UNITED STATES OF AMERICA v. UNITEDHEALTH GROUP INCORPORATED et al

Filing 11

RESPONSE TO PUBLIC COMMENTS in Antitrust Case by UNITED STATES OF AMERICA. (Attachments: # 1 Comment, # 2 AMA Attachment A, # 3 AMA Attachment B, # 4 AMA Attachment C, # 5 Velazquez Comment, # 6 Velazquez Attachment A, # 7 SEIU Comment, # 8 Giunchigliani Comment)(Mucchetti, Peter)

FULL COMMITTEE HEARING ON HEALTH
INSURER CONSOLIDATION - THE IMPACT
ON SMALL BUSINESS

COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF
REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
OCTOBER 25, 2007

Serial Number 110-55
Printed for the use of the Committee on Small Business

(
Available via the World Wide Web: http://www.access.gpo.gov/congress/house

U.S. GOVERNMENT PRINTING OFFICE
WASHINGTON

39–376 PDF

:

2007

For sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800
Fax: [phone] Mail: Stop IDCC, Washington, DC 20402–0001

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00001

Fmt 5011

Sfmt 5011

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

HOUSE COMMITTEE ON SMALL BUSINESS
´
NYDIA M. VELAZQUEZ, New York, Chairwoman
STEVE CHABOT, Ohio, Ranking Member
ROSCOE BARTLETT, Maryland
SAM GRAVES, Missouri
TODD AKIN, Missouri
BILL SHUSTER, Pennsylvania
MARILYN MUSGRAVE, Colorado
STEVE KING, Iowa
JEFF FORTENBERRY, Nebraska
LYNN WESTMORELAND, Georgia
LOUIE GOHMERT, Texas
DEAN HELLER, Nevada
DAVID DAVIS, Tennessee
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio

HEATH SHULER, North Carolina
´
CHARLIE GONZALEZ, Texas
RICK LARSEN, Washington
RAUL GRIJALVA, Arizona
MICHAEL MICHAUD, Maine
MELISSA BEAN, Illinois
HENRY CUELLAR, Texas
DAN LIPINSKI, Illinois
GWEN MOORE, Wisconsin
JASON ALTMIRE, Pennsylvania
BRUCE BRALEY, Iowa
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania
BRIAN HIGGINS, New York
MAZIE HIRONO, Hawaii

MICHAEL DAY, Majority Staff Director
ADAM MINEHARDT, Deputy Staff Director
TIM SLATTERY, Chief Counsel
KEVIN FITZPATRICK, Minority Staff Director

STANDING SUBCOMMITTEES
Subcommittee on Finance and Tax
MELISSA BEAN, Illinois, Chairwoman
RAUL GRIJALVA, Arizona
MICHAEL MICHAUD, Maine
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia
JOE SESTAK, Pennsylvania

DEAN HELLER, Nevada, Ranking
BILL SHUSTER, Pennsylvania
STEVE KING, Iowa
VERN BUCHANAN, Florida
JIM JORDAN, Ohio

Subcommittee on Contracting and Technology
BRUCE BRALEY, IOWA, Chairman
HENRY CUELLAR, Texas
GWEN MOORE, Wisconsin
YVETTE CLARKE, New York
JOE SESTAK, Pennsylvania

DAVID DAVIS, Tennessee, Ranking
ROSCOE BARTLETT, Maryland
SAM GRAVES, Missouri
TODD AKIN, Missouri
MARY FALLIN, Oklahoma

(II)

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00002

Fmt 0486

Sfmt 0486

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

Subcommittee on Regulations, Health Care and Trade
´
CHARLES GONZALEZ, Texas, Chairman
RICK LARSEN, Washington
DAN LIPINSKI, Illinois
MELISSA BEAN, Illinois
GWEN MOORE, Wisconsin
JASON ALTMIRE, Pennsylvania
JOE SESTAK, Pennsylvania

LYNN WESTMORELAND, Georgia, Ranking
BILL SHUSTER, Pennsylvania
STEVE KING, Iowa
MARILYN MUSGRAVE, Colorado
MARY FALLIN, Oklahoma
VERN BUCHANAN, Florida
JIM JORDAN, Ohio

Subcommittee on Urban and Rural Entrepreneurship
HEATH SHULER, North Carolina, Chairman
RICK LARSEN, Washington
MICHAEL MICHAUD, Maine
GWEN MOORE, Wisconsin
YVETTE CLARKE, New York
BRAD ELLSWORTH, Indiana
HANK JOHNSON, Georgia

JEFF FORTENBERRY, Nebraska, Ranking
ROSCOE BARTLETT, Maryland
MARILYN MUSGRAVE, Colorado
DEAN HELLER, Nevada
DAVID DAVIS, Tennessee

Subcommittee on Investigations and Oversight
JASON ALTMIRE, PENNSYLVANIA, Chairman
´
CHARLIE GONZALEZ, Texas
RAUL GRIJALVA, Arizona

LOUIE GOHMERT, Texas, Ranking
LYNN WESTMORELAND, Georgia

(III)

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00003

Fmt 0486

Sfmt 0486

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00004

Fmt 0486

Sfmt 0486

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

CONTENTS
OPENING STATEMENTS
Page

´
Velazquez, Hon. Nydia M. .......................................................................................
Chabot, Hon. Steve ..................................................................................................

1
2

WITNESSES
Plested III, Dr. William G., American Medical Association .................................
Huges, Robert, National Association for the Self-Employed ................................
King, Dr. James D, American Academy of Family Physicians ............................
Office, James R., Victory Wholesale Grocers .........................................................
Scandlen, Greg, Consumers for Health Care Choices ..........................................

4
5
7
9
11

APPENDIX
Prepared Statements:

´
Velazquez, Hon. Nydia M. .......................................................................................
Chabot, Hon. Steve ..................................................................................................
Altmire, Hon. Jason .................................................................................................
Plested III, Dr. William G., American Medical Association .................................
Huges, Robert, National Association for the Self-Employed ................................
King, Dr. James D., American Academy of Family Physicians ...........................
Office, James R., Victory Wholesale Grocers .........................................................
Scandlen, Greg, Consumers for Health Care Choices ..........................................

22
24
26
27
39
44
49
56

Statements for the Record:

Consumer Federation of America, Consumers Union and US PIRG ..................

63

(V)

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00005

Fmt 5904

Sfmt 5904

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00006

Fmt 5904

Sfmt 5904

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

FULL COMMITTEE HEARING ON HEALTH
INSURER CONSOLIDATION - THE IMPACT
ON SMALL BUSINESS
Thursday, October 25, 2007

U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON SMALL BUSINESS,
Washington, DC.
The Committee met, pursuant to call, at 9:30 a.m., in Room 2360
´
Rayburn House Office Building, Hon. Nydia Velazquez [Chairwoman of the Committee] presiding.
´
´
Present: Representatives Velazquez, Gonzalez, Cuellar, Altmire,
Clarke, Ellsworth, Sestak, Higgins, Chabot, Bartlett, and Fallin.
´
OPENING STATEMENT OF CHAIRWOMAN VELAZQUEZ

´
ChairwomanVELAZQUEZ. Good morning. I call this hearing to
order to address Health Insurer Consolidation--The Impact on
Small Business.
Access to health insurance is an area of concern to small businesses. The rising costs of health care are regularly cited by small
firms as one of their biggest worries. Small businesses need to have
choices in the health insurance marketplace. It is imperative that
the marketplace is diverse and competition flourishes.
It is also critical that small medical providers are able to continue offering services. Physicians and other providers must be able
to operate on a level playing field with health insurers and be reimbursed at fair rates. If not, quality of care will decline, and it is
the patient who ultimately will suffer.
Consolidation in the health insurance industry is one area of special concern that has a direct impact on these issues. Because these
mergers affect access to care and influence the quality of medical
services, they command careful scrutiny by regulators. Unfortunately, the health insurance industry, like a number of other industries, has seen a general lack of enforcement of antitrust laws.
Earlier this year, The Wall Street Journal reported that the Federal Government has nearly stepped out of the antitrust enforcement business. While some mergers benefit consumers and increase the competitiveness of U.S. companies, others pose substantial risks to competition and innovation.
The health insurance marketplace has become increasingly concentrated in recent years. Consolidation has left small businesses
with fewer choices, and physicians with diminished leverage to negotiate. In the majority of metropolitan areas, a single insurer now
dominates the marketplace. If individuals and small businesses
(1)

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00007

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

2
cannot get health coverage through the dominant insurer, they
may not be able to find alternatives.
Recent mergers in the health insurance industry has tended to
not generate efficiencies that have lower costs for small businesses
or improved coverage. Premiums for small businesses have continued to increase without a corresponding increase in benefits. Consumers are facing increased deductibles, co-payments, and co-insurance, which have reduced the scope of their coverage.
When operating in highly concentrated markets, physicians often
find they are stuck with take it or leave it contracts. The Department of Justice has recognized that physicians face special difficulties in dealing with health insurers--namely, it is very costly for
them to switch from one insurer to another.
Replacing lost business for a physician by attracting new patients from other sources is very difficult in our current health care
system. Physicians face barriers in attracting potential new HMO
patients, since they are filtered through an HMO plan. Physicians
struggle to maintain the quality of care in the face of reduced reimbursement--a large administrative burden.
When physicians are forced to spend less time on each appointment, ultimately it is the patients that suffer. It is essential that
competition remains vibrant in the health insurance marketplace.
Not surprisingly, studies have found that when competition declines premium costs generally go up. The rising costs of health
care are leading to greater numbers of uninsured, and less small
businesses and individuals can afford to pay premiums.
Small businesses continue to be burdened by the high cost of
health care. These rising costs of health insurance is one of the primary reasons the ranks of the 46 million uninsured Americans continue to grow. Tragically, 18,000 Americans lose their lives each
year because of a lack of health insurance. We need to ensure that
providers are on a level playing field, and small businesses and individuals have choices when it comes to health care.
I yield now to Ranking Member Chabot for his opening statement.
OPENING STATEMENT OF MR. CHABOT

Mr.CHABOT. Thank you very much, Madam Chairwoman. I want
to apologize for being a couple of minutes late. It was one of those
mornings where just too many things scheduled and just couldn’t
make it to everything on time. So I apologize.
And I want to thank the Chairwoman for holding this important
hearing on the impact of mergers and increasing concentration in
the health insurance market. This hearing continues this Committee’s examination of the cost of health care on small businesses,
both as purchasers of health care and as providers.
The Supreme Court has stated that ‘‘The unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality, and the
greatest material progress.’’ In short, competitive markets represent the cornerstone of American progress and the success of our
democracy. Antitrust laws were established to protect these precious values. By providing a mechanism to ensure that competition

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00008

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

3
is not unreasonably hindered, the antitrust laws can be seen as
further bracing the competition foundation of this country.
When mergers occur, that may reduce competition. It behooves
the Justice Department or the Federal Trade Commission to closely
assess the value of these mergers. That is particularly crucial in
the context of health care. When the members of this Committee
travel back to their districts, they are put face to face with constituents and small business owners that struggle every day to
cope with the rising costs of obtaining or providing health care.
If the number of companies that supply health insurance continues to decrease, basic economics suggest that costs of obtaining
health care coverage will increase. It then becomes vital to assess
the impact of industry consolidation on small business owners who
already have significant difficulty in obtaining health insurance
coverage.
Today, we have witnesses that represent small business purchasers of health care who will inform the Committee of the increasing difficulty that they have in obtaining health care coverage
at reasonable costs that are not made any easier as concentration
in the industry increases. In addition to the obvious effects on purchasers of health care coverage, it is important to remember that
many providers of health care are small businesses.
If concentration increases in the health insurance industry, then
the multitude of providers are faced with the market power of a
very large single purchaser that will be able to dictate prices and
the service rendered. And if the prices do not cover the physician’s
costs, physicians will stop seeing patients, thus reducing choice
even more. Of course, in addition to the bulwark of antitrust laws
to protect competition, another avenue is to increase competition in
the provision of health insurers.
This Committee, under the former Chairman, Mr. Talent, took
the lead in promoting competition in the health insurance market
by creating association health plans. The House, on a number of occasions--I believe six times in a five-year period--passed association
health plan legislation that unfortunately died in the Senate.
´
The Chairwoman, Chairwoman Velazquez, should be commended
for her courageous votes in support of association health plans.
Given their potential to reduce costs and increase competition, I
think the Committee seriously needs to investigate the resuscitation of that concept.
I look forward to a thoughtful discussion from the panel of witnesses, a very distinguished panel I might add that we have here
today, and their ideas on how to protect and improve competition
in the health insurance markets. And, again, I want to thank the
Chairwoman for holding this important hearing, and I yield back
my time.
´
ChairwomanVELAZQUEZ. Thank you, Mr. Chabot.
And we are going to start with our first witnesses, and let me
just take this opportunity to thank all of you for being here today.
We are going to have a timer in front of you. Green means you go,
and then the red one means five minutes are up. Each one of you
will have five minutes to make your presentation.
Dr. Plested, Dr. William Plested, is our first witness. He served
as the President of the American Medical Association from June

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00009

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

4
2006 to June 2007. Dr. Plested is a cardiovascular surgeon and has
been in private practice in Santa Monica, California, for more than
35 years. The American Medical Association is the nation’s largest
physician group and advocates on issues vital to the nation’s
health.
Thank you, and welcome.
STATEMENT OF DR. WILLIAM G. PLESTED, III, IMMEDIATE
PAST PRESIDENT, AMERICAN MEDICAL ASSOCIATION,
BRENTWOOD, CALIFORNIA

Dr.PLESTED. Thank you, Madam Chair. My name is Bill Plested.
I am a past president of the American Medical Association and a
cardiac surgeon from Santa Monica, California. I want to thank
you very kindly for inviting me to testify today and for holding a
hearing on this exceedingly important issue--health insurance consolidation.
Consolidation in the health insurance market is critical to the
AMA, because physicians are both patient advocates and small
business owners. Physicians have primary responsibility for advocating for their patients, and they also are small business that
want to provide health care insurance for their employees.
Physicians’ ability to perform either of these vital functions, however, has been severely compromised by growing consolidation in
the for-profit health insurance market. This consolidation has left
physicians with little leverage against unfair contract terms that
deal with patient care and little control over their own employees’
rising health insurance premiums.
As you all know, our market performs optimally when consumers
have a choice of competing products and services. Increasingly,
however, choice in the health insurance market has been severely
restricted as health plans have pursued aggressive acquisition
strategies to assume dominant positions.
In the past decade, there have been over 400 mergers. Contrary
to claims of greater efficiency and lower cost, these mergers in fact
have led to higher premiums and decreased patient access to care.
If the current trend continues, we fear it will lead to a health care
system dominated by a few companies that, unlike physicians, have
an obligation to shareholders, not to patients.
Our worst fears may be realized in Nevada where we have urged
the Department of Justice to block the merger of the United Health
Group and Sierra Health Systems. This merger would have a devastating impact on Nevada’s patients and physicians and would reverberate throughout the health care system as a harbinger of unrestricted consolidation, would drastically reduce competition, and
severely limit health insurance choice for employers and individuals in Nevada.
The United-Sierra merger would give United a 94 percent HMO
market--share of the HMO market in Clark County and an 80 percent share of the HMO market in the entire State of Nevada. Nevada is in need of more competition, not less. The State currently
ranks 47th in the country for access to care and 45th in access to
physicians. This merger would push Nevada even further down
these lists by exacerbating physician shortages.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00010

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

5
Competition is essential to the delivery of high quality health
care services, and this merger would serve only to further disadvantage an already challenged Nevada health care system. Consolidation is not benefiting patients. Health insurers are recording
record high profits while patient health insurance premiums continue to rise. In fact, United and Wellpoint have had seven--seven
years of consecutive double-digit profit growth that has ranged to
20 to 70 percent year after year.
In addition to compelling results of the AMA’s annual competition study, many areas across the country exhibit characteristics
typical of uncompetitive markets and growing monopolistic behavior. These include significant barriers to entry for new health insurers, the ability of large entrenched insurers to raise premiums
without losing market share, and the power of dominant insurers
to coerce physicians into accepting unreasonable and unjust contracts.
The AMA believes that the Federal Government must take steps
to address the serious public policy issues raised by unfettered
health insurer consolidation. The current situation in Nevada is
emblematic of the total absence of boundaries and enforcement currently applied to health plan mergers.
Therefore, we respectfully encourage this Committee to urge the
DOJ to enjoin the merger of United and Sierra. By so doing, the
Committee would be taking a meaningful step on behalf of America’s patients towards correcting the existing inequities in the
health care market.
Thank you.
[The prepared statement of Dr. Plested may be found in the Appendix on page 27.]
´
ChairwomanVELAZQUEZ. Thank you, Dr. Plested.
Our next witness is Mr. Robert Hughes. He is the President of
the National Association for the Self-Employed. Mr. Hughes has
managed his own accounting practice, Hall & Hughes, in Dallas/
Fort Worth, for the past 20 years. NASE represents hundreds of
thousands of entrepreneurs and microbusinesses and is the largest
non-profit, non-partisan association of its kind in the United
States.
Welcome.
STATEMENT OF ROBERT HUGHES, PRESIDENT, NATIONAL
ASSOCIATION FOR THE SELF-EMPLOYED

Mr.HUGHES. Thank you very much. It is our pleasure to be here
this morning, and thank you, Ms. Chairwoman, for the invitation.
As a representative of over 250,000 microbusinesses across the
country, the NASE is committed to addressing the issue of affordable health coverage. I am here to tell you that health care costs
and coverage premiums are adversely affecting microbusiness and
impairing their ability to grow, compete, and succeed.
In addition to the high cost of health coverage, it has a serious
personal impact on business owners and their employees. Oftentimes, the small business will sacrifice saving for retirement, putting money aside for their children’s education, and addressing
other personal needs to redirect funds to health coverage in order

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00011

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

6
to stay insured. Of course, the worst result of mounting premiums
is dropping coverage all together, which puts their business, their
employees, their family, and themselves at risk when they face
even a minor medical event.
In a 2005 survey, the NASE found that the majority of microbusiness owners, those businesses with 10 or less employees, do not
have for themselves, nor do they offer, health insurance to their
employees. Most alarming is the rate at which premiums for microbusinesses have been increasing. In a similar health study conducted in 2002, microbusinesses indicated the median premium increase for the year before was a little over 11 percent.
In 2005, microbusiness owners were experiencing a median premium increase of over 17 percent. Premium costs are the single
most important factor that determines whether a business owner
will insure himself and provide coverage for employees. Thus, the
key question here today is if the increasing number of mergers
among health insurers is playing a role in premium increases.
The self-employed and microbusinesses purchase health insurance in either the small group market or the individual market.
The small group market is much more restrictive and regulated,
which reduces, in our opinion, competition and availability. The
NASE believes that minimization of insurance carriers due to consolidation, compounded with a concern of high risk in the small
group segment, and excessive state regulation leave small business
with minimal options to set up small group health plan, and is a
factor contributing to high premiums in insurance markets.
A 2005 GAO report highlighted that the median market share of
the largest carrier in the small group market was 43 percent, up
10 percent from just three years earlier. The five largest carriers
in the small group market, when combined, represented threequarters or more of the market in 26 of the 34 states that participated in the GAO study. The dominance of a few carriers in the
small group market was also supported by studies from the AMA
and leading health insurance experts.
How, then, is this lack of competition affecting insurance premiums? Well, let me give you a quote from one of our members,
a freelance writer from Geneva, Illinois. ‘‘The lack of competition
among health insurers absolutely affects my insurance cost, as well
as the quality and scope of coverage I can barely afford. Our state’s
non-competitive health care insurance environment, due to the monopoly of one or two carriers, places all of the leverage in the hands
of the insurers. I can’t vote with my feet and dollars if I have no
alternatives from which to select.’’
David, along with other microbusiness owners, will tell you that
competition plays a central role in improving quality, spurring innovation, and keeping prices down. Research has indicated that
health plans have increased premiums consistently above the rate
of growth in costs. Cumulative, the premium increases for the last
six years have exceeded 87 percent, which is more than three times
the overall increase and medical inflation of 28 percent.
Why have insurance companies increased rates at these paces?
I guess the simple answer is: they can. I believe that the current
state regulatory climate plays an even more critical role in keeping
costs high and impairing competition. State mandates are an issue.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00012

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

7
Some believe that state mandates increase insurance premiums by
as much as 20 percent or even more.
Microbusiness owners have long been a proponent of marketbased solutions for dealing with our health care system. However,
competition without competitors will not deliver the desired incentive for health care improvement. The NASE urges Congress to address the disparities in individual and group markets. There are
over 20 million non-employer firms in America. Certainly, they
have access to, and choice of, health care coverage at a very limited
basis, and that issue should be addressed.
Increasing insurer competition for the strong economic market
segment, addressing state insurance regulation and mandates, and
creating equitable federal tax treatment for these non-employer
firms, are key to increasing access to affordable health coverage.
[The prepared statement of Mr. Hughes may be found in the Appendix on page 39.]
´
ChairwomanVELAZQUEZ. Thank you, Mr. Hughes.
Our next witness is Dr. James D. King. He is the President of
the American Academy of Family Physicians. Dr. King is in private
practice in the rural community of Selmer, Tennessee. He serves
as the Medical Director of Chester County Health Care Services.
The American Academy of Family Physicians is one of the largest
national medical organizations with more than 94,000 members in
50 states, the District of Columbia, Puerto Rico, the Virgin Islands,
and Guam.
Welcome.
STATEMENT OF DR. JAMES D. KING, PRESIDENT, AMERICAN
ACADEMY OF FAMILY PHYSICIANS, SELMER, TENNESSEE

Dr.KING. Thank you. On behalf of the Academy, I appreciate the
concern about the effect of consolidated health plans on family physicians. We are members of the small business community, and
also are professionals concerned about the effective delivery of
health care to our patients.
Consolidation of health insurance plans have created a profound
imbalance that hurts the ability of family physicians to negotiate
contracts. This is harmful to our practices, but also means that
many of our patients cannot find the primary care physicians who
accept their insurance.
According to the industry analysis, between 1992 and 2006 the
number of health insurance companies dropped from 95 to 7. The
American Medical Association reports that 280 U.S. markets, at
least one-third of the covered lives, are members of a single largest
insurer in that market. In the U.S., only two insurance companies
cover one-third of all insured Americans.
This market concentration gives health plans huge power to determine the coverage and payment terms. Let me give you a snapshot of how this affects the individual member. Nearly two-thirds
of the patients of a solo family physician in Colorado are insured
by one commercial payer. This situation occurred because of a
merger. When this doctor made the case for a payment increase to
keep pace with inflation, he was told by the insurance company,

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00013

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

8
‘‘As a solo physician, you are the weakest economic unit and must
take what we decide to give.’’
That single statement bluntly and accurately describes our problem. As the economic heavyweights, health plans have no incentive
to agree to physician requests. When a doctor doesn’t agree to the
terms of the contract, the plan just removes the practice from the
network. This means that patients essentially are denied access to
their physicians.
In most cases, family doctors stick to their patients and sign untenable contracts. These contracts can affect many aspects of the
practice. They dictate treatment decisions, require the use of special labs, require peer-to-peer requests for prior authorizations, demand completion of multiple-page forms, and delay payment while
requiring responses to endless questions.
Many insurance contracts even allow the health plan to change
the terms at any time without notifying the physician simply by
posting new information on their web site. These business practices
may increase the profit--may increase the profits of the insurance
company, but they create enormous burdens for our small and solo
practices and may hurt patient care.
As a result, more primary care physicians are driven to work in
other settings, such as emergency rooms, in cash only practices.
Some leave medical practice all together. Worst of all, payment
rates and other contract terms are unrelated to quality of care.
Let me give you another quick story. A family physician who had
been honored several times as the best physician in Arizona, who
had more than 100 physicians as his patients, and who received
the highest possible rating from his health plans for quality and efficiency, is taking more than $100,000 out of his savings each year
just to keep his practice afloat. Despite his good work, he has been
unable to negotiate higher payment rates with insurers.
Speaking more broadly, insurance plans consolidate threaten-consolidation threatens the potential for quality improvement in
U.S. health care. For example, family medicine and other primary
care specialties are advocating for the patient-centered medical
home for all Americans. This medical home would be a practice
that has been transformed to offer comprehensive, continuous, and
coordinated care to our patients.
Experience with health systems based on primary care in other
industrialized nations have demonstrated the exceptional value of
a medical home in terms of quality and cost effectiveness. However,
the success of the medical home depends on a long-term relationship between the physician and the patient. This relationship can
be threatened, even destroyed, if insurance companies dictate the
terms of the medical practice and limit our patients’ freedom of
choice.
The AAFP recommends changing antitrust laws so that physicians can be true market participants. The current statutes were
established years ago during a very different competitive environment. Under these outmoded laws, physicians are barred from discussing the financial aspects of their practice with any entity unrelated to their practice. In contrast, insurance companies use market share and shared economic strength to carry out near monopolistic behavior.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00014

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

9
AAFP commends the Committee for highlighting the significant
problems resulting from health insurance consolidation. Family
physicians, many of whom provide health care in small and solo
practices in rural and other under served areas, feel the effect of
the insurance consolidation as they attempt to negotiate in an environment that is stacked against them.
Again, I want to thank you for this opportunity to provide this
testimony, and I look forward to answering your questions.
[The prepared statement of Dr. King may be found in the Appendix on page 44.]
´
ChairwomanVELAZQUEZ. Thank you, Dr. King.
And now the Chair recognizes Dr. Chabot for the purpose of introducing our next witness.
Mr.CHABOT. Thank you very much, Madam Chair. I would like
to introduce Mr. Office. He is the Vice President and General
Counsel for Victory Wholesale Group, which is headquartered in
Springfield, Ohio. Mr. Office is currently sponsorship chair and a
board member of the Southwest Ohio Chapter of Association of
Corporate Counsel.
Victory is a national wholesale distributor of grocery, health and
beauty, and pharmaceutical products, and we are very pleased to
have a fellow buckeye here this morning. And we welcome you and
are looking forward to hearing from you, Mr. Office.
Thank you.
STATEMENT OF JAMES R. OFFICE, GENERAL COUNSEL,
VICTORY WHOLESALE GROCERS, SPRINGBORO, OHIO

Mr.OFFICE. Thank you, Madam Chairwoman, Representative
Chabot, and members of this Committee, for inviting us to discuss
this important issue.
Victory Wholesale Group appreciates the opportunity to submit
these comments to the Committee. The rising and out-of-control increases in health costs is a very important subject to us and every
other small business across America. Health insurance consolidations are a large contributor to the increased health costs. One of
Victory’s largest expenses is for the health care coverage that it
provides its employees.
Let me first tell you a little something about Victory. Some of
you may know something about Victory through our involvement
in and grants over the many years to the Congressional Hunger
Foundation. Victory is a group of family-owned separate companies.
The first was established in 1979. Our businesses include a wholesale grocery distributor, a food marketing company, a public warehouse business, a contract packaging business, a pharmaceutical
wholesale distributor, a promotional items distributor.
Victory has a small number of employees and businesses in over
22 states, including Ohio, New York, Florida, California, Nevada,
and the Commonwealth of Puerto Rico. Health insurance is the cornerstone of benefits that Victory provides its employees. Victory
has tried different health care plan models, including fully insured,
self-insured, PPOs, and HMOs, with the objective to reduce our
health insurance care costs, or to control their increases.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00015

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

10
Victory, having employees around the country, has not been able
to find a single affordable health care plan that covers our separate
businesses and employees on a national basis with health care provider networks that can compete with the regional health care providers.
In Victory’s experience, insurance consolidation has led to the decreased competition and higher prices in the market. Let me elaborate. First, we have found that controlling health care costs is nearly impossible. The health care industry is both fragmented and concentrated. It is loaded with administrative costs, it is inefficient, it
is not measured. Accounting for quality and for value just simply
doesn’t exist.
Next, we have found that the deepest discounts and best coverage networks are offered on a regional basis. We have found that
the markets where we have employees are dominated by a few
large insurance carriers. Carriers with a smaller market share in
these regions generally have weak hospital and doctor networks, or
smaller discounts. Plans with fewer hospitals and doctors to choose
from are simply not very popular with employees, and, therefore,
employers.
We have found that many of the markets where we have employees have several dominant affiliate health care provider networks
or groups. These are groups of one or more hospitals and physicians that have combined into an affiliation or network, and they
rent these networks to insurance companies and employers.
A few dominant health care provider networks in a region can
and do use their enhanced market clout to resist negotiating discounts with insurance carriers and employers. We have found that
the dominant insurance carriers in the region generally price
health care plans for small businesses through what I would describe as experience rating, i.e. healthy groups get fairly high
prices, and unhealthy groups get very high prices.
Insurance carriers have an uncanny way of learning the health
of a group, even if they don’t insure your group. We have found
that a single serious or major health event within a group will virtually eliminate competitive bids and result in much higher than
average cost increases as well as dictated structural changes in
your benefits to the group’s plan at renewal.
We have found that faced with the increasing health care costs,
employers and employees are faced with very few choices. I would
call it a menu of the lesser of evils. These options include: 1) increasing the amount of premium that each employee pays each
month; 2) increasing the co-payments or deductibles; 3) imposing
changes on unhealthy lifestyles, like charging smokers or obese
people more premiums; 4) incorporating higher deductibles and
lower benefits into the plan design, and sometimes using like a
health savings account or health reimbursement accounts, which in
the end is just a cut in benefits, reducing or modifying or eliminating benefits, and providing financial incentives or disincentives
to use the modified benefits.
And lastly, an option that I find is becoming a lot more common
today, which is small businesses are just eliminating offering employer-provided health insurance. Historically, small businesses
make up the backbone of our nation’s employers. Collectively, small

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00016

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

11
businesses employ the largest number of people in the United
States. Yet because each company is small, we have almost no market clout to help bring changes to our health care system.
Health insurance consolidation has in part created a take it or
leave it market for small businesses. Reduced competition through
consolidations both of insurance carriers and health insurance carrier provider networks has led to increased pricing, fewer choices
for small businesses and their employees.
[The prepared statement of Mr. Office may be found in the Appendix on page 49.]
´
ChairwomanVELAZQUEZ. Mr. Office, your time is up, and they
just called for a vote. So I would like to move to the next witness.
And for that purpose, I recognize Mr. Bartlett.
Mr.BARTLETT. Thank you very much. Mr. Scandlen wasn’t in his
chair when the Committee began, I suspect for the same reason I
wasn’t in my chair. I think we both probably came down 270 this
morning. I left two hours and 15 minutes before the Committee, because I really wanted to be here on time. But, unfortunately, this
was my second longest commute in 15 years of commuting that 50
miles from Frederick, Maryland, down to the Hill. So thank you
very much for braving the traffic and being here this morning.
Greg Scandlen is from Hagerstown, Maryland. He is the founder
of Consumers for Health Care Choices, a non-partisan, non-profit
membership organization aimed at empowering consumers in the
health care system. He is considered one of the nation’s experts on
health care financing, insurance regulation, and employee benefits.
He testifies frequently before Congress and appears on such television shows as The O’Reilly Factor, NBC Nightly News, and CNN.
He has published many papers on topics such as health care costs,
insurance reform, employee benefits, individual insurance programs, HSAs, HRAs, and every aspect of consumer-driven health
care. Mr. Scandlen was the president of the Health Benefits Group
and the founder and executive director of the Council for Affordable
Health Insurance. He also spent 12 years in the Blue Cross/Blue
Shield system, most recently as the director of state research at the
national association.
Thank you very much for joining us today.
STATEMENT OF GREG SCANDLEN, PRESIDENT, CONSUMERS
FOR HEALTH CARE CHOICES

Mr.SCANDLEN. Thank you, Mr. Congressman. Thank you, Madam
Chairman, and members of the Committee. I was going to ask you,
Mr. Bartlett, for a note excusing my tardiness, but you have made
that unnecessary. Thank you very much. I do apologize for being
late, though.
I know you have a vote pending, so I will be very quick. I just
want to share a couple of thoughts with you. One is that concentration of--in this market is not an accident, and it is not an inherent
part of the small group market. When I was with the Blue Cross/
Blue Shield Association, I was--one of my responsibilities was
working with the National Association of Insurance Commissioners
on their small group reform proposals back in the late 1980s.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00017

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

12
And I can tell you, at the time the Commissioners and their staff
made it very clear that these reforms would do nothing to lower
cost, nothing to increase access. Their purpose was to stabilize the
market, and that was their language.
And what they meant by that was they thought there was too
much competition in the small group market. It was confusing for
employers, and they would prefer it if there were only three or four
competitors in every market. That would be easier to understand,
and, frankly, probably easier for the regulators to regulate, with a
smaller number of companies.
So I think the situation we have today is the direct consequence
of regulatory interference with the market. Many of those regulations were well intentioned, but I think they all add to cost and
complexity in this market, and many, many smaller companies decided they simply could not afford to comply with the various state
and changing from year to year regulations that they had to follow.
So they simply got out of the business.
Many of them were life insurance companies, and they sold off
their health books to larger carriers that were--that are better able
to afford the compliance costs associated with all of these regulations. And what we have today, and as the other witnesses have
mentioned, we have coverage that is overpriced, inefficient, unaccountable, inconvenient, and incomprehensible to the consumer.
We need--these are, I believe, the characteristics of a non-competitive market. There is insufficient competition. If you don’t like
what--if you don’t like what one company offers, it really doesn’t
matter because everybody else is offering the exact same thing at
the exact same price.
This market is sorely needing innovation and efficiency. The insurance industry is notoriously inefficient. And back in the 19th
century when it comes to technology and computer support, larger
is not better, larger results in monopolization and a lack of innovation. And there have been some proposals that have come before
the Congress that I think would help here.
One is the interstate purchase of coverage. So if I am living in
Maryland, and there is a better product available in Pennsylvania,
I would like to be able to purchase that product, and I don’t see
why I can’t. Another possibility would be an alternative federal
charter, so insurance companies could become like banks. They
could decide whether they would like to be regulated by the states
or by the Federal Government.
And if they choose the states, they are confined to doing business
in the state that is regulating them. If they choose a federal charter, they can operate nationally, and Mr. Office and other multistate’s smaller employers would be able to purchase the same product for all of their employees.
So I think solutions are there, but I think decisive action is needed, because this market is collapsing.
Thank you very much.
[The prepared statement of Mr. Scandlen may be found in the
Appendix on page 56.]
´
ChairwomanVELAZQUEZ. Thank you very much.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00018

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

13
The Committee stands in recess and will resume right after the
vote.
[Recess.]
´
ChairwomanVELAZQUEZ. Gentlemen, the Committee is called
back to order. I know the Ranking Member is on his way here.
I would like to address my first question to Dr. Plested. We all
agree that it is critical that physicians are in a position to be advocates for their patients. I understand that some physicians are concerned that important decisions relating to care of patients has
been taken away from them by burdensome rules imposed by insurers.
My question is, Dr. Plested, have these rules gotten more onerous as the insurance industry has consolidated? And how do these
policies affect the doctor-patient relationship? Is the quality of care
impacted?
Dr.PLESTED. Thank you, Madam Chair, and the answer to the
question is unequivocally yes, quality of care is affected. The basis
for patient care throughout history has been based on what we call
the patient-physician relationship. And both of those partners in
that relationship have the same interest, and that is the health of
the patient. Regardless of how you change that, if you put anyone
in between that, whether that be an insurer or an employer, if anyone else gets in between those two parties in that relationship,
their interest is different.
With an insurer, the CEO of every insurance company’s primary
interest is his shareholders, not the patient. So that it can just-it just follows by reason that any time we dilute that basic fundamental relationship it is not in the interest of patients. And when
the insurer can bludgeon the physician with paperwork, with unnecessary rules and regulations and unilateral--contracts that can
be unilaterally amended, all these things that you have heard in
the testimony today, that directly affects the care that those patients can get.
´
ChairwomanVELAZQUEZ. Have you conducted any survey among
doctors regarding that doctor-patient relationship as a result of
consolidation?
Dr.PLESTED. Specifically related to consolidation, I don’t know
that we have, but we have all kinds of data about what has happened to the relationship, and consolidation is an integral part of
that. And it has all been detrimental.
´
ChairwomanVELAZQUEZ. Thank you, Dr. Plested.
Dr. King, the difficulty physicians have faced with the insurance
industry is in large part based upon the size of the companies and
the market share they command. Some insurance companies have
grown so large that physicians have found it difficult to negotiate
a contract with favorable terms. What has been the experience of
your members? Are they being forced to accept take it or leave it
contracts?
Dr.KING. The short answer is yes. I practice in a small town in
Selmer, Tennessee, west Tennessee in a rural area. And so we only
have one or two major industries to begin with, and when we only
have one insurance product they have as much as 30, 40, 50 percent of the patient base for us to take care of.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00019

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

14
And I have been taking care of these patients for 20 years, and
all of a sudden I am dealing with an insurance company that has
offered a contract that I know is inappropriate, that is going to
interfere with the quality of care that I need to provide. And it is
tough for me even to consider making a living and supply jobs for
my employees. I am a small business, too. I have got--we have
seven physicians, we have 39 employees that we need to supply
their health care, we need to provide them with pay.
So I am a small business, but I am also providing the health
care. And if I choose to eliminate 20 percent of the patients I have
been taking care of, I don’t think too many businesses can do that.
And we are seeing that every day, that they are having to either
accept a contract that is not acceptable, that we know we can’t
make it work, or give up 30 percent of the patients we have been
caring for over years.
´
ChairwomanVELAZQUEZ. Thank you.
Mr. Hughes, the cost of the same health benefits are likely to be
higher for a small firm than for a large firm. How does this make
for an unleveled playing field for your members when it comes to
negotiating health insurance plans? And with increased concentration in the industry, do you expect this disparity to grow?
Mr.HUGHES. The micro-employer is in a very difficult position,
because they are facing regulation that places them into the small
group market. So even though we may have a very small employer
group of only one or two people, they are thrown into the group
market that is accordingly rated based on that group experience.
What we are seeing is a significant premium rate increases as
a result of that. The small group simply doesn’t have a chance to
compete the way the larger group does in the marketplace.
´
ChairwomanVELAZQUEZ. What can be done to remedy this disparity?
Mr.HUGHES. Well, one of the factors involves federal taxation. It
is clear that taxes affect social behavior, and it is also clear that
in the Tax Code today all businesses receive an exemption for the
payment of income taxes and payroll taxes on premiums that they
provide for their employees for health insurance coverage.
The exception to that rule is for the sole proprietor, the self-employed individual. That particular individual does not receive a
payroll tax deduction for these health insurance premiums, and accordingly must pay then 15 percent of payroll taxes on those premiums. The effect is that if the tax law were amended to be equitable to all business owners, self-employed proprietors could then
reduce their premium costs by 15 percent across the board.
´
ChairwomanVELAZQUEZ. Thank you, Mr. Hughes.
Mr. Office, you mentioned that insurance companies may entice
employers by offering low coverage rates to new groups, and then
dramatically increase premiums or change benefits on renewals.
You mentioned that this behavior often chases competition out of
the market, thus allowing the insurer to later increase prices.
What have your experiences been with such enticement rates, and
what can your business do to respond to dramatically increased renewal premiums when you only have one or two other insurers to
choose from?
Mr.OFFICE. If you have any suggestions, I am open.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00020

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

15
[Laughter.]
That is the thousand-pound gorilla that we face. You will get an
insurance carrier that will come into the market. And to buy market share they will offer discounts, and most small businesses look
at price. That is a critical factor. And once they have done that, you
are moving--your numbers stay the same.
In any community, you have a certain number of people that are
insured, and you are just moving them from this bucket to this
bucket, and so this area over here loses those people and they push
out of the marketplace. Once that is done, then they do increase
the premiums. Or if, structurally, they say, ‘‘Well, we will keep
your premium the same, but here is the policy you are going to
have next year,’’ it is going to have fourth-tier pharmaceutical or
it is going to have higher co-pays and deductibles, or ‘‘we are not
going to cover, you know, these procedures,’’ or whatever.
But as a small business, you react to what they present to you.
You don’t really--and you don’t have a market to go look for to say,
‘‘Well, what about an alternative?’’ So any questions are welcome.
´
ChairwomanVELAZQUEZ. Sure. Mr. Scandlen--and I will recognize
Mr. Bartlett--I heard when you spoke about the direct consequences of state regulations that it really encourages concentration. And I know how frustrating it is. You said that one of the avenues could be interstate purchase of health insurance or federal
charter.
But even without going into that, what role or how do you assess
the Department of Justice role, or lack of oversight, regarding antitrust laws when it comes to consolidation?
Mr.SCANDLEN. I think there is an important role for antitrust enforcement here. Clearly, when there are only two or three players,
when they actually merge together, that is a concern. But I, quite
frankly, think that is--that is something for the--it is not a universal solution, because if there is a company that would like to
sell its business to another company, because the first company
simply is not profitable, then antitrust enforcement there strikes
me as inappropriate.
So I guess I am reluctantly embracing antitrust in selected cases.
And, for instance, in the United-Sierra merger in Nevada, my organization was quite concerned about that and communicated with
the Department of Justice encouraging them to reject that merger,
because here were two very strong viable companies that consumers we couldn’t see would derive any benefit from--from the
merger. And if consumers are not benefiting from it, then I think
it--and could actually be disadvantaged by it, then I think it is a
problem. But I don’t see it as the number one solution to this issue.
´
ChairwomanVELAZQUEZ. Thank you.
Now I recognize Mr. Chabot.
Mr.CHABOT. Thank you, Madam Chair.
Dr. Plested, I will start with you if I can. You noted that investigating consolidation regulators have tended to focus on physicians
rather than on health insurers. Could you expand upon that a little
bit? Why do you think that is so, and what should be done about
that?
Dr.PLESTED. Well, I certainly can’t testify to the motivation of
the DOJ, but I can testify to what has happened, and it would ap-

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00021

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

16
pear that the doctor--an individual doctor is much less able to withstand an assault from the DOJ. And it makes their rate of caring
actions that they succeed on exceedingly high, because it--an individual physician just can’t withstand this.
A huge insurer certainly can, and I think the point that the
Chairman just raised is exceedingly important. What can we do, or
what can this Committee do? And the answer to that is it is time
to draw a line in the sand and say, ‘‘This is going to stop.’’ The answers are complex, as everybody has said, and they aren’t going to
be solved in this testimony or this action. But to put down a marker and say this Committee from--to the DOJ, we have got to make
it crystal clear that this is going to stop, and get this merger enjoined, would be the necessary first step that could be made.
Mr.CHABOT. Thank you, Doctor.
MR. Hughes, if I could turn to you next. In your written testimony, you urged Congress to address the inequitable tax treatment
of health insurance for individuals purchasing coverage on their
own. I really couldn’t agree more with you on that, and, in fact,
today I am reintroducing a bill that I have introduced in previous
Congresses. Unfortunately, we haven’t gotten it passed into law
yet, but we are going to continue working.
It is called the Health Insurance Affordability Act, and it is legislation that would provide a tax deduction for gross income--or, excuse me, from gross income for the health insurance costs of an individual taxpayer, the taxpayer’s spouse, and dependents as well.
In other words, you know, large corporations obviously can fully deduct the health care costs for their employees, but an individual
basically pays for their premiums and doesn’t get to claim those for
the most part. And a lot of small businesses also aren’t able to do
so, at least to 100 percent.
Could you explain how a deduction like that would help individuals in small firms?
Mr.HUGHES. Well, again, going out in the individual market, as
you indicate, those health insurance premiums are paid with aftertax dollars, meaning that their purchasing power has been eroded
significantly. And if there is a way, a mechanism that would allow
for the deduction of health insurance premiums across the board,
whether employee or business or small business owner, then my
sense is that it is going to have the impact of bringing more people
into the marketplace, creating a marketplace that has in effect
lower ultimate cost of premiums, and theoretically that should increase competition, because more insurers should go after that
market niche. So we wholeheartedly support that type of legislation.
Mr.CHABOT. Thank you very much.
Dr. King, in your written testimony you state that ‘‘As a result
of concentration of insurers, many family practice physicians in
small or solo practices have little leverage in negotiations with
health plans.’’ Could you discuss that briefly, and what effect that
ultimately has?
Dr.KING. I will be glad to. In fact, I can give you an example of
my own practice. As I stated earlier, I practice in a small town in
west Tennessee. We have a large employer there, and they changed
insurances for cost, as mentioned earlier. There was no physician

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00022

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

17
in my county in the network that insurance product provided. And
they not only didn’t come at us with a contract we wouldn’t accept,
they didn’t offer us one at all.
Under their arrangement, all they had to do was have a doctor
within 45 miles of the plant that signed up. Then, they met all the
requirements they felt like they needed to do. And they wouldn’t
even sit down and talk to us.
And my patients had a choice to make that year. They came and
saw me and we tried to work out a way that they could pay me
for their services and we didn’t bill their insurance, or they drove
45 miles. So they were doing back and forth for an entire year until
they finally changed that plan. They chose not to make any
changes at all.
So not only do they come at us and we can’t negotiate, and this
was every physician in the county, that, you know, they have
enough, but for--with our family physicians, most of us are solo
practitioners or small groups, anywhere from one doctor to maybe
four or five. We have absolutely no leverage.
Mr.CHABOT. Thank you very much, Doctor.
Mr. Office, you mentioned that your companies maintain multiple health insurance plans to foster competition, and to help reduce costs. How much of an impact does this make on your overall
health insurance costs?
Mr.OFFICE. I would be happy to share some numbers with you,
which I came prepared to. But we range--for example, single only
coverage in one geographic location where I understand there is
some competition, and I am not involved in the buying there, but
they are paying $177 a month per employee. And in the area that
I work in, we are paying $570 a month. So there is a $400 difference. For family coverage, the difference is $450 versus $1,400.
So you can see that there could be significant differences.
Now, because of the regionalization I can’t go to, say, New York
or Puerto Rico where I might get a lower rate and buy a plan for,
you know, south--you know, southern Ohio where we have most-you know, a large group of people, or Florida. We just can’t get
that, because we end up with networks. We are not going to buy
a plan and pay a premium and then get a network where there is
no doctors in that area. Our employees will--there will be a mutiny.
[Laughter.]
Mr.CHABOT. Okay. Thank you.
Mr.OFFICE. So, you know, if you are going to pay the premium,
you have to have hospitals and doctors in that network. And you
don’t want to make people have to change those choices. So there
can be a big difference.
Mr.CHABOT. One of our colleagues, John Shadegg from Arizona,
has introduced a plan over the years relative to health insurance
that would allow people to go across state lines and would undo
some of the difficulties there are with various states having different requirements and regulations and keeping companies out
that aren’t necessarily in a particular state. So it is something that
we probably ought to look at.
Finally, Mr. Scandlen, in your written testimony you discuss the
need for innovation in the types of health insurance coverage that
are offered, such as health savings accounts, for example. How

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00023

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

18
would small businesses benefit from greater innovation? And is
there anything that you would suggest this Committee or Congress
do in that area to be of assistance?
Mr.SCANDLEN. I am not sure how you could encourage innovation
other than just encouraging competition. I mean, I think it is the
same thing. And there are some very, very interesting things out
there. One of the things I mentioned in the testimony was the special needs plans under Medicare, and that is sort of an experiment
that--that I think so far is having very good results, very interesting results.
These are insurance companies that focus on the needs of the
chronically ill, and one of the reasons they are able to do that is
because they receive--Medicare pays out risk-based premiums, so
they are receiving premiums that enable them to service that special population.
Mr. Chabot, if I could very quickly also, in terms of the--your tax
deduction for individuals, I think that is a marvelous idea, and I
think it is worth remembering that up until 1983 individuals could
deduct their health insurance premiums as part of the medical expense deduction, as long as, in 1983, it didn’t exceed three percent
of their AGI.
That was raised to 5.5 percent, and then in ’87 raised to 7.5 percent. and we have seen, as that has eroded, the individual market
has just gone in the tank, because that tax advantage has been
withheld from people that buy individual coverage.
Mr.CHABOT. Thank you very much.
I yield back, Madam Chair.
´
ChairwomanVELAZQUEZ. Thank you.
´
Mr. Gonzalez.
´
Mr.GONZALEZ. Thank you very much, Madam Chairwoman. The
issue of availability and affordability--and it transcends big business, small business, every American situated one way or another.
The interesting thing, I think the government has a tremendous
stake in making sure there is robust competition, because the future does hold more government involvement in assisting individuals, small business, families, in acquiring health insurance.
So availability and affordability looms large, whether it is the
President’s tax proposal, whether it is what Mr. Chabot was talking about, associated health plans, subsidizing premiums and such.
All that is for naught if we don’t have a healthy insurance industry
that will provide choice, which will drive down cost, obviously. At
least that is what I have used as the big picture.
Some of the things that we have covered here, though, I am wondering if it really does in any way assist in achieving that final
goal of availability and affordability. I will say that I think our first
witness alluded to--I guess it is the United acquisition of Sierra. Is
that right? And maybe that should be a marker. Maybe we ought
to pay a lot of attention to that, and put everybody on notice. And
I think that point is well taken.
One thing that Dr. King pointed out--and I am thinking all short
of that--is, how do we get all of the different participants fully empowered?
´
ChairwomanVELAZQUEZ. Will the gentleman suspend?
´
Mr.GONZALEZ. Yes.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00024

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

19
´
ChairwomanVELAZQUEZ. I just would like to ask unanimous consent, and the Ranking Member agreed with me, for every member
to have the opportunity to ask one question. This is going to be
quite--a very disruptive session today. Right now on the floor they
are going to be calling procedural votes.
So in light of that, I will give the opportunity for everyone to ask
one question, since I know that some of the members of the panel
have flights to catch.
´
Mr.GONZALEZ. I will be real brief, then. I will just ask Dr. King,
you pointed out that maybe empowering physicians to negotiate,
where presently they are prohibited by law--that was my understanding of your testimony--if you could just kind of elaborate a little bit on that, and how you see that would be beneficial to the big
question of availability and affordability.
Dr.KING. Well, in allowing us to be able to negotiate, or at least
talk to each other, you know, about the different insurance products, about the contracts that we are being offered to make sure
that we can compare, we talk doctor talk, we don’t talk lawyer talk.
And we need to have the ability to share information and share
problems and concerns as we look at the contracts, so that we can
make decisions that is the best interest for our patients.
And then, if we can negotiate that, I can see how, you know--you
know, I don’t know about the--you know, the consolidation of all of
the insurance companies and all, but I see how the health care of
my patients can improve, and we can arrive at a better plan that
we take away the barriers that I try to help take care of my patients with that, so that physicians won’t desert. We don’t have
enough primary care physicians out there. They are going into different arrangements. They are going into ERs, they are going into
urgent cars, which is not where we want our patients, and they are
going into markets that don’t include insurance.
So we have--just to get the physicians out in the rural areas and
taking care of patients like we need to, they have got to be able
to negotiate and make it work.
´
Mr.GONZALEZ. Thank you. I yield back.
´
ChairwomanVELAZQUEZ. Thank you.
Mr. Bartlett.
Mr.BARTLETT. Thank you very much. You know, we don’t really
have much of a health care system in our country. We have a really good sick care system. It is the best in the world, and I would
hope that we might move a little more toward a health care system, so maybe we wouldn’t need such a big sick care system.
One of the problems in rising health care costs is the fact that
health care--I am using that word euphemistically--health care is
about the only thing that most people shop for in our country and
never ask the price. So they are not a careful shopper.
And one of the things that I wanted to personally do, so that I
could become a careful shopper--and these were in the days before
health savings accounts, which really makes a person a careful
shopper, and I am a big fan of those. But absent that, when I retired 20-couple years ago, I wanted to find a catastrophic policy
with a $5,000 deductible. See, I think that these little nickel and
dime things just wear you out and enormously increase the cost of
health care.

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00025

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

20
I can pay the first $5,000. That might be a little painful, but
what I can’t pay is that second half million. And I think that many
of the policies drop. You have a cap at about a half million. I
couldn’t find a catastrophic policy with a $5,000 deductible. That
ought to be a pretty cheap policy, shouldn’t it? And wouldn’t it
make people a really careful shopper? And why don’t you--why
doesn’t the industry offer that kind of a policy?
Mr.SCANDLEN. I think they are available now. And if I am not
mistaken, the AMA has offered a $10,000 deductible policy to its
members for a long time. So I think if you were shopping today,
Mr. Bartlett, you would be able to find that.
Mr.BARTLETT. Madam Chair, I would like you to encourage our
people here who provide our options for health care to include that
as one of the options.
´
ChairwomanVELAZQUEZ. Definitely.
Mr.BARTLETT. Thank you very much.
´
ChairwomanVELAZQUEZ. Ms. Clarke.
Ms.CLARKE. I want to thank our Chairwoman and our Ranking
Member. This is probably one of the most critical issues facing
Americans today. As small businesses, as health care providers, as
consumers, we are all in a quandary and involved in the same
meltdown together.
There are so many questions that I would like to ask, but I want
to get an understanding of some of what is happening out there to
physicians’ claims. I want to ask for anyone on the panel--I have
heard that health insurers have employed coercive tactics, such as
re-pricing of physician claims, which results in non-contracted physicians receiving less than contracted physicians for the same service. What is re-pricing exactly, and what other manipulative practices have health insurers used to undermine a physician’s bargaining power? Dr. Plested?
Dr.PLESTED. Re-pricing is a very interesting phenomenon. It is
complex, but there have been contracts let by entities that do not
provide any care. They just round up a large number of contracted
doctors who will accept a price, and there are literally hundreds of
these contracted groups. There are now entities called re-pricers
that take every physician and match that physician by computers
with every contract that they have signed for every service that
they provide.
And so that when you get a bill from your insurance company
that has six things on it, that may be a sign by a re-pricer to six
or seven different contracts, so that he gets the lowest one. It is
complex, but it is a very Machiavellian type of system.
There are also the things that the insurers can do that have been
mentioned that they can unilaterally amend a contract. They can
change the amount that they agreed to pay you. They can unilaterally put in screens. They have computerized screens that will reduce the amount that they pay for things that it doesn’t pay the
physician to charge--to try to challenge each of these. There are a
multitude of monopolistic behaviors that are allowed by this.
´
ChairwomanVELAZQUEZ. Thank you. And I want to take this opportunity to thank all the witnesses. And I am sorry we do not
have more time to spend with you, but I am very, very happy that
we really had an opportunity to have this dialogue on an issue that

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00026

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

21
is so important, not only for small businesses and small practitioners, but also for consumers in America.
The Small Business Committee will call on federal antitrust regulators to play a more active role in ensuring that health insurance
markets remain competitive, and, to that effect, I will ask the
Ranking Member to join with me in sending a letter to the Department of Justice. I will also--I already discussed with Chairman
Conyers on the House floor, when we went to vote, asking him to
do a joint hearing between Judiciary and Small Business to examine specific mergers that may be pending.
I know, Mr. Scandlen, that you said that this is just one aspect
of a bigger picture, but we have to make sure that there is proper
oversight and examination before these mergers can proceed.
With that, I thank all the witnesses for your participation. I ask
unanimous consent that members have five legislative days to
enter statements and supporting materials into the record, and this
Committee is adjourned.
[Whereupon, at 11:45 a.m., the Committee was adjourned.]

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00027

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00028

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.001

22

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00029

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.002

23

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00030

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.003

24

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00031

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.004

25

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00032

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.067

26

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00033

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.005

27

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00034

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.006

28

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00035

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.007

29

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00036

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.008

30

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00037

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.009

31

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00038

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.010

32

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00039

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.011

33

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00040

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.012

34

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00041

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.013

35

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00042

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.014

36

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00043

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.015

37

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00044

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.016

38

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00045

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.017

39

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00046

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.018

40

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00047

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.019

41

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00048

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.020

42

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00049

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.021

43

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00050

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.022

44

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00051

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.023

45

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00052

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.024

46

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00053

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.025

47

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00054

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.026

48

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00055

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.027

49

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00056

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.028

50

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00057

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.029

51

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00058

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.030

52

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00059

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.031

53

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00060

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.032

54

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00061

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.033

55

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00062

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.034

56

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00063

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.035

57

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00064

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.036

58

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00065

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.037

59

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00066

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.038

60

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00067

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.039

61

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00068

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.040

62

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00069

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.041

63

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00070

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.042

64

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00071

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.043

65

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00072

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.044

66

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00073

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.045

67

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00074

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.046

68

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00075

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.047

69

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00076

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.048

70

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00077

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.049

71

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00078

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.050

72

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00079

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.051

73

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00080

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.052

74

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00081

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.053

75

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00082

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.054

76

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00083

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.055

77

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00084

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.056

78

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00085

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.057

79

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00086

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.058

80

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00087

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.059

81

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00088

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.060

82

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00089

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.061

83

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00090

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.062

84

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00091

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.063

85

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00092

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.064

86

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00093

Fmt 6633

Sfmt 6633

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.065

87

88

VerDate 0ct 09 2002

11:16 Dec 20, 2007

Jkt 033615

PO 00000

Frm 00094

Fmt 6633

Sfmt 6011

G:\CLERK SB\HEARINGS\TRANSCRIPTS\39376.TXT

LEANN

39376.066

Æ