[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
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
BETWEEN YOU AND YOUR DOCTOR: THE PRIVATE HEALTH INSURANCE BUREAUCRACY--
DAY 2
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
U.S. GOVERNMENT PRINTING OFFICE
64-918 WASHINGTON : 2011
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COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM
EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland JOHN M. McHUGH, New York
DENNIS J. KUCINICH, Ohio JOHN L. MICA, Florida
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
WM. LACY CLAY, Missouri JOHN J. DUNCAN, Jr., Tennessee
DIANE E. WATSON, California MICHAEL R. TURNER, Ohio
STEPHEN F. LYNCH, Massachusetts LYNN A. WESTMORELAND, Georgia
JIM COOPER, Tennessee PATRICK T. McHENRY, North Carolina
GERALD E. CONNOLLY, Virginia BRIAN P. BILBRAY, California
MIKE QUIGLEY, Illinois JIM JORDAN, Ohio
MARCY KAPTUR, Ohio JEFF FLAKE, Arizona
ELEANOR HOLMES NORTON, District of JEFF FORTENBERRY, Nebraska
Columbia JASON CHAFFETZ, Utah
PATRICK J. KENNEDY, Rhode Island AARON SCHOCK, Illinois
DANNY K. DAVIS, Illinois BLAINE LUETKEMEYER, Missouri
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
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 JIM JORDAN, Ohio
JOHN F. TIERNEY, Massachusetts MARK E. SOUDER, Indiana
DIANE E. WATSON, California DAN BURTON, Indiana
JIM COOPER, Tennessee MICHAEL R. TURNER, Ohio
PATRICK J. KENNEDY, Rhode Island JEFF FORTENBERRY, Nebraska
PETER WELCH, Vermont AARON SCHOCK, Illinois
BILL FOSTER, Illinois
MARCY KAPTUR, Ohio
Jaron R. Bourke, Staff Director
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
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.
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 California 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:]
[GRAPHIC] [TIFF OMITTED] T4918.001
[GRAPHIC] [TIFF OMITTED] T4918.002
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:]
[GRAPHIC] [TIFF OMITTED] T4918.003
[GRAPHIC] [TIFF OMITTED] T4918.004
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-of-pocket expenses so
people do not become broke when they become sick; and
eliminates additional charges for preventative care such as
mammograms.
In many States, insurance companies can simply cancel 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 high-risk 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.
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.
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.
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 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.
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.
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
evidence-based medical policy based on the latest clinical
research. Our nurses and other health care professionals
support our members to ensure that care is safe, necessary, and
timely. And looking to the future, we continue to explore new
ways to reward value over volume and stress safety, efficiency,
and patient satisfaction.
One of the areas under discussion in the current health
care reform debate is health plan 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, 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 7\1/2\
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 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 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, well-being, 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 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 investor-
owned. We are a customer-owned mutual. We have a work force of
more than 16,000 employees serving 12.3 million members through
our 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, high-quality 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 members 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.
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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 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?
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 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?
Mr. Collins. Sir, a loss ratio for 2008 was approximately
83 percent, 83\1/2\ 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 compared 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 one-half 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.
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.
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 8\1/2\
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?
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 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 4\1/2\
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
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 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?
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?
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.
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 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, 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 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:]
[GRAPHIC] [TIFF OMITTED] T4918.081
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?
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.
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 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.
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.
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.
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.
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 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?
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, 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?
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 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?
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?
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 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 Domenici-
Kennedy 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 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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