tv Washington This Week CSPAN August 6, 2011 10:00am-2:00pm EDT
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out. someone gets rearrested, poses a threat, they will be incarcerated. host: west huddleston is the ceo of national association of drug court professionals. nadcp.org is their website. thank you for being on the program. we want to tell our viewers and listeners what to expect on tomorrow's "washington journal." the former director of operations for the central intelligence agency will be here to talk about the administration's strategy to prevent violent extremism and homegrown terrorism in the united states. we will also be talking with patricia powell, ceo of the house financial group, talking about personal finance and what people should be doing with their savings, stocks, and retirement money. we will finish up with marvin and deborah kalb, talking about
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the vietnam legacy from ford to obama. i want to thank everyone who participated today and we will see you again tomorrow at 7:00 a.m. eastern. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> coming up, a senate hearing on health care costs since the passage of the 2010 law. after that, the players' labor unions discuss collective bargaining rights in sports. later, nominees to be ambassadors speak at a senate foreign relations hearing.
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on sunday, congressman smith talks about the famine in the somalia and the tensions in sudan and a look at u.s. foreign aid. next, a senate committee meeting on health care costs since the passage of the 2010 health care law. we will hear from steve larsen and california senator dianne feinstein. this is two hours and 15 minutes.
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>> in the decade before the bill was passed, premiums imposed a heavy tax on families and small businesses. premiums for families and employer-sponsored coverage more than doubled. small businesses cannot afford it and began dropping coverage. congress had to act. we did. we enacted reforms to attain this runaway premium growth. today's hearing will explore how those reforms are already protecting consumers. it is basic economics that one of these surest ways to bring down prices is through an open and tough competition. for the first time in our history, health reform applies this basic principle to the health insurance market. in 2014, americans in every state will be able to buy insurance in an exchange. small businesses will also be able to shop there also. a couple of weeks ago, the administration released
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guidance and gives states flexibility in designing the exchanges to meet the unique needs of their sentences -- citizens. it will bring transparency to the markets. from 1998 to 2006, just the consolidation of insurance markets alone accounted for over a premium increases of about $34 billion each year. that is equivalent to $200 annual rate hike per person. that is because of a lack of competition. if insurers have to compete on price, the rates will come down. the nonpartisan congressional budget office projects premiums in the small group market will be as much as 2% lower in 2016. in a market where premiums have increased 5% or more annually since 2005.
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employers spending on premiums is expected to decrease by almost 4%. that is about $20 billion in this year's dollars. by 2019, businesses will save approximately $2,000 per family the insurer. by 2014, families buying in the individual market could save an extra $2,300 a year if they buy health insurance in the new, affordable insurance exchange. health reform also gives state insurance regulators unprecedented new resources to fight for consumers. the law allocates $250 million in grants for this purpose. almost $50 million of that has been awarded to 45 states and the district of columbia. we're releasing a report today from the government accountability office that are requested along with senator feinstein that demonstrates the extraordinary work state regulators have done using these grant funds. these improvements will empower
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states to rigorously enforce health reforms rate review requirements. as of september 1, regulators will review proposed rate increases of more than 10% in the individual and small group markets. the insurer must publicly disclose and justify the rate increase. finds thegulator feinste increase to be unreasonable, the rates will be posted. there is a provision that is a powerful deterrent against increases. it requires insurers to provide fair value in return for premiums. the law requires insurers to return to consumers 80 cents of each premium dollar in the individual and small group market. 85 cents on the dollar in the large group market. if insurers failed to return these amounts to consumers as payments for health care services or investments in quality of care, the company has to make a difference in cash --
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make up the difference in cash. it is estimated 5 million americans will receive up to three in dollars per person. even those who do not receive rebates will benefit because insurers will have controlled premiums to stay above the threshold. some have argued that insures cannot meet the requirements and that holding them accountable will cripple their businesses. insurers have been reporting quarterly earnings over the last few days. let's take a look at that. for the second quarter this year, united health group's net earnings before taxes were $1.9 billion. that is for the quarter. that is not for a year. that is for the quarter. profit was more than $4.2 billion for the quarter. in the first half of 2011, the number of people united healthcare's served with medical
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benefits grew by 1.2 million on top of nearly 1 million people added over the course of 2010. this edition of 2.2 million more people places it among the strongest growth times for our company. i think united health care can muddle through review. on close with a letter received from a constituent who just received notification of a 19% rate increase. she is a professional with no pre-existing conditions. she will now pay $276 per month with a $5,000 deductible. she changed from a 2000 -- $2,500 deductible when the premiums from getting too costly leicester. at least this has not been a repeat of 2008 when my premium was increased twice that year. that was a 48% premium increase in that year.
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these reforms are long overdue. i am glad our witnesses have agreed to discuss them. i am looking forward to their testimony. i will yield. >> the new law is driving up premiums. the authors are attempting to shift the blame. they do not want to acknowledge the reason premiums are going up is because of the law they enacted. they would rather point fingers at the insurance companies and lay the blame of increased premiums on them. this story line in north the basic facts. insurance premiums are going up because health care costs are going up. health care costs are going up because of new health care law. do not take my word for it. the administration's chief
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actuary released a report last week that said premiums are estimated to increase by 9.4% in 2014. this increase was 0.4% higher than otherwise as a result of the health care law. more than 10 years ago, the congressional budget office told us the new law would increase premiums for individuals and families by 10% to 13%. this is a $2,100 increase for families. these results were confirmed by private studies that projected even higher increases. we are seeing the validation of those statements in the insurance market. the wall street journal reported several insurers have already requested premium increases to pay for the cost of the new benefits required under the new law. rather than confronting the reality they created, it appears the authors now want to find a
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scapegoat to take the blame for the increase in premiums. unfortunately, blaming the insurance companies will do nothing to address the problems driving up the costs of health insurance. giving states and the federal government the ability to deny nothing to will do offset the taxes and and sustainable cuts to medicare payments. those were all part of the new law and drive up the private sector health care costs. anyone who thinks insurers will not pass these costs along with higher premiums is deluding themselves. as a former business owner, i can assure you that no business can sell a product below cost for very long. to think they can because the government mandates is a recipe for disaster. rather than wasting our time on another hearing that tries to shift the blame, we should be
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focusing on how to address the causes of the increases. we need to examine how the specific provisions are increasing premiums and determine how to replace those with measures that could lower the costs for individuals and small businesses. we need to enact several provisions that will lower costs, help employers come and allow americans to keep the plants they want rather than what a bureaucrat thinks best meets their needs will apply for waivers. >> we would like to welcome our colleagues and senator feinstein from california, the chair of the intelligence committee who does a superb job there of keeping us advised as to terrorist threats and what is going on. senator feinstein was also active in the passage of the
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affordable care act. she did a lot of work on that. one area where she did a lot of work was in the area of great reviews and making sure consumers have information -- good information. we asked the gao to release a report on activity. they released that today. senator feinstein has long championed consumer protections and insurer accountability. i want to thank her for coming here today and for her great work in this area. i see you do have a prepared statement that will be made part of the record. you may proceed as you desire. >> thank you very much. for a number of years, i have been concerned about the affordability of health insurance. as you look at it and around the world, no country has the size
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of large for-profit insurance companies that the united states does. if you go further, you will see that since 1999, the average premiums for family coverage has risen 131%. medical inflation rose just 31%. two years ago in 2009, 57% of people attempting to purchase insurance in the individual market found it difficult or impossible to afford coverage. that is before the health care plan. the cost of health care insurance continues to rise for individuals. insurance companies enjoyed unprecedented profits. in the first quarter of this year, the five largest for-
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profit health insurance companies request -- recorded a net profit in one quarter of $ 3.9 billion. that is an average 16% increase from the same quarter the year before. ceo pay for the 10 largest health insurance companies was $228 million in 2009. that was up from $85.5 million the year before. this is a 167% raise in just one year. this does not include the tens of millions more of dollars in stock options. that means these ceo's receive nearly $1 billion in total compensation. those are dollars that could have been used to provide health benefits. this raises the question as to
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whether america's health insurance should be controlled by for-profit companies rather than by non-profit companies. here is the rub. at the same time these companies were reducing the amount they spend on actual medical care, the gao report shows state insurance practices vary widely even in different markets and the same state. to me, the report shows how a fractured the health insurance market continues to be. consumers cannot uniformly protected from egregious rate increases -- are not uniformly protected from egregious rate increases. what should be standardized is the authority to block or modify unjustified and unreasonable premium rate increases. i strongly believe that each state commissioner or regulator
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should not only be able to look at the rate filings and evaluate them thoroughly prior to implementation, but that he or she should also possess the authority to block or modify the rates that are egregious. to evaluate the rates and have no authority to reduce or stop those that are unjustified makes the state commissioner simply a paper tiger. the department of health and human services reports that as of december of 2010, less than half of states and territories have the legal authority to reject excessive rates. the kaiser family foundation reports in at least 17 states, including california, state regulators do not possess the authority to block or modify premium rates prior to implementation. the health reform law takes
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critical first steps to help control premium increases and ensures that companies spend more on medical care and not profits. the grants provided to states to improve the review processes have helped insure more information is available about of rate increases. the law does not grant explicit authority to modify will block egregious rate increases. this is a loophole. that is why during health reform, i introduced legislation to authorize the secretary of health and human services to block or modify unjustified increases in states where the regulator does not have the authority. the health insurance review act of 2011 is pending in this house.
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a like bill is also pending in the house. these bills create a federal fallback rate review process that grants the secretary of health and human services authority to block or modify rate increases that are excessive, unjustified, or unfairly discriminatory in the states where there is not appropriate authority. the legislation is a simple solution. we almost got included in the bill, but we did not. what is happening is these big for-profit companies are raising rates radicand. sometimes it is once a year, sometimes it is three times a year. in 2010, i received over 1700 letters from constituents
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pleading for me to help them with their skyrocketing insurance rates. in california, the state insurance commissioner has reviewed some filings. 6% were modified. i suspect california regulators have the appropriate legal authority many more than 14 rate filings would have been modified or withdrawn in 2010. let me give you an example of why the review of break filings is not sufficient and why i believe the authority to block or modify is necessary. just about everyone is familiar with the increases anthem blue cross was set to impose in
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february of 2010. it was as much as 39% for 800,000 policyholders in california. in california, a couple of these companies essentially control the major medical insurance markets. there is not the competitive competition that there might be otherwise. anthem was not an aberration. insurance companies in california have continued to propose up to 80% cumulative premium increases. we have a very strong insurance commissioner. we have a bill pending. mr. jones has been successful in getting some of these companies to reduce or cancel premium increases. a number of insurance companies were set to impose premium increases in my state, some were
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as much as 80% cumulatively. commissioner jones requested a delay of these until he had a chance to review them. the insurance companies complied. after review and pressure from him, and from across agreed to scale back the planned -- anthem agreed to scale back increases for six and a thousand individual policies and delay implementation of the hikes. here is the attache catch. anthem blue cross also serves customers through managed care. many californians receive their insurance through this department. their rates rose an average of 16% on may 1 of this year. the department of managed health care deemed these increases on reasonable, but they --
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unreasonable, but they do not have the authority to block them. the company scaled back rates for some individual policyholders but not others. i do not think that makes sense. on page 43 of the gao report, in the appendix are general comments of the department of health and human services on the government accountability office's draft report. they say that for too long insurance companies in many states have increased health- insurance premiums with little oversight, transparency, or public accountability. health insurance premiums have doubled on average over the last 10 years. it is much faster than wages and inflation. that puts coverage out of reach for millions of americans. as recently as december 2010, fewer than half of the states
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and territories have the legal authority to reject a proposed increase if the increase was excessive, lacked justification, or failed to meet other state standards. additionally, many states that have the authority lacked the resources needed to exercise it meaningfully. the lack of authority and resources for states has contributed to unjustified premium increases. starting in september of this year, hhs is requiring all non- grandfathered insurers seeking rate increases of 10% or more in individual and small group markets publicly disclose the proposed increases and their justification for them. disclosing proposed increases along with justification and
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sheds light on industry pricing practices. this transparency will help promote competition, encouraging insurers to work toward controlling health care costs, and discourage insurers from charging unjustified premium. then it goes on to talk about the affordable care act. i think this is a major step forward. we worked with the health department to try to get them rate review authority as part of the bill. we failed. the lobbying by the big insurance companies was intense. suffice it to say that we have a problem that is out of control. we have a lot of people suffering for it.
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we have a reduction in the number of people covered by this insurance because people can no longer afford the premiums. whether they are doingst because they know in 2014 the health insurance law goes into play and want to recover as much as they can before that or simply because they will raise rates as best they can to flush of the bottom line -- i think it is just as simple as that. let me conclude with that. a man named t.s. reed wrote a book about health care. members of this committee have probably read it. he concludes that no nation on earth has been able to reform health insurance with large, a for-profits industry. that may continue to be a problem. i want to thank you for watching this carefully.
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our people have to be able to afford to be covered. i wish we could get this rate review through. thank you for your support of the. -- thank you for your support of its. ranking member enxi has always been fair. -- ranking member enzi has always been fair. this one really needs to be watched to make sure that premium rates are justified. thank you for the opportunity to testify. >> thank you for the eloquent presentation. i quoted a constituent of mine who wrote in about her increases. one might ask why she did not to shop around and buy something else. two companies have over 80% of all the market in iowa.
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in some places, there is only united health care. there are no other options. it is called monopolism. >> that is why i was pushing for the small-business health plans with the associations could group together and possibly form their own insurance company. by having the groups, we would have some people who would have been on par with the insurance companies for this meeting. i think that would have brought down prices. i think the author missed switzerland. >> he did switzerland. i will send you the chapter. he was in switzerland. he found the care pretty good there. >> i read the book. in switzerland, he interviewed
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-- they have battled their several years ago. -- they had a battle there several years ago to regulate the insurance companies. now they are very happy with it. he interviewed a conservative who said since the reform -- in this country about 50% of bankruptcies or more are caused by a health care challenges. the author ask if anyone in switzerland had gone bankrupt since the reforms and the conservatives said no, that shame, that would be a disgrace. they have made these reforms in switzerland.
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>> thank you very much for being here, senator feinstein. now we will welcome our panel. steve larsen -- we have two panels. it is just steve larsen on the first panel. he is the director for consumer information and insurance oversight within the centers for medicare and medicaid services. he has a distinguished insurance background. he has held a number of senior positions with a managed health care company. he spent six years as the maryland insurance commissioner. we last saw him here in march where he shared his expertise on health insurance exchanges. we welcome you back to the committee. your statement will be made part of the record in its entirety. if you could sum it up in five
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to seven minutes, we would appreciate it. >> thank you very much for the opportunity to discuss the positive impact of the affordable care act on the affordability of health insurance premiums for american families and businesses. the act reforms the market for the benefit of consumers. one important goal of the reforms is to make sure people and businesses receive value for their premium dollars. the need for this focus is clear. over the last 10 years, premiums have risen dramatically. the increases in costs outpaced the rise in medical costs and wages during the same time. we know this is a burden on individuals who have seen rates increase 20% a year or more and
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on small businesses as well. the rate small-business is are offering coverage has dropped in the last decade. the act helps to make health insurance coverage more affordable in three key ways. it provides states with unprecedented resources to strengthen the existing processes in place to review proposed rate increases. i know how important the process of bringing an independent review can be for consumers. the review process is important. we also know the resources and expertise vary significantly across the states. the affordable care act provides $250 million in grants to assist states and territories in enhancing their rate review processes. since the bill, $48 million has
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been awarded to 42 states, the district of columbia, and territories. the availability of approximately $200 million more was announced to support the continuation of these efforts. the grants are having a major reviewon the wstate processes. 18 states have proposed legislation to increase their ability to review rates. 25 have hired additional staff to review rates. 37 were engaged in rate review contract activity. 33 states were enhancing their i.t. capabilities. 35 were working to enhance their consumer transparency and provide education to consumers on the review process. the second important tool that act provides are the review provisions. as senator feinstein and the chairman indicated, in september, insurers seeking rate
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increases of 10% or more are required to publicly disclose the proposed increases and provide basic information to consumers about the reasons for the increase. these increases will be reviewed s have the review process to determine if the rates are unreasonable. we recently concluded an evaluation of the state review processes. almost all states will have an effective process and will be reviewing rate increases beginning on september 1. many states enhanced their existing processes to meet the standards for effective review. a juror on the grant funds as part of the process. -- they drew on the grant funds as part of the process. the ryland commissioner was able to use the authority to reduce a proposed increase by a major insurer in that state by 6%. there was a blurb he had
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reduced rate increase by united healthcare. consumers in north dakota faced a rate increase of 23%. that is reduced to 14% i think we will hear about some of the great review activity the state of oregon has done. to ensure consumers receive value, minimum standards for spending were established for clinical services, medical costs, and quality improvement activities for members. that is known as the mlr provisions. the protections effective this year require insurers spent at least 80% or 85% of premium dollars on actual health care services and quality improvement efforts rather than on it administrative expenses. companies that do not meet the standards will be required to provide rebates to customers. recognizing state flexibility,
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law allows for a temporary adjustment in the individual market if the state requested and demonstrates the standard made to stabilize the individual insurance market. we are seeing indications the review provisions are benefiting consumers. we know insurance companies are pricing to the 80% standard for the benefit of consumers. they have announced they will moderate future increases to meet that standard. states play a critical role in the implementation of the affordable care act. we have worked actively with governors come insurance commissioners, medicaid directors, and stakeholders to implement programs. it has been our priority to work collaborative live with our state partners as the provisions going to affect. the affordable care act includes a variety of provisions designed to promote accountability, affordability, quality, and
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accessibility, and to make sure the market is more consumer- friendly, transparent, and responsive. thank you for the opportunity to testify. i look forward to answering questions. >> thank you for something that up. your statement will be made part of the record in its entirety. we will start with a round of five-minute questions. several insurance companies reported second quarter earnings over the past week. all indications are that the industry is doing very well. after the first quarter report this spring, united health groups shot up to a three-year high. humana jumped 7%. the chart shows the growth trend
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in the industry. it sought up in one year. aetna group to almost $1.8 billion in profits. united healthcare is growing at a gargantuan rate. their net profits were $4.6 billion last year. last week, united healthcare announced quarterly profits of $2.7 billion, up 13% from the same time last year. its shares have risen 44% this year. indexandard and poor's for large insurance overall has a 40% rate in one year. it is no mystery what is speeding this. if you look at the growth and profits on the left, on the right side is the family
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premiums. those two lines just about parallel each other. as the premiums go up, the costs -- profits go up. what is your perspective on the ability of insurance companies to remain viable in the health reform area? we have heard a lot of these numbers have gone up. premiums have gone up. people may say if we have not passed the affordable care act, they would not be going up. i do not know if that is because they're trying to get in and give their prices up before the changes go into effect or if this is simply market forces trying to make more profit without anybody regulating or guiding it. how does the affordable care a ct and reviews begin to change
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the markets of the more premium dollars are returned to consumers rather than just to company profits? could you elaborate on that? >> the provisions will help between now and 2014. some of the major companies have reported record profits in their stock is trading at an all-time high. some wall street analysts have indicated medical trends have been moderating somewhat, but premiums have not lowered a the same rate as the trend. some companies are benefiting from the spread between premiums and moderating medical trends. the mlr standard helps that. it forces companies to look down the road. if they do not want to pay rebates to consumers, they will have to moderate rate increases. thee seen and heard
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companies are going to be pricing to 80%. that means they will have to moderate the rate at which the premiums are increasing and track more closely to actual medical cost trends. >> is your office preparing for a second round of rate review grants? if so, how do you see these building on the first ones? >> we are. there was a first-round we issue that is about $1 million per state. it laid the foundation for the states. it was mentioned earlier in senator feinstein's statement and in the gao report. the second round of grants will enhance the work done so far. the first round is the building block.
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it helped to get a lot of states to a basic level. the next round will really help improve the capability of the state's between now and 2014. >> i have one more question to ask. i see my time is up. i will ask it in the next round. >> some folks in the administration have a problem understanding the cbo scoring on increasing premiums. cbo said the average premium would be higher because americans will be forced to obtain a greater amount of coverage because of more mandated benefits. the also said the average premiums would be lower because of greater administrative efficiencies and the average premiums would be lower because of healthier people getting coverage.
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i come up with 13% for an increase. would you agree cbo said the new law would increase premiums by about 13%? >> there were a number of moving parts. they did analysis for individual, a small group, and large group markets. with the small group market, there were factors that could lead to increases and factors that could lead to decreases. in the small group market, it was a wash or to the good because of the efficiencies that small businesses will get. it was similar for the large group market as well. with respect to the individual market, i do not recall exactly. by improving the risk pool and
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getting more healthy people in, that was going to improve the overall experience of individual markets. there were additional benefits that would move in the other direction. i did not recall exactly, but we certainly took the view that the impact would be in small numbers. when you add any preventative care and other benefits, it was going to be a benefit for health care consumers. >> the congressional research office confirmed that. only plans to be forced to have packages dictated by the secretary. -- all new plans would be forced to a package is dictated by the secretary. it is interesting to me as secretary used to be an insurance commissioner. she did not use her authority to change the rates. she kept a merger from happening
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but never change the rates. hhs prohibited the institute of medicine from considering cost implications when they drafted the recommendations that will mandate women's clinical preventive services that insurers must provide for free the federal government will now be subsidizing many plants. if it increases costs, will that increase the deficit? why did they prohibit the institute of medicine from considering the new mandates? >> the recommendations on women's preventive services apply only in the private insurance markets. i am not sure what you mean by the federal government's subsidizing it. the statute with respect to of preventive services the non- grandfathered plans are required to provide are not
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applied with respect to cost- benefit analysis. it was not part of the legislative charge. they had a panel of medical experts that looked at the efficacy of the preventative services and found they were effective. that is why oim recommended them to the secretary. >> i have questions about the way children-only policies are. i have someone who has really worked on this. i will let her handle those questions and any others she is interested in. the department of health and human services will write a $250 million check for the grants for these rate reviews. 46 states have already gotten funding. how many of these state recipients claim this would lead to decreased spending overall? this merely reviewing the rate
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increase result in lowered health care costs? >> we absolutely think there is huge value in reviewing rates and bringing in transparency to the review process. some of the examples cited earlier -- not every state has prior approval authority. some of the reviewing and bringing to light -- simply reviewing and bringing to light the underlying issues of a rate increase can have insurance companies go back and revisit the proposed increases. we think review alone is a very powerful tool. many states have a prior approval authority provides even more protection to consumers. we think the baseline of review is a good place to start. >> thank you. my time is expired. >> senator franken?
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>> experts agree rising health care costs are unsustainable. during the health reform debate, and looked to minnesota for ideas -- i looked to minnesota for ideas on been in the cost curve. i wanted to ensure our companies were offering good value. it was not that way everywhere. in some states the medical loss ratio for individual and small group policies was as low as 40%. insurers were spending only 40% of their dollars from premiums on health care services.
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based on minnesota's experience, i introduced a bill that was included requiring insurers to spend at least 80% on small group and individual markets and 85% of insurance premiums on actual health care services in the large group markets. in march, you testified you have seen premiums go down due to mlr. can you walk us through some examples of how this has helped to moderate increases? >> there are a couple i can cite off the top of my head. in the process of reviewing requests from the state's to adjust the mlr standard between now and 2014, states can submit
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a request to adjust those. we have quite a bit of back and forth with the states in the process. many that were lower than 80% are now pricing to 80%. that means they have to make sure they are not charging so much to their consumers that they are continuing to generate the lower loss ratio. the results in a moderation of the rate increases that otherwise would have gotten. a number of the publicly traded companies have announced that they will moderate prices instead of paying rebates. coventry indicated they would do that. wellpoint was going to look at shaving administrative expenses to be more efficient. across the markets, we are
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seeing now. >> connecticut lower the premium on average to%. see si o has already granted ml waivers to five states to phase in their requirements. i am concerned these waivers are being granted without sufficient evidence that these states would seek a disruption of their insurance market without such a waiver. a recent waiver granted in nevada made it clear the state did not make its case. it appeared they relied on information it was not included in the application to make its decision. out of the six waiver applications decided, only one has been rejected.
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i wrote a letter to secretary sebelius six months ago and have not received a response. two more waivers have been approved. can i expect in response to the letter and when? can you address the concern that ccio is willing to give a waiver to states even if they do not provide necessary data? how much money will consumers lose in states where they do not have to spend 80% of premiums on health care services? >> let me apologize to you for not getting a prompt response back. i will make sure you get that as soon as i get back to the office. with a request to the six requests for adjustments we have gotten, we take the review
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process very seriously. if you or your staff have looked at the letters we send back, there is an extensive record that has been developed. we have denied one. of the others we have approved, we have modified every request that has come in. ultimately it is a balancing act. we want consumers to get the provision. the 80% ca some states have smaller companies that on the edge of making money or not. these are the ones we're most concerned about leaving the market. if there are not other options available to individuals in the market, the small companies could leave if they have to hit the 80% in one year.
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we try to reach a balance in doing that. the decisions we have not granted what the commission requested, we tried to get as close to 80% as quickly as we can. i think that is reflected in our decisions. we support the mlr provision and think it is very important. we look very closely at these. >> thank you. i look forward to a response to a letter. >> senator enzi, you mentioned the child-only policies as an issue. thank you for your leadership on this aspect of health care. you and your staff have conducted a study on this. as one of the 17 states that has been impacted in the harsh way, we currently have no-child only policies since the affordable
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care act went into effect. it has been harmful to my state. as i look around, minnesota now does not have one. connecticut does not have one. wyoming does not have these notes-child policy is -- no- child policy iies. this is harmful to the states. i have been working on legislation that would allow parents and grandparents to purchase child-only policies across state lines to ensure we're not leaving any of these children behind. the legislation would also require the department of health and human services to issue a uniform annual enrollment of least 45 days. i appreciate your testimony today. i have a couple of questions for you. these relate to the news stories
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that describe the burden this provision has on the 17 states. the main concern is the child- only policies do not have uniform, open enrollment policies. parents can sign their kids up for insurance on their way to the emergency room. that prompts carriers to exit the trout-only market. i think it goes without saying that as a direct result of the policy, we are seeing children put in a very difficult position. we can talk about who is at fault. i am not here to defend the insurers. what other options are out there for these children in the
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17 states? what other options exist when there is only one insurer writing child-only policies in the market? what is the administration doing to get children access to insurance? >> we share your concern about what has happened. it has been disappointing to see the reaction of the insurer's. we have given them a number of tools to manage the risk. they can charge higher rates. they can have their own open enrollment. we have given them almost every option. they've decided not to participate in some of the markets. this does not affect kids currently covered. they stopped issuing new policies. we have provided a number of
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options available in the state's. the states employ different tools. some have passed laws saying you have to cover child-only policies. kids now have coverage on their parents policies up to the age of 26. to the extent there is. the coverage, you have access to the under the new provision. -- to the extent that there is. -- to the extent that there is parental coverage, you have access to that under the new provision. we have allowed insurers to screen kids for availability in other programs like chip programs. when you put the provisions together, we think there are
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many avenues for access for kids. there are tools available for the states and issuers like opening moment periods. >> is the administration planning to issue guidance that defines the open enrollment period? do you think it makes sense to do so? >> we can. our preference is for the states to design a state-based solution. >> in a state like alaska, we do not have anybody there. 16 others do not have anybody there. we are caught in a bind. our population is low enough that we are not attractive to many insurers coming into the market in the first place. when we lose those that will write the child-only policies, we are stopped. my proposal for purchasing across state lines is one
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avenue. i think we recognize even with the expansion of medicaid and s- chip, you will have a lot of children whose parents will not qualify for either of the programs. we have a real gap. i appreciate the fact the administration recognizes that. you have to work with us to find solutions so we do not leave these kids hanging. that. if we are at the point where states have done as much as we can, we can look at a backstopped open enrollment provision for states that still have an issue for these kids. >> my time has expired. >> thank you, mr. chairman.
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i want to thank the chairman for having this hearing on a very important topic and thank you, mr. larsen, for your continuing work on this very complex and profoundly important issue. i know a little bit about from the standpoint of a state offical having served as attorney general in connecticut and having participated in a number of hearings on rate review issues coming hearings that were not required under connecticut law, one of the weaknesses of connecticut law. hearings are not required, rates can go into effect without prior approval. despite your citing an example in connecticut and i agree a very encouraging example of one insurance proposal being cut as a result of public notice and
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attention being focused on that proposed increase of 20%, there are still more examples of rates going up than rate proposals being cut. i venture to say that is true across the country. let me begin with a question based on my experience. would you agree that prior approval or disapproval is a very important feature of the effective rate review? >> we define effective rate review in the provisions that were in the aca which is truly a review process. in the spectrum of activities that bullet protect consumers -- you have some states were raised to go into effect without any review and you have a review process and public disclosure and that the under of the
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spectrum is prior approval. the prior approval provision and the protections that senator feinstein indicated provide the maximum level of protection to the consumer. >> in my personal view, without being excessively critical of my own state, i believe that our rate review system should absolutely be strengthened by providing more transparency and accountability including the opportunity for citizens to participate and for prior approval by the insurance commissioner after that and a right of appeal which many states lack as well. would you agree? .
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aside from the grants would provide an thank you for providing conn with a grant among other states, what more can the administration to to encourage more accountable and effective review systems across the country given its present authority? >> we are certainly in the process of granting -- making and administering the grants. we go back and forth with the staff of insurance departments and hopefully we can play a role in cross pollinated ideas. we can certainly provide more technical expertise like states knowing what the activities are. we are working with the naic in that regard. as we evaluate the progress that states are making and executing on their grand plan, we want to
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hold them to standards and make sure they are doing what they said they would do to get the grant. that is an important part of making -- maintain an effective rate review process. >> would you say the industry could do more in encouraging that kind of review? especially companies in the industry and unquestionably there are some who want a responsible accounting. >> it has been my experience that the industry is usually wary of the review process. >> wary is a euphemism. >> not weary. >> it can be both but they can be encouraged to play -- >> if they felt it was a fair process which it think it should be and can be and is that they have to feel it is a fair process to engage. >> would they feel and you feel that a fairer process would be
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one administered at the federal level that might be more uniform nationwide? >> i don't know how to answer that. my experience was most companies want and we want for the reviews to be conducted at the local level by the local state insurance commissioner who is more familiar with the market and where people are situated that are covered by the policies. it is not our objective to have a large federal involvement in the rate review process. it is our objective to have that performed at the state level. this is only backstopped function where states cannot get an effective rate review would we be doing the reviews. >> thank you. i time has expired but i would welcome continuing conversation on this issue. thank you very much. >> senator hatch. >> thank you for having this
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hearing to discuss the rising cost of health care in this country and how the health laws fail to deliver its promised to reduce premiums for individuals, families, and businesses. cms recently published its report that shows that as a result of the whole block, premiums will increase by 9.4% in 2014. i would like to ask unanimous consent that my opening statement would be included in the record. welcome, mr. larsen and thank you for the work you are trying to do at cms. you recently published your annual national health expenditures report for 2010. the report found the insurance premiere's will increase by 9.4% in 2014 as a result of the president's health law. you discussed the administration
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using decrease in premium increases. the central premise of the promise of all law was that it would reduce premiums, not reduce the rate of growth in premiums. in light of the new report issued by your agency, how can the law keep its central promise of reducing premiums by $2,500? >> my understanding of the report was that it showed that our rate of health care spending for last year was at the lowest it had been in many, many years. the rate was moderating. that is a significant point. i am not able to speak to the estimates by the cms actuary to is the difference between what rates would have been with or without the aca but we continue to believe that the affordable care act will modified significantly premiums. how it will do that in different
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markets depends. for the small businesses, they will have opportunities they don't have today. they will get efficiencies through the exchanges that they don't have today. we continue to believe that the tools that are available in the aca will help moderate. >> the report found that prescription drugs than they will increase by 10.7% in 2014 which is 5.1% higher than without health law. clinical services will increase by 8.9% which is 3.1% higher than without help law. hospital spending will increase by 7.2% in 2014 which is 1% higher than without the help law. this report shows that the presence felt what did not reduce the cost of health care in the long run. instead, it will bend the cost curve in the wrong direction.
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do you agree? >> i don't agree but i have to admit that i have not reviewed the cms actuaries estimate. >> that's fair. you said states of the principal regulators of the prime + insurance market. how does the rate review program established under the health law respect the state's rules if the law requires the federal government to conduct a rate review in states without a federally approved process to reviewing rates? >> that is an important question. we touched on this a little in the prior exchange. our objective and i think we have largely reached that is for the state's to be the primary
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reviewer. we just completed an evaluation of all the states and the level of effectiveness they have. i think we found that only seven states so far were not affected meaning the vast majority of state were affected. even the ones that aren't, they can come back to us and say that we have some kind of authority to review rates and that is usually the biggest barrier. some states don't have any state lotte law. we will do everything we can to support the small number of states that are -- that need to get there. >> you have an entire section in your testimony focusing on transparency and accountability there are a number of areas where the administration has fallen short on the preventive benefits that were mandated on august 1 of next year will not receive the public comment period.
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none was provided so how can you tell me that the administration is in transparent and the process for some programs that not all. >> when we issued the initial interim final rule on preventive services last year, we got comments on various aspects of preventive services and what should be included. we took those comments into account when we just issued the latest decision with regard to women's preventive services. we feel like we took comments. we responded to the comments. nonetheless, in the amended interim final rule that we just put out, we have an additional comment. . if we get comments that say we should revisit the policies we
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just a bounce, we will do that. >> i have to leave but let me ask one more question. do you believe that a majority of employers will be incentivized to stop providing health insurance as a result of the employer mandate and penalties under the law? >> we think employers will continue to offer and the right of offers by small businesses will increase between now and when the exchanges are online. >> you actually believe that? >> yes, i think are a number of studies that make a projection. >> if you could submit those to the committee, i would like to review those. thank you so much. >> senator hagan. >> thank you. thank you for your testimony. i appreciate the worker office is doing. i hear from my constituents on a regular basis about how frustrated and concerned they
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are that the insurance premiums continue to rise. he your experience, can you tell me what the top three reasons re that health insuraers continue to raise rates? >> the insurance companies would indicate they are simply passing along health-care costs. health-care costs are driven by how much they are paying for doctor visits for hospital stay and how many of these services they are delivering. there are a number of different reasons why costs increased. one of the things that this provision, this review provision will get at is bringing transparency to exactly why rates are going up. there is not always a good answer to your question. i think there is a lot of confusion. i may not be answering your question but i think that is the rub benefit of this provision is that for the first time we will have a uniform disclosure form
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about what it is that is driving these rate increases and we can have a discussion about why they are going up. >> the 10% threshold that to mentioned in your testimony, is that a good benchmark for the percentage increases we should expect to see in the future or should we expect further reductions in premium increases? when states set their own thresholds' starting in 2012, do you expect the threshold will be greater or less than 10%? >> that will vary by state. that raises a good point. 10% was the starting point. we looked at a number of medical trend in the season landed on 10% of which we thought was the best to start with. it is a national number but we know that markets are very local with insurance. one state can be different than another because of cost factors. the 10% may turn into a 12% in one state and a 9% in another
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state depending on local factors. >> i hear from constituents all the time, particularly small businesses in north carolina they are frustrated. under these new regulations, will there be an opportunity for consumers to file requests for reviews of premium increases either with you and your office or their state insurance commissioner? >> the way it is structured now, of the consumers don't have the ability to ask for a review formally. we added to the final release issued an explicit provision that requires states to have public input because many states had no public input into the process. the reviews are triggered by a file that is over the 10%. the reviews don't depend on whether someone asks for them.
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they are automatic. we added in that provision for explicit public input into the process. >> thank you, mr. chairman. >> i thought about your question about why the increases are going up. i talked about the letters i receive from my own constituents. i don't know what it is like in north carolina but in iowa when you have two carriers that over 80% of the market and in some places only one carrier, the rates are going up because they can. this shows the profits the companies are making. you look at the increase in the premiums and the just about match. that is white rate review is so important. both rates review and medical loss ratio is so important to get on top of this.
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getting the honor -- getting the information out there as to what is happening is important. we just don't know because there is a cloud out there when we cannot know what is driving those costs. we know that from 1999-about the middle of this last decade, insurance costs went up about one under 31% but the medical inflation was only 31%. one under% more than the medical rate of inflation some of these companies are doing quite well. mr. murphy, did you have any questions? >> i will pass so we can go on. >> mr. larsen, thank you very much for being here for the second time. senator murkowski, i am sorry. >> this follows a discussion earlier about the flexibility to the states. 10 states were told at the end of june that they have insufficient rate review
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authority. you mentioned that as well. they might be taking them over at hhs in september if they don't get it fixed. you mentioned the fact that several of the state's lack that authority to fix it. unfortunately, it is my understanding, many of these states don't have legislate ures that are currently in session. we passed a law last year in alaska to review this. it goes into effect in january of 2012. what will happen is hhs will still step in for this time between september and the date it goes into enactment. i have to question how this
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promotes state flexibility. you have a state that lacks the authority and we passed a lot to gain it and it does not quite meshed with the requirements under the law and so we have a three-month period where you step does this promote the flexibility we are hoping for? >> you put it well when you said it does not quite meshed. we are caught in the switches between the september 1 date and the date your law takes effect. i can go back and talk to our staff. the one thing we want to make sure is that somehow or another consumers in the state of alaska will get the benefit of law. my understanding was that until the law took effect for the markets that are involved in alaska, the insurance department there did not have the authority to actually get all the information and do the reviews. we would prefer for the states to do it.
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>> we would as well. we would like to see if there is some way but it seems highly inefficient and goes against the goals for you to have a three- month -- >> if you could not do it and we did not step in and you have companies that will be raising rates typically for january, this is the period of the year when they're looking for increases and the rates don't get reviewed, you and hhs will get asked how these rates are not getting reviewed. i think we have the same goal. if there is a way to get theire- 0 >> the alaska situation is unique because of the issue for other states. the legislators are not in session to do anything about it. i would like to know that perhaps we can work with you so that we provide for the information we are hoping for without serious inefficiencies
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within the system. >> thank you, mr. larsen for being here again. we will call our next panel. our next palle will be -- our next panel will be -- that's right, this one here? we have three witnesses, mr. john dickinson, director for health care issues at the u.s. government accountability office where he directs gao evaluations of private insurance, long-term insurance, and progress -- and prescription drug issues. we have daniel withrow, the president of css distribution group headquartered in kentucky and his testimony covers the u.s. chamber of commerce.
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i will yield to senator murphy for purposes of introduction. >> it is my pleasure to introduce to resell miller from the insurance division administrator and i commend her for her work in the consumer business services insurance division. she joined the division in 2008 and brought a background in policy issues having previously worked as director of the governor. as insurance administrator, she has a staff of 100 and a budget of $10 billion. they protect insurers and making sure they are financially sound and investigating potential violations of insurance law. she had done a superb job of bringing diverse parties to the table. . they have a strong rate review
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process which preceded the affordable care act. thank you for being here. >> thank you, senator murphy, and welcome miss miller. your statements will be made a part of the record in their entirety. if you can sum up and 5-7 minutes, we would appreciate it. >> thank you. i am pleased to be here today to discuss the state oversight of health insurance premiums. as the cost of health insurance coverage continues to rise, policy makers have raised questions about the extent to which these increases in health- insurance premiums are justified and could adversely affect consumers. while oversight of private health insurance including premium rates is primarily a state responsibility, the 2010 patent protection and affordable care act establishes a role for
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hhs. the act requires the secretary of hhs to work with states to establish a process for the annual review of on reasonable premium increases. in addition, the act requires the secretary to award grants to assist states in their practices. my statement highlights key findings from a report requested by chairman harkin and senator feinstein that the gao is releasing today. the report describes the state oversight of insurance premium rates in 2010 and changes of states that received hhs rate review grants. for this report, officials from the insurance departments of all 50 states and the district of columbia participated. we conducted interviews with insurance department officials to review the rate review applications submitted to hhs. we found that oversight of health insurance premium rates vary among states in 2010.
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while 48 of the 50 state officials to respond to our survey reported their rebuke rate filings in 2010, the practice as reported by state insurance officials varied in three key areas. there was a variation in terms of the timing of rate filing reviews. specifically, respondents from 38 states reported that all reviewed rate filings were reviewed before the rates took effect while other respondents reported reviewing at least some filings after they went into effect. second, there is variation in the types of information respondents reported reviewing. while nearly all survey respondents reported reviewing information like trends in medical costs and services, fewer than half of respondents reported reviewing capital
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levels. some survey respondents also reported conducting a comprehensive reviews of rate filings while others reported reviewing little information or conducting reviews. a third area was in opportunities for involvement in rate reviews. their opportunities to be involved in rate oversight such as participation in rate review hearings or public comment periods. most of the respondents reported they did not provide opportunities for consumer involvement. the outcomes varied among states in 2010. specifically, survey respondents from five states reported that over half the rate filings they're reviewed in 2010 were disapproved withdrawn or resulted in rates lower than originally proposed. in contrast, state survey respondents from 19 states reported these outcomes occurred from their rate reviews in less
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than 10% of the time. let me close by discussing how states have begun using rate review grants provided by hhs. our survey found that 41 respondents reported their states have begun making changes to enhance their states' abilities to oversee health insurance premium rates. about half of these respondents reported taking steps to eat -- to eat their review their processes or develop new ones. some states also reported there were changing information that carries requirements to incorporate additional data and analysis were taking steps to end all consumers in the rate review process. in addition, over 2/3 reported they have begun to increase their capacity to oversee premium rates. these capacity enhancements included hiring staff or outside actuaries and improving information technology systems used to collect and analyze
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data. finally, more than once last reported their states have taken steps such as introducing are passing legislation to obtain additional legislative authority for overseeing health insurance premium rates. this concludes my statement. i will look forward to answering any questions. >> thank you very much. thank you for getting the report out in a timely manner. ms. miller, please proceed. >> good morning. my name is theresa miller and i am the director of the oregon insurance. i will talk to about federal grants are improving our health insurance rate review process in oregon. we have worked very hard last four years to strengthen our state rate review law and open our process. because of these efforts, the
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rate review process as one of the most transparent and is supported by strong statute. the federal rate review grant has allowed us to hire the staff necessary to conduct more in- depth reviews of rate filings and provide the funds necessary to solicit meaningful public comments. i have included more detail in my written testimony about the key features of our process. those include posting all documents contained in issuing a plain language summary of our decision and e-mail in policyholders with a link to that decision. i want to focus my remarks to the improvements we have made with respect to federal grants dollars. we were allowed to solicit more
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detailed and meaningful public comments. we have a 30 day public comment period. those who did comments that they cannot afford their rising premiums. they did not address the statutory factors we review when we review rate filing. we reviewed our grants to contract with the consumer advocacy group to weigh in on behalf of consumers. we have gotten detailed analyses focusing on the factors contained in our statute. oregon has a competitive health exchange market. insurers actively compete in the market. because of our competitive process, we review 40 rate requests per year in these markets. the first round of federal grants enabled us to add an actuary to our stuff. -- our staff.
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this will allow us to deal -- digging deeper and address issues brought up by the consumer advocacy group so that those who want to watch can participate in our process and see the scrutiny we provide with regard to these rate requests. federal grand dollars have also allowed us to communicate better with consumers for rate filings. there is a search engine that allows consumers to file -- find a rate filing. we use grand dollars to create a seven-minute animated story about health insurance costs that breaks down the premiums. we also use federal dollars to conduct a federal hearing on recent filings. how consumers benefited from it.
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the changes we have may have saved consumers money. in the years that followed the standing of our state's review law, we have lowered requests 50% of the time, saving consumers $25 million, or just under $10 per person on a monthly insurance premium. that does not solve the affordability of health insurance. every rate requests matters to us because it matters to consumers. we must control health-care costs. that brings me to the study we are conducting with first-year grant funds. the key to stabilizing health insurance costs is controlling medical costs. considering all insurance markets, a 89 cents of every premium dollar goes to pay health-care costs. to try to tackle health care costs, we contacted an actuarial firm for a study. the study is exploring whether
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there are opportunities within our current which review -- rate review process to control the growth of health care costs or to improve the health care delivery system. we are applying for a second round of grant money to hire a second actuary and to conduct public hearings for most of our rate requests. it became clear that even with one of the most open processes in the country, consumers were not aware of the process involved in rate filings. the federal grant filing available through the affordable care act helps review health insurance rates. it gives states like ours and to solicit legal consumer input, conduct more and -- in-depth reviews and improve rate filing available to consumers. we want to find ways to help lower medical costs so that we
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can make insurance more affordable to consumers. thank you for the opportunity to experience.'s i would be happy to answer any questions. >> thank you for inviting me today to testify on health care, the efforts to empower the states. i am be president of the css distribution group. behind me since my beautiful daughter. i apologize. i might be a bit nervous. i am testifying in front of my biggest fan. i am honor to be here. thank you for your service to the united states. after working in the packaging industry for decades, we borrow ed to open css distribution
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group. we approach everything by doing the right things right. we worked hard to grow our country. to date, we have not made a net profit. we did reduce our work force 10 full-time employees. we are paying our full-time employees overtime instead of hiring new employees. one element of our business that continues to be unpredictable is the cost of health care coverage. we have offered our employees' health care coverage ever since we opened our doors. our employees are like family to us. for the past five years, we have offered all employees a choice a's, heldpo's and hs
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savings accounts. two are enrolled in the ppo. of the employees who do not participate, one is covered under the spouse's plan. i am committed to offering coverage to all of my employees. the premium increases are beyond what we can afford. it is beyond what my employees can afford. each year, we have seen at least 30% premium increase except the some of the health reform law was passed. after the enactment of the affordable care at, we recorded an increase of over 42%. i have tried everything i know to do to mitigate the increases. the only way i have been able to curtail the increases is to restructure the plans. these changes have helped reduce the premiums. they do nothing to impact the
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out of pocket costs we have to pay for. these year over year increases cannot be blamed on my plan or the insurance industry at large. i believe health care costs are what are driving this. each year, i spent 45 days researching other plans and insurance options. i am in the middle of that now. i've not been able to find any options that can offer employees lower premiums. the i am an optimist at heart. i do not think this will change. the cost of coverage is increasing. it is simple economics. plans are required to cover a laundry list of services, many at no cost to the enrollee or the participants. a review of premium increases will not stop that from happening. restructuring the insurance market will not reduce the cost of coverage. it is simple.
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he once more, is going to cost more. a product cannot be sold for less than it cost to create our offer. -- costs to create our offer. the new health-care law has made it more difficult for small businesses to compete than you realize. i urge you to repeal the costs areas of the law. on behalf of millions of small businesses in america, please listen to our concerns. >> thank you. we will start a series of 5 minute questions. ms. miller, i will start with you. i was reading your testimony last night. you were talking about what you did. you use $100,000 to make a contract with a consumer advocacy group to weigh in on
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behalf of consumers. you say you are reminded of the questions consumers want answered. you also made a contract with an actuarial firm. frankly, i do not know of any other insurance commissioner to do something like that. i applaud you for that. not many insurance commissioners want to contract with a consumer advocacy group. they are usually a thorn in your side. i compliment you for that. that gives you input from consumers and what they want. you have shown great leadership there. you are looking at different ideas on how you can affect health care costs. you mentioned in your testimony that you are exploring denial
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rate increase requests if the insurer reimburses providers for unspecified medical care that should never have happened. i find that intriguing. can you flesh that out a little bit for me? >> thank you for the question. it gets down to the contract insurers are into with providers. when i talk to the insurers in oregon, one of the things i heard for years is that they have a difficult time negotiating with hospitals. they raise this as a specific issue. they would like to include a provision with hospitals that says, if any event happened, if you every day the wrong arm that we agree should never happen, who should bear the brunt of that expense?
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should policyholders pay it? should it come from the providers? our carriers had a difficult time getting providers to agree to those sorts of provisions. i understand it is more common for those provisions to be included in contracts. that is one of the ways we are studying this. i do not know how we get at these underlying costs. as state regulators, we may have an interesting opportunity to get at these costs. can we influence that insurer- provider contract. i hope that is helpful. >> are you looking at things like readmission rates at hospitals? we know there are some hospitals in this country doing a great job at keeping their readmission rates extremely low. when you have all these readmission rates time and time again, should policyholders'
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bear that or not? you are also looking at readmission rates also since you are looking at things that should never happen. >> part of what we ask the actuary is, let's look at everything. i do not want anything to be off of the table. if there is a way to address health-care costs, we want to do it. everything is on the table for that study. >> i compliment you for what you have done. you set a high standard for insurance commissioners around the country. mr. withrow, thank you again. is that haley or halle. are you enjoying washington?
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i can tell you are enjoying a great summer. mr. withrow, you said something about the health exchanges being up in 2014. i have met with small businesses on this issue many times. when the insurance exchanges come up, because of your number of employees, you will be able to go to an exchange. you will have more competition and more people competing to cover you. it will be open and it will be transparent. would that help you in terms of your premiums and the quality and coverage? >> i really do not know, senator cardin -- harkin. there is no definitive
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information about exchanges that i can read about. i have done my best to try to research that. even working with the chamber of congress, is -- chamber of commerce, it is difficult to find information about that. >> the law sets out how those exchanges are to operate. i do not know kentucky. in our state, where we have two insurance carriers that had 80% of the market, there is not much competition and not much transparency. when the exchanges come up, a lot of small businesses will be able to go on that. let me also ask you -- right now, small businesses can get a tax credits for the purchases -- for what they have put in for
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their employees. up to 50 employees. you do not have 50 employees. are you taking advantage of the tax credit? .> no, sir we pay our employees too well. >> so you do not get the tax credit. but you will be able to shop on the exchange. >> we try to plan business in one and two year increments. not having information on it makes it difficult to plan for it. >> thank you. my time is up. >> i think we are short on about five rules for the states to be working on regarded exchanges. i want to thank you, mr.
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dicken, on the work that the gao has done. has anyone provided evidence that the rate review process or the review results that any of the companies have pulled out of the market in that state -- was there any evidence to suggest the tighter rate of review policy for states would increase the types of policies available for consumers? >> thank you. we did not specifically asked in our surveys whether there were any changes in the market share or carriers in the market. your point is fair. we have looked in the past at the market shares of carriers in the small group market. many states only have one carrier that they represent.
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many states, 23 states, have five or fewer carriers representing 9% of the market. carriers may have increased or decreased their role in the market as a parts of the rage reviews. >> i think the small business health plans would have increased the number of companies that were out there participating. i hope this health care reform does, too. ms. miller, congratulations on hiring an actuarial firm. always better than an accounting firm. i assume the actuary was used to determine the rate you allow regions to pursue. >> just to be clear, we have actuaries unstaffed that do the review of our rate filings. we hired an actuarial firm to conduct the study, which is a
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separate study from our rates review process. we have actuaries unstaffed. we added an additional actuary to deal with work load -- we have actuaries on staff. we added an additional actuary to deal with workload issues related to the rate filings. >> if costs are higher than the actuarial charts say, how long do you think the regions will be able to take in less premiums than they pay providers in the medical claims? you have an adjustment for that? >> when we consider an insurer' overall profitability -- an profitability,ll we know that things need to be
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priced properly. there was a 22.1% request and we reduced it to a 12.8% increase. they dipped into their surplus. enrollment in their individual plans has been a concern for us and was a concern for the consumer advocacy group. there were 1000 members in 2007 to less than 60,000 members today. if we approved a 22.1% increase, that would result in further enrollment losses. the healthiest people are leaving and that would drive up claims resulting in higher increases down the road. part of what we were trying to do in the regents case was to try to stem the enrollment losses. >> mr. withrow, thank you for
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bringing your daughter on this experience in washington. i did that with my kids. getting back to insurance, did you know that in 2014, small businesses will not be able to buy a health insurance plan that has a deductible of more than $2,000 for individuals or $4,000 for family plans. do you think is new in -- new requirement will increase your premiums? >> i did i know. but i can tell you from the work i have done in the last 30 days is the only way we can stem the increase in costs is raising the deductible. if you have a cap of $2,000, our monthly premium will rise. >> my time is up. i have some additional questions for all of you. >> senator franken? >> i can assure the ranking member that minnesota is hard at work in setting up its exchange.
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the deputy commissioner of health in minnesota is hard at work in setting up the exchange. the fact that there are no rules is not slowing it down. >> is this information out to the public? >> it is available. i cannot speak to that. what you said was you do not know if they are working on it. i wanted to assure you that they are. mr. withrow, in your testimony -- first of all, you have a beautiful daughter. you said there was a laundry list -- i can remember what you
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said -- of new medical procedures required. >> the lifetime maximum of children to 26 years old. insurance companies having to cover anyone who does not get insurance because of a pre- existing condition. those benefits are what i was referring to. they are adding costs to the system. if we add costs to the system, premiums are going to rise, in my opinion. >> anyone who has a pre-existing condition, any adult? >> what i know of the law -- >> i do not think that as part of the law now. that kicks in in 2014. >> i do not understand what you are asking. >> you enumerated what will be
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requirements that increase the costs. there are things that do not exist now. >> i stand corrected. >> and you are representing the chamber of commerce. it is important that when you are testifying in front of congress, that you be accurate. that is important. are you aware of what the medical loss ratio is? >> no. i am not an insurance person. >> in oregon, ms. miller's medical loss ratio is about 89%. the medical loss ratio is the percentage of premiums that are paid into a health insurance company that must go into --
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that must be actual health care. 85% for a large group in this law. there was no lobby for. 80% for an individual -- there was no loaw before. when you are on the exchange, there is a much larger group. the medical loss ratio will be 85% and above. which means 85% of all premiums will have to be spent on actual health care and not on administrative costs and not on advertising or marketing and not on ceo salaries. that is why, in certain markets already, we are seeing them cut premiums by 10% on average. ms. miller, do you think the
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medical loss ratio is going to bring down health-care costs and the cost of premiums? >> just speaking for oregon, we have such high medical loss ratios. i do not think the medical loss ratio will make a big difference in oregon. it certainly could have been in that in other states. >> in other states backed -- that are not -- minnesota has an over 90% medical loss ratio. one thing i believe is going to bring down the band in the cost curve is that we are going to increase the value of health care. we are going to reward states that have high value care. my time is up. i did want to point out that
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earlier, senator hatch said that the purpose of health care reform was not to reduce the rate of growth of premiums but to reduce premiums. i do not think that is the case. i do not think anybody ever said that the purpose of health-care reform -- that we were saying we would reduce premiums. sometimes i hear that from opponents of health reform who say, premiums went up. we were told they would go down. no, we did not say premiums would go down. we said the rate of growth would go down. that was the goal. whether it has been achieved in every case, we will have to see.
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i just wanted to clarify the goal. i also want to clarify -- senator murkowski from alaska was talking about a children only planned. . children have pre-existing conditions covered. if you are a child, you are allowed to get care. we do not have a children-only plan. that has been taking care of by state plans. that is the reason for an individual mandate. everyone will have to get care. that is the purpose of the individual mandate, so that we cover people with pre-existing conditions. i wanted to clarify a couple of things. i apologize for going over my time.
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mr. chairman? >> senator merkley. >> thank you, mr. chairman. in 2009, expanded by creating more protocols for interaction with the public. a couple months ago in june, ms. miller, you posted public testimony on the rate increase. it was the first public testimony on rate increases in 10 years. were you required to do that by law or was this an interesting experiment? >> this was the first time in 20 years that we conducted a public hearing on a rate filing. this was the first public hearing. we were not required by law to do that. >> you were skeptical about how that would unfolds.
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wasn't unable? -- you were skeptical about how that would unfold. was its valuable? -- it valuable? i heard from consumers that they so appreciated the opportunity to be heard and testify and have their opinions listened we also -- the way we structured the hearing, i asked the company about 10 questions then we had the consumer advocacy group ask questions and people left comment cards that said things like i have a lot more confidence in the work
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the otheror insurance administrator does after this hearingt and if people don't have the opportunity to see what our process is they don't have the confidence in it. so i think it was a valuable experience, and the company i think also found it to be a valuable experience. >> i think it was absolutely terrific. and the public, so they could better understand it, could you explain it? >> i think our single greatest challenge has been to try to find a way to take what otherwise is a very technical process that is historically and turn it into something that you and i can understand and
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the public can understand is one of the biggest challenged. we've tried to do everything we can to make this more easily understandable. we spent a lot of time and staff time developing a summary in plain language because we want people to understand why their rates are going up and why we approved what we approved. >> i want to switch to the health insurance exchange that you set up. and what you set up and are hard at work designing the elements of it. how is that going? >> i will tell you rocket king is the -- i think his title is administrator or interim executive director, and i will
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tell you they are just starting to do things like try to find office locations. some of the things they are doing right now are very basic in setting up a corporation. so i would say it's a little bit slow because there are things we didn't focus on that they are needing help with such as looking or finding a building or office for their business and finding insurance for their workers. >> is that resonating? a lot of interest in it or support for it, or do people see that as unnecessary? >> well, especially in a market like oregon if you go to oregon .gov, the last time i looked at options, i think there were 77 options that came up, and sometimes i think too many options is difficult for
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consumers in figuring out which is best for them. it will make it easier for them to cop pair plans. >> so i have one last request. my colleague from minnesota likes to point out that they have a medical loss of 8t% so theirs is at 90%. will you work on that so i don't have to explain -- >> it's 91% in minnesota. [laughter] >> i'll submit those to you in writing. >> may i just thank mr.
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winthrow for coming here and bringing your family and having a small business. i love pallets. palletizing things is great. i've been on a u.s.o. tour where they palletized things on the back of that plane. i love pallets. >> and a colleague of mine a former congressman went into the palette business. >> but you got to put stuff on palettes. if you go to any factory or thing everything goes on pallets. >> would you clarify something i said earlier and i'll never forget again, the areas where i mentioned the additional cost is what's concerning me. but also the preventive costs and also the addition that's
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added to by the health and human secretary sadillias that added extra cost on a lactition, excuse me, breast feeding and birth control are the two costs i was referencing that -- i appreciate you correcting with a i said before. >> also i don't think the preventative kicks in until 2014. so i think that when you attribute the cost going up because of provisions that are in the afford nl care act that have not kicked in, i just
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think that, as you said, you're a small businessman who pays attention to your business, and you obviously care about your employees, and you're obviously doing what we need americans to be doing, which is working to build businesses and create economic opportunity for people. and you pay your employees too much to qualify for the tax credit, so i credit you on that, but, so you're not, un, you're not expected to know every detail of the law, which is over 2,000 pages long. >> thank you. >> some of those provisions have already gone into effect. >> some vaccine but some that were mentioned as have gone into effect haven't. and i just wanted to state
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that. >> the record will stay open for 10 days for submission of questions. >> may i insert one last question? i wanted to follow up on your point, mr. withrow. that was something i was very much involved in. i championed space at work and for women to express milk, and here in the senate dr. coburn on the senate side because it was basically no cost and it turned out to be an experiment? oregon that they had much less absenteism and a much higher speed of women returning after childbearing because of that stress over whether they are doing the right thing by their child, so you mentioned the cost associated to lactation.
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>> having had four kids, i certainly know the costs we had to pay in order to buy or rent breast pumps and also birth control. those are the costs that concerned me, because we seemed to be adding more and more to the ticket of benefits, and adds as we add benefits, typically in business you add benefits, the more you add, the more it costs . so it concerns me that we seem to keep adding more and more to the party. be >> my understanding -- i could be wrong but those features are not a mandate in the law. those are not required. many companies are putting them in because they have a very strong appeal to the customer. but that's a market decision not a mandate decision. i'll check on that and close the loop on that. >> would it be to everyone? is it something that has to be part of the entire mandate that
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everyone has to have that available? >> no. that's my point. my understanding is those services are not mandated. that that is an insurance company decision. but let me check on that and close the loophole on that. >> actually, everyone has to pay on all those for free. >> well, since everybody is weighing in i guess the chairman will have to weigh in on it. >> being the basic author of the section of the bill. i will just say it again, that we keep paying and paying and paying and paying to fix, to mend, to cure. to patch. we spend precious little on prevention. so one big failure of our health care system in america that we have not put enough into, less than four cents of every dollar even goes into
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prevention, and your mother was right, an ounce of prevention is worth a pound of cure. so as we're making this shift, we are putting more out there for preventtive services. and in some cases they do cost a little bit more. they are added on. but every single study i have ever seen indicates that the amount that you have put into proven preventible services approved by the united states prevention health tasks for of the centers for disease and prevention -- it costs more to patch and mend later on. so we want to do nrp preventative health care. a lot more. companies, a lot of companies are stepping up to the bar. some have preceded this with prevention. we were just talking about
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safeway that did a great job on this in the past, and was one of those companies that we look at and how you dwoo did advise health services and interventions and also as the chair, former chair one time of the national breast feeding coalition, it's been a lifelong goal of mine to change societyal's attitude in this country on breast feeding. it should be available easily. we all know from pediatricians that the first -- life is enhanced remarkably by mother's milk. i understand there has to be replacements and infant formula and stuff, but we should make it as easy as possible for every mother to be able to nurse her child.
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as easily as possible. in the workplace, in traveling, no matter where. it ought to be the norm not the exception that we do this. i don't know your business from anything, mr. withrow. but i have seen small businesses that really go out of their way to provide time, whatever kind of support they can give to women and young women who are in their childbearing years to be able to nurse their children. to those i say god bless you. keep doing more, and i hope all businesses will do that, and i hope we do that on the government level . local and that's one of the best things we can do for the health of this country. >> i was very interested in
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oregon that we had an exemption for any company that said it's just not feasible to provide privacy and flexibility in our break. so we assumed we would get asked for that exemption. not a single one has -- i think it really is a testimony to the fact that when people pause, they realize what profound value it is for women to be able to express milk. there is no substitute for it, for the child. and it's not only good for the child's health. it's tremendous for the mother's health. we had testimony in this very commi committee for the doctor
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[captions copyright national cable satellite corp. 2011] >> coming up, executive directors from both the nba and nfl players unions discuss collective bargaining rights in sports. >> the house of representatives has been off eight weeks already. did you get eight weeks of vacation so far this year? because i didn't.
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alyona minkovski tries to take a more irreverent view. >> we try to make it exciting and informative again rather than the garbage it has dwindled down to. >> she'll talk about it on c-span's "q&a." >> come upping we'll start on monday with the labor department's workforce training program. tuesday the focus is on technical education and the workforce. wednesday, a look at private-public partnerships and job creation and on thursday we'll have key federal job programs and on friday, women in the workforce. "washington journal" is live every day at 7:00 a.m. eastern right here on c-span.
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monday on c-span a discussion on the african-american vote? 2012. speakers include congresswoman donna edwards and washington poet columnest johnathan kay part. right here on c-span. executive directors for both the nfl and nba players union took up discussion. the nba locked out its players on july 1, and on tuesday filed a claim against the players union for unfair labor practices. the nfl recently ended their lockout by ratifying a new collect i have bargaining agreement. the national bar association hosted this 90-minute event. >> ok. before we get started, want to let everybody know that initially, myself and mr. hunter and mr. smith. we'll stand and then be in the
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confident of the chairs. so on behalf of the national bar association i want to welcome everybody to the executive director's forum. we all know sports plays a major role in american society. we all look forward to sunday during football season, and we look forward to -- during the week and on the weekend when the nba season comes. the sports industry naturally developed into a multibillion -dollar industry. and two of the biggest sports are football and basketball. and the two attorneys who happen to hold those players together are two african-american attorneys. mr. william hunter, and mr. demaurice smith of the nba and nfl respectively.
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so today we have mr. william hunter. he took the helm of the nba players association in 1996. he was then named the executive director of the national basketball players association. the union of professional basketball players in the national basketball association. his duty so advance the well being of the players. he continues to make it the nba p.a.'s mission to make sure the players' rights are protected and that every conceiveible measure is taken to maximize their opportunities on and off the court. the nba players have utilized their collective bargaining power to challenge how the nba is run and the method in which
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the money it generates is divided. so the chief negotiateors currently and in the past agreement, which culminated in the 1999 collective bargaining agreement. what a lot of people also don't understand is mr. hunter is also the head of the wnba players association, so the women nba players association is an organization he created. and now they also serve the women nba players. well, mr. hunter arrived to the nba paye ready for the role. mr. hunter's diverse background includes a stint with the washington redskins and miami dolphins and he is the former u.s. attorney in the northern district of california and san francisco. mr. hunter graduated from
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syracuse university where he was the captain of the football team and received his o his jurs doctorate from n. -- and with the san francisco district attorney's office. he was appointed u.s. attorney by jimmy carter in 1977 and after serving as u.s. attorney he developed a private practice, basically representing white collar clients, and he's represented such individuals as san francisco mayor willy brown, deion sanders, ricky henderson and a host of athletes and entertainers. so with that if you'll join me in welcoming mr. billy hunter. [applause]
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i put printed mr. smith's bio a little smaller so i have to wear my glasses. >> he was elected iner march 16, 2009. he replaced the legendary gene upshaw who passed away on august 20, 2008. his election prior to his election he was a trial lawyer and litigating partner at pat and box and is a native of washington, d.c. mr. smith serveed from 1991 to 2000 as assistant u.s. attorney in the district of columbia u.s. attorney's office. in addition a prosecutor in the violence crimes and major crimes section of the office. mr. smith then served as counsel to a deputy and the u.s. attorney's office lead
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representative to the law enforcement inaugural committee and sebbed as the command center during the 2001 presidential inauguration. during his time at pat and bawks, mr. smith focused primarily on white collar criminal offense and chair of the -- mr. smith argued numerous cases before the court of appeals and district of columbia court of appeals where he defended criminals in high-profile cases and as well as fortune 500 companies in criminal and complex situations and investigations and he just recently concluded the nfl agreement, so we get our football on sunday. so please join me in welcoming -- demaurice smith. [applause]
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>> and with that i'm going to have mr. smith start off by saying a few words. >> first of all, i want to say thank you for that round of applause. it's certainly a pleasure to be here. it was billy's idea to stand up throughout this whole thing. [laughter] >> fine. >> i know we're going to have a great discussion. when you said i was elected in march of 2009. i thought that was notr. that was actually 10 years ago when i was 6 foyt -- but i very long and extremely public fight over the last 2 1/2 years. and i'm most proud of our young men and their families, because at a time when people were very quick to make a judgment about
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their resolve, their ability to stay together, their commitment to fairness, when many people doubted that they were capable of that, our young men demonstrated a tremendous amount of resolve. and that was really the only thing that got us threw. when billy and i are together in the back, we tell stories about how it's all about us. but the reality of it is the work we do and worry is tied up in the strength of our -- billy is where i was two years ago. the last thing i will say is that in a few minutes, you're going to hear from one of my best friends, and i don't know if billy remembers this, but in november of 2008, when i was being considered for the post, i came up to harlem, because we
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had a trend in common, and the idea was that he and i would spend about 10 minutes talking about his job, the job that i was hoping to have 3 1/2 hours later. billy walked out saying i'm going to continue to pray for you and you're going to be the right man for the job. and he's an incredible man, and i have pleasure to call him my friend. so that's all i'm going to say and concede to the gray-herod gentleman. laughing laughing [applause] >> i think the one piece dee left out when he said i suggest we stand is once i sit down, i have a hard time getting up. but as i look around, i really think this is an historical moment, because i can't think of anytime in history when you had two african-americans heading up the heading up the
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respective union representing all these players that have celebrity throughout the world and to be part of an operation that generates billions of dollars per year so it's really great. i've enjoyed the relationship with dee for the two years more than he's -- and i served part of the time for gene upshaw's lawyer when he and his brother were in california. but it's been a long and pleasant ride. when i look back, it seems time has gone by pretty quick in the sense that it seems like only yesterday when i got here. but there's been some interesting moments. we have probably have two of the best jobs. i can't think of any better job in the country that one could have, one where you get to be paid a handsome salary and you get to hang with all the celebs and you have all kinds of other
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perks and travel the world and meet all the big, famous, important people. so it's just great. but the real prize is being able to work with these young brothers, because in my situation i have 85% of african-american males, and i can tell you from my vantage point, these are some great kids. they are growing into men, and that's what we're trying to help them become, in the process being confronted with all the attention they get. as dee indicated, it's not possible without them. 1998, i went through my first lockout, which you all know lasted about seven months. our players lost about $500 million, the owners lost over $1 billion. since then the amount of money our players have earned as increased expo mention thely and our players earned $2.3
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billion which gave us an average salary of about $5.8 million and immediate salary of $2. meaning 50% of our players made $2. or above. that was the breaking point. and we're now in the throws of probably one of the -- this is my third collective bargaining agreement i negotiated. in a matter of a few weeks it didn't take us long at all, but this time around i think it's going to be down and dirty unfortunately. i was hoping we could avoid it and drawing this thing into the courts, but as you were aware yesterday, the commissioner elected to bring suit against the union and a group of players. so we're now engaged in responding to that sue. but in the context of all that,
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we're still in the course of negotiating, so i was a little surprised when he filed sulet, because when we left monday i thought everything was cool. next thing i know he walks out in front of the cameras and says the union is not negotiating in good faith and the next morning he calls me at 7:00 a.m. and says they are -- it's ironic, because when they decided to petition for it, i called him before hand and said we're planning to do this, because the meeting was coming up, and i thought it might be embarrassing, and i didn't want thurl: think it was going to be -- that's just the way it is. >> but anyway, getting to your questions, i think this is
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going to be a good, lively session. don't hold back. any questions you got, don't be afraid to ask them. it may be something i may not be able to answer simply because of the current status of my situation, because we're still engaged in negotiations, and i can't promise you we're going to get an agreement before the is is, collectively the owners and players stand to lose about >> 5 billion. we're going to try to get it, but the problem is the gap is so far between the two of us because of the way david tends to negotiate. and i'll explain that to you as we go. but any questions feel free to ask. [applause]
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>> the don't hold back was for billy. [laughter] >> hold back is what you do with, like, well -- you guys mind me calling you billy? >> of course. i've been knowing you so long, nothing but. >> i've known billy since i was a young lawyer and he walked into the room. >> here's where i like to start. as you said, becoming the director of the nba players association is probably the best job anyone could vaccine and when you go through law school, that's not a position anyone really thinks about.
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so how did you land that position? >> i hadn't thought about it either. ironically after going back to syracuse and they had a coming back together for the athletes, and i had dave help recruit to the school and dave asked me what i was doing. i told him at the time i was engaged in private practice, because i had left the state attorney's office before. then he said are you familiar with the nba players association? what is that? he said well they represent the basketball players. it's a union for the players. and they are looking to get an executive director. i can't promise it to you, but i would like to submit your resume. so that's how it started. i got the interview, and then from there i was interviewed by
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a group of players, michael jordan included. it was like a three-day process where bithey had about 15 or 16 candidates from corporate america and from private practice, etc., and we were interviewed by 33 ballplayers in the room. michael jordan and patrick ewing and buck williams. and every day they would cut somebody. so it was almost like playing football. you get cut and you turn in your book, and you're gone. so by the end of the day there were three of us standing. those three were myself and tra dena ussery is now a member of the dallas mavericks and another is an agent in washington, d.c. i got selected from the three. the guy the guys chose to become the head of the union. that's how i got here.
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>> dee? >> similar to billy. both of us have similar backgrounds. prosecutors, states attorneys office. private practice. in october of 2008, i got a call at the office from a search committee. they left a message and said are you interested in a new job career? and to be dead honest with you i told my secretary, no, i'm not, because back in 2008 we were headed into an historical election, and we all thought we would be able to elect our first black president. and i had been -- it was potentially going back into the government so up to, it didn't appeal to me and about a week later somebody called and said we're calling you about the
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job. very similar to billy. it started off as a process with a lot of candidates that got whittled down. but to cut to the crux of your question, neither one of us started out in our career saying one day we'd be in this job, if someone had told usings we probably would have told them to stop drinking, because it's not a normal career path. but the gifts and/or things you are able to learn in a job being a prosecutor or representing people in very high stakes situations, running a firm, being in a management position, all of those things are things that i need every day to do my job and i couldn't imagine better training for what i went through and what billy went through. >> well, dee, let me follow up
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with you. you replaced gene upshaw, who, i mean, from all i read, he had a very amicable relationship with paul tagliabue. and whenever they had to negotiate the new collective bargaining agreement, it seemed to go through pretty smoothly. [laughter] >> on the surface. [laughter] >> how much pressure does that put on you, given that you are replacing gene upshaw, and the nfl commissioner was mr. goodell? did you feel any pressure when mr. -- we'd be lying to you if we didn't work in high-pressure, high-profile, win-lose paradise. but it's not much different than standing up in a homicide case or representing a corporation in a large-scale negotiation.
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it's all pressure. you know, what i've always told people about the comparison people want to make between gene and paul and roger and dee is everybody tends to look at where those relationships ended rather than where they started. most people don't know that paul tagliabue cross-examinationed gene upshaw during the reggie white trial. and early on in their relationship, i can promise you from going through everything i read about gene and the things he left for the person who was coming after him, when it started off, i'm sure there was not a day when one wasn't trying to tear the head off the other one. so those relationships evolved. >> yes. >> so i'm not sure any two people that have been thrust in a more high-profile, high-stakes relationship than roger and i.
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and he is going to do what he has to do and i'm going to do what i have to do, and you try to move that relationship to a point where there is trust, and there's a mutualty of what you want to achieve. and does it mean that every moment is, un, skipping down the lane, holding hands? no. but i think the most important thing that you can do is to never take anything personally. make sure you understand what your business objectives are, and perform your duties at the highest and best ability that you do. that's how ultimately how a deal is going to get done. >> well, bill, let me move to you. and it's a good follow-up to the question of not taking anything personal. how do you feel about david stern making $23 million a year? >> well, i think it's somewhat
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ironic, because in the negotiations -- recently they laid off about 120 people in the league office. they contended they have 20 or so teams losing money, which we obviously refute. so someone earning in the newspaper it was reported he was earning $23 million, i can't kind of mesh the two. it sounds too much like corporate america where you lay off people, and the salary of the head of the corporation continues to grow. so if he's earning $23 million in the face of the picture they painted for us, then somebody needs to go back and re-examine things. >> now at least from my vantage point, every time both the nfl
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and naverb have renegotiated television contracts, the figure has gone up. i don't think i've ever seen the figure go lower. why do you think with new contracts being negotiated at higher amounts, the nba owners are trying to retract -- trying to contract the income of players? >> well, the issue is really one of revenue sharing. and unlike the nfl, we don't have revenue sharing in the nba. where they have been able to give money to the owners is where we have an escrow and -- they hold back up to 8% or 10% of the players' salary and
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distribute to the teams that were tpwheeth -- it was a way to keep them on track. >> i lost my question. >> you stayed negotiations this time around seemed to be really tough and everything i read the owners say they are losing money yet every time i see a contract negotiation -- >> so what's happening is it's easy to make demand on the players. that's the way owners tend to react. they think the players should give back. there's not been a negotiation i'm aware of not only during my tenure but over the past 30, 40 years that the owners have yet to give something up. there was the salary cap in the 190's and other restrictions imposed. so it's like they are concrete if he negotiate yating trying to guarantee a certain system.
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so they want to -- what i'm saying the new york city or l.a. or chicago or some of the big market teams to kick back, i think that's part of the internal problem. that's clearly in that group a lot of fighting going on, and i think the commissioner feels that it's much easier to approach it and demand it from the players by threatening the players and locking out than it is to try to resolve it in their own circle. he may not own up to it, but i know that is a reality. that's what the problem is. so he has made a commit i want or promise to them that they were going to have a deal, a structure similar to the one that was imposed on the nal l.
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and the reality is maybe a promise he maid that he's not going to get to keep, and i had told him before that the only way he could get what he was looking for is after he and i bloodied each other up for a while, and then we'll see. now, mr. smith, the nhl players association signed a 10-year agreement, and they renegotiate television contracts and tend to get more money each time. did you ever think about signing a seven-year or five-year agreement? >> i think the right analysis for any deal is not the length but the mutual part of the contract that benefits both you and everybody else. two people get together and decide they want to do a business deal, and the first
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thing you're talk about is when does it end? it's about the most conducive thing you can do for the atmosphere because your internal discussion will turn to am i going to be better off after five than he is and if not, do i have an advantage to break the deal? it seems to me that the right way to look at any deal is to structure it in a way that provides for stability, a definite share of revenue, and in our case, where we have the lowest or shortest career path, how to create a business model where we can try to make our players work longer in the system. so if you end up in a situation where you have to trade the length of that deal minority to try to ensure that careers are longer, that's what you want.
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>> right. >> so with our district attorney, we ended up, and we're not quite -- in our deal, we ended up, and we're not quite there yet but what was the average career, how did it end? typically it ends on an injury. so if you take steps to prevent injury but take steps that you're going to get compensated in some way if you have an injury, those things become drivers. >> can i -- in our case, unlike the nfl, we at the nba are not prepared for a 10-year deal. a six-year deal was the past c.b.a..
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that was the longest. they opted not to do that. because if they continue losing money, we're saying why don't we do a shorter, let's do a five-year deal and take another look at this thing five years from now. we side five years, because you mentioned the notion of the tv contracts and rights fees being paid, and the reality is that's where the new revenue generators are, and they are linked to sport so we know right now the nba probably has some of the lowest rights contract. they did a 16-year deal about six or seven years ago, and it's due to expire in 2016. they are rejecting it over the 10 years they were proposing that there would be a 4%-5% increase in revenues with the exception for the years the new tv deal would expire and go
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back to negotiations. they were projecting a 7%-9% interview. when the nba tells you it's going to be 7%-9%, that's conservative. so they are projecting within this past year, $4.2 billion. and they are projecting that within the next four to five years, annual e. so with those kinds of numbers, they are saying we're not going to do a 10-year deal with what you're proposing, because the players' salaries would be frozen for the next 10 years and not be able to participate in the growth. so there's no way we're going to have our players playing for those services and have them show up in arenas and not shannon: at some level in growth.
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and that's why we're at an impasse. >> everyone probably takes a look at what we do on the outside and thinks they understand what it is. but both of us spend a tremendous amount of time in regular economic theory. and trying to figure out what the trends are going to be and what the growth rates are going to be. and those things become significant drivers of what's good for your players at that time. and our systems are similar in some respects. dissimilar in others. one significant issue for us is we're taking 55% of the tv money going forward. >> ok. >> which is a change over time. so when, you know, those economic drivers, and your respective analysis of those things become very important. but i will share something. anytime a sports league stays growth rate is going to be x,
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it's going to be x-plus. [laughter] >> right. >> but the other thing is football is the prototype sport. the people in the nba and in the nfl. the people in hockey and the nfl. the reality is the nfl is the big boy. it's the elephant in the radio. it generates more money than basketball, hockey, baseball -- it just doesn't begin to compare. these cats are generating about $10 billion a year. >> wow. >> i'm not getting paid. make it sound like it. [laughter] >> all right. well, wow. >> you know, billy, i know that in the last nba collective bargaining agreement is when they implemented the cap on rookie salaries. >> yes. >> and what i noticed was
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without knowing any of the agreements of the new collective bargaining agreement, i noticed in past years there were a lot of holdouts. particularly with first-round draft picks and surprised to open up the paper a couple weeks ago and saw cam newton already signed and signed for $50 million and the first pick of the draft. >> about $35 million. >> so is there now a salary cap for rookies? >> no. what we did in our system was look at the top 10-12 picks in the draft every year and looked at what that intact was over the overall rookie pool. obviously the league want to have a strict rookie scale.
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because a year after the guy plays, that becomes a veteran wage scale not a rookie scale. so we ended up freezing the rookie pool for 2011 at virtually the same amount that it was in 2009. so if we don't have a cap system, we have a pool of money that's available. then the other issue became fundamental principles. those other guys, there's no other way of looking at it. they took the largest de cease in the overall rookie pool system, but what we were able to do is push money down and remember we have two rounds. so we were able to raise the minimum salaries of all those people below. i mean, when people watch the draft, and everybody is like, well, you come into the national football league and you make a bazillion dollars.
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most of the young men have an annual salary less than $600,000 or $700,000. everybody remembers the top 10 picks. everybody forgets everybody after that. so we decrease money there and push it down. but then we also pushed a lot of that money into proven veterans in the locker room. because you do have a number of veterans who have proven themselves in years two, three, four, and -- the idea was to push it down in general. >> hrt. -- all right. that makes a lot of sense. all right, ladies and gentlemen, off few questions i'm going to ask billy and dee. if you have questions, you can start approaching the mike if you have questions to ask.
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billy, do you think we're going to have an nba season? >> if i had to bet on it at this moment, i would probably say -- no. the simple reason is because i just haven't seen any movement or occasion at all. i've been dealing with -- this is the first time it's been a puzzle. i haven't been able to read him. i think he can read me in a sense that we're both dug in. but i think the circumstances change among this constituency of owners. and he is a very impressive commissioner. and in the past, he's pretty much had carte blanche. but i think in the last six or seven years, there's a new
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group of owners that have come in and pay premiums for their -- we're $800 million apart per year, not for the total deal, per year. the owner started out in august of 2009 demanding that we give them back a billion a year then it came down. in two years, i guess 1 1/2 months ago we made a proposal we would give them back $100 million a year and do a five-year deal so it was $550 million over five years. and they said there was no way that they needed $900 million, and unless we were willing to give them $900 million we were
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just not negotiating. we said we're prepared to talk about other things, because we don't really think you need the changes -- we don't think you need to turn the system on its head. we can make the adjustments you need and help those teams you contend were struggling through revenue sharing. so revenue sharing has been raised in the meetings, but always goes to a de tour. so when you say final analysis. the only way there will be a season is if something -- i don't want the say catastrophic. but something has to happen that we can use as leverage, you know, to save face. i mean, save face in the sense that i can't move to hip, and he done staked out a position that's so far away that what happens in our proposal, we have a guaranteed 57% up until
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this last deal. and when we agreed to give back the $100 million a year, that takes our percentage down to 54%. that was a leap. but they wanted me to go down to 47%. and that's just ludicrous. it just can't be. so it's got to be some other way we can resolve this thing, because otherwise if they continue to be the way they are, something has to happen in order to convince those group of owners that prevent them from -- prevent him from being reasonable. >> what if kobe bryant, kevin durant, derrick rose, lebron james, dwyane wade, for example sign with a european team? while the lockout goes on? >> well, they have extended contracts that extend beyond
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the current sb. -- season. if at any given moment there's a resolution, they have to have an "out" in their contract and be able to come back and honor their nba contract. but i can assure you any marquee player that signs up overseas is opening eyes. i know it's got to be causing stress. you take a guy like kobe. two weeks ago they were able to get $3 million and they went to the philippines and put on exhibition games. it was kobe, derrick rose, kevin durant, derek fisher and a few others. and that was something they got on a lark in the sense that some rich guy in the philippines wanted them to come. so he reaches out to derek and they put a plan together and today agree to pay them. so when these guys go out and
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enter these deals on their own, they start to understand clearly about their business and what their personal worth is on the international and global markets. not just in the u.s. but on a global level. because i don't think there's any athletes known more around the world. i do not encourage them to go, but we will not stand in their way if they would like to. >> at this point, we will open it up to the audience. does anyone have questions? i have one caveat to the audience. particularly, as this pertains to billy hunter, a lot of us are lawyers. if someone asks us what trial strategy is or anything, i would just say that you may want to avoid asking about negotiations
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with the owners. >> i will not ask a question like that. i am a retired judge from cleveland, ohio, harvard class of 1970. we had a sports seminar on monday. during that time, there were a lot of questions or comments about the difficulty of african- americans to become agents for the professional players. i just wondered from mr. smith and mr. hunter few had any suggestions for those persons may want to go into that area. >> let me first to acknowledge that we were at harvard law school together. [applause]
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what makes this so unique is that she was the valedictorian of our class. [applause] when we had it daisy to stand with us, we felt like we accomplished something. becoming an agent is not difficult to waldo. you get an application and, fill it out, and for nfl free agents come you have to take a test. we do a background check. a college degree, etc., and you can become an agent. what most people are alluding to, they want to know how to become a successful agent. i cannot tell you how to go out and get the players, because that is the key. the business, it is a high-
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volume investment because most of the major agents, they have runners and identify these kids in their teens and a lot of these people cultivate these relationships. today, particularly in the black community with the the economic stress that we are suffering, if you are a parent with a kit that has any kind of talent and people come around and begin to tell you what they can do for you and they offer you $20,000, $30,000, then you might be willing to take it. it is not lawful, but we know that it happens. that is what you're competing with. if you know the kids and have a relationship with him, her, her parents, cultivate a relationship and try to stay in
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touch with of that kid because maybe when they make it, they will look back and taking with them. >> i think -- ok. >> howard university class of 1980. when they talk about losing money, they are always talking about revenue side, not equity side. gerry joined -- jerry jones and the cowboys. what'd he get? in 20 years he made $600 million. >> the average team increased in value 500% in the last 15 years. >> and players get none of the increase in equity, where if you
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are a ceo -- >> it depends how you think about it. if the only reason that eight teams increase in value primarily is the driver of a tv contract which drives the overall revenue, then use the revenue in our sport go from $4 billion to nearly $10 billion in as many years. do the players -- benefit of the television contracts? yes. to the contract bomb but the buying price -- bump up the buying price? yes. the more nuanced question is when a team's cells, the declared a portion of that selling price? no. >> at these individuals that our producers, we are looking at them and they are the ones who
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produce all of the revenue, all right? the top stockbrokers at goldman sachs make more than the chairman. they get stock options and what have you. basketball players cannot on basketball teams. football players cannot own football teams. these football and basketball players are precluded from the equity side. this is not to knock you guys, but whenever you are on tv, we always hear about them losing money, but you never put a value on the team and it never goes down. why is it that it is not brought up? why does the franchise player, if you want to preclude them from moving, and why can he not get a piece of the franchise?
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>> nothing would make me happier. nothing would make billy happier. i think executive directors should get a piece. [laughter] look. you are preaching to the choir. we are in church. there is not a time when billy would not want that for his players and i would not want for my players. it becomes the holy grail, i think, on where that line in the sand is between owners and players. i feel you. nothing would make me happier. at a time when we were in battle, one of the proposals we had was, ok, if you wanted money back, fine. just give us a share of the national football league. that did not go anywhere. [laughter] frankly, i thought it was brilliant. it did not go anywhere.
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that is because -- for any number of reasons. look. i believe you and think that one of the more creative model going forward in sports could be something like that. >> i think we need to advance to the point where these individuals, but one day when they start getting equity in what they're building, no one goes to see jones catch a football. no one cares who the owner is. we care about the players and that is what we look at. it may be because we are black. i think we need to move to the point where we open the public's eyes, not only to the equity side and the income, but also to the equity. if you are the ceo of ibm, you
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get a salary and stock. 10 years from now when used sell your stock, it is capital gains so you do not even pay the income tax, so you get a break there also. when they say that, a lot of people realize that it should be brought to the public, so they realize that the owners are making out like bandits and robbing the players. would these players have once they're finished? thank you. -- what do these players have? [applause] i appreciate the brothers question, but agreed to just ask the question and move on. >> good afternoon. [no audio] >> can you speak up? >> i am an attorney in new york. the two questions, but they're
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both short. with revenue sharing being such a critical component of negotiations and a source of income and benefits to the players, how do you navigate through the process of making sure that, obviously, you're being the best advocate and there are not terms adverse to the players being negotiated with the tv contract if you are not at the table? the second question is regarding retired players. the issue has come up, in the nfl especially common concerns about their interest being protected. >> let me answer the second one first. one facet of the deal was that the players in the nfl created a $1 billion a benefit to the former players out of this 10- year deal.
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that was an important and significant issue for me when i took the job, because i believe we stand on the shoulders of others. we were able to get the owners, for the first time in history -- think about it. this is the first time in history and that teams have contributed to the pensions of former players. [applause] to your other question, that is what our job is. we serve the owners over the tv contracts they negotiate in the past because we believe they were structured in a way that hurt the players. in this deal, we actually increased the language on revenue maximization and compliance so that the lawyers who are sitting here and the lawyers working for us have more tools to make sure when this
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contract negotiated, there negotiated in a way so the owners put on two house, represent the interests of the players and owners. >> one more caveat, and thank you for the question. could everyone speak up? it is hard to hear your from here. >> i am an attorney in texas. we have seen strong leadership from groups of players coming to speak out, and we have heard the occasional buzz from players or not involved in leadership but who have their own opinion. long-term, drawn-out negotiations, what role do you think that plays in the cohesiveness of the team and the players? does that issue actually come up in the negotiations, the longer this draws out come the more frustration, and we know how this is playing out, especially if you're looking forward to
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having a season? >> player solidarity in the confusion is the most important factor. -- players' solidarity and cohesion is the most important factor in this. every time i met with a group of players come out but i named every last one of them. everyone of them that across to their lines to let them suffer and crossover to join owners' side, you knew how i felt about it. i did not have any problem calling them out by name because they heard their fellow players. one year ago, we started this season in minnesota on that thursday night with drew brees and the saints walking the midfield and holding up one finger to represent the
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solidarity between each other. that is how we start, that is how we finish. i do not care how good we are in the negotiation room, but your opponent is always sitting there thinking that you're players will not stand together. until they become convinced that will not happen, that is when things change. >> in 1998 when we went through the lockout, but it started two years before going around meeting the players and we knew the lockout was coming. just as i predicted, it did occur. we were in the same agreement where we held it together for seven months and at the end, which struck a deal with the nba when we convinced them they would be forced to cancel the season. this time around, we spent the same amount of time and have
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better prepared our players. i am convinced that if our players are locked out for the year that they not can withstand the lockout. i think the owners know that and they are prepared. we have to be prepared to hang it means shutting it down for one year. one problem you run into is the length of a career of a professional athlete. it is very short. the average football career is at 3-4 years. if a guy misses one year, it is significant. if he will earn a $5 million this year and next time you do not want to lose that $5 million, particularly at the end of the career, and that issue came up at 1998 when patrick ewing was the president of the union and he announced he was prepared to blow the entire salary for that year.
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because of the position that patrick took, and the respect other players had for him, we could hold everybody together. he was prepared to sacrifice $20 million. some people say that he had already made $100 million, but $20 million is no biggie. i can assure your, $20 million is a big deal. [laughter] when i look at a guy like gary fisher, but he is getting to the end of his career and has two years left on his current contract, and whether he will get a contract beyond that is yet to be seen, but he has been pretty strident and he has dug in the same way patrick did. what it all comes down to as we can have all the negotiations in the world, but it comes down to
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power versus power. as long as the players are prepared to stand, that ultimately we will get where many to go. >> good afternoon. item from west palm beach, fla., and mark question is for mr. smith. i read you got the players before the lockout started to buy into an insurance policy that would cover them, for lack of a better word, if the lockout went beyond what was originally anticipated. can you talk about what impact that had on the negotiations? >> no. [laughter] i will claim privilege on that one. >> why my question? >> we will talk later. i am an attorney in boston. i will not ask you about performance enhancing testing,
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about n.c.a.a. and the league. in my community, players and celebrities are leaders in philanthropic efforts that benefit our communities. i was wondering he could give us insight into their thinking and the thinking of their advisers in setting up their own individual charitable foundations for every kind of issue that has somehow an impact in their lives rather than often just partnering up with welle existing charities that -- worthwhile existing charities. i have seen that these are utilize for marketing purposes and do not comply with the law, but players like ray allen with diabetes affecting his family, he partnered with a well-known, well-established organization and is being effective. a majority of the players are advised to the contrary.
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>> look at guys like larry fitzgerald. from the last time we took a look at it, more of our players said up their own foundations than partnered, and that is what we encourage. i want our men to be businessmen outside of the business of football. that also means that when you have your own sense of worth, value, more assets, go out and try to do something that is good on the basis of your own value and asset. we spend a lot of time in our office advising them on how to set up their own charities. there is nothing wrong with it, obviously may go -- obviously, with partnering with well- established sureties, but guys building the villages in his
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homeland? i did it. -- i dig it. he can step out in the new york community and get others involved. >> some are very effective, and some, it seems that they're not getting good advice. >> this is the range. i answered the question about the woman becoming the agent. the real question is, how do you become a good one? i have been very aggressive about our agents. i am sure if any of you know them, they have whispered to you what they think about me at times. it seems to me they have an obligation in the same way that we, as lawyers, have a myopic fiduciary relationship to the person we are representing.
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it comes down to how good of a representative you want to be. it seems to me that if they are doing their job, there are all sorts of things they can do in their communities to make it better. the real focus needs to not only be how to get in, but what will be the value added once they do? >> i cannot think of any bigger group of philanthropic professional athletes that exist than in the nba. 90% of our players have foundations. usually it has been their agents or money managers, or whatever. the misused the foundations because they thought it was a way to employ their families. then we have to remove them of the notion that they can do it that way. the what we have as darkly done as a union is, from time to time, we give the players a
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certain sum of money to buy the rights. i took a group of players over there and we fed 120,000 kids per day for over one year. you never read about that or had any idea it happened. when katrina happened, we read the first ones on the ground. not fema or nba. we sent tractor-trailers' of food, clothing, and other items to new orleans and baton rouge. in the case of the world trade center. we gave $2.50 million to the victims because we want our players to be more involved, more charitable, and we want them to feel a sense of community. we have a litany of things like
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that that have occurred. more recently, last summer, ron artest was one of the players who went to kenta with me -- kenya with me. there was a kid there needed a heart operation and he paid for it. we do not publicize that kind of thing. they do not go around announcing in. part of the problem also is that the need is so great that you are free to crack the door. next thing you know, every time we do something, i get inundated with requests from people around the country who want us to make a contribution. we are not a charity that way in them we are there to fund other organizations. we have a limited pool of revenue that from time to time we are able to access so we have to be smart about how to use it. >> we just need them to all be
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as helpful as possible in our communities. >> good afternoon. i am a lawyer from chicago. i am wondering if either of you have read the book "the $40 million a slave?" it's about the evolution of a bat --the black athelete. how can you become an owner strategically? what is the process like? what does it mean? i have noticed a few african- americans have tried to get into owning teams with limited success and i would like to hear ready think about that, as well. >> i can reference michael jordan and bob johnson. when bob johnson decided to bid on the charlotte bobcat's that
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it cost him like $300 million which is part of the dilemma. he not only paid $300 million for the franchise, but then you need capital to run it. consequently, you do not just by in and it is off and running. how many people in our community can step up with those kinds of numbers? you'd have to put together a group. if you have a group of people that you think prepared to buy an nba franchise, you give me a call. [laughter] give me a call, and i will see to it that you get the kind of introduction that you need. >> would you say that is important for a group of lawyers are business people to get together and have those conversations. >> definitely. that is the problem. we need to elevate our game and be thinking at that level as opposed to the problem, like
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most of us. i am fortunate and blessed to be sitting here, but when i go back and talk to my colleagues, a lot of them are struggling because they rely upon the black community for their business. we are the bottom, the most distressed group in the country. they need all kinds of legal services but they do not have the wherewithal to pay for them. i clearly think we need to have these discussions. we have enough ballplayers in the nba that can afford to buy a team, but as one gentleman indicated, they are barred from doing it. they do not allow players to invest in franchises, so maybe we need to change the thinking on that one. i said to the nba honors that i am dealing with it that if they
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get a deal that would guarantee them $20-$30 million per team profit, then the reality and the value of the franchise will go through the roof coupled with the fact that even if you have guaranteed income coming in. it is something we should all be in looking at. >> hello. good afternoon. thank you for joining us this afternoon. as a recent law school graduate, it is very inspirational. my question is about civic engagement. you often see teachers unions, police unions affecting the political process and advocating and donating to campaigns. is there any room for the nfl or nba to have an association to affect the political process. can they make a political action committee and can we see them
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advocate on capitol hill? >> i may know a secret coming out of the box, but we spend a lot of time on capitol hill and in statehouses over the country talking about the economic impact of the lockout. why? everybody focuses on the limited pool of athletes who will be affected, but down the street at fedex, they have nearly 8000 workers at that stadium alone that would lose their jobs if there were no games. countrywide, aboard the 550,000 people who would be impacted by the lack of games just in the stadium along. forget the bars, restaurants, collateral services. i think one of the things that came out of it was our young men got a different perspective of
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life outside of the bubble of football. the waiting you build on that going forward and the way that we will build on and going forward is now that we do have hopefully a labor peace for a while to take that same spirit of understanding that you can impact the ordinary lives of everyday people in a move in another direction. i think you have to do that. it is the only way to take advantage of the gifts god has given you. >> when you look around and you talk about role models, professional athletes and entertainers in our community or the individuals with the greatest opportunity to impact the young people. we need to become politically active, but the question that someone reference the book "$40 million slave," but the problem is that you get a player with a brief career in the nba and the
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struggles of his life to get there, he now gets there and he is looking at all kinds of marketing opportunities making millions, and the people around him and by that there are things they should or should not do. we have been thinking about creating our own political action committee. we are saying when we need to do is to have our own political action committee to be more involved. he was the one who told me what we needed to do, so we have been working on that. >> thank you very much. >> i & diego. i had a question about your life when you are not negotiating a contract. what do you do every day when you are not negotiating a 10- year contract? [laughter]
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>> sleep. [laughter] you know -- i'm being careful. i have not spoken to my wife and i am afraid of her. i think the challenge is always about whether there is stuff you can put on a mountaintop and climb to get it and whether that is enough to keep you going every day. i have not given a whole lot of thought to what will happen in the next few years. we have begun mapping out where the players need to be of the next 5-10 years, so i will work on that going forward. i have had conversations with the executive committee. they want me to stay. i want to stay, so we will work it out. all of the things you have heard
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people talk about are things for us to work on in the next few years. we supervise our agents in the national football league. how do we do a better job of making them better stewards toward the men that they serve? how do we do a better job of making the game safer for our players? when i got into the job, we treated concussions in a way that no one treats concussions anymore. the concussion issue is still there. what needs to get better. long-term health care for retired players needs to get other. there's plenty to do, after having a vacation, but that is the thought. >> enjoy your vacation. >> i am with wallace partners in washington. my question is about the confessions. for the long-term growth of the league, it may impact the growth
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wonderingard bout i am if this will lessen length of a player's career is going forward. what are your thoughts on that? >> coming into the job, i was stunned about where we were in east -- in the state about how concussions were managed and treated. the trickle-down effect is how it is treated in college and in use football. we took a very aggressive position on what we thought needed to occur to make the games saver. as medical studies improve, we will have to continue to take a very tough stands. one thing i am going to finalize negotiating is a medical accountability standards that, for the first time, we will put in the collective bargaining agreement. the idea there was we had a
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medical director for 10 years on our side, but his role, his obligations, the league's obligations have never been defined in the collective bargaining agreement. i want to set a position where the document that governs our business also was a document that gives us tools to address our safety. yes, there will be conflicting issues. i got a report about a player in philadelphia that costs under the heat. one thing i will jump on a really quick is what that situation is. in this new deal, we eliminated two-a-day's for the first time in history. [applause] that was a huge deal for our players. that culture of hitting twice a
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day during training camp is gone. we have limited the number of padded practices for the entire season. we have lengthened the terms of the off-season and when i try to create with something called a spring semester. since most of our teams are done in january, the idea was to cushion the off-season to mid april or early may said that those young guys to drop out of school to go play football can now try to avail themselves of a semester in college. [applause] so, there is stuff to do. >> i am a third year law student. >> i could go back and do 30- year again. >> given the fact you are representatives and advocates for the rights of players, and
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we discuss your ideas on revenue sharing and profit sharing, what are your thoughts on some kind of revenue-sharing structure at the collegiate level given the fact that these players are making millions of dollars and receiving relatively nothing in return? >> we have had the discussion many times in our office, and as relates to our negotiations, one of the things that the n.c.a.a. is pushing for in conjunction with the commissioner is that they want to extend the age limit. they want to make sure the players stay in college before they are allowed to come in the nba. in 2005 when we pretty much worked out our agreement with the exception of the pending issue about age, in order to bring closure, i agreed to give up one year. a kid could not directly come
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from high school, but had to spend at least one year in a junior college or whatever. from my perspective, your right. there is a lot of money being generated for these colleges by these kids. and in our case, basketball, it is something like 17% of the kids to go to college at a division i school for basketball scholarships ever graduate. that is something we have to visit. going forward, there should be something put in place. let's call it the way it is. the n.c.a.a. is negotiating a deal to pay $9 billion, so why should the players not participate? why should some college coach be paid $2 or $3 million per year and he determines what shoes you wear because he has a contract with nike.
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you're doing all this stuff to promote and enhance his quality of life, and i think the players should be entitled. maybe we should start with the hbc's. [applause] >> we are at the end of the program. i will take one more question. >> my name is robert lewis and i am a bankruptcy attorney. for the first time in my lifetime, a major league in baseball team filed a bankruptcy. how will that affect the players union's on both sides, football and basketball, if an nba team or an nfl team filed a bankruptcy? >> we had the case of the new orleans hornets and the owner
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was having problems there. the league stepped in and purchased the team. in negotiations from time to time, the issue of contraction has come up, and we have said that if you think you need to contract, so be it. it impacts the number of jobs, but someone can say we would reduce the number of teams and increase the quality of play. i do not see any nba team is currently on the roster on the road to bankruptcy. in the case of the sacramento kings, but they were having difficulty, but keep in mind eight or nine years ago they were making money simply because of the quality of players they had. it goes in cycles. if you have a product to put on the floor, people will come and see it.
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if the product gets it diminished because of incompetent management, then stay away. i do not see anything happening with regards to bankruptcy, at least coming up. i'm not concerned. we have people lining up, and that is part of the problem. they say they are losing money, and i cannot why the number people keep going up to buy if the league is in dire straits, why would someone come and pay $450 million to buy the golden state warriors? i can name several others. i think our league is in pretty good shape. >> by chance of it did happen -- >> if that happens, then those contracts would have to be liquidated somehow cause of the league would have to step up and pay them, or what have you.
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i think the obligation falls on the league. >> is that something there is in the collective bargaining agreement? >> no. from a macro economic standpoint, the viability of different clubs, we spent a tremendous amount of time on the macroeconomics of the national football league. on the fiscal economics of the team transitions, whether teams are maximizing revenue, whether there are some teams, that i shall remain nameless, but they have done a tremendous job driving revenue and driving revenue. some teams do not. i think that now is the time for all players in every union to become vitally involved in the economics of their game. what happens on the owners' side at times is that there could be
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this mentality that what we do on our side, forget what happens over here, and let's just talk about the players' money. we are partnered in this business. if you do not take a very aggressive approach on the system economics or the macroeconomics of the business, you are not serving your players well. >> thank you. on behalf of the national bar association, i want to thank everyone in the audience for attending this program, but i want to particularly thank you. billy, i know for a fact, monday i was in my room, turning on my tv, and i see you on espn. so i did not know if you're going to make it. it took a lot for them to be here on this panel, and we really appreciate you guys. you are great role models for us as attorneys, as african-
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americans, and we are very proud of the work that you do. >> thank you very much. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2011] >> as a point of personal privilege, i, the president, would like to think the panelists -- thank the panelists for bringing this relevant and timely discussion to the national bar association. we commend you for your continued support and i want the record to reflect that they approached me to talk about this. they took time to give back and be here with us today, so i think we should give them a standing ovation. [applause]
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somalia. tensions in sudan, south sudan, and a look at u.s. foreign aid. that is at 10:00 a.m. at 6:00 p.m. eastern here on c-span. monday on c-span3, and discussion about guns on college campuses. hear from state and local politicians as well as professors and students about concealed handguns. this is hosted by the second amendment foundation and you can watch it live at 12:00 p.m. eastern on c-span3. the nominees to the ambassador to syria, turkey, and the czech republic testified to the senate foreign relations committee. all of these work recess appointments by president obama and remember confirmed by the senate. recess appointments served in their post it for a limited amount of time without confirmation. this is a little over two hours.
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>> this hearing will come to murder. good afternoon, everyone. today, we have two panels of nominees, but we are doing this differently today. we are actually going to hear from all three nominees in the first panel and then we will do questioning of mr. ford in the second panel. we are fortunate to have senator lugar here with us and we want to accommodate his schedule as well as senator lieberman. in the first panel, we consider the nomination appeared of norman eisen to the czech republic, and francis ricciardone to turkey. the second panel be the
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nomination of robert for to be ambassador to syria. senator bob casey will be here. he chairs the subcommittee on near eastern affairs and will chair ambassador ford's questioning in the second panel. all of the posts being considered today are critical in safeguarding american interests around the globe. i look forward to discussing the challenges and opportunities the united states faces in these three important countries. as i said, we are doing this a little differently today. one of the differences is that both of our nominees on the first panel were nominated last year to serve in these same positions. i think that i chaired one of those nomination hearings last year. both nominations were thoroughly
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considered and approved by the senate foreign relations committee. both were held up on the senate floor and were not ultimately confirmed by the full senate. seeing the importance of having an ambassador in these critical countries, the president chose to recess a point both ambassadors ricciardone and eisen. as a result, these two men have been serving over the last seven months. as many of you know, a recess appointment by the president last for only one calendar year. these two men have been renominated and the committee will reconsider their nomination. as the subcommittee chair on european affairs, i was supportive of the nominations last year, and i intend to support denominations' once again. since both men have already been serving in these roles, we will have an excellent chance to hear from them directly about the challenges that have already seen in their plans for the future.
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welcome back to the committee, gentlemen. thank you both for being willing to go through the nomination process again and to continue to take on these difficult responsibilities at a difficult time for our country. first today, we will consider the u.s. relationship with the czech republic. as an important ally in central europe, the czech republic has demonstrated exceptional leadership in europe, particularly with respect to engaging the eastern neighborhood in pressing for further european integration. the czech republic has made some impressive contributions to international peacekeeping efforts in afghanistan, iraq, and because of low. in addition, the unique experience with a democrat -- a democratic transition should provide lessons for the u.s. as we navigate the ongoing transitions in the middle east and north africa. today, we also considered u.s. relationship with turkey. it remains a critical nato ally
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with a predominantly muslim population and a volatile and geopolitically strategic position in the world. recent events in the middle east and north africa has increased turkey's importance. there's little doubt turkey will continue to play an influential role in the national security threats facing the united states. i remain a proponent of a strong bilateral relationship with turkey and its continued integration into europe, however it is also important to recognize where we have differences. turkish troops continue to occupy the island of cyprus and the turkish government needs to do more to support a just solution. in addition, the vote against the fourth round of sanctions against iran in the u.n. security council raises concerns that the u.s. and turkey did not share the same threat assessment with regards to their nuclear
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weapons program. i just want to briefly introduce our two nominees and i know that senator lieberman is here to provide an introduction of four ambassador eisen. as i mentioned previously, senator bob casey will be introducing a our second it ambassador nominee, ambassador ford, when he gets here. i want to welcome ambassador ricciardone, a longtime distinguished officer. the former deputy ambassador to afghanistan and has served previously in turkey and around the middle east. he speaks a number of languages including turkish and arabic. most importantly from my perspective, he is a graduate of dartmouth in new hampshire. again, congratulations to all of you on your nominations, and i appreciate your willingness to come before the committee. as i said, we are fortunate to
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have senator dick lugar here with us. i know that he would like to make a statement. >> we will have an opportunity to review the events in these countries as we welcome ambassador ricciardone, embassador -- ambassador eisin, and ford. in particular, i hope that ambassador ricciardone's perspective on the effect that this will have on political stability will be a part of our discussion. moreover, i am interested to hear more about the dynamics relating to the upheaval in
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syria. the expanding turkish participation in diplomacy and its ongoing role in the creation of a southern energy corridor. the czech republic remains a very important ally of ours in central europe. i would be interested to hear about ramifications in the announcement that they will not participate in the missile defense program. energy diversification in the czech republic remains fundamental to the united states and european efforts to improve energy security for the region. finally, an important opportunity for the committee to review the events in syria. the syrian regime appears committed to the use of violence to suppress the will of its people. in the last few months, more than 1700 people have been killed, more than 10,000 imprisoned. the toll on syrian civilians,
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including children, gets worse day-by-day. despite the regime's efforts to cut off the internet, cell phones, and other forms of communications, the images continue to get out and the world has borne witness to these brutalities. the causes of peace, stability, and economic advancement would benefit from a swift transition to new leadership and a more representative government for all of the syrian people. the alternative is a cycle of ever widening violence and the prospect of sectarian conflict. the regime is intent in playing up sectarian strife come out and have sought the aid of tehran. we must work with our allies to present a clear and unequivocal message that the violence must stop and that a credible political transition of reform
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must begin immediately. i note the government of turkey has taken a strong stance given the potential for increasing refugee flow. the business elite must understand the current path will only deepen their isolation and intensify consequences for the regime and their leaders. i look for to our discussion with the nominees on these issues and others they will bring forward from their vast experience in american diplomacy. thank you. >> thank you, senator lugar. senator lieberman, we are delighted to have you here to introduce mr. eisen. >> thank you. it is a pleasure to be here. i should express my appreciation to you on behalf of the nominee is that you did not join the herd leaving washington after the vote at noon. thank you for convening this hearing. i am here to introduce ambassador eisen.
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i would be remiss if i did not say i have gotten the chance to know them, and these are two extraordinary public servants, very courageous and informed representatives in which the countries they have served and are serving. i am honored to be here to introduce norm eisen. this is not a political duty but a personal pleasure. ambassador eisen, his wife, and daughter, are personal friends of mine. as you mentioned, the reason i was asked is because at norman is one of those faceless peopel that lives in d.c. ambassador eisen was nominated and was given a recess appointment. prior to his nomination, he had
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a distinguished career as a lawyer in washington and was special counsel for ethics and governmental reform. i regret it was necessary for the president to make a recess appointments in this case, but perhaps there is a silver lining in that we can now judge ambassador eisen based on his performance over the last six months. from all that i have heard, it has been exemplary. since arriving in progress, there has been a world when of .ctivity "in your short time in the country come you have already made a significant impact and you have proven to have been among the most effective ambassadors to hold this post." he has been a tireless advocate for the american national interests in the czech republic weather with regards to imposing
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sanctions or winning contracts for american companies. with your permission, i'd like to insert in the record a list of, essentially, thank you's from companies doing business in the czech republic. for more than two years before embassador eisen arrived in prague, the u.s. had no ambassador there which spurred doubt along our czech allies about our commitment to their country. this is not a situation that our international interests should repeat. i hope we give a full nomination this time. the czech republic has been an extraordinary ally from the war in iraq, afghanistan, to the promotion of democracy worldwide. they are among our best friends and allies in europe and they deserve to have an ambassador from our country that is
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confirmed by the full senate. finally, as you may know, norm eisen has a deep connection to the czech republic. his mother was born there. both she and his father survived the holocaust and it is an act of justice that the ambassador's residence in prague, which was originally built by a jewish family that was forced to flee prague by the nazis who, in turn, to cover the house as their headquarters. 70 years later, it is occupied by norman and his family. a point of personal privilege, he and they observe the sabbath of there. if you needed evidence that there is a god, i offer that to you. the story of the norm eis
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