>> thank you for your question. our co-op had challenges from inception in that as the commissioner mentioned, going into a state without provider network caused the company to these those. in 2014 we had disastrously low enrollment truly at most maybe 1,000 people signed up for the co-op plan mostly because the rates were somewhat higher than the leader well-established. so overcoming challenges became extremely difficult which is why we saw significant rate increases for 2015 and beyond because of the enrollees across the market we had higher than expected utilization.

>> to the other plan raise costs? >> every plan lost. >> that is what i understand. they had to underbid. some survived and some did not. >> we did not have any company accurately. and so some of our larger established companies could withstand losses, but the co-op did not have resources available. >> what would you say are the top reasons, 1200 the 23 failed? internal problems, too. do you have insight into the

top reasons why they fail? >> i do not know what happened in the other groups surprising payments a set of receivables. >> why don't we just suggest that there were no mistakes made by management in co-ops , but if you look across the marketplace where you see is that this was a competitive marketplace and insurance companies priced aggressively. the difference was they did not have other business and surplus, and their capitol was continuously reduced and whenwhen the commissioner talks about learning to sail in a hurricane that is especially apt to a situation where we were prohibited from building a big boat.

>> it is a rollout that occurred. there was just not a lot clearly thought out. things that we found out were not ready would you say that he was reading that more foresight should have gone to set this up? >> there has never been aa situation where 22 new health insurance companies enter the market across the country in the same year two years after the charter their business. and so that was a challenging situation, but it was much more challenging and fatal for some. >> absolutely.

>> thank you for the invitation to be here today. i situation was worse comeau one of the last co-ops to be approved before the termination of the program. so the timeframe from licensing to may to selling in october or so constrained that building our company is quite awas quite a challenge. i was encouraged because the group that got approval was closely associated with our option pack in new orleans. maybe 100 -year-old hospital and clinic operation, internationally respected and had been until the '90s when they sold off their health plan. with their credibility and experience and expertise i was hopeful and optimistic that we would be successful. in hindsight it was too much

plus all of the other problems that have been described here in testimony today. >> recognized for five minutes. >> this is kind of what i was talking about in my opening statement. these co-ops started a couple of years later and had a couple of years to get going, so it was not like we were trying to stand up 22 companies at the same time we were doing enrollment on the website. this was standard. yes or no will work. >> the awarding of the loans was staggered. >> part of the problem we had. yes, there were problems from the beginning, but there was no support as it went along.

>> an adequate capitol. >> that is kind of what i want to talk about. is that right? and congress cut the funding. and then congress rescinded the remaining lending authority which blocked the establishment. is that correct? >> very. >> irrespective of that 23 co-ops, established. the co-ops they take into

account the affordable care act risk stabilization programs to help insurers mitigate the risk. the risk adjustment has been problematic. >> twenty-three. >> the program has failed to help the cost. we recently learned that co-op lacked sufficient funds for 2014.

the risk program is only reimbursing the co-op claims at 12.6 percent of what they are owed. >> that is correct. >> if congress had not made the program budget neutral would it be fair to say they would have likely made a difference in keeping these solvent? >> i have read news accounts from half a dozen co-ops that attributed closure to the government reneging on the risk corridor payments. >> what additional -- let's start with you. what do you think we can take? >> the risk adjustment formula was tweaked.

>> mr. morrison? it is important there be a federal mass stop. promised repeatedly to co-ops. and so they and their actuaries.

it takes a few years. we years. we did not know what the pool will look like. the federal backstop allows room for aggressive competition. co-ops command provide. everyone lost money. mckinsey report. >> but they did not have any way to recoup. >> we are not outliers and pricing. >> any business can be successful. and people have known quite weary of bail outs.bailouts.

i want to talk about the cms enhanced oversight plan. was the tennessee co-op under and in plant -- and enhanced oversight plan? >> the 1st notification was on september 29 when we received a letter. what is problematic is that we were also in discussions to lift the enrollment freeze without knowledge of the plan was going to becoming. >> you are getting conflicting information. the enhanced oversight plan included what? >> five pages of issues in the letter that were identified that were areas the co-op needed to focus on to create greater financial stability they were giving

you conflicting information. we were under the impression that they felt more comfortable so that the programming could be effectuated to be available for open enrollment starting november 1. they can's -- they converted the solvency loans so that they would artificially appear more financially secure. >> cms indicated they were in agreement with the approach.

>> we decided it was not a prudent course of action because you're not adding course or revenue but creating the impression on the balance sheet that the death could be subordinated and the company would appear more financially healthy. >> it is kind of a smokescreen. >> it certainly does not add any additional dollars. >> right. >> is it true that you were instrumental? >> it is difficult to look at premium increases that have been approved in tennessee. they took that seriously. as has been mentioned, we

need companies to be able to make good on the claims. we took an interest in making sure that premiums where appropriate. >> we do believe that the claims will be paid for all services rendered. and let me go back to the question talking about the enrollment. what was the projected enrollment from the co-op and what did cms projects the enrollment to be for 2016? >> i do believe that it was probably close to the 12 to 15,000 in early range for the 1st year growing to something more along the

20,000 enrollee range. the projection was 12 to 15,000 people command what they actually got was about a thousand. >> that far off of their mark. >> that is correct. >> thank you and i yield back 30 seconds of my time. >> thank you and i recognize mr. poe alone. congress established co-ops to do a number of things the private market had not done and were specifically created to compete and serve parts of the country.

they were often prohibitively expensive. >> all of those things are true, ranking member. the uninsured rate was about 20 percent. as i said, the difference in average premiums went from montana being 13 percent lower to 40 percent lower and we now have an uninsured rate that is closer to 11 or 12 percent. many thousands of people are now covered. many thousands of people are now able to afford insurance for not able to before. >> let me read a passage by the commonwealth fund. it says, and i quote,

predominated by one or two characters on how well they were able to screen and select characters. instead they focus was on reducing risk. did insurance companies compete largely by denying coverage? >> are is no question that segmenting the market and cherry picking to provide health insurance health issues was what was going on before the aca. >> and would you agree with what he just said? >> i believe so.

>> let me go back. is it accurate to say that prior to the passage many rural areas were underserved? >> what it meant was that if they were unable to get health insurance in many cases they were unable to get the healthcare that they needed, and access to healthcare has improved because access to health insurance has improved. although blue. although blue cross blue shield which is owned by healthcare insurance corporation still is the dominant carrier in the state of montana, the market share is somewhat smaller and consumers have the choice of the co-op. >> where there are many residents being rejected or only being offered access policies?

>> we found most of the uninsured were people who worked full-time for a small business command they greatest area of difficulty in delivering health coverage was through small businesses is wanted very much to provide health coverage that they cannot prove -- could not afford with the health coverage cost. that is why we undertook a program called ensure montana that provided refundable tax credits. >> how have co-ops served the rural west? >> when he introduced the time he talked about those

agriculture and other kinds of needs thank you mr. chairman. >> i would just like to say at the outset i am a strong leader and competition and a provider before i was a heart surgeon. they help consumers know what product they are getting and help to drive

down healthcare cost and working toward those ideas. it is unfortunate we are in the situation we are in now. cms is enhanced oversight measure have you been placed in an enhanced oversight position? the result transition.

>> and do you believe these oversight plans can be effective? >> they can be effective. yes. >> comments? >> i wouldi would just say that it has certainly been a challenge. this chapter then diverted to comply with multiple levels of regulation that far exceed the regulation of other carriers. >> understood. a personal question unrelated to co-ops. anyone can answer this.

is expanding the traditional healthcare private insurance market across the country rather than having it essentially state -based or regionally -based a concept that would work. >> thank you and a great question. i caution my republican colleagues have made a strong push toward authorizing companies to sell health insurance on a national basis which they can do already. i would be concerned about a race to the bottom.

i do want to.out one other thing, tennessee is better served in louisiana at this point. hmos are protected by guarantee fund safety net unlike the louisiana where we have tried unsuccessfully in the past. the ranking member was talking about a federal backstop. that should be done at the state level. please support state -based regulation. the president strongly expressed his continued support for regulation of insurance. >> fair enough.

any other thoughts? is the whole idea history create competition. mr. morrison. >> i testified in 2005. i think we have more interest each state has their own essential state benefit.

i know there are challenges of my time is up. they wanted to benefit consumers comeau one of the primary reasons behind the formation of the co-op. to some extent they have achieved their goal. however i would like to understand how they can continue to meet the original goals of providing the public with more insurance choices and benefits achieved through greater competition. for those who may not closely follow economics why are co-ops an important ingredient?

>> there were like and competition to begin with. mergers of the largest hospitals. the need for competition has never been greater than today. they can come into the marketplace and have a fundamentally different motive, to deliver quality healthcare at an affordable price which guides corporate decisions in a different kind of way which can be positive in the marketplace and in short to answer your question comeau what they need, eventually they will stand on their own, but they need adequate capitol.

>> similar question, how to co-ops foster competition? >> we have a big insurance company that is 75 percent of the marketplace. we are member governed. sort of like the titanic i should not use, the gigantic ship. we are a nimble pt felt, if you will. we can do innovative things.

>> it depends upon how many are left. >> 400 something thousand. >> in march 252015 press release for the 2nd year in a row average premium rates are lower than those without. .. ow what has actually happened, how have the co-ops affected the premium prices and plan choices in the states where they are operating? >> is being a new competitor in a market. in maryland, where the first new commercial insurer in 25 years. . police cites another

announcement that shows co-op states had premiums it percent-9% lower than in non-co-op states. is that accurate? were they able to drive down premium rates in 2014? >> the delta between the co-op space and the non-co-op space in 2014 was about 8%. apparently in 2015, it was more like 13%. the believe co-op split is significant role and there have been -- played a significant role in that. it is a question that requires further study because there are other factors. >> and there are other trends right now. the health insurance industry is facing a wave of consolidation such as aetna and anthony are considering mergers.

nthem are considering mergers. newly expect higher premiums as a result? >> competition drives lower prices. we think that's one of the reasons the co-ops were created and we take that mission seriously. >> thank you. we have work to do this -- to do on this for consumers. >> may i be excused? i have a flight that leaves in 38 minutes. >> good luck getting to the airport. you are excused. [laughter] thank you. and thank the witnesses for coming today. a private sector guy that understands how you are supposed to make money in business and how you capitalize companies and how you fail or succeed based on your pricing and products and what you deliver to your customers and if you make money,

you succeed and if you lose money, you don't. we're talking about co-ops and i am from new york where the new york co-op and its failure cost the taxpayers over $250 million. someone asked me would i be surprised we are here today, i predicted this over two days ago . i remember sitting down with insurance executives in early 2013 and asked them how they would be pricing their products for obamacare. of thoseckly came out meetings is they were going to underprice their products because of the risk corridor doors. doors -- corridoors. a third of our subscribers will be young and healthy. i said that's not going to

happen. what's going to happen when a dozen? we lose money and the government will make it up. this is set up for failure from winer and stop -- dave -- day one. when you spoke about it not being capitalize properly, would you agree if the co-ops made money, we wouldn't be having discussion? you don't need more capital if you make more money. >> i would agree. >> so we are here because obamacare was set up for failure. it was set up to encourage low premiums to deceive the american public. that's when we got here. everyone knew these projects were underpriced and they would make it up on the backs of the taxpayers. that is why we are here today.

the problem is the product meant you lost money and now the complaint is we didn't -- we cut the money from $2.4 billion. 60 co-ops.d on they got every dollar they were supposed to get. they would be 50 co-ops. i have to categorically disregard your comment that had we thrown $6 billion. that was never the intention. the $6 billion was for 50 co-ops. he 23 were not harmed in any way. they fail because the product .as underpriced obamacare was meant to deceive the public. all i can say is now we are a couple years in and the

deception is obvious. i don't know what the polls would say but i think obamacare now would be in the 20% range. and we have these problems. new york -- on hundred 50,000 members on the new york plan was their insurance in two weeks. we are forcing private companies to take those policyholders for 30 days. the blue cross blue shield. the take these 150,000 people for 30 days coming in the losses, and have them set up for new plans. this is obamacare at its worst. it's not surprising to me. i saw this coming three years .go if you underprice your product, there will be a price to pay. this product was deliberately underpriced from day one and is me,ople say woe

that's because even expected to lose a lot of money. it didn't happen. i feel sorry for the american taxpayers during this financial burden who were deceived from day one and it's all coming home to roost and we see it every day with the price increases and policies. not surprisingly are not doing fine here. the project was never priced correctly. >> can you give an answer with regard to would you have priced it differently if there were not risk core doors -- corridoors. conservatively and we're making a profit the last three months.

was that a backstop you saw? >> i don't know i would characterize it as a backstop but if the incentive to appropriately price alumina did what any excess profit needed to be paid back. unless the entire market priced appropriately, your pricing less else out of the market -- pricing yourself out of the market. >> i think the witnesses. this has been a very constructive hearing and dialogue has been good. there are a lot of different experiences with co-ops and a lot of different reasons they've had problems. my co-op in kentucky did not have enrollment. the initial was 30,000 enrollees, it peaked at 50,000.

itselfd not sustain believe gone from losing $50 million to losing $4 million in 2015 and was on track to make a profit in 2016. not every experience have been right. there are various factors that could affect this. did not have an administration that supported the affordable care act. as opposed to contact his experience with a supportive administration, alerting the population to the options available to them, that experience was going to be different than tennessee or louisiana where it seems to me you had an enrollment profit first and foremost. would it be a fair statement all of these factors would affect

how the co-ops operate and whether they had a better or worse chance of succeeding? >> certainly. statewide, we had a positive enrollment through the federally facilitated marketplace but we did not expand medicaid. the enrollment of less than 1000 people made it extremely difficult. >> obviously we have different health conditions as well. montana probably has a lot healthier population than kentucky and tennessee. in kentucky, we have serious challenges. one of the things that impresses , is that while our co-op is going out of business, we have three new private insurers and now have seven insurers. they are not relying on risk corridors.

disastrousot seen a situation. haveonsumers will competition in activities and we see enhanced capitation in the private market through our exchange. could have a benefit. would that not be true? >> that's very encouraging and i think the benefits of introducing a co-op into the dynamics of the marketplace can have a lot of ripple effects. i am glad to know about that. talked about the question of offering insurance policies 20% commercial insurance company can. there is no profit margin involved in ou can. can. you

would that be correct? >> that is true. the co-ops generally were not outliers on the low end in price. mckenzie did a report in late 2013 about those initial prices and co-ops were toward the lowestwithin 10% of the 42% of the time but when these companies set their prices and filed them, they don't know what the other companies are doing. the fact they were there to cause the other companies to price more aggressively. >> that are a lot of different reasons they co-op has succeeded think this is a very useful hearing to analyze about the factors involved. include there was not a

fundamental flaw in the affordable care act that caused any of these co-ops of fail. there were different factors just as there is an any business situation. thank you again to the witnesses. >> i think all of the witnesses. this will conclude our second panel and you can rush to the airport if you have any flights. i want to thank the members that did stay. we had so many members that had flights to connect. i apologize for the attended. you for your testimony. it's very helpful. we're not going to bring out our third panel, which is a representative from cms and oig.

[inaudible conversations] the roof [inaudible conversations] i wants for joining us today and before

we get going, we want to make sure the witnesses are aware we are holding an investigating hearing and when doing so, we have the practice of taking testimony under own. do you have any objection to oath?ying under both -- you are entitled to be advised by counsel. do you desire to be advised by counsel during her testimony? no. in that case, if you would please rise and raise her right hand. i will swear you in. do you swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth? thank you very much. you are under both and subject to the penalty set forth in and we8 section 1001 recognize you to give a five-minute summary of your

written testimony beginning with dr. colin, chief of staff for cms. afternoon and thank you for inviting me. we appreciate the opportunity to talk about the co-op program. our priority is to make sure consumers have access to quality affordable coverage. in the year since the passage of aca, we seen an increasing competition and more choices for consumers. in today's dynamic market, consumers can choose from 50 .lans and five issuers nearly nine out of 10 returning consumers have three or more issuers to choose from, which research shows has typically intensified price competition.

the insurance market campus pressures and early stages. co-ops entered with a number of challenges, including building provider networks, no previous claims experience, and competition from more experienced issuers and the in theinty a company early years of a new market. some co-ops succeeded will others encountered more challenges. there have been successful co-ops that provided consumers additional choices. there have also been co-ops that have faced technical operational or financial difficulties. congress made a substantial revision to the initial $6 billion in spending, impacting program operations. surprising some new entrants have struggled to succeed. providinga dual role,

oversight and support. sharingd to give co-ops best practices in looking for additional regulatory flexibility. at the request, we have approved the surplus and the infusion of outside capital consistent with legal and regulatory framework. cms also plays an oversight role. worked to ensure the co-ops are well run and financially bound. cms and lamented a program as required by statute, evaluating applications, monitoring financial performance. all co-ops are subject to standardized, ongoing oversight activities including calls to monitor goals, periodic on-site visits, auditing, reporting obligations, and additional measures like the evaluation of co-op sustainability.

cms increased the reporting requirements to provide quarterly statements saying they're in compliance. financial data collection has helped cms develop financial issues and give us an opportunity to work with insurance regulators to correct issues. has put some co-ops on enhanced oversight schedules. despite the support and oversight, some new entrants have struggled. when states determine a co-op should wind down, our responsibility is to make sure policyholders are able to retain coverage. it's necessary to make sure customers have access to quality , affordable coverage. we're working to do everything possible to make sure consumers stay covered. like other consumers, co-ops are

able to shop for 2015 coverage now. nearly eight in 10 returning consumers will be able to buy a plan with premiums that than $100 per month. we continue to encourage consumers already enrolled in the marketplace. since the enactment of aca, cms has worked to increase access to quality affordable coverage .hile being responsible the program was designed to give consumers more choice and improve quality in the insurance market and has done so in a number of states. cms will closely work with state department to provide the best outcome for a -- for consumers. we appreciate the committee's interest. >> thank you. >> good afternoon.

i am gloria jarmon. thank you for the opportunity to work.y today about oig's plan,t of our strategic oig has performed three reviews related to co-ops. 's testimony focuses on oig most recent report in july 2015 that reviewed whether enrollment met co-op projections. understanding co-op space numerous challenges, we conducted this audit to assess the status of the co-op.

we reviewed the status of the 23 31, 2015.of december these financial concerns might limit some co-ops ability to give loans. oig issued four recommendations. these recommendations include one, continuing to place underperforming co-ops on enhanced oversight plans. to, providing criteria determine what a co-op is no longer viable or sustainable. three, working closely with to identifytors underperforming co-ops. four, -- i will briefly discuss each of these recommendations in more detail. what respect to enhanced oversight, with the 2011 funding opportunity announcement, cms

has the ability to place underperforming co-ops with enhanced oversight plans. this provides authority to cms to conduct reviews of the co-ops operations. guidance, toto ensure cms can appropriately with a high risk of failure, they should establish criteria to assess whether a co-op is viable or sustainable. with respect to state insurance regulators, cms should enhance its oversight by working closely with state and -- regulators who are the primary entities that health co-ops as insurance issuers. by doing this, cms can obtain insight into the co-op's performance and work with them to address ongoing financial and operational problems early. should pursue all

available remedies for recovery of funds and pullouts. this would include the option to terminate loan agreements, which would require the cu opt -- to recover some portion of the loan. in closing, we appreciated the subcommittee's interest in this important issue and continue to urge cms to formally address oig's recommendations for financial solvency. oig is committed to providing continued oversight in this program. our work will assess whether co-ops were in compliance with federal regulation and program requirements and managing federal funds. oig will we assess the co-ops 2015 financial status and identify cms actions and

monitoring the co-ops. we anticipate issuing these reports in 2016 and look forward to sharing the results with the committee. this concludes my testimony. i would be happy to answer any questions. >> thank you. i now recognize myself for five minutes. i'm just going to accept you at and say cms considers themselves responsible stewards of taxpayer dollars. this begs the question whether that is totally accurate. made have been comments that have somehow tried to correlate states that did not increase, expand medicaid to some of these failures on co-ops. i would point out in a new york state, we aggressively expanded medicaid and actively promoted

obamacare probably more so than any other state, and the hearing is recognizing the failure of a co-op that was oversubscribed, not under subscribed, and cost the taxpayers up to $250 million. i don't know that some of these other comments would accurately portray the problem. i will go back to the products were underpriced from day one and they will be a price to pay. i worry about new york and the loss of $250 million. it would appear the work is in distress right from the beginning. are aware thatou there was an additional loan of $91 million after they lost $35 million. could you speak to what that rationale was that the taxpayers

now lost another $91 million? >> as he looked at the co-op program over the first few years, you have heard a lot about the early years. we're only in the second year of the program in terms of people facing a number of challenges. weighted -- we evaluated any request for funds on an individual basis. we looked at their financial health at that time, the projection of where they were going, how they intended to get to a place of good standing. to say we want to be good stewards of taxpayer dollars and what to be sure if we are going to be investing, we see those dollars. you can only look at the information we have on hand at that time. our independent expert panel who reviewed these felt a further investment in new york was the

right decision and we move forward with that investment as we do and we continue oversight. information changed and we made different decisions. >> i would appreciate if you could provide the committee with the analysis that you indicate losing $35that after million and the first year, i have to presume the analysis -- the difference in the much higher rates charged in 2015. they lost a lot of money in 2014 based on rates that weren't adequate to cover losses. were the rates substantially increase the next year by 20% or more? cmss important to remember shares of partnership the oversight responsibility but the responsibility for ratesetting is done at the state level near

the department of insurance. they are responsible for saying are these rates adequate. they do their own rate review and new york. new york also runs its own exchange. from our perspective, we do oversight in terms of the financial stability of the program according without oig recommended the additional enhanced oversight but the rates themselves are set by the company and then approved by the state department of insurance. >> do you know how much were the rates increase for 2015? >> i know they did request and were granted a rate increase for 2015. >> i think it's important to note that it's a little concerning that cms is making a $91 million loan based on what sounds like an analysis by the new york state department of

insurance, which ultimately was proven by the fact they are now shutting down. if you could share that information, we could learn something. andrtainly appreciate that i will be sending you a letter to ask for a more thorough investigation as to what happened in new york state and what we may learn from the failures of the new york state co-op. thank you for that. you, mr. chairman. i want to thank our witnesses for coming today and i want to start with the risk mitigation mechanisms which we commonly refer to as the three r's. those were designed to promote competition and ensure stability in the insurance marketplace, is that correct? >> that is right. >> yet somewhat argue does

programs are what led to the insolvency act the co-op. i don't really understand how programs that were under -- formed to help would end up hurting them. the risk adjustment program is designed to transfer funds from lower risk plans to higher risk plans. >> it is designed to make sure that companies are taking care of the people who really need the care, does that are sick, and making sure they are not cherry picking the healthy people but really offering coverage. >> what that does then is transfers money from lower risk plans where there aren't so many severely sick people to higher risk plans. the co-op, how is it ended up owing money to big insurance companies through the risk adjustment program? >> the risk adjustment program is not based on size.

it's really looking at the math formula, the total risk and help of the population. >> there was nothing in the statute to target not for profit? >> is agnostic -- >> was that the intention of the program? >> it was intended to be a risk program for all insurers that participated. programisk corridor also and that not coming through the co-ops as we learned through colorado. some state insurance commissioners, including mine, made management decisions this on the co-op's inability to deal with losses. some questionsou about that. the 2015 legislation made it so ensure payments into the risk corridor program are the only source of funding to reimburse claims, effectively making the

program and budget neutral, is that correct? >> did is a mathematical formula that decides the ends and outs of that program but you are correct. >> thank you. reiterated thems state insurance commissioners that they anticipate risk will bes selection sufficient to pay for all quarter payments. and yet a few weeks ago, cms revealed it would only be able to pay 13% of the reimbursements that the co-ops are owed. is that correct? >> yes. >> why is that? >> that formula is based on information we got from the stewards themselves, not information cms had prior to the month of september. originally, that data came in

over the course of the month of july and it was -- we needed issuers to resubmit it. >> in july, you say it will be sufficient and you can cover all the payments and in october, you it's only 13%. irrespective of whether you had -- thea, you had co-ops one in my state was 83,000 people relying on that. i guess it was that information. >> the risk corridors is one of r's and in the reinsurance program, we paid 25% more than we thought we would be able to. >> if you have a co-op on the edge, that didn't solve that problem. so i'm running out of time and i just want to ask you a couple questions. do you think you can do anything to give more certainty to this

program without statutory changes? -- can you make changes that will give more certainty to these co-ops so they can stay in business? >> we are always looking -- >> if you can supplement your responses by giving us the ideas. do you believe there are statutory changes congress could pass? >> i think there are opportunities. >> thank you very much. >> i think the right number for her comments. >> i think the witnesses for being here. who ultimately made the decision to give out $91 million to new york, $65 million to kentucky health co-op? but threea few more of the six i have listed failed.

i want to know the person who made the decision to give them the money. >> we had a rigorous process -- >> here is the thing -- you have already described your process. you have outside people that look at the data but i want to know is someone put their said wee on a loan and are giving them this money. who did that? >> i don't know who signed it but i can get back to you. >> was it you? >> it wasn't me. i can let you know. >> i'm sure you have every intention of doing that but i can tell you with experience asking these questions that i will never find the answer because no one will take that responsibility. i understand that. do you know if it was a political appointee or full-time staff? >> i don't know who signed the loan agreements but i can talk more about the process we went through in terms of evaluating information we had. >> i understand.

>> we can get you that information. and theyso testified asked when they knew cms would know the co-ops would fail. give a clearidn't answer. when did cms know these co-ops would fail? >> we have been doing oversight since the co-op inception. each circumstance is very unique. periods ofdifferent time we had information where when you folks were going down the wrong path potentially. they put enhanced oversight and action plans and we took action. we are in the very early stages of this program. i think from the discussion today, you can see we have taken our oversight responsibility very seriously. trying to like we're be the best stewards of taxpayer dollars possible. is their political pressure

to keep these co-ops alive? >> i would say we are trying to do our best job possible to make sure consumers can know that if they go to the marketplace now, they are strong and stable. we had done a tough job here. i think if there was another way we could have arrived here, we could have but we have been doing some tough for. >> that didn't answer the question but i understand. r's?o we need the three if i if i was going to start a business, i would not rely on 's to make sure that if some did not work out, i would get a check from the government. fundamentally, i get it, but answer this question real quickly. they intended the

program to be budget-neutral. is that correct? that question, specifically. dr. cohen: i would have to get back to you. senator because that is what it says on my paper. senator: i understand that you did not make these decisions. programs aree based on the drug program and medicare. in a new market, there is uncertainty. we have been hearing about that earlier today. again, we wanted to make sure that sick people were not somehow not covered by the insurance. we want those folks to be covered. the insurance program was to cover the cost in the early years. we know there may have been pent

up demand. day, it isnd of the just to capitalize the business. dr. cohen: i think it is to keep premiums stable for consumers. >> you thought earlier in the year that you would be able to move payments and you found out in october that you could not. what is the reason for that? dr. cohen: it is the math formula. it is the way the data came in from the issuers. that is the way the math worked out. 12%,re able to pay at which is the dollars coming in, dollars going out. that is the way we are moving forward for this program. we said that we would take from last year's collections and pay back. >> thank you. i yield back. >> i now recognize mr. yarmouth.

>> thank you very much. -- outelp the doctor off a little bit on the background of the co-ops. one of the things we faced when drafting legislation was that, in certain states, the availability of private insurance was limited. in alabama, there was blue cross blue shield. in many states, that situation was not that high. the idea was to create competition. the only way you could do it was to create a new entity. the idea was that you could create the kind of price competition that was meaningful. we knew when the co-op was and i talked with many times as they were getting started, they had no idea what kind of insured population they would have. they did not know what the age was going to be.

they had no data to predict that. many had never had any health care. once they became insured, they would have a rush of care. they would try to get tests to treat things they had never been able to treat before. they had people who had medical care, but just lost their insurance. the unpredictability of it was the rationale for that. i am proud of the experience in kentucky. we let the country in the reduction of uninsured, more than 50% of previous uninsured are now covered. more than 520,000 people in a state of 4.4 million. in my district alone, we have reduced the uninsured rate by 81%. that is an astounding accomplishment the -- accomplishment. every day, i am hearing from people who now have insurance and have a family member or

neighbor or friend whose life has been saved because they had insurance that they otherwise would not have had. i could talk about that for a long time. the focus on this hearing is on the co-ops. i want to set the record straight with what happened in kentucky. unlike most of the co-ops reviewed by your office, is it your understanding that the kentucky health cool had far higher enrollment than expected op at far higher enrollment then expected? ms. jarmon: we actually have a chart in the report and for kentucky, yes, it was like 183%. that was one of the few. and is it your understanding that they were much sicker and utilize much more care and were more expensive to ensure than the general information -- general public? ms. jarmon: i do not have that information.

rep. yarmuth: that is why it is so important and that is what happened to kentucky's co-op. it lost $50 million in its first year. of 2015, itd half slowed down to a rate of $4 million. they were on track to make a profit in 2016. unfortunately, when the program was cut by 87%, they were unable to continue. is it your understanding that had congress not capped payment that the kentucky health cooperative would still be open for business? dr. cohen: i think a number of factors contributed. that was one of the last. certainly, we have heard it was an important factor for them. you have to know that there are many factors, as we have been talking about all along. as i mentioned before, that having been said,

is it your understanding that, even without the co-op, kentucky residents will still have more health insurers to choose from than they had in prior years? dr. cohen: yes. very exciting. i can talk about the success of the affordable care act in kentucky. we are a much healthier state because of it. someone threw around a figure that maybe the approval rating was down. in kentucky, it is well over 50%. dr. cohen: there is a new reduction in the uninsured rate to 9%. historic. i appreciate your leadership on that. >> can i take a moment of personal privilege? this is not one of the members of congress. this is a dear friend of mine and chairman upton. max has been helping us with our 21st century cares bill.

last night, he was honored to receive an award at the every life foundation for rare diseases. upton and i also received awards, but max is the one -- he is why we are doing this. upton: thank you. we all welcome max. i look back at the unanimous vote on 21st century cares and i can tell you max whipped more than one vote. >> he is our secret weapon. upton: we might be looking at a future majority with. -- whip. representative: i am sorry mr. yarmuth left. tencare, asee had

lot of residents were coming interstate and the co-opted close. the kentucky approval rating of the obamacare buttocks in the marketplace is really quite low. as was evidenced in that state. this week. ms. cohen, i want to come to you. were you in the room for the first panel estimate -- for the first panel? dr. cohen: i was. what happened with the -- happenedative: what with the loans and the solvency grants? we all should be concerned about that. that is not your money to give away. it is taxpayer money. this is just money down the hole. this did not work. and here from the

co-ops that they now have these loan conversion options, start up loans, classified as assets debt, i do death -- not see how you get there. doesn't that type of loan conversion really give a false picture of what is going on in that co-op? is that not a falsehood? dr. cohen: when talking about those conversions, we evaluated each of those on an individual basis. that --ard it mentioned i think you heard it mentioned that, in that case, it was not -- right step forward and step forward. rep. blackburn: who suggested that? is that not giving an inappropriate picture of the financial stability of that co-op? dr. cohen: we did evaluate

whether or not that was the right -- rep. blackburn: you looked at whether or not debt could because an asset. in the private business world, if you did that, you would be accused of fraud. if you started re-characterizing your debts as assets and started pulling them -- putting them on your balance sheet as assets. i have never heard of someone saying that the federal government would approve such a process. how do you all view that? ms. jarmon: i believe it came out in guidance in july of this year. we're going to be looking at if you rep. blackburn: you are going to review that? ms. jarmon: we will look at it as part of our follow-up. neverlackburn: i have seen this type of characterization viewed as being a standard operating procedure. ms. jarmon: it appears unusual. rep. blackburn: it does appear unusual.

if thereus to wonder are other unusual business practices that are surrounding the stability of the co-ops or the lack of stability of the co-ops and the entire lack of stability of the affordable care act program. this is highly unusual. hills co-op. $33 million in federal loans have been awarded to the vermont health co-op. how much, if any, of the money will be returned to the federal treasury? aggressively work if we are winding down any co-op to return funds to the taxpayers. rep. blackburn: how much? dr. cohen: i do not have that number. rep. blackburn: would you get that money -- that number for us? when money is awarded and you do not get the license, every penny

on to be coming back to the federal treasury and i think you know that. dr. cohen: we work aggressively to recover the loan funds. rep. blackburn: i can imagine what the irs would say if people would say, well, you know, we are going to work to get that money back to you. we are really working on it. see that that comes think it is i inconceivable that the taxpayers are going to be held responsible for this. when should we expect that money? what is your timeline for getting that money back in? dr. cohen: we are working through that process right now. rep. blackburn: you have all that money out there -- listen to yourself. you have all this money out here. it is being wasted. half of your co-ops are insolvent. you have got this recharacterization process going to take your debts and make them

appear to be assets. that is highly unusual. and you want to sit here and say, well, we are looking at it. ?hen are you doing it are you continuing to meet on it every week? do you have a timeline for coming up with hitting this money back -- getting this money back? is it a top priority? yes, please read the note that has been passed to you. dr. cohen: we got all the money back from vermont. the rest of the co-ops we have been working with over the last several months are still in business. they continue to provide coverage for consumers until the end of the year we will work through the process at that point in accordance with the loan agreement to recover funds for the taxpayer. so there isrn: something in progress. thank you. continue to provide that information for us. that is what we need to know, the specifics. it does not help us in doing our

due diligence. it does not help us if you come into a hearing and you cannot ,ay, this is where we are exactly where we are and what we are going to do. it is helpful when ms. jarmon after our happened july review and we are going to come back and look at this practice and have a recommendation for you. that is the kind of thing that is helpful. i yield back. we will ask a few more questions today down a little bit deeper. again, i would like to kind of set the stage. all of us agree we need to be good stewards of taxpayer money. that is the purpose of this hearing. learning from what has happened , losses haveyears occurred. it sounds like a few co-ops are doing ok. .alf of them fail

there are lessons to be learned here. the purpose of this hearing and our request for more information will be, how can we take all of that and hopefully not continue to lose taxpayer money? there is a question for oig. the loan agreements between cms and the co-ops do have enforcement provisions in them. i just wondered, could you explain what some of those and then, toght be the best of your knowledge, have we taken any of these enforcement measures against any co-ops? the loan agreements do allow -- there is an option to terminate the loan agreements which would require the co-op to forfeit the unused loan funds. within the loan agreement, and the funding opportunity, there

is the issue of enhanced corrective action plans, which cms says put several of the plans.under enhanced those are part of the loan agreement. has cms terminated any loan agreements? ms. jarmon: i am not aware. dr. cohen: we have terminated the loan agreements for the 12 co-ops that are shutting down. rep. collins: did we get any money back? vermont, we did get the vast majority of the money. there was some funding that was used in start up funds that was not recovered. basis, we ared making sure that consumers have coverage through the end of the year. the identities will be operating through the end of the year. at that time, we will do a run out of claims and understand the

financial health of the organization and use all of our ability with the terms of the loan agreement to recover funds. rep. collins: that is not the case in new york. which lostn new york $250 million and is shutting down in two weeks time -- that does not line up with your testimony. dr. cohen: that is why we are doing so much of the hard work right now before the open enrollment period to make sure we understood the financial health of any one of these co-ops and because we want consumers to be confident that there would not be a midyear rozier at any one of these co-ops. in the case of new york, we went to wind them down and terminate their loan agreement in the september timeframe when we said -- sent in our audit team. we found out that their financial situation was even more dire than we understood it to be and that is why we are in this unfortunate situation. the folks in new york, the

governor's office, the department of insurance has jumped on this problem and is working on it very aggressively to make sure consumers have a smooth transition. this is exactly why we are doing all of this tough work right now, so it does not happen in other places. rep. collins: i purchased a lot of distressed companies in my private sector career. inank that then loans money asset-based lending agreements, there is literally daily and weekly reports. if you are under the magnifying glass, until that bank who has money at risk is confident that they are going to be able to be paid back, it sounds as though cms has accepted a lot of information at face value and has not dug very deeply into those details to say, ok, two months later, we are totally

shocked the finances are so much worse. if someone was really watching a $250 million loan, i do not think you would wake up two months later and found out. he would have found out two months earlier and maybe you would have lost $200 million instead of $250 million. there are lessons learned. when you are good stewards of taxpayer money, the taxpayers expect the level of scrutiny consistent with what big banks do when they make loans. you could argue it could even be more than that. the last thing is not a question. i know that there will be outstanding claims. pays -- i assuming there is no money. who pays those claims? dr. cohen: they continue to wind down over the course of the year and they do have funding. rep. collins: take new york. do they have money? dr. cohen: new york is a different circumstance. they need to run down by november 30 and --

rep. collins: they will be able to pay all of those? dr. cohen: we make sure that they go into receivership and they will have better control over their finances -- rep. collins: do you feel there will be enough money to pay out? if there is not, is the government going to make -- how do they get paid? dr. cohen: you said it is a day by day situation. we are watching closely to make sure -- rep. collins: could there be more taxpayer money having to go in? dr. cohen: our first goal is to protect the consumer and the taxpayer. we are going to do everything possible to make sure that we can have a smooth transition. that is a partnership between ourselves and the new york state department of insurance. we are working collaboratively in that process to make sure -- rep. collins: it would occur to you to continue to do that. inc. you for your testimony. -- thank you for your testimony.

representative: i want to go back to something mr. morris said in the previous penalty -- panel. we set up the co-ops to help give people who were sick or aor or have less of a choice choice of an insurance plan. as we know quite clearly, the co-ops do not have a lot of the same benefits as private insurance companies. have the kind of capitalization from other products and so on. would that be a fair statement? dr. cohen: yes. they face a number of those challenges. rep. degette: when you are just starting up as a co-op, it is not like you are a private company saying, ok, let's offer this product. if it takes us a few years, we can do that. i really think that the comparison of the co-ops to private business is a little

unfair. that is why i think we set up s, to help the co-ops get established. the concept was that they would become self-sufficient and be able to sustain their business model. is that right? those programs were set up to help the entire market transition. rep. degette: ok. so i guess i was a little concerned when i heard you say earlier that you were reviewing all of these situations on an individual basis. here is why. , being in from my end thinks,, where my state in july, that the money is going to be sufficient risk order patients.

thatthey hear in october that is not going to happen and there is a real degree of uncertainty with how cms is howing that state co-op, they are viewing their capitalization and liability. they do not know, day to day, whether they will be able to offer product in the open and roman that starts on november 1. that startsllment on november 1. the concern is that you do not have a bright line rule. the uncertainty is those stays are contributing to instability in the whole insurance market. i assume you understand those points i am making. dr. cohen: absolutely. rep. degette: i am hoping you and your staff would continue to meet on the committee staff on both sides of the aisle to help us figure out how we can help you get some certainty so that we do not have situations where states like new york and colorado are suddenly going out of business just a few weeks

before the open enrollment peri od. the other providers are scrambling to try to figure out how to sort this. the 83,000 people of colorado, i do not know how many in new york, but this is affecting real lives it would be helpful if we could get more clear standards going forward. thank you.s: it was 155,000 in new york. if we conclude this hearing, i en if we couldcoh get an analysis of the additional funds awarded at the end of 2014. and if you could commit that cms would provide us any co-op corrective action plans that may exist. could you forward those to the committee? dr. cohen: i will have to look

and see. some of those are market sensitive, but we will do our best to get what we can to the committee. rep. collins: i would like to enter into the record a "wall street journal" article that has a quote from cms that risk corridors were intended to be budget neutral. so moved. hearing, iude our want to say that we would ask unanimous consent that members' written opening statements be introduced into the record. without objection, they will be introduced to the record. i would like to thank our two witnesses for your comments as we want to work together to be good stewards of taxpayer money. i would like to remind members to submit questions for the record and the witnesses all toee to respond promptly

those questions. with that, this meeting is adjourned. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [inaudible conversations]

>> while our service men and women are deployed our spouses take care of the family and home. the children, manage the finances and prayed their husbands and wives will return home safely. master sergeant and his wife joined us at our ranch for

the annual warrior by cried. she said we served 25 years. i live every deployment every trial and tribulation. i did not realize the impact would have on me. of the servicemen and women had the support that we need we care for their families as well. plus 9/11 veterans and the consequences of that are under employment are only financial in 11 family member is suffering the entire family suffers

>> good afternoon. welcome to the carnegie

tndowment and in a senior associate of the endowment and it gives me pleasure to welcome you to is this discussion of n afghanistan in the future prospects. ghanistan in the futue prospects and as solid you know, have a reserved twice as the chief of staff as an ambassador to two of afghanistan's most problematic neighbors of iran and pakistan, and finally afghanistan during 2014 that was an important year in afghanistan politics. it could not be timely your obama recently made an important decision with respect to the continued u.s. troop presence in the

country. as a continuing reminder of the sacrifice and blood and treasure that the allies have made for post 9/11 afghanistan especially for the afghan people this task is by no means complete and the recent crisis and the efforts at reconciliation about the prospects of success it is in this context to understand the political terrain as part of the united states and its allies.

and then to be working so long enough. so now i will leave the podium for his remarks and welcome him once again. [applause] >> they give for that, a deduction. and good afternoon to all of you.

>> they keep forgetting we this opportunity to be here today. with the continuous said generous contributions with the common cause and our side between the two partners. to show you your sacrifices to not waste it i see many

faces and many friends here. with my colleagues as they work together the past decade and have banned by international colleagues to have lots of instruction but one of the problematics i wish that one day we have that. >> it is a great honor to be

here in to see you today. the headlines that are coming to washington paid a picture that is gramm. -- a grim. so that may be true but not the full picture we're increasingly challenged and looking at people's potential in about 15 years

to undergo significant positive changes by those that have seen with the civil war and is impossible to look from where we started and important to recognize up against unrealistic expectations. in 2001 those that would enroll in universities that were not normally open.

imagine taking on the difficult task of rebuilding the state and nation. but today we have over 100 universities and almost half a million boys and girls are enrolled. tens of thousands of boys and girls have been three universities across the world return and work in the country and some are working here in the united states. by the way the syncom then stay on and work for the american friends at work in afghanistan with the enduring partnership.

and from that we built the state of course, a lot of patience and a lot of pain. all of us are committed. you probably have memories particularly of the last election but i am here to tell you the cultures are entrenched and people participate and speak up like never before in the history. significant progress is made in human rights but not

enough for ending balance and justiciar by a shameful example the only extreme examples and today those that are expressed on the capability after their brief fall after the completion of the international forces struck down. >> the achievement is long

and with your permission i will go over my suggestions that we will do question intended answers. with the afghan national security forces. with the afghan national security forces they are a very challenging time. and i continue with all honesty of the security forces is now a force to

reckon with. we are proud of the directory job every day. of course, the forces still have a long way to go. this summer was exceptionally challenging with a high number and scale from me and my experience this is the most the national security forces could face over many years to get with their expected. in addition into the taliban assault had to be at the burden of international terrorist groups to the

pakistan army the afghan national security forces take control of anything that could have replaced. let me explain. this year there were talks the taliban was taking control certain pockets of afghanistan in order to pull the headquarters. but then the fall happened in the made -- in the middle of that ad that was a major incident so it provided a lesson learned with the

national security forces and they're trying to learn their lessons from the fall. the afghan security forces took over in the project -- the projected civilian life. now the other aspect as they have so much diversity -- adversity because after the fall many are enterprising across the country. that is the making of the afghan national security forces and people look at

them as their savior. now we know those seven support of the afghan national security forces but we haven't heard of anybody in support of the taliban. still against day victim in afghanistan and i want to give give you an example. there is a woman issue visa force and that is why we call her commander behalf and she formed a small

resistance group from many of her distant relatives. when i was the minister in order to legitimize her work within the framework i brought her under the umbrella of the afghan police and she continues under that. and reheard she lost a son in this latest battle. the other frequently asked question from the afghan national security forces to talk about the national unity government in a way put together private ambassador. [laughter]

before i give my judgment or say something you need to clarify one thing. the state of afghanistan as of the collective force we have invested treasures to create the state of afghanistan in and defend it at all cost. as far as the government is concerned there is one culture that we normally don't criticize our own government. the national governments is new although some would

argue it has been tried before but what was tried twice before with slightly different the one was in the first government was created coming from two factions and the people argue it did not survive for more than a year. and the second to was the empty soviet union when they form that national unity government and it didn't take a year for the prime minister's to start fighting each other. but then we read in a totally different era. there was no prostitution now we do.

and it is one of the best in the region. the national unity government may not be 100 but that -- bit more than 50% and then they try a to deal with those limits. with that political argument into being and that is to elevate the position through that of the prime minister. audi's unfold i don't know

signs are that they may not there would have to hold the election and under the circumstances that is not an easy thing to do. but what i can see for sure is no afghan political forces in the country do not wish the national unity government we all want them to complete their term and continue through 2019. but the political forces across the country preparing

for the coming parliamentary elections that is in 2019. the next question to say a few words over the prospect that in the past 15 years with energy construction with international partners also in the midst of the war imposed on us with applet peace dialogue or a political settlement, it goes from my memory and then we realized with the afghan

population selfie try to eliminate the taliban by force and is part of the warring strategy never hesitated to use civilians as a shield and sometimes that was the source of tension so we have a political settlement from the peace process but we needed to find the address

the only address we knew was islamabad. where we could find the leadership to talk to them. so the state serving as chief of staff i was moved to the ambassador there to improve relations and to get the cooperation to the pre- - - the peace process. an interesting coincidence i arrived there the president of pakistan bendy american steel's took been lauded so a very difficult start and a difficult