BETWEEN YOU AND YOUR DOCTOR: THE PRIVATE

HEALTH INSURANCE BUREAUCRACY—DAY 2

HEARING

BEFORE THE

SUBCOMMITTEE ON DOMESTIC POLICY

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

SEPTEMBER 17, 2009

Serial No. 111–128

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BETWEEN YOU AND YOUR DOCTOR: THE PRIVATE

HEALTH INSURANCE BUREAUCRACY—DAY 2

HEARING

BEFORE THE

SUBCOMMITTEE ON DOMESTIC POLICY

OF THE

COMMITTEE ON OVERSIGHT

AND GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED ELEVENTH CONGRESS

FIRST SESSION

SEPTEMBER 17, 2009

Serial No. 111–128

Printed for the use of the Committee on Oversight and Government Reform

(

Available via the World Wide Web: http://www.fdsys.gov

http://www.oversight.house.gov

(II)

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

EDOLPHUS TOWNS, New York, Chairman

PAUL E. KANJORSKI, Pennsylvania

CAROLYN B. MALONEY, New York

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

JOHN F. TIERNEY, Massachusetts

WM. LACY CLAY, Missouri

DIANE E. WATSON, California

STEPHEN F. LYNCH, Massachusetts

JIM COOPER, Tennessee

GERALD E. CONNOLLY, Virginia

MIKE QUIGLEY, Illinois

MARCY KAPTUR, Ohio

ELEANOR HOLMES NORTON, District of

Columbia

PATRICK J. KENNEDY, Rhode Island

DANNY K. DAVIS, Illinois

CHRIS VAN HOLLEN, Maryland

HENRY CUELLAR, Texas

PAUL W. HODES, New Hampshire

CHRISTOPHER S. MURPHY, Connecticut

PETER WELCH, Vermont

BILL FOSTER, Illinois

JACKIE SPEIER, California

STEVE DRIEHAUS, Ohio

JUDY CHU, California

DARRELL E. ISSA, California

DAN BURTON, Indiana

JOHN M. MCHUGH, New York

JOHN L. MICA, Florida

MARK E. SOUDER, Indiana

JOHN J. DUNCAN, JR., Tennessee

MICHAEL R. TURNER, Ohio

LYNN A. WESTMORELAND, Georgia

PATRICK T. MCHENRY, North Carolina

BRIAN P. BILBRAY, California

JIM JORDAN, Ohio

JEFF FLAKE, Arizona

JEFF FORTENBERRY, Nebraska

JASON CHAFFETZ, Utah

AARON SCHOCK, Illinois

BLAINE LUETKEMEYER, Missouri

RON STROMAN, Staff Director

MICHAEL MCCARTHY, Deputy Staff Director

CARLA HULTBERG, Chief Clerk

LARRY BRADY, Minority Staff Director

SUBCOMMITTEE ON DOMESTIC POLICY

DENNIS J. KUCINICH, Ohio, Chairman

ELIJAH E. CUMMINGS, Maryland

JOHN F. TIERNEY, Massachusetts

DIANE E. WATSON, California

JIM COOPER, Tennessee

PATRICK J. KENNEDY, Rhode Island

PETER WELCH, Vermont

BILL FOSTER, Illinois

MARCY KAPTUR, Ohio

JIM JORDAN, Ohio

MARK E. SOUDER, Indiana

DAN BURTON, Indiana

MICHAEL R. TURNER, Ohio

JEFF FORTENBERRY, Nebraska

AARON SCHOCK, Illinois

JARON R. BOURKE, Staff Director

(III)

C O N T E N T S

Page

Hearing held on September 17, 2009 ..................................................................... 1

Statement of:

Collins, Richard A., senior vice president of underwriting, pricing, and

healthcare economics, UnitedHealthcare Group, CEO, Golden Rule Insurance Co., president, UnitedHealthone; Brian A. Sassi, president and

CEO, consumer business, Wellpoint, Inc.; Patricia Farrell, senior vice

president, National and International Business Solutions, Aetna, Inc.;

James H. Bloem, senior vice president, chief financial officer, and treasurer, Humana, Inc.; Thomas Richards, senior vice president of product,

Cigna Healthcare; and Colleen Reitan, executive vice president and

chief operating officer, Health Care Service Corp. ..................................... 14

Bloem, James H. ........................................................................................ 49

Collins, Richard A. .................................................................................... 14

Farrell, Patricia ......................................................................................... 33

Reitan, Colleen .......................................................................................... 90

Richards, Thomas ...................................................................................... 67

Sassi, Brian A. ........................................................................................... 22

Letters, statements, etc., submitted for the record by:

Bloem, James H., senior vice president, chief financial officer, and treasurer, Humana, Inc., prepared statement of ................................................ 51

Collins, Richard A., senior vice president of underwriting, pricing, and

healthcare economics, UnitedHealthcare Group, CEO, Golden Rule Insurance Co., president, UnitedHealthone, prepared statement of ............ 16

Farrell, Patricia, senior vice president, National and International Business Solutions, Aetna, Inc., prepared statement of .................................... 35

Jordan, Hon. Jim, a Representative in Congress from the State of Ohio,

prepared statement of ................................................................................... 7

Kucinich, Hon. Dennis J., a Representative in Congress from the State

of Ohio:

Article dated August 24, 2009 .................................................................. 121

Article dated February 11, 2009 .............................................................. 102

Prepared statement of ............................................................................... 4

Reitan, Colleen, executive vice president and chief operating officer,

Health Care Service Corp., prepared statement of .................................... 92

Richards, Thomas, senior vice president of product, Cigna Healthcare,

prepared statement of ................................................................................... 69

Sassi, Brian A., president and CEO, consumer business, Wellpoint, Inc.,

prepared statement of ................................................................................... 24

(1)

BETWEEN YOU AND YOUR DOCTOR: THE PRIVATE HEALTH INSURANCE BUREAUCRACY—

DAY 2

THURSDAY, SEPTEMBER 17, 2009

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON DOMESTIC POLICY,

COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM,

Washington, DC.

The subcommittee met, pursuant to notice, at 2:25 p.m., in room

2154, Rayburn House Office Building, Hon. Dennis J. Kucinich

(chairman of the subcommittee) presiding.

Present: Representatives Kucinich, Cummings, Tierney, Kennedy, Foster, Towns (ex officio), Jordan, and Schock.

Also present: Representative Conyers.

Staff present: Jaron R. Bourke, staff director; Yonathan Zamir,

counsel; Jean Gosa, clerk; Charisma Williams, staff assistant; Ron

Stroman, chief of staff, full committee; Carla Hultberg, chief clerk,

full committee; Leneal Scott, IT specialist, full committee; Adam

Hodge, deputy press secretary, full committee; Rob Borden, minority general counsel; Dan Blankenburg, minority director of outreach and senior advisor; Adam Fromm, minority chief clerk and

Member liaison; Ashley Callen, minority counsel; and Molly Boyl,

minority professional staff member.

Mr. KUCINICH. The Domestic Policy Subcommittee of the Oversight and Government Reform Committee will now come to order.

Today is the second of this subcommittee’s 2-day hearings examining how the bureaucracy of the private health insurance industry

influences the relationship between physicians and their patients.

Yesterday, the subcommittee heard the testimony from individuals, doctors, whistleblowers, and policy analysts, all of whom related their experiences with, and opinions about, the private health

insurance bureaucracy and its impact on health care in America.

Today, the subcommittee will hear testimony from top executives

of the six largest health insurance companies in the United States,

and I want to welcome the witnesses and thank them for their

presence here, and we look forward to hearing from you.

Now, without objection, the Chair and ranking minority member

will have 5 minutes to make opening statements, followed by opening statements not to exceed 3 minutes by any other Member who

seeks recognition.

Without objection, Members and witnesses may have 5 legislative days to submit a written statement or extraneous materials for

the record.

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I want to add that the House has adjourned for the weekend, and

while generally that means that there would be very few Members

here, there are a number of Members who have expressed an interest, and you may see them come in throughout the course of the

hearing. But good afternoon and thank you very much for your

presence before this subcommittee.

Yesterday, we received testimony from the daughter of a man

whose bone marrow transplant was delayed an agonizing 126 days

while authorization from his insurer was denied and sustained on

appeal. She asks, ‘‘Would there have been a different end to my

dad’s story if he had been given approval of the first transplant request in April 2006? Would he be alive today? We don’t know.

What we do know is that his chance for survival most assuredly

did not increase because’’—and she is talking about the insurer—

‘‘built the bureaucratic roadblocks that changed the course of my

father’s treatment and made him wait for his potentially life-saving

bone marrow transplant.’’

We also heard from the father of a 2-year-old who was born with

a severe cognitive disorder. He has had to struggle to get the coverage his premiums pay for. Recounting the toll on his family that

the repeated delays and denials of care for his daughter caused by

his health insurer, here is what he told us. He said, ‘‘The stress of

constantly of having to hold the HMO and their agents to their

agreed-upon obligations has relegated me to the role of my daughter’s care manager and all too often robbed me of my role as Sidney’s loving daddy.’’

The experiences of these individuals are the tip of an iceberg.

Court and State regulatory records are replete with recent findings

of wrongful denial and delay of health care by private health insurance bureaucrats. Hundreds of thousands of people have been

wrongly denied health care coverage, hassled with unnecessary

documentation requests, underpaid claims, ripped off by fixed data

bases that underpaid claims. The actions of insurance company bureaucrats in causing needless delays and denials of coverage for

prescribed treatment can be as detrimental as the disease itself.

Now, this was the conclusion of the Ohio Supreme Court when

it upheld the largest jury award in Ohio’s history against Anthem

for denying life-saving treatment to Esther Dardinger. Here is

what the Court said in that decision.

‘‘Then came the bureaucracy. Anthem had worn’’—talking about

the Dardingers—‘‘Anthem had worn the Dardingers down as surely

as the cancer had. Like the cancer, Anthem relentlessly followed its

own course, uncaring, oblivious to what it destroyed, seeking only

to have its own way.’’

That is from the court decision.

Now, regulatory actions and jury awards do not, however, tell the

whole story, since these measures consist only of instances in

which insurers were caught and punished for a violation. There is

no record of the silent suffering that our constituents endure without filing a complaint or a lawsuit.

Recently, however, the research arm of the California Nurses Association published results of its analysis of claims payment data

maintained by the California Department of Managed Health Care.

They found that claim denials by health insurers operating in CaliVerDate 11-MAY-2000 11:42 May 23, 2011 Jkt 000000 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\64918.TXT KATIE PsN: KATIE
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fornia averaged 21 percent in the period 2002 to June 2009. Unfortunately, we learned yesterday from another witness that there is

no comprehensive national data source on all health care coverage

that has been denied, substituted, or delayed.

In this absence of transparency, health insurance companies promote the public image that they encourage healthy living. All of

the insurance companies here today wanted to be represented by

their top doctors, known as chief medical officers. Had we allowed

that, their preferred representatives would have been consistent

with the public image that the companies like to project, but it

would have denied the subcommittee the ability to probe how

health insures really work. What is your business model?

Whether a health insurer follows a doctor’s order or interferes

with it by denying a pre-authorization is in large part a business

decision. It is not a medical one. Financial analysts of the health

insurance industry carefully chart the medical loss ratio, which you

are all familiar with, the MLR, the amount of each dollar received

in premiums that health insurers spend on medical expenses. Investors consider MLR to be a key indicator of an insurer’s ability

to control its spending on health care and thereby is a predictor of

profitability.

Insurance company executives pay attention first to the concerns

of Wall Street. We understand that. According to a former executive of one of the Nation’s largest for-profit insurers, quote, investors want that MLR to keep shrinking. And if they see that an insurance company has not done what they think meets their expectations with the medical loss ratio, they’ll punish them. I’ve seen

a company stock price fall 20 percent in a single day, when it did

not meet Wall Street’s expectations with this medical loss ratio.

That’s a quote.

Private health insurers have developed a sophisticated bureaucracy to find reasons to avoid paying for expensive treatment. They

are developing new products, with high deductibles and copayments, so they don’t have to pay the health care bills. Private

health insurers refuse to abandon the practice of rescissions, in

which they revoke a policy after receiving premium payments once

large claims are filed. Over 60 percent of people who entered bankruptcy due to medical costs that caused them to become insolvent

had private insurance at the start of the illness.

Finally, private health insurers are insuring fewer people and

earning higher profits by avoiding providing coverage to people who

get very sick and have very high medical bills. That is what Wall

Street wants to see; and today, thankfully, we have before us senior executives from the six largest private insurers in the Nation

who are here to explain to this committee and to Congress how you

can reconcile the demands of Wall Street—which are quite significant and severe sometimes—the demands of Wall Street with the

health care needs of your policyholders. That is what we are going

to be exploring today.

So, with that, I am going to recognize the distinguished ranking

member of the subcommittee, Mr. Jordan of Ohio.

[The prepared statement of Hon. Dennis J. Kucinich follows:]

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Mr. JORDAN. Thank you, Mr. Chairman, for holding this hearing.

I want to thank our witnesses for being here today.

Yesterday, we heard some heart-breaking stories of families dealing with severe illnesses and the mounds of paperwork they were

forced to wade through when trying to get treatment. Bureaucracy,

whether in government or private industry, should not be the final

arbiter of health care decisions. In my opinion, those decisions

should be between doctors, patients, and their families.

My constituents come into our office and say that their child got

sick and their insurance got canceled. Practices like this are inexcusable. People purchase health insurance to guard against the day

their child or spouse becomes gravely ill. It is precisely these instances when people most need coverage. Individuals who have

acted in good faith, paid their premiums, and upheld their contractual responsibilities should, in fact, be covered and get coverage.

Last year, in the full committee, we held a hearing on improper

health insurance rescissions. This was a problem in California and

Connecticut. Rescissions should only occur when there is a material

misrepresentation of fact or other breach of contract. It must be

noted that any rescission, even when proper, leaves individuals uninsured. All stakeholders, regulators, insurers, and consumers

should obviously try to prevent these occurrences.

So what can we do to make sure that all Americans have access

to coverage? My friends on the other side believe that more and

bigger government is the answer. I think most Americans instinctively realize that trading some challenges with private insurance

for the bureaucracy of the Federal Government is certainly not the

solution. Instead, we should keep what works best in the current

system and try to reform what is not working.

The plan I support has four principles that I think need to be a

part of any health care reform proposal: First, all Americans must

have access; second, that coverage should be truly owned by the patient; third, we must improve the health care delivery structure;

and, finally, any reform must attempt to rein in out-of-control

costs.

As we address these challenges in our health care system, it is

important that everyone has a seat at the table. I am glad that our

witnesses can be here today, and I look forward to hearing their

testimony.

Thank you, Mr. Chairman. I yield back.

[The prepared statement of Hon. Jim Jordan follows:]

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Mr. KUCINICH. I want to thank my colleague from Ohio. We have

a bipartisan effort here on these committee hearings; and I have

always appreciated his perspective and also the fact that you sometimes offer a contrary point of view, which is needed to get to the

truth. So thank you.

We have the privilege of having the chairman of the full committee here, and I am sure all Members would agree that it is our responsibility when the chairman of the full committee shows up to

provide the chairman of the full committee with an opportunity to

be recognized. So at this time I want to thank Mr. Towns for the

support that he has given this subcommittee in our effort to get to

the bottom of some of these serious health care issues and thank

you for your support on the whole range of concerns that the American people have.

The Chair recognizes the chairman of the full committee, Mr.

Towns of New York.

Mr. TOWNS. Thank you very much. I would like to thank you,

Chairman Kucinich and Ranking Member Jordan, for holding this

important hearing on unfair practices engaged in by private health

insurance carriers.

And let me begin by saying I agree with President Obama’s

statement last week to the joint session that private, for-profit

health insurance companies perform valuable services to their subscribers and our Nation. However, President Obama rightly called

for health care reform legislation that, No. 1, ends discrimination

against people with pre-existing conditions; limits discrimination

because of age and gender, so that seniors and women will pay the

same coverage as others; prevents insurance companies from dropping coverage when people are sick and need it most; caps out-ofpocket expenses so people do not become broke when they become

sick; and eliminates additional charges for preventative care such

as mammograms.

In many States, insurance companies can simply cancel a person’s insurance if any existing medical condition is not listed on the

application, and this can happen whether the person is even aware

of the condition or not. We hear repeated reports that insurance

companies limit benefits, simply drop or deny coverage for highrisk patients whose claims eat into the carrier’s profits, and purge

small businesses with high claims. Carriers are doing this at the

same time that their executives are receiving millions and millions

of dollars compensation packages.

Businesses cannot provide their employees with coverage due to

their own eagerness to make a profit. On the other hand, patients

are afraid to disclose health conditions and might even be forced

to lie in order to receive medical treatment. Some patients suffer

greatly as their health declines without necessary medical treatment. These insurance carriers’ practices are unacceptable and

must be reformed.

I believe insurance carriers must be held accountable. If a company sells insurance, it must provide insurance coverage. When

claims are made in that regard, it is essential that Congress enact

health care legislation that includes provisions designed to ensure

accountability and strong enforcement.

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Mr. Chairman, I applaud you and Mr. Jordan for the work that

you are doing and the members of the committee, but I want you

to know that we have a lot of work to do because as we look and

we see in terms of what people are going through, that we must

reform it and we must reform it in a positive way.

On that note, I yield back the balance of my time.

Mr. KUCINICH. I thank Chairman Towns.

The Chair recognizes Mr. Foster, who was here even before anybody else.

Mr. FOSTER. I yield back.

Mr. KUCINICH. OK. We will go to Mr. Cummings then.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. And, Mr.

Chairman, thank you again for holding this hearing; and I want to

thank our panelists for being here this afternoon.

Yesterday, we heard chilling testimony, shocking to the conscience—and, to be frank with you, after hearing that testimony,

it was very difficult for me to sleep—about what insurance companies do to regular, everyday people like the people that I represent.

We heard from a Mr. Potter, Wendell Potter, and let me just give

you some of the words that he said.

He said, ‘‘For weeks now we’ve been hearing industry executives

saying the same things and making the same assurances; and I am

sure you will hear the same refrain tomorrow. This time, though,

the industry is bigger, richer, and stronger; and it has a much

tighter grip on our health care system than ever before.’’

‘‘In the 15 years since the insurance companies killed the Clinton

plan, the industry has consolidated to the point that it is now

dominated by a cartel of large, for-profit insurers. The average family doesn’t even understand how Wall Street dictates determine

whether they will be offered coverage and whether they can keep

it and how much they will be charged for it. But in fact Wall Street

plays a powerful role. The top priority of for-profit companies is to

drive up the value of their stock. Stocks fluctuate based on companies’ quarterly reports, which are discussed every 3 months in conference calls with investors and analysts.’’

‘‘On these calls, Wall Street investors and analysts look for two

key figures: earnings per share and the medical loss ratio, or medical benefit ratio as some companies now call it. That is a ratio between what the company actually pays out in claims and what is

left over to cover sales, marketing, underwriting, and other administrative expenses and, of course, profits.’’

And I will end it there.

Basically, what they were telling us is that too many people are

paying loyally, year after year after year, but when they want the

insurance company to pay, the insurance companies quite often

slap them in the face and say, no, we are going to give you a rescission. We are going to find a pre-existing condition so we can save

money.

But one of the things that was most chilling was the testimony

that came when they told us that, quite often, these panels in the

insurance companies get together and they wait out people while

they are sick. They wait out while they are trying to get a decision;

and, quite often, they wait so they can die. That is what we heard

in here yesterday.

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And I said to them at that time that if that is the case then that

is fraud, and it is criminal, and we as a country can do better than

that.

So I look forward to the testimony, Mr. Chairman; and, with

that, I yield back.

Mr. KUCINICH. I thank the gentleman.

The Chair recognizes Mr. Tierney of Massachusetts.

Mr. TIERNEY. Thank you, Mr. Chairman.

I don’t intend to take my full 5 minutes except to note that you

have all heard a little bit about the testimony we have been hearing from individuals, and I hope you take a moment rather than

to read any pro forma statements that you may have made to address the particular issues like the medical loss ratio.

Can you explain how it is as medical costs rise faster than inflation companies still manage to keep the same ratio—medical loss

ratio? Meaning they are putting less money into actual medical

care and more money into profits, into salaries for executives, and

into underwriting?

And when it gets to underwriting, I think we would like to hear

a little bit about why it is that other executives from firms like

yours came before Congress and said that they would not do away

with such practices like rescission, where somebody is ill and getting treatment only to find out the company then reaches back and

tells them they are disqualified for some reason or why it is that

you won’t stop the practice of pre-existing conditions unless you are

regulated to do it or why it is you continue to put caps on coverage.

It is all those reasons and things that lead this Congress to think

that the only protection we can have for consumers is to put up a

viable competitor against your companies to make them behave,

make them come back and do more for consumers and less for their

own self-interests and Wall Street’s self-interest.

I see and we heard testimony yesterday about all sorts of new

plans that you have coming out, voluntary benefits, limited medical

benefits. And the voluntary usually means that employees are

going to pay 100 percent of the premiums and that really the employers pay nothing, while limited benefit plans mean that they are

providing limited coverage, maybe prescription drugs or maybe

some lab work and X-rays, maybe through doctors’ visits, but essentially the premiums are again paid entirely for by the employees. Those monthly premiums are usually 30 to 50 percent less

than major medical plans, and the employees get left holding the

bag because they are not really covered at the end.

I know some of your companies are sponsoring a medical conference in Los Angeles next month promoting those types of plans.

I want you to address for us how you think that is that will help

small businesses. You say that they are doing it because you can’t

afford it, when in fact you are the ones who set the rates. You determine how high you are going to raise the premiums on other

policies, driving them into policies like this for the small business

employees.

My small businesses aren’t impressed with it, and they don’t

want to go in that direction. They want their employees to have

good, solid coverage.

12

So I hope you answer all of those questions, and I look forward

to your testimony and maybe discussion afterwards of I think the

sorry direction that we are going in the private health care industry, and maybe you can convince us why it is not essential that we

do something in terms of regulation and competition to put a stop

to those practices which really haven’t shown or reflected well on

your industry.

I yield back. Thank you, Mr. Chairman.

Mr. KUCINICH. If there are no further opening statements, we

will proceed to receive testimony from the witnesses before us

today.

I want to start by introducing our first panel:

Mr. Richard Collins, welcome, Mr. Collins.

Mr. Collins is the senior vice president of Underwriting, Pricing,

and Healthcare Economics at UnitedHealthcare Group. He also

serves as CEO of Golden Rule Insurance Co. and president of

UnitedHealthOne, UnitedHealthcare’s individual line of business.

He has served in this capacity since July 2005. Mr. Collins also

manages the individual business of American Medical Security Life

Insurance Co. and PacifiCare.

Next, Mr. Brian Sassi, welcome. Thank you for being here.

Mr. Sassi is president and CEO of the Consumer Business unit

for WellPoint, Inc. Mr. Sassi is responsible for the company’s seniors, State-sponsored, and individual under 65 businesses. Previously, Mr. Sassi was president of Blue Cross of California and

chief executive officer of its life and health affiliate. He also served

as vice president of Operations and Strategic Initiatives for Blue

Cross of California and general manager of Small Group Accounts

for the west region for WellPoint, Inc., the parent company of Blue

Cross of California. Thank you.

Ms. Patricia A. Farrell. Welcome, Ms. Farrell.

Ms. Farrell is senior vice president of National and International

Business Solutions for Aetna, Inc., leading divisions which provide

health insurance for the Federal Government, TRICARE and State

Medicaid programs and other businesses in the United States and

abroad. Previously, she was the senior vice president of Aetna Specialty Products and Medicaid. This included Aetna dental, life, disability, long-term care, and voluntary products, and Aetna’s Medicaid and children health insurance program business. Ms. Farrell

has also served as senior vice president for Strategic Planning.

Mr. James H. Bloem—is that correct? The pronunciation?

Mr. BLOEM. Bloem.

Mr. KUCINICH. Mr. James H. Bloem.

Mr. Bloem is senior vice president, chief financial officer and

treasurer for Humana, Inc. He has primary responsibility to supervise all accounting, actuarial, analytical, financial, tax, risk management, treasury, and investor relations activities for that company. Thank you for being here.

Mr. Thomas Richards. Appreciate your attendance here, Mr.

Richards.

Mr. Richards is senior vice president for Product Management

and New Product Development for CIGNA Healthcare and

CIGNA’s Choice Link subsidiary, which provides customer benefits

and online enrollment. Previously, Mr. Richards ran CIGNA’s stop

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loss business, which provides reinsurance to middle market and national segment customers. During his career, Mr. Richards has held

a variety of product positions in CIGNA Healthcare, including in

CIGNA Healthcare’s marketing department, where he helped design and bring to market preferred provider organization products

and networks.

And, finally, Ms. Colleen Reitan.

Ms. REITAN. Reitan.

Mr. KUCINICH. Reitan. Ms. Reitan is executive vice president and

chief operating officer of Health Care Service Corp., where she is

responsible for its internal operations, as well as numerous divisions of the company, including subscriber services, government

services, enterprise information, strategy and management financial services, among others. Previously, Ms. Reitan was president

and chief operating office of Blue Cross Blue Shield of Minnesota,

20 years of experience in the health insurance field. She was also

the co-creator of the Minnesota Health Information Exchange, a

national model for sharing electronic health information.

I want to thank you, Ms. Reitan, for appearing, and I want to

a thank all the witnesses for appearing before our subcommittee

today.

I have to say, in just these first few minutes, in looking out at

you and looking at your accomplishments in the insurance industry, this hearing is not and any of the questions that are asked,

this isn’t about anything personal. We respect who you are. But the

institutions that you represent are here to be questioned today and

challenged today, and we are going to need your cooperation in understanding your business model.

With that, I will proceed to the swearing in. It is the policy of

the Committee on Oversight and Government Reform to swear in

all witnesses before they testify. I would ask that you please rise,

each of the witnesses, and raise your right hands.

[Witnesses sworn.]

Mr. KUCINICH. Let the record reflect that each of the witnesses

stood, raised their right hand and answered in the affirmative.

You may be seated.

Mr. CUMMINGS. Mr. Chairman.

Mr. KUCINICH. Yes, Mr. Cummings.

Mr. CUMMINGS. Mr. Chairman, just a point of information. Mr.

Chairman, you just swore in the witnesses. Should a witness fail

to be truthful with this committee, is there a penalty connected

with that?

Mr. KUCINICH. Staff attorneys have just handed this to me. This

is pretty pro forma for any congressional hearing where witnesses

testify and swear under oath. There are two sections covered.

One is 18 U.S.C., section 1001, which relates to knowingly and

willfully falsifying any statement. There are provisions in this for

penalties that include fine and imprisonment.

There is another section that I was given, 2 U.S.C., section 194,

that relates to congressional and committee procedure. If anyone

fails to answer any pertinent question, we would have to, according

to this, certify through the House of Representatives the facts as

we see them to the U.S. attorney’s office.

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So, you know, it is a standard operating procedure in this committee, Mr. Cummings, that you know we expect witnesses to tell

the truth, but, if they don’t, there are penalties under law.

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

Mr. KUCINICH. Let’s go to opening statements.

Mr. Collins, you may begin with your opening statement. Thank

you. And make sure that mic is close so we can hear what you have

to say.

STATEMENTS OF RICHARD A. COLLINS, SENIOR VICE PRESIDENT OF UNDERWRITING, PRICING, AND HEALTHCARE ECONOMICS, UNITEDHEALTHCARE GROUP, CEO, GOLDEN RULE

INSURANCE CO., PRESIDENT, UNITEDHEALTHONE; BRIAN A.

SASSI, PRESIDENT AND CEO, CONSUMER BUSINESS,

WELLPOINT, INC.; PATRICIA FARRELL, SENIOR VICE PRESIDENT, NATIONAL AND INTERNATIONAL BUSINESS SOLUTIONS, AETNA, INC.; JAMES H. BLOEM, SENIOR VICE PRESIDENT, CHIEF FINANCIAL OFFICER, AND TREASURER,

HUMANA, INC.; THOMAS RICHARDS, SENIOR VICE PRESIDENT OF PRODUCT, CIGNA HEALTHCARE; AND COLLEEN

REITAN, EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER, HEALTH CARE SERVICE CORP.

STATEMENT OF RICHARD A. COLLINS

Mr. COLLINS. Thank you.

Chairman Kucinich, Ranking Member Jordan and members of

the subcommittee, my name is Richard Collins. I’m the head of underwriting, pricing, and health care economics for

UnitedHealthcare. I am also the CEO of Golden Rule Insurance

Co., a UnitedHealth Group company that provides individual

health insurance to individuals and their families.

Today, I will start with some relevant facts about UnitedHealth

Group, our industry, and try to demonstrate how we are improving

the quality of health care while reducing costs and streamlining administration.

First, UnitedHealth Group provides high-quality health services

and products for more than 70 million people in partnership with

5,000 doctors—5,000 hospitals and 600,000 doctors across all 50

States.

Second, we employ 75,000 committed and dedicated men and

women. These people work hard to improve the health care and

well-being of our health plan members.

Third, we have prudently managed our finances during these

challenging economic times and can back the promises that we

make to our stakeholders.

Fourth, our industry is already one of the most highly regulated

in the United States. UnitedHealth Group has long advocated for

comprehensive, bipartisan health care reform. We have proposed

constructive changes that would ensure rates do not vary because

of health status and gender and will guarantee coverage regardless

of pre-existing conditions for those that maintain continuous coverage. These reforms would also require that individuals obtain

and maintain health insurance coverage so that everyone participates in both the benefits and the costs of the system.

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Discussions of administration processes and health begin with

benefits of a strong provider network. Our members receive great

value from our extensive network, which includes more than 85

percent of the physicians and hospitals in the United States.

We perform periodic credential reviews to make sure that network physicians and hospitals continue to meet standards of quality. Our members receive negotiated savings and discounts when

they are cared for by one of our contracted providers. A key element to the success of this network is health information technology that we use to increase the speed and accuracy of claim

processing.

We pay more than 250 million claims annually, and more than

95 percent are processed on our primary commercial platforms

within 10 days. In fact, over 80 percent are processed automatically.

Across our entire business, we have identified 100,000 physicians

through our premium designation program that consistently deliver

quality in accordance with evidence-based standards, and they do

so at costs 10 to 20 percent below their peers. These physicians use

data, efficient practice management, and evidence-based medicine

to guide and consistently improve patient care.

This network system extends to doctors and hospitals that are

best at managing complex medical conditions such as organ transplants, cancer, and congenital heart disease. This helps the sickest

patients receive the best possible care, often resulting in better outcomes and often at prices with savings as much as 60 percent.

Partnerships with physicians and hospitals are critical to streamlining administrative processes and providing greater value to our

members. To that end, we have established two national and numerous local physician advisory committees. They provide us with

feedback and help us ensure that we maximize the health care

quality and minimize the administrative burden.

We’re also introducing innovative and practical tools that allow

doctors and nurses and other health care providers to spend more

time with their patients and less on paperwork. For instance, our

eSync program synchronizes a person’s medical history to help

identify gaps in care that they should be receiving. Electronic medical records and e-prescribing technology help physicians practice

better medicine through clinical decision support and reduce administrative costs through automation and Web-based transactions.

In conclusion, UnitedHealth Group provides critical services and

support at every point in the health care delivery system. We are

privileged to serve our members and take seriously our responsibilities to serve Americans in this socially sensitive area of health

care. Through innovative technology and programs, as well as close

collaboration with the provider community, we are successfully improving quality, reducing costs, and making the administration of

health care more efficient.

Thank you, Mr. Chairman.

Mr. KUCINICH. Thank you, Mr. Collins.

[The prepared statement of Mr. Collins follows:]

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Mr. KUCINICH. Mr. Sassi, you’re recognized for 5 minutes. You

may proceed. Make sure you bring that mic close enough.

STATEMENT OF BRIAN A. SASSI

Mr. SASSI. Thank you, Chairman Kucinich, Ranking Member

Jordan, and members of the subcommittee for allowing me to testify before you today. I’m Brian Sassi, president and CEO of the

consumer division of WellPoint.

WellPoint provides insurance and health benefits to 35 million

people across the country, representing almost one in nine Americans. We recognize we have the ability to help change health care

for the better; and with this ability comes a responsibility to our

members and to all Americans to advance health care quality, safety, and affordability.

I look forward to discussing how WellPoint helps create health

care value for our customers. At WellPoint, we develop evidencebased medical policy based on the latest clinical research. Our

nurses and other health care professionals support our members to

ensure that care is safe, necessary, and timely. And looking to the

future, we continue to explore new ways to reward value over volume and stress safety, efficiency, and patient satisfaction.

One of the areas under discussion in the current health care reform debate is health plan administrative costs. Last year,

PricewaterhouseCoopers conducted an analysis of how the typical

health insurance premium dollar is spent. My written testimony includes a chart that shows that 87 cents of every premium dollar

is paid out to cover the cost of health care claims. Of the remaining

13 cents, 6 cents goes toward taxes, other government payments,

claims processing, and other administrative costs. Four cents go to

consumer services such as care coordination, disease prevention,

chronic care management, provider support, and marketing. And

only three cents of premium dollars remains for profit or surplus.

I understand the subcommittee is interested in knowing how we

determine medical policy and how our medical policy relates to how

we process our members’ health care claims. Our medical policies

reflect input from premier academic institutions and experts within

the medical profession, as well as considering the standards of care

within our local communities. These medical policies are available

online to all providers and to the public at large.

Last year, WellPoint received 380 million claims; and we processed 97 percent of those in 30 days.

The subcommittee’s letter asked for some information on deferral

of claims. I should note that we do not defer claims. What happens

sometime is that claims are pending as we await additional information or conduct additional reviews. Some common reasons for

pending claims are that premiums have not been paid; the claim

is incomplete, such as missing diagnosis codes; or when members

have health coverage—other health coverage that may be primary.

The subcommittee’s letter also asked about administrative costs.

Our administrative costs include a variety of initiatives designed to

promote the health and well-being of our members. For instance,

WellPoint employs thousands of health professionals, including

nurses, dieticians, social workers, and pharmacists, among others.

These professionals speak with thousands of members each day,

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encouraging them to learn more about their conditions and how

they can better manage their care. Our health professionals help

members schedule the necessary followup care and specialist care,

remind them to pick up important prescriptions, and serve as a

valuable resource to our members, 24 hours a day, 7 days a week.

Another example of our clinical—is our clinical research subsidiary, HealthCore, which has produced noteworthy studies on best

practices for treating low back pain, high cholesterol, asthma, to

name just a few. We take these recommendations and share them

with physicians to help them improve our members’ health.

HealthCore also works with the FDA and the CDC to improve drug

and vaccine safety and has created a sentinel system that helps

these agencies monitor emerging drug safety issues in real time.

My written testimony includes more detail of these types of initiatives, which are typically not included in government-run programs. Efforts like these, funded out of our administrative expenses, are critical to our ability to follow through on our primary

commitment, which is to improve the lives of the people we serve

and the health of our communities.

In closing, I would like to assure the subcommittee that

WellPoint supports responsible health care reform, but reform

must go beyond the insurance marketplace to address system-wide

challenges and associated costs. Changing how we finance health

care without changing how we deliver health care would be incomplete reform at best.

I appreciate the opportunity to testify before you today and to respond to your questions.

Mr. KUCINICH. Thank you, Mr. Sassi.

[The prepared statement of Mr. Sassi follows:]

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Mr. KUCINICH. The Chair recognizes Ms. Farrell. You may proceed for 5 minutes.

STATEMENT OF PATRICIA FARRELL

Ms. FARRELL. Good afternoon. My name is Pat Farrell, and I am

the senior vice president at Aetna.

Aetna’s one of the Nation’s leading insurance companies providing medical, dental, pharmacy, disability, life insurance, and other

health benefits. We provide those products and services in all 50

States, and we provide those products and services to 37 million

Americans.

I’m proud to have worked at Aetna for over 20 years in a variety

of capacities. On behalf of the thousands of employees at Aetna, I

look forward to talking to you today about the value we bring to

the health care system and in discussing Aetna’s commitment to

reforming the health care system.

Aetna today is a health care solutions company that helps Americans manage their health care and get the most out of their health

care dollar. Since 2005, Aetna has called for major fundamental reform of the insurance market so that all Americans have guaranteed access to affordable coverage with no exclusions for pre-existing conditions. This, combined with the requirement that everyone

have insurance coverage and financial assistance for those who

can’t afford it and who need it, will get and keep everyone covered

in our system.

I expect that many of the issues we will discuss today will illustrate the need for reform. Aetna is committed to health reform that

addresses access, affordability, and quality. We operate in a dynamic and highly competitive marketplace. Our business can only

be successful when health care consumers are confident that we

can provide the greatest value for their health care dollar and helping them improve or maintain their health care status.

Our employees come to work every day—doctors, nurses, and

customer service professionals—with the same commitment, to

make sure our members get the best health care coverage possible.

Much of our focus during the health care reform debate has been

on building what works well in the employer- sponsored market

today while addressing the problems in the small group market

and in the individual marketplace. These solutions, which now

seem to be broadly accepted, should go a long way to addressing

the problem of access to health insurance.

What we strongly believe is that for health care reform to be enduring and affordable in the Nation we must address the underlying problem of rising health care costs. Health care costs drive insurance premiums, not the other way around. Over the last decade,

health care costs have risen about 71⁄2 percent, and premiums have

risen that very same amount.

It’s fundamental to our discussion today to understand the value

that Aetna brings to the health care system and how our business

practices are focused on empowering consumers and health care

providers to make the best decisions possible.

We process hundreds of millions of claims every year, and getting

them right every single time is our goal. We recognize even a small

percentage of problems represent real issues for our customers and

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for our providers. When we do get it wrong, we have processes in

place to help get it back on track quickly.

Aetna’s driving innovation is to improve the lives and the health of our members. In just the past 4 years, we’ve invested over $1.8

billion in health information technology. For example, some of that

investment went to having personal health records that can empower consumers’ decisions around their health.

Finally, we’re also leaders in promoting wellness and prevention

and the management of chronic diseases. Refocusing our system to

prevent disease and promote wellness can lead to better health for

all Americans and positively impact costs system-wide.

I believe the competitive marketplace has played, and should

continue to play, an important role in fostering the innovation

that’s necessary for our country to achieve true and widespread

quality and affordability in our health care system.

Thank you, and I look forward to continuing to work with Congress to pass health care reform this year.

Mr. KUCINICH. Thank you, Ms. Farrell.

[The prepared statement of Ms. Farrell follows:]

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Mr. KUCINICH. The Chair recognizes Mr. Bloem.

STATEMENT OF JAMES H. BLOEM

Mr. BLOEM. Thank you, Mr. Chairman.

Mr. KUCINICH. Make sure that mic is close. We want to hear you.

Go ahead.

Mr. BLOEM. Mr. Chairman, Ranking Member Jordan, members

of the subcommittee, I’m James H. Bloem. I am a senior vice president and I’m the chief financial officer and treasurer of Humana,

Inc.

Humana’s a health benefits company headquartered in Louisville, Kentucky, offering health benefit plans for employer groups,

government programs, and individuals. We have 10.3 million medical members and 6.8 million specialty members in all 50 States and

Washington, DC, and in Puerto Rico. Humana employs 28,600 employees and contracts with nearly 400,000 physicians around the

country.

We’ve provided extensive written testimony on today’s subject

matter, and I will briefly summarize a few key points here.

Every aspect of Humana’s operations is governed by Federal and/

or State laws and regulations, and Humana continues to both support and advocate for responsible health system reform. We believe

that doing nothing is—doing nothing is not an option. We believe

that all Americans should have affordable, quality health coverage.

It’s essential that everyone participate in the health system, with

subsidies for those who can’t afford coverage; and, in return, coverage should be guaranteed and not based on pre-existing conditions or health status.

To ensure affordability, reform must focus on improving health

outcomes, reducing variations in care, and reducing costs.

Humana also supports America’s Health Insurance Plans’ comprehensive reform plan which provides for universal coverage with

insurance rating reforms. These reforms, voluntarily offered, will

obviate the need for business practices that were put into place because there currently is no requirement that individuals have

health insurance coverage.

The subcommittee has specifically requested that we comment on

our processes for both coverage determination and processing

claims, as well as the physician feedback on these processes.

For 2009, Humana ranked No. 1 among national payers as the

easiest to do business for both doctors and hospitals. Specifically,

Athena Health found Humana to have the lowest denial rate

among all major payers. In contrast, the Medicare Part B program

ranked fifth. Humana also ranked as the fastest payer to physicians, with the Medicare Part B program again ranking in fifth

place.

The subcommittee also asked that we address how Humana

makes coverage decisions. Let me summarize.

Coverage decisions are based on evidence-based medical criteria,

developed and approved by physicians. Under our policy, a nurse

or a non-clinician can authorize any service that’s under review.

However, only a licensed, board-certified physician medical director

can issue a denial based on a medical criterion. To the extent that

a practicing physician disagrees with a decision, there are timely

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internal appeal processes allowing peer-to-peer input. These grievance and appeals processes are governed by State and Federal regulations. Internal appeal decisions can be further appealed to an

independent external review entity, whose decision is binding on

Humana.

Humana’s worked effectively over the past few years to streamline and simplify our administrative practices. We’ve partnered

closely with the hospitals and physicians who care for our members

and our members themselves. Here’s one example.

Availity is an industry leading multipayer, multiuse electronic

medical provider information exchange. Humana cofounded

Availity with the Blues of Florida. It fulfills the President’s and

Congress’ call for a workable health care information technology

superhighway. It has standardization, speed, accuracy, transparency; and it results in significant cost savings.

Today, across the country, 50,000 physicians, 1,000 hospitals, 100

million members, and 1,000 payers, including public payers, access

or connect with Availity every year. This will result this year in approximately 600 million transactions. Availity, what it does is provides seamless provider interactions and improves patient safety,

saving money. It has digitized most of the nonstandard administrative processes that providers have complained about for years. And

for those who use e-prescribing, preventable adverse drug events

have been reduced by 61 percent; and, most importantly, there are

no charges to providers for using Availity.

In closing, Mr. Chairman, let me say that Humana’s committed

to continue to work closely with the administration and Congress

to increase the likelihood that measures designed to solve the most

significant problems in our health care system become the focal

points of responsible and real health reform efforts.

I look forward to your questions. Thank you very much.

Mr. KUCINICH. Thank you, Mr. Bloem.

[The prepared statement of Mr. Bloem follows:]

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Mr. KUCINICH. The Chair recognizes Mr. Richards. You may proceed for 5 minutes. Thank you.

STATEMENT OF THOMAS RICHARDS

Mr. RICHARDS. Chairman Kucinich, Ranking Member Jordan,

and members of the subcommittee, I appreciate the opportunity to

address the subcommittee and to discuss the issues raised in your

letter to Mr. Hamm on August 26th.

My name is Tom Richards. I am the senior vice president of

Product for CIGNA Corp., which is based in Philadelphia.

At the outset, I want to emphasize, on behalf of the 26,000

CIGNA employees, that we support health care reform that provides security, affordability, and stability for all Americans. We believe such a goal is achievable by strengthening the current system

to include both a personal coverage requirement and a helping

hand for those who can’t afford coverage.

We support guaranteed coverage for everyone and no exclusion

for any pre-existing condition. We support reforms in the way premiums are calculated, without taking into consideration health status or gender. We support providing subsidies to individuals who

have difficulty affording health insurance, including subsidies to

small businesses. We support administrative standardization and

simplification. We support a focus on health and wellness. Further,

we support the establishment of exchanges to provide a choice of

plan options for all Americans. We also support reimbursement reforms to the current fee-for-service delivery system.

It’s also important to understand CIGNA’s role in health care.

While we have some insurance business, nearly 80 percent of

CIGNA’s health care business is administrative services only. This

means we administer the programs for employers in accordance

with their policies and pay claims for them. It is not risk-based, as

would be traditional insurance. These employers are self-insuring,

and the claim payments come out of their employer funds. There

is no financial incentive for our employees to accept or deny claims.

At CIGNA, in 2008, 89 cents of each premium dollar was spent

on medical care. Our support for reform is aligned with what we

stand for as a company. Our mission is to improve the health, wellbeing, and sense of security of the customers we serve.

Our results demonstrate our focus on health improvement. Competitive data from NCQA’s 2008 State of Health Care Quality Report shows this difference. Against a baseline of standard care provided by doctors and hospitals in a fee-for-service unmanaged situation, we have better results. If you turn to figure 1 on page 4 of

my written testimony, you will see a chart that reflects these results.

All of our coverage policies follow best practices and are evidence-based, which means they’re based on the most recently published scientific evidence. We consider safety and effectiveness. It’s

important to note that cost is not a factor unless there are multiple

items or services with equivalent safety and effectiveness.

We are very proud to employ over 3,000 clinicians. These doctors

and nurses make decisions about clinical policy, review medical necessity, and advocate for individuals. They make the system easier

to understand. They help our customers navigate the health care

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system when they need help, and they literally save lives. We’ve

included the words of several of these individuals in our written

testimony telling you how we have helped them.

In 2008, CIGNA processed approximately 91 million claims for

payment. More than 90 million of these claims were paid without

question. I call your attention to figure 2 on page 10 of the written

testimony. Of the approximately 1 million claims that did require

prior authorization, all but 0.80 percent were approved on initial

review. What that means is at CIGNA more than 99.9 percent of

the time the person received the care that the doctor recommended

and the services were covered.

At CIGNA, all medical coverage decisions are made by doctors

and nurses; and, ultimately, the chief medical officer is responsible

for all coverage decisions. We recognize the doctor-patient relationship is critical and do everything we can to enhance it. Let me cite

just a few examples.

First, CIGNA is simplifying and reducing administrative complexities from payment methodologies and claim process to problem

resolution and education.

Second, CIGNA’s further innovating our payment methodologies.

An example of this is CIGNA’s patient-centered medical home initiative, such as the one we have with Dartmouth-Hitchcock, New

Hampshire. Our joint goal is to improve patient access, continuity,

and coordination of care, quality of care for patients, and lower

medical costs for everyone.

At CIGNA, we focus on helping people improve their health. We

believe the health care is a shared responsibility of the individual,

the private sector, the medical community, and the Government.

Such a shared responsibility is right for individuals, families, and

the country as a whole. We look forward to how we can work together to improve the health and wellness and quality of care for

all Americans.

Mr. Chairman, this concludes my remarks.

Mr. KUCINICH. Thank you very much, Mr. Richards.

[The prepared statement of Mr. Richards follows:]

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Mr. KUCINICH. The Chair recognizes Ms. Reitan. Thank you.

Please proceed for 5 minutes.

STATEMENT OF COLLEEN REITAN

Ms. REITAN. Good afternoon, Mr. Chairman, Ranking Member

Jordan, and members of the subcommittee. I’m Colleen Reitan. I

am the executive vice president and chief operating officer of

Health Care Service Corp. We are a mutual legal reserve corporation that does business as the BlueCross BlueShield plans in Illinois, New Mexico, Oklahoma and Texas.

By way of background, HCSC is the largest customer-owned

health insurance company in the Nation. We are not investorowned. We are a customer-owned mutual. We have a work force of

more than 16,000 employees serving 12.3 million members through

our BlueCross plans in those four States. Our mission is to promote

the health and wellness of health care for our members and the

communities that we serve through accessible, cost-effective, highquality care.

Prior to joining HCSC in 2008, I was the president and chief operating officer of BlueCross BlueShield in Minnesota, that State’s

largest health insurer. And they are a not-for-profit health plan. I

have 28 years of experience in the BlueCross system. The areas of

accountability I have with the HCSC is for management of our subscriber services division which processes member claims and handles health care inquiries. I’m also responsible for information technology, finance and actuarial functions.

We certainly recognize and share the public’s concern with the

current health care system. But fundamentally we believe in the

strength and the value of the American health care system. We believe that insurers like HCSC are uniquely positioned to help foster

and form improvements to the health care system. And we really

welcome the opportunity to serve in that role.

HCSC has been an advocate of health care reform. To that end,

we support the proposition that health insurance companies are required to offer coverage to all applicants regardless of their current

health status, coupled with a personal responsibility for all Americans to obtain and maintain coverage.

Second, we support subsidies for those Americans who cannot afford health care coverage.

Third, we support health and wellness initiatives that focus on

the prevention of chronic illness.

And finally, we support initiatives that promote effective care

and treatment and for information technologies that improve quality and provide value for every health care dollar.

We are pleased to share with the subcommittee some examples

of how HCSC has incorporated evidence-based approach into medical policy, into two key tenets that underpin the core values of our

company, and that of access and quality.

My written statement outlines our approach in each of those

areas in greater detail, but a few items are just worth noting before

the discussion today.

First, our members need access to proven medical care. One of

HCSC’s four guiding principles is our belief that the interests of

our members are of primary importance to our company. The memVerDate 11-MAY-2000 11:42 May 23, 2011 Jkt 000000 PO 00000 Frm 00098 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\64918.TXT KATIE PsN: KATIE
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bers we serve provide the reason for our existence and the rationale for the resources with which we operate.

Second, but equally important, is to continually improve the

quality of care.

Another of our guiding principles is our belief that we as representatives of our members have an obligation to provide leadership in the health care field. We are promoting evidence-based

medicine to increasingly focus our plans around proven health care

services. We also work closely with our very broad network of doctors and hospitals to invest in data-sharing technology that works

to improve clinical decisionmaking, and these efforts help improve

quality and ensure that doctors and hospitals treat patients effectively and get paid efficiently.

HCSC is committed to working with the administration and Congress to achieve comprehensive health care reform, to expand access and improve quality of care for all Americans.

On behalf of our company and its members, I thank the subcommittee for the opportunity to discuss these important issues

today.

Mr. KUCINICH. Thank you very much for your testimony.

[The prepared statement of Ms. Reitan follows:]

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Mr. KUCINICH. Without objection, the Chair and the ranking

member will proceed for 10 minutes each for questions, and then

each member after that will have 5 minutes. So we may have several rounds. We will see how it goes.

The only thing I want to share with the members of the panel

here is this: Members of Congress generally like to get answers. If

you are able to give us a brief answer and it covers the territory,

that’s fine. If you start to go on and on on something—I don’t want

to appear confrontational, but I may have to encourage you to

hurry up your answer or maybe have to cut you off. I don’t want

to do that. But I do want you to know that we are here to get answers and we need your help.

So without objection, I will begin. I just want to add one other

thing. We may be joined by other Members of Congress who are

not members of this committee. That’s not unusual. And without

objection, if other Members choose to come here from either side of

the aisle, even though they are not on this committee, without objection, we will permit them to sit in, to participate and to ask

questions.

So with that, I would like to start the questioning with Mr. Sassi

of WellPoint. Sir, in your testimony you state, ‘‘Last year WellPoint

received 380 million claims and processed 97 percent of them within 30 days.’’ I’m looking at the arithmetic. And if the arithmetic is

correct, it means that you did not pay within 30 days over 11 million claims.

Would you tell this subcommittee what is the value in dollars to

WellPoint of the 11 million claims that were not paid in that time

period?

Mr. SASSI. Chairman, I don’t know the value of that.

Mr. KUCINICH. Can you provide this subcommittee with such information? There has to be a way to calculate it.

Mr. SASSI. I’m not sure, because that is at a point in time—the

vast majority of those claims most likely were paid at a future

point, either on the 31st day, or if we had requested additional information that was provided and then subsequently paid.

Mr. KUCINICH. Maybe you could then chart out 30 days, 60, 90.

Businesses operate that way, of course, 120. And maybe if you

could provide us information with what was the average cost of

each claim that you did not immediately pay, it would be helpful.

You could either look at it as a cost or a value. And we will followup with written questions so we can keep going. We are not going

to belabor that.

Mr. Sassi, on a 2008 earnings conference call with Wall Street,

your CEO said the following, ‘‘We will not sacrifice profitability for

membership.’’ As you know, WellPoint was forced to pay $1 million

last year to settle claims or charges by the California Department

of Insurance that you removed coverage from 2,330 members after

they submitted claims for expensive medical care.

I am going to submit for the record the article on the settlement

from the Los Angeles Times from February of this year.

[The information referred to follows:]

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Mr. KUCINICH. WellPoint settled similar charges the previous

year and paid a $10 million fine for removing coverage from 1,770

members of its HMOs in California.

Mr. Sassi, is dropping members just when they need health care

what your CEO meant when she said that she wouldn’t sacrifice

profitability for membership?

Mr. SASSI. Absolutely not.

Mr. KUCINICH. What did she mean, then?

Mr. SASSI. I believe what was meant was that we would not reduce prices artificially to essentially buy membership in the open

marketplace.

Mr. KUCINICH. And Mr. Sassi, what characteristics did those

2,330 individuals have in common that resulted in WellPoint’s decision to drop members just as their medical bills threatened to reduce WellPoint’s profitability?

Mr. SASSI. That settlement pertained to a settlement agreement

that we reached with the Department of Managed Health Care and

the Department of Insurance in California relative to recissions in

the individual marketplace. I’m sure you’re aware that companies

agree to settle lawsuits or situations for a variety of reasons

and——

Mr. KUCINICH. But you’re in front of a congressional committee

here. There is—unless your counsel is advising you that you can’t

answer that question, you should answer the question.

Mr. SASSI. I did answer the question, sir.

Mr. KUCINICH. You didn’t really say what characteristics those

individuals had in common that resulted in WellPoint’s decision to

drop members just as their medical bills threatened to reduce

WellPoint’s profitability. You did not answer the question. I would

just ask you if you would answer the question.

Mr. SASSI. Those members were rescinded in the individual market because they materially misrepresented their medical history

on their insurance application at the time that they applied for coverage.

Mr. KUCINICH. How did WellPoint discipline the executives who

committed the practices that led to the enforcement action against

you?

Mr. SASSI. We did not admit—we did not agree with the findings

of the Department of Managed Health Care. That is on public

record. They did issue a report. We did append a report to that.

The settlement—we agreed to settle with the Department of Managed Health Care——

Mr. KUCINICH. I understand.

Mr. SASSI [continuing]. To put the issue behind us.

Mr. KUCINICH. Mr. Collins, in UnitedHealthcare Group’s social

responsibility report in 2008, your CEO writes, ‘‘The businesses of

UnitedHealthcare Group are fundamentally organized around advancing our mission of helping people live healthier lives.’’

Now, if your business is fundamentally organized around that

mission, will you explain UnitedHealthcare’s settlement of charges

last year that its PacifiCare subsidiary wrongfully denied 130,000

claims in California, paid claims incorrectly, lost documents that

included medical records, failed to acknowledge claims in a timely

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manner, and hassled its members with multiple requests for documentation that was previously provided?

Mr. COLLINS. Yes, sir. We are vigorously contesting the findings

of the State. I do not contest that there is room for improvement

in our California operations. We have put a lot of resources into

improving our operations. And we regret inconvenience to our

membership. But I don’t see our aspirations provide products, services and financing of the health care of Americans as inconsistent

with our behavior.

Mr. KUCINICH. Then that is fine. You have answered that question. But in 2007, what was the compensation of the top executives

at PacifiCare?

Mr. COLLINS. In 2007, sir, PacifiCare was a wholly owned subsidiary of UnitedHealthcare. So the top executives would have been

the top executives of United Health Group. And that is public

record, sir.

Mr. KUCINICH. Was the compensation possibly in millions?

Mr. COLLINS. I don’t have those numbers off the top of my head,

Congressman.

Mr. KUCINICH. Would you provide them to this committee?

Mr. COLLINS. Absolutely. They are public record in our 10-K, sir.

Mr. KUCINICH. Other members may have this question. But I

think it would be great if each of you could provide us that compensation information of officers and also information about bonuses and incentives received by PacifiCare executives and employees that would have rewarded the denial of claims in California in

2006 and 2007. We want to see if there is any connection there.

And we need that information, if you can cooperate and provide it.

Mr. COLLINS. I’m confident, sir, that there was no bonuses

awarded for denial of claims or other activity that was illegal. And

as I said before, we are vigorously contesting the findings of the

Department and the characterization of the actions there as denial

of claims.

Mr. KUCINICH. Thank you, Mr. Collins.

Mr. Richards of CIGNA. On page 8 of your written testimony you

state, ‘‘We do not consider costs in establishing coverage policy in

our decisions to provide access to care.’’

But we heard from a former senior executive with CIGNA, who

told us yesterday that CIGNA has meetings every quarter which

are called ‘‘town hall meetings,’’ internal town hall meetings, in

which executives go over the past quarter’s financial statements

and talk about how they can tighten utilization to lower the share

of CIGNA’s premium income spent on medical expenses.

Isn’t it true that CIGNA has held internal town hall meetings at

which those topics are discussed?

Mr. RICHARDS. It is absolutely true that we hold town hall meetings to communicate with our employees, to reinforce our mission

and to talk about our financial results.

Mr. KUCINICH. And those town hall meetings are videotaped, are

they not, and audiotaped?

Mr. RICHARDS. I do not believe they are videotaped. We certainly

audiotape them so that individual employees who are not able to

attend are able to——

Mr. KUCINICH. Are there audiotapes available?

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Mr. RICHARDS. Yeah.

Mr. KUCINICH. I would like you to provide this subcommittee

with copies of those audiotapes and any videotapes that you have.

Our staff will work with you to achieve the——

Mr. RICHARDS. Again, what I would like to emphasize, Mr. Chairman, is those internal meetings are to communicate to our

employees——

Mr. KUCINICH. I understand. And we—I understand that they

are. And we will be in touch with you regarding our request that

we get those audiotapes.

I just would like to conclude with this question for each and

every one of you. The premise of this hearing is that health insurers wield strong influence in the kind of care, whether there is

care, for their policyholders who become very sick.

According to the American Cancer Society, ‘‘Cancer patients and

survivors may delay or forego care, in the face of cost sharing, that

they find difficult to afford.’’

A recent study found that 5 percent of non-elderly adults with

private health insurance who have been diagnosed with a chronic

condition such as cancer reported they went without needed care

in 2006. This is the American Cancer Society saying this.

I want to give you a chance to express for the record what you

think about this question, and really with a simple yes or no answer. And we are going to go down the line and I want you to answer this question. Do you believe that a health insurer’s refusal

to pay for a patient’s cancer treatment can directly or indirectly

cause harm or death to that patient?

I’m going to ask the question one more time. Do you believe that

a health insurer’s refusal to pay for a patient’s cancer treatment

can directly or indirectly cause harm or death to that person?

I would like to go right down the line, Mr. Collins, and just give

me a simple answer go. All the way down the line and then my

question time is completed. Mr. Collins.

Mr. COLLINS. Yes, sir.

Mr. KUCINICH. Pardon?

Mr. COLLINS. Yes, sir.

Mr. KUCINICH. Mr. Sassi.

Mr. SASSI. Yes, sir.

Mr. KUCINICH. Ms. Farrell.

Ms. FARRELL. Yes.

Mr. KUCINICH. Mr. Bloem.

Mr. BLOEM. Yes.

Mr. KUCINICH. Mr. Richards.

Mr. RICHARDS. Yes. But CIGNA only allows clinicians to make

coverage decisions and those coverage decisions are only based on

external scientific evidence.

Mr. KUCINICH. The answer is yes. OK. Ms. Reitan.

Ms. REITAN. Yes, sir.

Mr. KUCINICH. Thank you. I want to thank each and every one

of you for your candor.

The Chair recognizes for 10 minutes Mr. Jordan of Ohio. You

may proceed.

Mr. JORDAN. Thank you, Mr. Chairman. I appreciate the chairman’s having this hearing. I appreciate the chairman’s intensity

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and passion that he brings to any debate, but I fundamentally disagree with sort of the underlying premise here, the idea that because there has been—as I stated in my opening statement, that

there has been some problems with the way private insurance

works; that somehow that should cause us to move to a government-run system. I just fundamentally disagree with that.

Frankly, I think the majority of Americans, as pointed out over

the last several months in any poll you look at here of recent date,

is—would say the same thing.

So I have really kind of two focuses here in the few minutes I

have with you. And, again, I appreciate you being here. One, I

want to get the facts. And then I want to get at this idea that I

think is fundamental to real reform and what needs to happen in

this country, and that is a health care system that empowers the

patient.

There is a great—I think a great article in this month’s Atlantic

which talks about the idea that it is always somebody else who is

paying. And when somebody else is paying, that is—I think Ms.

Farrell said it well. She said insurance premiums don’t drive

health care costs; health care costs drive insurance premiums. We

have to get at health care costs. And that only happens when the

consumer, the patient, the family, the small business owner out

there, has a better handle on what is happening, more transparency so they can figure this out and make some real market—

real market-type decisions.

So let me start with this. One of the things we heard yesterday,

again in an effort to get to the facts, one of the things we heard

yesterday was from the panel we had; 57 percent of every dollar

is all that goes toward health care of the premiums that you take

in. And so we heard about the cartels and—I’m actually looking

now at a piece the Journal ran this Monday. And they actually talk

about an example in Alabama where it was 92 percent, according

to what is happening in the State of Alabama, where one insurer,

BlueCross BlueShield of Alabama, has 70 percent of the market

share.

So I would like to know, do you agree with that 57 percent figure; and if not, what it is in each of your companies’ situation?

We’ll just go down the list. Mr. Collins.

Mr. COLLINS. Thank you, Congressman Jordan. The statistics

cited in Mr. Sassi’s testimony come from a

PriceWaterhouseCooper’s study that cites 83 cents on the dollar.

That is a credible study. It is a recent study. There is another

study that just came out from Sherlock & Co., just in the last few

weeks, which corroborates the PriceWaterhouse study.

Mr. JORDAN. What is United? What do you say? What do you

pay? With every dollar you take in, how much goes for patient

care?

Mr. COLLINS. That’s not a real simple answer to——

Mr. JORDAN. Is it 57 percent? Is it less? Is it more?

Mr. COLLINS. No, sir. It’s consistent with the findings in the

Sherlock and the PriceWaterhouseCooper’s studies.

Mr. JORDAN. Have you done an internal investigation? Do you

know? Do you have a good idea what United would be?

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Mr. COLLINS. Sir, a loss ratio for 2008 was approximately 83 percent, 831⁄2 percent for the company. But that is across a wide spectrum of businesses.

Mr. JORDAN. Mr. Sassi, WellPoint?

Mr. SASSI. Same question?

Mr. JORDAN. Yeah.

Mr. SASSI. The loss ratio for WellPointplans overall is directionally similar to what I quoted as PriceWaterhouseCooper’s. But

as I also stated, loss ratio is just the calculation of premium less

claims that are paid. And as I also indicated in my testimony, there

are a fair amount of administrative costs that we pay to help manage chronic care, chronic conditions. We pay out of our administrative cost for disease management programs for asthma, heart disease, diabetes, COPD, to help those 50 percent of Americans that

have chronic illness manage their costs. And that is typically not

included in the loss ratio. That is included in administrative expense. So if you’re looking for a holistic what-do-we-spend, it’s

north of that.

Mr. JORDAN. I understand. I understand.

Ms. FARRELL. Congressman, at Aetna, we spend 84 cents on the

dollar directly on medical claims. We do spend a fair amount on administration relative to innovations in the health care industry,

making sure that we are providing our members and our providers

with the most recent tools and technologies and information in

order to, as you said, give them the tools to make them understand

what policies they purchased, what is in those policies, so that they

can make better decisions on behalf of themselves and their families.

Mr. BLOEM. Ranking Member Jordan, we paid between 83 and

85 percent for the last 7 years. Last year was the upper end of the

range. Around 84.6.

Mr. RICHARDS. Ranking Member Jordan, for CIGNA last year,

the number was 89 cents. That number has gone up each of the

last 5 years.

Ms. REITAN. Our medical care ratio at HCSC is approximately 84

percent.

Mr. JORDAN. OK. Let me move to another one.

According to the Congressional Research Service, each year 1 billion claims are submitted to Medicare and 10 percent of those

claims are denied. So 10 percent—that is a lot of claims denied, if

I got the numbers right when you went through your testimony—

I just jotted these down.

United, you have 70 million that you insure; WellPoint 35; Aetna

37; Humana, I think had 2 different distinctions, but I totaled 16;

CIGNA, 46 here and around the world; and HCSC, 12.3 million.

So how does your denial rate compare to what the Government

currently does with the Medicare program?

Mr. COLLINS. Congressman, I’m not prepared to answer that

question today. I really just don’t have those numbers available, I

would like to point out——

Mr. JORDAN. How many claims do you have a year? I’m interested in Medicare population, older populations who are probably

going to be significantly more claims. But 70 million people comVerDate 11-MAY-2000 11:42 May 23, 2011 Jkt 000000 PO 00000 Frm 00115 Fmt 6633 Sfmt 6633 C:\KATIES\DOCS\64918.TXT KATIE PsN: KATIE
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pared to 45 in Medicare—45 million in Medicare. How many claims

do you get a year?

Mr. COLLINS. I don’t know exactly. On our primary processing

platform where the vast majority of our claims are processed, as I

stated in my testimony, 250 million claims.

Mr. JORDAN. OK.

Mr. SASSI. Ranking Member Jordan, I don’t have the percentage

of claims that were denied, if that is the question. We processed

380 million—we received 380 million claims. The number I read

was the amount that we processed in 30 days. We processed——

Mr. JORDAN. Ninety-seven percent in 30 days. I got that. But we

heard stories yesterday, so there have to be some that are denied.

Mr. SASSI. Oh, absolutely.

Mr. JORDAN. Do you know what percentage are denied?

Mr. SASSI. I don’t have that.

Mr. JORDAN. Is it more than 10 percent?

Mr. SASSI. I don’t have that number. I’m sorry.

Mr. JORDAN. Ms. Farrell.

Ms. FARRELL. We process approximately 407 million claims annually at Aetna. And if you look at the reasons why claims are denied, I think what you are trying to get at is the reason something

might be denied for medical necessity, and at Aetna less than onehalf of 1 percent of claims are denied because of medical reasons.

Mr. JORDAN. Thank you.

Mr. BLOEM. Ranking Member Jordan, I cited the Athena Health

Study which I commented that we ranked first in terms of the lowest denial rate. Our denial rate in that survey was 5.7 percent. The

government, in the government—the Medicare Part B program,

that had an 8.7 percent denial rate for fifth place.

Mr. RICHARDS. Ranking Member Jordan, at CIGNA, we have

about 91 million claims we processed last year, and again 99.9 first

of those were approved for the coverage. So it would have been

point 1 percent that were not approved for coverage.

Mr. JORDAN. Good.

Ms. REITAN. HCSC processes 560,000 claims a day, and we deny

for the medical necessity coverage three-tenths of a percent.

Mr. JORDAN. Wonderful.

Mr. Bloem, in your testimony you talked about some things you

were doing to make it easier for the folks who you do business

with, people you insure to deal with—that is one thing you hear

from folks in our own lives. You get the statement of benefits, you

try to figure out what the heck it says. I think if a lot of Americans

are like me, they are looking—if it says it’s not a bill, they kind

of file it away and not worry about it too much.

But you talked about some things you’re doing. I would like for

you to elaborate on that a little bit. Because one of the things we

hear from health care professionals is they don’t like the reimbursement rate they get from Medicare and Medicaid. But in some

ways it’s not as cumbersome as some of the other things they have

to deal with. So I’m curious what you are doing to make it easier

for people to deal with and figure out what is going on, and again

getting at this idea to empower the patient, which I believe will

lower the cost.

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Mr. BLOEM. OK. A couple of things I mentioned in my written

testimony I would just like to quickly summarize. First of all, when

we talk about the problems that have existed between the various

constituencies, obviously we have three people involved: We have

us as the payer, we have the member, and we have the provider.

So to make things simpler, to make things easier, what we’ve

done, as in Florida but now throughout the country, is come up

with a joint venture that we have with a number of companies that

helps providers get instant adjudication, real-time adjudication in

terms of what a member’s responsibilities are, what ours are. We

are trying to provide certainty against all—for all our constituencies.

Mr. JORDAN. So the providers are liking it and the patients are

liking it?

Mr. BLOEM. Because it’s electronic and it basically tells people

when they go to the doctor, this is what is going to be expected of

you, this is what Humana is going to pay, this is what you are

going to pay, this is what the provider is going to charge.

We also—if I could be real brief—we also have a document called

a ‘‘smart summary’’ that we mail to 10 million of the 10.3 million

members that we have, every quarter. And it basically tells all the

claims that they have had, what those claims are for, what doctors,

what hospitals they went to, what pharmacy, what drugs they are

taking. It gives them sort of a quick summary of what their situation was for that quarter, much like you get with maybe investment accounts you have. I would be happy to provide this.

Mr. JORDAN. A quarterly statement?

Mr. BLOEM. Yes. So that people understand that they can begin

to have the knowledge you’re talking about in order to take effective control of their health status and their insurance. Thank you.

Mr. JORDAN. Ten minutes goes fast, Mr. Chairman. Thank you.

Mr. KUCINICH. I thank my colleague from Ohio.

We’ve been joined by two other members. And before we go to

Mr. Cummings, I will introduce Mr. Schock from Illinois, and also

the distinguished chairman of the Judiciary, John Conyers, who is

the author of—he is the author of H.R. 676. I’m always pleased to

work with him on that. Mr. Conyers, we are honored by your presence here, as well as Mr. Schock’s presence.

We are going to go to Mr. Cummings for your questions. Go

ahead, Mr. Cummings.

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I just

want to know, how many of you—which of you, if any—we will go

down the line—give bonuses for folks who deny coverage? Straight

down the line.

Mr. COLLINS. We don’t issue bonuses for people that deny coverage.

Mr. CUMMINGS. Is it a part of their evaluation? I’m going to ask

each one of you the same question. Is it part of their evaluation—

is there any kind of incentives with regard to evaluations regarding

denial of coverage; that is, claims?

Mr. COLLINS. I’m sorry, Congressman. Without going back and

doing research on that topic, I really could not give you a responsive answer to that question.

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Mr. CUMMINGS. You don’t know the answer to that question? Is

that what you are telling me?

Mr. COLLINS. Yes, sir.

Mr. SASSI. I can tell you that WellPoint does not have any policies in place to reward people for denying care.

Mr. CUMMINGS. So there’s no policies and you do not do that; is

that correct?

Mr. SASSI. My understanding is we do not.

Mr. CUMMINGS. Or physicians? How about physicians denying

treatment?

Mr. SASSI. There are no metrics or anything surrounding denial

of care.

Mr. CUMMINGS. Very well. Ms. Farrell.

Ms. FARRELL. Only physicians can deny a claim at Aetna, and we

have absolutely no incentives, financial incentives, tied to that decisionmaking process.

Mr. CUMMINGS. So employees don’t either; is that right? I know

you said physicians, but what about employees?

Ms. FARRELL. Physicians are the only ones that can actually——

Mr. CUMMINGS. In other words, do they ever?

Ms. FARRELL. Physicians are the only ones who can actually——

Mr. CUMMINGS. Did you ever have that policy of giving incentives

for denying claims?

Ms. FARRELL. You say ‘‘ever.’’ I can’t speak for ever.

Mr. CUMMINGS. To your knowledge, have you?

Ms. FARRELL. To my knowledge, no.

Mr. CUMMINGS. I see your lawyer is trying to advise you. You’re

welcome to do so because we are going to followup on this. Are you

finished, Mr. Lawyer?

Ms. FARRELL. To my knowledge, no.

Mr. CUMMINGS. All right. Mr. Bloem.

Mr. BLOEM. To my knowledge, during my tenure of 81⁄2 years, no.

Mr. RICHARDS. There are no financial incentives for our clinicians

to deny coverage.

Ms. REITAN. At HCSC there are no financial incentives and no

bonuses paid related to denial of care.

Mr. CUMMINGS. Then between today and yesterday, there are

some—apparently there must be some other insurance companies,

then, because the testimony we got yesterday was just the opposite

to that. But we will go forward.

Very interestingly, when you all were answering Mr. Jordan’s

question, you were talking about this whole idea of claims. And,

Mr. Richards, you in your oral testimony and your written testimony seemed—were very proud and I think you should be—I

think, when you said that over 99 percent of the claims that are

covered, people are receiving the services that the doctor recommended; is that correct?

Mr. RICHARDS. That’s correct.

Mr. CUMMINGS. Mr. Richards, when you say ‘‘claim,’’ what do you

mean by that?

Mr. RICHARDS. When I refer to that, I’m talking about the determination of whether the particular procedure is covered.

Mr. CUMMINGS. In other words, those are services that were already done; is that right?

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Mr. RICHARDS. Actually, a lot of times a physician, the individual’s physician would check with us prior to the procedure being

done under what is called a ‘‘prior authorization’’ to see if the procedure would be covered.

Mr. CUMMINGS. So you’re including—when you look at this, when

you’re giving us this figure, you’re telling us that in those cases before services were rendered, you include those, and you include

those after services were rendered that you paid, ‘‘claims.’’ Is that

what you mean by claims? Because I want to make sure that we

are going from the same page. Because the testimony we got yesterday is that, you know, the industry has a definition for claims.

And claims means some services that have already been rendered.

And then you’re talking about denial. But a lot of the problems

that we heard yesterday were things leading up to that, where the

doctor calls—we had one doctor here yesterday that said he literally had to double his number of employees just to deal with getting authorization to do procedures.

So just answer my question. When you say 99.9 percent, what do

you mean?

Mr. RICHARDS. I mean of the claims that we get, 99.9 percent of

those are approved without any need for appeal. I think—first of

all, I appreciate, Congressman, the chance to clarify this because

I don’t think it’s well understood by the public. CIGNA—and I suspect other insurance companies—get submitted a lot of claims that

are duplicates or are for people that are not insured by CIGNA.

Mr. CUMMINGS. Are those included in this definition?

Mr. RICHARDS. They are not included. So if, for instance, a doctor

submitted us a duplicate claim, we had already received one——

Mr. CUMMINGS. OK. I got the duplicate. What else? I want to

make sure—the definition is changing already.

Mr. RICHARDS. Well, I understand the committee is interested in

both what insurance companies are doing relative to medical coverage—which is how I was answering the question—but I also understand you’re very interested in the administrative procedures.

I’m trying to clarify that.

Fraud and abuse would be another reason why a claim might be

denied. And, for instance, I know that that is extremely important

to Medicare and the Office of the Inspector General. So we, for instance, denied—or did not pay 215 million claims for fraud and

abuse. Again, these would be situations where the individual has

already received the care but that the doctor or provider is inappropriately billing for that.

Mr. CUMMINGS. When you say a ‘‘duplicate,’’ do you mean a case

where somebody may have been denied and then they try again?

Mr. RICHARDS. No, no. I mean due to a billing error; we would

have already, for instance, paid the claim and it was submitted

again. Sometimes things cross in the mail, Congressman.

Mr. CUMMINGS. So is that the only other thing that is—that may

not be included in your denial rate?

Mr. RICHARDS. I think those are the major categories. The only

other thing I might mention is in California, there’s a fair number

of doctors in California who operate under a prepayment mechanism where we pay them a certain amount per month to cover the

care for our customers. So that prepaid—the way that prepayment

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works, we pay them whether the individuals seek care from that

doctor that month or not. We occasionally—we sometimes do get

claims from those doctors, again erroneously, for care that we have

already paid under the prepayment. In that case, those claims

would also not be paid.

Mr. CUMMINGS. Thank you.

Mr. KUCINICH. The gentleman’s time is expired.

The Chair recognizes the Congressman from Illinois, Mr. Schock.

You may proceed for 5 minutes.

Mr. SCHOCK. Thank you, Mr. Chairman. Thank you to our distinguished panel for being here. Unfortunately I have half the time

as the chairman and the ranking member. So I’m going to try to

make this quick.

It seems as we discuss health care and the rising costs of health

care, the focus seems to be on who is paying for it. And to me it

doesn’t matter whether you’re a State government providing Medicaid or a Federal Government providing Medicare or a private business or an individual paying for it privately, the issue is the huge

rise in costs.

My question to all of you in the private pay business is within

your respective organizations—I’m assuming when you negotiate

with rates to your preferred providers, you ask for some justification in costs. And what there seems to be very little discussion

about is the rise in cost. Some of that is true operating costs; in

other words, new X-ray, new MRIs, new technologies, staff. And

some of the rise in cost is also a cost shift.

In other words, the great debate this year is whether or not we

should cut Medicare rates by 16 percent, and we seem to pat ourselves on the back when we leave and we say we staved off cuts

again this year. We may have staved off cuts, but we didn’t adequately reimburse the providers for the true increase in their costs,

therefore requiring them to shift that cost to those in the private

pay industry.

So my question to each one of you is: Have any of you within

your organization looked at the increase in reimbursement rates

that you all are required to pay and thus raising your premium

rates? What percent of that is a true cost increase in terms of costs

to the recipient and what percent of that cost increase is because

of cost shifting as a result of the State and Federal Government

not adequately paying for their patients?

Mr. Collins.

Mr. COLLINS. Thank you for that question, Congressman. The

trend in unit costs—so the negotiated rates we have with providers

and doctors has been running in the range of 41⁄2 to 6 percent for

many years now. That is in excess of CPI. I don’t know the exact

percentage of what our costs are due to cost shifting. But according

to a recent Milliman Study, Milliman & Robertson of the accounting firm or the actuarial firm, $88 billion a year are cost-shifted

from Medicare and Medicaid programs to the private sector. The

American Hospital Association and the AMA have both published

statistics that show that Medicaid programs on average pay less

than 90 percent of cost and that Medicare pays less than 100 percent of cost. So there is a cost shifting that has been a constant

pressure on unit costs in the private sector, and it’s an ongoing and

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major driver of unit cost inflation in health care on the private

side.

Mr. SCHOCK. You said your premiums went up on the average of

4 to 6 percent?

Mr. COLLINS. Unit cost trend over time in the industry has been

running around 4 to 6 percent, and that’s over a long period of

time. Annual—just the unit cost. Other components of inflation are

utilization increases, new technology, those sorts of things. But just

straight unit costs has been running 4 to 6 percent.

Mr. SCHOCK. And have you looked at what percent of that is

costs of doing business and what percent of it is a shift?

Mr. COLLINS. I’m sorry, sir. I couldn’t answer that precise question. But 88 billion over the private sector is a significant amount

of money.

Mr. SCHOCK. Yeah.

Mr. SASSI. Congressmen, I would agree with Mr. Collins’ comments. Milliman did publish that study and it estimated that 88

billion is being cost-shifted to the private sector from Medicare and

Medicaid, which equates to about an overall increase across the

board for commercial members of about 10 percent, or, I believe the

study says $1,600 per covered member. It would be very difficult

for us to identify on a facility-by-facility, doctor-by-doctor understanding their entire cost structure, what goes into that, to identify

at that level. But I believe that the Milliman study is credible.

Mr. SCHOCK. Because I’m tight on time, I’m not going to ask anyone to repeat the same thing. Has anyone done—I guess I understand provider by provider, it’s not possible to do that. But I didn’t

know if you actually looked, did some independent study on a sampling pool of preferred providers on what their justification of increase in costs is?

Mr. RICHARDS. Congressman, first of all, I do agree that the underpayment by Medicare and Medicaid is absolutely a huge problem for hospitals and doctors and it’s definitely increasing medical

inflation. CIGNA has done some analysis of the disparity in the

rates between Medicare and Medicaid and commercial rates. I don’t

have that with me, but we would be happy to provide that analysis

of the average rates to the committee.

Mr. SCHOCK. I only have a couple—what is the yellow, 2 minutes,

1 minute?

Mr. KUCINICH. Go ahead and finish.

Mr. SCHOCK. OK. One other question, because I’m going to be

cutoff here. I wish I had more time. It seems to me, again as we

talk about controlling costs, I found it very interesting, I met with

the Consulate General of Canada, and he is very much supportive

of their Canadian health care system. But one thing I thought during the discussion was he said, Congressman Schock, he said, ‘‘It’s

still too easy in your country to sue doctors.’’ And I kind of sat back

in my chair and I said, ‘‘Excuse me?’’ He said, ‘‘Well, our health

care system in Canada would not continue to function if comprehensive tort reform were not a part of the health care plan

when we passed it in our country.’’

My question—obviously my view on this is we shouldn’t wait for

a single-payer system in our country to have comprehensive tort reform as a part of reducing not only the premiums that the health

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care community pays but, more importantly, the unnecessary medicine that’s ordered as a result.

My question to you, again, is whether or not within your respective companies you have looked at the amount of reimbursed care

that you give through the insured folks, what percent of that’s done

through defensive medicine as a result of a fear of these physicians

being sued?

Ms. REITAN. I actually don’t have the data with me, but I know

the BlueCross BlueShield association has done some work on this

exact issue. So we would be happy to submit that in followup.

Mr. SCHOCK. Could you provide us a copy of that?

Ms. REITAN. Yes, we would be happy to do that.

Mr. SCHOCK. Anyone else?

Mr. BLOEM. Tort reform would be very helpful because the absence of tort reform increases the intensity of procedures that doctors perform, which is one key aspect of utilization which you

talked about before.

If I may, I would just like to go back to your question about cost

shifting with government programs. One of the things that happens with Medicare and Medicaid is that they lower reimbursement rates in an effort to get more efficiency out of the health care

system. That, in part, does happen. But when it doesn’t fully pay

for the reimbursements, then what happens is there is a cost shift.

And the commercial segment, the commercial products pay for that

shortfall that’s not made up by efficiency that comes from those reimbursement cuts. And that’s estimated to be $1,500 for a family

of four who has private health insurance. That—if you look at the

total cost of private health insurance, that’s a major component it

of. Thank you.

Mr. SCHOCK. Thank you. And thank you, Chairman, for your

generosity.

Mr. KUCINICH. We are glad that you’re on this committee and we

appreciate your participation. The Chair will recognize the distinguished chairman of the Judiciary Committee who has joined us,

Mr. Conyers. You may proceed.

Mr. CONYERS. Thank you for this permission, Chairman

Kucinich. And I want to thank you for the hearing. These are distinguished, experienced members of the health insurance industry,

and I’m sure their testimony has been very important as we work

toward a reform of health care.

And I also want to commend the ranking Republican member,

Aaron Schock, who is carving out quite a record of distinction for

himself. I’m glad he is here with us as well.

Ms. Farrell, what do you think—what is your feeling about the

public option, and how do you think it fits into health care reform

as you see it, ma’am?

Ms. FARRELL. My view of the public option is that I think we

really need to focus our efforts on understanding what problems

that we are trying to solve around access and quality and affordability, and then ask ourselves at the end of that whether or not

a public plan would actually progress us further down the path

than some of the bills that have already been put in place. I do

believe——

Mr. CONYERS. Could you pull the mic just a little closer, please?

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Ms. FARRELL. One of the things that’s concerning about a public

plan, which Congressman Schock was just referencing, is the cost

shift. If a public plan were to reimburse at Medicaid or Medicare

rates, there would be quite a cost shift to the commercial segment,

which would in turn result in increased costs in the commercial

sector, and therefore increased premiums, which is really antithetical to what we are trying to achieve in health care reform.

Now, Mr. Richards, it was my impression that the public option

would be designed to save money, not cost more money, and that

it would provide a choice between citizens as to whether they wanted a private insurance plan, of which there are literally hundreds,

or would they want a public plan. Is that your impression?

Mr. RICHARDS. Congressman, CIGNA supports many of the reforms that are being debated in the debate in both the Senate and

in the House, including personal coverage requirements, guaranteed coverage, the elimination of preexisting conditions, and the reform of payment mechanisms. We believe if those reforms are enacted, then a government-run plan is not necessary.

Mr. CONYERS. So, Mr. Sassi, if you agree with that last comment,

then you don’t want any competition in the insurance—health insurance field, right?

Mr. SASSI. I think it’s our position that there is a lot of competition today in the health insurance industry. There are over 1,300

health insurers in this country that compete for business.

The challenge is that when the Government could come in and

have the ability to set reimbursement rates, that it creates an

unlevel playing field between private industry and the Government, and that certainly has the potential to exacerbate the cost

shift that already occurs between Medicare and Medicaid and the

private sector.

We also fear that as a result of that, since we don’t have—we

would not have a level playing field, since insurers are subject to

taxes and other types of expenses, that lower reimbursements, coupled with taxes that we pay, create a dramatically unlevel playing

field and that could reduce choice for the American public.

Mr. CONYERS. Well, Ms. Reitan, with this unanimity against the

public option, we are putting in a provision that everybody has to

get insurance, and if you can’t afford it, guess who will pay for?

The Government. And you’re talking about the public option will

cost—someone is talking about it, not you. How could one public

option destabilize 1,300 private insurance companies?

Ms. REITAN. Our company agrees with the statement that was

made earlier, that when you implement some of the reforms that

are being discussed that require insurers to offer coverage to all individuals, regardless of their health status, as long as they have a

requirement to access and carry coverage——

Mr. CONYERS. Could you pull your mic up a little closer?

Ms. REITAN. We do agree there are people who are lower income,

often low-income working individuals, who will need some subsidy

in order to be able to afford health care coverage. So we believe if

you pass reform with all of those elements, we actually will have

a more well functioning health care system today and have the

ability to put in the market plans that can be affordable over time.

Mr. CONYERS. Couldn’t a public option accomplish that?

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Ms. REITAN. We don’t think it’s needed in order to accomplish

that.

Mr. CONYERS. Why not? There are a lot of people advocating it.

Ms. REITAN. Because those reforms that I have described have

never been in existence in the United States. And so by passing

them, we think that can significantly improve the health insurance

system and make coverage both more accessible and more affordable.

Mr. CONYERS. Well—surely.

Mr. KENNEDY. We have a public option in the VA. The Veterans

Administration is essentially a public option. So we do have one

here in this country.

Mr. CONYERS. What about Medicare? Who do you think runs

that?

Mr. KENNEDY. Exactly.

Mr. CONYERS. Well, let me—I’m not doing too well on these question, Mr. Chairman. Nobody seems to——

Mr. KUCINICH. I would suggest that the Chair is doing very well

with the questions. It may be the answers that we may be having

difficulty dealing with here, but your questions are just fine.

Mr. CONYERS. Well, let me try Mr. Collins. Have you ever heard

of a universal single-payer health care system?

Mr. COLLINS. Yes, sir, I have heard of the concept.

Mr. CONYERS. And have you developed some feelings about it?

Mr. COLLINS. Well, yes, sir, I have—clearly I’m a partisan for

the—having a private health care, robust private health care sector. I believe that the private health care sector brings a lot of

value to the overall system that we have here, and of course we

have a robust public system with Medicare, Medicaid, VA system,

TRICARE. Those are all components of the public system.

I believe the private system is important because it brings in innovation, it brings energy, it brings change, it brings ideas that are

often used in the public sector system as well. And I think we can

have both a private and public system. We can build on what is

good in the public system—in the private system, and use those

things to improve the private system as well, sir.

Mr. CONYERS. That’s encouraging. Then why not let’s try the single-payer system, H.R. 676? That’s mostly a public system. What’s

wrong with it?

Mr. COLLINS. I’m not actually familiar with that bill. If it’s a single-payer system it would be the end of the private system as we

know, I believe.

Mr. CONYERS. Is that true, Mr. Bloem? Does that mean that the

private system goes out if you have a single-payer system?

Mr. BLOEM. I think the primary concern, Congressman, is the

fact that we mentioned before with respect to the cost shift. The

Medicare and the government programs, the VA, all of those programs have lower rates of reimbursement. So that in the entire

system, not all of the costs are being covered by—not the proportional costs of care that those programs—that those programs give

are being borne by the Government. So there is a shift, as I mentioned to Congressman Schock, of about $1,500 for a family of four

every year.

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And so I think one valid concern would be that if all—there was

a single payer and all of the costs were borne by the Government,

then there would be none of the innovations that the others have

discussed. It would be the end of the commercial. But then you

would have to—the Government would then have to absorb all that

other cost, and that would make it—that would make it more expensive for everyone. There is also, I want to remind everybody,

what was said to—was said about the value of what the private

sector provides.

Mr. CONYERS. But what about all the cost increases that the

health industry is imposing upon people with health care, not only

in their premiums but also in pharmacy prescriptions that are

being raised? I mean, you talk about cost shifting; you ladies and

gentlemen are representing companies that keep raising the costs

of premiums every single year, and yet you’re worried about somebody else shifting costs.

Mr. KUCINICH. Mr. Conyers, time has expired. But each one of

you that wishes to respond to his question, please do so. And I

would urge any or all of you to do it. Would someone care to respond?

Mr. CONYERS. Could we start—Ms. Farrell, could you help me

understand how I can increase my sympathy for health insurance

companies?

Mr. KUCINICH. Ms. Farrell.

Ms. FARRELL. Yeah. The way we look at premium increases every

year and the way they are calculated is based on the underlying

increase in medical costs. And so——

Mr. CONYERS. So you have to do it. But the profits are greater

and help—the only people I can think of that make more profits

than the industry that you six represent is oil and pharmacy.

Mr. KUCINICH. The gentleman’s time is expired.

Mr. CONYERS. I’m sorry.

Mr. KUCINICH. We are grateful that you’re here.

Mr. CONYERS. All right. Thank you very much.

Mr. KUCINICH. And the Chair recognizes Mr. Kennedy. And we

are grateful that you’re here, Mr. Kennedy. And we are grateful for

your family’s lifelong commitment to health care for all Americans.

Mr. KENNEDY. Thank you, Mr. Chairman.

To the panel, as my former colleague was just talking about the

public option, and given the environment right now in Congress

with respect to the political liability of a public option, I wanted to

get to how we are going to implement savings in the event that a

public option isn’t passed. I am in strong favor of a public option

and want that on the record, but I understand that the political reality of what is going on right now in Congress shows that that

may or may not happen.

If that doesn’t happen, I want to hear today what insurance companies are going to do to step up to the plate to make sure that

we don’t waste a lot of time before we get put into place what will

be the alternative to a public option; that is, perhaps a trigger of

the public option, which means that we are going to have to wait

for us to show that insurance companies aren’t doing their job before a public option then gets kicked into place. And, of course,

that’s an ugly kind of scenario because it’s basically saying OK, we

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are going to wait until things go wrong before we fix them. And

that presupposes things are going to go wrong.

So obviously we don’t want things to go wrong. And what I would

like to hear from you is—we hear a lot of talk about different tools

in health care that will save money and improve quality and efficiency, and we are all familiar with the inefficiencies in our current

system that lead not only to wasted dollars and poor health outcomes for patients, but also huge administrative headaches and red

tape for patients.

Health care information technology, as I know, is one of the tools

we talk about in achieving efficiencies. But another area where we

could generate savings and quality improvements is through a

process called improvement tools, such as value stream mapping

and flat mapping.

We talk about how to make clinical improvements to improve efficiency, so to save money. But what do you see for these as potential to save money through the process of administrative improvements? And what can be done to incentivize the use of these tools

in not only making clinical improvements, but also making improvements in the whole process of administrative making and cutting out a lot of that red tape that everybody always acknowledges

is a big cumbersome part of your business? Could you tell us how

do we incentivize in government a way for you to do the right

thing?

Mr. SASSI. Congressman, I think there are many things that the

private sector can work with government on. I think you brought

up an important element: health information technology. I think

there—certainly my company, WellPoint, is very interested in implementing health insurance technology. Examples include e-prescribing and making sure that—making available to doctors the

ability via a PDA to prescribe—to check for drug-to-drug interactions, to get personal health information——

Mr. KENNEDY. We know all—we don’t have much time. We know

all about IT and what it can do. But how do we ensure that, you

know, when you have an IT system that’s actually an IT system

that’s working to the maximum effect? We all know IT can work,

but it doesn’t do a lot of good to have IT and say all those great

buzzwords about keep prescribing and, you know, Doctor, you

know, supported protocols and all of that stuff. It’s not going to do

well if you don’t have a way of monitoring whether the system is

actually running efficiently.

And when the doctor says, oh, go out for these five referrals, and

they go out to the front and the administrative clerk only gives

them three of the five, who picks up that it was only three of the

five? How do you measure whether your system is working up to

speed?

How do you measure whether your system is working up to

speed? Who’s going to be testing to make sure that you’re doing the

job in terms of getting the most efficiency out of your IT system.

Mr. SASSI. I think each company owns that for their own IT

areas, but I think it’s a shared responsibility.

Mr. KENNEDY. See, that’s the problem. See, that’s the problem,

because you can’t have all these proprietary systems out there. Everybody thinks they’ve got this new age IT thing going, and then,

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you know, they’ve all got different systems for, oh, we’re going to

try to do this process more efficiently here and this process here,

when we don’t have standards.

We have basic metrics for clinical care. Where are the metrics for

making sure that you’re going to do the best administratively? I

mean, we can do all the protocols in the world, when you come into

an ER and say, you know, wash your hands, get this glove, get that

glove, cooperate this way, we want this person to be treated so that

they don’t get an infection.

What I want to know is what you are doing to standardize, so

no matter what IT system there is and what health system, we

know that you all are doing, you know, not your own proprietary

thing, but whatever proprietary thing is doing, it’s Good Housekeeping Seal of Approval proprietary system that is squeezing out

every bit of waste and duplication and redundancy that there is out

there; how do we know that it’s really working to the best effect

that it’s supposed to be?

Mr. KUCINICH. The gentleman’s time has expired, but the witness—one of the witnesses may respond if they care to. Anyone? I

think that Mr. Kennedy raised some important points. In the followup discussions that staff has with the panel, we’ll explore that.

Thank you, Mr. Kennedy.

We’re now going to go to round two of questions. Just a little bit

of housekeeping here. On the last round of questions, I asked Mr.

Richards for information about his town hall meetings. You know

about all of our town hall meetings, we want to know about yours.

And so you have internal town hall meetings. We want your audio

tapes as well as copies of all minutes of those meetings and all

memoranda that was discussed at those meetings or actions decided at those meetings. So you will be hearing from us in an even

more formal way, but just to understand that we do want that information, and I just announced it from the Chair here.

Now, I want——

Mr. CUMMINGS. Will the gentleman yield?

Mr. KUCINICH. The gentleman will yield.

Mr. CUMMINGS. Just one quick question. We don’t know whether

the others have these types of materials. I just was wondering if

the gentleman was——

Mr. KUCINICH. At Mr. Cummings request that we will ask, so

we’re not singling you out, Mr. Richards, we will ask everybody to

produce the same information. You may not call them town hall

meetings, but we will try to find out what it is you have there, try

to organize your troops on the issue of cost reduction.

Mr. CUMMINGS. Thank you, Mr. Chairman.

Mr. KUCINICH. I thank the gentleman.

Mr. KENNEDY. Mr. Chairman, in response to the questions I’d

asked, if all of them could get back to me on actual, tangible recommendations as I pointed out to what we can do to standardize

incentives for them to have widespread standard of option of IT to

incentivize those savings.

Mr. KUCINICH. I thank Mr. Kennedy. This is not solely an investigative subcommittee. We also look for recommendations as to how

the existing system can be improved. So, as long as we have this

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system, I would imagine you ladies and gentlemen probably have

some pretty good ideas. So thank you, Mr. Kennedy.

Now, Ms. Farrell, let’s talk about Aetna. Aetna’s the third largest

private for-profit insurer, according to Fortune magazine, but your

current management returned your company to profitability by

shedding members. You made bigger profits with fewer premium

payers; isn’t that true?

Ms. FARRELL. Are you referring to back in the late nineties and

early 2000’s?

Mr. KUCINICH. That you have made—there is a point at which

you shed some members, and the profits started to go up; isn’t that

right?

Ms. FARRELL. There was a point in our history where we were

as an enterprise not profitable, and one of the reasons—the big reason why we were not profitable is we had underestimated medical

costs.

Mr. KUCINICH. I’m sure. That’s exactly the point. So how many

customers did you have to lose in order to return to profitability?

Ms. FARRELL. I don’t recall. It wasn’t looked at in terms of how

many members we had to lose. It was looked at in terms of how—

what is the underlying weight of medical costs and how are we

going to price appropriately for that in the marketplace.

Mr. KUCINICH. Forbes magazine said you had to lose about 8 million. We’re going to put that article in the record.

[The information referred to follows:]

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Mr. KUCINICH. Does Aetna have an estimate of how much expenses the company avoided by shedding those policyholders?

Ms. FARRELL. I don’t believe it was looked at that way. It was

looked at relative to——

Mr. KUCINICH. Can you determine for us, look at your internal

memoranda, at your actuarials? You should be able to figure out

how much money you actually saved by shedding 8 million policyholders?

Ms. FARRELL. I can look at that——

Mr. KUCINICH. I appreciate if you look at that. Also, almost all

of those 8 million people received their health insurance through

employers, and they lost their Aetna health insurance when Aetna

raised prices of the group plans beyond what their employers could

pay. I mean, isn’t that true?

Ms. FARRELL. I say if they left us, it was beyond that which they

felt was a reasonable premium——

Mr. KUCINICH. Thank you. Now, your CEO has spoken publicly

about the significant investments in sophisticated information technology he authorized at the start of his leadership. I assume those

IT investments helped Aetna identify employers for repricing. So

I’m wondering, could you tell the subcommittee if Aetna picks employers to shed by, for example, the type of occupation, work is performed?

Ms. FARRELL. No, that’s not the way we would do that.

Mr. KUCINICH. Age in the plan, the age of the workers?

Ms. FARRELL. You’re asking about our underwriting practices?

Mr. KUCINICH. Does your IT system identify people by age, and

do you pick employers to shed by the age of the workers in the

plan?

Ms. FARRELL. Our IT system does not identify people by age. The

way it works is that an employer will provide us with a list of their

employees and, along with that list would be other requirements in

order to underwrite, age being one of those.

Mr. KUCINICH. Can you identify how long someone has been in

the system?

Ms. FARRELL. It would identify how long they have been a member at Aetna, yes.

Mr. KUCINICH. OK. Now, do you pick employers to shed by

claims histories of the workers in the plan, such as frequency of

emergency room visits or disease clusters, like cancer?

Ms. FARRELL. Could you repeat your question, I’m sorry?

Mr. KUCINICH. I’m just trying to explore how employers get shed.

Do you look at claims histories of workers in the plan? For example, if somebody visits an emergency room frequently or there is a

number of people with cancers, do you make decisions based on

some of those principles? Are any of those programmed into your

information technology?

Ms. FARRELL. No, we never drop a member because of an increase in their medical.

Mr. KUCINICH. Like some, there will be a report that will just be

spit out that will say, uh oh, cluster of diseases here, cancer, high

cost, out?

Ms. FARRELL. No.

Mr. KUCINICH. That does not happen?

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Ms. FARRELL. That does not happen.

Mr. KUCINICH. And you don’t screen by location or ZIP codes; or

do you? Do you screen by location or ZIP codes?

Ms. FARRELL. One of the ways we price our business is to actually look at geography because there are significant cost variations

by geography across the United States.

Mr. KUCINICH. Are those cost variations determined by, among

other things, epidemiological factors?

Ms. FARRELL. They are determined by looking at the underlying

costs by geography, and there can be significant variations just

towns away from one another. So that’s one of the things that we

do take a look at.

Mr. KUCINICH. My time has expired on this round, but what I’d

like to do, Ms. Farrell, is so that we can better understand the relationship between your information technology and how it serves as

a tool for decisionmaking, if you could provide this subcommittee

with a narrative so that we can come to an understanding of the

relationship between the data that you gather and the way that’s

used as a tool for your decisionmaking with respect to your customers and whether they will continue to have policies. This would

deal with shedding, rescissions, even, you know, any use of information technology that would use to shed any of those 8 million

customers.

And since we’re trying to be fair to each and every one of you,

this subcommittee’s going to ask each and every one of you by letter to provide that information, that with the information technology that you have, how does it—does it help you decide which

customers to shed and how does it do that?

OK. My time has expired. We are going to go to Mr. Schock. You

have 5 minutes. You may proceed.

Mr. SCHOCK. Thank you, Mr. Chairman. You know, I guess in response to some of the concerns raised, I would only say that, you

know, I think most of us agree—at least I agree—with the comments that were made earlier that health care premium costs are

a function of reimbursement rates. And so I think it’s disingenuous

to compare a government-run plan to a private plan when a private

plan cannot control for costs and a government plan can.

In other words, in a truly static system where all reimbursement

rates are set at a Medicare and Medicaid reimbursement level, the

system then would be forced to control their costs either by reducing quality or reducing options.

And I think for those of us who share the concern of a movement

toward a single-payer system, it is clearly focused on the quality

of the care the patient will receive and continuing the progress that

this country and its health care system has made over those countries with a different plan in terms of the innovation and the technology that we have here in our country.

I can only speak from my experience prior to being in Congress,

which was in the State legislature in Illinois, and I witnessed firsthand what happened in Illinois under then Rob Blagojevich’s

health care proposal, which was All Kids, which did similar to

what the Majority wants to do here, which was basically offer

health care, a government plan, for all kids in the State of Illinois

regardless of income.

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I saw firsthand in my legislative office individuals who had children insured, individuals who were duly employed by an employer

who offered a private health care plan and who opted for the savings of anywhere from $50 to $70 a month to take their child out

of the private plan and enroll them in the All Kids Medicaid reimbursement level health care plan.

Now, it did two things. No. 1, I’ve got a very poor legislative district, 40,000 voters, 20,000 of them on food stamps. The people living in poverty who otherwise had access to care, their access dried

up and went away. Today, there is not a dentist in the city of Peoria, Illinois that will take an All Kids patient.

Second, it ballooned the deficit within the State of Illinois’ Medicaid program, All Kids program. We are now 9 months late in our

reimbursement levels.

So I would just throw this out there as a case-in-point example,

a microcosm in our country where we have tried a similar option,

a competition if you will, against private insurers.

Second, and to that point I just don’t—I don’t buy the concept

that the solution to greater quality, greater access, and lower costs

is the Government.

To that point, though, I think we need to do a better job of providing—if we understand we’re trying to control cost, if everyone

accepts the fact that health care premiums rising are making it

more difficult for businesses to provide health insurance, for individuals to provide health insurance, how do we lower the health

care premium costs? Are we going to have to lower the request for

services or the rates that we’re paying back?

My question to you would be, how do we give those tools to the

consumer? Because it’s my view right now, as consumers, if I have

a private-pay health care plan, whether it’s provided to me as an

individual or whether it’s provided to me by my employer, I don’t

have the tools necessary—there’s not a lot of competition. I’m digressing a little bit.

But there’s a lot of talk about health insurance being compared

to automobile insurance. The biggest difference I see in automobile

insurance is that if my car gets in a wreck I’m going to do one of

two things. I’m going to go around and I’m going to get probably

two or three estimates, not because I’m going to pay for out of

pocket, but because I know when I turn in my automobile expenses, my automobile insurance rates are going to go up. That

connection doesn’t seem to be there—while it’s true, that connection doesn’t seem to be in the mind of the patient as he or she accesses the health care system.

So what tools can you in the insurance industry give to consumers, how can we look at maybe reforming the way in which people

buy their health care, not the premium, not the premium, but rather, the actual service, how they buy it—and I understand you can’t

do it in emergency care. But if I go in—I live in a relatively large

city, 150,000 people. A lot of places offer MRIs and each one of

those locations charge a different rate. Yet that information is not

readily available to me as a consumer.

I think that is a part and parcel to us of doing a better job of

controlling the costs that go and drive up health care premiums.

So if you could answer that question I would appreciate it. What

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are you doing now and what could we be doing to give those tools

better to consumers?

Mr. KUCINICH. The gentleman’s time has expired, but the witnesses can answer the question. Thank you.

Mr. SASSI. Congressman, I can answer that from my company,

WellPoint. Several years ago, we embarked on a journey to increase

the transparency so that consumers could more easily compare the

prices of commonly used services within their geographic area; because you’re right, there is a large disparity between an MRI in

one part of the city and another part of the city, a cost for commonly—knee replacements in one part of the city versus others.

So we created Anthem Care Compare, which is a Web site that

identifies the top 34 elective-type procedures and a member can go

into that Web site, type in their ZIP code, and it will identify different providers within the area and the costs associated that

would be charged by the different facilities for those areas. Plus,

we try and tie in as much quality—publicly available quality information that is available to members, so that if you’re considering

having your knee replaced at a certain facility, how often do they

do that procedure and what is the success rate, what is the readmission rate for that?

We have rolled that out in many of our markets across the country, and actually we’re now providing that service to many

BlueCross BlueShield plans across the country. So that’s one example of how we can increase the transparency.

Mr. RICHARDS. Congressman, you mentioned MRIs, which is a

great example. In some geographies the cost of an MRI can vary

by 100 percent or more depending on where you go. At CIGNA,

we’ve provided the cost of MRIs on our Web site so individuals can

go and look it up. The vast majority of the health care providers

that work with us allow us to do that. There are some that do not

allow us to show the transparency, but the vast majority do, and

it does help.

The other thing I would say is—along the lines of tools, you need

to provide the incentives to individuals. One of CIGNA’s customers

is Safeway, and I think they’re a marvelous example of a company

that has worked with CIGNA to both increase the cost and quality

transparency—because it’s not cost of areas but quality of areas as

well—among their employees so they can get the right care, get it

at the most efficient price. They also incentivize people for appropriate behaviors, whether that’s not using tobacco or exercising because, at the end of the day for Safeway, if you have a healthier

employee, it’s also going to be a lower-cost employee.

Mr. KUCINICH. I thank Mr. Schock for his presence here, and if

you have followup questions, you want to put them in writing, we

will make sure that they will go through the committee. We support your request.

You know you brought up that issue—I just want as Chair just

take a little bit of your pointing out that, you know, when you

brought up the issue about car insurance and compared to health

insurance, I mean that’s one of the debates right now. And just

what occurs to me is that if you wrecked your car, you get a new

car. If you wreck your health, you’re dead, you know, unless you

believe in reincarnation.

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Mr. Schock, thank you.

Mr. SCHOCK. Thank you.

Mr. KUCINICH. The Chair recognizes Mr. Cummings.

Mr. CUMMINGS. As I was sitting here listening to you all, I was

saying to myself, boy, they sound real nice, I mean it sounds like

everything’s rosy, and you know, when—it’s amazing, the people

who sat here yesterday made us—I mean said some things that

were very, I thought, I felt, very damaging to the—to what you all

do every day. I’m not talking about you all individually, of course.

And the thing I guess that I’m just sort of wondering about, they

made a big deal of this whole denial of claims. And I specifically

asked them the question about whether they felt that things were

worse or better since the Clintons tried to get through health care

reform, and they said that they were far worse with regard to denial of claims.

And so, Ms. Farrell, I’m going to go to you because I—for one

reason because you had said something that interests me. You had

talked a little bit earlier about claims, that there were no—there

was no one—that only—maybe it was several of you who said only

doctors deny claims; is that right? So you all were telling me that

there are no other nonmedical people who make decisions that a

person cannot get a certain treatment paid for; is that what you’re

telling me?

Ms. FARRELL. Just to clarify, what I said was that there are no

medical decisions or no medical denials that are made by somebody

who is not a physician. You can deny a claim for a nonmedical reason, and that decision can be made, obviously, by a nonclinician.

Mr. CUMMINGS. And I take it that those kinds of decisions are

made every day, are they not, by nonmedical people?

Ms. FARRELL. Nonmedical decisions, yes, can be made by nonmedical people; but if it’s medically related, it is made by a physician.

Mr. CUMMINGS. And so a claim is for services—I just want to

make sure our definitions are right again—services already rendered; is that right? A claim is normally for something—I see you

shaking your head, Mr. Bloem; is that right?

Mr. BLOEM. I think that we are as a group here struggling with

what the definition of a denial of a claim is. To me, a claim, when

I cited what the survey said about us, a claim—there are basically

three kinds of claims, and the first kind has been really enunciated

here quite well. That’s when you get a duplicate claim. That’s when

you’ve rendered service, as you said, and then you get a claim that

comes in, and then another claim comes in and you probably paid

the first one.

In the denial rate, in the numbers I cited, the 5.7 that we have

and the 5.4 that we have and the 8.7 that Medicare Part B has,

in those claims, the biggest cause of that is duplicate claims.

The next kind of claim is for experimental or investigational

where there wasn’t any preauthorization, which was also discussed

earlier.

And the last kind is where the employer has not—has through

the policy terms decided we are not going to cover that kind of a

claim, that kind of a process, that kind of a procedure.

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Now, the other thing that we’re struggling—when you are asking

questions, I believe you’re also talking about coverage determination; other people have coverage in advance of when services are

covered.

Mr. CUMMINGS. Yes, OK. I’ve got to ask you this. I understand

a person can have their treatment preauthorized and even get a

preauthorization number, get treatment and still the payment for

that same procedure may be denied; is that true?

Mr. BLOEM. In a coverage determination, there’s an initial decision made about whether this procedure is covered, and that, in

our company, like in the case of Ms. Farrell’s company, that’s done

on a denial of coverage, is only for medical reasons, is only done

by a licensed board-certified medical director.

Mr. CUMMINGS. And so none of you all, then, nobody up here has

anyone who denies a person treatment, in other words that’s—in

other words, how many of you all deny folks, if any of you have

people who you give bonuses to or give financial incentive for a denial of treatment? Nobody.

Mr. BLOEM. I answered before, neither, none.

Mr. CUMMINGS. No, OK. I just think that based upon the testimony that we got yesterday, the testimony was clear that there are

many, many instances where insurance companies are basically intentionally—and you may call it coverage, you may call it claims,

whatever—holding back decisions and literally waiting for certain

things to happen and, sadly, in some instances, death, and then,

you know, and the person is denied one way or the other. So as

the chairman said, here—different with an automobile—a person

dies, and that’s a sad, sad situation.

Mr. KUCINICH. The Chair recognizes Mr. Conyers. You may proceed for 5 minutes.

Mr. CONYERS. Thank you for your generosity, Chairman

Kucinich.

Ms. Farrell, are you aware of the report from Health Care for

America Now, on July 15th, that reported that profits at the 10

largest publicly traded insurance companies was 428 percent from

2000 to 2007?

Ms. FARRELL. I am not aware of the specific report that you’re

referencing, but Aetna’s profits—for every dollar we take in, we pay

about—we make about 5 cents in profit, pay about 84 cents in medical claims.

Mr. CONYERS. Well, what about you, Mr. Richards, are you aware

of this report?

Mr. RICHARDS. I’m not aware of that report. I do know that if you

look at CIGNA’s total profits globally, we make about $1.66 per

customer per month.

Mr. CONYERS. I see. Mr. Sassi, have you ever heard of this statement?

Mr. SASSI. I am not aware of that report either.

Mr. CONYERS. OK. And Ms. Reitan, you must have heard about

this.

Ms. REITAN. I have not heard of it, and we wouldn’t be in there

because we’re a noninvestor-owned company.

Mr. CONYERS. Well, I know Mr. Collins has.

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Mr. COLLINS. As a matter of fact, Chairman Conyers, I’ve seen

that report in the newspaper and I believe it’s just—it’s somewhat

deceptive in the way it’s framed. There’s been an enormous amount

of growth among the top companies, and it’s simply adding up the

gross profits of companies as they’ve grown over time. So there’s

a larger share of profitability today in those top companies than

there was 10 years ago, but that doesn’t mean that profits have

grown per member, per unit of business, per customer. It—one necessarily doesn’t flow from the other. It’s a function of the size.

Mr. CONYERS. Mr. Bloem, you know about this, don’t you?

Mr. BLOEM. I’m not familiar with that study, but let me comment

on my company.

Mr. CONYERS. Wait a minute, I don’t want you to comment on

your company. You’re not familiar with the statement?

Mr. BLOEM. I’m not familiar with—I’m not familiar with the

study or the statement.

Mr. CONYERS. OK. Well, how long have you been in the business?

Mr. BLOEM. I’ve been at my company since the beginning of

2001.

Mr. CONYERS. OK. Have you ever heard of Health Care for America Now?

Mr. BLOEM. No, I’ve not.

Mr. CONYERS. OK. Well, let me ask you this question. Are you

familiar with a recent study of the American Medical Association

that 94 percent of the insurance markets in the United States are

highly concentrated?

Mr. BLOEM. I’m not. I would——

Mr. CONYERS. You’re not familiar?

Mr. BLOEM. I’m not familiar generally with those statistics, but

it’s not an unfamiliar statistic that in terms of some markets don’t

have a lot of competition, but most markets have much competition. Excuse me.

Mr. CONYERS. Well, do you contest this finding of the AMA?

Mr. BLOEM. I don’t know enough to contest or affirm.

Mr. CONYERS. OK. Well, let’s go down the line again then. Ms.

Farrell, you’re a student of the—I know you subscribe to AMA journals; you’ve heard of it.

Ms. FARRELL. I’m not aware of that specific study.

Mr. CONYERS. You’ve never heard of it. Richards, you never

heard of it?

Mr. RICHARDS. No, I have not, Congressman.

Mr. CONYERS. Well, let me just ask to save time: Has anybody

ever heard of it? Has anybody ever heard of the AMA?

Mr. BLOEM. Yes.

Mr. RICHARDS. Yes.

Mr. SASSI. Yes.

Mr. CONYERS. All right. Well, let me—let me ask you about this.

Have you ever heard of the statement that’s been made public, and

to my knowledge never contested, that the 10 largest companies in

health insurance, the CEOs’ compensations total $118.6 million, an

average of $11.9 million per CEO?

Now, let’s save some time. Anybody ever heard of that before?

Nobody? Well, do you want a citation for it? Not particularly. OK.

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All right. Let me ask you this, Ms. Farrell: What is your annual

compensation per year?

Ms. FARRELL. My annual compensation is something that is very

private to me and something that I would be happy to submit——

Mr. CONYERS. You don’t want to tell me; is that what you’re saying?

Ms. FARRELL. I’m saying that I consider my compensation to be

very private and that I would be happy to submit it to the committee in writing.

Mr. CONYERS. But you don’t want to say it publicly?

Ms. FARRELL. No, because I do consider it to be private.

Mr. KUCINICH. Mr. Conyers, before you came, we asked the witnesses to submit information about their compensation in writing,

if they choose not to answer at this committee meeting, but they

will present it to us in writing.

Mr. CONYERS. OK.

Mr. KUCINICH. We can still get that information with their agreement.

Mr. CONYERS. Last question. Does anybody here—I’ve never had

a hearing with six executives of health insurance who were all on

the same panel. This is a new experience for me. Do any of you

want to tell me what your annual compensation is, just for the

record, without having to submit it in writing?

Mr. KUCINICH. If the witnesses care to respond, you can do that.

If you don’t, we certainly want you to submit that in writing.

Mr. CONYERS. What do you want to tell me, Ms. Reitan?

Ms. REITAN. I’ll tell you I make $728,000 a year in salary.

Mr. CONYERS. OK. I thank you for that. And what did you want

to tell me, Mr. Bloem?

Mr. BLOEM. My compensation is $545,000 a year. It’s a matter

of public record.

Mr. CONYERS. Sure, and I thank you for that. And what do you

want to tell me, Mr. Sassi?

Mr. SASSI. I’d be happy to provide it in writing but it’s a privacy

issue.

Mr. CONYERS. It’s what?

Mr. SASSI. I consider it a privacy issue, and I’d be happy to submit it in writing.

Mr. CONYERS. OK.

Mr. KENNEDY. Would you yield?

Mr. KUCINICH. Before we go to Mr. Kennedy, I just want it understood that you have agreed to submit this information to the

committee. As long as we have that agreement, that’s fine. You can

choose to answer the question now or you can choose to answer it

in writing. It’s really your choice.

Mr. KUCINICH. So, Mr. Conyers. Mr. Kennedy,

Mr. KENNEDY. I just to yield, just to be happy, John was bringing

up a point. I think folks here just are obviously just working in a

field that’s perfectly legal and set up by our society to earn what

they’re doing and there’s nothing wrong with that.

I think what is wrong, as the gentleman’s trying to point out, is

that last year the head of CIGNA earned $11 million. Now, if

you’re going to talk about where that money’s coming from, it’s

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clearly coming from denied claims. The head of the UnitedHealth

Group earned $9.4 million. Now, these are public records.

So you don’t have to ask. They’re nice to—I’m sure they love to

be called senior executives; but frankly, John, I think they hope to

be senior executives at those kinds of pay scales, but they’re I’m

sure not at that level yet.

But the point is, we are trying to make the point that the industry is allowing for these kinds of exorbitant pay at the very top,

which just begs the question, it’s an allowable industry in our country. But we need to know, you know, kind of what is this a matter

of where these dollars are coming from when people are paying

these premiums and people are getting rejected for health care,

how are these compensations so exorbitant?

So I appreciate the questions you’re asking. I also understand

the fact that these individuals here have every right to say or do

what they’re, you know, doing because they’re in an industry——

Mr. KUCINICH. If I may, Mr. Conyers’ time has expired. However,

we will now go to you, Mr. Kennedy, if you want to yield any time

back to Mr. Conyers. You can proceed for 5 minutes, and we’re

going to go one more round after that, and then we will be done,

because I know everyone here is trying to catch your planes.

Mr. KENNEDY. Well, I would like, Mr. Chairman, to go back to

this whole idea of how we’re—if insurance has thus far not gotten

around to figuring out ways to help the government or the society

change reimbursement reform, if we’ve known for years that our

system is upside down, that all we pay is for sick care rather than

health care, if there are simple ways for us to keep people from

being frequent flyers in our emergency rooms, if we just did X, Y

and Z, and that that would lessen the pressure on you as insurers

to charge your customers exorbitant premiums, then why haven’t

you in your industry taken upon yourself to be the biggest advocates for insurance reform over the last 20 years?

And furthermore, what I don’t get is that back home, like most

of my businesses for the most part are passive when it comes to

their insurance premiums. They let their insurer—insurance carriers kind of dictate to them. They said, oh, here’s your premium

this year. And in fact, it’s the insurance companies that work for

the company that they are, you know, subscribing for and they’ve

been hired to do their policies for.

And so I just don’t for the life of me understand why, if it’s in

the interest of their client to reduce premium costs and so forth

and health—why insurers in this country haven’t been at the forefront of this health care debate saying, listen, we’ve got—here are

the ways we can restructure the health care market based upon a

capitalist system whereby it pays to have better care at reduced

costs.

That’s what I can’t figure out, Mr. Chairman. If this is really

about making money, we know there’s plenty of money to be made.

Why can’t they build a better mousetrap to make money and also

save—save money and give us the answers? You know, we’re just

trying to do what I think is consistent with what they’re trying to

do, and that is lower costs and build quality. They’re the experts.

They keep saying they’ve got all the innovation because they’re in

the private sector. Then why aren’t they giving it to us?

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Why do I have to sit up here and ask about things that I frankly

am not all that educated about, because my staff person puts it in

front of me, and they’re going to promise to get back to me on

value-based streamlining and engineering. That cannot apply to

health care.

You know, all of these kinds of things that we’re going to have

to try to put in law so as to enforce insurance companies to bring

their costs down, why do we have to put that into law? I’m sure

they don’t want to be regulated anymore than they are being regulated.

So tell us why—because we’re being pressured to bring our deficit down. We’ve got this enormous deficit. It’s going to swallow all

our future dollars, our taxpayer dollars. Our taxpayers are going

crazy because they’re getting on our tail for having a big deficit,

and what we are trying to do is respond to them and say health

care is one of the biggest financial nuts our country has going forward.

So we’re asking you to help us because one way or the other,

money’s going to get—have to be streamlined, and it’s a question

of whether it’s going to be done at the expense of our consumers,

which we don’t want, or it’s going to be done efficiently and with

quality in mind so that people don’t get their health care cut just

because we haven’t been on the forefront of making the right decisions policy-wise that allows them to continue their health care in

the most efficient way possible.

Maybe you could comment on why you don’t think—you guys

have been ahead of the game in terms of getting better reimbursement reform prior to this year—why does the Government have to

do all this incentivizing for health rather than sick care? Why are

we the ones that have to do this? Why haven’t you been out there

for years doing this stuff?

Mr. RICHARDS. Congressman, I’d love to respond to your question. First of all, I think there are some things that we can do individually. Certainly, at CIGNA we do several things to improve the

health of our customers.

For instance, we have a gaps-in-care program where we monitor

for evidence-based care to identify if our customers aren’t getting

the care they need. For instance, somebody who has recently had

a heart attack, who is not on the proper medication, a beta blocker.

By mining that data, we can then outreach to that individual’s doctor and to the individual and say, shouldn’t this person be on a

beta blocker because medical evidence would say that for most people that’s appropriate and if they don’t take that drug they’re much

more likely to have an heart attack. So that’s an instance where

we are using technology and our people to actually increase pharmaceutical claims for the better health of the individual. That’s

something we can do and do do today.

Relative to your payment reform question, again, CIGNA is

working with a variety of health care professionals. I referenced

Dartmouth-Hitchcock in New Hampshire. We’re actually working

with five other entities around the country for payment reform

where we have a patient-centered medical home, where a primary

care doctor can coordinate the care because it is a complex system.

If somebody is very sick, they tend to need a lot of different doctors,

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and having that primary care person look after the care is very important. A lot of primary care doctors can’t afford to do that today

because the reimbursement rates that Medicare and private insurance pay them, it’s very tough for them to be able to do that.

So medical home is a promising pilot that we’re trying where

we’re paying extra money to those primary care physicians to allow

them the time to help coordinate the care. So I think there are

things we can do individually. There are thing we can do in partnership with health care professionals, the doctors and hospitals,

and then I think there are things that the government needs to

help on as well. And CIGNA and the industry have definitely supported reforms for a variety of things that we mentioned at the

committee today.

We really need government to work with us to help enact some

reform as well. We look forward to working with you on this debate, Congressman Kennedy.

Mr. KENNEDY. My point is that medical home we’ve known for

a long time works. Why are we piloting it? I know it’s what we’re

piloting in the legislation, but we’re only doing it because we’re

slow-walking something that we know works. It’s been demonstrated over and over again. It makes so much common sense.

It’s like this whole trigger thing. We’re doing what is inevitable,

but it’s going to take us an extra 4 or 5 years before we take the

whole medical home thing to scale, because we’re just—too many

financial interests that we’re going to have to tiptoe around in

order to get this thing implemented.

But if you guys stood up and said, hey, we all know medical

homes are about making more efficient, giving the primary care doc

and gatekeeper more time to help coordinate care because 80 percent of the dollars are spent on 20 percent of the people. They’re

the chronic users. They’re the highest users of health care. That’s

where we can get the most money. Let’s do it, boom, let’s go. What

are we slowing down for?

The reason we’re slowing down is because there is this inertia

out there because everybody is trying to protect their piece of the

turf, and we wouldn’t have that if insurance was more proactive.

It’s in your interest to be more proactive because at the end of the

day we’re going to hit the wall, and when we hit the wall, everyone

else who is well off is going to be fine. It’s the people in the middle

and the bottom who are going to be hurt.

Mr. KUCINICH. The gentleman’s time expired quite a while ago.

But I tell you, I think everyone in this room and everyone watching

knows how important what you just said is. And they’re wondering

if there’s any response to—does industry care to respond to what

Mr. Kennedy said? Anyway, what he’s providing is a wake-up call

here. Does anyone care to respond? We’re going to have one more—

Mr. Kennedy, we’re going to have one more round after this and

we’ll wrap it up. But does anyone want to respond to Mr. Kennedy?

Mr. COLLINS. Chairman Kucinich, we’ve submitted—and we’ll

send it for the record—proposals that we circulated with the administration and Capitol Hill of $500 billion of potential savings.

I won’t——

Mr. KUCINICH. Over what period of time?

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Mr. COLLINS. Over a period of time from 2010 to 2019, and we’ll

submit this report to the committee as part of the record.

Mr. KUCINICH. How much was that again?

Mr. COLLINS. It was $540 billion, sir.

Mr. KUCINICH. OK. That would be helpful, and anyone who

wants to submit similar information, so ordered, and we appreciate

you doing that.

I just want to say that as we go to the final round of questions

here, I’m sure that the insurance company executives who are here

recognize that everything’s changed with respect to health care in

America. You are facing a totally new environment than when you

started your careers in health care: 47 million people uninsured,

another 50 million underinsured.

As you know, many people are losing everything they have because they can’t afford to pay their hospital bills, and many of

those people had insurance. And so today we’re talking about this

business model, but we also have to understand—you get respect

for your being here, but we also have a great understanding of your

position and your political power.

Let me give you an example. The insurance companies are so

powerful that you were able to take H.R. 676, Medicare for All,

well off the table right at the beginning of the discussion, for either

party, not just one party or another. Both parties took it off the

table. There’s 85 Members of Congress that have signed on to it.

It’s a bill that Mr. Conyers and I drafted—86, thank you.

But the point is that you are able to exert your influence, and

some of the reasons you’re here today, I mean very clearly clashes

with your business model. We understand that you’re very influential here.

Based on your influence, we’re seeing the so-called public option

which will provide some competition—we understand you feel it

wouldn’t be productive. But based on your influence, the public option looks like it is going to be very difficult to get into a final bill.

And of course, the industry has had an influence in shaping issues

such as triggers and co-ops.

What Mr. Kennedy had to say I think is so important, and where

Mr. Kennedy’s comments lead to is that you should be thinking

about the fact that the business model that you have could end up

being—could end up killing the goose that laid your golden egg.

You may be reaching an end point as to how much medical loss

ratio you can go before people start to say, what’s going on here?

How far can your executives go, making millions of dollars a year,

while claims are being denied—you may say there’s no connection,

but the public does make a connection.

And look at where we’re headed toward. This is where your presence here is not a small matter. We could very well be headed toward a condition where health care reform in America is really a

form of a continuation of what I call insurance care, whereby the

food and well-being of people, according to CBO, will potentially be

covered by H.R. 3200.

Without a public option, 32 million people will be pushed into

private plans. They have to choose among private plans, and if they

don’t do that and they don’t choose and they don’t pay, they could

be penalized. Extraordinary. But with that kind of power, I would

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hope you start to think about a different model of business and social responsibility. I’m not lecturing you. I’m just sharing some

thoughts.

The insurance industry, because of changes in the global climate,

is due to take enormous hits, particularly in coastal areas over the

next 40 years. We should all be working together, but on health

care, you may eventually want to think about what it’s going to be

like when you wind down your health care products because, frankly, Mr. Chairman, I think sooner or later, whether it’s this decade

or another decade, you’re moving toward a condition where more

people are going to be uninsured, more people will be underinsured. Premiums, copays, and deductibles are going to be out of

the reach of more and more Americans, and they’re going to put

it on you, and you know that.

And so you know, I didn’t call you in front of this committee

today to embarrass you. That’s not my intention at all. We need

to get information about how your business model works, because

people really need to understand that. We understand you’re not

charitable organizations. That’s not why you were formed. You’re

responsible to shareholders; we understand that. If your medical

loss ratio changes too significantly, Wall Street will punish you; we

understand that too.

The question is, is this business model sufficient to provide

health care to American people at costs that’s affordable? There’s

a collision here, and you happen to be at that time and place where

this collision is happening.

I’m going to ask one final question as I wrap up my time here.

Yesterday we received testimony from Erinn Ackley of Montana.

Erinn’s father, William Ackley—and his obituary is part of the

record—had a request for bone marrow transplant and that request

was denied coverage on four separate occasions, causing a delay of

126 days in his cancer treatment. He ended up dying from the cancer.

Now, Erinn Ackley told this committee that had he been enrolled

in Medicare he would have received his bone marrow transplant

right away. And Government-run Medicare provides primary

health insurance to most senior citizens, has developed standardized forms, and standardized fits, with administrative costs that

are a fraction of yours as percentage of revenues.

Now, I’d just like to go down the line and answer this question.

Isn’t it true that your reason for not adopting Medicare’s coverage

standards as your own is that you could not deny payment for expensive treatments such as the one I just referred to? Mr. Collins.

Mr. COLLINS. Chairman Kucinich, I can’t answer that question.

I’m not familiar with the Medicare guidelines. That would have

been something appropriate for our chief medical officer to discuss.

Mr. KUCINICH. Mr. Sassi.

Mr. SASSI. Like Mr. Collins, I am not familiar with it.

Mr. KUCINICH. Ms. Farrell.

Ms. FARRELL. Same, Mr. Chairman, I’m not familiar either.

Mr. KUCINICH. Mr. Bloem.

Mr. BLOEM. Nor myself.

MR. KUCINICH. Mr. Richards, can you answer that?

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Mr. RICHARDS. No. Our chief medical officer actually used to be

the chief medical officer for CMS, Dr. Jeffrey Kang. Had he been

here today, I’m sure he could have answered it.

Mr. KUCINICH. Thank you. But I’m glad that you’re here because

I got a chance to ask you about your town hall meetings, and I’m

really interested in that. So thanks for being here, Mr. Richards.

Ms. Reitan.

Ms. REITAN. I’ve got the same problem that everyone else mentioned. One of our chief medical officers could have answered that

question.

Mr. KUCINICH. See, I mean, you know, you may not be as familiar with the Medicare standards—and I’ll accept that answer—but

I think you understand why I asked the question; and that is, we’re

trying to get to the genesis of the business model here: How do you

make money?

Many Americans believe that insurance companies make money

not providing health care; that your first obligation is to the stockholders or shareholders, and then you have an obligation somewhere down the road to the people who are your policyholders. You

have to have some obligation. You do pay, you said you have. You

have a pretty good batting average on a lot of that. And when you

get into the mechanics of analyzing it, it will raise some questions

which is what we did today.

Mr. Conyers, you have 5 more minutes for questions, or do you

wish to——

Mr. CONYERS. I’m so nearly exhausted, Mr. Chairman, I hardly

have anything else to say, but to thank you for this meeting and

to thank our witnesses for holding up.

But you know, it’s been made public, but the American Medical

Association has sort of come out for the Obama approach. You all

have heard about that, have you? No? Yes, no? OK. You don’t know

if the AMA is with Obama or not?

What about your companies? Have your companies said anything

one way or the other about Obama’s strategy of health reform?

Anybody? You don’t know? Yes, sir.

Mr. RICHARDS. Congressman, CIGNA has come out, as have

many others in the industry, in support of many aspects of the

President’s plan.

Mr. CONYERS. OK. Let me put it more delicately. Are there parts

of the Obama H.R. 3200 approach that your company is for and

there are other parts you may not be in full accord with? Is that

about fair? Everybody shakes their head. There are parts you can

go along with and some parts—obviously public option is not one

of your favorite parts of the bill, however it may appear, but there

may be some other things. But there are things you like.

Mr. RICHARDS. Congressman, there are many things we like, yes.

Mr. CONYERS. Pardon?

Mr. RICHARDS. There are many things we like, yes.

Mr. CONYERS. Well, thank you. Let me just ask you about the

Baucus bill. You’ve got a reaction. Did he make a little impression

on you, or somewhat favorable? How does that resonate with your

companies?

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Mr. RICHARDS. Congressman, just from CIGNA’s standpoint, I

know that Senator Baucus just came out with it, and we’re still reviewing the details of that bill.

Mr. CONYERS. Yeah, but so am I. I mean, we all got the news

at the same time. It’s been on television, newspapers, commentators, doctors, come on. I mean, how long do you have to—how much

study——

Mr. RICHARDS. Congressman, my understanding is there’s no legislative language actually that’s been shared yet; but again, we are

studying what has been released.

Mr. CONYERS. Really?

Mr. RICHARDS. That’s my understanding, yes.

Mr. CONYERS. He’s been preaching about his bill and copying

headlines all over the place. You say there’s been nothing specific.

There’s a bill out that’s got the chairman of the Finance Committee

of the Senate.

Well, I tell you what, could you—I know you’ve got a lot of assignments coming here today. Could you let me know when you—

when your companies have examined it sufficiently to let me know

what you think of it?

Mr. COLLINS. Absolutely.

Mr. CONYERS. OK. All right. Thank you very much.

Now, finally, we had testimony in the Judiciary Committee,

under subcommittee Chairwoman Linda Sanchez, from doctors that

there were 1 million medical bankruptcies in the United States;

that is, personal bankruptcies caused by medical bills. Ever heard

of that? Nobody’s heard of that. OK. Well, I can’t—I can’t ask you

to comment on that.

Let’s do it hypothetically. If you heard it and learned about that,

would that cast some concern on you about the problems that individuals are going through when the largest cause of individual

bankruptcies in the United States are due to medical bills that people couldn’t afford? You’d be concerned? Well, may I send you some

things? You’re sending us a lot of things; can I send you some more

information about that subject? OK.

Thank you, Mr. Chairman, for your generosity.

Mr. KUCINICH. I thank the gentleman. Finally, Congressman

Kennedy, you may proceed for 5 minutes.

Mr. KENNEDY. Thank you, Mr. Chairman. Thank you for holding

this hearing, Mr. Chairman, appreciate it.

Thank you all for your patience this afternoon during our questions, and looking forward to getting responses to the ones I asked

earlier.

I would ask all of you if you would just give me affirmative in

terms of working with my office in closing a loophole that appeared

in last year’s Wellstone-Domenici Mental Health Parity and Addiction Equity Act bill. We applied it to all insurers for mental benefits. It seems as though college students’ health insurance plans do

not have—it’s not applicable to college students’ health care plans

because students are not technically employees of the university.

So the bill talks about this as covering employee-based health insurance plans. So you see the wrinkle there.

And as a result, since students aren’t considered employees,

they’re not subject to the requirement—although the insurance

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companies who insure students aren’t subject to the requirement

for parity and because suicide amongst kids is the third largest

cause of death, I would ask all of you now, would you be willing

to work with me to close that loophole in this health bill with language that ensures that the spirit of the law that’s applying to all

of you for every other health insurance plan is—ensures that kids

who need it the most get that coverage as mandated under the

Wellstone-Domenici parity bill.

Mr. COLLINS. Yes, sir.

Mr. SASSI. Yes, sir.

Ms. FARRELL. Yes, sir.

Mr. RICHARDS. Yes. CIGNA strongly supported the DomeniciKennedy bill, and we’d be glad to work with you to close the loophole.

Mr. KENNEDY. OK. That would be great. William Gardner in my

office, if you could be in touch with him. We’re just trying to make

sure we get that facilitated in this bill so that the kids don’t get,

you know, disrupted in their health insurance coverage.

Obviously, I have a lot of other things but want to make sure we

tidied that up. Thank you, Mr. Chairman.

Mr. KUCINICH. Thank you very much, Mr. Kennedy and Mr. Conyers, for remaining.

This has been a hearing of the Domestic Policy Subcommittee of

the Oversight and Government Reform Committee. We have gone

over 3 hours now, and the witnesses have been much appreciated

and your presence here.

The title of today’s hearing, Between You and Your Doctor: The

Private Health Insurance Bureaucracy: I feel, as Mr. Kennedy just

implied, that we barely scratched the surface here, but I hope that

the witnesses understand and hope that you feel that this committee has treated you fairly. There’s no brow-beating here, there’s no

trick questions, there’s no attempt to try to force you to give an answer over something that you’re not ready to do at this moment,

and that’s the way we’re going to continue to proceed.

We are a fact-finding investigative subcommittee. We’re going to

continue to try to get information from the industry so that we can

understand your business model a little bit better.

And while I have tried to conduct these hearings in an impartial

way, away from these hearings I’m a very strong advocate of the

bill that I wrote with John Conyers, but I don’t let that interfere

with the conduct of this meeting. I want to make sure that you’re

given a chance to put your point of view on the record. And so

while you’re treated fairly here, we’re hopeful that you’re going to

treat—treat the American people fairly.

And I think as we move forward this issue of awareness, Mr.

Conyers is going to send you some information. I think this is a

time we can become more aware of your business model and you

can become more aware of why we have such great concerns and

why there is a national movement right now to really move away

from the model that you have spent your life building.

So it’s a great time for this debate in the country. Health care

ends up being a flashpoint, you know this: people losing their jobs,

their homes, their retirement security, their investments. And

we’re right at the point where it’s a flashpoint. So let’s see if there

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is a way that we can find to best serve the American people. That’s

why we’re in Congress, and I hope that’s what you’ll conclude is a

good purpose to be in business.

I’m Congressman Dennis Kucinich, Chairman of the subcommittee. This committee stands adjourned.

[Whereupon, at 5:26 p.m., the subcommittee was adjourned.]

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Æ