private capital. 10, in year one, co-ops were prohibited from limiting enrollment on state exchanges and the ffm despite limited capital. 11, many co-ops were forced to pay risk adjustment to existing carriers without consideration of the effect of early renewals or the co-op solvency requirement. 12, recently, congress reneged on the risk corridor. paying less than $.13 on the dollar. americans will pay billions of dollars more in the years ahead because these co-ops are closing. there are 11 co-ops remaining. in my written statement, i make recommendations for measures that should be taken to maximize the chance for long-term survival. i hope we can discuss some of

these options today. thank you, i look forward to your questions. >> let me start was in questions. many factors contributed to the failure of the co-ops. lower than higher expected enrollments, restrictions on investors, risk adjustment formulas, lots of those. let me start off. what are the top reasons the co-op failed in your state? >> thank you for your question. our co-op had challenges from inception, in that as the commissioner mentioned, going into a state without provider networks cause the company to have to lease those. there were a ministry of cost that were new to the startup, that any startup would have. but in 2014, we had disastrously low enrollment. truly come at most, 1000 people signed up for the co-op plan. mostly because the rates were somewhat higher than the leader and the well-established companies in tennessee.

overcoming those challenges became extremely difficult. and is why we saw significant rate increases for 2015 and beyond because of the enrollees across the market intimacy, we had higher-than-expected utilization, i claims costs, and insufficient premiums. >> did they lose money with a lower cost of the premiums? >> yes, every plan on exchange lost. >> nationwide, a bid to get enrollees, they had to underbid. and we found out how many of them realized to make up for the losses by charging more. some survive, some did not. >> we did not have any copy accurately project the claims cost that were going to be coming from these enhanced if it plans that were sold in the state mandated affordable care act. some of our larger established companies could withstand losses and offer plans. but the co-op did not have the resources available. >> thank you.

what would you say are the top reasons that 12 out of 23 failed? internal problems, too. not just external. >> i don't know specifically what happened with the other groups. although the risk corridor was clearly an issue, there were surprising payments and vice versa. >> mr. morrison? mr. morrison: i don't mean to suggest that there were no mistakes made in management and co-ops. but if you look across the marketplace, what you see is that this is a very competitive marketplace. and insurance companies all priced aggressively. everybody lost money. the difference was that the

co-ops were new, they do not have other business and surplus to offset the losses. and their capital was continuously reduced and capped. so sailing in a hurricane is accurate. we were prohibited from building a big boat. >> given that roll up, we heard it was the website. not a lot that was clearly rolled out. it was pushed out, more like it. with the web enrollment, what we found out, would you say it was not ready? more foresight should have gone into setting up for the co-ops were drawn into the hurricane? mr. morrison: to my knowledge, there's never been a situation where 22 new health insurance companies entered the health

insurance market across the country in the same year, two years after they chartered their business. and so that was certainly a challenging situation. but it was much more challenging and indeed fatal for some, because it did not have adequate capital to deal with the risks they were put into. >> mr. donaldson, can you comment on that, too? microphone. mr. donaldson: thank you for the chairman's question. my situation was worse. we were one of the last thoughts to be approved before the termination of the program. as of the time frame from licensing in may to selling in october was so constrained the building our company was quite a challenge. i was initially very encouraged because the group that got approval from cms for co-op loans and from us for licensing was closely associated with our optional health plan back in new orleans.

a maybe 100-year-old hospital and clinic operation, internationally respected. it had been in the health insurance business until the 90's when they sold off the health plan to humana. so with their credibility and their experience and expertise, i was hopeful and optimistic that we would be successful. in hindsight, it was too much into short. of time. plus all of the other problems of and described a. >> another five minutes. >> this is what i was talking about in my opening statement. the aca started in 2010. then these co-ops started a couple years later, he had a couple years to get going. it was not like we were trying to stand up 22 companies all at the same time we were doing the enrollment on the website and all that. this was staggered, is that right, mr. morrison?

yes or no will work. mr. morrison: the awarding of the loans was staggered. that is true. >> so really, part of the problem is that there was no support as it went along. with that be a fair assessment? mr. morrison: inadequate capital -- >> that is kind of what i want to talk about. the co-op was initially conceived as a grant program. within the startup funding ultimately came in the form of loans. is that right? mr. morrison: yes. >> then congress cut the program. mr. morrison: then 22.4 million. >> the fiscal cliff deal, which have against, it essentially blocked further co-ops. even though 40 additional groups had limited application. is that correct? >> very correct.

>> irrespective of that, 23 co-ops got established. and like all of the other insurers in the marketplace took into account the affordable care act risk stabilization program. the health insurance mitigate the risk of ensuring new losses. three rs, but those do not seem to have worked. i want to ask you, the risk adjustment formula have been problematic. as we have been discussing. a lot of the small co-ops are writing checks to large insurance companies under the risk adjustment formula. does that seem fair to you? >> it does not. and that was actually 21 of the 23. >> it does not.

>> i also understand because of congresses rule of budget neutrality, the risk court or program has failed to help the co-op. this was the problem with the colorado co-op. we recently learned it lacks sufficient funds to reimburse. the first quarter program is only reimbursing the co-op claims at 12.6% of what they are owed. is that correct? >> correct. >> would it be fair to say the payments from the first quarter program would have likely made a different in keeping a lot of these co-ops solvent? >> i've read in news accounts from half a dozen or so co-ops that specifically turreted their closure to the government on the risk corridor payments. >> what additional steps do you think we can take to ensure the continued viability of the

co-op? >> the revising the risk adjustment formula. it was tweaked several times over 10 years. and probably most important is to allow us to have the flexibility to go after private capital. >> mr. morrison? >> i made recommendations in my written statement but these ones that peter suggested are important. i want to say about the risk corridor that when you send these boats, is important there be a federal backstop. that's why the risk corridor payments were important.

the first corridor payments was promised repeatedly to the collapse and the co-ops and other actuaries took that into account. >> you say we need a federal backstop. what's the public interest in having that? >> it takes a few years. we didn't know until 2016 what this risk will look like. the federal backstop allows room for aggressive competition. the co-ops come in and provide and add to that competition. everybody lost money. $2.5 billion the wall street journal said to doug days ago on how much all the insurers have lost. >> the co-ops didn't have any way to recuperate. >> the co-ops were pricing competitively. everyone lost money but the

co-ops need of the federal backdrop. >> thank you very much. >> thank you all for being here. it's important to note any business can be successful at it had a federal backstop and somebody who was going to be there and people have grown quite weary of bailouts. i want to talk about the enhanced oversight plan. was the tennessee co-op under an enhanced oversight plan? >> the verse notification we have for the tennessee co-op was on september 29 when we received a letter i have attached. what's problematic is that we were also in discussions with cms to list the enrollment fees for 2016. >> you are getting conflicting information. the enhanced oversight plan for the tennessee co-op included what?

>> there were five pages of issues in the letter that were identified that were areas the co-op needed to focus on to create greater financial stability and a better viability for their plan going forward. >> they were giving you conflicting information. you had this on one hand and this on the other. >> we were under the impression cms felt pressure with the stability of the co-op and week requested to list the moment fees by october 1 so the programming could be available for open enrollment starting november 1. >> let's talk about the solvency. they converted the solvency loans in seven co-ops. so the loans would artificially appear more financially secure.

did cms approach you about converting those loans so the co-op would appear to have more capital? >> cms indicated they were in agreement with that approach and the request came from our co-op itself. >> to recharacterize those lines. did you think it made sense to convert? >> we decided it was not a prudent course of action because you're not adding any capital or revenue to the benefit of the company. they are creating the impression that the debt could be subordinated in the company would appear more financially healthy. >> is a smokescreen type practice. the premium prices were appropriate and consumers were protected?

>> it's difficult to look at premium increases that have been approved in tennessee. as has been mentioned today, we need companies to be able to make good on the claims. we took an interest in making sure premiums were appropriate. >> does the cut a lot have enough money to support consumers and pay its claims through the end of the year? >> we do believe that the claims will be paid through all services rendered through the end of the year. >> let me go back to dr. murphy's question.

you were talking about the enrollment. what was the projected enrollment? >> i would have to research the number but i believe it was probably close to the 12,000-15,000 range for the first year growing among the 20,000 range 2015. >> their projection was 12,000-15,000 people and what they got was about 1000. >> that is correct. >> thank you very much. >> let me just get my questions out here. congress established co-op to do a number of things the private market have not done and specifically created to compete with large for-profit insurance companies and hopefully put

downward pressure on premium prices and serve part of the country with fewer insurance options. remind us of what the landscape looked like prior to the involvement of co-ops. >> in montana, the uninsured rate went up 20%. with the introduction of the co-op, the difference in average premiums between montana and wyoming went from a tin of being 13% lower to being 20% lower. we now have an uninsured rate that is closer to 11% or 12%. many thousands of people are now covered who didn't used to have insurance. many thousands of people are now able to afford insurance. and consumers now have more choices.

>> regarding what the landscape looked like prior to the affordable care act, most states markets for individual health insurance were dominated by one or two carriers that competed on how well they were able to screen and select people. they have little incentive to compete by providing efficient services and their focus was on introducing the risk of covering for him might have a high medical cause. that sounds like a bleak landscape. can insurance companies compete by denying coverage? >> segmenting the market and cherry picking to provide health insurance to healthy people and exclude or price up people with health issues is what was going on and that was happening in montana. i saw it across rural america. >> would you agree? >> i agree but it's not my area of expertise.

clerics is it accurate to say prior to the aca, many rural areas were underserved and what did that mean for montana residents? >> if they were unable to get health insurance, they were unable to get the health care they needed. access to health care has improved. although blue cross blue shield, which is now owned by health care service corporation, one of the blue cross corporate groups, still is the dominant carrier in

the state of montana. their market share is much smaller now and consumers have the choice of the co-op. there's more competition. clerics were there many rural residents being rejected for insurance are only being offered costly policies? >> we found most of the uninsured were people who work full-time for a small business and the greatest area of difficulty in delivering health coverage to people was through small businesses who wanted very much to provide health coverage to their employees. that's why we undertook a program called insure montana. >> based on your experience, have co-ops serve the rural west? has it provided important

competition and access to health care that previously didn't exist? >> co-ops have a great tradition in rural america. take senator conrad when he introduced the idea of a co-app and talked about those people and are part of the country and across the coast that have long used the co-op model for credit, electricity, agriculture, and other kinds of needs where they want to spread risk. >> i'm concerned we may again find ourselves letting adequate competition in rural areas. thank you. >> i am a strong believer in competition as a way to drive down health care costs.

i was a provider before a heart surgeon so i'm a believer in provider competition, including price transparency, quality transparency, and other measures that help consumers know what product they are getting and help drive down cost. i think it's unfortunate that we're in this situation with the co-ops and we to figure out why and what we can do to prevent the others from going under. cms is an enhanced oversight plan to violate troubled co-ops. these plans have been deemed as burdensome. has your co-op been placed under an enhanced oversight plan? >> most of the co-ops have been. >> what kind of requirements do

they put upon you based on that? >> one is enrollment getting to 30,000. we will hit that by the end of december. second is a resolved transition. we expect to come off the corrective action plan. >> d believe these oversight plan can be effective? >> they can be. >> it has certainly been a challenge for co-ops to face not only state regulation but several levels of cns regulation and congressional oversight investigation, which began before the co-ops ever opened their doors. there's no question administrative research has been distracted to comply with multiple levels of regulation that far exceed the regulation of others. >> understood. a personal kind of question. creating more competition. if expanding the traditional

health care private insurance market across the country rather than having essentially state-based, is that a concept that would work to create more competition? >> thank you very much. i would caution why republican

colleagues who have made a strong push toward authorizing companies to sell health insurance on a national basis, which they can do already but subject to the individual states regulation. i would be concerned about a race to the bottom and the least regulation similar to what happened with aig. that concern is truly -- i had a meeting with one of my delegation members this morning and passed on that advice. i do want to point out when -- tennessee is better served than louisiana at this point. their hmos are protected on a safety net. we have tried that in the past but unsuccessfully. the ranking member was talking about a federal backstop. in closing, please support this. it's served all forms of insurance. when i was asked to come to the oval office, he strongly

expressed his continued support for regulation of insurance at the state level. >> i expected. any other conceptual thoughts on that? the whole idea is competition for consumers to have more choice, to know what's the product is they're getting and help consumers drive down the cost. >> i'm a former commissioner and i testified in the senate small business committee about the ahp bill and i opposed it. >> by think we would have more interest in companies selling across state lines if we had uniforms single health benefit

plan design. it's very difficult for a company to sell across state lines and program their system to pay for different benefits. >> what you state laws apply? if you live in california and have a plan from a company in new york, which state law would apply? i appreciate all your comments. i yield back. under the affordable care act, congress limited to foster more competition among insurance providers to benefit consumers. this was one of the primary reasons behind the formation of the co-op and to some extent,

they have achieved their goals. however, they have faced headwinds. i will like to understand how co-ops can continue to meet the original goal of providing the public with more insurance choices and benefits through greater competition. for those who may not closely follow health care economics, why are co-ops and important ingredient in today's insurance market? >> the insurance markets or locking competition to begin with and now we see in the news there is increasing mergers of the largest health insurance companies in the country. there are mergers at the largest hospitals in the country. the need for competition has never been greater than it is today. co-ops can come into the

marketplace to have a fundamentally different motive. its not make as much money as they can. if deliver quality health care at an affordable price. that a guy's corporate decisions in a different way and that competitive influence can be very positive in the marketplace where they need in order to succeed is adequate capital. >> how can they keep premium prices in check? >> as a new competitor, we have a big insurance company that is 75% of the marketplace and stop i want to point out a couple things about the co-op. we have gotten all sorts of great ideas and it's very consumer driven at the co-op. the program was meant to be. we are a nimble boat, if you will. we can do innovative things like our diabetic program where we get rid of all co-pays and deductibles for proven practices to keep diabetics under control.

that sort of the sweet spot health care reform. >> how many americans are enrolled today? >> i am not sure. >> does anyone know? >> 400-something thousand. >> in the march 2015 press release comments and for the second year in a row, average premium rates are lower in states than those without. can you explain how what has actually happened, how have the co-ops affected the premium

prices and plan choices in the states where they are operating? >> is being a new competitor in a market. in maryland, where the first new commercial insurer in 25 years. >>. police cites another announcement that shows co-op states had premiums it percent-9% lower than in non-co-op states. is that accurate? were they able to drive down premium rates in 2014? >> the delta between the co-op space and the non-co-op space in 2014 was about 8%. apparently in 2015, it was more like 13%. the believe co-op played a significant role in that. it is a question that requires

further study because there are other factors. >> and there are other trends right now. the health insurance industry is facing a wave of consolidation such as aetna and anthem are considering mergers. newly expect higher premiums as a result? >> competition drives lower prices. we think that's one of the reasons the co-ops were created and we take that mission seriously. >> thank you. we have work to do this for consumers. >> may i be excused? i have a flight that leaves in 38 minutes. >> good luck getting to the airport.

you are excused. [laughter] >> thank you. and thank the witnesses for coming today. i'm a private sector guy that understands how you are supposed to make money in business and how you capitalize companies and how you fail or succeed based on your pricing and products and what you deliver to your customers and if you make money, you succeed and if you lose money, you don't. we're talking about co-ops and i am from new york where the new york co-op and its failure cost the taxpayers over $250 million. someone asked me would i be surprised we are here today, i predicted this over two days ago. i remember sitting down with insurance executives in early 2013 and asked them how they would be pricing their products

for obamacare. what a sickly came out of those meetings is they were going to underprice their products because of the risk corridors. a third of our subscribers will be young and healthy. i said that's not going to happen. what's going to happen when a dozen? we lose money and the government will make it up. this is set up for failure from day one. when you spoke about it not being capitalize properly, would you agree if the co-ops made money, we wouldn't be having this discussion? you don't need more capital if you make more money. >> i would agree. >> so we are here because

obamacare was set up for failure. it was set up to encourage low premiums to deceive the american public. that's when we got here. everyone knew these projects were underpriced and they would make it up on the backs of the taxpayers. that is why we are here today. the problem is the product underpriced meant you lost money and now the complaint is we cut the money from $2.4 billion. it was based on 60 co-ops. they got every dollar they were supposed to get. had we not cut, they would be 50 co-ops. i have to categorically disregard your comment that had we thrown $6 billion. that was never the intention. the $6 billion was for 50 co-ops. he 23 were not harmed in any way. they fail because the product was underpriced. obamacare was meant to deceive the public. all i can say is now we are a

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

lose a lot of money. it didn't happen. i feel sorry for the american taxpayers during this financial burden who were deceived from day one and it's all coming home to roost and we see it every day with the price increases and policies. not surprisingly are not doing fine here. the project was never priced correctly. >> can you give an answer with

regard to would you have priced it differently if there were not risk corridors. >> play priced conservatively and we're making a profit the last three months. was that a backstop you saw? >> i don't know i would characterize it as a backstop but if the incentive to appropriately price alumina did what any excess profit needed to be paid back. unless the entire market priced appropriately, you're pricing yourself out of the market. >> i think the witnesses. this has been a very constructive hearing and dialogue has been good. there are a lot of different experiences with co-ops and a lot of different reasons they've had problems. my co-op in kentucky did not

have enrollment. the initial was 30,000 enrollees, it peaked at 50,000. it could not sustain itself believe gone from losing $50 million to losing $4 million in 2015 and was on track to make a profit in 2016. not every experience have been right. there are various factors that could affect this. tennessee did not have an administration that supported the affordable care act. as opposed to contact his experience with a supportive administration, alerting the population to the options available to them, that experience was going to be different than tennessee or

louisiana where it seems to me you had an enrollment profit first and foremost. would it be a fair statement all of these factors would affect how the co-ops operate and whether they had a better or worse chance of succeeding? >> certainly. statewide, we had a positive enrollment through the federally facilitated marketplace but we did not expand medicaid. the enrollment of less than 1000 people made it extremely difficult. >> obviously we have different health conditions as well. montana probably has a lot healthier population than kentucky and tennessee. in kentucky, we have serious challenges. one of the things that impresses

me, is that while our co-op is going out of business, we have three new private insurers and now have seven insurers. they are not relying on risk corridors. they have not seen a disastrous situation. our consumers will have competition in activities and we see enhanced capitation in the private market through our exchange. they could have a benefit. would that not be true? >> that's very encouraging and i think the benefits of introducing a co-op into the dynamics of the marketplace can have a lot of ripple effects. i am glad to know about that. >> talked about the question of

offering insurance policies 20% less than a commercial insurance company can. there is no profit margin involved in so you can. would that be correct? >> that is true. the co-ops generally were not outliers on the low end in price. mckenzie did a report in late 2013 about those initial prices and co-ops were toward the bottom within 10% of the lowest 42% of the time but when these companies set their prices and filed them, they don't know what the other companies are doing. the fact they were there to cause the other companies to price more aggressively. >> that are a lot of different reasons they co-op has succeeded or not and i think this is a very useful hearing to analyze that to talk about the factors involved. i would include there was not a fundamental flaw in the

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

third panel, which is a representative from cms and oig.

we will begin our third panel. i want to thank the witnesses for joining us today and before we get going, we want to make sure the witnesses are aware we are holding an investigating hearing and when doing so, we have the practice of taking testimony under own. do you have any objection to testifying under oath? you are entitled to be advised by counsel. do you desire to be advised by counsel during her testimony?

no. in that case, if you would please rise and raise her right hand. i will swear you in. do you swear that the testimony you are about to give is the truth, the whole truth, and nothing but the truth? thank you very much. you are under both and subject to the penalty set forth in title 18 section 1001 and we recognize you to give a five-minute summary of your written testimony beginning with dr. colin, chief of staff for cms. >> good afternoon and thank you for inviting me. we appreciate the opportunity to talk about the co-op program. our priority is to make sure consumers have access to quality affordable coverage. in the year since the passage of aca, we seen an increasing

competition and more choices for consumers. in today's dynamic market, consumers can choose from 50 plans and five issuers. nearly nine out of 10 returning consumers have three or more issuers to choose from, which research shows has typically intensified price competition. the insurance market campus pressures and early stages. co-ops entered with a number of challenges, including building provider networks, no previous claims experience, and competition from more experienced issuers and the uncertainty a company in the early years of a new market. some co-ops succeeded will others encountered more challenges. there have been successful co-ops that provided consumers additional choices. there have also been co-ops that have faced technical operational or financial difficulties. congress made a substantial revision to the initial $6 billion in spending, impacting program operations. it's not surprising some new entrants have struggled to succeed.

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

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

stay covered. like other consumers, co-ops are able to shop for 2015 coverage now. in 2016, nearly eight in 10 returning consumers will be able to buy a plan with premiums that than $100 per month. we continue to encourage consumers already enrolled in the marketplace. since the enactment of aca, cms has worked to increase access to quality affordable coverage while being responsible. the program was designed to give consumers more choice and improve quality in the insurance market and has done so in a number of states. cms will closely work with state department to provide the best outcome for consumers.

we appreciate the committee's interest. >> thank you. >> good afternoon. i am gloria jarmon. thank you for the opportunity to testify today about oig's work. as part of our strategic plan, oig has performed three reviews related to co-ops. my testimony focuses on oig's most recent report in july 2015 that reviewed whether enrollment met co-op projections. understanding co-op space numerous challenges, we conducted this audit to assess the status of the co-op.

we reviewed the status of the 23 co-ops as of december 31, 2015. these financial concerns might limit some co-ops ability to give loans. oig issued four recommendations. these recommendations include one, continuing to place underperforming co-ops on enhanced oversight plans. two, providing criteria to determine what a co-op is no longer viable or sustainable. three, working closely with

state regulators to identify underperforming co-ops. and four, -- i will briefly discuss each of these recommendations in more detail. what respect to enhanced oversight, with the 2011 funding opportunity announcement, cms has the ability to place underperforming co-ops with enhanced oversight plans. this provides authority to cms to conduct reviews of the co-ops operations. with respect to guidance, to ensure cms can appropriately identify co-ops with a high risk of failure, they should establish criteria to assess whether a co-op is viable or sustainable. with respect to state insurance regulators, cms should enhance its oversight by working closely

with state regulators who are the primary entities that oversee co-ops as health insurance issuers. by doing this, cms can obtain insight into the co-op's performance and work with them to address ongoing financial and operational problems early. finally, cms should pursue all available remedies for recovery of funds and pullouts. this would include the option to terminate loan agreements, which would require the co-op to recover some portion of the loan. in closing, we appreciated the subcommittee's interest in this important issue and continue to urge cms to formally address oig's recommendations for

financial solvency. oig is committed to providing continued oversight in this program. our work will assess whether co-ops were in compliance with federal regulation and program requirements and managing federal funds. oig will we assess the co-ops 2015 financial status and identify cms actions and monitoring the co-ops. we anticipate issuing these reports in 2016 and look forward to sharing the results with the committee. this concludes my testimony. i would be happy to answer any questions. >> thank you. i now recognize myself for five minutes. i'm just going to accept you at face value and say cms considers themselves responsible stewards of taxpayer dollars. this begs the question whether that is totally accurate.

there have been comments made that have somehow tried to correlate states that did not increase, expand medicaid to some of these failures on co-ops. i would point out in a new york state, we aggressively expanded medicaid and actively promoted obamacare probably more so than any other state, and the hearing is recognizing the failure of a co-op that was oversubscribed, not under subscribed, and cost the taxpayers up to $250 million. i don't know that some of these other comments would accurately portray the problem. i will go back to the products were underpriced from day one and they will be a price to pay. i worry about new york and the loss of $250 million. it would appear the work is in distress right from the beginning.

i just assume you are aware that there was an additional loan of $91 million after they lost $35 million. could you speak to what that rationale was that the taxpayers now lost another $91 million? >> as he looked at the co-op program over the first few years, you have heard a lot about the early years. we're only in the second year of the program in terms of people facing a number of challenges. we evaluated any request for funds on an individual basis. we looked at their financial health at that time, the projection of where they were going, how they intended to get to a place of good standing. to say we want to be good stewards of taxpayer dollars and

what to be sure if we are going to be investing, we see those dollars. you can only look at the information we have on hand at that time. our independent expert panel who reviewed these felt a further investment in new york was the right decision and we move forward with that investment as we do and we continue oversight. information changed and we made different decisions. >> i would appreciate if you could provide the committee with the analysis that you indicate

did occur, that after losing $35 million the first year, i have to presume the analysis would include the difference in the much higher rates charged in 2015. they lost a lot of money in 2014 based on rates that weren't adequate to cover losses. were the rates substantially increase the next year by 20% or more? >> is important to remember cms shares of partnership the oversight responsibility but the responsibility for ratesetting is done at the state level near the department of insurance. they are responsible for saying are these rates adequate.

>> were the rates increased for 2015? >> don't know off the top of my head, but i do know they asked for and were granted a rate increase for 2015. >> it is a little concerning $91 c.m.s. is making a on the lone -- loan recommendation. if you could share that information back with the committee. we could learn something from that. i appreciate that. it will be my office sending you a later to ask for an even more thorough investigation of what happened in new york state and what we may learn from the failures of the new york state coop. ith that i would recognize the

ranking member. >> thank you mr. chairman. i want to thank our witnesses for coming today, and i want to start with the risk mitigation mechanisms in the law, which we commonly refer to as the three r's. those were designed to promote competition and ensure stability in the insurance marketplace. is that correct? >> that's right. >> and yet some would argue that those programs are what have led to the insolvency of the coops. i don't understand how programs that were designed to help the coops could end up hurting them. let me go into that. the risk adjustment program is designed to transfer funds from lower risk plans to higher, is that correct? >> the risk adjustment program is designed to make sure that companies are taking care of the people who really need the care, those that are sick and making sure they are not cherry

picking the healthy folks, but offering coverage to anyone who walks through the door. >> what that does then is transfers money from lower risk plans where there aren't so many severely sick people, to higher risk plans? >> that is right. >> given that, how is it that up owing money to the big risk companies? >> the risk adjustment program is not based on size. it is agnostic to size. the math formula is focused on the total risk and the health of the population. >> so there was nothing in the not for o target profit or profit? was that the suspension of the program? do you know? >> it was intended to be a risk program for all of the insurers that participated in the marketplace. >> the risk quarter program also ended up not coming

through to the coops as we learned painfully in colorado. some state insurance commissioners made management decisions based on the coop's inability to deal with losses. i want to ask you some questions about that. the 2015 legislation made it so that insurance payments into the risk program are the only source of fund can't to reimburse claims, effectively making the program bug neutral, is that correct? >> it is a mast mat cal formula that decides the row ration rates of that program, but you are correct. >> thank you. c.m.s. of 2015, reiterated to state insurance commissioners that they, quote, anticipate that risk quarters collections will be sufficient to pay for all risk quarter payments. is that correct, dr. colin? >> that is correct.

yet just a few weeks ago, cms revealed that it would only beible to pay 13% of the reimbursement the the coops are owed, is that correct? >> that is correct. >> why is that? >> that formula is based on information that we got from the issuers themselves. that was not information that c. m.s. had prior to the month of september. originally that data came in over the course of the month of july, and it was actually slow enough that we needed them to resubmit it. >> here is the problem. in july you are saying it is going to be sufficient to cover all risk quarter payments. then in october you are saying it is only 13 respect. so irrespective of whether you had the data, you had coops like the one in my state with 83,000 people in it who were relying on that. i guess it was bad information. >> it is important to remember

that the risk quarters are one of three. in the insurance program we actually paid 25% more than we thought we would be able to pay. >> but again, if you have a coop that is on the edge, that didn't solve that problem. i am running out of time. e.u. just want to ask you a couple of questions. do you think that you can do anything to give more certainty to this program without statutory changes? yes or no. >> can we give more certainty to the program? >> can you make changes to give more certainty to the coops so they can stay in base without statutory changes. if you can supplement are responses by giving us the ideas, do you believe there are statutory changes that congress could pass to give more certainty? >> i think there are more certainties, yes. >> and that would be helpful if you would supplement that, too.

thank you. >> thank the ranking member for her comments. we will turn to the next for five minutes. >> thank you. who ultimately made the decision to give out $91 million to new york, $66 million to mintmen health, $65 to kentucky health coop? i can go on. there are a few more but three of the six i have listed here failed. i want to know the person who made the decision to give them the money? >> we had a rigorous process -- >> here is the thing. you have already described your process. i understand you have outside people to look at all the data. what i want to know is stwob put their signature on the loan from c.m.s. and said we are giving them this money. who did that? >> i don't know. >> was it you? >> it wasn't me. >> i didn't expect it to be. >> i can let you know. >> i am sure up every intention

of doing that, but i can tell you as a member of congress with experience asking these questions, eitel never find the answer to that because no one is going to take that responsibility, and i understand that. do you know if it was a political point ee or staff? >> i don't know who signed the loan afremonts. i can take more about the process we went through in terms of evaluating the information we had. but we can get you that information. >> i understand. dr. cohen, you testified before ways and means, and they asked en c.m.s. knew the coops would fail, and it says you didn't really give a clear answer. when did c.m.s. know these coops would fail? >> we have been doing oversight f the coop program since its inception, and each circumstance is unique. there were different periods of time when we had information in front of us when we knew folks

were potentially going down the wrong path. we put folks on enhanced oversight and corrective action programs. we took action. we still are in the very early stages of this program, and i think from the discussion today you could see that we have taken our overstithe responsibilities very seriously. we do feel like we are trying to be the best stewards of tax payer dollars possible. >> i am going to run out of time. is there political pressure to keep these coops alive? >> sir, i would say we are trying to do our best job possible to make sure consumers know if they go to the marketplace and want to sign up for their coop, that they are strong and stable and that we have a done a tough job here. if there was another way that we could have arrived here, we would have. but we have been doing some tough work. >> that doesn't answer the question, but i understand that.

why do we need the three r's? like i think mr. collins pointed out, if i was going to start a business out there somewhere, i wouldn't rely on the plea r's to make sure -- i . uldn't rely on the three r's fundamentally, i get it. first of all, answer this question quickly. c.m.s. has always said they intended the risk corridor program to be budget neutral. did c.m.s. always intend for the risk corridor to be budget neutral? >> i don't know. >> so then you can go into why we need the three r's in the first place. i understand you didn't make these decisions, but you are here. >> happy to answer. the programs were based on our experience with the medicare part d program that had similar

programs. as you stand any new market, there are uncertainties. we have been hearing about that uncertainty earlier today. one we wanted to make sure that sick people weren't somehow not covered by the insurance. we want those folks to be covered. the insurance program specifically was to cover the cost of any high-cost enrolle everyone s in the early years. we know there may have been pent-up demand. >> so basically it is to capitalize the business so that they have the capital to get off the ground? >> i think it is to keep premiums stable for consumers. >> along fontenot up, you thought earlier in year that you were going to be able to make the payments, and then you found out in october that you couldn't. what is the reason -- i mean basically what is the reason for that? >> honestly it is the math formula. it is the way the data came in for the shoers.

that is the way the math worked out. we were able to pay 12%, which is the dollars coming in and dollars going out, and that is the way we moved forward with this program. we have said we will take from next year's collections and pay back to this year. it is a three-year temporary program. >> thank you. i yield back. >> thank the gentleman for his questions. we now recognize the next one for five minutes. >> thank you mr. chairman. welcome to the witnesses. i can help the doctor out a the bit on the background of the coops. one of the problems we faced when we were drafting legislation was that in certain states the availability of private insurance was limited to one provider. i think in alabama blue cross blue shielddom naped over 90% of the market. in many states that was the situation. the idea was to create competition and the only way you could do it was to create a new entity.

we chose coops as a non-profit. the idea was that you could that way create the kind of price competition that was meaningful. we knew in kentucky when the coop was established, and i talked with them many times as they were getting started, they d no idea what type of insurance population they were going to have. they had no data. they didn't know how many would enroll. they had no idea who had never had any health care. we figured they would have a rush of care and treat things they had never been able to treat before or whether they were going to get people who had had medical care and lost their insurance. the unpredictability was the rationale for that. i am proud of the experience with a.c.a. in kentucky. we led the country in the reduction of the amount of

unsured. more than 50% of our previously unsured are now covered. in my district alone in louisville, we have reduced the unsured rate by 81%, an astouppeding accomplishment. more importantly than that, i day i am hearing from people who had insurance or ad a family neighbor friend whose life was saved. i can talk about that for a long time. but the focus on this hearing is about coops, and i wanted to set the record straight about what happened with kentucky. unlike most of the coops reviewed by your office, is it your understanding that the kentucky crooptive had far higher en-- cooperative had far higher enrollment than projected? >> we have a chart in our

report for enrollment projections. for kentucky, yes, it was like 183%. it was one of the few that was like that. >> and is it your understanding that a very high percentage of utilized much more care and therefore were more expensive to insure than the general population. >> i don't have that information. >> that is why we established that risk corridor thing. that is what happened to kentucky's coop. the t $50 million in first year. the first half of 2015 it had slowed down to $4 million. unfortunately when the risk corridor program was cut by that 87%, they were unable to continue. dr. cohen, is it your

understanding that had congress not capped the payments that the kentucky corridor would still be open for business? >> no. that was one of the last and certainly -- we have heard was an important factor for them. but you have to know that there were many factors as we have been talking about a all along for the coop program. >> as i mentioned before, that having been said, is it your understanding that even without the coop, kentucky residents will still have more health insurance to choose from in 2016 than they had in prior years? >> yes. that is very exciting. >> again, i could talk for a long time about the success of the affordable care act in kentucky. we are a much healthier state because of it. somebody threw around the igure that the approval rate is around 20%. in kentucky it is well over 50%.

>> a new reduction in the unsured rate to 9% historic. >> thank you. i yield back. >> mr. chairman, can i take a mohamed of personal privilege? >> yes, absolutely. >> you might have noticed this is not one of the new members of congress here. this is a dear friend of mine and chairman upton's, max. he has been helping us with our 21 st. century cures bill. last night max received an award at the every life undation for rare diseases gala reception. the chairman and i received awards, but max is the reason we are doing this. >> thank you. we all welcomes max. [applause] >> i look back to the unanimous vote out of our committee on 1st century cures, max whipped

more than one vote. we may be looking at a future majority whip next to us. i would like to recognize mrs. blackburn for five minutes. >> thank you. thank you to our witnesses and your patience. i am sorey that mr. y amp rmis left. it is important to note in kentucky, when tennessee had ten care, a lot of kentucky residents were coming into the state to try to get health care. the kentucky coop did close, and the kentucky approval rating of the obama care products in the marketplace are quite low, as was evidenced in that state this week. i want to come to you. i had the commissioner here. were you in the room for the first panel? >> i was. >> i am really concerned about what has happened with tax with and the liability

what took place with the loans and then the solvency fwrants. we all should be concerned with that. that is not your money to give away. it is tax payer money, and this is just money down the hole, it appears, because this didn't work. and to go in here and hear from the coops that they now have these loan conversion options, start-up loans, classified as , and i ther than debt don't see how you get there. doesn't that type loan conversion really give a false picture of what is going on in that coop? is that not a falsehood? >> when talking about those conversions, which is what some

of the were coops approached c.m.s. with, we evaluated them on an individual basis. you heard it mentioned that in that case, that was not the right step forward, and we did not go forward with the loan. >> you have congested that. is that not giving and inappropriate picture of the financial stability of that coop? >> that was a request by the coop to c.m.s. we did evaluate whether or not that was the right move forward. >> let me ask you this. in the business world, the private business world, if you did that you would be accused of fraud, if you started recharacterizing your debts as assets and putting them on your balance sheet as an asset. i have never even heard of somebody saying that the rguson would approve did the federal government would approve such a process?

how do you do that? >> it came out in guidance. we are going to be looking at it. >> you are going to review that? >> we are going to look at it in our follow-up. >> we would appreciate getting that. is that not an odd business practice? i have never seen this type of characterization viewed as being a standard operating proer. >> tears unusual, right. >> it does appear unusual, and i think it leads us to wonder if there are other unusual business practices that are surrounding the stability of the coops or the lack of stability of the coops and the entire lack of stability of the affordable care act programs? his is highly unusual. rmont health coop, $33

million in federal loans had been awarded to the vermont health coop. how much of that money is or will be returned to the federal treasury. >> we are working to return funds back to the taxpayers? >> how much? >>off that number. >> would you get that number for us? >> i will try. >> if they don't get the license to stand up the coop, every penny of that should be coming back to the federal treasury. i think you know that. >> we work aggressively to recover the loan funds. >> i can't imagine what the i.r.s. would say to that if the people said we are working to get that money back to you. we want to see that that comes back because i think it is inconceivable the taxpayers are going to be held responsible for this.

when should we expect that money. what is your time line for getting that money back in? >> we are working through that process right now. >> you have all this money out here. mrs. cohen, listen to yourself. you have all this money out here. it is being wasted. half of your coops are insolvent, and you've got this recharacterization process going to take your debts and make them appear to be assets. that is highly unusual, and you want to sit here and say we are looking at it. when are you doing it? are you continuing to meet on it every week? do you have a time line for coming up with this getting this money back? s it a top priority? please read the note that has been passed to you. >> we got all the money back from vermont. i would say the rest of the coops we have been working with

over the last several months are still in business. they continue to provide coverage for consumers until the end of the year, and then we will work through the process at that point to recover funds for the taxpayer. >> so there is something in process. thank you. >> thank you. >> and if you will continue to provide that type information for us, that is what we need to know, the specifics. it does not help us in doing -- it is igence and helpful when she says this happened after our july review, and we are going to come back in and look at this very unusual business practice and have a recommendation for you. that is the kind of thing that is helpful. i am way over my time. i yield back. >> that is ok. we are missing a lot of our

members. we will ask maybe a few more questions to dig down a little built deeper. i would like to set the stage. all of us up here agree we need to be good stewards of taxpayer money. that is the purpose of this hearing. learning from what has happened the last two years, and rosses have occurred. it sounds like a few coops are doing ok. half of them failed. there are lessons to be learned here. the purpose of this hearing and our request for information will be how can we take all of that and hopefully not continue to lose taxpayer money? there is a question for o.i.g. the loan agreements as i understand it between c.m.s. and the coops do have enforcement provisions in them. i just wondered could you explain what some of those provisions might be?

and then a very direct question would be to the burgess, and i will go to dr. cohen -- have we taken any of these enforcement coops? against the >> there is a provision to terminate the agreement, which would require them to return all unused funds. there is another in the funding opportunity, there is the issue of enhanced opportunity plans and corrective opportunity plans. c.m.s. has actually put several of the coops under enhanced plans and corrective action players. those are a part of the loan agreement. >> has c.m.s. terminated any loan agreements? >> i am not aware. >> we have terminated the loan agreements for the 12 coops that we have heard are shutting

down. >> did we get any money back? >> i want to make sure forward we have it right. in vermont we go the vast majority of the money. there was some money used in their start-up funds that was not recovered. on a go forward basis, we are making sure the insureds have coverage to the end of the year. at that time we will do a run-out of claims and the financial organizations and then use all of our ability in terms of the loan agreement to recover the funds. >> that is not the case in the new york. which p in new york, lost $250 million and is shutting down in two weeks time. that doesn't line up with your testimony. >> that is why why we are doing so much of the hard work now before the enrollment period started. we want consumers to be

confident that there would be a mid year closure in any of the coops. in the case of new york, we went to wind them down and terminate the loan agreement in the september time frame. after we decided to wind them down, we found their financial situation was even more dire than we understand it to be when we made the decision to wind them down. that is why we are in this unfortunate situation. the governor's office and the department of shurna has jumped on this problem and is working on it aggressively to make sure consumers have a smooth transition. this is exactly where we are doing all this tough work now, so it doesn't happen in other places. >> i have purchased a lot of distressed companies in my private sector career. a bank that loans money in asset-based letter agreements.

there are daily and weekly reports, and you are under a magnifying glass until that bank who has money at risk is question ken they are going to be able to be paid pack. it sound as though c. m.s. has accepted a lot of information at face value, has not dug deeply into their details. they say two months later, we are totally shocked. the finances are much worse. if somebody was really watching a $250 million day by day and week by week, you would have ound out two months earlier. when you are good stewards of taxpayer money, the taxpayers xpect a level of scrute nissan -- scrutiny.

another question. i know there are going to be outstanding claims as these coops are shutting down. i am assuming there is no money. who is going to pay those claims? >> the coops tip to wind down over the course of the year. >> take new york. is there enough money -- >> new york is a different circumstance. they need to wind down by farm out 0 and then the claims. we have to make sure they go into receivership. by doing that we are able to have better control over their finances and the claims paid out. >> do you feel as though there would be enough money? if there is not, now there is no money. how do they get paid? >> as you said, it is a day by day situation. we are watching closely. >> could there be more taxpayer moneys having to go in as this

is wound down? >> our first primary goal is to protect the contsunamier and the taxpayer. so we are going to do everything possible to make sure we are going to have a smooth transition. that is a partnership between ourselves and the new york state insurance agency. we are working collaboratively. >> we would encourage you to continue to do that. thank you for your testimony. i would like to see if you have any follow-on questions. >> thank you. i want to go back to something said in the ison last panel. we set them up to help people who were sicker, who were poorer, somebody who had less of a chance, the chance of an insurance plan. as we know, the coops don't have a lot of the same benefits at private insurance companies.

they don't have it the capitalization from other products. wouldn't that be a fair statement? >> yes. they face a number of challenges. >> so when you are just . arting up some coops and if it takes us a few years, we can do that. i really think that the comparison of the coops to a private business is a little unfair. that is why i think we set up to help ee r's, to ese coopses goodel established. the hope is they would become self sufficient. >> i think those programs were set up to help the entire market transition. >> all right. i guess i was a little concerned when i heard you say

earlier that you were reviewing all of the state situations on an individual basis. here is why. saw this from my end, being in congress, where my state thinks in july that the money is going to be sufficient for risk quarter payments. then they hear in october that no, that is not going to happen. they have a real degree of uncertainty with how c.m.s. is viewing that state coop, how they are viewing their capitalization and viability. they don't know day-to-day whether they are going to be able to whoever a product in open enrollment november is. the concern a lot of us have is where you don't have some kind of a bright line rule, the uncertainty in those states is

really contributing to instability in the whole insurance market in those states. i assume you understand those points i am making. >> absolutely. you and am hoping that your staff would be willing to continue to meet with our committee staff on both sides of the aisle to figure out how we can help you get in certainty so we don't have situations where states like new york and colorado are suddenly going out of bounds just a few weeks before the open enrollment period. the other providers, including private insurance companies are scrambling to try to figure out how to absorb this, and the 83,000 people in colorado, i don't know how many it was in new york, but this is affecting real lives. i know you realize that, but i think it would be helpful if we can get more clear standards going forward. i yield back. >> it was 155,000 in new york.

as we conclude this hearing, i would ask dr. cohen to get a commitment out of c.m.s. to provide the analysis that resulted in c.m.s. awarding additional funds to new york and others. and if you could commit that c.m.s. will provide us any coop corrective action plans? as you have done this analysis, could you forward those to the committee? >> i will have to look and see. some of those are market sensitive, but we will do our best to get what we can to the committee. >> thank you for that. i would like to enter into the record a "washington journal" article that has a quote that risk corridors were intended to be budget neutral. i would ask unanimous consent to enter this into the record. so moved. as we conclude our hearing, i want to first of all also say that we would ask unanimous

consent that members' written opening statements be introduced into the report, and without objection those documents will be entered into the report. i would like to thank our two witnesses as we all want to work together to again be good stewards of taxpayer money. members have 10 days to submit questions for the record, and i would ask the witnesses to respond promptly to those questions. with that this meeting is adjourned. [captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute]

>> today president obama announced he will not approve the permit needed to build the keystone oil pipeline. it would have carried crude oil to canada's tar sands to the gulf of mexico in texas. during the announcement, he was ined by jacoby jones -- by joe bidenen and secretary of state john kerry. >> good morning, everybody. several years ago the state department began a review process for the promised construction of a pipeline that would carry canadian crude oil through our heartland to ports in the gulf of mexico and out into the world market. this morning second kerry informed me that after extensive public out reach and consultation with other cabinet agencies, the state department has decided that the keystone xl pipeline would not serve the national interests of the

united states. i agree with that decision. this morning i always had the opportunity to speak with prime minister trudeau of canada. while he expressed his disappointment given can's stance on shall issue, we agreed that our agreements on other issues should provide the basis for closer coordination of our countries going forward. in the coming weeks, my team will be engaging with theirs to help deepen that cooperation. now for years the keystone pipeline has occupied what i frankly consider an over inflated role in our political discourse. it became a symbol used by both parties rather than a serious policy matter. all of this obscured the fact that the pipeline would neither

be a silver bullet for the economy, now the express lane climate disaster as illustrated by others. let me comment on some of the reasons why the stapleton rejected this pipeline. first, the pipeline would not make a meaningful long-term contribution to our economy. so if congress is serious about wanting to create jobs, this was not the way to do it. what we should be doing is passing a bipartisan infrastructure plan that in the short term could create more than po times as many jobs per year as the pipeline would and would benefit our economy and workers for decades to come. our businesss created 268,000 new jobs last month. millions of ated

jobs. the unemployment rate fell to 5%. this congress should pass a serious infrastructure plan and keep those jobs coming. that would make a difference. the pipeline would not have made a serious impact on those numbers and on the american people's prospects for the future. second, the pipeline would not lower gas prices for american consumers. in fact, gas prices have been falling steadily. the national average gas price is down about 77 cents over a year ago. it is down a dollar over two years ago. it is down $1.27 over three years ago. today in 41 states drivers can find at least one gas station selling gas for at least than $2 a gallon.

while or politics have been consumed about whether this pipeline would create jobs and lower gas prices, we have gone ahead and lowered gas prices. third, shipping lower grade crude oil would not increase america's energy security. what has is reducing our reliance on dirty fossil fuels from unstable parts of the world. i set a goal to set our oil imports in half by to 20. between producing more oil here at home and using less oil in the economy, we met that goal last year, five years early. in fact, for the first time in two decades, the united states of america now produces more oil than we buy from other countries. the truth is the ups will continue to rely on oil and gas as we transition, as we must

transition, to clean energy economy. that transition will take some time. but it is also going more quickly than many anticipated. think about it. since i took office, we have doubled the distance our cars gas, o on a gallon of tripled our power generated from the wind. multi-employed the power generated from the sun 20 times over. our biggest and most successful businesses are going all in on clean energy. and thanks in part to the investments we have made, there are already parts of america where clean power from the wind or the sun is cheaper than dirtier conventional power. the point is the old rule said e didn't -- couldn't transition to clean energy wows squeezing businesses and consumers. but this is america, and we have come up with new ways and

new technologies to break down the old recalls so that today home grown american energy is booming, energy prices are falling. and over the past decade, even as our economy has continued to grow, microhas cut our total carbon pollution more than any other country on earth. today the united states of america is leading on climate change with our investments in clean energy and energy efficiency. america is leading on climate change with new rules on power plants that will protect our air so that our kids can breathe. america is leading on climate change by working with other big emitters like china to encourage and announce new commitment toss reduce harmful greenhouse gas emissions. in part because of that american leadership, more than 150 makeses, representing nearly 90% of global emissions have put forward plans to cut

emission. america is now a global leader when it comes to taking serious action to fight climate change. and frankly, approving this project would have undercut that leadership. and that is the biggest risk we face, not acting. today we are continuing to lead by example. ultimately if we are going to prevent large parts of this early from becoming not only inhospitable, but uninhabittable during our life times, we have to keep some fossil fuels in the ground rather than burn them and release pollution into the sky. as long as i am president of the united states, america is going to hold themselves to the same high standards to which we hold the rest of the world. three weeks from now i look forward to joining with my fellow world leaders in paris over a framework to protect the planet. f we want to prevent the worst

effects of climate change, the time to act is now. not later, not some day. right here, right now. and i am optimistic about what we can accomplish together. i am optimistic because our country proves every day, one step at a time, that not only we have the power to combat this threat. we can do it while krauting new jobs. while growing the economy, while helping consumers. and most of all, leaving our kids a cleaner safe irplanet at the same time. that is what our own ingenuity and action can do. that is what we can accomplish. america is prepared to show the rest of the world the way forward. thank you very much. [inaudible question]

[captions copyright national cable satellite corp. 2015] [captioning performed by the national captioning institute] >> and some of the reaction from congress to the president's decision today. aren't senator from north dakota tweeted -- then from the democrat bonnie watson had coleman of new jersey -- well show the keystone -- we will show the company stone announcement tonight at 8:00. ery weekend the c-span networks features books. the nation commemorates veterans day. saturday starting 11:00 a.m., american history will be live from the world war one or two

museum in new orleans. we will tour the exhibits and take your calls and tweets. starting this week and every sunday morning at 10:00, our new program road to the white house rewind, taking a look at past presidential campaigns through are keisel footage. his sunday we will feature ronald reagan eanls proceedings announcement. debate over legalized marijuana. then sunday at 6:30 our road to the white house coverage tips with martin omalley, who will speak at a town hall meeting. and saturday afternoon on c-span-2's book it have been, it is the boston book festival, featuring not fiction author presentations, including jessica saturn, and another

about two afghanistan war veterans who used their december palin to help others. and james wood, the connections between fictional writing and life. and sunday night at 11:00, a book discussion with former first lady of massachusetts, and romney. on her back in this together, about her journey with multiple sclerosis. get our complete schedule at c-span.org. >> the unemployment rate fell last month to 5%, the lowest level in seven years. 271,000 jobs were added to the u.s. economy in october according to numbers from the bureau of labor statistics. after the numbers were released this morning, we spoke with the head of the bureau of labor statistics and a reporter from the "washington journal." >> here are the employment numbers for october. in october e is 5%. 271,000.d

this is the commissioner of the bureau of labor statistics. how are these numbers put together and what do they mean? numbers come from two separate surveys. and then a very separate survey of almost 590,000 worksites across the country who voluntarily report to us whether payrolls are so we can keep track of what employment is. often when these numbers bye out they are preceded predictions are ask and ask. do you make this predictions? >> we do not.

anyone is entitled to make predictions and many people do. host: what do these numbers it to you? showese numbers seem to the labor market moving in the right direction. i think this latest number will give us some comfort to some policymakers. so the number of jobs added that was positive? >> we survey economists to find our they think they'll be. certainly no one did number about 200,000. it might say that we got a little bit of bounce back for the retirement. >> when you look at the past the pastthey fit into

year? was it then link the past year? it's deftly a strong number and at the pays more like we were seeing in what we've been seeing so far in 2015. this one is very healthy in a number of ways. it is the highest number that we have so far. so it particularly is strong that we haveows the sectors. we were seeing a lot of job growth in the past. it's very service center. do you cover government employment as well? guest: yes it's in here. .e can turn to a chart

were going to throw a lot of numbers at you. we will put the phone numbers on the screen because we want your participation. you will see a lot of words and a lot of numbers on the screen. we have broken the phone lines down a little bit differently because it's an effective way of getting different voices on. select the phone numbers up. let me read through those. 2202 is very good for all of them. if you are unemployed and want to hear you from you at 202-748-8000 if you've recently been hired 202-748-8001. for those of002 you. looking for work and then

finally all others 202-748-8003. let's go through chart number one employment in total. guest: it's difficult to count employment on farms because they're scattered around and they have so many household the national agricultural statistical service tracks that. we do not track that. host: so this is employment october 2015. 31,000 jobs were added in construction. write the blue bar show you the jobs added in the gray bar next to them shows you the

12 month average prior to that to give you an idea of how typical this is. host: so this is where the gray bar ends in construction but will guest: that's right. we got a real verse host: this is just october. is just october. and this is concentrated in nonresidential, specialty trades. commercial hvac office buildings and things like that. there was a big burst of 31,000 jobs in construction. 78,000 jobs added. guest: this again is a big burst. these are people like architectural and engineering services computing systems. also temporary halt.

all of these have significant increases. host: education and health. healthdriven mostly by which is given us a lot of growth in the past years. the one is more similar to pattern we have been seeing. a growth in both ambulatory health care services in the hospitals. these are in hospitality also growing. guest: very strongly. general merchandise stores at a real bump up. in hospitality this was almost all food services and drinking places. numbers, wasthese your analysis? >> a few different things.

i think the construction number jumps out to me as a very strong positive. it suggests that there might be some more energy or momentum behind it. mining and logging is pretty easy to explain. that incorporates the energy industry. he see gas prices down in oil prices down this lesson videos and in that area. leisure hospitality and retail is a mixed bag. , atne hand it's positive the same time this tend to be lower wage jobs. this people are not -- better we have to got back to reinventing the economy. health care certainly continues to be a real driver employment in this country. i will show you these

charts. civilian unemployment rate. here we are in the recession 2008 at nine workers out. if you look at this chart and looks like really good news. guest: it is. 5.0% isone this month half the unemployment rate that we saw in october 2000 and nine which was the peak right after the end of the session. is the official recession. set by the bureau of economic research. host: if we take that money so.ared to this one 6% or laborlook at civilian participation.

if you notice this participation rate for october 2015 was 62 point 4%. was this number? isst: the participation rate the working age population. they're either working or looking for work. this is a very different pattern unemployment rate. it has a pattern all its own and that's largely because very strongly influenced by demographic trends. trends inong downward the participation rate ever hase we baby boomers started to retire. we see less of an influence from the business cycle and more of an influence from demographics. host: this is the lowest participation rate in the labor septembere guest:

1977. >> i think they'll be part of the story. but i also suggest that it shows the number of folks outside the labor force for different reasons. one might be of their students. some people may retire early. i am also -- if you look at the number one reason folks are not in the labor force, one of the top reasons disability. that may suggest that they are receiving social security disability benefits. it may be an impediment. they may say i will set aside those benefits and go back to the workforce. but for minimum-wage job it may not make sense. when you see that 5% unemployment figure as a reporter for the wall street journal, what do you also see.

>> 5% is a very solid figure. to zero.r never gets i think when you look at things like registration rate. employers at 5%'s with seen wages increasing and worker shortages. that's not happening across all industry. guest: this one is marginally attached. [applause]

-- [laughter] host: people not in the labor force -- the indicator. marginally attached is jargon for a group of people who have looked for work within the past 12 months and say they want to job but have not looked within the past month. these are the people so these are the people who we think would be most likely to be ulled back into the labor market if conditions were better, right. 5%. 's in the guest: no. these are people who are not in percent. >> and they're not employed. guest: right. they're not employed. unemployed, we s want some evidence that they're very serious about looking for a