WASHINGTON, D.C.--Chairman John D. (Jay) Rockefeller IV today gave an opening statement at the U.S. Senate Commerce, Science, and Transportation hearing entitled "The Power of Transparency: Giving Consumers the Information They Need to Make Smart Choices in the Health Insurance Marketplace."

Prepared Opening Statement – Senator John D. (Jay) Rockefeller IV, Chairman

Almost four years ago, this Committee held a hearing on the many challenges consumers faced when trying to buy health insurance.  At that hearing, we heard that shopping for health insurance was a confusing, exasperating, and stressful experience.  Consumers had no easy way to learn about, or compare, different health insurance policies.  They could get slick marketing materials from the insurance companies, but they couldn’t get straight answers about what services health insurance plans did or did not cover.  When they asked for further information about health insurance plans, consumers usually got bulky disclosure documents, written in incomprehensible legal jargon and small print.  And there was no standard terminology in health insurance.  Terms like “copay,” “hospitalization,” or “out-of-pocket limit” meant different things in different plans. 

Consumers were in the dark, and that is exactly where the health insurance companies wanted to keep them.  A former CIGNA executive named Wendell Potter testified before this Committee that health insurance companies purposely made their materials incomprehensible to their customers.  Mr. Potter told us that the industry’s goal was to make their disclosure materials so impenetrable and confusing that consumers would give up and throw them away.  As long as consumers couldn’t understand how the policies worked, they wouldn’t understand the bad deal they were getting.

While the market we heard about in 2009 was profitable for health insurance companies, it could be disastrous for families dealing with a serious illness or injury.  Consumers assumed that if they paid their health insurance premiums every month, they were protected.  Only too late would they discover that the fine print in their health insurance plan stuck them stuck them with thousands of dollars in unexpected medical bills.  A complicated pregnancy, a cancer diagnosis or even a broken limb, could push families well beyond their tight budgets.  In fact, medical debt had become the leading cause of personal bankruptcy filings, even for families with insurance.

After hearing too many of these stories, some of us in Congress got serious about bringing more transparency to the health insurance market.  We created a new “clear labeling” requirement in the 2010 health care reform law.  We required health insurance companies to clearly and accurately disclose to their customers what their policies cost and what services they cover.  Instead of 20 or 40 or even 100-page disclosure documents, the law required insurers to give consumers a 4-page “Summary of Benefits and Coverage” (SBC) document.  The SBC had to be written in plain English and printed in a font consumers could actually read.  The law also called for the development of industry-wide standard definitions, so consumers could clearly understand words like “co-pay” or “hospitalization.”  

With clearly presented plan features, described using standard terms, consumers could finally make “apples-to-apples” comparisons between health insurance products and find the one that best met their health coverage needs.  To help consumers understand how the policies would work in a real-life situation, the law also required insurers to give examples of how their plans would cover the expenses of a major health care event, such as having a baby or treating a chronic disease.  After extensive discussion and consumer testing, insurance companies began issuing SBCs in the fall of 2012.  While there may still be room for improvement, these forms represent a major step forward in in helping consumers make informed decisions about their health care coverage.  

With this new transparency, health insurance companies have a new incentive to compete on the value of their products, not on their ability to confuse and mislead consumers.  Our witnesses today are going to tell us about how the SBC was developed and what they think of the SBC as a tool for creating transparency and improving consumers’ health plan shopping experience.  I hope they will also share their thoughts on other steps to improve transparency in this market.  What other information do consumers need to make good decisions? Are there better ways to present or format this information to maximize its effectiveness?  I look forward to our discussion today.

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