II 

109TH CONGRESS 

1ST SESSION S. 1015 

To amend the Public Health Service Act to provide for cooperative governing 

of individual health insurance coverage offered in interstate commerce. 

IN THE SENATE OF THE UNITED STATES 

MAY 12, 2005 

Mr. DEMINT introduced the following bill; which was read twice and referred 

to the Committee on Health, Education, Labor, and Pensions 

A BILL 

To amend the Public Health Service Act to provide for 

cooperative governing of individual health insurance coverage offered in interstate commerce. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as ‘‘Health Care Choice Act 

5 of 2005’’. 

6 SEC. 2. SPECIFICATION OF CONSTITUTIONAL AUTHORITY 

7 FOR ENACTMENT OF LAW. 

8 This Act is enacted pursuant to the power granted 

9 Congress under article I, section 8, clause 3, of the United 

10 States Constitution. 
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1 SEC. 3. FINDINGS. 

2 Congress finds the following: 

3 (1) The application of numerous and significant 

4 variations in State law impacts the ability of insur5 ers to offer, and individuals to obtain, affordable in6 dividual health insurance coverage, thereby impeding 

7 commerce in individual health insurance coverage. 

8 (2) Individual health insurance coverage is in9 creasingly offered through the Internet, other elec10 tronic means, and by mail, all of which are inher11 ently part of interstate commerce. 

12 (3) In response to these issues, it is appropriate 

13 to encourage increased efficiency in the offering of 

14 individual health insurance coverage through a col15 laborative approach by the States in regulating this 

16 coverage. 

17 (4) The establishment of risk-retention groups 

18 has provided a successful model for the sale of insur19 ance across State lines, as the acts establishing 

20 those groups allow insurance to be sold in multiple 

21 States but regulated by a single State. 

22 SEC. 4. COOPERATIVE GOVERNING OF INDIVIDUAL 

23 HEALTH INSURANCE COVERAGE. 

24 (a) IN GENERAL.—Title XXVII of the Public Health 

25 Service Act (42 U.S.C. 300gg et seq.) is amended by add26 ing at the end the following new part: 
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1 ‘‘PART D—COOPERATIVE GOVERNING OF 

2 INDIVIDUAL HEALTH INSURANCE COVERAGE 

3 ‘‘SEC. 2795. DEFINITIONS. 

4 ‘‘In this part: 

5 ‘‘(1) PRIMARY STATE.—The term ‘primary 

6 State’ means, with respect to individual health insur7 ance coverage offered by a health insurance issuer, 

8 the State designated by the issuer as the State 

9 whose covered laws shall govern the health insurance 

10 issuer in the sale of such coverage under this part. 

11 An issuer, with respect to a particular policy, may 

12 only designate one such State as its primary State 

13 with respect to all such coverage it offers. Such an 

14 issuer may not change the designated primary State 

15 with respect to individual health insurance coverage 

16 once the policy is issued, except that such a change 

17 may be made upon renewal of the policy. With re18 spect to such designated State, the issuer is deemed 

19 to be doing business in that State. 

20 ‘‘(2) SECONDARY STATE.—The term ‘secondary 

21 State’ means, with respect to individual health insur22 ance coverage offered by a health insurance issuer, 

23 any State that is not the primary State. In the case 

24 of a health insurance issuer that is selling a policy 

25 in, or to a resident of, a secondary State, the issuer 
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1 is deemed to be doing business in that secondary 

2 State. 

3 ‘‘(3) HEALTH INSURANCE ISSUER.—The term 

4 ‘health insurance issuer’ has the meaning given such 

5 term in section 2791(b)(2), except that such an 

6 issuer must be licensed in the primary State and be 

7 qualified to sell individual health insurance coverage 

8 in that State. 

9 ‘‘(4) INDIVIDUAL HEALTH INSURANCE COV10 ERAGE.—The term ‘individual health insurance cov11 erage’ means health insurance coverage offered in 

12 the individual market, as defined in section 

13 2791(e)(1). 

14 ‘‘(5) APPLICABLE STATE AUTHORITY.—The 

15 term ‘applicable State authority’ means, with respect 

16 to a health insurance issuer in a State, the State in17 surance commissioner or official or officials des18 ignated by the State to enforce the requirements of 

19 this title for the State with respect to the issuer. 

20 ‘‘(6) HAZARDOUS FINANCIAL CONDITION.—The 

21 term ‘hazardous financial condition’ means that, 

22 based on its present or reasonably anticipated finan23 cial condition, a health insurance issuer is unlikely 

24 to be able— 
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1 ‘‘(A) to meet obligations to policyholders 

2 with respect to known claims and reasonably 

3 anticipated claims; or 

4 ‘‘(B) to pay other obligations in the normal 

5 course of business. 

6 ‘‘(7) COVERED LAWS.—The term ‘covered laws’ 

7 means the laws, rules, regulations, agreements, and 

8 orders governing the insurance business pertaining 

9 to— 

10 ‘‘(A) individual health insurance coverage 

11 issued by a health insurance issuer; 

12 ‘‘(B) the offer, sale, and issuance of indi13 vidual health insurance coverage to an indi14 vidual; and 

15 ‘‘(C) the provision to an individual in rela16 tion to individual health insurance coverage 

17 of— 

18 ‘‘(i) health care and insurance related 

19 services; 

20 ‘‘(ii) management, operations, and in21 vestment activities of a health insurance 

22 issuer; and 

23 ‘‘(iii) loss control and claims adminis24 tration for a health insurance issuer with 
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1 respect to liability for which the issuer pro2 vides insurance. 

3 ‘‘(8) STATE.—The term ‘State’ means only the 

4 50 States and the District of Columbia. 

5 ‘‘(9) UNFAIR CLAIMS SETTLEMENT PRAC6 TICES.—The term ‘unfair claims settlement prac7 tices’ means only the following practices: 

8 ‘‘(A) Knowingly misrepresenting to claim9 ants and insured individuals relevant facts or 

10 policy provisions relating to coverage at issue. 

11 ‘‘(B) Failing to acknowledge with reason12 able promptness pertinent communications with 

13 respect to claims arising under policies. 

14 ‘‘(C) Failing to adopt and implement rea15 sonable standards for the prompt investigation 

16 and settlement of claims arising under policies. 

17 ‘‘(D) Failing to effectuate prompt, fair, 

18 and equitable settlement of claims submitted in 

19 which liability has become reasonably clear. 

20 ‘‘(E) Refusing to pay claims without con21 ducting a reasonable investigation. 

22 ‘‘(F) Failing to affirm or deny coverage of 

23 claims within a reasonable period of time after 

24 having completed an investigation related to 

25 those claims. 
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1 ‘‘(10) FRAUD AND ABUSE.—The term ‘fraud 

2 and abuse’ means an act or omission committed by 

3 a person who, knowingly and with intent to defraud, 

4 commits, or conceals any material information con5 cerning, one or more of the following: 

6 ‘‘(A) Presenting, causing to be presented 

7 or preparing with knowledge or belief that it 

8 will be presented to or by an insurer, a rein9 surer, broker or its agent, false information as 

10 part of, in support of or concerning a fact ma11 terial to one or more of the following: 

12 ‘‘(i) An application for the issuance or 

13 renewal of an insurance policy or reinsur14 ance contract. 

15 ‘‘(ii) The rating of an insurance policy 

16 or reinsurance contract. 

17 ‘‘(iii) A claim for payment or benefit 

18 pursuant to an insurance policy or reinsur19 ance contract. 

20 ‘‘(iv) Premiums paid on an insurance 

21 policy or reinsurance contract. 

22 ‘‘(v) Payments made in accordance 

23 with the terms of an insurance policy or 

24 reinsurance contract. 
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1 ‘‘(vi) A document filed with the com2 missioner or the chief insurance regulatory 

3 official of another jurisdiction. 

4 ‘‘(vii) The financial condition of an in5 surer or reinsurer. 

6 ‘‘(viii) The formation, acquisition, 

7 merger, reconsolidation, dissolution or 

8 withdrawal from one or more lines of in9 surance or reinsurance in all or part of a 

10 State by an insurer or reinsurer. 

11 ‘‘(ix) The issuance of written evidence 

12 of insurance. 

13 ‘‘(x) The reinstatement of an insur14 ance policy. 

15 ‘‘(B) Solicitation or acceptance of new or 

16 renewal insurance risks on behalf of an insurer 

17 reinsurer or other person engaged in the busi18 ness of insurance by a person who knows or 

19 should know that the insurer or other person 

20 responsible for the risk is insolvent at the time 

21 of the transaction. 

22 ‘‘(C) Transaction of the business of insur23 ance in violation of laws requiring a license, cer24 tificate of authority or other legal authority for 

25 the transaction of the business of insurance. 
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1 ‘‘(D) Attempt to commit, aiding or abet2 ting in the commission of, or conspiracy to com3 mit the acts or omissions specified in this para4 graph. 

5 ‘‘SEC. 2796. APPLICATION OF LAW. 

6 ‘‘(a) IN GENERAL.—The covered laws of the primary 

7 State shall apply to individual health insurance coverage 

8 offered by a health insurance issuer in the primary State 

9 and in any secondary State, but only if the coverage and 

10 issuer comply with the conditions of this section with re11 spect to the offering of coverage in any secondary State. 

12 ‘‘(b) EXEMPTIONS FROM COVERED LAWS IN A SEC13 ONDARY STATE.—Except as provided in this section, a 

14 health insurance issuer with respect to its offer, sale, re15 newal, and issuance of individual health insurance cov16 erage in any secondary State is exempt from any covered 

17 laws of the secondary State (and any rules, regulations, 

18 agreements, or orders sought or issued by such State 

19 under or related to such covered laws) to the extent that 

20 such laws would— 

21 ‘‘(1) make unlawful, or regulate, directly or in22 directly, the operation of the health insurance issuer 

23 operating in the secondary State, except that any 

24 secondary State may require such an issuer— 
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1 ‘‘(A) to pay, on a nondiscriminatory basis, 

2 applicable premium and other taxes (including 

3 high risk pool assessments) which are levied on 

4 insurers and surplus lines insurers, brokers, or 

5 policyholders under the laws of the State; 

6 ‘‘(B) to register with and designate the 

7 State insurance commissioner as its agent solely 

8 for the purpose of receiving service of legal doc9 uments or process; 

10 ‘‘(C) to submit to an examination of its fi11 nancial condition by the State insurance com12 missioner in any State in which the issuer is 

13 doing business to determine the issuer’s finan14 cial condition, if— 

15 ‘‘(i) the State insurance commissioner 

16 of the primary State has not done an ex17 amination within the period recommended 

18 by the National Association of Insurance 

19 Commissioners; and 

20 ‘‘(ii) any such examination is con21 ducted in accordance with the examiners’ 

22 handbook of the National Association of 

23 Insurance Commissioners and is coordi24 nated to avoid unjustified duplication and 

25 unjustified repetition; 
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1 ‘‘(D) to comply with a lawful order 

2 issued— 

3 ‘‘(i) in a delinquency proceeding com4 menced by the State insurance commis5 sioner if there has been a finding of finan6 cial impairment under subparagraph (C); 

7 or 

8 ‘‘(ii) in a voluntary dissolution pro9 ceeding; 

10 ‘‘(E) to comply with an injunction issued 

11 by a court of competent jurisdiction, upon a pe12 tition by the State insurance commissioner al13 leging that the issuer is in hazardous financial 

14 condition; 

15 ‘‘(F) to participate, on a nondiscriminatory 

16 basis, in any insurance insolvency guaranty as17 sociation or similar association to which a 

18 health insurance issuer in the State is required 

19 to belong; 

20 ‘‘(G) to comply with any State law regard21 ing fraud and abuse (as defined in section 

22 2795(10)), except that if the State seeks an in23 junction regarding the conduct described in this 

24 subparagraph, such injunction must be obtained 

25 from a court of competent jurisdiction; or 
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1 ‘‘(H) to comply with any State law regard2 ing unfair claims settlement practices (as de3 fined in section 2795(9)); 

4 ‘‘(2) require any individual health insurance 

5 coverage issued by the issuer to be countersigned by 

6 an insurance agent or broker residing in that Sec7 ondary State; or 

8 ‘‘(3) otherwise discriminate against the issuer 

9 issuing insurance in both the primary State and in 

10 any secondary State. 

11 ‘‘(c) CLEAR AND CONSPICUOUS DISCLOSURE.—A 

12 health insurance issuer shall provide the following notice, 

13 in 12-point bold type, in any insurance coverage offered 

14 in a secondary State under this part by such a health in15 surance issuer and at renewal of the policy, with the 5 

16 blank spaces therein being appropriately filled with the 

17 name of the health insurance issuer, the name of primary 

18 State, the name of the secondary State, the name of the 

19 secondary State, and the name of the secondary State, re20 spectively, for the coverage concerned: 

21 ‘This policy is issued by lllll and is governed by 

22 the laws and regulations of the State of lllll, and 

23 it has met all the laws of that State as determined by 

24 that State’s Department of Insurance. This policy may be 

25 less expensive than others because it is not subject to all 
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1 of the insurance laws and regulations of the State of 

2 lllll, including coverage of some services or bene3 fits mandated by the law of the State of lllll. Ad4 ditionally, this policy is not subject to all of the consumer 

5 protection laws or restrictions on rate changes of the State 

6 of lllll. As with all insurance products, before pur7 chasing this policy, you should carefully review the policy 

8 and determine what health care services the policy covers 

9 and what benefits it provides, including any exclusions, 

10 limitations, or conditions for such services or benefits.’. 

11 ‘‘(d) PROHIBITION ON CERTAIN RECLASSIFICATIONS

12 AND PREMIUM INCREASES.— 

13 ‘‘(1) IN GENERAL.—For purposes of this sec14 tion, a health insurance issuer that provides indi15 vidual health insurance coverage to an individual 

16 under this part in a primary or secondary State may 

17 not upon renewal— 

18 ‘‘(A) move or reclassify the individual in19 sured under the health insurance coverage from 

20 the class such individual is in at the time of 

21 issue of the contract based on the health-status 

22 related factors of the individual; or 

23 ‘‘(B) increase the premiums assessed the 

24 individual for such coverage based on a health 

25 status-related factor or change of a health sta-
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1 tus-related factor or the past or prospective 

2 claim experience of the insured individual. 

3 ‘‘(2) CONSTRUCTION.—Nothing in paragraph 

4 (1) shall be construed to prohibit a health insurance 

5 issuer— 

6 ‘‘(A) from terminating or discontinuing 

7 coverage or a class of coverage in accordance 

8 with subsections (b) and (c) of section 2742; 

9 ‘‘(B) from raising premium rates for all 

10 policy holders within a class based on claims ex11 perience; 

12 ‘‘(C) from changing premiums or offering 

13 discounted premiums to individuals who engage 

14 in wellness activities at intervals prescribed by 

15 the issuer, if such premium changes or incen16 tives— 

17 ‘‘(i) are disclosed to the consumer in 

18 the insurance contract; 

19 ‘‘(ii) are based on specific wellness ac20 tivities that are not applicable to all indi21 viduals; and 

22 ‘‘(iii) are not obtainable by all individ23 uals to whom coverage is offered; 

24 ‘‘(D) from reinstating lapsed coverage; or 
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1 ‘‘(E) from retroactively adjusting the rates 

2 charged an individual insured individual if the 

3 initial rates were set based on material mis4 representation by the individual at the time of 

5 issue. 

6 ‘‘(e) PRIOR OFFERING OF POLICY IN PRIMARY

7 STATE.—A health insurance issuer may not offer for sale 

8 individual health insurance coverage in a secondary State 

9 unless that coverage is currently offered for sale in the 

10 primary State. 

11 ‘‘(f) LICENSING OF AGENTS OR BROKERS FOR

12 HEALTH INSURANCE ISSUERS.—Any State may require 

13 that a person acting, or offering to act, as an agent or 

14 broker for a health insurance issuer with respect to the 

15 offering of individual health insurance coverage obtain a 

16 license from that State, except that a State many not im17 pose any qualification or requirement which discriminates 

18 against a nonresident agent or broker. 

19 ‘‘(g) DOCUMENTS FOR SUBMISSION TO STATE IN20 SURANCE COMMISSIONER.—Each health insurance issuer 

21 issuing individual health insurance coverage in both pri22 mary and secondary States shall submit— 

23 ‘‘(1) to the insurance commissioner of each 

24 State in which it intends to offer such coverage, be-
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1 fore it may offer individual health insurance cov2 erage in such State— 

3 ‘‘(A) a copy of the plan of operation or fea4 sibility study or any similar statement of the 

5 policy being offered and its coverage (which 

6 shall include the name of its primary State and 

7 its principal place of business); 

8 ‘‘(B) written notice of any change in its 

9 designation of its primary State; and 

10 ‘‘(C) written notice from the issuer of the 

11 issuer’s compliance with all the laws of the pri12 mary State; and 

13 ‘‘(2) to the insurance commissioner of each sec14 ondary State in which it offers individual health in15 surance coverage, a copy of the issuer’s quarterly fi16 nancial statement submitted to the primary State, 

17 which statement shall be certified by an independent 

18 public accountant and contain a statement of opin19 ion on loss and loss adjustment expense reserves 

20 made by— 

21 ‘‘(A) a member of the American Academy 

22 of Actuaries; or 

23 ‘‘(B) a qualified loss reserve specialist. 
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1 ‘‘(h) POWER OF COURTS TO ENJOIN CONDUCT.— 

2 Nothing in this section shall be construed to affect the 

3 authority of any Federal or State court to enjoin— 

4 ‘‘(1) the solicitation or sale of individual health 

5 insurance coverage by a health insurance issuer to 

6 any person or group who is not eligible for such in7 surance; or 

8 ‘‘(2) the solicitation or sale of individual health 

9 insurance coverage by, or operation of, a health in10 surance issuer that is in hazardous financial condi11 tion. 

12 ‘‘(i) STATE POWERS TO ENFORCE STATE LAWS.— 

13 ‘‘(1) IN GENERAL.—Subject to the provisions of 

14 subsection (b)(1)(G) (relating to injunctions) and 

15 paragraph (2), nothing in this section shall be con16 strued to affect the authority of any State to make 

17 use of any of its powers to enforce the laws of such 

18 State with respect to which a health insurance issuer 

19 is not exempt under subsection (b). 

20 ‘‘(2) COURTS OF COMPETENT JURISDICTION.— 

21 If a State seeks an injunction regarding the conduct 

22 described in paragraphs (1) and (2) of subsection 

23 (h), such injunction must be obtained from a Fed24 eral or State court of competent jurisdiction. 
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1 ‘‘(j) STATES’ AUTHORITY TO SUE.—Nothing in this 

2 section shall affect the authority of any State to bring ac3 tion in any Federal or State court. 

4 ‘‘(k) GENERALLY APPLICABLE LAWS.—Nothing in 

5 this section shall be construed to affect the applicability 

6 of State laws generally applicable to persons or corpora7 tions. 

8 ‘‘SEC. 2797. PRIMARY STATE MUST MEET FEDERAL FLOOR 

9 BEFORE ISSUER MAY SELL INTO SECONDARY 

10 STATES. 

11 ‘‘A health insurance issuer may not offer, sell, or 

12 issue individual health insurance coverage in a secondary 

13 State if the primary State does not meet the following re14 quirements: 

15 ‘‘(1) The State insurance commissioner must 

16 use a risk-based capital formula for the determina17 tion of capital and surplus requirements for all 

18 health insurance issuers. 

19 ‘‘(2) The State must have legislation or regula20 tions in place establishing an independent review 

21 process for individuals who are covered by individual 

22 health insurance coverage unless the issuer provides 

23 an independent review mechanism functionally equiv24 alent (as determined by the primary State insurance 

25 commissioner or official) to that prescribed in the 
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1 ‘Health Carrier External Review Model Act’ of the 

2 National Association of Insurance Commissioners for 

3 all individuals who purchase insurance coverage 

4 under the terms of this part. 

5 ‘‘SEC. 2798. ENFORCEMENT. 

6 ‘‘(a) IN GENERAL.—Subject to subsection (b), with 

7 respect to specific individual health insurance coverage the 

8 primary State for such coverage has sole jurisdiction to 

9 enforce the primary State’s covered laws in the primary 

10 State and any secondary State. 

11 ‘‘(b) SECONDARY STATE’S AUTHORITY.—Nothing in 

12 subsection (a) shall be construed to affect the authority 

13 of a secondary State to enforce its laws as set forth in 

14 the exception specified in section 2796(b)(1). 

15 ‘‘(c) COURT INTERPRETATION.—In reviewing action 

16 initiated by the applicable secondary State authority, the 

17 court of competent jurisdiction shall apply the covered 

18 laws of the primary State. 

19 ‘‘(d) NOTICE OF COMPLIANCE FAILURE.—In the case 

20 of individual health insurance coverage offered in a sec21 ondary State that fails to comply with the covered laws 

22 of the primary State, the applicable State authority of the 

23 secondary State may notify the applicable State authority 

24 of the primary State.’’. 
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1 (b) EFFECTIVE DATE.—The amendment made by 

2 subsection (a) shall apply to individual health insurance 

3 coverage offered, issued, or sold after the date of the en4 actment of this Act. 

5 SEC. 5. SEVERABILITY. 

6 If any provision of the Act or the application of such 

7 provision to any person or circumstance is held to be un8 constitutional, the remainder of this Act and the applica9 tion of the provisions of such to any other person or cir10 cumstance shall not be affected. 

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