of Congress, we help hundreds 

and sometimes thousands of people every year. Your case just happened to be life and death and we put a lot of extra effort into it 

because we knew how important it was to get you health care as 

quickly as possible. But it is not just me, it is every Member of 

Congress that tries to serve our constituents. 

My first question will be to the gentlelady down to the far right. 

You said that your application, they asked several questions several different ways and they were very tricky. Is it your understanding that that is a standard practice in the individual insurance market? Do they start out with the intention of setting you 

up so that later on they may disqualify you? Is that your opinion? 

Ms. HORTON. Yes, that is my opinion. You know, I believe that 

they ask you the same question several times so that if you disclose 

it in one area and then don’t realize that you need to disclose it 


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again, that they can somehow say then that you have, you know, 

committed fraud. 

Mr. BARTON. Are you aware since your lawsuit if they have made 

some changes to that questionnaire? 

Ms. HORTON. I believe that was one of the things they were trying to negotiate with Blue Cross, was changing the application, but 

I don’t know what the status of it is. 

Mr. BARTON. My next question is to the gentlelady there in the 

middle. Your brother, has he had his stem cell transplant? 

Ms. RADDATZ. He did indeed receive the stem cell transplant. It 

was extremely successful. It extended his life approximately 31⁄2

years. He did pass away January 6, 2009, and he was about to 

have a second stem cell transplant. Unfortunately, due to certain 

situations, his donor became ill at the last minute and so he did 

pass away on January 6. But again, it extended his life nearly 31⁄2

years and at his age, each day meant everything to him and each 

day that we had him was wonderful, and my daughter, who is behind me, and I and his wife and his other brother, Richard, we 

spent the last 30 days, every single day with him at his side, and 

like I say, there couldn’t be any better memorial to my brother 

than what this committee is doing because life is so precious and 

in spending those last moments of his life with him for 30 days, 

at the end we realized how important this work you are doing is 

and we just want to say again from our family, thank you all so 

much. We know with Mr. Gordon here that you have been working 

round the clock 7 days a week and very, very hard, and Mr. Gordon, thank you and your staff for all your hard work. Thank you. 

Mr. BARTON. Ms. Beaton, what have your doctors told you your 

condition would have been had you had the mastectomy immediately as originally scheduled? Would you have had to undergo the 

chemotherapy and is it probable that the cancer would have spread 

to the lymph nodes as it apparently has? 

Ms. BEATON. They said that every day that I put off the surgery 

was a really, you know, day that the cells just multiplied and grew, 

and I think there is a strong chance that in the beginning that 

maybe I didn’t have to have—I could have had a lesser surgery and 

not have had my lymph nodes taken out. I would have had to have 

chemo but maybe not for quite as long a period of time. 

Mr. BARTON. If it is personal—it is personal—you don’t have to 

tell us, but would you tell us as much as you can about your prognosis right now? Is the expectation positive for your chemotherapy 

and cancer remission or is it still up in the air? 

Ms. BEATON. It is still up in the air. 

Mr. BARTON. Mr. Chairman, my time is about expired. I am 

going to yield back. I think I speak for every member of the committee on both sides of the aisle, we want to hear from the insurance companies in the next panel, but it is clear that if in fact 

there is a practice of going in after the fact and canceling policies 

on technicalities, we have got to do whatever is possible to prevent 

that. I think a company does have a right to make sure that there 

is no fraudulent information but it is obvious to me that—I will 

guarantee you in Ms. Beaton’s case there was no fraud intended, 

and I am convinced with the other two witnesses that they were 

being truthful and honest also, and if a citizen acts in good faith, 


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we should expect the insurance companies who take their money 

to act in good faith also. And I will tell you, Ms. Beaton, we will 

monitor your case and we will stay in touch with Blue Cross/Blue 

Shield of Texas and so long as you do what you are supposed to 

do, I will guaran-damn-tee you they will do what they are supposed 

to do. 

With that, Mr. Chairman, I will yield back. 

Mr. STUPAK. Thank you, Mr. Barton. 

Ms. Schakowsky for questions, please. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman, and after hearing 

the testimony, I want to thank the witnesses even more for sharing 

this. 

I wanted to talk about rescissions for unrelated medical conditions. I understand that they scour the records to find anything 

but, Ms. Beaton, let me understand what happened to you. After 

your insurance policy began, you developed breast cancer and the 

insurance company decided to investigate your application but it 

didn’t find any evidence that you had breast anything before you 

got your policy, did it? 

Ms. BEATON. No. 

Ms. SCHAKOWSKY. So it was rescinded because essentially of pimples, right? Is that what you’re saying? 

Ms. BEATON. They rescinded because of—what it all started with 

was the red flag. What that means is something suspicious, so they 

red flag you. Then they go back and they just cut your chart apart, 

and what they found was on my weight, I think I put down—I said 

what woman is going to tell you what she really weighs, you know. 

I weighed more than what I put down, and they said that they 

might not have given me a policy because I was overweight. And 

the second thing was, I had—in my early years I had a previous 

fast beating of my heart and I didn’t have a problem with that anymore, but anyway, that was brought up. Everything they could possibly dig up in my whole life history got brought up, unrelated to 

the cancer, nothing related to the cancer. 

Ms. SCHAKOWSKY. So if we lie about our weight at all, we better 

look out, huh? 

Ms. BEATON. They will get you. 

Ms. SCHAKOWSKY. I better change my driver’s license. 

Ms. Raddatz, it sounds like your brother had a similar experience. He signed up for an insurance policy, then was stricken with 

an aggressive form of lymphoma, and the insurance company, 

which is now part of Assurant, investigated his application but it 

didn’t find any evidence that your brother had cancer before his insurance policy, right? 

Ms. RADDATZ. That is correct. 

Ms. SCHAKOWSKY. So—— 

Ms. RADDATZ. He did not have cancer prior to—at the time he 

signed up, he did not have cancer. 

Ms. SCHAKOWSKY. So it rescinded his policy based on alleged 

misstatement about gallstones and you said aneurysm, which is 

what? A weak blood vessel, right? Does that have anything to do 

with anything? 

Ms. RADDATZ. Nothing whatsoever. 

Ms. SCHAKOWSKY. And he didn’t—— 


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Ms. RADDATZ. The gallstones actually, like I said, he never even 

knew he had gallstones. He actually wrote down he had kidney 

stones and was treated for kidney stones. So when he got that letter, he thought that was an error, oh, they must have meant the 

kidney stones, but he disclosed that he did have kidney stones and 

they knew that when they gave him the insurance. He never knew 

he had minor gallstones, never to his death was ever treated for 

any gallstones, and was never treated for any aneurysm. 

Ms. SCHAKOWSKY. So in addition then to having an unrelated 

medical condition, it was something he didn’t know about at all. So 

when we hear, as perhaps we will, about fraud from the insurance 

companies, he even mentioned kidney stones that he didn’t have, 

are you saying? 

Ms. RADDATZ. He did have kidney stones and he did disclose 

those and was treated for those, and he was given insurance despite the fact that he had kidney stones. But had they not been 

able to find his doctor, who was retired and on a fishing trip in another State, they still might not have believed him because he had 

no knowledge of it. Luckily, they were able to find the doctor, who 

was able to say oh, yes, I never discussed those issues with him, 

I never treated him for those, they were very minor and they appeared on a CT scan but we never engaged in any treatment for 

those whatsoever and I never disclosed them to him. 

Ms. SCHAKOWSKY. But ultimately even that, didn’t it take the attorney general to get it changed? 

Ms. RADDATZ. Oh, yes, it did, it absolutely did. Like I said, Lisa 

Madigan, the Attorney General’s Office, and Dr. Babs Waldman 

were wonderful and their staff were just incredible. They were 

working daily on this file because they knew that the clock was 

ticking every day and their investigations were—— 

Ms. SCHAKOWSKY. But what I am asking is, even if they found 

the doctor on the fishing trip and the doctor had said what he 

thought, that wasn’t enough apparently? 

Ms. RADDATZ. It wasn’t. At that point they still wrote a letter 

saying no, too bad, it was a material lack of disclosure, and Dr. 

Waldman had to contact them again and discuss it further. 

Ms. SCHAKOWSKY. And Ms. Horton, your situation is that your 

policy was rescinded because you were seeking some insurance coverage, or how did that work for you? 

Ms. HORTON. I was seeking the policy when I was going over 

from a group health insurance plan. 

Ms. SCHAKOWSKY. So this is just a denial from the beginning because of—— 

Ms. HORTON. I was accepted and then the first time I went to 

see a doctor I received a letter from Blue Cross stating that they 

wanted all of my medical records, and it was a bill for just routine 

blood work. It was to test my T4 level, which is your thyroid hormone, and so it was routine blood work that anyone who has an 

underactive thyroid, which I disclosed, would get and I had paid almost three times more in premiums than they needed to pay out 

and they still sent me to this, you know, post-claims underwriting 

department where they went through my medical records, they 

found, you know, a mention of something in her notes that she 

never disclosed to me, and both of my doctors wrote letters in supVerDate Mar 15 2010 09:03 Jun 29, 2012 Jkt 073743 PO 00000 Frm 00044 Fmt 6633 Sfmt 6633 E:\HR\OC\73743.XXX 73743

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port of the fact that they had not discussed the condition with me 

that they suspected I had but could prove. 

Ms. SCHAKOWSKY. So we know that—it seems obvious that anything that might relate to cancer treatment they are going to scour 

the records. In your case, it might have been something about the 

blood work that you were having? 

Ms. HORTON. In my case, it just proves that there is no condition 

too small that they are willing to send you to this department for. 

You know, I did not have anything even close to life-threatening 

nor as expensive as some of the people on the panel, and it just 

shows you that you can’t be too young or you can’t be too healthy 

for them to send you to this department. 

Ms. SCHAKOWSKY. Thank you, Mr. Chairman. 

Mr. STUPAK. Mr. Burgess for questions, please. 

Mr. BURGESS. Thank you, Mr. Chairman. 

Ms. Beaton, let me ask you, Blue Cross and Blue Shield came 

back to you after finding out you needed the surgery and said that 

they were taking your insurance and the date of rescission was 

dated back to the date of enactment of the insurance. Is that correct? 

Ms. BEATON. I am kind of hard of hearing. 

Mr. BURGESS. Your rescission was effective on 12/07, which was 

the date that the insurance was initiated. Is that correct? 

Ms. BEATON. Right. They gave me back all my premiums. 

Mr. BURGESS. OK. That was going to be my question. They refunded the—— 

Ms. BEATON. I never cashed the check because Mr. Barton told 

me never to cash it and I never did. They rescinded all my money 

back to the day that they said—in simple language, they wanted 

nothing to do with me. They gave me back every penny that I had 

ever given them and they considered never being insured by them. 

Mr. BURGESS. And Ms. Raddatz, what about in your brother’s situation? Was there a refund of premium back to the date of the rescission? 

Ms. RADDATZ. Yes, they didn’t actually get to that point because 

it got resolved before they refunded the money but they sent a letter stating yes, you are rescinded to the date of the original contract, which was before my brother had any cancer treatments at 

all, and $200,000 back, so my brother would have to pay out of 

pocket over $200,000 in medical expenses. 

Mr. BURGESS. But they never got to the point where they sought 

that refund from your brother? 

Ms. RADDATZ. Well, again, the $200,000 was the amount that his 

medical bills—— 

Mr. BURGESS. So those were subsequent bills? 

Ms. RADDATZ. Right. That would have been what he would have 

had to pay out because they were rescinding their contract and so 

they were then stating we are rescinding all the way back to the 

original date of the contract so you have never had any insurance 

at all for the entire time you have had cancer. You now have no 

insurance. 

Mr. BURGESS. So that was actually—that retroactive pronouncement also dealt with the money that they had used to pay for his 

cancer treatment to date. Is that correct? 


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Ms. RADDATZ. That is correct. 

Mr. BURGESS. Now, in your brother’s situation also, I think you 

said that he was told he would have to have a certain sum of 

money or he couldn’t get the bone marrow transplant. Is that correct? 

Ms. RADDATZ. That is correct. 

Mr. BURGESS. But that wasn’t the insurance company that told 

him that, that was the medical facility? 

Ms. RADDATZ. That was the hospital coordinator. When I called 

to literally beg her to schedule the stem cell transplant because my 

brother was on pins and needles being ill, going through aggressive 

chemotherapy and readying himself for this transplant, which is a 

long step-by-step procedure medically, then they wouldn’t schedule 

him because the insurance company said he is no longer insured 

so we will not schedule you for your stem cell transplant that you 

were supposed to have within the next 3 weeks, we will not schedule you. So I got on the phone and literally begged her, and no. 

Mr. BURGESS. Let me ask you a question. It doesn’t really have 

to do with the subject of the hearing today but it figures into the 

larger discussion that we are having. Was any other plan delineated for you then, another option you might have would be medical school at Northwestern or Cook County or were there any 

other options discussed? 

Ms. RADDATZ. No, there really weren’t because my brother’s doctor was one of the most renowned doctors in the whole world on 

the specific routine of treatment and he had a very specific type of 

cancer that really had to be treated by that doctor in that hospital 

at that time, and you can’t just say well, OK, you can have it a 

couple months down the road or you can wait. I mean, again, the 

Attorney General’s Office realized thankfully because it is headed 

by a doctor, medical doctor, that time was of the essence. 

Mr. BURGESS. It is just that I can recall multiple times when I 

was in practice you come up on these situations and you find a way 

to make it work for the patient. I guess I am a little frustrated in 

your situation in that you were essentially allowed or offered no 

other option. I appreciate the fact that particularly for that type of 

non-Hodgkin’s lymphoma that it may require very, very specialized 

type of care. My frustration is as a physician, I just cannot tell you 

the times that I found another hospital or another way to make it 

happen and not wait the lengths of time that you all are discussing. 

Ms. Beaton, in Tarron County, I mean, there is a county hospital. 

Was that ever—did anyone ever try to help you through that tangle 

to try to get any care through John Peter Smith? 

Ms. BEATON. I couldn’t qualify for that, but what I did do is, I 

moved in with my sister in Cedar Hill for a while so I could declare 

residency and went to Parkland Hospital, the Dallas county hospital, tried to get help there. You get on a waiting list for a mastectomy. And three or four times I went there and they lost my medical records. They said why are you here. I said I am here, I have 

cancer, I need to get a mastectomy. They said we will put you on 

the waiting list. Well, I do believe with all my heart that today my 

name still wouldn’t be up on the waiting list because they never 

even contacted me back, but I am thankful to say that in trying 


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to get help, like you said, going to all the county hospitals, applying 

for the State programs, doing all that kind of stuff, Mr. Barton got 

my insurance reinstated and I was able to have insurance with the 

original doctor who I wanted to have insurance with. 

Mr. BURGESS. Sure, and I appreciate that and I think that is— 

I believe in continuity of care and I believe that is important, and 

again, the other aspect is not really a part of our discussion today 

but it is part of our broader discussion as we talk about strategies 

for the future. I want to thank every one of our panelists for being 

here today. Ms. Horton, I didn’t get to you. It is not because I was 

afraid to get to you, I just didn’t have an opportunity, but thank 

you too for your testimony as well. It was all very important today. 

Thank you, Mr. Chairman. I will yield back. 

Mr. STUPAK. Mr. Gingrey for questions, please. 

Mr. GINGREY. Mr. Chairman, thank you, and I am going to direct 

my question to Ms. Beaton. 

Am I pronouncing that right? 

Ms. BEATON. It doesn’t matter, Beaton, Beaton. 

Mr. GINGREY. Ms. Beaton, we of course heard and listened very 

intensely to your testimony and quite compelling, and I wanted to 

take one quote from your written testimony and I think you said 

when you get on a waiting list, cancer grows, and I think that was 

in reference to the fact as you just testified to Dr. Burgess that you 

were on that waiting list at the county hospital. There was an alternative but thank God that your Congressman and my colleague, 

Joe Barton, was able to intervene and you were able to get the care 

at the private hospital and by your physician that you trusted and 

that you wanted to do the surgery. This statement that you made 

is absolutely right. I don’t know if you know it, but I am a physician too, an OB/GYN doctor before being elected to Congress, and 

your statement is a profound one indeed: when you get on a waiting list, cancer grows. And when we look at statistics of countries 

where you routinely get put on a waiting list like the U.K. and others, in particular in the treatment of breast cancer, in our country 

where hopefully you don’t get put on a waiting list when you have 

breast cancer, you get operated on quickly, the 5-year overall survival rate for breast cancer is 98 percent. But in the U.K. system 

where you frequently get put on a waiting list, the 5-year survival 

rate for breast cancer is 78 percent. That is a significant change, 

and as you described to us, that 2-centimeter mass grew to 7 centimeters and lo and behold you have to have your lymph nodes removed and I guess some of those were positive by the time you finally got operated on. Is that the case? 

Ms. BEATON. Yes. 

Mr. GINGREY. Well, with that information, let me just ask you 

this question, and it relates to you in particular but it relates to 

everybody in general, and I would appreciate your thoughts on 

ways that you think that we can strengthen the private market so 

that other people, anyone with chronic illness can find affordable 

health insurance or do you think we should turn over our health 

care system lock, stock and barrel to the compassion and efficiency 

of our federal bureaucracy? 

Ms. BEATON. All I can say is that I did go many, many different 

places trying to get help and I spent hours and quit working and 


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did all my focusing, instead of focusing on getting well and focusing 

on my cancer, I focused on trying to get treatment, and I went to 

every hospital in Dallas. I went to county hospital, I went to Fort 

Worth, I went everywhere, and I don’t know how to fix it but all 

I know is there something terribly wrong with the health care system because when you go to big hospitals and there is so many people there waiting for help, I went to all the clinics. I sat with all 

the people that I just—you can’t even imagine how many people 

are there waiting for help. You spend hours and hours. You probably spend the whole day trying to see a doctor. I did that. I did 

that for weeks and never got help. So and the bad thing about that 

is, when you go to different hospitals they give you different opinions. Every time I went to a different hospital, my tumor was a different size. Every time I went to another hospital, one person 

wanted to do one thing, one person wanted to do another. You get 

a difference in diagnosis, a difference in treatment plans. So who 

do you listen to, who do you know to listen to? And I don’t know 

how to fix it but all I know is, when you have to go through this 

like every one of us has been through what we have been through, 

you just realize that it is something that is broken. 

Mr. GINGREY. Ms. Beaton, I am going to reclaim my time because 

I just have a few seconds left, but I really thank you for that testimony, and I think you are absolutely right. There is something 

that needs to be fixed, something is broken, and when we hear 

from the second panel from the insurance companies, I am going 

to make some suggestions to them how we can fix this system, but 

it is my firm belief, Ms. Beaton, the other two, Ms. Horton, Ms. 

Raddatz, that we can fix this system without, as I say, turning it 

over lock, stock and barrel to a federal bureaucracy that routinely 

is going to ration and put people on the waiting list. But we will 

get into that later and I want to thank all three of you for being 

here today and giving us such compelling testimony. 

Mr. STUPAK. We will go to Mr. Walden, but please don’t accept 

Mr. Gingrey’s description of a possible health care plan for the Nation based upon those comments. Some of us on the other side see 

it a little differently. But Mr. Walden for questions, please. 

Mr. WALDEN. Thank you, Mr. Chairman. I appreciate the opportunity. I had to step out to another hearing I am involved in upstairs but I read your testimony this morning and so I appreciate 

what you have been through, although none of us can really understand what it is like to be in your shoes or that of your loved ones. 

It is not a good thing. 

We have two physicians here, both Dr. Gingrey and my colleague 

from Texas, Dr. Burgess, and I think that is good to have. I hope 

at some point, given some CMS’s role in overseeing HIPAA that 

perhaps we could have the federal agency that also has a role in 

this to come before our subcommittee as well to find out their take 

on what is happening. 

Ms. Horton, you stated that you think the applications are deliberately confusing. I have looked through some of those, and I understand what you mean. Could you be a little more specific the 

kinds of questions that you found difficult and confusing? 

Ms. HORTON. I haven’t looked at the application in 4 years since 

I first filled it out so I can’t be super specific but I do remember 


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them, you know, after looking at it again with my sister and brother-in-law, they both said you would have to be a doctor or a lawyer 

in order to figure out the application and fill it out to 100 percent 

accuracy. 

Mr. WALDEN. How would each of you improve that application 

process? Because it seems to me that that is kind of the crux of 

the argument here is, there are things that you didn’t know that 

were on your medical records or your loved one’s medical records 

that they didn’t know. I don’t know you ever disclaim knowledge 

of something you have no knowledge of. That to me is one point 

here. And then the second is to know as a layperson if you are on 

some medication years ago and you haven’t been taking it, it would 

be easy to forget that, I would think, or perceive that you no longer 

have whatever that was that you took the medication for so you 

don’t note it or you forgot it, and yet, you know, we also know there 

are cases of fraud and those people that were like you with individual policies paying more because people were deliberately trying 

to get on the rolls, and our files that we got from the companies 

indicate that too. So I am trying to figure out, how do we get a balance here where people like you and your loved ones aren’t rescinded from coverage and yet find this balance and it seems to get 

back to the initial application process, the review of those applications and then better understanding for those of us who may be 

signing up for that type of health insurance, so I am curious, how 

would you fix at least that part of the process? Anyone want to 

tackle that? 

Ms. RADDATZ. I would just state that the insurance company at 

the time you apply for insurance and you disclose your doctors, 

they should be the ones that have to do the investigations. If they 

don’t do the proper investigation at the time you apply, they 

shouldn’t have the right to go back years later. You know, there is 

a 2-year window for the insurance companies by which they can do 

their investigations. No, that is wrong. They should have to investigate before they give you your insurance. They have all the opportunity to investigate then. You disclose your doctors, let them get 

the records, let them look at and comb the records at that time. 

Why are they doing that later on when people—— 

Mr. WALDEN. When you have a big claim. 

Ms. RADDATZ. Pardon me? Absolutely. I mean, if that isn’t intentional, what is? They want to save money and wait until you have 

claims before they spend the investigative money to do what they 

should do at the beginning. So all this time they haven’t done their 

job. They are taking the consumer’s money and the consumer 

thinks I am insured, but I am not insured and that is not right. 

That law needs to be changed. 

Mr. WALDEN. Ms. Beaton, do you want to comment on that? 

Ms. BEATON. Yes. Just like myself, I asked could I have a physical. I wanted to have a physical for insurance and they said no, 

we don’t do that. So I even offered to let them have a physical on 

me, which to me that would be a good thing. You know, that way 

if there is anything they don’t want, they don’t have to take you. 

Mr. WALDEN. We have that in Medicare, I think. 


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Ms. BEATON. They don’t do that at all, so they don’t want to 

spend the money for a physical to give it to you to rule you out 

then so you don’t get your hopes up and think you have insurance. 

Mr. WALDEN. OK. 

Ms. HORTON. I completely agree with what Ms. Raddatz said, 

and I just wanted to add, you know, after this practice happens, 

which hopefully we are going to stop it from happening in the first 

place, but then when your physicians write letters on your behalf 

and aid you in appealing to these insurance companies, the fact 

that they give no weight whatsoever to what these physicians who 

have been treating you for years say, it is totally unconscionable. 

Mr. WALDEN. I was reading through some of those examples of 

people who, you know, were rescinded and their physician says the 

patient would have no idea of this, it is a note I put in the file I 

never shared with them, and that doesn’t seem right. Would it be 

helpful—and I realize I have run over my time here, but would it 

be helpful if there were also—it seems like there is yes and no columns on these forms. Given that I don’t think any of you are physicians, would it be helpful if there maybe was an unsure, don’t know 

column as well that you could check which then I would think if 

I am the insurer would cause me to go ah, there may be something 

here I should look at further. Because, I mean, the insurers, if you 

read through their testimony, they make the case that look, it is 

a very small percentage, although it is a very painful percentage— 

I am just telling you what they are telling us—small percentage. 

If we did everyone, it would slow down people getting access to insurance, blah, blah, blah. And so they are saying, you know, we go 

investigate those where we have cause or an issue. That is something we will get into on the next panel. But, you know, there is 

this notion that is a very small segment of the population and so, 

you know, to get people covered they go this direction. 

Ms. HORTON. I don’t believe that it is a very small segment of 

the population. I believe that they send anyone who sends in a 

claim to this post-claims underwriting department, and I have 

heard many people who formerly worked, you know, at insurance 

companies talk about these secret, you know, specific units that are 

designed to find errors or omissions or whatever you want to call 

them in people’s records so that they can go back and save money. 

Mr. WALDEN. And I think we actually get some of that testimony 

from our final witness from Georgetown that says it may be a 

small percentage but it is perhaps a big percentage of the claim 

costs. 

Ms. RADDATZ. And I would just like to say, those are the people 

you know of. There are many people out there who lose their insurance and then go on Medicaid, go on welfare, go without insurance. 

You are not aware of who those are. Those are their numbers. 

Those aren’t the consumer’s numbers. We don’t really know how 

many people are out there, and you know what? I don’t care if 

there is just the three of us. That is too many. One too many who 

dies because an insurance company cancelled their insurance is one 

too many. 

Mr. WALDEN. Ms. Beaton, any final comment? I just wondered if 

you had any final comment on that point. It is OK if you don’t. 

Ms. BEATON. I am real hard of hearing. What did you say? 


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Mr. WALDEN. I just wondered if you had any final comment. 

Ms. BEATON. Oh, I just agree with both of what they said and 

I know so many people in my cancer group that I wish could be 

here to talk to you, that you wouldn’t believe their stories. So it is 

common practice and you will never know how common it is, and 

when they hire nurses to investigate who sit there their whole shift 

doing nothing but review medical records looking for things to get 

rid of people, and that just shows you right there. 

Mr. WALDEN. Indeed. Thank you very much. 

Thank you, Mr. Chairman, for your indulgence. 

Mr. STUPAK. Thank you. I ask unanimous consent that a statement from Rosa DeLauro, Member, be placed in the record. 

[The information was unavailable at the time of printing.] 

Mr. STUPAK. Let me just ask a question. You know, we have focused sort of on what happened to you three as we should and 

rightfully so but, you know, we found close to 20,000 cases in looking where there were rescissions over the last few years from three 

insurance companies here who will be testifying on the next panel, 

like a spouse gets in a bicycle accident and had some fractured 

bones and they denied it because her husband had back surgery. 

What bearing that had on the lady’s fractures is beyond me. But 

that is what we are seeing. But Ms. Beaton, one thing I want to 

ask you, in your testimony you stated, and I am going to quote 

now, that you ‘‘live with fear every day of my insurance company.’’ 

What are you afraid your insurance company might do? 

Ms. BEATON. Without a doubt, some day they will cancel me. 

Some day Mr. Barton won’t be there to protect me, and you know, 

I am young and they will find something to get rid of me. Somehow 

I won’t have insurance. Some day I will be—out of Blue Cross and 

Blue Shield’s record they will find a way to get rid of me, and coming here today I think will just about maybe do it. 

Mr. STUPAK. So if your lost your insurance, you are afraid you 

would never get insurance from another company since you have 

been rejected once? 

Ms. BEATON. If I lost my insurance what? 

Mr. STUPAK. Are you afraid you would not be able to pick up another individual health insurance policy? 

Ms. BEATON. I am uninsurable. The only way I could ever get insurance, through being a registered nurse I could go back to work 

in a hospital and be covered under a group. They could not deny 

you that way. I have done a lot of research about that. But as far 

as the individual policy, for the rest of my life I am uninsurable. 

Mr. STUPAK. Because of your preexisting condition? 

Ms. BEATON. Because of my cancer. Once you have cancer, you 

are uninsurable forever. 

Mr. STUPAK. Thank you. 

I apologize, Mr. Deal, I didn’t see you there, but 5 minutes for 

questions. 

Mr. DEAL. That will teach me to wear a light-colored suit. Thank 

you, Mr. Chairman, and I just simply wanted to express my appreciation to the witnesses for coming today. Certainly none of us condone abuses within the system, and you have pointed out some of 

those that appear to be in that category, and I know that it took 

a great deal of effort on your part to come and we appreciate your 


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courage and we appreciate your time that you have devoted to it. 

I do not have any questions of you. I think your testimony speaks 

for itself. 

Thank you, Mr. Chairman. I yield back. 

Mr. STUPAK. Well, that was pretty quick. Well, let me thank this 

panel for their testimony, their heartfelt testimony, and thank you 

for shedding some light on this and bringing a human face to a 

very serious problem. Thank you all for coming and thank you for 

your testimony. 

I would now like to call up our second panel of witnesses. On our 

second panel, we have Don Hamm, who is the chief executive officer of Assurant Health; Mr. Richard Collins, who is the chief executive officer at Golden Rule Insurance Company, which is owned by 

United Health Group; Mr. Brian Sassi—am I saying that right? 

Mr. SASSI. Sassi. 

Mr. STUPAK. Sassi, who is president and chief executive officer 

at WellPoint Incorporated, and Ms. Karen Pollitz, who is the research professor at Georgetown University Health Policy Institute. 

Welcome, all our witnesses. It is the policy of this subcommittee to 

take all testimony under oath. Please be advised that you have the 

right under the rules of the House to be advised by counsel during 

your testimony. Do you wish to be represented by counsel during 

your testimony? 

Mr. HAMM. Yes, if necessary. 

Mr. STUPAK. Mr. Hamm, you would? 

Mr. HAMM. Yes, if necessary. 

Mr. STUPAK. OK. So if any time during the questions if you want 

to get advice from counsel, just let us know and we will allow you. 

Counsel can’t testify but they can advise you. Mr. Collins? 

Mr. COLLINS. No, sir. 

Mr. STUPAK. Mr. Sassi. 

Mr. SASSI. No, sir. 

Mr. STUPAK. Ms. Pollitz. 

Ms. POLLITZ. No. 

Mr. STUPAK. So you are already standing. Let us raise your right 

hand and we will take the oath. 

[Witnesses sworn.] 

Mr. STUPAK. Let the record reflect that the witnesses replied in 

the affirmative. They are now under oath beginning with your 

opening statement. You have 5 minutes for an opening statement. 

You may submit a longer statement for inclusion in the record. Mr. 

Hamm, if you don’t mind, I will start with you, start from my left 

and go to our right. 


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TESTIMONY OF DON HAMM, CHIEF EXECUTIVE OFFICER, 

ASSURANT HEALTH, ASSURANT; RICHARD COLLINS, CHIEF 

EXECUTIVE OFFICER, GOLDEN RULE INSURANCE COMPANY, 

UNITEDHEALTH GROUP; BRIAN A. SASSI, PRESIDENT AND 

CHIEF EXECUTIVE OFFICER, CONSUMER BUSINESS, 

WELLPOINT, INC.; AND KAREN POLLITZ, RESEARCH PROFESSOR, GEORGETOWN UNIVERSITY HEALTH POLICY INSTITUTE 

TESTIMONY OF DON HAMM 

Mr. HAMM. Chairman Stupak, Congressman Walden, members of 

the subcommittee, I am Don Hamm, president and CEO of 

Assurant Health. I welcome this opportunity to participate in the 

hearing today. It is through dialog like this that we can continue 

to address one of the most challenging issues of our time, providing 

health insurance coverage for all Americans. 

We appreciate that this subcommittee and Congress are committed to finding the right ways to address health care reform. If 

a system can be created where coverage is available to everyone 

and all Americans are required to participate, the process we are 

addressing today, rescission, becomes unnecessary because risk is 

shared among all. I passionately believe that all Americans must 

have access to high-quality, affordable health care regardless of 

their income or their health status, and I am proud to lead a great 

company that provides health coverage to individuals and families 

in 45 States. People need our products and we are proud to provide 

them to thousands of Americans. 

Individual medical insurance is portable and belongs to each consumer. In these uncertain economic times, individual medical provides benefits to a growing population who do not receive employee-sponsored health coverage. That is why individual medical 

is so important. We work hard to ensure our health questions include simple, easy and straightforward language. A correct medical 

history is necessary so we can fairly assess the health risk of each 

applicant. The vast majority of people complete the enrollment 

form accurately. The underwriting process depends on this information and we rely upon consumers’ disclosures. People applying 

for individual insurance are given multiple opportunities to verify, 

correct and complete the information they provide. They are given 

10 days to notify us of any inaccurate information or to reject the 

coverage. 

As Assurant Health, we are acutely aware of how our coverage 

affects people’s lives. It is a responsibility we take very seriously. 

Unfortunately, there are times when we discover information that 

was not disclosed during the enrollment process, and when this information is brought to our attention, we ask additional questions 

to determine if the information would have been material to the 

underwriting risk we assumed. Accurate risk assessment keeps 

rates lower for all. 

Assurant Health does not want to rescind coverage. We are in 

fact in the business of providing health care coverage. We regret 

the necessity of even a single rescission. The decision is never easy, 

and that is why we follow a fair and thorough process that includes 

a number of careful reviews. Here is how our system works. When 


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we become aware of a condition that existed prior to the application date and that information was not disclosed, a senior underwriter reviews the omitted information to determine if it was material to the underwriting decision. Then the underwriting manager 

verifies the analysis. If the omission was not material, the review 

is complete. If the omission was material, the underwriter makes 

a recommendation to a review panel, which includes at least one 

physician. This review panel evaluates the information and makes 

a decision. The amount of the potential claim is never disclosed to 

the underwriters or to the review panel. The decision to rescind is 

only made when the undisclosed information would have made a 

material difference to the underwriting decision based on our 

guidelines. The consumer is given the opportunity to provide additional information before coverage is rescinded. This information is 

evaluated and a decision is made. If the consumer is dissatisfied 

with the decision, we provide multiple opportunities to appeal, 

which now includes an option to request a medical review by an 

independent third-party company. 

Rescission affects less than one-half of 1 percent of the people we 

cover. Yet it is one of many necessary protections for affordability 

and viability of the individual health insurance in the United 

States. Assurant Health supports the principle that everyone in the 

United States deserves affordable health care and we see reform of 

our Nation’s health care system as a shared responsibility between 

doctors, consumers, health insurers and policymakers who collectively can deliver effective solutions to provide coverage for all 

Americans, and that is why at Assurant Health we will continue 

to participate in efforts to reform and improve health care in America. Thank you. 

[The prepared statement of Mr. Hamm follows:] 


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Mr. STUPAK. Thank you, Mr. Hamm. 

Mr. Collins, your opening statement, please, sir. 

TESTIMONY OF RICHARD COLLINS 

Mr. COLLINS. Good morning, Chairman Stupak, Ranking Member 

Walden, members of the subcommittee, thank you for inviting me 

to testify today. My name is Richard Collins. I am the CEO of 

Golden Rule Insurance Company. We are a UnitedHealth Group 

business that sells health insurance policies to individuals and 

their families. Golden Rule has been offering this important coverage for over 60 years. We seek to offer innovative and affordable 

products to meet the diverse health care and financial needs of our 

customers. 

In our current health care delivery system, the individual insurance market operates primarily for families who do not have access 

to group insurance or government benefit programs. We have long 

advocated that our country needs comprehensive reform that includes modernizing our delivery system, tackling the fundamental 

drivers of health care cost growth, strengthening employer-based 

coverage, and providing well-targeted support for low-income families. To be effective, we believe the modernization of the individual 

market needs to contain all the following elements. 

First of all, individuals must be required to obtain and maintain 

health coverage so that everyone participates in both the benefits 

and the costs of the system. Second, insurers should be able to set 

rates within limited parameters of age, geography, family size and 

benefit design, just as they do in the group market. However, and 

I want to emphasize this point, rates should not vary on health status and coverage should be guaranteed regardless of preexisting 

medical conditions for those that maintain continuous coverage. 

Third, low- and middle-income families should receive some form of 

subsidiary to ensure they have the same access to care as all Americans. Fourth, insurers should be able to offer a wide spectrum of 

plan designs to allow American families the flexibility to choose a 

plan that fits their budget, and lastly, the tax treatment of individual insurance premiums should be on par with employer coverage. 

Until comprehensive reform is achieved, we believe the medical 

underwriting of individual policies will continue to be necessary. If 

these changes are instituted, most of the reasons for individual 

medical underwriting as well as most of the reasons for rescissions 

and terminations of policies would cease to exist. Our company 

mission is to improve the health and well-being of all Americans. 

In the individual market, we accomplish this by covering as many 

consumers as possible with quality health insurance. We also work 

to keep our products affordable to accomplish our mission because 

the primary barrier to access is affordability. We understand that 

we have a responsibility to treat all of our policyholders fairly and 

I assure you, we take this responsibility very seriously. 

Unfortunately, for a variety of reasons, some people choose not 

to purchase individual health insurance until they have a significant health event. This decision not only has enormous physical 

impact and financial impact on these families but raises the cost 

of health care for everyone. As you know, the practice of rescission 


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has long been recognized by the laws of virtually every State. Rescission is uncommon but unfortunate and a necessary recourse in 

the event of material and at times intentional or fraudulent 

misstatement or omission on an insurance application. Under our 

current system, failure to act on these cases is fundamentally unfair to those working families that play by the rules because it 

would severely limit our ability to provide quality and affordable 

health insurance. In the rare event that we determine it is necessary to rescind coverage and after a thorough investigation of the 

facts and in compliance with State laws and regulations, we follow 

practices and procedures designed to ensure a fair and transparent 

process for the individual. And as I indicated, our use of rescission 

is rare. Less than one-half of 1 percent of all individual insurance 

policies in 2008 were terminated or rescinded and in each case the 

affected customer was afforded the right of appeal. 

In conclusion, we look forward to working with this committee, 

the Congress, State and federal regulators to continue to expand 

access to affordable health insurance coverage in the individual 

market. Thank you. 

[The prepared statement of Mr. Collins follows:] 


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Mr. STUPAK. Thank you. 

Mr. Sassi, your opening statement, please. 

TESTIMONY OF BRIAN SASSI 

Mr. SASSI. Thank you, Chairman Stupak, Ranking Member Walden and members of the committee for inviting me to testify before 

you today. I am Brian Sassi. I am the president and CEO of the 

consumer division of WellPoint. 

We take contract rescissions very seriously because we understand the impact these decisions can have on individuals and families. We have put in place a thorough process with multiple steps 

to ensure that we are as fair and as accurate as we can be in making these difficult decisions. I want to emphasize that rescission is 

about stopping fraud and material misrepresentation that contribute to the spiraling health care costs. By some estimates, 

health care fraud in the United States exceeds $100 billion, an 

amount large enough to pay for covering nearly half the 47 million 

uninsured. Rescission is a tool employed by WellPoint and other 

health insurers to protect the vast majority of policyholders who 

provide accurate and complete information from subsidizing the 

cost of those who do not. The bottom line is that rescission is about 

combating cost driven by these issues. If we fail to address fraud 

and material misrepresentation, the cost of coverage would increase, making coverage less affordable for existing and future individual policyholders. 

I would like to put this issue in context. While most people who 

are under the age of 65 obtain health insurance through their employers, some 15 million Americans purchase coverage in the voluntary individual market. In a market where individuals can 

choose to purchase insurance at any time, health insurers must 

medically underwrite applicants for current health risk. If an individual buys health coverage only when he or she needs health care 

services, the system cannot be sustained. While we understand and 

appreciate that this is a critical personal issue, individual market 

rescission impacts an extremely small share of the individual market membership. In our experience, we believe that more than 99 

percent of all applicants for individual coverage provide accurate 

and complete information. In fact, as a percentage of new individual market enrollment during 2008, we rescinded only one tenth 

of 1 percent of individual policies that year. 

The issue of rescission in health insurance surfaced in the media 

in 2006 and 2007, generating the public concern that we are here 

talking about today. Our main point today is the same as it was 

then: a voluntary market for health insurance requires that we 

protect our members from costs associated with fraud and material 

misrepresentations. Otherwise the market cannot be sustained. 

In response to the public concern over the practice of rescissions, 

in 2006 WellPoint undertook a thorough review of our policies and 

procedures. Following that review, WellPoint was the first insurer 

to announce the establishment of a variety of robust consumer protections that ensure rescissions are handled as accurately and as 

appropriately as possible. These protections include, one, creating 

an application review committee which is staffed by a physician 

that makes rescission decisions; two, establishing a single point of 


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contact for members undergoing a rescission investigation; and 

three, establishing an appeal process for applicants who disagree 

with our original determination which includes a review by an application review committee not involved in the original decision. 

And then in 2008, WellPoint was the first in the industry to offer 

a binding, external, independent third-party review process for rescissions. 

We have put all these protections in place with multiple steps because we cover millions of Americans and want to be as fair and 

as accurate as we can be. Some have asserted that health insurers 

provide a systematic reward for employees regarding rescissions. 

This is absolutely not the case at WellPoint. I want to assure the 

committee that there is no WellPoint policy to either factor in the 

number of rescissions or the dollar amount of unpaid claims in the 

evaluation of employee performance or in calculating employees’ 

salary or bonuses. 

In response to policymaker interest in enacting consumer protections related to rescission, WellPoint is proposing a set of rescission 

regulations with new consumer protections, and I have outlined 

these in my written testimony to the subcommittee. In addition, 

the health insurance industry has proposed a set of comprehensive 

and interrelated forms to the individual health insurance market 

as a whole. The centerpiece of this proposal is the elimination of 

medical underwriting combined with an effective and enforceable 

personal coverage requirement. In other words, insurers sell to applicants regardless of preexisting conditions as long as everyone enters the risk pool by purchasing and maintaining coverage. This 

would render the practice of rescissions unnecessary. Our proposals 

are examples of how we are working to find common ground on 

these issues so that we can make quality, affordable health care 

available to all Americans. 

Thank you for the opportunity to discuss this issue and our proposals with you. I look forward to your questions. 

[The prepared statement of Brian Sassi follows:] 


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Mr. STUPAK. Thank you. 

Ms. Pollitz, your opening statement, please. 

TESTIMONY OF KAREN POLLITZ 

Ms. POLLITZ. Thank you, Mr. Chairman, members of the committee. I am Karen Pollitz and I study private health insurance 

and its regulation at Georgetown University. Thank you for holding 

this hearing today. Health insurance rescission is a serious issue 

of utmost importance. In addition to the devastation that it visits 

on people, the problems explored today can teach us lessons that 

will be important for health care reform. 

The individual market is a difficult one, as we all know, and because it is small and voluntary and vulnerable to adverse selection, 

there has been a lot of resistance to enacting a lot of incremental 

reforms to govern practices in this marketplace. However, with the 

enactment of HIPAA in 1996, the Congress did act to apply one important rule broadly to all health insurance including individual 

health insurance, and that is the rule of guaranteed renewability. 

Prior to HIPAA, individuals and small employers who bought 

health insurance and then made claims would sometimes have 

their coverage cancelled and HIPAA sought to fix that by requiring, 

and I quote ‘‘except as provided in this section, a health insurance 

issuer that provides individual health insurance coverage to an individual shall renew or continue in force such coverage at the option of the individual. Only narrow exceptions to guaranteed renewability are permitted and with respect to policyholders’ behavior, the policy can be renewed or discontinued only if the individual 

moves out of the service area, fails to pay their premium or commits fraud.’’ 

Congress relies on States to adopt and enforce HIPAA protections and the federal government is supposed to directly enforce 

when States do not. As States implemented HIPAA, they adopted 

the guaranteed renewability rule but other conflicting provisions in 

State law remained unchanged. In particular, laws governing socalled contestability periods continue to permit insurers to engage 

in post-claims underwriting and to rescind policies or deny claims 

based on reasons other than fraud and failure to pay premiums. 

State laws create a window, usually two years, when claims made 

under a policy can be investigated to determine whether they may 

be for a preexisting condition. After the period of incontestability, 

a policy can be rescinded or a claim denied only on the basis of 

fraud, but during the window, if a claim is submitted by a new policyholder, the original application for coverage is reinvestigated, 

and if any, even unintentional, material misstatement or omission 

is discovered, consumers may lose their health insurance. That conflicts with HIPAA. 

Now, clearly, when it comes to post-claims underwriting, protection against fraud is important but there is evidence that some insurance companies are not nearly as careful as they should be in 

their initial medical underwriting and rely instead on post-claims 

underwriting to catch their mistakes later. Applications for coverage may ask broad, vague or confusing questions, use technical 

terms and make it very difficult for consumers to answer accurately and completely, or other follow-up that should occur in the 


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initial underwriting may not. For example, if a 62-year-old submits 

an application indicating absolutely no health problems or health 

history that application may be considered and coverage issued 

without any further investigation at the time of application. Market competition and profitability create pressures on medical underwriters to do their jobs more quickly and cheaply. However, if 

medical underwriting is allowed in health insurance, it has to be 

completed upfront before coverage is issued. The recent subprime 

mortgage scandals where banks issued mortgages without adequate screening of consumers’ financial status offers an analogy. 

When insurers issue medical underwritten coverage without carefully screening an applicant’s health status and rely on post-claims 

investigations to avoid incurring a loss, consumers are vulnerable. 

How extensive is this problem? It is hard to say. The industry has 

offered its own estimates but official data are lacking, and that is 

troubling. The federal government has not kept track of this issue. 

At a hearing of the Government Oversight Committee last year, a 

witness for the Bush Administration testified that she had not 

acted on press reports of inappropriate rescissions or even looked 

into them. She did not appear to be aware of conflicts in current 

State law and she testified she had only four people on her staff 

who worked part time on HIPAA private insurance issues. 

In conclusion, Mr. Chairman, this investigation into health insurance rescission has trained a spotlight on an important question. 

If the Congress enacts a law or an entire health care reform proposal, how will you know if that law is being followed? It is fundamentally important that along with federal protections for health 

insurance, you also enact reporting requirements on health insurers and health plans so that regulators can have access to complete 

and timely data about how the market is working in order to monitor compliance with the law. Congresswoman DeLauro has introduced a bill to create a federal office of health insurance oversight 

that establishes such reporting requirements on insurers and that 

appropriates resources so that the federal government and State 

insurance departments together can carry out those responsibilities. I hope the Congress will follow her leadership and make adequate oversight and enforcement resources part of health care reform. 

[The prepared statement of Karen Pollitz follows:] 


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Mr. STUPAK. Thank you, and thank you all for your testimony. 

We will go to questions. 

Mr. Sassi, let me ask you this because you threw a bunch of statistics at us, but I was just looking at the State of California alone, 

and it seems to me if I remember correctly, in July of 2008 Anthem 

Blue Cross, which is a subsidiary of WellPoint, paid a $10,000 fine 

and had to reinstate 1,770 rescinded policies, and in February of 

2009 once again California Anthem Blue Cross, again, one of your 

subsidiaries, had to pay a $15 million fine and reinstate over 2,300 

rescinded policies, and then another settlement, $5 million and another 450. So it seems like in the last year you have had to reverse 

4,500 rescissions and pay a fine of $30 million just in one State. 

Is that true? 

Mr. SASSI. I don’t believe the numbers are exactly accurate, but 

the premise is accurate. The issue of rescission first surfaced in the 

media, particularly in California, I believe, in 2006 and 2007, and 

shortly thereafter one of our regulators initiated an audit, issued 

audit findings. We disputed the majority of those findings, and our 

response is appended to that audit report. The regulator subsequently did change—— 

Mr. STUPAK. Well, according to California Department of Management and Health, in July of 2008, last year, July 17, 2008, you 

entered into an agreement with California to—— 

Mr. SASSI. Yes. We—— 

Mr. STUPAK [continuing]. Over 1,700 people and, what, a $10 

million fine, and in February 2009, California Department of Insurance also put out a release indicating that you paid a $15 million 

fine and had to reinstate 2,300 people. So according to my math, 

that is just over 4,000 and $25 million in fines, right? 

Mr. SASSI. Yes, I think there wasn’t a $15 million fine to the Department of Insurance. Irregardless of that, you know, companies 

enter into settlement—— 

Mr. STUPAK. Let me ask you this—— 

Mr. SASSI [continuing]. Agreements for a variety of reasons. 

Mr. STUPAK. Let me ask you this, and I will ask all three of you. 

Why don’t you just vet these policies before you ever collect the 

premium? Why don’t you just go through these policies and make 

sure there is no problems with it before you insure the people? 

Only one State requires you to do that, and that is Connecticut, 

right? 

Mr. SASSI. Chairman, we do investigate the applicants. We have 

very rigorous underwriting requirements. As we review an applicant’s application, we rely on the applicants to be truthful in completing, and our experience has shown that over 99 percent of applicants are truthful in completing their applications. 

Mr. STUPAK. So when do you do the—— 

Mr. SASSI. We rely on that. 

Mr. STUPAK. When do you do the investigation then? Why are we 

getting this post-underwriting going on? Why does that occur? 

Mr. SASSI. Well, I would contend that we don’t participate in 

post-claim underwriting. 

Mr. STUPAK. Really? Well, let me ask you this—— 

Mr. SASSI. If there is a situation where either a pharmacy claim 

was received or a pre-authorization for a hospital stay is received 


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or a claim that is received that would hit either a specific diagnosis 

that could lead to potential fraud, that would trigger an underwriter to investigate. 

Mr. STUPAK. Well, let me ask you this. In the book right there, 

and I believe it is tab number 11, that is our document. You gave 

us—WellPoint provided the committee with a list of conditions that 

automatically lead to an investigation post underwriting, OK? And 

for WellPoint, the list of conditions that trigger rescission investigation includes diseases ranging from heart disease and high 

blood pressure to diabetes and even pregnancy. So what do these 

conditions have in common that would cause you to investigate patients with these conditions for a possible rescission? You have 

1,400 different conditions which would trigger, according to your 

documents, which will trigger an investigation. 

Mr. SASSI. Chairman, an investigation does not mean that a rescission actually occurs. For example, in 2008, there were over 

16,000 investigations triggered. Ninety-two percent of those were 

dismissed and no action was taken. 

Mr. STUPAK. Right, but why do you have 1,400 different conditions which trigger an investigation? What is the common theme 

amongst these 1,400 that would trigger an investigation? 

Mr. SASSI. I would say there is no common theme other than 

these are conditions that had the applicant disclosed their knowledge of a condition at the time of initial underwriting, we may have 

taken a different underwriting action, and so that is what the investigation really is about, is to determine did the applicant have 

the condition, did they know about the condition—— 

Mr. STUPAK. Well, I thought you said you did pre-screening before, you screened them before. 

Mr. SASSI. We do, but in many of these—— 

Mr. STUPAK. Why would you have to go back? If you screened 

them before and there wasn’t a problem, then why would you have 

a list of 1,400 different conditions that trigger an investigation? If 

you pre-screen, if your pre-screening is good, you wouldn’t need a 

list of 1,400, would you? 

Mr. SASSI. But unfortunately, there are those among us that are 

not truthful in completing their application. 

Mr. STUPAK. So in the 1,400 different areas they lie? The applicants lie? Or is it a cost issue? These are 1,400 expensive areas, 

aren’t they? 

Mr. SASSI. Rescission is not about cost. A pharmacy claim that 

is $20 could trigger something. 

Mr. STUPAK. Sure, if it is for a certain condition, right? Heart 

disease? 

Mr. SASSI. No, not necessarily. 

Mr. STUPAK. All right. My time is up. Mr. Walden. 

Mr. WALDEN. Thank you, Mr. Chairman. 

I would just like to ask each of the companies present, is it your 

company’s policy to deny coverage to any applicant that discloses 

that he or she has had had previous policies rescinded? You heard 

some of the witnesses today say look, once I get rescinded, no company is going to write me again on an individual policy. Is that correct, Mr. Sassi. 

Mr. SASSI. I am personally unaware of that policy. 


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Mr. WALDEN. Mr. Collins. 

Mr. COLLINS. Sir, we do have that question on our application 

but I am not aware as to whether or not what the underwriting 

guidelines are so we ask if you have been rescinded or declined by 

another carrier. 

Mr. WALDEN. But you don’t know what happens with that information? 

Mr. COLLINS. No, sir. I imagine it triggers an investigation but 

I don’t know if there is an underwriting policy that is directly 

linked to that that is a black and white policy. 

Mr. WALDEN. Mr. Hamm. 

Mr. HAMM. Yes, we would not provide coverage in that situation. 

Mr. WALDEN. So do you ever look to see if a rescission—the circumstances around another company’s rescinding of a policy before 

you just—I mean, if they check the box and say yes, I was rescinded in the past—— 

Mr. HAMM. Our underwriting guidelines are that we would not 

issue that policy. 

Mr. WALDEN. Wow. Mr. Collins, is that your underwriting? Can 

somebody tell you if that is your underwriting policy too? 

Mr. COLLINS. I don’t know, sir, but I would be happy to get back 

to you with an answer on that. 

Mr. WALDEN. And Mr. Sassi, is that your company’s policy? 

Mr. SASSI. Again, I am not aware of the policy. I would be happy 

to research it and provide a response for the record. 

Mr. WALDEN. You obviously sat here and heard the testimony of 

the prior witnesses, and some of the information we have seen indicates there are mistakes made in rescinding policies, at least from 

our standpoint, and I think you have settled some cases along 

those lines. After hearing that testimony, do you think it should be 

your company’s policy to just not issue a private insurance policy 

to somebody who had been rescinded by another company? Should 

that be the policy of your company? 

Mr. SASSI. Well, as I stated for the record, I am not aware that 

that is a company policy. 

Mr. WALDEN. And I stipulate that. Should it be? 

Mr. SASSI. I think that is a factor that should be considered. 

Mr. WALDEN. But I am hearing, at least from Mr. Hamm, that 

it is your company’s policy that if they were rescinded by another 

company, it is a no go coming to your company. That is correct, 

right? I heard you correctly. Mr. Collins, once you find out whether 

it is or not, do you think it ought to be? 

Mr. COLLINS. Well, sir, I think we should investigate the circumstances. 

Mr. WALDEN. I do too. I mean, if somebody did lie on a prior 

form, that is one thing. If they are truthful on your form, though, 

should that—because they made a mistake in the past, should they 

never be forgiven? They never have a shot at health insurance 

again? I mean, let us take Ms. Horton’s case. You heard her situation. You heard her fear. So she will never get offered coverage 

again. Is that right? 

Mr. SASSI. I agree, it should be something that should be investigated and considered. 


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Mr. WALDEN. Most of your company policies approve a decision 

to rescind if an applicant made any material misrepresentations or 

omissions in the application. I understand that. How does your 

company ensure the applicant was aware of the condition or notation found in his or her medical records? We have had some testimony along those lines and we have seen some in some of the files 

where they say, you know, my doctor never told me that, and we 

have letters from physicians who say that is correct, I make notes 

all the time in the medical files, I didn’t tell the patient that. 

Where is the balance here, Mr. Hamm. 

Mr. HAMM. We have a very fair and thorough process of determining if there was a material misrepresentation. The process involves several layers of review and a review panel including a medical doctor, and in that process we gather all the available information with respect to a person’s use of medical services including 

medical records as well as the information on their application and 

we will do detailed research and look at each situation based on 

the facts, make a determination whether there was a material misrepresentation when the policy was underwritten. 

Mr. WALDEN. So do you look at the case files? Do you look at the 

medical records? Do you communicate directly with the physician? 

Mr. HAMM. We will communicate when it is necessary. 

Mr. WALDEN. Well, but to determine the material misrepresentation. I mean, what happens in a case where the physician says I 

never told the patient that? 

Mr. HAMM. It is difficult to speak of a hypothetical situation, it 

depends on the facts of each time, but I can tell you that we would 

not rescind a policy if the applicant was not aware of the condition. 

Mr. WALDEN. Mr. Collins. 

Mr. COLLINS. Sir, we afford the customer the right to appeal and 

we accept statements and information from the customer and their 

physicians with regards to the circumstances of the rescission, and 

we would take that into account. I think that fair-minded people 

would say that if an individual did not know of a condition that 

was noted in the medical record, then that would not be grounds 

for a rescission normally. 

Mr. WALDEN. Mr. Sassi. 

Mr. SASSI. We also have a thorough process when we initiate a 

rescission investigation. We do reach out to the member and share 

with them the information that we do have and ask them to provide us with any comments or other relevant information, and all 

of that information is used in making a recommendation, and all 

that information is provided to our application review committee 

that actually makes the rescission decision. We would not rescind 

a member that we could determine did not know of their condition. 

Mr. WALDEN. And Mr. Hamm’s company I know a week and a 

half or 2 weeks ago started this third-party independent review opportunity, correct? 

Mr. HAMM. That is correct. We recently implemented that. 

Mr. WALDEN. And I commend you for that. I think that is a good 

move. 

Mr. Collins and Mr. Sassi, do you have a similar sort of independent review panel that an insured could go to and make their 

case? 


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Mr. COLLINS. No, sir, we do not have an independent review 

panel. 

Mr. WALDEN. Do you plan to go that route? Is that something 

you are thinking about? 

Mr. COLLINS. It is under consideration but we haven’t made that 

decision, sir. 

Mr. WALDEN. Mr. Sassi. 

Mr. SASSI. Congressman, we were the first insurer to implement 

an independent third-party review and we implemented that in 

July of 2008. 

Mr. WALDEN. OK, so last July. All right. My time is expired. 

Thank you, Mr. Chairman. 

Mr. STUPAK. Well, thanks. On that third-party review, that was 

because California made you do it, right? 

Mr. SASSI. No, absolutely not. It was not a requirement. 

Mr. STUPAK. Because in your opening statement, you said you 

had announced robust consumer protections, so I want to know 

what is the difference between announcing implementation, I wanted to see if you had implemented those robust consumer protections. Have you implemented those robust consumer protections 

you mentioned in your opening statement? 

Mr. SASSI. Yes, absolutely. In my written testimony to the subcommittee, we have outlined ten recommendations. We have implemented eight of those ten recommendations. 

Mr. STUPAK. So eight of the ten are there. OK. 

Mr. Hamm, you said you would not reject or rescind a contact for 

a policyholder if the policyholder had no knowledge of it. Well, that 

is the Raddatz case. That was our last case. That was Otto 

Raddatz. He didn’t have any idea he had gallstones and an aneurysm, and your company rejected him. 

Mr. HAMM. Mr. Chairman, I would really like to comment on 

that case, but due to privacy concerns I am not able to, but I can 

tell you that in situations when we uncover that the individual was 

not aware of the condition, we would not go forward with the rescission. 

Mr. STUPAK. But do all your clients or policyholders have to get 

a hold of the attorney general of their State to get it done? I mean, 

that is what Raddatz had to do and you denied him twice. 

Mr. HAMM. We have a very detailed appeals process. In fact, 

after the three levels review and the entire committee voting for a 

rescission, we notify the customer. We give them 15 days. We delay 

the rescission, giving them an opportunity to respond back to us 

with additional information, and when it does come in we have a 

different underwriter look at the appeal and they may appeal as 

many times as they would like. 

Mr. STUPAK. Raddatz only had 2 or 3 weeks to get his stem 

cell—— 

Mr. HAMM. We go through the process as fast as possible. 

Mr. STUPAK. And I apologize again, Mr. Deal. I didn’t see you 

there. You have to change the color of your suit. I will go to you 

for questions, please. 

Mr. DEAL. I am going to have to remind the chairman, Georgia 

was the fourth state admitted to this union when Michigan was 


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still Indian territory. We don’t need to be overlooked. Thank you, 

though. We didn’t win that argument, though. 

Normally, we are confronted here with the question of, do we 

need new federal legislation, and the gentlemen from the insurance 

industry have all uniformly told us that if we will pass a federal 

mandate of having everybody mandatorily in the insurance pool, 

that all of these problems will go away. What I find interesting, 

Ms. Pollitz, is that you brought up a question that nobody has 

seemed to answer. In your testimony, you point out that in 1996 

the HIPAA provisions required that in individual health insurance 

policies, that not only is it a guarantee of renewability, but you say 

continuation in force. Now, do you interpret that phrase to mean 

the non-cancellability that we have been talking about here, and if 

so, if that is what the law that has been in place since 1996 means, 

why are we having this discussion? 

Ms. POLLITZ. Well, I am not sure if I can answer that second 

question, but I think I should say I am not an attorney, I just read 

English, and the words say continue in force, and the only exceptions among the ones we are talking about today are fraud, and 

that is inconsistent with what these other kind of post-claims underwriting guidelines or provisions that are in State law provide 

for, which say that fraud is the only defense or the only reason for 

canceling after a 2-year period so that essentially new policyholders 

can’t ever quite be sure if they are really covered. The insurance 

industry kind of gets a do-over and gets to look again, and any material omission, whether—material just means it matters. It doesn’t 

mean that it was fraudulent. It doesn’t mean—it just means that 

it matters to the insurance industry. That can become the basis for 

challenging coverage. Sometimes coverage is rescinded, sometimes 

it is terminated going forward. Some insurers won’t rescind a policy 

because they don’t want to get an argument with doctors and hospitals who may already have been paid to try to get that money 

back and so they will just cancel the policy going forward. But with 

respect to cancellation and rescission, I think the Congress spoke 

on this in 1996—— 

Mr. DEAL. And none of the five exceptions to that fit the discussions here unless it is elevated to the level of fraud. 

Ms. POLLITZ. That is correct. 

Mr. DEAL. And I would ask the entire panel, are you aware of 

any court interpretation or any question that has ever been raised 

as to the applicability of this section 2742(a) of the Public Health 

Service Act as it relates to the issue we are talking about here 

today as to whether or not it in fact does preclude cancellation for 

whatever we might call it, whether we call it post-review underwriting? 

Mr. HAMM. Congressman, may I speak to that? 

Mr. DEAL. Yes. 

Mr. HAMM. This is a legal issue but I don’t believe that rescission 

is considered a non-renewal. 

Mr. DEAL. Well, but it doesn’t just stop when it says ‘‘shall 

renew.’’ It says ‘‘or continue in force.’’ I guess if you read that 

phrase ‘‘or continue in force’’ to mean the same as renew, then it 

would actually be a redundant phrase, which the law generally 


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does not favor redundancy. Has this ever been challenged? Does 

anybody know if it has ever been raised before? 

Mr. COLLINS. I have no knowledge, sir. 

Mr. DEAL. Well, let me go then to the second part of my question, 

and that is, we then go to the States having their statutory periods, 

generally 2 years as has been pointed out, for review, but Mr. 

Hamm, you pointed out that under your policies, I believe you said 

that you give the potential customer 10 days to review the application and to notify the company of any errors in 10 days to just say 

we don’t want to have the policy in effect. Are there any States 

that currently have in place a period of time for insurance companies to mandatorily review for these kinds of misstatements, in 

other words, review the medical records within a given time other 

than the 2-year period? Do any States have a shorter time frame? 

Mr. HAMM. I am not aware of that. We comply with all applicable 

State statues, and I think it is almost all States we have a 10-day 

free look where we send the customer a copy of their application, 

remind me that they are attesting to the accuracy of it, ask them 

if they have any questions or changes, and then as part of the policy, in the welcome letter we reinforce the importance that we receive all the disclosed information appropriately. 

Mr. DEAL. If, though, something was going to be rejected based 

on information that was in an application or information in the 

medical records that we for whatever reason have not disclosed, it 

seems to me that 2 years is a rather lengthy period of time, and 

in practical application, it seems that even in that 2-year period it 

takes some other triggering mechanism to institute the review, 

that there is no normally dictated review of the applications unless 

something triggers it or brings it to your attention. Should there 

be a time frame shorter than this 2-year period and should there 

be a review that takes place prior to a triggering act taking place? 

Mr. HAMM. Let me clarify that we do not post-claims underwrite. 

We ask information of every single applicant to the company, and 

88 percent of the time we receive additional information from them 

and we ask them to fully disclose all their information. It is only 

when we are aware subsequently that there was some information 

that was omitted or inaccurate that we would investigate whether 

a rescission should be made. 

Mr. DEAL. But that would be that triggering act and you 

wouldn’t know about that unless something by way of a pharmaceutical being prescribed or an office visit in the doctor’s office or 

a hospitalization. 

Mr. HAMM. That is correct. 

Mr. DEAL. What I am asking is, just as you give the policyholder 

10 days to review the application to figure out if it is correct, 

should there be a comparable, maybe longer, obviously I think 

longer, period of time in which the company without some triggering act should be required to review the applications and say 

hey, we think there is something wrong or ask for additional information rather than waiting until people get in a posture where 

they probably are uninsurable at the time the issue is raised? 

Mr. HAMM. It is something to discuss and give some thought to. 

Mr. DEAL. Thank you, Mr. Chairman. 

Mr. STUPAK. Mr. Burgess for questions. 


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Mr. BURGESS. Thank you, Mr. Chairman, and that last point of 

Mr. Deal’s I think is an excellent one and likely would have eliminated the problem for at least one of the three witness that we had 

in front of this morning. 

Let me just ask Mr. Hamm, Mr. Collins, Mr. Sassi, you were 

here and you heard the testimony this morning of the three individuals who testified. What do you think after hearing that? Is that 

something that—and again, I am coming at this from the perspective of someone who supports the individual insurance market. I 

was a customer of the individual insurance market at one time. I 

may be again in the future. I recognize the value that you bring, 

and I want you to be able to continue to do the type of business 

that you do but you heard the opening comments of the chairman 

of the subcommittee this morning. There is a move afoot to do 

things in a way that would be very difficult for you to business in 

the future and I for one would not like to see that happen, but tell 

me what your impressions are after hearing the testimony that you 

heard this morning. 

Mr. HAMM. I would be glad to respond to that, Congressman, and 

I have to say, I really felt bad. You know, I have a lot of empathy 

for the people that are impacted, and I know in my own life I have 

dealt with the cancer and I just have a lot of empathy and concern 

for the people and it is my hope that there will be changes made, 

that this will no longer be necessary. It is just that today when we 

have a voluntary system of insurance where people choose, we have 

to collect information up front to underwrite, and if we didn’t have 

that process, then people would wait until they had a health condition before applying for coverage and the rates would be much, 

much, much higher than they are today. I chaired a group that put 

forth reform proposals, and in our proposal we suggest that the 

country should move toward a guarantee issue environment with 

no preexisting conditions being excluded as long as everyone is required to participate. If everyone participates, then there is no 

need for rescission and the price would not increase for those currently covered. 

Mr. BURGESS. You brought that up. What do you do with the segment of society that is just not going to participate? I mean, there 

will be—that segment of society will exist whether it is the individuals who are in this country without the benefit of a Social Security number, whatever that number is, 10 million, 12 million, people who just don’t comply. We live in a free country and they don’t 

like mandates. Look at the people who don’t comply with the mandate of the IRS right now knowing the penalties that are out there 

waiting for them if they get caught, so people are perfectly willing 

to fly beneath the radar. What then? Will these people be rated on 

whether or not they had a preexisting condition or are they just absorbed then by the larger taxpaying public who does play by the 

rules and pays their bills on time? 

Mr. HAMM. We believe that the requirement to purchase insurance should be enforced. We believe that those who don’t have the 

means should be subsidized, and we would look forward to working 

with Congress to find a solution that is workable for all Americans, 

but I believe every American must have access to high-quality 


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health care. We have to work together to find out how we can make 

that happen. 

Mr. BURGESS. Well, you and I will fundamentally disagree on 

that point, and I think the approach that was taken by Congress 

in the development of the Part D program in Medicare for all the 

faults initially rolling it out, creating problems that people actually 

want that are actually useful for people will be a better way of 

going about that. The coverage rates for prescription drugs 

amongst seniors now is in excess of 90 percent with a very high 

satisfaction rate, and clearly in my mind, at least, that is a better 

strategy than simply layering another mandate on the American 

people or the employers of America. But I don’t disagree with you 

that something needs to happen, and let me just take this to a different level, and again, I want to pose this question to all three and 

I really would like an answer from all three on this. 

If there were a system of universal coverage without government 

intervention in the marketplace, is there a better way to accomplish our goal of universal coverage without that excess market 

manipulation by the government? Insurance companies have used 

adverse selection methods to deny or cancel policies in the individual market. Apparently it happens also in other markets. To the 

extent that this has been allowed in law, the business interests almost dictate those actions, yet some of us have argued that if we 

let the market work, you can make an innovative product for all. 

So here is my question. Will you today publicly and clearly commit 

right now that regardless of what happens in Washington, whatever decision that we reach on health reform, that you will design 

a product for all populations regardless of claims history but also 

economic status? And I would like an answer to those questions individually, a product for all populations regardless of claims history 

and all populations regardless of economic status. Mr. Hamm, why 

don’t you go first and then we will just go down the row. 

Mr. HAMM. I am having a little difficulty following your question, 

sir. If I may understand specifically what you are asking? 

Mr. BURGESS. Regardless of what we do, whether we do an individual or business mandate, employer mandate, maybe we don’t do 

a mandate at all, but you have it within your power to design a 

product so that all populations regardless of claims history could be 

covered. Would you be willing to do that? 

Mr. HAMM. In the current system, that would not be feasible. We 

need to have an environment where all Americans are required to 

participate before we could give those assurances. 

Mr. BURGESS. So you would not be willing to alter business practices if there were a way to do that to provide coverage for a greater segment of the population, even with a claims history? 

Mr. HAMM. If the reforms proposed by AHIP are adopted, then 

we would be very glad to participate in the system, but it is necessary that all participate. When it is a system where people 

choose, we need to have the process of assessing risk at the time 

of the application. 

Mr. BURGESS. With all respect, the reforms proposed by AHIP 

are not going to happen. You are going to get a plan as your chairman outlined here this morning. 


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Mr. Collins, can I get you to answer briefly? Would you be willing 

to design such a product? 

Mr. STUPAK. Briefly. We are going to have votes here. 

Mr. COLLINS. Sir, I would respectfully have to agree with Mr. 

Hamm that a guarantee issue product that would fit all people at 

affordable prices is economically practically impossible. What I 

would suggest is that HIPAA also creates alternative coverage 

mechanisms for each and every State, so each State is supposed to 

have a high-risk pool or an alternative coverage mechanism, and 

these high-risk pools have been woefully underfunded so one of the 

things that could be done right now today is to increase the 

amount of funding going into those high-risk pools so that people 

that have serious health issues and are otherwise uninsurable in 

the individual market have a place to go that is affordable and affords them the care that they need. 

Mr. BURGESS. And on the issue of high-risk pools, I think the private sector is going to be required to make a contribution to that 

as well and that you all in the private sector, whether it be group 

insurance or individual market, there must be a product that is 

available to everyone regardless of their claims history. Yes, they 

may require a federal subsidiary. Yes, they may require a State 

subsidiary, and yes, the private sector may have to bring something to the table as well. 

Mr. Sassi, let me ask you—— 

Mr. STUPAK. All right, that is it. Last question, Mr. Burgess. You 

are just going on. 

Mr. BURGESS. Let me ask you then just to answer the question—— 

Mr. STUPAK. Last one. 

Mr. BURGESS [continuing]. I posed to the others. Regardless of 

the claims history and the population, would you be willing to 

make a product available? 

Mr. SASSI. I have to agree with my colleagues here that in the 

current voluntary individual market, we could not guarantee issue 

policies where people could jump in and out of the insurance market. We have had experience of States that have implemented 

guarantee issue without an effective, enforceable personal coverage 

mandate, and unfortunately, that has resulted in significant cost 

increases that have to be borne by others in the individual market. 

So the answer would be no. 

Mr. BURGESS. Mr. Chairman, you have been very generous with 

your time. Again, I would just stress that this is going to take creative thinking outside the box. I don’t think you are going to get 

what you want in the AHIP proposal. You are going to get more 

something that looks like what the chairman outlined to you at the 

beginning, and I would urge you to think creatively about this 

problem because this is the difficulty that leads us to where we are 

here today, and I can’t help you—— 

Mr. STUPAK. OK, questions or speeches are over. 

Mr. BURGESS [continuing]. If you are not willing to move on this 

issue, and thank you, Mr. Chairman. I will yield back. 

Mr. STUPAK. We hope the chairman’s, not my plan, but our side 

plan does work. We do hope that. I won’t argue it with you now. 

That is for another hearing. 


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Maybe we can get another round in. We are going to have votes 

here in a few minutes. Now, each of you provided to the committee 

information that relates to certain medical conditions that automatically trigger an investigation into possible grounds for rescission. Mr. Sassi, I left off with you. You had 1,400 different conditions that automatically trigger an investigation. Mr. Hamm, on 

behalf of Assurant, there are 2,000 conditions that trigger an investigation that you provided to the committee. These include breast 

cancer, ovarian cancer and brain cancer. Why does cancer trigger 

an investigation? 

Mr. HAMM. What triggers the investigation—— 

Mr. STUPAK. No, why does cancer trigger an investigation? 

Mr. HAMM. I will answer. What triggers the investigation are the 

types of medical conditions of a chronic nature where there is a 

high probability that the condition would have preexisted at the 

time of the application. It is not based on the cost of the claim. It 

is based on the medical condition. In fact, the people that make the 

rescission decision are not aware of the cost of the claim. It is all 

about—— 

Mr. STUPAK. If it is the medical condition, then before you sign 

them up, why don’t you get all the medical records? Why don’t you 

find it then? Why do you wait until there is a claim? 

Mr. HAMM. If we were to receive all the medical records at the 

time of application, that would delay the process significantly, delaying people’s access to health care, and would add a tremendous 

amount of cost to the product. The vast majority of applicants provide all the information that is asked for at the time of application. 

Mr. STUPAK. So it is a cost issue? It is too costly to get the medical records? 

Mr. HAMM. It would add to—yes, it would add to the premiums 

that our customers would pay by a significant amount. 

Mr. STUPAK. So what does it cost, $40 to get medical records? 

Mr. HAMM. I am not familiar with the cost but I would also delay 

the process. 

Mr. STUPAK. But isn’t it better to delay the process to make sure 

a person is insured as opposed to pulling them when they are going 

through cancer like Mr. Raddatz? 

Mr. HAMM. The vast majority of our customers provide the appropriate information. 

Mr. STUPAK. So did Mr. Raddatz but you still denied him coverage, right? 

Mr. HAMM. I unfortunately cannot comment on that particular 

case. 

Mr. STUPAK. Mr. Collins, in asking the same question of United, 

you insisted that you also use a computerized system to identify 

cases to automatically investigate for possible rescission but there 

is no one at your company who knew how the computer decides 

which files should be reviewed. So is it the case that United has 

put the decision of which patients will have their health care treatment interrupted by a rescission investigation in the hands of a 

computer that no one understands? 

Mr. COLLINS. No, sir, that is not true. I haven’t really been privy 

to the discussions between my staff and your staff on this issue. 

We have been trying to come to an understanding about how to 


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best provide the data in a format that is easily understandable, but 

let me just say—— 

Mr. STUPAK. Can you tell us what conditions the computer considers for a possible rescission investigation? 

Mr. COLLINS. No single factor is used in our process to trigger 

an investigation so we look at—the system looks as it is screening 

claims that come in at the effective date of the policy, the effective 

date of the procedure, the severity, the type of service and the diagnosis code. Those are all factors that go into the algorithm that 

pulls cases out for screening. 

Mr. STUPAK. Well, the algorithm, no one from your company 

could tell us. Will you commit to us today to produce whatever witnesses or documents are necessary to explain your algorithm, your 

computer selection process? Could you do that? Will you commit to 

do that? 

Mr. COLLINS. Yes, sir. We are—— 

Mr. STUPAK. We are still trying to figure it out. 

Mr. COLLINS. We are trying to put it in a format that would be 

acceptable to the committee, sir. 

Mr. STUPAK. Dr. Pollitz—Professor Pollitz, do you see a common 

thread here among the conditions? You have 1,400 conditions, 

2,000 conditions and a computer that it can’t explain that does rescission. Why do you think they have all these rescission? 

Ms. POLLITZ. I think the common thread is that if somebody 

makes a claim for anything serious in their first year, there is an 

opportunity to go back and review the entire transaction to see if 

it is going to be withdrawn. I think that is just the common transaction, and I think it is not consistent with your federal law, and 

whatever else you may do going forward—— 

Mr. STUPAK. But as to the HIPAA law, basically we leave it up 

to the States, and HIPAA has to be enforced by the federal government, CMS, right? 

Ms. POLLITZ. That is correct, the ultimate enforcement. 

Mr. STUPAK. So the value of the law only depends on the enforcement of the law? 

Ms. POLLITZ. Yes, it does, and there is a fine of $100 per day per 

affected individual for noncompliance with the law that can be levied. 

Mr. STUPAK. Let me ask each of our CEOs this question, starting 

with you, Mr. Hamm. Would you commit today that your company 

will never rescind another policy unless there was intentional 

fraudulent misrepresentation in the application? 

Mr. HAMM. I would not commit to that. 

Mr. STUPAK. How about you, Mr. Collins? Would you commit not 

to rescind any policy unless there is intentional fraudulent misrepresentation? 

Mr. COLLINS. No, sir. We follow the State laws and regulations 

and we would not stipulate to that. That is not consistent with 

each State’s laws. 

Mr. STUPAK. How about you, Mr. Sassi? Would you commit that 

your company will never rescind another policy unless it was intentional fraudulent misrepresentation? 

Mr. SASSI. No, I can’t commit to that. The intentional standard 

is not the law of the land in the majority of States. 


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Mr. STUPAK. Well, do you think it is fair to rescind somebody for 

an innocent mistake? 

Mr. SASSI. Well, I think applying a knowing standard is a much 

more objective and—— 

Mr. STUPAK. Well, our first panel, none of them had any knowledge of it and they were all rescinded, right? 

Mr. SASSI. I am sorry? 

Mr. STUPAK. Our first panel, none of them knowingly made a 

misrepresentation but they were all rescinded, their policies from 

Ms. Beaton all the way down to our witnesses there. They weren’t 

material misrepresentations, right? 

Mr. SASSI. It is our policy if we determine that the applicant did 

not know about a specific condition, we would not rescind. 

Mr. STUPAK. So like Ms. Horton there, you wouldn’t have rescinded her? 

Mr. SASSI. I can’t speak to the specifics of Ms. Horton’s case. I 

am not familiar with the specifics. I am sorry. 

Mr. STUPAK. Mr. Barton for questions, please. 

Mr. BARTON. Thank you. I want to thank our witnesses for being 

here. This is a difficult situation. But I listened when you all answered Chairman Stupak’s question about unintentional omissions, 

and to your credit you were honest that you would reserve the 

right to still rescind some of these policies. Doesn’t it bother you 

that people are going to die because you insist on reviewing a policy that somebody took out in good faith and forgot to tell you that 

they were being treated for acne? Doesn’t that bother you? 

Mr. HAMM. Yes, sir, it does, and we regret the necessity that that 

has to occur even a single time, and we have made suggestions 

that would reform the system such that that would no longer be 

needed. 

Mr. BARTON. Well, you know, I haven’t heard your opening statements, I glanced at them, and I haven’t heard the first round of 

questions. We understand the need to verify that people are telling 

the truth. We are not asking you guys, the insurance industry, to 

automatically take somebody’s word for it. I mean, I understand 

that. But when I see advertisement after advertisement about be 

a part of the family and we treat you like, you know, our own family, and then somebody who doesn’t have group coverage takes out 

an individual policy and runs into some situation where they have 

a health care issue that requires a major claim early in the policy, 

if they operate in good faith in taking out the policy and you approve them, I really don’t think it is good business practice to go 

back and try to figure out a way to rescind that policy. If nothing 

else, it is a false trade practice, truth in advertising, and one of the 

beauties of our Constitution is a little thing called federal preemption. We have the authority on this committee to preempt State 

law if it is interstate commerce. Now, we can’t preempt State law 

in intrastate commerce but we can in interstate commerce, and I 

don’t think there is one vote on this committee for the practice of 

retroactively reviewing a policy to try to rescind it if you have a 

woman like my constituent, Ms. Beaton, who discovers that she has 

breast cancer or you have somebody who needs a stem cell transplant or even the young lady from California who just needed some 

blood work done. We will back you up on fraud and misrepresentaVerDate Mar 15 2010 09:03 Jun 29, 2012 Jkt 073743 PO 00000 Frm 00097 Fmt 6633 Sfmt 6633 E:\HR\OC\73743.XXX 73743

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tion but I don’t think you are going to get a vote at all on rescissions that are not material to the claim being processed. I don’t 

know that that is a question. That is just a statement. If you would 

like to comment on that, I would certainly like to give you the opportunity to do it. 

Mr. STUPAK. No one cares to answer? 

Mr. HAMM. I would just reinforce that rescission would only 

occur when the information was material to the initial—if the information was material to the underwriting decision, only in that 

case. 

Mr. BARTON. Mr. Chairman, I am going to yield back. I mean, 

I would—— 

Mr. STUPAK. Could I follow up on that? 

Mr. BARTON. Sure. 

Mr. STUPAK. Well, if it is material to the representation—let me 

ask you this. In your policy, Mr. Hamm, it states, and it is question 

number 14 on your questionnaire, your enrollment questionnaire. 

Now, tell me how you get a misrepresentation. Within the last 10 

years—this is what it says—because you said Assurant Health’s 

enrollment questionnaires are simple, easy to understand, straightforward language, so people can easily and accurately report their 

medical history. So your question says, within the last 10 years, 

has any proposed insured had any diagnosis, received treatment for 

or consulted with a physician concerning phlebitis, TIA, cystitis, 

lymphadenopathy, glandular disorder. So tell me, what is TIA? 

Mr. HAMM. I am not aware. I believe—— 

Mr. STUPAK. If you don’t know what it is, how would anyone filling out your application know what it is? So there is grounds to 

deny them right there. You don’t even know what it is and neither 

do I. How about phlebitis or lymphadenopathy? How about lymphadenopathy? What is that? 

Mr. HAMM. I don’t know the answer to those questions. 

Mr. STUPAK. Do you sincerely believe that an average applicant 

would know what these words mean if you don’t know and I don’t 

know? 

Mr. HAMM. Sir, I believe that is an application that is not currently used at this time. I would like to—— 

Mr. STUPAK. It is last year’s application. Yes, it is last year’s application. Have you changed the application in the last year? 

Mr. HAMM. I am sorry, sir. I didn’t hear you. 

Mr. STUPAK. It is last year’s application. Did you change it in the 

last year? 

Mr. HAMM. I am not aware if we have changed that application. 

Mr. STUPAK. So far as you know, that is your current application? 

Mr. HAMM. But I believe that our current application asks questions back to 5 years, so the 10-year might be different than what 

we issue today. I would need to—— 

Mr. STUPAK. Well, it is the same questions, TIA, right, that you 

don’t know what it is and—— 

Mr. HAMM. I do not know what that is. 

Mr. STUPAK. Mr. Deal. 

Mr. BARTON. Mr. Chairman, I do have one question. 


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Mr. STUPAK. Sure, Mr. Barton. I took your time. I will yield to 

you. 

Mr. BARTON. This is a hypothetical but I just want to figure out 

what the answer is. I had a mild heart attack 3 years ago, so I now 

take six different medications every day and I am going to probably 

have to take those medications for the rest of my life. I am covered 

under a group plan, Blue Cross/Blue Shield of Texas and it is available to every federal employee who lives in Texas, and my coverage 

has been good. I have never had a problem. But let us say I quit 

the Congress and I go into business for myself and I try to get a 

private health plan like Ms. Beaton got when she switched jobs 

from being a nurse and went into business for herself. On the application, I have to list the medications that I am taking, the fact 

that I had a heart attack, give the doctor, the time, the location, 

but I broke my leg playing football in high school. I got a 250- 

pound fullback ran over a 150-pound linebacker. I was the linebacker. Now, if I forget to put on my application with your companies that I had the small bone in my left leg broken playing football in 1967, but I do put all my medications and my history of my 

heart attack, the fact that I omitted breaking my leg in 1967, is 

that a grounds to rescind my claim, my policy later on under your 

policies right now that your companies issue? I admit to my big 

problem, tell you the medications, all the stuff but I just flat forget 

that I broke my leg and was treated by a doctor paid by the Waco 

Independent School District in 1967. 

Mr. SASSI. Congressman Barton, our underwriting guidelines 

really kind of dictate that but it is my understanding of how our 

underwriting guidelines work is that since that condition would not 

be material in our initial underwriting decision because it happened so far in the past and was of a non-serious nature, that that 

would not have factored into the underwriting decision. 

Mr. BARTON. And I understand you might cover me because of 

my heart attack. I understand that. It would bee totally within 

your company’s right to say Congressman Barton had a heart attack in 2004 or 2005, therefore we can’t issue him a policy. I understand that. My question is really about my leg injury from way 

back when. If I don’t disclose that, does that disqualify me potentially on down the road? Mr. Collins? 

Mr. COLLINS. Sir, the application is looking for information going 

10 years back so that—— 

Mr. BARTON. So that would not be material? 

Mr. COLLINS. That would not be material. 

Mr. BARTON. Mr. Hamm. 

Mr. HAMM. The same answer as Mr. Collins. 

Mr. BARTON. Thank you, Mr. Chairman. 

Mr. STUPAK. Mr. Deal for questions, please. 

Mr. DEAL. Thank you, Mr. Chairman. 

We are talking her in the private insurance market and I believe, 

Mr. Sassi, you said that somewhere in the 15 million range. Is that 

correct? 

Mr. SASSI. Correct. 

Mr. DEAL. To you three gentlemen, do you also have policies that 

extent to ERISA-type coverage plans? 


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Mr. SASSI. Yes. WellPoint insures one in nine Americans. The 

vast majority of our members are covered under ERISA plans. 

Mr. DEAL. Mr. Collins. 

Mr. COLLINS. Yes, sir, the majority of our membership are also 

in group insurance plans which are covered under ERISA. 

Mr. DEAL. Mr. Hamm. 

Mr. HAMM. The majority of our policies are individual. However, 

we do have some customers that are under ERISA. 

Mr. DEAL. Does the same problem pertain in the ERISA marketplace as in this private insurance marketplace? Ms. Pollitz, you indicated you think it does. 

Ms. POLLITZ. There is rescission in the small group market. It operates a little bit differently because that is a guaranteed issue 

market, but a similar process if a claim is submitted during the 

pre-X period. It is largely the eligibility of the members of the 

group and the family members of the group that will be reinvestigated to see if there is any way that the people who made the 

claim shouldn’t have been on that policy in the first place. 

Mr. DEAL. But the State periods like 2 years do not apply because it is an ERISA plan? 

Ms. POLLITZ. Well, your pre-X rules are also much tighter in the 

small group market so Congress has said these questions about 10 

years ago, 5 years ago, those don’t matter in the small group market. You are only allowed to apply—an insurer is only allowed to 

apply preexisting condition for something that was actually treated 

or diagnosed in the six-month window prior to coverage taking effect. So anything that happened before that isn’t even allowed to 

be considered, and if the person coming into the policy had prior 

group coverage, that gets credited against the pre-X so that can’t 

be considered either. So it is mostly eligibility, and I have seen—— 

Mr. DEAL. I am going to try to be real quick here and I apologize 

for cutting you off. With regard to what needs to be done, in the 

event we don’t get the major reform that you all have been talking 

about, anybody else is talking about, in the event it becomes something of trying to narrow a time window in which insurance companies have the right to review medical records, would it not be feasible that if we had electronic medical records that that would facilitate a more timely review? I would assume common sense would 

say that it would. Ms. Pollitz, do you foresee that consumer protection groups would oppose making those kind of personal medical 

records available for insurance companies to review in a timely 

fashion so that we would not hopefully have these situations to develop? 

Ms. POLLITZ. They are already available for review. 

Mr. DEAL. Well, we don’t have the extent of electronic medical 

records that we all hope we will have. 

Ms. POLLITZ. But the privacy rules that you have in force today 

under HIPAA say that medical underwriting is a permissible reason for disclosure of medical records. 

Mr. DEAL. You would see no reason that anybody would raise 

that issue? 

Ms. POLLITZ. It is already permitted under current law. 

Mr. DEAL. The last thing, and this is more of a comment than 

anything else, I think the issue that Dr. Burgess discussed with 


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you about those who are now being excluded because of preexisting 

conditions, et cetera. I think we all know that our high-risk pools 

are not effectively operated and certainly nonexistent in States like 

mine, for example. I think we need to be looking at a policy where 

we would maybe take those funds that are available for high-risk 

pools, some of which are not being utilize, put them into an environment in which we could perhaps with the sharing of some of 

those costs with the insurance industry bring these individuals into 

the pool with the additional revenue that would be available from 

federal sources. I just simply suggest that something we all need 

to be thinking about in my opinion. Thank you, Mr. Chairman. I 

yield back. 

Mr. STUPAK. Mr. Burgess, do you want to question now or do you 

want to come back after votes? We only have 5 minutes, so I am 

going to have to hold you tight. 

Mr. BURGESS. OK. You know me. I can be really brief. 

Mr. STUPAK. I have never seen it yet, but go ahead if you want 

to try. 

Mr. BURGESS. I will just ask all three of you briefly, you know, 

you have heard the discussion of the public option plan. What is 

your opinion of that? 

Mr. HAMM. I oppose the public plan option. 

Mr. BURGESS. Mr. Collins. 

Mr. COLLINS. Sir, I believe that with the reforms that have been 

proposed, that we can make the market work much better without 

a public plan. 

Mr. BURGESS. And Mr. Sassi. 

Mr. SASSI. We also oppose a public plan. We also feel that—— 

Mr. BURGESS. I don’t want to be the one to have to break this 

to you, but the reality is, you are very likely to get a public plan. 

You are not likely to get the deal that was struck by AHIP down 

at the White House. I mean, I think you can see the handwriting 

on the wall. I would urge you to think outside the box on this one. 

There are ways that we can solve this problem without going to a 

public plan, in my opinion, and without leaving so many people uninsured, without leaving so many people fall through the cracks, as 

we heard this morning. Clearly the situation as it stands right now 

is unstable. It is untenable. We can’t continue it. But you guys 

have got to be able to come to the table with some innovative 

thinking on how we provide coverage to that segment of the population that is particularly vulnerable and needs the coverage. We 

don’t need to turn the whole system on its head just to cover that 

10 or 15 percent that is right now left out but that is what we are 

going to do if you don’t help us with this, and the fallback position, 

I promise you, is a government-run plan and that is what you are 

going to get if we don’t work together on this issue, so I appreciate 

you all being here today. Mr. Chairman, I appreciate the extra time 

and I am going to yield back. 

Mr. STUPAK. OK, so you didn’t have a question on the subject of 

today’s hearing. OK. In all fairness to WellPoint, I said in my opening statement—and if you care to comment, please do. I said in my 

opening statement in the committee investigation, WellPoint evaluated employee performance based in part on the amount of money 

its employees saved the company through retroactive rescissions of 


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health insurance policies. According to the documents obtained by 

the committee, one WellPoint official was awarded a perfect score 

of five for exceptional performance based on having saved the company nearly $10 million through rescissions. Do you care to comment on that? I think it is fair to give you an opportunity to comment on it. 

Mr. SASSI. Thank you, Chairman. During the process of collecting 

information requested by this committee, we did uncover two performance appraisals from 2003 that were isolated to one area within California that included one line each referring to retro savings 

and a dollar amount. They were in the context of a part of the performance appraisal with other metrics and they were part of a 

more comprehensive performance appraisal that was, I think, five 

to seven pages long. I reiterate my statement that WellPoint does 

not have a policy, it has not been our policy to systematically reward associates for performing rescissions, for tracking the number 

of rescissions or the dollar amounts. 

Mr. STUPAK. But didn’t both of those employees receive bonuses, somewhere between $600 to about $6,000, I think the range was? 

Mr. SASSI. My understanding is that those associates received 

within the average compensation that all WellPoint associates received for that given time period. 

Mr. STUPAK. OK, so it is not the reviewers, all your employees— 

OK. With your profits, I guess you could give bonuses. 

All right. That concludes our hearing for today. The committee 

rules provide that members have 10 days to submit additional 

questions for the record. The record book has already been submitted for the record. We will redact any business proprietary or 

anything that relates to privacy concerns or is law enforcementsensitive, so that will be entered into the record. 

That concludes our hearing. I thank all of our witnesses for coming, and that concludes this subcommittee hearing. 

[Whereupon, at 1:35 p.m., the subcommittee was adjourned.] 

[Material submitted for inclusion in the record follows:] 


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