Testimony of Wendell Potter to the Senate's Commerce Committee on the health insurance industry

by: Gerald Weinand

Mon Jun 29, 2009 at 22:30:00 PM EDT

You can read his testimony in its entirety here (pdf warning), and I urge you to do so. Some snippets from it:

I know from personal experience that members of Congress and the public have good reason to question the honesty and trustworthiness of the insurance industry. Insurers make promises they have no intention of keeping, they flout regulations designed to protect consumers, and they make it nearly impossible to understand - or even to obtain - information we need.

While they expressed concerns about some of President Clinton's proposals, they said they enthusiastically supported several specific goals.

Those goals included covering all Americans; eliminating underwriting practices like pre-existing condition exclusions and cherry-picking; the use of community rating; and the creation of a standard benefit plan. Had the industry followed through on its commitment to those goals, I wouldn't be here today.

To win the favor of powerful analysts, for-profit insurers must prove that they made more money during the previous quarter than a year earlier and that the portion of the premium going to medical costs is falling.

Ten percent of the population accounts for two-thirds of all health care spending. The Energy and Commerce Committee's investigation into three insurers found that they canceled the coverage of roughly 20,000 people in a five-year period, allowing the companies to avoid paying $300 million in claims.

Using the figures above, the average claim would have been for $150,000 - not a small amount.

But it may help to explain why medical costs are the #1 cause of personal bankruptcies in the U.S.

The purging of less profitable accounts [small businesses] through intentionally unrealistic rate increases helps explain why the number of small businesses offering coverage to their employees has fallen from 61 percent to 38 percent since 1993, according to the National Small Business Association. Once an insurer purges a business, there are often no other viable choices in the health insurance market because of rampant industry consolidation.

We've already seen reports (pdf warning) like this from the Main Street Alliance detailing how small employers can no longer afford to offer health insurance to their employees. This explains that in part:

Unless required by state law, insurers often refuse to tell customers how much of their premiums are actually being paid out in claims. A Houston employer could not get that information until the Texas legislature passed a law a few years ago requiring insurers to disclose it. That Houston employer discovered that its insurer was demanding a 22 percent rate increase in 2006 even though it had paid out only 9 percent of the employer's premium dollars for care the year before.

For profit health insurance companies are in the business to make money, not to provide health care. This should always be the first thing you consider whenever you consider any arguments about reforming our current system.

Not only are the benefits [of limited-benefit plans] extremely limited but the underwriting criteria established by the insurer essentially guarantee big profits. Pre-existing conditions are not covered during the first six months, and the employer must have an annual employee turnover rate of 70 percent or more, so most of the workers don't even stay on the payroll long enough to use their benefits. The average age of employees must not be higher than 40, and no more than 65 percent of the workforce can be female. Employers don't pay any of the premiums - the employees pay for everything. As Consumer Reports noted in May, many people who buy limited-benefit policies, which often provide little or no hospitalization, are misled by marketing materials and think they are buying more comprehensive care. In many cases it is not until they actually try to use the policies that they find out they will get little help from the insurer in paying the bills.

Again, note that the industry offers insurance on which it knows it will likely never have to pay a claim - it's like printing money, except it's legal.

Please read Mr. Potter's entire testimony, and then copy and send it along to everyone that you know. Especially to those that are opposed to a public option.