[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]



    REVIEW OF OBAMACARE CONSUMER OPERATED AND ORIENTED PLANS (CO-OPS)

=======================================================================

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON HEALTH CARE,
                   BENEFITS AND ADMINISTRATIVE RULES

                                 OF THE

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 25, 2016

                               __________

                           Serial No. 114-175

                               __________

Printed for the use of the Committee on Oversight and Government Reform


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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                     JASON CHAFFETZ, Utah, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, Jr., Tennessee       CAROLYN B. MALONEY, New York
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
TIM WALBERG, Michigan                    Columbia
JUSTIN AMASH, Michigan               WM. LACY CLAY, Missouri
PAUL A. GOSAR, Arizona               STEPHEN F. LYNCH, Massachusetts
SCOTT DesJARLAIS, Tennessee          JIM COOPER, Tennessee
TREY GOWDY, South Carolina           GERALD E. CONNOLLY, Virginia
BLAKE FARENTHOLD, Texas              MATT CARTWRIGHT, Pennsylvania
CYNTHIA M. LUMMIS, Wyoming           TAMMY DUCKWORTH, Illinois
THOMAS MASSIE, Kentucky              ROBIN L. KELLY, Illinois
MARK MEADOWS, North Carolina         BRENDA L. LAWRENCE, Michigan
RON DeSANTIS, Florida                TED LIEU, California
MICK MULVANEY, South Carolina        BONNIE WATSON COLEMAN, New Jersey
KEN BUCK, Colorado                   STACEY E. PLASKETT, Virgin Islands
MARK WALKER, North Carolina          MARK DeSAULNIER, California
ROD BLUM, Iowa                       BRENDAN F. BOYLE, Pennsylvania
JODY B. HICE, Georgia                PETER WELCH, Vermont
STEVE RUSSELL, Oklahoma              MICHELLE LUJAN GRISHAM, New Mexico
EARL L. ``BUDDY'' CARTER, Georgia
GLENN GROTHMAN, Wisconsin
WILL HURD, Texas
GARY J. PALMER, Alabama

                   Jennifer Hemingway, Staff Director
 Sean Hayes, Subcommittee on Health Care, Benefits and Administrative 
                          Rules Staff Director
                          William Marx, Clerk
                 David Rapallo, Minority Staff Director
                                
                                
                                ------                                

     Subcommittee on Health Care, Benefits and Administrative Rules

                       JIM JORDAN, Ohio, Chairman
TIM WALBERG, Michigan                MATT CARTWRIGHT, Pennsylvania, 
SCOTT DesJARLAIS, Tennessee              Ranking Minority Member
TREY GOWDY, South Carolina           ELEANOR HOLMES NORTON, District of 
CYNTHIA M. LUMMIS, Wyoming               Columbia
MARK MEADOWS, North Carolina         BONNIE WATSON COLEMAN, New Jersey
RON DeSANTIS, Florida                MARK DeSAULNIER, California
MICK MULVANEY, South Carolina, Vice  BRENDAN F. BOYLE, Pennsylvania
    Chair                            JIM COOPER, Tennessee
MARK WALKER, North Carolina          MICHELLE LUJAN GRISHAM, New Mexico
JODY B, HICE, Georgia                Vacancy
EARL L. ``BUDDY'' CARTER, Georgia
                           
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on February 25, 2016................................     1

                               WITNESSES

Dr. Mandy Cohen, MD, MPH, Chief Operating Officer and Chief of 
  Staff, Centers for Medicare and Medicaid Services, U.S. 
  Department of Health and Human Services
    Oral Statement...............................................     2
    Written Statement............................................     5
Mr. Al Redmer, Jr., Commissioner, Maryland Insurance 
  Administration
    Oral Statement...............................................    14
    Written Statement............................................    16

                                APPENDIX

Letter for the Record from the National Association of Insurance 
  Commissioners, submitted by Mr. Cartwright.....................    46

 
   REVIEW OF OBAMACARE CONSUMER OPERATED AND ORIENTED PLANS (CO-OPS)

                              ----------                              


                      Thursday, February 25, 2016

                  House of Representatives,
        Subcommittee on Health Care, Benefits, and 
                              Administrative Rules,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 2:01 p.m., in 
Room 2154, Rayburn House Office Building, Hon. Mick Mulvaney 
presiding.
    Present: Representatives Jordan, Walberg, DesJarlais, 
Meadows, Mulvaney, Walker, Hice, Carter, Cartwright, and 
DeSaulnier.
    Mr. Mulvaney. [Audio malfunction in hearing room] things a 
little bit differently this morning. First, we are going to 
turn on the microphones.
    There is a little bit of disarray in our schedule, as you 
may have found out in the last couple of minutes. We expect a 
vote on the Floor any minute now. So the proposed way to 
proceed is that I will give an opening statement. I will try to 
allow Dr. Cohen to give her opening statement, Mr. Redmer, 
yours. And if we can get that far, that is great. We will then 
recess and we will go over and vote. If votes are called in the 
middle of that, we will have to recess earlier, and then we 
will pick up where we left off.
    It is slightly unusual to begin the committee hearing 
without a Democrat present, but we have cleared it with the 
staff. Mr. Cartwright knows that we are starting without him, 
and he has asked for the ability to give his opening statement 
immediately upon our return.
    So with that being said, I will get us started.
    I think it is fairly obvious why we are here today. It 
shouldn't be a surprise to anybody as to why you are in front 
of this committee. Twelve of these 12 CO-OPs have failed. I 
think it has cost taxpayers so far about $2.4 billion, 
including in my State, where we have had a CO-OP fail.
    Based on the track record, we are here today to try and 
find out what the future holds for the remaining CO-OPs and 
what the future holds for the people who are counting on those 
CO-OPs to provide them with health insurance. Consumers have 
lost $1.2 billion in the failed CO-OPs, and I don't think it is 
fair to anyone that we just sit around and not have hearings 
like this.
    Perhaps just as discouragingly, there is a subtext here 
today. In addition to dealing with the merits of why the 
previous CO-OPs have failed and the condition of the current 
CO-OPs is our inability to get information out of your 
organizations. It is our job to do oversight into the CO-OPs. 
Is it our job to ask difficult questions. It is our job to ask 
you to come here today and provide us with information. It is 
also our job to ask you for documents that might help us in our 
oversight function, and we are going to have some hopefully 
straightforward conversations today about why those documents 
have not been provided to Congress.
    I reject the notion the administration is able to hide 
information from us, especially since Congress created these 
things, Congress is involved in the oversight, and for the 
executive branch to deny Congress of its ability to do its job, 
I think, is something that merits a very close look. It makes 
it look like the administration is simply trying to prevent us 
from doing our job. Again, we will get into our inability to 
get documents as we go through there.
    It is even stranger that CMS is worried about the public 
having information about these when we know ones have already 
failed, and there is concern, public concern about other ones 
failing. You would think that the public--Mr. DesJarlais, 
myself, I am on the exchanges. My staff is on the exchanges. 
Don't we have the right to know when we go on the exchanges 
what the financial condition is of the CO-OPs that we might 
choose to sign up with?
    You all have a tough job here today. I fully recognize 
that. I am sorry that you are the ones that have to do this, 
but you are the ones that the administration sent over. But you 
have got two jobs. You have to convince the public that they 
shouldn't know everything about the CO-OPs that they might want 
to sign up with, and you have to convince us that you are not 
obstructing our ability to oversee the programs. So I don't 
envy you those positions, but we will try to make it as 
congenial as we possibly can.
    Mr. Mulvaney. So with that, I will recognize Dr. Cohen from 
CMS for 5 minutes for her opening statement.
    Hold on a second. See, we don't swear them in, Financial 
Services, so--all right. I am pleased to welcome Dr. Mandy 
Cohen, Chief Operating Officer and Chief of Staff for the 
Centers for Medicare and Medicaid Services at the U.S. 
Department of Health and Human Services; and Mr. Al Redmer, 
Jr., Commissioner of the Maryland Insurance Administration. We 
welcome you both.
    Pursuant to our rules, we do swear all witnesses in this 
committee before you testify. So if you please rise and raise 
your right hand.
    [Witnesses sworn.]
    Mr. Mulvaney. Thank you. Please be seated. Let the record 
reflect that both witnesses answered in the affirmative.
    So with that, Dr. Cohen, and I think you have done this 
before so you know about the 5-minute rule. We are not going to 
strictly enforce it, so if you need a few extra minutes, please 
take that time and go ahead and begin now.

                       WITNESS STATEMENTS

                    STATEMENT OF MANDY COHEN

    Dr. Cohen. Well, thank you very much. Thank you, Vice Chair 
Mulvaney. I will thank Ranking Member Cartwright when he 
returns. And members of the rest of the subcommittee, I 
appreciate the opportunity to discuss the Consumer Operated and 
Oriented Plan program. CMS takes its commitment both to CO-OP 
consumers and taxpayers seriously.
    As you know, CO-OPs were created to stimulate new 
competition in an industry that has a long history of being 
very difficult for small companies to enter with some entering 
markets that hadn't seen new competitors in decades.
    CMS's principal role is to award and oversee loans and then 
to maximize the likelihood that Federal taxpayer funds are 
returns. We are in close context with the State Departments of 
Insurance as they, of course, have authority over all the 
issuers of their State and oversee the rules that the CO-OPs 
operate under.
    As with any new set of business ventures, some CO-OPs have 
succeeded while others have encountered challenges. Successful 
CO-OPs have provided consumers in their State an additional 
choice of health insurance and have improved competition. But 
there have also been CO-OPs that, for a number of reasons, have 
faced technical, operational, and financial difficulties.
    In addition, Congress has made a number of substantial 
rescissions to the initial $6 billion in funding for the CO-OP 
program, impacting program operations and available funding. In 
the face of multiple pressures, it is not surprising that some 
new entrants have struggled to succeed.
    Protecting consumers affected by CO-OP closures is a top 
priority. In each case, when a CO-OP is no longer offering 
coverage on the marketplace, we work closely with the CO-OP and 
the State regulators to facilitate a smooth transition for 
consumers to retain access to coverage. Each of the consumers 
in the CO-OPs that close at the end of last year maintain 
coverage until the end of the year. And after dozens of 
communications with CO-OP consumers, three-quarters of those 
CO-OP marketplace consumers have continued their coverage in a 
new plan.
    CMS plays a dual role as the loan-holder for the CO-OP 
program providing both oversight and support of these nascent 
small businesses. In our oversight capacity, CMS, along with 
the State Departments of Insurance, which serves as the primary 
regulator of insurance in the States, work aggressively to 
ensure that CO-OPs are well run and financially sound. Every 
CO-OP is subject to standardized ongoing program oversight 
activities. In 2015 we conducted over two dozen financial and 
operational reviews, numerous in-person visits, and had many 
formal communications, not to mention hundreds of phone calls.
    When concerns are identified, CMS, in coordination with 
State Departments of Insurance, place CO-OPs on enhanced 
oversight or corrective action plans. These tools are commonly 
used by State Departments of Insurance to identify and fix 
correctible problems to ensure the viability of insurance 
products they oversee in their State.
    In CMS's role to support to the CO-OPs to maximize the 
likelihood that Federal taxpayer dollars are returned, CMS is 
working to make it easier for CO-OPs to attract outside capital 
or merger partner if the board chooses. We've released 
clarifying guidance and are exploring further steps to ease 
that path to outside funding for CO-OPs and investors, while 
still preserving the fundamentally member-driven nature of the 
CO-OP program.
    Even with the oversight and support provided by CMS and the 
Departments of Insurance, the single biggest factor for the 
future success of the CO-OPs will come from the action of the 
companies themselves. As new small businesses, they need to 
rapidly mature the fundamentals of their financial systems, 
tighten their operating disciplines, and hold their vendors 
accountable. Through--though the challenges that they CO-OPs 
have faced, they have every opportunity to be successful and be 
long-term market participants.
    CMS appreciates and understands this committee's oversight 
responsibilities, and has provided--and has worked to provide 
you with the information needed to fulfill these 
responsibilities. I understand why the subcommittee is 
interested in the experiences of these private businesses, our 
lessons learned, and our expectations for the future. CMS has 
made a concerted effort to answer the committee's questions and 
provide relevant and responsive information, including 
providing thousands of pages of documents, as well as briefing 
by a key executive from the CO-OP management staff.
    Because some of the materials you've requested contain 
market-sensitive information, we have made a limited number of 
the CO-OP documents responsive to your investigation available 
through confidential review.
    As part of our fiduciary duty as the lender and stewards of 
taxpayer money, CMS has worked hard to accommodate the 
committee's request for information while responsibly 
protecting the competitiveness of the loan recipients and 
safeguarding the CO-OPs' ability to repay Federal loans.
    Since the enactment of the Affordable Care Act, CMS has 
worked to increase access to quality, affordable coverage 
through the marketplaces while being responsible stewards of 
taxpayer dollars. CMS will continue to work closely with the 
subcommittee, with CO-OPs and State Departments of Insurance to 
provide the best outcome for consumers and taxpayers. We 
appreciate the subcommittee's interest and happy to answer any 
questions.
    [Prepared statement of Dr. Cohen follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Mulvaney. Thank you, Dr. Cohen.
    Before you begin, Mr. Redmer, we have had a little change 
in logistics, not unusual around here. It looks like we won't 
be voting until three o'clock. So we should have a chance to 
get through at least the first round of questions.
    Mr. Redmer, after your opening statement, we are going to 
allow Mr. Cartwright to have his, and then we will move into 
the questions. So, Mr. Redmer, you have 5 minutes.

                  STATEMENT OF AL REDMER, JR.

    Mr. Redmer. Okay. Thank you, Mr. Chairman, members of the 
committee. It's ----
    Mr. Mulvaney. Mr. Redmer, if you would hit the button in 
front of you, turn the microphone on.
    Mr. Redmer. Sorry. Mr. Chairman, members of the committee, 
I appreciate the invitation to be here today. My name is Al 
Redmer. I'm the insurance commissioner in the State of 
Maryland, and I'm here today to offer my views on the risk 
adjustment program based on section 1343 of the Affordable Care 
Act and its impact on a CO-OP incorporated in Maryland but just 
as importantly as well as other CO-OPs and small insurance 
carriers around the country.
    Evergreen Health Cooperative is a Maryland-based CO-OP 
created under the Affordable Care Act. It's been in business 
since 2014, and if you look at the Affordable Care Act and the 
reason that these organizations were created, Evergreen is a 
compelling story. If you look at the objective of increasing 
competition focusing on medical outcomes, improving the health 
outcomes of patients, medical management, disease management, 
it is a success story.
    For example, Evergreen offers a value-based product for 
diabetic patients that removes virtually all financial barriers 
for the patient--no copays, no coinsurance, no deductibles--to 
help folks be treated to prevent the onset and the increased 
problems with the disease.
    Any small carrier in--any company, any new company in any 
industry has a challenge. They have to reach a certain size to 
pay for the infrastructure to run that business, and Evergreen 
and these CO-OPs are no different. They need to reach scale. 
Evergreen's enrollment as of January of this year is 36,000 
compared to just under 20,000 in July of 2015.
    Additionally, they have diversified their portfolio. 
They're not just on the exchange. They do business throughout 
the individual market. They're in the small group market. They 
are also in the large group market. And their medical loss 
ratio is favorable. It's been running between 80 and 85 
percent. Based on current enrollment trends, Evergreen is on 
track to reach their 2016 enrollment goals and turn a profit by 
the end of this year.
    Over the past few years, around the country we've seen 
new--excuse me--innovative health insurance plans that have 
been created that are providing enhanced competition and 
patient care. And it's working. For example, at the end of 2004 
our largest individual carrier in Maryland had a 91 percent 
market share. Today, it's down to 57 percent due in part to a 
more competitive marketplace. These new carriers have the 
ability to continue, but their ability is severely jeopardized 
by the adverse and potentially fatal effect--financial effect 
caused by the technical shortcomings of the current risk 
adjustment and risk corridor programs. The failure of these 
plans would be disruptive to the marketplace, and State 
insurance regulators believe that a competitive marketplace 
benefits and protects policyholders.
    The risk adjustment formula is specifically of concern 
because it's proven that newer carriers have a distinct 
advantage. And I point out new carriers whether they're a CO-OP 
or not CO-OP. For example, the risk adjustment formula 
quantifies an enrollee's health status based on their age, sex, 
and diagnoses recorded during the course of the year. New 
carriers have limited ability to get that information on the 
health status and previous claims history for the applicants. 
So you can imagine a new small carrier. They don't have the 
infrastructure, they don't have the staff, they don't have the 
technology that these large carriers that have doing--been 
doing business for decades possess. Therefore, the carrier's 
population may appear to be healthier than it actually is if 
some diagnoses are not captured, which may result in improper 
risk adjustment payments.
    And let's contrast that with the risk corridor. So the risk 
corridor last year resulted in our CO-OP receiving 12 cents on 
the dollar. So the plans established, we booked this amount of 
money, but they received 12 cents on the dollar. Now, with the 
risk adjustment formula, they're going to have to write a check 
at 100 cents on the dollar. Any business that's going to 
collect 12 cents on the dollar and pay 100 cents on the dollar, 
that math does not work. And when you take that math and you 
add it to the Affordable Care Act that mandates a certain 
medical loss ratio, they can't raise their rates and collect it 
with premium because if they do, they'll bump below the medical 
loss ration and they'll have to pay that excess money back to 
the customers that they serve.
    The NAIC has urged CMS to review the formula and work with 
carriers and State regulators to make adjustments for 2015 and 
2016 to ensure that it's providing appropriate protection for 
all carriers, but we really can't wait for 2017 or 2018 to 
enact those reforms. There are several immediate solutions that 
would provide financial relief while technical corrections are 
developed. Among these are exempting new and fast-growing plans 
from the risk adjustment for, say, the first 3 to 5 years or 
limiting the amount a carrier pays for risk adjustment to 
perhaps 2 percent of their annual premiums collected in the 
year.
    Mr. Chairman, members of the committee, I appreciate the 
invitation to speak. I encourage you to consider immediate 
solutions which would provide stability in the individual and 
small group market and allow these companies to provide overall 
benefits to the marketplace, again, across the country. And 
with that, I'll look forward to your questions.
    [Prepared statement of Mr. Redmer follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Mulvaney. Thank you, Mr. Redmer.
    We will now recognize Mr. Cartwright for his opening 
statement for 5 minutes.
    Mr. Cartwright. Thank you, Mr. Chairman. And thanks for 
holding today's hearing. I would also like to welcome our 
witnesses, Dr. Cohen and Commissioner Redmer. I thank you for 
being here and appreciate your testimony.
    The CO-OP program was established, of course, to bring 
competition to the health insurance market by encouraging the 
development of nonprofit consumer-focused insurance companies. 
Many CO-OPs have done just that, providing quality care to more 
than 1 million consumers at competitive prices, and 
accordingly, driving down premiums in those places.
    Of course, like any other startup, CO-OPs face challenges. 
In addition to competing against larger, well-established, some 
might say entrenched insurance companies that have dominated 
the market for years, CO-OPs lack the claims experience and the 
detailed textural knowledge of the markets that insurance--
insurers have to rely on accurately to predict their products.
    Coops are also prohibited by law--this interesting--from 
using loan funding to market their plans. So it is like their 
ability to speak has been cut, and it is hard to attract new 
customers when you can't advertise with all of your resources.
    But CO-OPs have also long been the target of Affordable 
Care Act opponents who view this program as one more 
opportunity to attack the law. And this is getting tiresome, of 
course. The ACA authorized $6 billion for the CO-OP program. 
The following year Congress cut $2.6 billion of that $6 billion 
authorized. And then the American Taxpayer Relief Act of 2012 
further cut the program's remaining $3.4 billion by 90 percent 
and put what little was left into a contingency fund, 
effectively preventing the creation of any new CO-OPs.
    So if you are scoring along at home, it adds up like this: 
Congress has gutted about $4 billion of the $6 billion that was 
originally appropriated for the program, and now we are here to 
criticize how they did after we cut their legs off at the 
knees. I hope we are not really here to do that.
    On top of these cuts, Congres voted last year to gut the 
risk corridors, one of the ACA's risk mitigation programs. As a 
result, insurers will receive only 12.6 percent of the expected 
payments for 2014, roughly 13 cents on the dollar for every 
dollar they expected to receive.
    Republicans in Congress have always focused more on tearing 
down the ACA than making it work, and I think that is what we 
are up to here today. They have taken more than 60 votes to 
repeal or undermine the ACA, never voting on any kind of 
replacement of their own. We are hearing today about CO-OPs 
that are operating under corrective action plans or enhanced 
oversight plans, but it is important to understand the 
challenges facing these CO-OPs so that we can learn from this 
going forward.
    Being under a CAP or an EOP does not mean that an insurance 
company is in imminent danger of failing. In fact, our 
committee staff, both Democratic and Republican, spoke with the 
Insurance Departments of States in which CO-OPs currently 
operate under a CAP or an EOP, and they have all approved these 
CO-OPs to offer coverage this year. They have also importantly 
informed us that there are many other insurance companies, for-
profit insurance companies that are not CO-OPs that have also 
been put under corrective action plans, consent orders, or 
similar remedial actions at the State level for some of the 
same issues facing the CO-OPs.
    So I understand the argument that consumers have a right to 
know about their plans, but we shouldn't game the market by 
selectively targeting only CO-OPs when the larger picture is 
that they are struggling across the board. If we want consumers 
to know about their insurance plans, let's look at all of them, 
not just the ones you want to call ObamaCare.
    Now, I will say I don't believe we should release any of 
the confidential regulatory information that we have obtained 
about the remaining CO-OPs in a way that would mislead 
consumers about the insurance companies in their States or 
prejudice the ability of CO-OPs to operate going forward. But 
going forward, I would commit to working with the chairman on a 
broader comprehensive review of these programs in a way that 
actually helps consumers make informed decisions.
    And I hope we can use today's hearing to learn from our 
expert witnesses about what is going well in the CO-OP program, 
what needs to be improved, and how we can work together to make 
this program succeed.
    I thank you, Mr. Chairman. I yield back.
    Mr. Mulvaney. I thank the gentleman from Pennsylvania. I 
would now recognize the gentleman from Tennessee, Dr. 
DesJarlais, for 5 minutes for questions.
    Mr. DesJarlais. Thank you, Mr. Chairman. And I thank the 
witnesses for being here today.
    As I continue to listen to the rhetoric from the other side 
of the aisle, we can pretend that ObamaCare is popular, but it 
is not. People didn't want ObamaCare; they didn't want 
socialized medicine when it was crammed down their throat 
several years ago. So to sit there and demagogue Republicans 
for just trying to make this into something it isn't is 
disingenuous. And today's hearing is a great example of one of 
the reasons this is failing.
    Dr. Cohen, what qualified CMS to set up and provide 
oversight for these CO-OPs in the first place?
    Dr. Cohen. The Affordable Care Act provided the statute and 
the funding for the CO-OP program.
    Mr. DesJarlais. Okay. Did CMS have any qualifications or 
experience in setting up these type of programs and overseeing 
them?
    Dr. Cohen. Well, we do--CMS also obviously runs Medicare, 
the largest insurer in the country. But in terms of how we 
decided on the CO-OP programs themselves, obviously they are 
private businesses. We had a panel of experts both externally 
and internally, whether it's insurance expert and actuaries and 
others, who reviewed CO-OP business plans before making 
decisions about who would be awarded the loans.
    Mr. DesJarlais. Okay. And I guess at the beginning it was 
accepted that probably only about 60 percent of these loans at 
best were going to be paid back, so I question why weren't they 
just called grants or at least a majority of the money.
    Dr. Cohen. So they are very much loans, and we do very much 
expect to get taxpayer dollars back for those loans, and that's 
what we intend to do.
    Mr. DesJarlais. Okay. How many CO-OPs were initiated?
    Dr. Cohen. Twenty-four.
    Mr. DesJarlais. Okay. How many of them are still in 
existence?
    Dr. Cohen. Eleven.
    Mr. DesJarlais. Eleven, so more than half have failed?
    Dr. Cohen. Yes, that is correct.
    Mr. DesJarlais. And they went ----
    Dr. Cohen. There is only 11 currently operating.
    Mr. DesJarlais. And so that little money we are probably 
not going to recoup, right?
    Dr. Cohen. So we are in the process of recouping that the 
money right now. We ----
    Mr. DesJarlais. How much money are we talking?
    Dr. Cohen. So we've just started that process as most of 
these CO-OPs have just shut their doors about 6 weeks ago. So 
we'll go through an extensive process of making sure they 
continue--first, their claims run out, and then we'll look at 
their--you know, the excess revenue and then use all the tools 
available to us through their loan agreements and State and 
Federal law to pull back Federal tax dollars.
    Mr. DesJarlais. Okay. Tennessee had Community Health 
Alliance, or CHA. By the end of 2014, they'd only had about 
2,300 members out of a projected 25,000, resulting in a loss of 
$22 million for the year. In 2015 they actually lowered the 
premiums to try to entice membership, and boy, did it work. It 
jumped up to 35,000 by May of 2015, but it grew so fast during 
the open enrollment period that CHA had to suspend enrollment 
plans. They proposed an increase in premiums because obviously 
it, you know, was too affordable--kind of a bait-and-switch if 
you will--of 32 percent, but the regulators asked to increase 
it to 44 percent. So for these poor people that decided to take 
a chance on this CO-OP, they came in at a certain rate, had 
their rates almost double, and then it was determined by the 
end of the year that it was no longer sustainable and they shut 
down. So a CAP was imposed on Community Health Alliance on 
September 29, and then just 2 weeks later, it closed its doors. 
How can you say that these corrective measures are useful when 
50 percent of the CO-OPs subject to CAPs have failed?
    Dr. Cohen. So the--we use the corrective action plans when 
we identify something that we believe is correctable. In the 
case of Tennessee, obviously, we were identifying problems, and 
then we saw additional new information that came to light about 
their finances, about what happened in Q2 of their claims 
experience. As you were mentioning, they were highly enrolled 
so they had a lot more--their consumer base was extremely high 
to their premiums that were coming in. And so we, along with 
the Departments of Insurance, need to make some tough decisions 
about one thing to make sure that consumers had continuous 
coverage and didn't want them to enter the next open enrollment 
period if they couldn't make it through the whole next year. 
And so we, along with the Departments of Insurance, said that 
they were no longer going to be operating.
    Mr. DesJarlais. And this is not just Tennessee. This has 
happened in a lot of States, correct?
    Dr. Cohen. We have shut down 11 CO-OPs, that's right.
    Mr. DesJarlais. Eleven CO-OPs. So what do you tell a person 
that is going to look for insurance? Why would you recommend 
anyone looking for insurance or their family to go to a CO-OP?
    Dr. Cohen. Well, that's why we did the tough work at the 
end of last year before the open enrollment period started. We, 
along with the State Departments of Insurance, took a seriously 
hard look at these CO-OPs to make sure the ones that would 
continue forward we had the confidence would make it through 
2016 for their consumers.
    Mr. DesJarlais. But you say that this CAP program is the 
solution to fixing these problems. How many programs were under 
CAPs that have failed?
    Dr. Cohen. So I don't think the CAP is the only solution. I 
think the CO-OPs themselves are really the ones who are going 
to be the ones to determine whether or not they ultimately will 
be successful. They have a lot of work to do to rapidly mature 
their entities, their small businesses, as you know, and 
they're still getting their foothold on this business. So I 
think CAPs are one way for us to identify correctable problems, 
but certainly, the State Departments of Insurance are doing 
their own work as well.
    Mr. DesJarlais. Yes, but bottom line, the CMS was given in 
excess of $2 billion to help oversee these, and over half of 
them have failed, but yet you are asking us to have the 
confidence to continue to support organizations that are 
obviously failing. And it is awful difficult, I would think, to 
attract people. It is a big inconvenience for these people to 
go sign up for insurance, have their rates jacked, and then 
told that they are canceled. So, I mean, I think we have got a 
lot bigger problems here.
    I see my time is expired, but maybe we will get to a second 
round of questioning.
    Dr. Cohen. Okay.
    Mr. Mulvaney. I thank the gentleman and now recognize Mr. 
Cartwright from Pennsylvania for 5 minutes, give or take.
    Mr. Cartwright. Thank you, Mr. Chairman.
    Well, now, Dr. Cohen, thanks for being here again. And I 
said some things in my opening, and I want to confirm them with 
you. One of them is this idea of establishing the CO-OPs. The 
idea is that we are going to provide competition. And we are 
all good capitalists in this room, and we know that the more 
competition there is, the lower prices will be for consumers. 
Is that a fair statement?
    Dr. Cohen. That was the idea for the CO-OP program to not 
only provide an additional choice for consumer but one that was 
consumer-run.
    Mr. Cartwright. So a central capitalist principle underlies 
the whole idea for CO-OPs, right?
    Dr. Cohen. That's right, private businesses.
    Mr. Cartwright. All right. And the other idea was we were 
going to help fund the CO-OPs to get on their feet and get 
going. And how much did the Affordable Care Act appropriate for 
the CO-OP program in the first--for ----
    Dr. Cohen. Originally, it was $6 billion.
    Mr. Cartwright. Six billion dollars. And I understand 
Congress on several occasions has cut the CO-OPs' funding. Am I 
correct in that?
    Dr. Cohen. That is correct.
    Mr. Cartwright. Is that four times?
    Dr. Cohen. I believe that's right.
    Mr. Cartwright. Four times they have cut. And the year 
after ACA was passed, Congress voted to cut a total of $2.6 
billion from the program, right?
    Dr. Cohen. That's right.
    Mr. Cartwright. And then in 2012 Congress rescinded 90 
percent of the remaining $3.4 billion on the program, right?
    Dr. Cohen. That's correct.
    Mr. Cartwright. And then finally, sequestration cut an 
additional $13 million in funds from the CO-OP program, right?
    Dr. Cohen. You can see why they had some challenges.
    Mr. Cartwright. Okay. Well, now, Dr. DesJarlais brought up 
the fact that some of these CO-OPs have failed. You don't need 
to be a rocket scientist to say that cutting and cutting and 
cutting the funding is going to be a big part of why some of 
these CO-OPs failed. Would that be a fair statement?
    Dr. Cohen. That would be a fair statement.
    Mr. DesJarlais. Would the gentleman yield just for a quick 
question?
    Mr. Cartwright. Certainly.
    Mr. DesJarlais. Okay. You had pointed out the funding at $6 
million. Originally, they were supposed to ----
    Mr. Cartwright. Six billion.
    Mr. DesJarlais. Six billion. There were originally supposed 
to be CO-OPs in all 50 States. There are only 23 or 24, so 
obviously, we did save the taxpayer a fair bit of money by 
cutting that amount.
    Mr. Cartwright. Reclaiming my time, actually, in terms of 
saving the taxpayers money, this is the loan money, isn't it, 
Dr. Cohen? And it is coming from CMS. The lender is CMS, your 
agency, and your plan is to get the money back for the 
taxpayers, right?
    Dr. Cohen. That's right. The money is from the Treasury.
    Mr. Cartwright. But if we kill the CO-OP, it is not going 
to pay us back, is it?
    Dr. Cohen. That's why we want--we are trying to support the 
CO-OPs for them to succeed. They succeed, we succeed.
    Mr. Cartwright. Right. Thank you. Now, unfortunately, cuts 
made by the program last year resulted in insurers receiving 
only about 13 cents on the dollar of payments they were 
expecting. Commissioner Redmer, I want to direct this to your 
attention. In your opinion, how have changes to the risk 
corridors program affected CO-OPs and other small insurance 
companies?
    Mr. Redmer. Well, they've affected them a lot. And let me 
go back and point out that all of the CO-OPs are not failing. 
Again, in Maryland we have a successful, compelling story. And 
I would like to add that this risk adjustment formula that I've 
chatted about previously is not just affecting CO-OPs; it's 
going to affect all of these smaller companies around the 
country, some of which--a lot of them have no taxpayer money at 
all. These are all private organizations.
    But as I mentioned previously, if you are collecting money 
under the risk corridor and you're paying money out under the 
risk adjustment formula, any business, if you are going to 
collect 12 or 13 cents on the dollar and you're going to pay 
out 100 cents on the dollar, the math just does not work. And 
that has already proven to be fatal on the corridor's side to 
some of the CO-OPs, and I'm concerned that if we do impose that 
100 cents on the dollar risk adjustment formula, that it may 
prove to be fatal to other organizations around the country.
    Mr. Cartwright. I appreciate your comments. And, 
Commissioner Redmer, you have been appointed as insurance 
commissioner by a Republican Governor, and you are a former 
Republican State legislator yourself. Why do you think it is 
important to help the remaining CO-OPs succeed?
    Mr. Redmer. When I walked in, if I could have written the 
ACA differently, I probably would have. If I could have written 
the exchange law in Maryland, I probably would have. But I 
walked in the office January the 21st of last year with a 
business that was providing competition to the marketplace.
    And if, again, you go back to the Affordable Care Act, and 
I don't want to re-litigate that, but if you look at the 
objectives of increased competition, improved medical outcomes 
focusing on medical management and disease management, this 
specific organization is a success story. They've got a 
compelling story to tell. They're insuring 30,000 Maryland 
citizens. We've seen improved competition, and my perspective 
is that it's worth the investment of my time and effort to try 
to help and save that organization.
    Mr. Cartwright. Well, thank you, Commissioner Redmer. And 
30,000 in Maryland, and, Dr. Cohen, how about nationwide? I 
have said it is more than 1 million people who are enjoying the 
fruits of having health insurance because of the CO-OP program. 
Am I correct in that?
    Dr. Cohen. It was 1 million people as of last year, yes.
    Mr. Cartwright. As of last year, 1 million people?
    Dr. Cohen. Yes.
    Mr. Cartwright. Well, thank you both, and I yield back, Mr. 
Chairman.
    Mr. Mulvaney. I thank the gentleman. You have an extra 24 
seconds.
    We now recognize the gentleman from North Carolina, Mr. 
Meadows, for 5 minutes.
    Mr. Meadows. Thank you, Mr. Chairman.
    Dr. Cohen, you are not here to suggest that if the CO-OPs 
go away that those 1 million people would be uninsured, are 
you?
    Dr. Cohen. No. Luckily, they have other choices that the 
Affordable Care Act ----
    Mr. Meadows. Okay. Let's make that clear, Mr. Cartwright.
    And so as we look at this, one of my concerns, I guess, 
that I have, Mr. Redmer, is, as you have gone over this 
business model, how much longer should the American taxpayer be 
on the hook to make sure that these fledgling startups ----
    Mr. Redmer. Sure.
    Mr. Meadows.--make a profit?
    Mr. Redmer. I can tell you ----
    Mr. Meadows. And since they are nonprofits, I guess that is 
not ----
    Mr. Redmer. Sure.
    Mr. Meadows.--the correct word but ----
    Mr. Redmer. The ----
    Mr. Meadows.--become financially solvent.
    Mr. Redmer. The--Evergreen has been profitable on a monthly 
basis in 2015, 4 months out of 12. Their loss in 2015 was 
reasonable. They are projected to be profitable ----
    Mr. Meadows. But without the risk corridor, will they be 
profitable going forward?
    Mr. Redmer. If we ----
    Mr. Meadows. Because I think your testimony ----
    Mr. Redmer. Yes.
    Mr. Meadows.--would suggest they were not.
    Mr. Redmer. No, they would be profitable. If they are left 
alone in 2016, they will be profitable for 2016. The problem is 
the risk adjustment formula. If they have to stroke a check for 
$1 million or $2 million or a number like that, that's not 
going to be an issue.
    Mr. Meadows. But wasn't that ----
    Mr. Redmer. But ----
    Mr. Meadows.--part of their business model when they went 
in? I mean, didn't they--I mean, the ACA has been very clear so 
----
    Mr. Redmer. Of course.
    Mr. Meadows.--I mean, that is not like you wake up and you 
have a shock that this is going away.
    Mr. Redmer. You're exactly right. However, also part of the 
business model was the risk corridor payment, of which they 
received 12 cents on the dollar. So if they would have ----
    Mr. Meadows. But again, I would stress that is not new 
news. This is not breaking news. I mean, we changed the models 
and we started to look at this, but part of the ACA rollout has 
been consistent from day one they would have these certain 
subsidies in certain risk corridor someplace. They would 
eventually go away once they are there. And I guess my question 
still remains. How long should we keep everything subsidized in 
hopes that we have competition?
    Mr. Redmer. I don't know that we need to give them 
subsidies. I think we need to leave them alone.
    Mr. Meadows. All right. So let me ask you maybe a different 
question. Since you have a very successful CO-OP, how much has 
that CO-OP affected the premiums? Have premiums gone down on 
health care overall in Maryland?
    Mr. Redmer. The--I believe the premiums are more moderate 
than they would otherwise be ----
    Mr. Meadows. Have they gone down?
    Mr. Redmer.--but no, I would ----
    Mr. Meadows. Yes, they have not.
    Mr. Redmer. I--there has not been any premiums going down.
    Mr. Meadows. So what you are saying is they may have 
affected them, the rate of growth?
    Mr. Redmer. Yes.
    Mr. Meadows. Co-ops may have affected the rate of growth?
    Mr. Redmer. Sure.
    Mr. Meadows. So how many people do you have insured in 
Maryland?
    Mr. Redmer. I don't have a number of the top of my head.
    Mr. Meadows. What would you guess? Millions?
    Mr. Redmer. I'm going to say--oh, yes, sure.
    Mr. Meadows. All right. So how do you think the competition 
of 30,000 people really affects the premiums of millions of 
people?
    Mr. Redmer. I'm not going to guess as to what it's going to 
affect.
    Mr. Meadows. Well, I am a business guy ----
    Mr. Redmer. It's--sure.
    Mr. Meadows. It has got very little impact. And I guess 
here is what my concern is, Dr. ----
    Mr. Redmer. Well, but if I could say that we're talking 
about 30,000 ----
    Mr. Meadows. If you want to talk business, I am ready all 
day long ----
    Mr. Redmer. Sure.
    Mr. Meadows.--to jump ----
    Mr. Redmer. We're ----
    Mr. Meadows.--right in the depths of this.
    Mr. Redmer. Sure. We're ----
    Mr. Meadows. I would ----
    Mr. Redmer. We ----
    Mr. Meadows.--encourage you to probably not go there but --
--
    Mr. Redmer. I'm ----
    Mr. Meadows.--go ahead.
    Mr. Redmer. I'm trying to answer your question. The 30,000 
lives have been there, have grown in the last couple of years 
compared to insurance companies that have been doing business 
for decades. So naturally, the--even if you are lower and 
you're moderating prices, the acceleration of growth is not 
going to be as significant as if they were all the same size 
and the same age.
    Mr. Meadows. Well ----
    Mr. Redmer. But you're right, they're not reducing ----
    Mr. Meadows. All right.
    Mr. Redmer.--rates.
    Mr. Meadows. So, Dr. Cohen, let me come to you because what 
has been alleged, and certainly you know that I am no fan of 
ACA, but let's look at the CO-OP as a separate entity at this 
particular point. You have 11 CO-OPs remaining, is that 
correct?
    Dr. Cohen. That's right.
    Mr. Meadows. And so out of those 11 how many of them would 
have a corrective action plan in place or some kind of enhanced 
oversight right now out of the 11 remaining?
    Dr. Cohen. More than half.
    Mr. Meadows. But how many?
    Dr. Cohen. Seven.
    Mr. Meadows. Okay. So we have four CO-OPs out of all the 
CO-OPs that have been--so we have got one example in Maryland, 
so, surprise, surprise, we happen to have the one good example. 
But four out of most of them, that is not really a successful 
business model, wouldn't you think, Dr. Cohen?
    Dr. Cohen. So when we think about corrective action plans 
is us trying to identify a correctable problem. So we are 
working very hard with these CO-OPs, and I know they're working 
individually to remedy the issues that we've identified.
    Mr. Meadows. All right. So out of those seven, how many of 
those do you think will be doing business in 2017? Because you 
were real careful in your response. You said they were going to 
be able to provide coverage for the rest of this year.
    Dr. Cohen. You're right. It's ----
    Mr. Meadows. Let me tell you why I am asking you ----
    Dr. Cohen. Yes.
    Mr. Meadows.--is because I don't think CO-OPs necessarily 
are affecting the market because they're such a small ----
    Dr. Cohen. Well ----
    Mr. Meadows.--part of it, and the other is, is I have got 
huge health care providers that are hemorrhaging money under 
this program because they are trying to figure out the risk and 
all of that. And as a guy who has started 12 small businesses, 
this is not one where I would try to wade in and try to compete 
with the big boys. And I guess what I would ask you to do is to 
make a realistic assumption, and I will actually agree with Mr. 
Cartwright that I will not use it to bludgeon the ACA, but I 
would ask you to get back to this committee on really should we 
continue the program or not? And with that, I appreciate the 
indulgence of the chair.
    Mr. Mulvaney. I thank the gentleman and now recognize the 
gentleman from Georgia, Mr. Hice, for 5 minutes.
    Mr. Hice. Thank you, Mr. Chairman.
    Well, fortunately, Georgia has not been impacted by the 
collapse of the CO-OPs, but several of our neighboring States 
have, South Carolina. Some 67,000 from South Carolina are now 
trying to seek new insurance; Tennessee, somewhere in the 
ballpark of 27,000. And as I understand it, predictions are 
close to three-quarters of a million have already lost their 
health insurance with little to no notice that this was coming.
    And, you know, I am troubled. As you just shared, we have 
got at least seven more that are in danger. I am troubled with 
the reality that this same fate is probably going to continue 
to many more Americans who likewise are probably not going to 
be notified.
    You know, and here we are dealing with people who were 
forced to get insurance and to go this route, and now all of a 
sudden it is evaporating and they have no notice whatsoever. 
They find themselves scrambling around trying to find 
insurance.
    And let me just ask you personally in light of all of this, 
if you were one of these people, would you want to know, would 
you want to be notified that your insurance was about to be 
taken away?
    Dr. Cohen. So a couple of things. One is we certainly share 
your concerns about the small businesses, and that's why we're 
doing the aggressive work that we are on the oversight side. 
What I would say is what we are trying to do on the oversight 
side is a tool that is used by Departments of Insurance all the 
time to identify correctable problems. And we believe that they 
are--again, we learn--we get additional data and make different 
decisions as the years go by. Our primary goal is to make sure 
that consumers have--can have continuous coverage, which is why 
at the end of last year we ----
    Mr. Hice. Well, my question was would you want to be 
notified if you were about ----
    Dr. Cohen. So I know that the Department of Insurance is--
has the voice of the consumer when they're thinking about when 
to notify consumers about issues related to CO-OPs ----
    Mr. Hice. So would you want to be notified?
    Dr. Cohen. At the appropriate time. I know that the 
Departments of Insurance are thinking about the ----
    Mr. Hice. Okay. Well, you just mentioned that there are 
seven that are in danger. At what point is an appropriate time 
to notify these people? Which of the seven is most likely to 
fail next?
    Dr. Cohen. So, first I should pause, and my team corrected 
me that eight are on CAPs. So the number is eight. So the 
appropriate time is when the Department of Insurance that 
regulates this process of communication tells us that that's 
the right time. Again, we're the loan-holders here. The State 
Departments of Insurance are the primary regulators, and so 
they sort of govern this space about notification. We don't 
want to have consumer ----
    Mr. Hice. All right. Well, apparently, the insurance site 
is not getting the job done either because we have got three-
quarters of a million Americans with little to no notice 
whatsoever lost this, and you are jumping all over the place 
when it comes to facing any responsibility that Americans ought 
to be notified of this.
    Which of the eight is most likely next to collapse?
    Dr. Cohen. So it's--we are at a very early point in the 
year. We did some tough work at the end of last year to make 
sure the consumers could have confidence in the CO-OPs that 
were continuing for 2016. We are just learning about what the 
CO-OPs did in terms of enrollment during the open enrollment 
period ----
    Mr. Hice. Again, that is not my question. Do you know which 
one is in the greatest danger?
    Dr. Cohen. I can't say at this point. I don't have that 
information ----
    Mr. Hice. All right. We have got billions of dollars on the 
line, American taxpayers on the hook for this. Don't the 
taxpayers deserve to know--you know, if you are making a 
business decision, is this a business venture you would want to 
be a part of? I know we have got--from info that I have got, we 
have got one of the CO-OPs now projecting a $70 million loss as 
opposed to what was supposed to be a $4 million gain. I mean, 
this is a horrible, horrible venture.
    How many of the remaining CO-OPs are actually profitable? 
Three? Is that what we are looking at?
    Dr. Cohen. So we know that small businesses always struggle 
to turn a profit in the first few years. It's a matter of in 
this entrenched business I think as the Congressman mentioned 
before. These are tough markets to break into. There's a 
certain amount of loan funding that we can offer from the 
Federal Government, but what we're trying to do now is 
encourage these CO-OPs to look for outside capital, additional 
resources to bring in, thinking about selling in the small 
group market in addition to the individual market, maybe even 
the large group market, and again, thinking about how they're 
going to sustain themselves and be viable over the long term.
    Mr. Hice. All right. Last thing, and my time is about up, 
let's walk through the process of what happens when a CO-OP 
closes. Do they continue to draw money from the Federal loan?
    Dr. Cohen. So the--when we--when the CO-OP closes, it's a 
decision between CMS and the Department of Insurance. When that 
wind-down starts, that doesn't mean the CO-OP is closed. So we 
started wind-down processes in the September/October time 
frame, but consumers are able to continue coverage until the 
end of that year.
    Mr. Hice. So they continue drawing Federal loan money?
    Dr. Cohen. So the loan money had already been awarded. 
There's no new dollars that go out the door. All of that loan 
money ----
    Mr. Hice. So even when they close, loan money continues 
going out the door?
    Dr. Cohen. So--no, there's no--when they close their doors, 
there's no additional loan money so--because that was already 
awarded to them. There's obligations of money that they need 
that they have been--they're on a payment cycle if you will, 
but that money had already been awarded.
    Mr. Hice. Mr. Chairman, thank you as well for your 
indulgence.
    Mr. Mulvaney. I thank the gentleman and now recognize the 
gentleman from North Carolina, Mr. Walker, for 5 minutes for 
questions.
    Mr. Walker. Thank you, Mr. Chairman. I would like to thank 
Mr. Cartwright from Pennsylvania for being present today. 
Defending the various components of the ACA I know is 
difficult, but I would hope that my friends on the other side 
of the aisle would be concerned about the constituents and the 
losses here of some of these CO-OPs.
    Mr. Redmer, I believe about 10 or 15 minutes ago, if I 
remember correctly, you said all of the CO-OPs are not failing. 
Can you tell me what percentage of failing CO-OPs need to take 
place before you feel like there is a problem?
    Mr. Redmer. I didn't say there was not a problem. I said 
that not all CO-OPs have failed, and we have one in Maryland 
that is performing reasonably well. And that's the extent of my 
knowledge and interest is the Maryland CO-OP.
    Mr. Walker. Okay. Well, speaking of Maryland, last 
November, just as the open enrollment period was starting, the 
CEO of the Maryland CO-OP testified before the Energy and 
Commerce Committee. He did acknowledge that the CMS has placed 
the Maryland CO-OP under an enhanced oversight plan. Does CMS 
have any evidence that the Maryland CO-OP was adversely 
impacted as a result of that public disclosure? And Mr. Redmer 
or Dr. Cohen, whoever feels more comfortable in answering the 
question.
    Mr. Redmer. I can't answer whether there was any effects of 
that being disclosed or not.
    Mr. Walker. Dr. Cohen?
    Dr. Cohen. So I'm not aware of that situation.
    Mr. Walker. Okay. Well, as a matter of fact, 3 days after 
his testimony the CO-OP CEO was projecting increased 
enrollment. That is interesting. Is there anything that is 
being hid here from the public? I mean, do you have any 
information regarding what was going on there, Dr. Cohen?
    Dr. Cohen. So regarding the Maryland CO-OP? I'm sorry. I'm 
not following the question.
    Mr. Walker. Okay.
    Dr. Cohen. I apologize.
    Mr. Walker. Let me ask it again. Three days after his 
testimony, the Maryland CO-OP CEO was in the press projecting 
an increased enrollment. It seems like there is a continuance 
to refuse to comply with the committee's duly authorized 
subpoena. Any evidence of that?
    Dr. Cohen. I didn't realize the Maryland CO-OP was under 
subpoena by this committee.
    Mr. Walker. Okay. All right. So let's go a different 
direction since it sounds like that information did not get to 
you guys, okay? I want to be fair with that. Let me go back to 
a question earlier because I didn't know if I heard a 
definitive answer. Of the taxpayers' money that the 
administration was loaned out to the CO-OPs, do we have a 
range, a number, speculation of how much will actually be paid 
to the taxpayers?
    Dr. Cohen. So we're working through that process right now. 
As mentioned earlier, again, the CO-OPs that wound down at the 
end of last year are now going through a process of doing their 
claims round out, understanding what revenue that it has coming 
in. Some of them are taking actions with their vendors. And 
then we go through a process based on the loan agreements and 
the State law to use all the tools at our disposal to get the 
funding back.
    Mr. Walker. Sure. You would understand why the word process 
is probably overused in this town a good bit. Is there any way 
that you can put any kind of numeric value to that?
    Dr. Cohen. I can't at this time. It's a really case-by-case 
process. It's led by the Department of Justice who leads these 
as--because it's a Federal loan, and so it's a process we'll 
work through and it's too early to speculate.
    Mr. Walker. Is there a percentage of how much that we would 
want the CO-OPs--if there is not an exact dollar amount, is 
there a percentage goal, benchmark? Is there anything like that 
that has been ----
    Dr. Cohen. It certainly is ----
    Mr. Walker.--determined in the process?
    Dr. Cohen. It is certainly as much as we possibly can 
within the confines of the loan agreement and the laws.
    Mr. Walker. Okay. Thank you, Mr. Chairman. I yield back the 
balance of my time.
    Mr. Mulvaney. I thank the gentleman and would now recognize 
Mr. Walberg for 5 minutes.
    Mr. Walberg. Thank you, Mr. Chairman. And I apologize for 
being a little late to arrive, so I hope I am not asking some 
questions that have been asked already.
    But to Dr. Cohen, thank you for being here. Major insurers, 
as we have been aware in the reports in the media, have 
sustained significant losses on their exchange plans and have 
been pessimistic about the profitability of their plans. In 
2015 and 2016 the records show that United Health expects to 
lose $1 billion on exchange plans. The company's CEO has even 
stated that entering the exchange was ``for us a bad 
decision.'' United might quit exchanges altogether in 2017. 
Aetna has lost money on plans sold through the exchanges, and 
its CEO said, ``We continue to have serious concerns about 
sustainability of the public exchanges.'' Humana's losses might 
drive it from the exchanges. Most major insurers seem unable to 
make a profit on the exchange. If that is the case, if major 
insurers can't make it on exchanges, why should we be 
optimistic that CO-OPs will?
    Dr. Cohen. Well, we are very confident about the fact that 
the marketplace grew over the last open enrollment period with 
12.7 million consumers in the marketplace now. And if you look 
at Kaiser, Centene, Molina, others, they are seeing strength in 
the marketplace and looking to expand. And so we think that 
it's a growing market.
    We share your concerns about the CO-OPs and their ability 
to be successful in an entrenched market. They certainly have a 
lot of barriers that they needed to overcome, and so that's why 
we're doing as much work as we can on the oversight side to 
make sure that they are making good decisions with taxpayer 
dollars.
    Mr. Walberg. Well, I guess that time will tell on that, but 
we're talking of significant organizations that have seen that 
it has been a bad investment, so hopefully, it will be a 
turnaround.
    The administration has requested more than $1.8 billion in 
emergency funds to combat Zika; $828 million would go to the 
CDC, $200 million would go to NIH and FDA. A separate committee 
investigation into this administration's ObamaCare spending has 
revealed that during the Ebola crisis HHS propped up ObamaCare 
by taking money from CDC and NIH and giving it to CMS, over $14 
million from CDC and over $75 million from NIH if the records 
are correct. By HHS's accounting, over $1 billion in ObamaCare 
funding has come from the systematic raiding of funds from 
other programs utilizing the Secretary's transfer authority and 
nonrecurring expense fund.
    Based on that track record, Dr. Cohen, how can we be 
confident that any Zika funds would be spent on their intended 
purpose and not instead used to prop up CO-OPs or other pieces 
of ObamaCare?
    Dr. Cohen. So I can't speak to the Zika funding and how 
that will be spent, but what I can say about the funding for 
the marketplaces is that now that we are on stable footing with 
the 12 million and more consumers, we are able to charge user 
fees to the issuers through that, and that is what sustains the 
marketplace in terms of its viability to cover the--its 
operational costs.
    Mr. Walberg. I yield back.
    Mr. Meadows. Would the gentleman yield for a second?
    Mr. Walberg. I would yield.
    Mr. Meadows. What was the breakeven point? You say now that 
we are 12 million consumers that you are self-sustaining ----
    Dr. Cohen. No, I said that is the funding that we used to 
----
    Mr. Meadows. That is the ----
    Dr. Cohen.--cover the marketplace operations ----
    Mr. Meadows. Well, but ----
    Dr. Cohen.--for ----
    Mr. Meadows.--to the gentleman's point, he said are we 
going to reprogram the money, and you said that now we are 12 
million we don't need ----
    Dr. Cohen. That's not what ----
    Mr. Meadows. So maybe I misunderstood, but I am just trying 
to get a clarification ----
    Dr. Cohen. Well, what I said is ----
    Mr. Meadows.--on the gentleman's point.
    Dr. Cohen. I don't know about the funding for the Zika 
program and who it's getting funded through. It's ----
    Mr. Meadows. No, his point was is that other monies had 
been reprogrammed and shifted to prop up ObamaCare. That is his 
point. And what you are saying is because you--is your 
testimony here today that there will be no shifting of funds to 
prop up any part of ObamaCare from here on out?
    Dr. Cohen. So I think what you were asking is would the 
Zika funding be used to prop up the marketplace ----
    Mr. Walberg. Well, that was an example of how Zika funding 
has been used. It has been shifted and that is the question.
    Dr. Cohen. Well ----
    Mr. Walberg. If that is the pattern, we are concerned that 
the dollars aren't there and we will be shifting it from other 
funds.
    Dr. Cohen. Understood. So--and that's why the user fee will 
cover the marketplace operations. In addition, obviously, the 
Secretary has at her discretion to move money within the 
Department to cover whether it's Zika or Ebola or marketplace 
whatever important action of the moment is needed across the 
country.
    Mr. Walberg. That is concerning. So anyway, I yield back.
    Mr. Mulvaney. I thank the gentleman. I will recognize 
myself for 5 minutes.
    Dr. Cohen, during your opening statements you said that one 
of your jobs was to make these loans to the CO-OPs and to work 
on getting them back. I understand there is $1.2 billion 
outstanding on those--or is it a full $2.4 billion is 
outstanding on the loans, isn't it?
    Dr. Cohen. Well, they've been--they are making loan 
payments, but it--that's in the right ballpark, yes.
    Mr. Mulvaney. Let's talk about these loans. What kind of 
loans are they? Are they secured, are they priority? Tell me, 
when you loan money to the Maryland--if we use Evergreen for an 
example--what is the nature of that loan?
    Dr. Cohen. I'm--I am not the loan expert, but I can be 
happy to follow up and provide that.
    Mr. Mulvaney. Is it secured by any of the assets of the 
entity?
    Dr. Cohen. So I don't know that I could answer that 
question.
    Mr. Mulvaney. Okay. Do you know the priority of repayment?
    Dr. Cohen. Yes. So obviously for Federal loans there is--
there's an order of payment. I believe that we are at the very 
top of all of the creditors when we are going back, but that 
is, I will say, on a case-by-case basis. In different States 
that is a--there is a different makeup of where the Federal 
loans and Federal obligations fall in the order of who gets 
paid back first, which is why it is a case-by-case process that 
the Department of Justice runs.
    Mr. Mulvaney. Okay. So is it your testimony then--because 
we have had information that indicates that at least on some of 
the CO-OPs you have allowed them to reclassify the loans as 
what they call surplus on their balance sheet.
    Dr. Cohen. Okay. Got you.
    Mr. Mulvaney. Is it your testimony that that is because of 
State law or have you made a decision to allow that to happen?
    Dr. Cohen. So I think you're talking about the loan 
conversions. So ----
    Mr. Mulvaney. It sounds like it.
    Dr. Cohen. Those are ones that are requested by the CO-OPs 
themselves, and if we are going to make a determination to move 
some of those and convert those loans, we do that in 
coordination with the State Departments of Insurance. So we 
don't okay any of those conversions without the State 
Department of Insurance ----
    Mr. Mulvaney. When you say conversions--I am sorry to cut 
you off, but you are using a term that I am not familiar with--
what are you converting them to, from loans to what?
    Dr. Cohen. So on their balance sheets, so whether it's--
whether they can see it as--I'm going to use the wrong terms 
because I'm not the financial person, but to show--to be able 
to show that they have risk-based capital. So it allows them to 
show that they have more risk-based capital on their balance 
sheet.
    Mr. Mulvaney. Okay. All right. Now you have my attention.
    Dr. Cohen. You might want to tell--ask my commissioner ----
    Mr. Mulvaney. No, I will stay right here for a second.
    Dr. Cohen. Yes.
    Mr. Mulvaney. You allow certain CO-OPs to use loans from 
the Federal Government that used to be prioritized loans to 
count those as capital on their balance sheet for purpose of 
meeting their risk-based capital requirements?
    Dr. Cohen. That's correct.
    Mr. Mulvaney. And that doesn't scare the hell out of you?
    Dr. Cohen. That's allowed by--under law, and it is 
something that we do ----
    Mr. Mulvaney. What law--okay. And you can ask somebody 
behind you if you want to. Is there a specific section of the 
law you want to cite on that one?
    Dr. Cohen. I'd be happy to have one of the lawyers follow 
up with ----
    Mr. Mulvaney. All right.
    Dr. Cohen.--our authority.
    Mr. Mulvaney. Do you agree with me that it undermines the 
whole purpose of having risk-based capital in the first place 
by allowing them to count a government loan as capital? You 
understand the--and ----
    Dr. Cohen. Absolutely. Absolutely.
    Mr. Mulvaney.--a lot of people don't understand the 
difference between loans ----
    Dr. Cohen. Yes.
    Mr. Mulvaney.--and capital so ----
    Dr. Cohen. Yes. Understood. And we very much hear your 
concerns in this space, which is why it's quite a rigorous 
process from the time a CO-OP would request something like this 
until we would be able to approve it, and it requires a full 
review of their entire business process and their financials. 
It involves coordination with the State Departments of 
Insurance, and so we have turned a number of them down because 
of that.
    But we do want to be flexible, again, for these CO-OPs 
when, as I've mentioned, if they are successful, we the--we get 
those taxpayer dollars back, and so we are trying to use our 
tools to be flexible and help those CO-OPs out.
    Mr. Mulvaney. Let's talk about your efforts to get them 
back. I have heard from some of the CO-OPs that the payments, 
the reinsurance payments have slowed up. Are you withholding 
reinsurance payments from any of the CO-OPs whether they are 
ongoing, they are winding down, or they are closed in order to 
offset the loss from the loans?
    Dr. Cohen. So each of those are, again, on a case-by-case 
basis ----
    Mr. Mulvaney. Okay. Does that mean ----
    Dr. Cohen.--depending on ----
    Mr. Mulvaney.--in some cases the answer is yes?
    Dr. Cohen. So most of the time the decision has not yet 
been made, so I think it's too early to say.
    Mr. Mulvaney. Okay. Then, let's talk about when you say 
most of the time the decision has not been made ----
    Dr. Cohen. And they have not ----
    Mr. Mulvaney.--let's talk about the times ----
    Dr. Cohen. They have not been made.
    Mr. Mulvaney. It ----
    Dr. Cohen. They have not been made in the wind downs of the 
CO-OPs.
    Mr. Mulvaney. In any of them?
    Dr. Cohen. No.
    Mr. Mulvaney. So it is ----
    Dr. Cohen. That is an ongoing process.
    Mr. Mulvaney. It is your testimony here today that you are 
not withholding any of those payments from any of the winding-
down CO-OPs?
    Dr. Cohen. So at this time the Department of Justice runs 
this process. I'm happy to have them come and answer questions 
about how the process would work, but right now, we are not.
    Mr. Mulvaney. When do you think you are going to make a 
decision on that?
    Dr. Cohen. I would have to consult with the Department of 
Justice on the timing of those decisions.
    Mr. Mulvaney. Okay. All right. I understand that Mr. Jordan 
has joined us, so we are going to have one more questioning in 
our first round. I will recognize the gentleman from Ohio, Mr. 
Jordan, for 5 minutes.
    Mr. Jordan. I thank the chairman. And I am not exactly sure 
where the hearing has gone thus far with the questioning, so 
let me just jump in with some different things here maybe.
    So this all started--it has been in existence for 2 years, 
right? January 2014 is when the first CO-OP started operation, 
is that right?
    Dr. Cohen. That's correct.
    Mr. Jordan. And you had over 100 applicants but you 
approved 24?
    Dr. Cohen. That's right.
    Mr. Jordan. And out of the 24, 12 have already failed?
    Dr. Cohen. Twelve have closed, yes.
    Mr. Jordan. Twelve have closed, closed, failed, whatever 
word you want to use. Okay. And last year, I understand while 
maybe 24 were still operating, you visited 16 of the CO-OPs, is 
that accurate, site visits?
    Dr. Cohen. That sounds right.
    Mr. Jordan. Sixteen of the 24. Were there still 24 in 
operation starting January 1 of 2015?
    Dr. Cohen. No, there were 23. Vermont never ----
    Mr. Jordan. Never got involved?
    Dr. Cohen.--got their State license ----
    Mr. Jordan. Okay. So the ones who ----
    Dr. Cohen.--yes.
    Mr. Jordan.--got approved and actually started insuring 
American citizens, 23, you visited 16 of the 23 last year?
    Dr. Cohen. That's correct.
    Mr. Jordan. Okay. So of the seven you didn't visit, have 
any of them closed?
    Dr. Cohen. I don't have the list of who we visited and who 
didn't, but I know we prioritized those that we had concerns 
about.
    Mr. Jordan. Okay. Then let me ask you this way. The 16 you 
did visit, were all 12 in that 16?
    Dr. Cohen. I don't know, but I can follow up and let you 
know.
    Mr. Jordan. All right. Of the 12 who are still in 
operation, how many do you anticipate are going to collapse 
this year?
    Dr. Cohen. Again, it's too early to know about what will 
happen over the course of this year. We did a lot of work at 
the end of last year with our colleagues at the State 
Departments of Insurance to make sure that we felt that these 
CO-OPs could operate ----
    Mr. Jordan. Let me ask--maybe this has been asked by the 
chairman or some of the members. Of the 12 still in existence, 
how many are meeting enrollment projections?
    Dr. Cohen. I can't speak to the specifics about any one of 
the CO-OPs, but that's definitely a factor that we look at. And 
we're only first getting in the data about how ----
    Mr. Jordan. Is that one of the things that you look at when 
you go out on these site visits?
    Dr. Cohen. Absolutely.
    Mr. Jordan. But you can't tell me?
    Dr. Cohen. So I can't speak to that right now, but I'd be 
happy to follow up ----
    Mr. Jordan. Are ----
    Dr. Cohen.--with details.
    Mr. Jordan.--one of the 12 meeting enrollment projections? 
Are five of the 12? Can you give me some numbers?
    Dr. Cohen. I think some of them are over-enrolled, and 
sometimes that's their concern, and sometimes they're under-
enrolled. So it depends on the particular circumstance.
    Mr. Jordan. How many of the 12 still in operation are 
currently profitable?
    Dr. Cohen. I couldn't say how many are profitable. I think 
that we know that small businesses are going to struggle to 
turn a profit in the early years, and it's too early to know 
what their balance sheet is going to look like for 2016.
    Mr. Jordan. You don't know if these places that are still--
I mean, half of them have already collapsed, closed, your term, 
costing the taxpayers over $1 billion. Of the 12 that are left, 
you can't tell me which ones you have visited or haven't 
visited, what the enrollment projections are and whether they 
are meeting their enrollment projections, and whether they are 
profitable or not? That is the kind of stuff we kind of wanted 
to know in this hearing.
    Dr. Cohen. Understood. And I'd be happy to follow up with 
those details.
    Mr. Jordan. I mean, there are only 12. It is one thing if 
it was 100. There are 12 still operating. You have lost half of 
them, and I am asking you about those 12 still in operation. 
Who is making any money, right, who is meeting their enrollment 
projections, and who did you visit?
    Dr. Cohen. I can follow up ----
    Mr. Jordan. And you can't tell me out of those 12 ----
    Dr. Cohen. I don't have that information in front of me on 
the top of my head, but I would want to--I would be very happy 
to follow up and get you that.
    Mr. Jordan. Well, we need that information. And that is 
kind of, frankly, the information you should have had on the 
top of your head and in front of you when you come to--it is 
only 12. That is the kind of stuff we need to know. Now ----
    Dr. Cohen. Sure.
    Mr. Jordan.--I understand on the 20th of November and the 
23rd of December, we sent you letters requesting documents, and 
staff had told me earlier this week we had not received those 
documents. Was the stuff we requested in the document dump you 
gave us yesterday?
    Dr. Cohen. I believe that we have been working with your 
staff, prioritized ----
    Mr. Jordan. That is not my question.
    Dr. Cohen.--what ----
    Mr. Jordan. I understand we got a bunch of documents last 
night. I want to know if they specifically--specifically in 
that dump of documents we got last night, is that what we 
requested in the November 20 and December 23 letters to you?
    Dr. Cohen. So I ----
    Mr. Jordan. Because we want that information.
    Dr. Cohen. Yes. So I--what were the specific documents that 
you were referring to, and I can let you know if they were in 
the document dump? Or at least I'll ----
    Mr. Jordan. Well, there is a number of things we haven't 
gotten, the corrective action plans for current operation for 
some of the current CO-OPs, documents and communications 
relating to CMS assessment and analysis of these site visits I 
was trying to ask you about ----
    Dr. Cohen. Got it.
    Mr. Jordan.--so we don't have that information. We want 
that information, and I want to know did we get it last night 
or do you still need to get it to us?
    Dr. Cohen. So I ----
    Mr. Jordan. We have also subpoenaed that, by the way.
    Dr. Cohen. Yes. So they're--some of those documents are in 
the document dump that you got from us. Others we have offered 
in a confidential review. I know that you ----
    Mr. Jordan. And if I could, Mr. Chairman, that is what I 
wanted to get to. So why an in camera viewing only?
    Dr. Cohen. So we feel strongly that we--these documents are 
market-sensitive, that we have a fiduciary responsibility to 
the CO-OPs to allow them to operate on a level playing field 
with their competitors. These are 12 that the State Department 
of Insurance used with every insurer. If we were to release --
--
    Mr. Jordan. But what about ----
    Dr. Cohen.--the details of just the CO-OPs, that would put 
them at a disadvantage and further--make it more unlikely that 
we wouldn't return taxpayer dollars.
    Mr. Jordan. But don't you also run the risk that it puts 
the enrollees at some kind of disadvantage that they are now 
maybe part of a CO-OP that is in financial trouble, and based 
on history and experience and the fact that half of them have 
already failed and many of these, I assume, of these other 12 
are in big trouble, you don't think it is important for the 
enrollees, the actual fellow citizens, to know what is going 
on?
    Dr. Cohen. So we share that information with the two 
entities that are most important to making the corrections, the 
CO-OPs themselves and the State Departments of Insurance, which 
carry the voice of ----
    Mr. Jordan. But we are the Congress of the United States. 
We are an entity that it is kind of important to know about 
this as well.
    Dr. Cohen. And we want you to know that we are doing our 
job, which is why we had your staff--and I know they spent 
hours with those documents so that you know that we are doing 
our job here and are being pretty tough on the CO-OPs.
    Mr. Jordan. But our job is to stand up and represent the 
citizens of the country who want to know that information, and 
frankly, from a market standpoint and an evaluation standpoint, 
need that information.
    Dr. Cohen. And that's why you can have access to those 
documents if you need more time to review them.
    Mr. Jordan. Thank you for the time.
    Mr. Mulvaney. I now recognize the gentleman from Georgia, 
Mr. Carter, for 5 minutes.
    Mr. Carter. Thank you, Mr. Chairman. And thank you for 
being here, both of you. I appreciate it.
    Dr. Cohen, in 2011 the current administration projected 
that the CO-OP programs would result in significant losses, and 
that was something that they projected. And it would be losses 
in taxpayers' dollars. Specifically, when this rule was 
proposed to implement the CO-OP program they estimated that 
only about 65 percent of the solvency loans and only about 60 
percent of the startup loans would be repaid. You had to be 
aware of this. Were you aware of that?
    Dr. Cohen. So I think you're talking about the repayment 
time, not the default rate, which is often called the default 
rate. So it's really about will they pay back in the time 
allotted, but we knew that the CO-OPs would likely need more 
time and have it to be ----
    Mr. Carter. All right. Well, you want to limit it to the 
time. What about the time? How many of them have paid back now?
    Dr. Cohen. So they're--as any loan, as you know, they're 
paying back their loan. For those that have closed, we are 
working through a process now to recover those funds.
    Mr. Carter. You were aware of this. You said you were aware 
of this because it was part of the proposed rule to implement 
it. Did you set up any kind of criteria whereas you would 
assess the financial viability of these CO-OPs?
    Dr. Cohen. Absolutely. The terms of the loan agreement 
themselves have quite an extensive amount of oversight process 
laid out for it. In addition, we have gone over and beyond that 
knowing that these ----
    Mr. Carter. When did you do this? When did you ----
    Dr. Cohen. Doing ----
    Mr. Carter. When did you set up this criteria?
    Dr. Cohen. The criteria--when the loans were let before 
2014.
    Mr. Carter. You set it up during that time?
    Dr. Cohen. Yes.
    Mr. Carter. It was my understanding that it was developed 
after the recommendation of the HHS IG.
    Dr. Cohen. We certainly went beyond the terms of the loan 
agreement to do further oversight, and yes, appreciated the OIG 
work saying that--to do enhanced oversight, which we have. I 
don't think anyone can fault us for--in terms of how many folks 
are on corrective action plans or enhanced oversight. We're 
visiting these folks. We're calling them. We're being pretty 
hard on them frankly.
    Mr. Carter. The inspector general of HHS, he found that all 
but one, all but one of the CO-OPs had lost money in 2014. CMS 
was aware of this, that almost all of the CO-OPs incurred 
losses in 2014. If you were aware of that and some were already 
shutting down, why did you continue to award the taxpayer 
dollars in loans?
    Dr. Cohen. So you need it to ----
    Mr. Carter. I mean, if you know you are on a sinking ship, 
you know, you have got to--when I first entered the Georgia 
Legislature, one of the things they told us, when you are in a 
hole, stop digging. And we are in a hole here. Why are we still 
digging?
    Dr. Cohen. Now, we share your concerns here. These programs 
certainly have challenges, which is why we've been doing the 
extensive and aggressive oversight that we have. What I would 
say is that when we are looking at what the CO-OP is doing, 
it's a totality. It's what is their business strategy ----
    Mr. Carter. Well, but when you talk about ----
    Dr. Cohen.--what is their ----
    Mr. Carter.--totality, though, 12 of the 23 CO-OPs have 
already closed, 12 of the ----
    Dr. Cohen. Yes.
    Mr. Carter.--23. Anybody in business would pull the plug on 
that immediately, but you continue it. Why is that?
    Dr. Cohen. Well, we look at each individual situation, as 
my colleague ----
    Mr. Carter. And I hope you look at each individual, and I 
don't mean to interrupt, but with 12 out of 23, come on.
    Dr. Cohen. Right. And that's why we're working hard to make 
sure the other ones are as strong as they can be, but they are 
small businesses. As you know, small businesses struggle at the 
beginning, particularly ----
    Mr. Carter. I know small businesses--trust me. I own a 
small business. I struggled at the beginning.
    Dr. Cohen. Yes, it's tough.
    Mr. Carter. But I didn't fail. I continued on.
    Dr. Cohen. And that's what we're trying to do with the CO-
OPs that are ----
    Mr. Carter. Yes, but I ----
    Dr. Cohen.--currently in business ----
    Mr. Carter.--met my obligations. I didn't close. I mean, if 
you have got 12 out of 23 closing, it would appear to me that 
you have got to say, hey, wait a minute, something is going on 
here. This just isn't working.
    And we are talking about taxpayers' dollars, again, that we 
in Congress, we are responsible for this. We are the ones who 
----
    Dr. Cohen. Absolutely.
    Mr. Carter.--have to answer for this. So I am asking you if 
you have got 12 out of 23 that are closing, why are we 
continuing this?
    Dr. Cohen. And the original reason for the CO-OP program 
was to provide an additional choice and competition, so where 
it is working, where they are viable, we want to support them 
----
    Mr. Carter. Where are they working?
    Dr. Cohen. In the 11 places where they're existing.
    Mr. Carter. That is not--are they working in those 11 
places?
    Dr. Cohen. Well ----
    Mr. Carter. Just because they haven't gone out of business 
doesn't necessarily mean they are working.
    Dr. Cohen. We agree with you there. They certainly have 
some challenges, and so we need to stay on top of them, and 
that's what we're doing.
    Mr. Carter. What about the $1.2 billion in loans ----
    Dr. Cohen. That's what ----
    Mr. Carter.--that were awarded to the 12 closed CO-OPs?
    Dr. Cohen. Yes, that's the process we're working through 
right now ----
    Mr. Carter. What about it? Where is the $1.2 billion?
    Dr. Cohen. Well, some of that obviously went to pay for 
actual medical care for the consumers that were enrolled in 
those ----
    Mr. Carter. Are we going to get it back?
    Dr. Cohen. We are working to get every penny we can.
    Mr. Carter. Are we going to get the $1.2 billion back?
    Dr. Cohen. We're going to use every tool at our disposal --
--
    Mr. Carter. Are we, yes or no? Are we ----
    Dr. Cohen. So obviously some of that money was spent on 
actual medical care for consumers, so ----
    Mr. Carter. We are not going to get it back, are we?
    Dr. Cohen. We're going to try to get every dollar we ----
    Mr. Carter. And do you think we will get half of it back? 
Do you think we will get ----
    Dr. Cohen. I ----
    Mr. Carter.--a quarter of it back?
    Dr. Cohen. I can't say ----
    Mr. Carter. Do you have any idea how much of it we will get 
back?
    Dr. Cohen. I can't say at this point.
    Mr. Carter. Twelve out of 23.
    Dr. Cohen. Understood. That's right.
    Mr. Carter. Thank you, Mr. Speaker.
    Dr. Cohen. Thank you.
    Mr. Mulvaney. I recognize the gentleman from Pennsylvania, 
Mr. Cartwright, for an additional 5 minutes.
    Mr. Cartwright. Thank you, Mr. Chairman.
    And, Mr. Chairman, the last thing I want to do is hold 
myself out as the adult in the room, but we have ----
    Mr. Mulvaney. Certainly not. Can we put it to a vote?
    Mr. Cartwright. We are not going to put that to a vote, Mr. 
Chairman. That is right.
    But we have had a discussion about the release of 
confidential information, and I am concerned about that. I 
would like to reiterate my concern that the committee not 
release any confidential regulatory information that we have 
obtained about the remaining CO-OPs in a way that could mislead 
consumers about the insurance companies in their States. I 
think empowering consumers through transparency is a good 
thing, and you don't hear many voices louder than mine on the 
issue of transparency.
    But that is not what we would be accomplishing by releasing 
this information. In reality, it would be misleading 
selectively to release information about currently operating 
CO-OPs that have been placed under corrective actions plans or 
enhanced oversight plans by CMS.
    Mr. Redmer, I see you nodding your head. And isn't it true 
that State regulators like yourself frequently do enter into 
consent orders with health insurance companies to address 
issues raised by consumer complaints like billing or claims 
practices, right?
    Mr. Redmer. Absolutely, we do, yes.
    Mr. Cartwright. But it is also my understanding that this 
type of regulatory action is typically kept confidential until 
a resolution has been reached?
    Mr. Redmer. Correct.
    Mr. Cartwright. Okay. And in fact, yesterday, the committee 
received a letter from the National Association of Insurance 
Commissioners. You remember that, I take it, Commissioner?
    Mr. Redmer. Yes, sir.
    Mr. Cartwright. And here is what the NAIC had to say, and I 
would like to ask unanimous consent to enter that letter into 
the record, Mr. Chairman.
    Mr. Mulvaney. Without objection,
    Mr. Cartwright. They said this: ``For the sake of the 11 
CO-OPs that continue to operate in our States, we encourage all 
congressional members and their staff to heed the confidential 
nature of some of the financial information that may come to 
your attention. Divulging information on State actions or the 
financial status of any plan that is not public could threaten 
the long-term success of these plans.''
    Now, Commissioner Redmer, as a State insurance 
commissioner, do you think it would be harmful to release 
information about any CAP or EOP for the remaining CO-OPs?
    Mr. Redmer. I do. It's easy for a competitor to take a 
nugget of information and throw it out there out of context and 
create an unfavorable, adverse effect for that organization.
    Mr. Cartwright. And not to put too fine a point on it, I 
really don't think I am the only adult in the room, and I look 
forward to working with the folks across the aisle to be 
responsible with that information.
    And I also want to follow up on the question of recouping 
funds. Dr. Cohen, roughly $2.4 billion had been loaned to all 
the CO-OPs, is that correct?
    Dr. Cohen. That's right.
    Mr. Cartwright. But only half of that amount has gone to 
CO-OPs that have wound down. Am I correct in that?
    Dr. Cohen. That's right. That's right.
    Mr. Cartwright. Okay. And then the remainder of the loan 
funding, money that had been lent to the CO-OPs that are still 
in operation, is still being serviced, right?
    Dr. Cohen. Sorry, repeat that?
    Mr. Cartwright. They are making payments on the ----
    Dr. Cohen. That's right.
    Mr. Cartwright.--loans?
    Dr. Cohen. That's right.
    Mr. Cartwright. And, Dr. Cohen, what is CMS doing to recoup 
loan funds from the CO-OPs that have in fact wound down?
    Dr. Cohen. To recoup the funding for the CO-OPs that have 
wound down, we're going through a process right now. We know 
about our obligations to the taxpayer. The recoupment process 
is dictated by the terms of the loan agreement, as well as 
State and Federal law. The Department of Justice leads that 
process on our behalf.
    Mr. Cartwright. Okay. Now, a fellow named John Morrison, 
who was a former president of the National Alliance of State 
Health CO-Ops, testified before Congress on this issue in 
November, and you are aware of that, I take it?
    Dr. Cohen. Yes.
    Mr. Cartwright. Now, he suggested that consumers in States 
with CO-OPs have already saved more money through lower 
premiums than the total cost of the entire CO-OP program 
itself. He also noted that these savings are passed along to 
the Federal Government, the taxpayers, in the form of lower 
subsidy costs. Now, Dr. Cohen, what do you make of that 
statement?
    Dr. Cohen. So I don't know the data, but again, we agree 
with the concept.
    Mr. Cartwright. Okay. And, Commissioner Redmer, what is 
your perspective on the capacity of CO-OPs to save consumers 
and the Federal Government money?
    Mr. Redmer. I believe that competition is a good thing, 
and, again, to go back to my earlier statement, the broader 
conversation is not just about CO-OPs. We've got small, new, 
emerging, privately owned carriers all around the country that 
could be adversely affected specifically because of the risk 
adjustment formula that aren't using any taxpayer dollars at 
all.
    Mr. Cartwright. Well, I thank both of you for your 
testimony here today.
    Dr. Cohen. Thank you.
    Mr. Mulvaney. And I am sorry to cut the gentleman ----
    Mr. Cartwright. I yield back.
    Mr. Mulvaney.--off, but we have to go vote on the 
Cartwright of Pennsylvania amendment, whatever that is. We now 
recognize the chairman of the subcommittee, Mr. Jordan, for 5 
minutes for the final questions.
    Mr. Jordan. And we don't want to miss an opportunity to 
vote against that wonderful amendment, I am sure. I am kidding 
you.
    So, Dr. Cohen, of the 12 left ----
    Dr. Cohen. Yes.
    Mr. Jordan.--how many of those are under corrective action 
plan, enhanced oversight?
    Dr. Cohen. Eight.
    Mr. Jordan. Eight. So your position is that certain 
information can't get out because it could somehow jeopardize 
the ability of CO-OPs to survive. I just fail to see that. 
Twenty-three started, 12 have already collapsed. Of the 12 
remaining, eight are under some corrective action plan, and 
somehow, if we get information about enrollment projections and 
profitability, that is going to ruin their reputation? I mean 
really?
    Dr. Cohen. Well, again, I'm happy to share that information 
with you, Chairman ----
    Mr. Jordan. Well, no, let me ask ----
    Dr. Cohen.--out of a public setting.
    Mr. Jordan.--somehow if consumers get that information, 
that is somehow going to hurt them?
    Dr. Cohen. Well ----
    Mr. Jordan. It seems to me that is the kind of information 
they would need to know so they will say, look, this thing is 
going down. I need to run as far away from this--I need to get 
insured somewhere else.
    Dr. Cohen. And that's really the job of the State 
Department of Insurance to be the ones to certify whether or 
not the insurer has the ability to sell a product on the ----
    Mr. Jordan. What are these CAPs? What is in this corrective 
action plan? What is that? Is that a letter to them saying, 
hey, things don't look so good, you got to change some things? 
What is that?
    Dr. Cohen. Yes, it's a pretty detailed plan saying we've 
identified these particular ----
    Mr. Jordan. Detailed in what area? Give me some examples of 
things you require these CO-OPs to do to change ----
    Dr. Cohen. Sure.
    Mr. Jordan.--to correct the ----
    Dr. Cohen. We identify operational issues that they had 
whether it's in their management team, how they're doing vendor 
oversight, what they're doing with their provider networks, how 
they're pricing their product, their business strategy. It 
could be a range of issues.
    Mr. Jordan. So it is our understanding that the very things 
you just outlined that you put in this corrective action plan 
for the eight of the 12 who are still out there, the 12 who 
collapsed had the exact same plan sent to them.
    Dr. Cohen. No, that's--they were all tailored individually 
to their situation. Some of them, we couldn't--we realized that 
we didn't--couldn't identify a correctible issue and that, 
frankly, we went straight to a wind-down process with some of 
them.
    Mr. Jordan. Is it your opinion that--and then I am going to 
yield to the chairman for the remainder of my time. Is it your 
opinion that the three who are currently still operating and 
not--or, excuse me, it would be the four that are still 
operating who are not under a corrective action plan, are they 
going to be around at the end of the year?
    Dr. Cohen. So again, too early to tell in the year. We're 
just looking at their Q4 data from the end of last year ----
    Mr. Jordan. Can you guarantee us that those four who aren't 
under a corrective action plan, so of the 12 surviving, the --
--
    Dr. Cohen. Yes.
    Mr. Jordan.--four who aren't under a CAP or enhanced 
oversight, can you guarantee us that they are going to be 
around?
    Dr. Cohen. So we will continue to do our oversight of them 
in a very strict way, and as new information comes up, if we 
need to, we will put more folks on corrective action plans ----
    Mr. Jordan. So it is likely that those four may go on a 
corrective action plan, too?
    Dr. Cohen. It's too early for me to know. I think that's 
the work ahead of us.
    Mr. Jordan. I yield to the chairman.
    Mr. Mulvaney. Dr. Cohen, are you making any contingency 
plans for any of the currently operating CO-OPs to shut down 
during 2016?
    Dr. Cohen. I think a lot of our oversight work is in and of 
itself the planning that we're doing, trying to identify issues 
with them ----
    Mr. Mulvaney. Are you taking any specific actions to 
prepare for the possible shutdown of any of the currently 
operating CO-OPs?
    Dr. Cohen. I don't know exactly what you're referring to, 
but I think the work that we're doing on the oversight work is 
that contingency planning.
    Mr. Mulvaney. Does it bother you that I think several--I 
think it is at least four, maybe as many as seven of the CO-OPs 
that have already gone out of business or are winding down 
never went on a CAP to begin with?
    Dr. Cohen. Again, if we identify something we think is 
correctible, reversible, addressable, we put them on a CAP. 
Others, we recognize that that wouldn't ----
    Mr. Mulvaney. Have you ever corrected, reversed, or fixed 
anything under any of the CAPs?
    Dr. Cohen. So these are things that are structural to the 
program. As I was mentioning, some of the things, whether it's 
----
    Mr. Mulvaney. I understand what they are. I am asking you 
if you have fixed them.
    Dr. Cohen. So it--they don't fix overnight. These are 
things that take many months ----
    Mr. Mulvaney. And you have had many months ----
    Dr. Cohen.--to see those corrected ----
    Mr. Mulvaney.--you have had some of them under CAPs for 
many months. Have you made any improvements that we ----
    Dr. Cohen. Yes, I think some of them have certainly made 
some improvements in their vendor management and their--in the 
way that they're looking at their operations and the way that 
they're looking at their provider networks, yes.
    Mr. Mulvaney. Several times today you have mentioned that 
you take a seriously hard look at the CO-OPs, that you 
aggressively work on oversight, you have strict oversight. Do 
you believe that you are entitled to see anything from the CO-
OPs that this committee and this Congress is not entitled to 
see?
    Dr. Cohen. Again, we are happy to share with you any of the 
information ----
    Mr. Mulvaney. I understand that, and I appreciate that. Do 
you believe that you are entitled to see anything that we are 
not?
    Dr. Cohen. I--no, again, we're happy to share with you the 
information that we can ----
    Mr. Mulvaney. Mr. Redmer, the last question.
    Mr. Redmer. Sure.
    Mr. Mulvaney. I understand the concern about going public 
with the information. Evergreen chose to go public in November 
of 2015 to a committee of this Congress that it was under a 
CAP, didn't it?
    Mr. Redmer. They went to go public--I'm sorry, say again.
    Mr. Mulvaney. They made public statements in Congress to 
one of the committee--of this body that they were under a CAP?
    Mr. Redmer. I don't know whether they did or not but ----
    Mr. Mulvaney. I can assure they did.
    Mr. Redmer. But I can tell you discussing the CAP is not a 
concern for me as a regulator. What's of concern to me is 
disclosing confidential proprietary information that could be 
used against them in the marketplace by just passing out 
nuggets that might be out of context.
    Mr. Mulvaney. Fair enough. I thank both of you very much.
    Mr. Redmer. Thank you.
    Mr. Mulvaney. And I am sorry to wrap this up very quickly, 
but as you can see, we have got 7 minutes to run across the 
street. We are going to hold the record open for 5 days for any 
member who wants to submit a written statement. We thank the 
witnesses.
    There being no further business and without objection, we 
will stand adjourned. Thank you very much.
    Mr. Redmer. Thank you.
    Dr. Cohen. Thank you.
    [Whereupon, at 3:24 p.m., the subcommittee was adjourned.]


                                APPENDIX

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