I

104TH CONGRESS

2D SESSION H. R. 3070

To improve portability and continuity of health insurance coverage in the

group and individual markets, to combat waste, fraud, and abuse in

health insurance and health care delivery, and to simplify the administration of health insurance.

IN THE HOUSE OF REPRESENTATIVES

MARCH 12, 1996

Mr. BILIRAKIS (for himself and Mr. BLILEY) introduced the following bill;

which was referred to the Committee on Commerce, and Committees on

Ways and Means, the Judiciary, and Economic and Educational Opportunities, for a period to be subsequently determined by the Speaker, in each

case for consideration of such provisions as fall within the jurisdiction of

the committee concerned

A BILL

To improve portability and continuity of health insurance

coverage in the group and individual markets, to combat

waste, fraud, and abuse in health insurance and health

care delivery, and to simplify the administration of health

insurance.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

2 (a) SHORT TITLE.—This Act may be cited as the

3 ‘‘Health Coverage Availability and Affordability Act of

4 1996’’.

5 (b) TABLE OF CONTENTS.—The table of contents of

6 this Act is as follows:

Sec. 1. Short title; table of contents.

TITLE I—IMPROVED AVAILABILITY AND PORTABILITY OF

HEALTH INSURANCE COVERAGE

Subtitle A—Coverage Under Group Health Plans

Sec. 101. Portability of coverage for previously covered individuals.

Sec. 102. Limitation on preexisting condition exclusions; no application to certain newborns, adopted children, and pregnancy.

Sec. 103. Prohibiting exclusions based on health status and providing for enrollment periods.

Sec. 104. Enforcement.

Subtitle B—Certain Requirements for Insurers and HMOs in the Group and

Individual Markets

PART 1—AVAILABILITY OF GROUP HEALTH INSURANCE COVERAGE

Sec. 131. Guaranteed availability of general coverage in the small group market.

Sec. 132. Guaranteed renewability of group coverage.

PART 2—AVAILABILITY OF INDIVIDUAL HEALTH INSURANCE COVERAGE

Sec. 141. Guaranteed availability of individual health insurance coverage to certain individuals with prior group coverage.

Sec. 142. Guaranteed renewability of individual health insurance coverage.

PART 3—ENFORCEMENT

Sec. 151. Incorporation of provisions for State enforcement with Federal fallback authority.

Subtitle C—Definitions; General Provisions

Sec. 191. Definitions; scope of coverage.

Sec. 192. State flexibility to provide greater protection.

Sec. 193. Effective date.

Sec. 194. Rule of construction.

TITLE II—PREVENTING HEALTH CARE FRAUD AND ABUSE;

ADMINISTRATIVE SIMPLIFICATION

Sec. 200. References in title.
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Subtitle A—Fraud and Abuse Control Program

Sec. 201. Fraud and abuse control program.

Sec. 202. Medicare integrity program.

Sec. 203. Beneficiary incentive programs.

Sec. 204. Application of certain health anti-fraud and abuse sanctions to fraud

and abuse against Federal health care programs.

Sec. 205. Guidance regarding application of health care fraud and abuse sanctions.

Subtitle B—Revisions to Current Sanctions for Fraud and Abuse

Sec. 211. Mandatory exclusion from participation in medicare and State health

care programs.

Sec. 212. Establishment of minimum period of exclusion for certain individuals

and entities subject to permissive exclusion from medicare and

State health care programs.

Sec. 213. Permissive exclusion of individuals with ownership or control interest

in sanctioned entities.

Sec. 214. Sanctions against practitioners and persons for failure to comply with

statutory obligations.

Sec. 215. Intermediate sanctions for medicare health maintenance organizations.

Sec. 216. Additional exception to anti-kickback penalties for discounting and

managed care arrangements.

Sec. 217. Criminal penalty for fraudulent disposition of assets in order to obtain medicaid benefits.

Sec. 218. Effective date.

Subtitle C—Data Collection

Sec. 221. Establishment of the health care fraud and abuse data collection program.

Subtitle D—Civil Monetary Penalties

Sec. 231. Social security act civil monetary penalties.

Sec. 232. Clarification of level of intent required for imposition of sanctions.

Sec. 233. Penalty for false certification for home health services.

Subtitle E—Revisions to Criminal Law

Sec. 241. Definition of Federal health care offense.

Sec. 242. Health care fraud.

Sec. 243. Theft or embezzlement.

Sec. 244. False statements.

Sec. 245. Obstruction of criminal investigations of health care offenses.

Sec. 246. Laundering of monetary instruments.

Sec. 247. Injunctive relief relating to health care offenses.

Sec. 248. Authorized investigative demand procedures.

Sec. 249. Forfeitures for Federal health care offenses.

Subtitle F—Administrative Simplification

Sec. 251. Purpose.

Sec. 252. Administrative simplification.

‘‘PART C—ADMINISTRATIVE SIMPLIFICATION
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‘‘Sec. 1171. Definitions.

‘‘Sec. 1172. General requirements for adoption of standards.

‘‘Sec. 1173. Standards for information transactions and data elements.

‘‘Sec. 1174. Timetables for adoption of standards.

‘‘Sec. 1175. Requirements.

‘‘Sec. 1176. General penalty for failure to comply with requirements and

standards.

‘‘Sec. 1177. Wrongful disclosure of individually identifiable health information.

‘‘Sec. 1178. Effect on State law.

‘‘Sec. 1179. Health Information Advisory Committee.’’.

1 TITLE I—IMPROVED AVAILABIL2 ITY AND PORTABILITY OF

3 HEALTH INSURANCE COV4 ERAGE

5 Subtitle A—Coverage Under Group

6 Health Plans

7 SEC. 101. PORTABILITY OF COVERAGE FOR PREVIOUSLY

8 COVERED INDIVIDUALS.

9 (a) CREDITING PERIODS OF PREVIOUS COVERAGE

10 TOWARD PREEXISTING CONDITION RESTRICTIONS.—Sub11 ject to the succeeding provisions of this section, a group

12 health plan, and an insurer or health maintenance organi13 zation offering health insurance coverage in connection

14 with a group health plan, shall provide that any preexist15 ing condition limitation period (as defined in subsection

16 (b)(2)) is reduced by the length of the aggregate period

17 of qualified prior coverage (if any, as defined in subsection

18 (b)(3)) applicable to the participant or beneficiary as of

19 the date of commencement of coverage under the plan.
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1 (b) DEFINITIONS AND OTHER PROVISIONS RELAT2 ING TO PREEXISTING CONDITIONS.—

3 (1) PREEXISTING CONDITION.—

4 (A) IN GENERAL.—For purposes of this

5 subtitle, subject to subparagraph (B), the term

6 ‘‘preexisting condition’’ means a condition, re7 gardless of the cause of the condition, for which

8 medical advice, diagnosis, care, or treatment

9 was recommended or received within the 6-

10 month period ending on the day before—

11 (i) the effective date of the coverage

12 of such participant or beneficiary, or

13 (ii) the earliest date upon which such

14 coverage could have been effective if there

15 were no waiting period applicable,

16 whichever is earlier.

17 (B) EXTENSION OF PERIOD IN THE CASE

18 OF LATE ENROLLMENT.—In the case of a par19 ticipant or beneficiary whose initial coverage

20 commences after the date the participant or

21 beneficiary first becomes eligible for coverage

22 under the group health plan, the reference in

23 subparagraph (A) to ‘‘6-month period’’ is

24 deemed a reference to ‘‘12-month period’’.
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1 (2) PREEXISTING CONDITION LIMITATION PE2 RIOD.—For purposes of this subtitle, the term ‘‘pre3 existing condition limitation period’’ means, with re4 spect to coverage of an individual under a group

5 health plan or under health insurance coverage, the

6 period during which benefits with respect to treat7 ment of a condition of such individual are not pro8 vided based on the fact that the condition is a pre9 existing condition.

10 (3) AGGREGATE PERIOD OF QUALIFIED PRIOR

11 COVERAGE.—

12 (A) IN GENERAL.—For purposes of this

13 section, the term ‘‘aggregate period of qualified

14 prior coverage’’ means, with respect to com15 mencement of coverage of an individual under

16 a group health plan or health insurance cov17 erage offered in connection with a group health

18 plan, the aggregate of the qualified coverage pe19 riods (as defined in subparagraph (B)) of such

20 individual occurring before the date of such

21 commencement. Such period shall be treated as

22 zero if there is more than a 60-day break in

23 coverage under a group health plan (or health

24 insurance coverage offered in connection with

25 such a plan) between the date the most recent
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1 qualified coverage period ends and the date of

2 such commencement.

3 (B) QUALIFIED COVERAGE PERIOD.—

4 (i) IN GENERAL.—For purposes of

5 this paragraph, subject to subsection (c),

6 the term ‘‘qualified coverage period’’

7 means, with respect to an individual, any

8 period of coverage of the individual under

9 a group health plan, health insurance cov10 erage, or under title XIX of the Social Se11 curity Act.

12 (ii) DISREGARDING PERIODS BEFORE

13 BREAKS IN COVERAGE.—Such term does

14 not include any period occurring before

15 any 60-day break in coverage described in

16 subparagraph (A).

17 (C) WAITING PERIOD NOT TREATED AS A

18 BREAK IN COVERAGE.—For purposes of sub19 paragraphs (A) and (B), any period that is in

20 a waiting period for any coverage under a

21 group health plan (or for health insurance cov22 erage offered in connection with a group health

23 plan) shall not be considered to be a break in

24 coverage described in subparagraph (B)(ii).
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1 (D) ESTABLISHMENT OF PERIOD.—A

2 qualified coverage period with respect to an in3 dividual shall be established through presen4 tation of certifications described in subsection

5 (c) or in such other manner as may be specified

6 in regulations to carry out this section.

7 (c) CERTIFICATIONS OF COVERAGE; CONFORMING

8 COVERAGE.—

9 (1) IN GENERAL.—The plan administrator of a

10 group health plan, or the insurer or HMO offering

11 health insurance coverage in connection with a group

12 health plan, shall, on request made on behalf of an

13 individual covered (or previously covered within the

14 previous 18 months) under the plan or coverage,

15 provide for a certification of the period of coverage

16 of the individual under such plan or coverage and of

17 the waiting period (if any) imposed with respect to

18 the individual for any coverage under the plan.

19 (2) STANDARD METHOD.—Subject to paragraph

20 (3), a group health plan, or insurer or HMO offering

21 health insurance coverage in connection with a group

22 health plan, shall determine qualified coverage peri23 ods under subsection (b)(3)(B) by including all peri24 ods described in such subsection, without regard to

25 the specific benefits offered during such a period.
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1 (3) ALTERNATIVE METHOD.—Such a plan, in2 surer, or HMO may elect to make such determina3 tion on a benefit-specific basis for all participants

4 and beneficiaries and not to include as a qualified

5 coverage period with respect to a specific benefit

6 coverage during a previous period unless such pre7 vious coverage for that benefit was included at the

8 end of the most recent period of coverage. In the

9 case of such an election—

10 (A) the plan, insurer, or HMO shall promi11 nently state in any disclosure statements con12 cerning the plan or coverage and to each en13 rollee at the time of enrollment under the plan

14 (or at the time the health insurance coverage is

15 offered for sale in the group health market)

16 that the plan or coverage has made such elec17 tion and shall include a description of the effect

18 of this election; and

19 (B) upon the request of the plan, insurer,

20 or HMO, the entity providing a certification

21 under paragraph (1)—

22 (i) shall promptly disclose to the re23 questing plan, insurer, or HMO the plan

24 statement (insofar as it relates to health

25 benefits under the plan) or other detailed
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1 benefit information on the benefits avail2 able under the previous plan or coverage,

3 and

4 (ii) may charge for the reasonable

5 cost of providing such information.

6 SEC. 102. LIMITATION ON PREEXISTING CONDITION EXCLU7 SIONS; NO APPLICATION TO CERTAIN

8 NEWBORNS, ADOPTED CHILDREN, AND PREG9 NANCY.

10 (a) LIMITATION OF PERIOD.—

11 (1) IN GENERAL.—Subject to the succeeding

12 provisions of this section, a group health plan, and

13 an insurer or HMO offering health insurance cov14 erage in connection with a group health plan, shall

15 provide that any preexisting condition limitation pe16 riod (as defined in section 101(b)(2)) does not ex17 ceed 12 months, counting from the effective date of

18 coverage.

19 (2) EXTENSION OF PERIOD IN THE CASE OF

20 LATE ENROLLMENT.—In the case of a participant or

21 beneficiary whose initial coverage commences after

22 the date the participant or beneficiary first becomes

23 eligible for coverage under the group health plan,

24 the reference in paragraph (1) to ‘‘12 months’’ is

25 deemed a reference to ‘‘18 months’’.
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1 (b) EXCLUSION NOT APPLICABLE TO CERTAIN

2 NEWBORNS AND CERTAIN ADOPTIONS.—

3 (1) IN GENERAL.—Subject to paragraph (2), a

4 group health plan, and an insurer or HMO offering

5 health insurance coverage in connection with a group

6 health plan, may not provide any limitation on bene7 fits based on the existence of a preexisting condition

8 in the case of—

9 (A) an individual who within the 30-day

10 period beginning with the date of birth, or

11 (B) an adopted child or a child placed for

12 adoption beginning at the time of adoption or

13 placement if the individual, within the 30-day

14 period beginning on the date of adoption or

15 placement,

16 becomes covered under a group health plan or other17 wise becomes covered under health insurance cov18 erage (or covered for medical assistance under title

19 XIX of the Social Security Act).

20 (2) LOSS IF BREAK IN COVERAGE.—Paragraph

21 (1) shall no longer apply to an individual if the indi22 vidual does not have any coverage under a group

23 health plan, health insurance coverage, or under title

24 XIX of the Social Security Act for a continuous pe25 riod of 60 days, not counting in such period any
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1 days that are in a waiting period for any coverage

2 under a group health plan.

3 (3) PLACED FOR ADOPTION DEFINED.—In this

4 subsection and section 103(d), the term ‘‘place5 ment’’, or being ‘‘placed’’, for adoption, in connec6 tion with any placement for adoption of a child with

7 any person, means the assumption and retention by

8 such person of a legal obligation for total or partial

9 support of such child in anticipation of adoption of

10 such child. The child’s placement with such person

11 terminates upon the termination of such legal obliga12 tion.

13 (c) EXCLUSION NOT APPLICABLE TO PREGNANCY.—

14 For purposes of this section, pregnancy shall not be treat15 ed as a preexisting condition.

16 (d) ELIGIBILITY PERIOD IMPOSED BY HEALTH

17 MAINTENANCE ORGANIZATIONS AS ALTERNATIVE TO

18 PREEXISTING CONDITION LIMITATION.—A health mainte19 nance organization which offers health insurance coverage

20 in connection with a group health plan and which does

21 not use the preexisting condition limitations allowed under

22 this section and section 101 with respect to any particular

23 coverage option may impose an eligibility period for such

24 coverage option, but only if such period does not exceed—
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1 (1) 90 days, in the case of a participant or ben2 eficiary whose initial coverage commences at the

3 time such participant or beneficiary first becomes el4 igible for coverage under the plan, or

5 (2) 180 days, in the case of a participant or

6 beneficiary whose initial coverage commences after

7 the date on which such participant or beneficiary

8 first becomes eligible for coverage.

9 For purposes of this subsection, the term ‘‘eligibility pe10 riod’’ means a period which, under the terms of the health

11 insurance coverage offered by the health maintenance or12 ganization, must expire before the health insurance cov13 erage becomes effective. Any such eligibility period shall

14 be treated for purposes of this subtitle as a waiting period

15 under the plan and shall run concurrently with any other

16 applicable waiting period under the plan.

17 SEC. 103. PROHIBITING EXCLUSIONS BASED ON HEALTH

18 STATUS AND PROVIDING FOR ENROLLMENT

19 PERIODS.

20 (a) PROHIBITION OF EXCLUSION OF PARTICIPANTS

21 OR BENEFICIARIES BASED ON HEALTH STATUS.—

22 (1) IN GENERAL.—A group health plan, and an

23 insurer or HMO offering health insurance coverage

24 in connection with a group health plan, may not ex25 clude an employee or his or her beneficiary from
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1 being (or continuing to be) a participant or bene2 ficiary under the terms of such plan or coverage

3 based on health status (as defined in section

4 191(c)(6)).

5 (2) CONSTRUCTION.—Nothing in this sub6 section shall be construed as preventing the estab7 lishment of preexisting condition limitations and re8 strictions to the extent consistent with the provisions

9 of this subtitle.

10 (b) ENROLLMENT OF ELIGIBLE INDIVIDUALS WHO

11 LOSE OTHER COVERAGE.—A group health plan shall per12 mit an uncovered employee who is otherwise eligible for

13 coverage under the terms of the plan (or an uncovered

14 dependent, as defined under the terms of the plan, of such

15 an employee, if family coverage is available) to enroll for

16 coverage under the plan under at least one benefit option

17 if each of the following conditions is met:

18 (1) The employee or dependent was covered

19 under a group health plan or had health insurance

20 coverage at the time coverage was previously offered

21 to the employee or individual.

22 (2) The employee stated in writing at such time

23 that coverage under a group health plan or health

24 insurance coverage was the reason for declining en25 rollment.
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1 (3) The employee or dependent lost coverage

2 under a group health plan or health insurance cov3 erage (as a result of loss of eligibility for the cov4 erage, termination of employment, or reduction in

5 the number of hours of employment).

6 (4) The employee requests such enrollment

7 within 30 days after the date of termination of such

8 coverage.

9 (c) DEPENDENT BENEFICIARIES.—

10 (1) IN GENERAL.—If a group health plan

11 makes family coverage available, the plan may not

12 require, as a condition of coverage of an individual

13 as a dependent (as defined under the terms of the

14 plan) of a participant in the plan, a waiting period

15 applicable to the coverage of a dependent who—

16 (A) is a newborn,

17 (B) is an adopted child or child placed for

18 adoption (within the meaning of section

19 102(b)(3)), at the time of adoption or place20 ment, or

21 (C) is a spouse, at the time of marriage,

22 if the participant has met any waiting period appli23 cable to that participant.

24 (2) TIMELY ENROLLMENT.—
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1 (A) IN GENERAL.—Enrollment of a partici2 pant’s beneficiary described in paragraph (1)

3 shall be considered to be timely if a request for

4 enrollment is made within 30 days of the date

5 family coverage is first made available or, in the

6 case described in—

7 (i) paragraph (1)(A), within 30 days

8 of the date of the birth,

9 (ii) paragraph (1)(B), within 30 days

10 of the date of the adoption or placement

11 for adoption, or

12 (iii) paragraph (1)(C), within 30 days

13 of the date of the marriage with such a

14 beneficiary who is the spouse of the partic15 ipant,

16 if family coverage is available as of such date.

17 (B) COVERAGE.—If available coverage in18 cludes family coverage and enrollment is made

19 under such coverage on a timely basis under

20 subparagraph (A), the coverage shall become ef21 fective not later than the first day of the first

22 month beginning 15 days after the date the

23 completed request for enrollment is received.
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1 SEC. 104. ENFORCEMENT.

2 (a) ENFORCEMENT THROUGH COBRA PROVISIONS

3 IN INTERNAL REVENUE CODE.—

4 (1) APPLICATION OF COBRA SANCTIONS.—Sub5 section (a) of section 4980B of the Internal Revenue

6 Code of 1986 is amended by striking ‘‘the require7 ments of’’ and all that follows and inserting ‘‘the re8 quirements of—

9 ‘‘(1) subsection (f) with respect to any qualified

10 beneficiary, or

11 ‘‘(2) subject to subsection (h)—

12 ‘‘(A) section 101 or 102 of the Health

13 Coverage Availability and Affordability Act of

14 1996 with respect to any individual covered

15 under the group health plan, or

16 ‘‘(B) section 103 of such Act with respect

17 to any individual.’’.

18 (2) NOTICE REQUIREMENT.—Section

19 4980B(f)(6)(A) of such Code is amended by insert20 ing before the period the following: ‘‘and subtitle A

21 of title I of the Health Coverage Availability and Af22 fordability Act of 1996’’.

23 (3) SPECIAL RULES.—Section 4980B of such

24 Code is amended by adding at the end the following:

25 ‘‘(h) SPECIAL RULES.—For purposes of applying this

26 section in the case of requirements described in subsection
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1 (a)(2) relating to section 101, section 102, or section 103

2 of the Health Coverage Availability and Affordability Act

3 of 1996—

4 ‘‘(1) DEFERRAL TO STATE REGULATION.—No

5 tax shall be imposed by this section on any failure

6 to meet the requirements of such section by any en7 tity which offers health insurance coverage and

8 which is an insurer or health maintenance organiza9 tion (as defined in section 191(c) of the Health Cov10 erage Availability and Affordability Act of 1996)

11 regulated by a State if the Secretary of Health and

12 Human Services has made the determination de13 scribed in section 104(c)(2) of such Act with respect

14 to such State, section, and entity.

15 ‘‘(2) LIMITATION FOR INSURED PLANS.—In the

16 case of a group health plan of a small employer (as

17 defined in section 191 of the Health Coverage Avail18 ability and Affordability Act of 1996) that provides

19 health care benefits solely through a contract with

20 an insurer or health maintenance organization (as

21 defined in such section), no tax shall be imposed by

22 this section upon the employer on a failure to meet

23 such requirements if the failure is solely because of

24 the product offered by the insurer or organization

25 under such contract.
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1 ‘‘(3) LIMITATION ON IMPOSITION OF TAX.—In

2 no case shall a tax be imposed by this section for a

3 failure to meet such a requirement if a sanction has

4 been imposed—

5 ‘‘(A) by the Secretary of Labor under part

6 5 of subtitle A of title I of the Employee Retire7 ment Income Security Act of 1974 with respect

8 to such failure, or

9 ‘‘(B) by the Secretary of Health and

10 Human Services under section 109 of the

11 Health Coverage Availability and Affordability

12 Act of 1996 with respect to such failure.’’.

13 (b) ENFORCEMENT THROUGH ERISA SANCTIONS

14 FOR CERTAIN GROUP HEALTH PLANS.—

15 (1) IN GENERAL.—Subject to the succeeding

16 provisions of this subsection, sections 101 through

17 103 of this subtitle shall be deemed to be provisions

18 of title I of the Employee Retirement Income Secu19 rity Act of 1974 for purposes of applying such title.

20 (2) FEDERAL ENFORCEMENT ONLY IF NO EN21 FORCEMENT THROUGH STATE.—The Secretary of

22 Labor shall enforce each section referred to in para23 graph (1) with respect to any entity which is an in24 surer or health maintenance organization regulated
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1 by a State only if the Secretary of Labor determines

2 that—

3 (A) such State has not provided for en4 forcement of State laws which govern the same

5 matters as are governed by such section and

6 which require compliance by such entity with at

7 least the same requirements as those provided

8 under such section, and

9 (B) such entity has failed to comply with

10 such requirements of such section as are appli11 cable to such entity.

12 (3) LIMITATIONS ON LIABILITY.—

13 (A) NO APPLICATION WHERE FAILURE

14 NOT DISCOVERED EXERCISING REASONABLE

15 DILIGENCE.—No liability shall be imposed

16 under this subsection on the basis of any failure

17 during any period for which it is established to

18 the satisfaction of the Secretary of Labor that

19 none of the persons against whom the liability

20 would be imposed knew, or exercising reason21 able diligence would have known, that such fail22 ure existed.

23 (B) NO APPLICATION WHERE FAILURE

24 CORRECTED WITHIN 30 DAYS.—No liability

25 shall be imposed under this subsection on the
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1 basis of any failure if such failure was due to

2 reasonable cause and not to willful neglect, and

3 such failure is corrected during the 30-day pe4 riod beginning on the first day any of the per5 sons against whom the liability would be im6 posed knew, or exercising reasonable diligence

7 would have known, that such failure existed.

8 (4) AVOIDING DUPLICATION OF CERTAIN PEN9 ALTIES.—In no case shall a civil money penalty be

10 imposed under the authority provided under para11 graph (1) for a violation of this subtitle for which

12 an excise tax has been imposed under section 4980B

13 of the Internal Revenue Code of 1986 or a civil

14 money penalty imposed under subsection (c).

15 (c) ENFORCEMENT THROUGH CIVIL MONEY PEN16 ALTIES.—

17 (1) IMPOSITION.—

18 (A) IN GENERAL.—Subject to the succeed19 ing provisions of this subsection, any group

20 health plan, insurer, or organization that fails

21 to meet a requirement of this subtitle is subject

22 to a civil money penalty under this section.

23 (B) LIABILITY FOR PENALTY.—Rules simi24 lar to the rules described in section 4980B(e) of

25 the Internal Revenue Code of 1986 for liability
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1 for a tax imposed under section 4980B(a) of

2 such Code shall apply to liability for a penalty

3 imposed under subparagraph (A).

4 (C) AMOUNT OF PENALTY.—

5 (i) IN GENERAL.—The maximum

6 amount of penalty imposed under this

7 paragraph is $100 for each day for each

8 individual with respect to which such a

9 failure occurs.

10 (ii) CONSIDERATIONS IN IMPOSI11 TION.—In determining the amount of any

12 penalty to be assessed under this para13 graph, the Secretary of Health and Human

14 Services shall take into account the pre15 vious record of compliance of the person

16 being assessed with the applicable require17 ments of this subtitle, the gravity of the

18 violation, and the overall limitations for

19 unintentional failures provided under sec20 tion 4980B(c)(4) of the Internal Revenue

21 Code of 1986.

22 (iii) LIMITATIONS.—

23 (I) PENALTY NOT TO APPLY

24 WHERE FAILURE NOT DISCOVERED

25 EXERCISING REASONABLE DILI-
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1 GENCE.—No civil money penalty shall

2 be imposed under this paragraph on

3 any failure during any period for

4 which it is established to the satisfac5 tion of the Secretary that none of the

6 persons against whom the penalty

7 would be imposed knew, or exercising

8 reasonable diligence would have

9 known, that such failure existed.

10 (II) PENALTY NOT TO APPLY TO

11 FAILURES CORRECTED WITHIN 30

12 DAYS.—No civil money penalty shall

13 be imposed under this paragraph on

14 any failure if such failure was due to

15 reasonable cause and not to willful ne16 glect, and such failure is corrected

17 during the 30-day period beginning on

18 the first day any of the persons

19 against whom the penalty would be

20 imposed knew, or exercising reason21 able diligence would have known, that

22 such failure existed.

23 (D) ADMINISTRATIVE REVIEW.—

24 (i) OPPORTUNITY FOR HEARING.—

25 The person assessed shall be afforded an
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1 opportunity for hearing by the Secretary

2 upon request made within 30 days after

3 the date of the issuance of a notice of as4 sessment. In such hearing the decision

5 shall be made on the record pursuant to

6 section 554 of title 5, United States Code.

7 If no hearing is requested, the assessment

8 shall constitute a final and unappealable

9 order.

10 (ii) HEARING PROCEDURE.—If a

11 hearing is requested, the initial agency de12 cision shall be made by an administrative

13 law judge, and such decision shall become

14 the final order unless the Secretary modi15 fies or vacates the decision. Notice of in16 tent to modify or vacate the decision of the

17 administrative law judge shall be issued to

18 the parties within 30 days after the date of

19 the decision of the judge. A final order

20 which takes effect under this paragraph

21 shall be subject to review only as provided

22 under subparagraph (D).

23 (E) JUDICIAL REVIEW.—

24 (i) FILING OF ACTION FOR REVIEW.—

25 Any person against whom an order impos-
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1 ing a civil money penalty has been entered

2 after an agency hearing under this para3 graph may obtain review by the United

4 States district court for any district in

5 which such person is located or the United

6 States District Court for the District of

7 Columbia by filing a notice of appeal in

8 such court within 30 days from the date of

9 such order, and simultaneously sending a

10 copy of such notice be registered mail to

11 the Secretary.

12 (ii) CERTIFICATION OF ADMINISTRA13 TIVE RECORD.—The Secretary shall

14 promptly certify and file in such court the

15 record upon which the penalty was im16 posed.

17 (iii) STANDARD FOR REVIEW.—The

18 findings of the Secretary shall be set aside

19 only if found to be unsupported by sub20 stantial evidence as provided by section

21 706(2)(E) of title 5, United States Code.

22 (iv) APPEAL.—Any final decision,

23 order, or judgment of such district court

24 concerning such review shall be subject to
26

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1 appeal as provided in chapter 83 of title 28

2 of such Code.

3 (F) FAILURE TO PAY ASSESSMENT; MAIN4 TENANCE OF ACTION.—

5 (i) FAILURE TO PAY ASSESSMENT.—If

6 any person fails to pay an assessment after

7 it has become a final and unappealable

8 order, or after the court has entered final

9 judgment in favor of the Secretary, the

10 Secretary shall refer the matter to the At11 torney General who shall recover the

12 amount assessed by action in the appro13 priate United States district court.

14 (ii) NONREVIEWABILITY.—In such ac15 tion the validity and appropriateness of the

16 final order imposing the penalty shall not

17 be subject to review.

18 (G) PAYMENT OF PENALTIES.—Except as

19 otherwise provided, penalties collected under

20 this paragraph shall be paid to the Secretary

21 (or other officer) imposing the penalty and shall

22 be available without appropriation and until ex23 pended for the purpose of enforcing the provi24 sions with respect to which the penalty was im25 posed.
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1 (2) FEDERAL ENFORCEMENT ONLY IF NO EN2 FORCEMENT THROUGH STATE.—Paragraph (1) shall

3 not apply to enforcement of the requirements of sec4 tion 101, 102, or 103 with respect to any entity

5 which offers health insurance coverage and which is

6 an insurer or HMO regulated by a State if the Sec7 retary of Health and Human Services has deter8 mined that—

9 (A) such State has not provided for en10 forcement of State laws which govern the same

11 matters as are governed by such section and

12 which require compliance by such entity with at

13 least the same requirements as those provided

14 under such section, and

15 (B) such entity has failed to comply with

16 such requirements of such section as are appli17 cable to such entity.

18 (3) NONDUPLICATION OF SANCTIONS.—In no

19 case shall a civil money penalty be imposed under

20 this subsection for a violation of this subtitle for

21 which an excise tax has been imposed under section

22 4980B of the Internal Revenue Code of 1986 or for

23 which a civil money penalty has been imposed under

24 the authority provided under subsection (b).
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1 (d) COORDINATION IN ADMINISTRATION.—The Sec2 retaries of the Treasury, Labor, and Health and Human

3 Services shall issue regulations that are nonduplicative to

4 carry out this subtitle. Such regulations shall be issued

5 in a manner that assures coordination and nonduplication

6 in their activities under this subtitle.

7 Subtitle B—Certain Requirements

8 for Insurers and HMOs in the

9 Group and Individual Markets

10 PART 1—AVAILABILITY OF GROUP HEALTH

11 INSURANCE COVERAGE

12 SEC. 131. GUARANTEED AVAILABILITY OF GENERAL COV13 ERAGE IN THE SMALL GROUP MARKET.

14 (a) ISSUANCE OF COVERAGE.—

15 (1) IN GENERAL.—Subject to the succeeding

16 subsections of this section, each insurer or HMO

17 that offers health insurance coverage in the small

18 group market in a State—

19 (A) must accept every small employer in

20 the State that applies for such coverage; and

21 (B) must accept for enrollment under such

22 coverage every eligible individual (as defined in

23 paragraph (2)) who applies for enrollment dur24 ing the initial period in which the individual

25 first becomes eligible for coverage under the
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1 group health plan and may not place any re2 striction which is inconsistent with section

3 103(a) on an individual being a participant or

4 beneficiary so long as such individual is an eli5 gible individual.

6 (2) ELIGIBLE INDIVIDUAL DEFINED.—In this

7 section, the term ‘‘eligible individual’’ means, with

8 respect to an insurer or HMO that offers health in9 surance coverage to any small employer in the small

10 group market, such an individual in relation to the

11 employer as shall be determined—

12 (A) in accordance with the terms of such

13 plan,

14 (B) as provided by the insurer or HMO

15 under rules of the insurer or HMO which are

16 uniformly applicable, and

17 (C) in accordance with all applicable State

18 laws governing such insurer or HMO.

19 (b) SPECIAL RULES FOR NETWORK PLANS AND

20 HMOS.—

21 (1) IN GENERAL.—In the case of an insurer

22 that offers health insurance coverage in the small

23 group market through a network plan and in the

24 case of an HMO that offers health insurance cov-
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1 erage in connection with such a plan, the insurer or

2 HMO may—

3 (A) limit the employers that may apply for

4 such coverage to those with eligible individuals

5 whose place of employment or residence is in

6 the service area for such plan or HMO;

7 (B) limit the individuals who may be en8 rolled under such coverage to those whose place

9 of residence or employment is within the service

10 area for such plan or HMO; and

11 (C) within the service area of such plan or

12 HMO, deny such coverage to such employers if

13 the insurer or HMO demonstrates that—

14 (i) it will not have the capacity to de15 liver services adequately to enrollees of any

16 additional groups because of its obligations

17 to existing group contract holders and en18 rollees, and

19 (ii) it is applying this paragraph uni20 formly to all employers without regard to

21 the claims experience of those employers

22 and their employees (and their bene23 ficiaries) or the health status of such em24 ployees and beneficiaries.
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1 (2) 180-DAY SUSPENSION UPON DENIAL OF

2 COVERAGE.—An insurer or HMO, upon denying

3 health insurance coverage in any service area in ac4 cordance with paragraph (1)(C), may not offer cov5 erage in the small group market within such service

6 area for a period of 180 days after such coverage is

7 denied.

8 (c) SPECIAL RULE FOR FINANCIAL CAPACITY LIM9 ITS.—

10 (1) IN GENERAL.—An insurer or HMO may

11 deny health insurance coverage in the small group

12 market if the insurer or HMO demonstrates to the

13 applicable State authority that—

14 (A) it does not have the financial reserves

15 necessary to underwrite additional coverage,

16 and

17 (B) it is applying this paragraph uniformly

18 to all employers without regard to the claims

19 experience or duration of coverage of those em20 ployers and their employees (and their bene21 ficiaries) or the health status of such employees

22 and beneficiaries.

23 (2) 180-DAY SUSPENSION UPON DENIAL OF

24 COVERAGE.—An insurer or HMO upon denying

25 health insurance coverage in connection with group
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1 health plans in any service area in accordance with

2 paragraph (1) may not offer coverage in connection

3 with group health plans in the small group market

4 within such service area for a period of 180 days

5 after such coverage is denied.

6 (d) EXCEPTION TO REQUIREMENT FOR ISSUANCE OF

7 COVERAGE BY REASON OF FAILURE BY PLAN TO MEET

8 CERTAIN MINIMUM PARTICIPATION OR CONTRIBUTION

9 RULES.—

10 (1) IN GENERAL.—Subsection (a) shall not

11 apply in the case of any group health plan with re12 spect to which—

13 (A) participation rules of an insurer or

14 HMO which are described in paragraph (2) are

15 not met, or

16 (B) contribution rules of an insurer or

17 HMO which are described in paragraph (3) are

18 not met.

19 (2) PARTICIPATION RULES.—For purposes of

20 paragraph (1)(A), participation rules (if any) of an

21 insurer or HMO shall be treated as met with respect

22 to a group health plan only if such rules are uni23 formly applicable and in accordance with applicable

24 State law and the number or percentage of eligible

25 individuals who, under the plan, are participants or
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1 beneficiaries equals or exceeds a level which is deter2 mined in accordance with such rules.

3 (3) CONTRIBUTION RULES.—For purposes of

4 paragraph (1)(B), contribution rules (if any) of an

5 insurer or HMO shall be treated as met with respect

6 to a group health plan only if such rules are in ac7 cordance with applicable State law.

8 SEC. 132. GUARANTEED RENEWABILITY OF GROUP COV9 ERAGE.

10 (a) IN GENERAL.—Except as provided in this section,

11 if an insurer or health maintenance organization offers

12 health insurance coverage in the small or large group mar13 ket, the insurer or organization must renew or continue

14 in force such coverage at the option of the employer.

15 (b) GENERAL EXCEPTIONS.—An insurer or organiza16 tion may nonrenew or discontinue health insurance cov17 erage offered an employer based only on one or more of

18 the following:

19 (1) NONPAYMENT OF PREMIUMS.—The em20 ployer has failed to pay premiums or contributions

21 in accordance with the terms of the health insurance

22 coverage or the insurer or organization has not re23 ceived timely premium payments.

24 (2) FRAUD.—The employer has performed an

25 act or practice that constitutes fraud or made an in-
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1 tentional misrepresentation of material fact under

2 the terms of the coverage.

3 (3) VIOLATION WITH PARTICIPATION OR CON4 TRIBUTION RULES.—The group purchaser has failed

5 to comply with a material plan provision relating to

6 participation or contribution rules contributions in

7 accordance with section 131(d).

8 (4) TERMINATION OF PLAN.—Subject to sub9 section (c), the insurer or organization is ceasing to

10 offer coverage in the small or large group market in

11 a State (or, in the case of a network plan or HMO,

12 in a geographic area).

13 (5) MOVEMENT OUTSIDE SERVICE AREA.—The

14 employer has changed the place of employment in

15 such manner that employees and dependents reside

16 and are employed outside the service area of the in17 surer or organization or outside the area for which

18 the insurer or organization is authorized to do busi19 ness.

20 (c) EXCEPTIONS FOR UNIFORM TERMINATION OF

21 COVERAGE.—

22 (1) PARTICULAR TYPE OF COVERAGE NOT OF23 FERED.—In any case in which a insurer or HMO

24 decides to discontinue offering a particular type of

25 health insurance coverage in the small or large
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•HR 3070 IH

1 group market, coverage of such type may be discon2 tinued by the insurer or organization only if—

3 (A) the insurer or organization provides

4 notice to each employer provided coverage of

5 this type in such market (and participants and

6 beneficiaries covered under such coverage) of

7 such discontinuation at least 90 days prior to

8 the date of the discontinuation of such cov9 erage;

10 (B) the insurer or organization offers to

11 each employer in the small employer or large

12 employer market provided coverage of this type,

13 the option to purchase any other health insur14 ance coverage currently being offered by the in15 surer or organization for employers in such

16 market; and

17 (C) in exercising the option to discontinue

18 coverage of this type and in offering one or

19 more replacement coverage, the insurer or orga20 nization acts uniformly without regard to the

21 health status or insurability of participants or

22 beneficiaries covered or new participants or

23 beneficiaries who may become eligible for such

24 coverage.

25 (2) DISCONTINUANCE OF ALL COVERAGE.—
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1 (A) IN GENERAL.—Subject to subpara2 graph (C), in any case in which an insurer or

3 HMO elects to discontinue offering all health

4 insurance coverage in the small group market

5 or the large group market, or both markets, in

6 a State, health insurance coverage may be dis7 continued by the insurer or organization only

8 if—

9 (i) the insurer or organization pro10 vides notice to the applicable State author11 ity and to each employer (and participants

12 and beneficiaries covered under such cov13 erage) of such discontinuation at least 180

14 days prior to the date of the expiration of

15 such coverage, and

16 (ii) all health insurance issued or de17 livered for issuance in the State in such

18 market (or markets) are discontinued and

19 coverage under such health insurance cov20 erage in such market (or markets) is not

21 renewed.

22 (B) PROHIBITION ON MARKET REENTRY.—

23 In the case of a discontinuation under subpara24 graph (A) in one or both markets, the insurer

25 or organization may not provide for the issu-
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•HR 3070 IH

1 ance of any health insurance coverage in the

2 market and State involved during the 5-year pe3 riod beginning on the date of the discontinu4 ation of the last health insurance coverage not

5 so renewed.

6 (d) EXCEPTION FOR UNIFORM MODIFICATION OF

7 COVERAGE.—At the time of coverage renewal, an insurer

8 or HMO may modify the coverage offered to a group

9 health plan in the group health market so long as such

10 modification is effective on a uniform basis among group

11 health plans with that type of coverage.

12 PART 2—AVAILABILITY OF INDIVIDUAL HEALTH

13 INSURANCE COVERAGE

14 SEC. 141. GUARANTEED AVAILABILITY OF INDIVIDUAL

15 HEALTH INSURANCE COVERAGE TO CERTAIN

16 INDIVIDUALS WITH PRIOR GROUP COV17 ERAGE.

18 (a) GOALS.—The goals of this section are—

19 (1) to guarantee that any qualifying individual

20 (as defined in subsection (b)(1)) is able to obtain

21 qualifying coverage (as defined in subsection (b)(2));

22 and

23 (2) to assure that qualifying individuals obtain24 ing such coverage receive credit for their prior cov25 erage toward the new coverage’s preexisting condi-
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•HR 3070 IH

1 tion exclusion period (if any) in a manner consistent

2 with subsection (b)(3).

3 (b) QUALIFYING INDIVIDUAL AND HEALTH INSUR4 ANCE COVERAGE DEFINED.—In this section—

5 (1) QUALIFYING INDIVIDUAL.—The term

6 ‘‘qualifying individual’’ means an individual—

7 (A) who is in a qualified coverage period

8 (as defined in section 101(b)(3)(C)) that—

9 (i) includes coverage under one or

10 more group health plans, and

11 (ii) commenced 18 or more months

12 before the date on which the individual

13 seeks coverage under this section;

14 (B) who is not eligible for coverage under

15 a group health plan;

16 (C) with respect to whom the most recent

17 coverage within the coverage period described in

18 subparagraph (A)(i) was not terminated based

19 on a factor described in paragraph (1) or (2) of

20 section 132(b);

21 (D) if the individual had been offered the

22 option of continuation coverage under a

23 COBRA continuation provision or under a simi24 lar State program, elected such coverage; and
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1 (E) who, if the individual elected such con2 tinuation coverage, has exhausted such continu3 ation coverage.

4 (2) QUALIFYING COVERAGE.—

5 (A) IN GENERAL.—The term ‘‘qualifying

6 coverage’’ means, with respect to an insurer or

7 HMO in relation to a qualifying individual, in8 dividual health insurance coverage for which the

9 actuarial value of the benefits is not less than—

10 (i) the weighted average actuarial

11 value of the benefits provided by all the in12 dividual health insurance coverage issued

13 by the insurer or HMO in the State during

14 the previous year (not including coverage

15 issued under this section), or

16 (ii) the weighted average of the actu17 arial value of the benefits provided by all

18 the individual health insurance coverage is19 sued by all insurers and HMOs in the

20 State during the previous year (not includ21 ing coverage issued under this section),

22 as elected by the plan or by the State under

23 subsection (c)(1).

24 (B) ASSUMPTIONS.—For purposes of sub25 paragraph (A), the actuarial value of benefits
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1 provided under individual health insurance cov2 erage shall be calculated based on a standard3 ized population and a set of standardized utili4 zation and cost factors.

5 (3) CREDITING FOR PREVIOUS COVERAGE.—

6 Crediting is consistent with this paragraph only if

7 any preexisting condition exclusion period is reduced

8 at least to the extent such a period would be reduced

9 if the coverage under this section were under a

10 group health plan to which section 101(a) applies. In

11 carrying out this subsection, provisions similar to

12 the provisions of section 101(c) shall apply.

13 (c) OPTIONAL STATE ESTABLISHMENT OF MECHA14 NISMS TO ACHIEVE GOALS OF GUARANTEEING AVAIL15 ABILITY OF COVERAGE.—

16 (1) IN GENERAL.—Any State may establish

17 public or private mechanisms reasonably designed to

18 meet the goals specified in subsection (a). If a State

19 implements such a mechanism by the deadline speci20 fied in paragraph (4), the State may elect to have

21 such mechanisms apply instead of having subsection

22 (d) apply in the State. An election under this para23 graph shall be by notice to the Secretary of Health

24 and Human Services on a timely basis consistent

25 with the deadlines specified in paragraph (4). In es-
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1 tablishing what is qualifying coverage under such a

2 mechanism under this subsection, a State may exer3 cise the election described in subsection (b)(2)(A)

4 with respect to each insurer or HMO in the State

5 (or on a collective basis after exercising such election

6 for each such insurer or HMO).

7 (2) TYPES OF MECHANISMS.—State mecha8 nisms under this subsection may include (but are

9 not limited to)—

10 (A) health insurance coverage pools or pro11 grams authorized or established by the State,

12 (B) mandatory group conversion policies,

13 (C) guaranteed issue of one or more plans

14 of individual health insurance coverage to quali15 fying individuals, or

16 (D) open enrollment by one or more insur17 ers or HMOs.

18 (3) SAFE HARBOR FOR BENEFITS UNDER CUR19 RENT RISK POOLS.—In the case of a State that has

20 a health insurance coverage pool or risk pool in ef21 fect on March 12, 1996, and that implements the

22 mechanism described in paragraph (2)(A), the bene23 fits under such mechanism (or benefits the actuarial

24 value of which is not less than the actuarial value

25 of such current benefits, using the assumptions de-
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1 scribed in subsection (b)(2)(B)) are deemed, for pur2 poses of this section, to constitute qualified coverage.

3 (4) DEADLINE FOR STATE IMPLEMENTATION.—

4 (A) IN GENERAL.—Subject to subpara5 graph (B), the deadline under this paragraph is

6 July 1, 1997.

7 (B) EXTENSION TO PERMIT LEGISLA8 TION.—The deadline under this paragraph is

9 July 1, 1998, in the case of a State the legisla10 ture of which does not have a regular legislative

11 session at any time between January 1, 1997,

12 and June 30, 1997.

13 (C) CONSTRUCTION.—Nothing in this sec14 tion shall be construed as preventing a State

15 from—

16 (i) implementing guaranteed availabil17 ity mechanisms before the deadline,

18 (ii) continuing in effect mechanisms

19 that are in effect before the date of the en20 actment of this Act,

21 (iii) offering guaranteed availability of

22 coverage that is not qualifying coverage, or

23 (iv) offering guaranteed availability of

24 coverage to individuals who are not quali25 fying individuals.
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1 (d) FALLBACK PROVISIONS.—

2 (1) NO STATE ELECTION.—If a State has not

3 provided notice to the Secretary of an election on a

4 timely basis under subsection (c), the Secretary shall

5 notify the State that paragraph (3) will be applied

6 in the State.

7 (2) PRELIMINARY DETERMINATION AFTER

8 STATE ELECTION.—If—

9 (A) a State has provided notice of an elec10 tion on a timely basis under subsection (c), and

11 (B) the Secretary finds, after consultation

12 with the chief executive officer of the State and

13 the insurance commissioner or chief insurance

14 regulatory official of the State, that such a

15 mechanism (for which notice was provided) is

16 not reasonably designed to meet the goals speci17 fied in subsection (a),

18 the Secretary shall notify the State of such prelimi19 nary determination, of the consequences under para20 graph (3) of a failure to implement such a mecha21 nism, and permit the State a reasonable opportunity

22 in which to modify the mechanism (or to adopt an23 other mechanism) that is reasonably designed to

24 meet the goals specified in subsection (a). If, after

25 providing such notice and opportunity, the Secretary
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1 finds that the State has not implemented such a

2 mechanism, the Secretary shall notify the State that

3 paragraph (3) will be applied in the State.

4 (3) DESCRIPTION OF FALLBACK MECHANISM.—

5 As provided under paragraphs (1) and (2) and sub6 ject to paragraph (5), each insurer or HMO in the

7 State involved that issues individual health insurance

8 coverage—

9 (A) shall offer qualifying health insurance

10 coverage to each qualifying individual in the

11 State, and

12 (B) may not decline to issue such coverage

13 to such an individual based on health status

14 (except as permitted under paragraph (4)).

15 (4) APPLICATION OF NETWORK AND CAPACITY

16 LIMITS.—Under regulations, the provisions of sub17 sections (b) and (c) of section 131 shall apply to an

18 individual in the individual health insurance market

19 under this subsection in the same manner as they

20 apply under section 131 to an employer in the small

21 group market.

22 (5) TERMINATION OF FALLBACK MECHANISM.—

23 The provisions of this subsection shall cease to apply

24 to a State if the Secretary finds that a State has im25 plemented a mechanism that is reasonably designed
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1 to meet the goals specified in subsection (a), and

2 until the Secretary finds that such mechanism is no

3 longer being implemented.

4 (e) CONSTRUCTION.—

5 (1) PREMIUMS.—Nothing in this section shall

6 be construed to affect the determination of an in7 surer or HMO as to the amount of the premium

8 payable under an individual health insurance cov9 erage under applicable state law.

10 (2) MARKET REQUIREMENTS.—

11 (A) IN GENERAL.—The provisions of sub12 section (a) shall not be construed to require

13 that an insurer or HMO offering health insur14 ance coverage only in connection with a group

15 health plan or an association offer individual

16 health insurance coverage.

17 (B) CONVERSION POLICIES.—An insurer

18 or HMO offering health insurance coverage in

19 connection with a group health plan under sub20 title A shall not be deemed to be an insurer or

21 HMO offering an individual health insurance

22 coverage solely because such insurer or HMO

23 offers a conversion policy.

24 (3) DISREGARD OF ASSOCIATION COVERAGE.—

25 An insurer or HMO that offers health insurance cov-
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1 erage only in connection with a group health plan or

2 in connection with individuals based on affiliation

3 with one or more associations is not considered, for

4 purposes of this subtitle, to be offering individual

5 health insurance coverage.

6 (4) MARKETING OF PLANS.—Nothing in this

7 section shall be construed to prevent a State from

8 requiring insurer or HMOs offering individual health

9 insurance coverage to actively market such coverage.

10 SEC. 142. GUARANTEED RENEWABILITY OF INDIVIDUAL

11 HEALTH INSURANCE COVERAGE.

12 (a) GUARANTEED RENEWABILITY.—Subject to the

13 succeeding provisions of this section, an insurer or HMO

14 that provides individual health insurance coverage to an

15 individual shall renew or continue such coverage at the

16 option of the individual.

17 (b) NONRENEWAL PERMITTED IN CERTAIN CASES.—

18 An insurer or HMO may nonrenew or discontinue individ19 ual health insurance coverage of an individual only based

20 on one or more of the following:

21 (1) NONPAYMENT.—The individual fails to pay

22 payment of premiums or contributions in accordance

23 with the terms of the coverage or the insurer or or24 ganization has not failed to receive timely premium

25 payments.
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1 (2) FRAUD.—The individual has performed an

2 act or practice that constitutes fraud or made an in3 tentional misrepresentation of material fact under

4 the terms of the coverage.

5 (3) TERMINATION OF COVERAGE.—Subject to

6 subsection (c), the insurer or HMO is ceasing to

7 offer health insurance coverage in the individual

8 market in a State (or, in the case of a network plan

9 or HMO, in a geographic area).

10 (c) TERMINATION OF INDIVIDUAL COVERAGE.—The

11 provisions of section 132(c) shall apply to this section in

12 the same manner as they apply under section 132, except

13 that any reference to an employer or market is deemed

14 a reference to a covered individual or the individual mar15 ket, respectively.

16 (d) EXCEPTION FOR UNIFORM MODIFICATION OF

17 COVERAGE.—The provisions of section 132(d) shall apply

18 to individual health insurance coverage in the individual

19 market under this section in the same manner as it applies

20 to health insurance coverage offered in connection with a

21 group health plan in the group market under such section.
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1 PART 3—ENFORCEMENT

2 SEC. 151. INCORPORATION OF PROVISIONS FOR STATE EN3 FORCEMENT WITH FEDERAL FALLBACK AU4 THORITY.

5 The provisions of paragraphs (1) and (2) of section

6 104(c) shall apply to enforcement of requirements in each

7 section in part 1 or part 2 with respect to insurers and

8 HMOs regulated by a State in the same manner as such

9 provisions apply to enforcement of requirements in section

10 101, 102, or 103 with respect to insurers and HMOs regu11 lated by a State.

12 Subtitle C—Definitions; General

13 Provisions

14 SEC. 191. DEFINITIONS; SCOPE OF COVERAGE.

15 (a) GROUP HEALTH PLAN.—

16 (1) DEFINITION.—Subject to the succeeding

17 provisions of this subsection and subsection (d)(1),

18 the term ‘‘group health plan’’ means an employee

19 welfare benefit plan to the extent that the plan pro20 vides medical care (as defined in subsection (b)( ))

21 to employees or their dependents (as defined under

22 the terms of the plan) directly or through insurance,

23 reimbursement, or otherwise, and includes a group

24 health plan (within the meaning of section

25 5000B(b)(1) of the Internal Revenue Code of 1986).
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1 (2) LIMITATION OF REQUIREMENTS TO PLANS

2 WITH 2 OR MORE EMPLOYEE PARTICIPANTS.—The

3 requirements of subtitle A and part 1 of subtitle B

4 shall apply in the case of a group health plan for

5 any plan year, or for health insurance coverage of6 fered in connection with a group health plan for a

7 year, only if the group health plan has two or more

8 participants as current employees on the first day of

9 the plan year.

10 (3) EXCLUSION OF PLANS WITH LIMITED COV11 ERAGE.—An employee welfare benefit plan shall be

12 treated as a group health plan under this title only

13 with respect to medical care which is provided under

14 the plan and which does not consist of coverage ex15 cluded from the definition of health insurance cov16 erage under subsection (c)(4)(B).

17 (3) TREATMENT OF CHURCH PLANS.—

18 (A) EXCLUSION.—The requirements of

19 this title insofar as they apply to group health

20 plans shall not apply to church plans.

21 (B) OPTIONAL DISREGARD IN DETERMIN22 ING PERIOD OF COVERAGE.—For purposes of

23 applying section 101(b)(3)(B)(i), a group health

24 plan may elect to disregard periods of coverage

25 of an individual under a church plan that, pur-
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1 suant to subparagraph (A), is not subject to the

2 requirements of this title.

3 (4) TREATMENT OF GOVERNMENTAL PLANS.—

4 (A) ELECTION TO BE EXCLUDED.—If the

5 plan sponsor of a governmental plan which is a

6 group health plan to which the provisions of

7 this subtitle otherwise apply makes an election

8 under this paragraph for any specified period

9 (in such form and manner as the Secretary of

10 Health and Human Services may by regulations

11 prescribe), then the requirements of this title

12 insofar as they apply to group health plans

13 shall not apply to such governmental plans for

14 such period.

15 (B) OPTIONAL DISREGARD IN DETERMIN16 ING PERIOD OF COVERAGE IF ELECTION

17 MADE.—For purposes of applying section

18 101(b)(3)(B)(i), a group health plan may elect

19 to disregard periods of coverage of an individual

20 under a governmental plan that, under an elec21 tion under subparagraph (A), is not subject to

22 the requirements of this title.

23 (5) TREATMENT OF MEDICAID PLAN AS GROUP

24 HEALTH PLAN.—A State plan under title XIX of the

25 Social Security Act shall be treated as a group
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1 health plan for purposes of applying section 101(c),

2 unless the State elects not to be so treated.

3 (b) INCORPORATION OF CERTAIN DEFINITIONS IN

4 EMPLOYEE RETIREMENT INCOME SECURITY ACT OF

5 1974.—Except as provided in this section, the terms ‘‘bene6 ficiary’’, ‘‘church plan’’, ‘‘employee’’, ‘‘employee welfare

7 benefit plan’’, ‘‘employer’’, ‘‘governmental plan’’, ‘‘multi8 employer plan’’, ‘‘multiple employer welfare arrange9 ment’’, ‘‘participant’’, ‘‘plan sponsor’’, and ‘‘State’’ have

10 the meanings given such terms in section 3 of the Em11 ployee Retirement Income Security Act of 1974.

12 (c) OTHER DEFINITIONS.—For purposes of this title:

13 (1) APPLICABLE STATE AUTHORITY.—The term

14 ‘‘applicable State authority’’ means, with respect to

15 an insurer or health maintenance organization in a

16 State, the State insurance commissioner or official

17 or officials designated by the State to enforce the re18 quirements of this title for the State involved with

19 respect to such insurer or organization.

20 (2) BONA FIDE ASSOCIATION.—The term ‘‘bona

21 fide association’’ means an association which—

22 (A) has been actively in existence for at

23 least 5 years,
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1 (B) has been formed and maintained in

2 good faith for purposes other than obtaining in3 surance,

4 (C) does not condition membership in the

5 association on health status,

6 (D) makes health insurance coverage of7 fered through the association available to all

8 members regardless of health status,

9 (E) does not make health insurance cov10 erage offered through the association available

11 to any individual who is not a member (or de12 pendent of a member) of the association at the

13 time the coverage is initially issued,

14 (F) does not impose preexisting condition

15 exclusions except in a manner consistent with

16 the requirements of sections 101 and 102 as

17 they relate to group health plans, and

18 (G) provides for renewal and continuation

19 of health insurance coverage in a manner con20 sistent with the requirements of section 132 as

21 they relate to the renewal and continuation in

22 force of coverage in a group market.

23 (3) COBRA CONTINUATION PROVISION.—The

24 term ‘‘COBRA continuation provision’’ means any of

25 the following:
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1 (A) Section 4980B of the Internal Revenue

2 Code of 1986, other than subsection (f)(1) of

3 such section insofar as it relates to pediatric

4 vaccines.

5 (B) Part 6 of subtitle B of title I of the

6 Employee Retirement Income Security Act of

7 1974 (29 U.S.C. 1161 et seq.), other than sec8 tion 609.

9 (C) Title XXII of the Public Health Serv10 ice Act.

11 (4) HEALTH INSURANCE COVERAGE.—

12 (A) IN GENERAL.—Except as provided in

13 subparagraph (B), the term ‘‘health insurance

14 coverage’’ means benefits consisting of medical

15 care (provided directly, through insurance or re16 imbursement, or otherwise) under any hospital

17 or medical service policy or certificate, hospital

18 or medical service plan contract, or health

19 maintenance organization group contract of20 fered by an insurer or a health maintenance or21 ganization.

22 (B) EXCEPTION.—Such term does not in23 clude coverage under any separate policy, cer24 tificate, or contract only for one or more of any

25 of the following:
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1 (i) Coverage for accident, credit-only,

2 vision, disability income, long-term care,

3 nursing home care, community-based care

4 dental, on-site medical clinics, or employee

5 assistance programs, or any combination

6 thereof.

7 (ii) Medicare supplemental health in8 surance (within the meaning of section

9 1882(g)(1) of the Social Security Act (42

10 U.S.C. 1395ss(g)(1))) and similar supple11 mental coverage provided under a group

12 health plan.

13 (iii) Coverage issued as a supplement

14 to liability insurance.

15 (iv) Liability insurance, including gen16 eral liability insurance and automobile li17 ability insurance.

18 (v) Workers’ compensation or similar

19 insurance.

20 (vi) Automobile medical-payment in21 surance.

22 (vii) Coverage consisting of benefit

23 payments made on a periodic basis for a

24 specified disease or illness or period of hos25 pitalization, without regard to the costs in-
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1 curred or services rendered during the pe2 riod to which the payments relate.

3 (viii) Short-term limited duration in4 surance.

5 (ix) Such other coverage, comparable

6 to that described in previous clauses, as

7 may be specified in regulations prescribed

8 under this title.

9 (5) HEALTH MAINTENANCE ORGANIZATION;

10 HMO.—The terms ‘‘health maintenance organiza11 tion’’ and ‘‘HMO’’ mean—

12 (A) a Federally qualified health mainte13 nance organization (as defined in section

14 1301(a) of the Public Health Service Act (42

15 U.S.C. 300e(a))),

16 (B) an organization recognized under State

17 law as a health maintenance organization, or

18 (C) a similar organization regulated under

19 State law for solvency in the same manner and

20 to the same extent as such a health mainte21 nance organization,

22 if (other than for purposes of part 2 of subtitle B)

23 it is subject to State law which regulates insurance

24 (within the meaning of section 514(b)(2) of the Em25 ployee Retirement Income Security Act of 1974).
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1 (6) HEALTH STATUS.—The term ‘‘health sta2 tus’’ includes, with respect to an individual, medical

3 condition, claims experience, receipt of health care,

4 medical history, evidence of insurability, or disabil5 ity.

6 (7) INDIVIDUAL HEALTH INSURANCE COV7 ERAGE.—The term ‘‘individual health insurance cov8 erage’’ means health insurance coverage offered to

9 individuals if the coverage is not offered in connec10 tion with a group health plan (other than such a

11 plan that has fewer than two participants as current

12 employees on the first day of the plan year).

13 (8) INSURER.—The term ‘‘insurer’’ means an

14 insurance company, insurance service, or insurance

15 organization which is licensed to engage in the busi16 ness of insurance in a State and (except for pur17 poses of part 2 of subtitle B) which is regulated by

18 a State (within the meaning of section 514(b)(2)(A)

19 of the Employee Retirement Income Security Act of

20 1974).

21 (9) MEDICAL CARE.—The term ‘‘medical care’’

22 means—

23 (A) amounts paid for, or items or services

24 in the form of, the diagnosis, cure, mitigation,

25 treatment, or prevention of disease, or amounts
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1 paid for, or items or services provided for, the

2 purpose of affecting any structure or function

3 of the body,

4 (B) amounts paid for, or services in the

5 form of, transportation primarily for and essen6 tial to medical care referred to in subparagraph

7 (A), and

8 (C) amounts paid for insurance covering

9 medical care referred to in subparagraphs (A)

10 and (B).

11 (10) NETWORK PLAN.—The term ‘‘network

12 plan’’ means, with respect to health insurance cov13 erage, an arrangement of an insurer or a health

14 maintenance organization under which the financing

15 and delivery of medical care are provided, in whole

16 or in part, through a defined set of providers under

17 contract with the insurer or health maintenance or18 ganization.

19 (11) WAITING PERIOD.—The term ‘‘waiting pe20 riod’’ means, with respect to a group health plan

21 and an individual who is a potential participant or

22 beneficiary in the plan, the minimum period that

23 must pass with respect to the individual before the

24 individual is eligible to be covered for benefits under

25 the plan.
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1 (d) TREATMENT OF PARTNERSHIPS.—

2 (1) TREATMENT AS A GROUP HEALTH PLAN.—

3 Any plan, fund, or program which would not be (but

4 for this paragraph) an employee welfare benefit plan

5 and which is established or maintained by a partner6 ship, to the extent that such plan, fund, or program

7 provides medical care to present or former partners

8 in the partnership or to their dependents (as defined

9 under the terms of the plan, fund, or program), di10 rectly or through insurance, reimbursement, or oth11 erwise, shall be treated (subject to paragraph (1)) as

12 an employee welfare benefit plan which is a group

13 health plan.

14 (2) TREATMENT OF PARTNERSHIP AND PART15 NERS AND EMPLOYER AND PARTICIPANTS.—In the

16 case of a group health plan—

17 (A) the term ‘‘employer’’ includes the part18 nership in relation to any partner; and

19 (B) the term ‘‘participant’’ includes—

20 (i) in connection with a group health

21 plan maintained by a partnership, an indi22 vidual who is a partner in relation to the

23 partnership, or

24 (ii) in connection with a group health

25 plan maintained by a self-employed individ-
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1 ual (under which one or more employees

2 are participants), the self-employed individ3 ual,

4 if such individual is or may become eligible to

5 receive a benefit under the plan or such individ6 ual’s beneficiaries may be eligible to receive any

7 such benefit.

8 (e) DEFINITIONS RELATING TO MARKETS AND

9 SMALL EMPLOYERS.—As used in this title:

10 (1) INDIVIDUAL MARKET.—The term ‘‘individ11 ual market’’ means the market for health insurance

12 coverage offered to individuals and not to employers

13 or in connection with a group health plan and does

14 not include the market for such coverage issued only

15 by an insurer or HMO that makes such coverage

16 available only on the basis of affiliation with an as17 sociation or other group.

18 (2) LARGE GROUP MARKET.—The term ‘‘large

19 group market’’ means the market for health insur20 ance coverage offered to employers (other than small

21 employers) on behalf of their employees (and their

22 dependents) and does not include health insurance

23 coverage available solely in connection with a bona

24 fide association (as defined in subsection (c)(2)).
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1 (3) SMALL EMPLOYER.—The term ‘‘small em2 ployer’’ means, in connection with a group health

3 plan with respect to a calendar year, an employer

4 who employs at least 2 but fewer than 51 employees

5 on a typical business day in the year. For purposes

6 of this paragraph, two or more trades or businesses,

7 whether or not incorporated, shall be deemed a sin8 gle employer if such trades or businesses are within

9 the same control group (within the meaning of sec10 tion 3(40)(B)(ii)).

11 (4) SMALL GROUP MARKET.—The term ‘‘small

12 group market’’ means the health insurance market

13 under which individuals obtain health insurance cov14 erage (directly or through any arrangement) on be15 half of themselves (and their dependents) on the

16 basis of employment or other relationship with re17 spect to a small employer and does not include

18 health insurance coverage available solely in connec19 tion with a bona fide association (as defined in sub20 section (c)(2)).

21 SEC. 192. STATE FLEXIBILITY TO PROVIDE GREATER PRO22 TECTION.

23 (a) STATE FLEXIBILITY TO PROVIDE GREATER PRO24 TECTION.—Subject to subsection (b), nothing in this title

25 shall be construed to preempt State laws that—
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1 (1) require insurers or HMOs to impose a limi2 tation or exclusion of benefits relating to the treat3 ment of a preexisting condition for a period that is

4 shorter than the applicable period provided for under

5 this title; or

6 (2) allow individuals, participants, and bene7 ficiaries to be considered to be in a period of pre8 vious qualifying coverage if such individual, partici9 pant, or beneficiary experiences a lapse in coverage

10 that is greater than the 60-day periods provided for

11 under sections 101(b)(3)(A), 101(b)(3)(B)(ii), and

12 102(b)(2).

13 (b) NO OVERRIDE OF ERISA PREEMPTION.—Noth14 ing in this Act shall be construed to affect or modify the

15 provisions of section 514 of the Employee Retirement In16 come Security Act of 1974 (29 U.S.C. 1144).

17 SEC. 193. EFFECTIVE DATE.

18 (a) IN GENERAL.—Except as otherwise provided for

19 in this title, the provisions of this title shall apply with

20 respect to—

21 (1) group health plans, and health insurance

22 coverage offered in connection with group health

23 plans, for plan years beginning on or after January

24 1, 1998, and
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1 (2) individual health insurance coverage issued,

2 renewed, in effect, or operated on or after July 1,

3 1998.

4 (b) CONSIDERATION OF PREVIOUS COVERAGE.—The

5 Secretaries of Health and Human Services, Treasury, and

6 Labor shall jointly establish rules regarding the treatment

7 (in determining qualified coverage periods under sections

8 102(b) and 141(b)) of coverage before the applicable effec9 tive date specified in subsection (a).

10 (c) TIMELY ISSUANCE OF REGULATIONS.—The Sec11 retaries of Health and Human Services, the Treasury, and

12 Labor shall issue such regulations on a timely basis as

13 may be required to carry out this title.

14 SEC. 194. RULE OF CONSTRUCTION.

15 Nothing in this title or any amendment made thereby

16 may be construed to require the coverage of any specific

17 procedure, treatment, or service as part of a group health

18 plan or health insurance coverage under this title or

19 through regulation.
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1 TITLE II—PREVENTING HEALTH

2 CARE FRAUD AND ABUSE; AD3 MINISTRATIVE SIMPLIFICA4 TION

5 SEC. 200. REFERENCES IN TITLE.

6 Except as otherwise specifically provided, whenever in

7 this title an amendment is expressed in terms of an

8 amendment to or repeal of a section or other provision,

9 the reference shall be considered to be made to that sec10 tion or other provision of the Social Security Act.

11 Subtitle A—Fraud and Abuse

12 Control Program

13 SEC. 201. FRAUD AND ABUSE CONTROL PROGRAM.

14 (a) ESTABLISHMENT OF PROGRAM.—Title XI (42

15 U.S.C. 1301 et seq.) is amended by inserting after section

16 1128B the following new section:

17 ‘‘FRAUD AND ABUSE CONTROL PROGRAM

18 ‘‘SEC. 1128C. (a) ESTABLISHMENT OF PROGRAM.—

19 ‘‘(1) IN GENERAL.—Not later than January 1,

20 1997, the Secretary, acting through the Office of the

21 Inspector General of the Department of Health and

22 Human Services, and the Attorney General shall es23 tablish a program—
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1 ‘‘(A) to coordinate Federal, State, and

2 local law enforcement programs to control fraud

3 and abuse with respect to health plans,

4 ‘‘(B) to conduct investigations, audits,

5 evaluations, and inspections relating to the de6 livery of and payment for health care in the

7 United States,

8 ‘‘(C) to facilitate the enforcement of the

9 provisions of sections 1128, 1128A, and 1128B

10 and other statutes applicable to health care

11 fraud and abuse,

12 ‘‘(D) to provide for the modification and

13 establishment of safe harbors and to issue advi14 sory opinions and special fraud alerts pursuant

15 to section 1128D, and

16 ‘‘(E) to provide for the reporting and dis17 closure of certain final adverse actions against

18 health care providers, suppliers, or practitioners

19 pursuant to the data collection system estab20 lished under section 1128E.

21 ‘‘(2) COORDINATION WITH HEALTH PLANS.—In

22 carrying out the program established under para23 graph (1), the Secretary and the Attorney General

24 shall consult with, and arrange for the sharing of

25 data with representatives of health plans.
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1 ‘‘(3) GUIDELINES.—

2 ‘‘(A) IN GENERAL.—The Secretary and the

3 Attorney General shall issue guidelines to carry

4 out the program under paragraph (1). The pro5 visions of sections 553, 556, and 557 of title 5,

6 United States Code, shall not apply in the issu7 ance of such guidelines.

8 ‘‘(B) INFORMATION GUIDELINES.—

9 ‘‘(i) IN GENERAL.—Such guidelines

10 shall include guidelines relating to the fur11 nishing of information by health plans,

12 providers, and others to enable the Sec13 retary and the Attorney General to carry

14 out the program (including coordination

15 with health plans under paragraph (2)).

16 ‘‘(ii) CONFIDENTIALITY.—Such guide17 lines shall include procedures to assure

18 that such information is provided and uti19 lized in a manner that appropriately pro20 tects the confidentiality of the information

21 and the privacy of individuals receiving

22 health care services and items.

23 ‘‘(iii) QUALIFIED IMMUNITY FOR PRO24 VIDING INFORMATION.—The provisions of

25 section 1157(a) (relating to limitation on
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1 liability) shall apply to a person providing

2 information to the Secretary or the Attor3 ney General in conjunction with their per4 formance of duties under this section.

5 ‘‘(4) ENSURING ACCESS TO DOCUMENTATION.—

6 The Inspector General of the Department of Health

7 and Human Services is authorized to exercise such

8 authority described in paragraphs (3) through (9) of

9 section 6 of the Inspector General Act of 1978 (5

10 U.S.C. App.) as necessary with respect to the activi11 ties under the fraud and abuse control program es12 tablished under this subsection.

13 ‘‘(5) AUTHORITY OF INSPECTOR GENERAL.—

14 Nothing in this Act shall be construed to diminish

15 the authority of any Inspector General, including

16 such authority as provided in the Inspector General

17 Act of 1978 (5 U.S.C. App.).

18 ‘‘(b) ADDITIONAL USE OF FUNDS BY INSPECTOR

19 GENERAL.—

20 ‘‘(1) REIMBURSEMENTS FOR INVESTIGA21 TIONS.—The Inspector General of the Department

22 of Health and Human Services is authorized to re23 ceive and retain for current use reimbursement for

24 the costs of conducting investigations and audits and

25 for monitoring compliance plans when such costs are
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1 ordered by a court, voluntarily agreed to by the

2 payor, or otherwise.

3 ‘‘(2) CREDITING.—Funds received by the In4 spector General under paragraph (1) as reimburse5 ment for costs of conducting investigations shall be

6 deposited to the credit of the appropriation from

7 which initially paid, or to appropriations for similar

8 purposes currently available at the time of deposit,

9 and shall remain available for obligation for 1 year

10 from the date of the deposit of such funds.

11 ‘‘(c) HEALTH PLAN DEFINED.—For purposes of this

12 section, the term ‘health plan’ means a plan or program

13 that provides health benefits, whether directly, through in14 surance, or otherwise, and includes—

15 ‘‘(1) a policy of health insurance;

16 ‘‘(2) a contract of a service benefit organiza17 tion; and

18 ‘‘(3) a membership agreement with a health

19 maintenance organization or other prepaid health

20 plan.’’.

21 (b) ESTABLISHMENT OF HEALTH CARE FRAUD AND

22 ABUSE CONTROL ACCOUNT IN FEDERAL HOSPITAL IN23 SURANCE TRUST FUND.—Section 1817 (42 U.S.C. 1395i)

24 is amended by adding at the end the following new sub25 section:
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1 ‘‘(k) HEALTH CARE FRAUD AND ABUSE CONTROL

2 ACCOUNT.—

3 ‘‘(1) ESTABLISHMENT.—There is hereby estab4 lished in the Trust Fund an expenditure account to

5 be known as the ‘Health Care Fraud and Abuse

6 Control Account’ (in this subsection referred to as

7 the ‘Account’).

8 ‘‘(2) APPROPRIATED AMOUNTS TO TRUST

9 FUND.—

10 ‘‘(A) IN GENERAL.—There are hereby ap11 propriated to the Trust Fund—

12 ‘‘(i) such gifts and bequests as may be

13 made as provided in subparagraph (B);

14 ‘‘(ii) such amounts as may be depos15 ited in the Trust Fund as provided in sec16 tions 242(b) and 249(c) of the Health Cov17 erage Availability and Affordability Act of

18 1996, and title XI; and

19 ‘‘(iii) such amounts as are transferred

20 to the Trust Fund under subparagraph

21 (C).

22 ‘‘(B) AUTHORIZATION TO ACCEPT GIFTS.—

23 The Trust Fund is authorized to accept on be24 half of the United States money gifts and be25 quests made unconditionally to the Trust Fund,
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1 for the benefit of the Account or any activity fi2 nanced through the Account.

3 ‘‘(C) TRANSFER OF AMOUNTS.—The Man4 aging Trustee shall transfer to the Trust Fund,

5 under rules similar to the rules in section 9601

6 of the Internal Revenue Code of 1986, an

7 amount equal to the sum of the following:

8 ‘‘(i) Criminal fines recovered in cases

9 involving a Federal health care offense (as

10 defined in section 982(a)(6)(B) of title 18,

11 United States Code).

12 ‘‘(ii) Civil monetary penalties and as13 sessments imposed in health care cases, in14 cluding amounts recovered under titles XI,

15 XVIII, and XXI, and chapter 38 of title

16 31, United States Code (except as other17 wise provided by law).

18 ‘‘(iii) Amounts resulting from the for19 feiture of property by reason of a Federal

20 health care offense.

21 ‘‘(iv) Penalties and damages obtained

22 and otherwise creditable to miscellaneous

23 receipts of the general fund of the Treas24 ury obtained under sections 3729 through

25 3733 of title 31, United States Code
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1 (known as the False Claims Act), in cases

2 involving claims related to the provision of

3 health care items and services (other than

4 funds awarded to a relator, for restitution

5 or otherwise authorized by law).

6 ‘‘(3) APPROPRIATED AMOUNTS TO ACCOUNT

7 FOR FRAUD AND ABUSE CONTROL PROGRAM, ETC.—

8 ‘‘(A) DEPARTMENTS OF HEALTH AND

9 HUMAN SERVICES AND JUSTICE.—

10 ‘‘(i) IN GENERAL.—There are hereby

11 appropriated to the Account from the

12 Trust Fund such sums as the Secretary

13 and the Attorney General certify are nec14 essary to carry out the purposes described

15 in subparagraph (C), to be available with16 out further appropriation, in an amount

17 not to exceed—

18 ‘‘(I) for fiscal year 1997,

19 $104,000,000, and

20 ‘‘(II) for each of the fiscal years

21 1998 through 2003, the limit for the

22 preceding fiscal year, increased by 15

23 percent; and
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1 ‘‘(III) for each fiscal year after

2 fiscal year 2003, the limit for fiscal

3 year 2003.

4 ‘‘(ii) MEDICARE AND MEDICAID AC5 TIVITIES.—For each fiscal year, of the

6 amount appropriated in clause (i), the fol7 lowing amounts shall be available only for

8 the purposes of the activities of the Office

9 of the Inspector General of the Depart10 ment of Health and Human Services with

11 respect to the medicare and medicaid pro12 grams—

13 ‘‘(I) for fiscal year 1997, not less

14 than $60,000,000 and not more than

15 $70,000,000;

16 ‘‘(II) for fiscal year 1998, not

17 less than $80,000,000 and not more

18 than $90,000,000;

19 ‘‘(III) for fiscal year 1999, not

20 less than $90,000,000 and not more

21 than $100,000,000;

22 ‘‘(IV) for fiscal year 2000, not

23 less than $110,000,000 and not more

24 than $120,000,000;
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1 ‘‘(V) for fiscal year 2001, not

2 less than $120,000,000 and not more

3 than $130,000,000;

4 ‘‘(VI) for fiscal year 2002, not

5 less than $140,000,000 and not more

6 than $150,000,000; and

7 ‘‘(VII) for each fiscal year after

8 fiscal year 2002, not less than

9 $150,000,000 and not more than

10 $160,000,000.

11 ‘‘(B) FEDERAL BUREAU OF INVESTIGA12 TION.—There are hereby appropriated from the

13 general fund of the United States Treasury and

14 hereby appropriated to the Account for transfer

15 to the Federal Bureau of Investigation to carry

16 out the purposes described in subparagraph

17 (C), to be available without further appropria18 tion—

19 ‘‘(i) for fiscal year 1997, $47,000,000;

20 ‘‘(ii) for fiscal year 1998,

21 $56,000,000;

22 ‘‘(iii) for fiscal year 1999,

23 $66,000,000;

24 ‘‘(iv) for fiscal year 2000,

25 $76,000,000;
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1 ‘‘(v) for fiscal year 2001,

2 $88,000,000;

3 ‘‘(vi) for fiscal year 2002,

4 $101,000,000; and

5 ‘‘(vii) for each fiscal year after fiscal

6 year 2002, $114,000,000.

7 ‘‘(C) USE OF FUNDS.—The purposes de8 scribed in this subparagraph are to cover the

9 costs (including equipment, salaries and bene10 fits, and travel and training) of the administra11 tion and operation of the health care fraud and

12 abuse control program established under section

13 1128C(a), including the costs of—

14 ‘‘(i) prosecuting health care matters

15 (through criminal, civil, and administrative

16 proceedings);

17 ‘‘(ii) investigations;

18 ‘‘(iii) financial and performance audits

19 of health care programs and operations;

20 ‘‘(iv) inspections and other evalua21 tions; and

22 ‘‘(v) provider and consumer education

23 regarding compliance with the provisions of

24 title XI.
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1 ‘‘(4) APPROPRIATED AMOUNTS TO ACCOUNT

2 FOR MEDICARE INTEGRITY PROGRAM.—

3 ‘‘(A) IN GENERAL.—There are hereby ap4 propriated to the Account from the Trust Fund

5 for each fiscal year such amounts as are nec6 essary to carry out the Medicare Integrity Pro7 gram under section 1893, subject to subpara8 graph (B) and to be available without further

9 appropriation.

10 ‘‘(B) AMOUNTS SPECIFIED.—The amount

11 appropriated under subparagraph (A) for a fis12 cal year is as follows:

13 ‘‘(i) For fiscal year 1997, such

14 amount shall be not less than

15 $430,000,000 and not more than

16 $440,000,000.

17 ‘‘(ii) For fiscal year 1998, such

18 amount shall be not less than

19 $490,000,000 and not more than

20 $500,000,000.

21 ‘‘(iii) For fiscal year 1999, such

22 amount shall be not less than

23 $550,000,000 and not more than

24 $560,000,000.
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1 ‘‘(iv) For fiscal year 2000, such

2 amount shall be not less than

3 $620,000,000 and not more than

4 $630,000,000.

5 ‘‘(v) For fiscal year 2001, such

6 amount shall be not less than

7 $670,000,000 and not more than

8 $680,000,000.

9 ‘‘(vi) For fiscal year 2002, such

10 amount shall be not less than

11 $690,000,000 and not more than

12 $700,000,000.

13 ‘‘(vii) For each fiscal year after fiscal

14 year 2002, such amount shall be not less

15 than $710,000,000 and not more than

16 $720,000,000.

17 ‘‘(5) ANNUAL REPORT.—The Secretary and the

18 Attorney General shall submit jointly an annual re19 port to Congress on the amount of revenue which is

20 generated and disbursed, and the justification for

21 such disbursements, by the Account in each fiscal

22 year.’’.
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1 SEC. 202. MEDICARE INTEGRITY PROGRAM.

2 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO3 GRAM.—Title XVIII is amended by adding at the end the

4 following new section:

5 ‘‘MEDICARE INTEGRITY PROGRAM

6 ‘‘SEC. 1893. (a) ESTABLISHMENT OF PROGRAM.—

7 There is hereby established the Medicare Integrity Pro8 gram (in this section referred to as the ‘Program’) under

9 which the Secretary shall promote the integrity of the

10 medicare program by entering into contracts in accord11 ance with this section with eligible private entities to carry

12 out the activities described in subsection (b).

13 ‘‘(b) ACTIVITIES DESCRIBED.—The activities de14 scribed in this subsection are as follows:

15 ‘‘(1) Review of activities of providers of services

16 or other individuals and entities furnishing items

17 and services for which payment may be made under

18 this title (including skilled nursing facilities and

19 home health agencies), including medical and utiliza20 tion review and fraud review (employing similar

21 standards, processes, and technologies used by pri22 vate health plans, including equipment and software

23 technologies which surpass the capability of the

24 equipment and technologies used in the review of

25 claims under this title as of the date of the enact26 ment of this section).
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1 ‘‘(2) Audit of cost reports.

2 ‘‘(3) Determinations as to whether payment

3 should not be, or should not have been, made under

4 this title by reason of section 1862(b), and recovery

5 of payments that should not have been made.

6 ‘‘(4) Education of providers of services, bene7 ficiaries, and other persons with respect to payment

8 integrity and benefit quality assurance issues.

9 ‘‘(5) Developing (and periodically updating) a

10 list of items of durable medical equipment in accord11 ance with section 1834(a)(15) which are subject to

12 prior authorization under such section.

13 ‘‘(c) ELIGIBILITY OF ENTITIES.—An entity is eligible

14 to enter into a contract under the Program to carry out

15 any of the activities described in subsection (b) if—

16 ‘‘(1) the entity has demonstrated capability to

17 carry out such activities;

18 ‘‘(2) in carrying out such activities, the entity

19 agrees to cooperate with the Inspector General of

20 the Department of Health and Human Services, the

21 Attorney General of the United States, and other

22 law enforcement agencies, as appropriate, in the in23 vestigation and deterrence of fraud and abuse in re24 lation to this title and in other cases arising out of

25 such activities;
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1 ‘‘(3) the entity demonstrates to the Secretary

2 that the entity’s financial holdings, interests, or rela3 tionships will not interfere with its ability to perform

4 the functions to be required by the contract in an ef5 fective and impartial manner; and

6 ‘‘(4) the entity meets such other requirements

7 as the Secretary may impose.

8 In the case of the activity described in subsection (b)(5),

9 an entity shall be deemed to be eligible to enter into a

10 contract under the Program to carry out the activity if

11 the entity is a carrier with a contract in effect under sec12 tion 1842.

13 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—

14 The Secretary shall enter into contracts under the Pro15 gram in accordance with such procedures as the Secretary

16 shall by regulation establish, except that such procedures

17 shall include the following:

18 ‘‘(1) The Secretary shall determine the appro19 priate number of separate contracts which are nec20 essary to carry out the Program and the appropriate

21 times at which the Secretary shall enter into such

22 contracts.

23 ‘‘(2)(A) Except as provided in subparagraph

24 (B), the provisions of section 1153(e)(1) shall apply
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1 to contracts and contracting authority under this

2 section.

3 ‘‘(B) Competitive procedures must be used

4 when entering into new contracts under this section,

5 or at any other time considered appropriate by the

6 Secretary, except that the Secretary may contract

7 with entities that are carrying out the activities de8 scribed in this section pursuant to agreements under

9 section 1816 or contracts under section 1842 in ef10 fect on the date of the enactment of this section.

11 ‘‘(3) A contract under this section may be re12 newed without regard to any provision of law requir13 ing competition if the contractor has met or ex14 ceeded the performance requirements established in

15 the current contract.

16 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

17 Secretary shall by regulation provide for the limitation of

18 a contractor’s liability for actions taken to carry out a con19 tract under the Program, and such regulation shall, to the

20 extent the Secretary finds appropriate, employ the same

21 or comparable standards and other substantive and proce22 dural provisions as are contained in section 1157.’’.

23 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL24 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO25 GRAM.—
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1 (1) RESPONSIBILITIES OF FISCAL

2 INTERMEDIARIES UNDER PART A.—Section 1816

3 (42 U.S.C. 1395h) is amended by adding at the end

4 the following new subsection:

5 ‘‘(l) No agency or organization may carry out (or re6 ceive payment for carrying out) any activity pursuant to

7 an agreement under this section to the extent that the ac8 tivity is carried out pursuant to a contract under the Med9 icare Integrity Program under section 1893.’’.

10 (2) RESPONSIBILITIES OF CARRIERS UNDER

11 PART B.—Section 1842(c) (42 U.S.C. 1395u(c)) is

12 amended by adding at the end the following new

13 paragraph:

14 ‘‘(6) No carrier may carry out (or receive payment

15 for carrying out) any activity pursuant to a contract under

16 this subsection to the extent that the activity is carried

17 out pursuant to a contract under the Medicare Integrity

18 Program under section 1893. The previous sentence shall

19 not apply with respect to the activity described in section

20 1893(b)(5) (relating to prior authorization of certain

21 items of durable medical equipment under section

22 1834(a)(15)).’’.

23 SEC. 203. BENEFICIARY INCENTIVE PROGRAMS.

24 (a) CLARIFICATION OF REQUIREMENT TO PROVIDE

25 EXPLANATION OF MEDICARE BENEFITS.—The Secretary
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1 of Health and Human Services (in this section referred

2 to as the ‘‘Secretary’’) shall provide an explanation of ben3 efits under the medicare program under title XVIII of the

4 Social Security Act with respect to each item or service

5 for which payment may be made under the program which

6 is furnished to an individual, without regard to whether

7 or not a deductible or coinsurance may be imposed against

8 the individual with respect to the item or service.

9 (b) PROGRAM TO COLLECT INFORMATION ON FRAUD

10 AND ABUSE.—

11 (1) ESTABLISHMENT OF PROGRAM.—Not later

12 than 3 months after the date of the enactment of

13 this Act, the Secretary shall establish a program

14 under which the Secretary shall encourage individ15 uals to report to the Secretary information on indi16 viduals and entities who are engaging or who have

17 engaged in acts or omissions which constitute

18 grounds for the imposition of a sanction under sec19 tion 1128, section 1128A, or section 1128B of the

20 Social Security Act, or who have otherwise engaged

21 in fraud and abuse against the medicare program

22 for which there is a sanction provided under law.

23 The program shall discourage provision of, and not

24 consider, information which is frivolous or otherwise
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1 not relevant or material to the imposition of such a

2 sanction.

3 (2) PAYMENT OF PORTION OF AMOUNTS COL4 LECTED.—If an individual reports information to

5 the Secretary under the program established under

6 paragraph (1) which serves as the basis for the col7 lection by the Secretary or the Attorney General of

8 any amount of at least $100 (other than any

9 amount paid as a penalty under section 1128B of

10 the Social Security Act), the Secretary may pay a

11 portion of the amount collected to the individual

12 (under procedures similar to those applicable under

13 section 7623 of the Internal Revenue Code of 1986

14 to payments to individuals providing information on

15 violations of such Code).

16 (c) PROGRAM TO COLLECT INFORMATION ON PRO17 GRAM EFFICIENCY.—

18 (1) ESTABLISHMENT OF PROGRAM.—Not later

19 than 3 months after the date of the enactment of

20 this Act, the Secretary shall establish a program

21 under which the Secretary shall encourage individ22 uals to submit to the Secretary suggestions on meth23 ods to improve the efficiency of the medicare pro24 gram.
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1 (2) PAYMENT OF PORTION OF PROGRAM SAV2 INGS.—If an individual submits a suggestion to the

3 Secretary under the program established under

4 paragraph (1) which is adopted by the Secretary and

5 which results in savings to the program, the Sec6 retary may make a payment to the individual of

7 such amount as the Secretary considers appropriate.

8 SEC. 204. APPLICATION OF CERTAIN HEALTH ANTI-FRAUD

9 AND ABUSE SANCTIONS TO FRAUD AND

10 ABUSE AGAINST FEDERAL HEALTH CARE

11 PROGRAMS.

12 (a) IN GENERAL.—Section 1128B (42 U.S.C.

13 1320a–7b) is amended as follows:

14 (1) In the heading, by striking ‘‘MEDICARE OR

15 STATE HEALTH CARE PROGRAMS’’ and inserting

16 ‘‘FEDERAL HEALTH CARE PROGRAMS’’.

17 (2) In subsection (a)(1), by striking ‘‘a program

18 under title XVIII or a State health care program (as

19 defined in section 1128(h))’’ and inserting ‘‘a Fed20 eral health care program’’.

21 (3) In subsection (a)(5), by striking ‘‘a program

22 under title XVIII or a State health care program’’

23 and inserting ‘‘a Federal health care program’’.

24 (4) In the second sentence of subsection (a)—
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1 (A) by striking ‘‘a State plan approved

2 under title XIX’’ and inserting ‘‘a Federal

3 health care program’’, and

4 (B) by striking ‘‘the State may at its op5 tion (notwithstanding any other provision of

6 that title or of such plan)’’ and inserting ‘‘the

7 administrator of such program may at its op8 tion (notwithstanding any other provision of

9 such program)’’.

10 (5) In subsection (b), by striking ‘‘title XVIII

11 or a State health care program’’ each place it ap12 pears and inserting ‘‘a Federal health care pro13 gram’’.

14 (6) In subsection (c), by inserting ‘‘(as defined

15 in section 1128(h))’’ after ‘‘a State health care pro16 gram’’.

17 (7) By adding at the end the following new sub18 section:

19 ‘‘(f) For purposes of this section, the term ‘Federal

20 health care program’ means—

21 ‘‘(1) any plan or program that provides health

22 benefits, whether directly, through insurance, or oth23 erwise, which is funded directly, in whole or in part,

24 by the United States Government (other than the
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1 health insurance program under chapter 89 of title

2 5, United States Code); or

3 ‘‘(2) any State health care program, as defined

4 in section 1128(h).’’.

5 (b) EFFECTIVE DATE.—The amendments made by

6 this section shall take effect on January 1, 1997.

7 SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH

8 CARE FRAUD AND ABUSE SANCTIONS.

9 Title XI (42 U.S.C. 1301 et seq.), as amended by

10 section 201, is amended by inserting after section 1128C

11 the following new section:

12 ‘‘GUIDANCE REGARDING APPLICATION OF HEALTH CARE

13 FRAUD AND ABUSE SANCTIONS

14 ‘‘SEC. 1128D. (a) SOLICITATION AND PUBLICATION

15 OF MODIFICATIONS TO EXISTING SAFE HARBORS AND

16 NEW SAFE HARBORS.—

17 ‘‘(1) IN GENERAL.—

18 ‘‘(A) SOLICITATION OF PROPOSALS FOR

19 SAFE HARBORS.—Not later than January 1,

20 1997, and not less than annually thereafter, the

21 Secretary shall publish a notice in the Federal

22 Register soliciting proposals, which will be ac23 cepted during a 60-day period, for—

24 ‘‘(i) modifications to existing safe har25 bors issued pursuant to section 14(a) of

26 the Medicare and Medicaid Patient and
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1 Program Protection Act of 1987 (42

2 U.S.C. 1320a–7b note);

3 ‘‘(ii) additional safe harbors specifying

4 payment practices that shall not be treated

5 as a criminal offense under section

6 1128B(b) and shall not serve as the basis

7 for an exclusion under section 1128(b)(7);

8 ‘‘(iii) advisory opinions to be issued

9 pursuant to subsection (b); and

10 ‘‘(iv) special fraud alerts to be issued

11 pursuant to subsection (c).

12 ‘‘(B) PUBLICATION OF PROPOSED MODI13 FICATIONS AND PROPOSED ADDITIONAL SAFE

14 HARBORS.—After considering the proposals de15 scribed in clauses (i) and (ii) of subparagraph

16 (A), the Secretary, in consultation with the At17 torney General, shall publish in the Federal

18 Register proposed modifications to existing safe

19 harbors and proposed additional safe harbors, if

20 appropriate, with a 60-day comment period.

21 After considering any public comments received

22 during this period, the Secretary shall issue

23 final rules modifying the existing safe harbors

24 and establishing new safe harbors, as appro25 priate.
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1 ‘‘(C) REPORT.—The Inspector General of

2 the Department of Health and Human Services

3 (in this section referred to as the ‘Inspector

4 General’) shall, in an annual report to Congress

5 or as part of the year-end semiannual report re6 quired by section 5 of the Inspector General

7 Act of 1978 (5 U.S.C. App.), describe the pro8 posals received under clauses (i) and (ii) of sub9 paragraph (A) and explain which proposals

10 were included in the publication described in

11 subparagraph (B), which proposals were not in12 cluded in that publication, and the reasons for

13 the rejection of the proposals that were not in14 cluded.

15 ‘‘(2) CRITERIA FOR MODIFYING AND ESTAB16 LISHING SAFE HARBORS.—In modifying and estab17 lishing safe harbors under paragraph (1)(B), the

18 Secretary may consider the extent to which provid19 ing a safe harbor for the specified payment practice

20 may result in any of the following:

21 ‘‘(A) An increase or decrease in access to

22 health care services.

23 ‘‘(B) An increase or decrease in the quality

24 of health care services.
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1 ‘‘(C) An increase or decrease in patient

2 freedom of choice among health care providers.

3 ‘‘(D) An increase or decrease in competi4 tion among health care providers.

5 ‘‘(E) An increase or decrease in the ability

6 of health care facilities to provide services in

7 medically underserved areas or to medically un8 derserved populations.

9 ‘‘(F) An increase or decrease in the cost to

10 Federal health care programs (as defined in

11 section 1128B(f)).

12 ‘‘(G) An increase or decrease in the poten13 tial overutilization of health care services.

14 ‘‘(H) The existence or nonexistence of any

15 potential financial benefit to a health care pro16 fessional or provider which may vary based on

17 their decisions of—

18 ‘‘(i) whether to order a health care

19 item or service; or

20 ‘‘(ii) whether to arrange for a referral

21 of health care items or services to a par22 ticular practitioner or provider.

23 ‘‘(I) Any other factors the Secretary deems

24 appropriate in the interest of preventing fraud
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1 and abuse in Federal health care programs (as

2 so defined).

3 ‘‘(b) ADVISORY OPINIONS.—

4 ‘‘(1) ISSUANCE OF ADVISORY OPINIONS.—The

5 Secretary shall issue written advisory opinions as

6 provided in this subsection.

7 ‘‘(2) MATTERS SUBJECT TO ADVISORY OPIN8 IONS.—The Secretary shall issue advisory opinions

9 as to the following matters:

10 ‘‘(A) What constitutes prohibited remu11 neration within the meaning of section

12 1128B(b).

13 ‘‘(B) Whether an arrangement or proposed

14 arrangement satisfies the criteria set forth in

15 section 1128B(b)(3) for activities which do not

16 result in prohibited remuneration.

17 ‘‘(C) Whether an arrangement or proposed

18 arrangement satisfies the criteria which the

19 Secretary has established, or shall establish by

20 regulation for activities which do not result in

21 prohibited remuneration.

22 ‘‘(D) What constitutes an inducement to

23 reduce or limit services to individuals entitled to

24 benefits under title XVIII or title XIX or title

25 XXI within the meaning of section 1128B(b).
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1 ‘‘(E) Whether any activity or proposed ac2 tivity constitutes grounds for the imposition of

3 a sanction under section 1128, 1128A, or

4 1128B.

5 ‘‘(3) MATTERS NOT SUBJECT TO ADVISORY

6 OPINIONS.—Such advisory opinions shall not address

7 the following matters:

8 ‘‘(A) Whether the fair market value shall

9 be, or was paid or received for any goods, serv10 ices or property.

11 ‘‘(B) Whether an individual is a bona fide

12 employee within the requirements of section

13 3121(d)(2) of the Internal Revenue Code of

14 1986.

15 ‘‘(4) EFFECT OF ADVISORY OPINIONS.—

16 ‘‘(A) BINDING AS TO SECRETARY AND

17 PARTIES INVOLVED.—Each advisory opinion is18 sued by the Secretary shall be binding as to the

19 Secretary and the party or parties requesting

20 the opinion.

21 ‘‘(B) FAILURE TO SEEK OPINION.—The

22 failure of a party to seek an advisory opinion

23 may not be introduced into evidence to prove

24 that the party intended to violate the provisions

25 of sections 1128, 1128A, or 1128B.
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1 ‘‘(5) REGULATIONS.—

2 ‘‘(A) IN GENERAL.—Not later than 180

3 days after the date of the enactment of this sec4 tion, the Secretary shall issue regulations to

5 carry out this section. Such regulations shall

6 provide for—

7 ‘‘(i) the procedure to be followed by a

8 party applying for an advisory opinion;

9 ‘‘(ii) the procedure to be followed by

10 the Secretary in responding to a request

11 for an advisory opinion;

12 ‘‘(iii) the interval in which the Sec13 retary shall respond;

14 ‘‘(iv) the reasonable fee to be charged

15 to the party requesting an advisory opin16 ion; and

17 ‘‘(v) the manner in which advisory

18 opinions will be made available to the pub19 lic.

20 ‘‘(B) SPECIFIC CONTENTS.—Under the

21 regulations promulgated pursuant to subpara22 graph (A)—

23 ‘‘(i) the Secretary shall be required to

24 respond to a party requesting an advisory
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1 opinion by not later than 30 days after the

2 request is received; and

3 ‘‘(ii) the fee charged to the party re4 questing an advisory opinion shall be equal

5 to the costs incurred by the Secretary in

6 responding to the request.

7 ‘‘(c) SPECIAL FRAUD ALERTS.—

8 ‘‘(1) IN GENERAL.—

9 ‘‘(A) REQUEST FOR SPECIAL FRAUD

10 ALERTS.—Any person may present, at any

11 time, a request to the Inspector General for a

12 notice which informs the public of practices

13 which the Inspector General considers to be

14 suspect or of particular concern under the med15 icare program or a State health care program,

16 as defined in section 1128(h) (in this subsection

17 referred to as a ‘special fraud alert’).

18 ‘‘(B) ISSUANCE AND PUBLICATION OF SPE19 CIAL FRAUD ALERTS.—Upon receipt of a re20 quest described in subparagraph (A), the In21 spector General shall investigate the subject

22 matter of the request to determine whether a

23 special fraud alert should be issued. If appro24 priate, the Inspector General shall issue a spe25 cial fraud alert in response to the request. All
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1 special fraud alerts issued pursuant to this sub2 paragraph shall be published in the Federal

3 Register.

4 ‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—

5 In determining whether to issue a special fraud alert

6 upon a request described in paragraph (1), the In7 spector General may consider—

8 ‘‘(A) whether and to what extent the prac9 tices that would be identified in the special

10 fraud alert may result in any of the con11 sequences described in subsection (a)(2); and

12 ‘‘(B) the volume and frequency of the con13 duct that would be identified in the special

14 fraud alert.’’.

15 Subtitle B—Revisions to Current

16 Sanctions for Fraud and Abuse

17 SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION

18 IN MEDICARE AND STATE HEALTH CARE PRO19 GRAMS.

20 (a) INDIVIDUAL CONVICTED OF FELONY RELATING

21 TO HEALTH CARE FRAUD.—

22 (1) IN GENERAL.—Section 1128(a) (42 U.S.C.

23 1320a–7(a)) is amended by adding at the end the

24 following new paragraph:
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1 ‘‘(3) FELONY CONVICTION RELATING TO

2 HEALTH CARE FRAUD.—Any individual or entity

3 that has been convicted after the date of the enact4 ment of the Health Coverage Availability and Af5 fordability Act of 1996, under Federal or State law,

6 in connection with the delivery of a health care item

7 or service or with respect to any act or omission in

8 a health care program (other than those specifically

9 described in paragraph (1)) operated by or financed

10 in whole or in part by any Federal, State, or local

11 government agency, of a criminal offense consisting

12 of a felony relating to fraud, theft, embezzlement,

13 breach of fiduciary responsibility, or other financial

14 misconduct.’’.

15 (2) CONFORMING AMENDMENT.—Paragraph (1)

16 of section 1128(b) (42 U.S.C. 1320a–7(b)) is

17 amended to read as follows:

18 ‘‘(1) CONVICTION RELATING TO FRAUD.—Any

19 individual or entity that has been convicted after the

20 date of the enactment of the Health Coverage Avail21 ability and Affordability Act of 1996, under Federal

22 or State law—

23 ‘‘(A) of a criminal offense consisting of a

24 misdemeanor relating to fraud, theft, embezzle-
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1 ment, breach of fiduciary responsibility, or

2 other financial misconduct—

3 ‘‘(i) in connection with the delivery of

4 a health care item or service, or

5 ‘‘(ii) with respect to any act or omis6 sion in a health care program (other than

7 those specifically described in subsection

8 (a)(1)) operated by or financed in whole or

9 in part by any Federal, State, or local gov10 ernment agency; or

11 ‘‘(B) of a criminal offense relating to

12 fraud, theft, embezzlement, breach of fiduciary

13 responsibility, or other financial misconduct

14 with respect to any act or omission in a pro15 gram (other than a health care program) oper16 ated by or financed in whole or in part by any

17 Federal, State, or local government agency.’’.

18 (b) INDIVIDUAL CONVICTED OF FELONY RELATING

19 TO CONTROLLED SUBSTANCE.—

20 (1) IN GENERAL.—Section 1128(a) (42 U.S.C.

21 1320a–7(a)), as amended by subsection (a), is

22 amended by adding at the end the following new

23 paragraph:

24 ‘‘(4) FELONY CONVICTION RELATING TO CON25 TROLLED SUBSTANCE.—Any individual or entity
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1 that has been convicted after the date of the enact2 ment of the Health Coverage Availability and Af3 fordability Act of 1996, under Federal or State law,

4 of a criminal offense consisting of a felony relating

5 to the unlawful manufacture, distribution, prescrip6 tion, or dispensing of a controlled substance.’’.

7 (2) CONFORMING AMENDMENT.—Section

8 1128(b)(3) (42 U.S.C. 1320a–7(b)(3)) is amended—

9 (A) in the heading, by striking ‘‘CONVIC10 TION’’ and inserting ‘‘MISDEMEANOR CONVIC11 TION’’; and

12 (B) by striking ‘‘criminal offense’’ and in13 serting ‘‘criminal offense consisting of a mis14 demeanor’’.

15 SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EX16 CLUSION FOR CERTAIN INDIVIDUALS AND

17 ENTITIES SUBJECT TO PERMISSIVE EXCLU18 SION FROM MEDICARE AND STATE HEALTH

19 CARE PROGRAMS.

20 Section 1128(c)(3) (42 U.S.C. 1320a–7(c)(3)) is

21 amended by adding at the end the following new subpara22 graphs:

23 ‘‘(D) In the case of an exclusion of an individual or

24 entity under paragraph (1), (2), or (3) of subsection (b),

25 the period of the exclusion shall be 3 years, unless the
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1 Secretary determines in accordance with published regula2 tions that a shorter period is appropriate because of miti3 gating circumstances or that a longer period is appro4 priate because of aggravating circumstances.

5 ‘‘(E) In the case of an exclusion of an individual or

6 entity under subsection (b)(4) or (b)(5), the period of the

7 exclusion shall not be less than the period during which

8 the individual’s or entity’s license to provide health care

9 is revoked, suspended, or surrendered, or the individual

10 or the entity is excluded or suspended from a Federal or

11 State health care program.

12 ‘‘(F) In the case of an exclusion of an individual or

13 entity under subsection (b)(6)(B), the period of the exclu14 sion shall be not less than 1 year.’’.

15 SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

16 OWNERSHIP OR CONTROL INTEREST IN

17 SANCTIONED ENTITIES.

18 Section 1128(b) (42 U.S.C. 1320a–7(b)) is amended

19 by adding at the end the following new paragraph:

20 ‘‘(15) INDIVIDUALS CONTROLLING A SANC21 TIONED ENTITY.—(A) Any individual—

22 ‘‘(i) who has a direct or indirect ownership

23 or control interest in a sanctioned entity and

24 who knows or should know (as defined in sec25 tion 1128A(i)(6)) of the action constituting the
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1 basis for the conviction or exclusion described

2 in subparagraph (B); or

3 ‘‘(ii) who is an officer or managing em4 ployee (as defined in section 1126(b)) of such

5 an entity.

6 ‘‘(B) For purposes of subparagraph (A), the

7 term ‘sanctioned entity’ means an entity—

8 ‘‘(i) that has been convicted of any offense

9 described in subsection (a) or in paragraph (1),

10 (2), or (3) of this subsection; or

11 ‘‘(ii) that has been excluded from partici12 pation under a program under title XVIII or

13 under a State health care program.’’.

14 SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PER15 SONS FOR FAILURE TO COMPLY WITH STATU16 TORY OBLIGATIONS.

17 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI18 TIONERS AND PERSONS FAILING TO MEET STATUTORY

19 OBLIGATIONS.—

20 (1) IN GENERAL.—The second sentence of sec21 tion 1156(b)(1) (42 U.S.C. 1320c–5(b)(1)) is

22 amended by striking ‘‘may prescribe)’’ and inserting

23 ‘‘may prescribe, except that such period may not be

24 less than 1 year)’’.
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1 (2) CONFORMING AMENDMENT.—Section

2 1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended

3 by striking ‘‘shall remain’’ and inserting ‘‘shall (sub4 ject to the minimum period specified in the second

5 sentence of paragraph (1)) remain’’.

6 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDI7 TION FOR IMPOSITION OF SANCTION.—Section 1156(b)(1)

8 (42 U.S.C. 1320c–5(b)(1)) is amended—

9 (1) in the second sentence, by striking ‘‘and de10 termines’’ and all that follows through ‘‘such obliga11 tions,’’; and

12 (2) by striking the third sentence.

13 SEC. 215. INTERMEDIATE SANCTIONS FOR MEDICARE

14 HEALTH MAINTENANCE ORGANIZATIONS.

15 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

16 ANY PROGRAM VIOLATIONS.—

17 (1) IN GENERAL.—Section 1876(i)(1) (42

18 U.S.C. 1395mm(i)(1)) is amended by striking ‘‘the

19 Secretary may terminate’’ and all that follows and

20 inserting ‘‘in accordance with procedures established

21 under paragraph (9), the Secretary may at any time

22 terminate any such contract or may impose the in23 termediate sanctions described in paragraph (6)(B)

24 or (6)(C) (whichever is applicable) on the eligible or-
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1 ganization if the Secretary determines that the orga2 nization—

3 ‘‘(A) has failed substantially to carry out

4 the contract;

5 ‘‘(B) is carrying out the contract in a man6 ner substantially inconsistent with the efficient

7 and effective administration of this section; or

8 ‘‘(C) no longer substantially meets the ap9 plicable conditions of subsections (b), (c), (e),

10 and (f).’’.

11 (2) OTHER INTERMEDIATE SANCTIONS FOR

12 MISCELLANEOUS PROGRAM VIOLATIONS.—Section

13 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

14 adding at the end the following new subparagraph:

15 ‘‘(C) In the case of an eligible organization for which

16 the Secretary makes a determination under paragraph (1)

17 the basis of which is not described in subparagraph (A),

18 the Secretary may apply the following intermediate sanc19 tions:

20 ‘‘(i) Civil money penalties of not more than

21 $25,000 for each determination under paragraph (1)

22 if the deficiency that is the basis of the determina23 tion has directly adversely affected (or has the sub24 stantial likelihood of adversely affecting) an individ25 ual covered under the organization’s contract.
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1 ‘‘(ii) Civil money penalties of not more than

2 $10,000 for each week beginning after the initiation

3 of procedures by the Secretary under paragraph (9)

4 during which the deficiency that is the basis of a de5 termination under paragraph (1) exists.

6 ‘‘(iii) Suspension of enrollment of individuals

7 under this section after the date the Secretary noti8 fies the organization of a determination under para9 graph (1) and until the Secretary is satisfied that

10 the deficiency that is the basis for the determination

11 has been corrected and is not likely to recur.’’.

12 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

13 Section 1876(i) (42 U.S.C. 1395mm(i)) is amended

14 by adding at the end the following new paragraph:

15 ‘‘(9) The Secretary may terminate a contract with an

16 eligible organization under this section or may impose the

17 intermediate sanctions described in paragraph (6) on the

18 organization in accordance with formal investigation and

19 compliance procedures established by the Secretary under

20 which—

21 ‘‘(A) the Secretary first provides the organiza22 tion with the reasonable opportunity to develop and

23 implement a corrective action plan to correct the de24 ficiencies that were the basis of the Secretary’s de-
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1 termination under paragraph (1) and the organiza2 tion fails to develop or implement such a plan;

3 ‘‘(B) in deciding whether to impose sanctions,

4 the Secretary considers aggravating factors such as

5 whether an organization has a history of deficiencies

6 or has not taken action to correct deficiencies the

7 Secretary has brought to the organization’s atten8 tion;

9 ‘‘(C) there are no unreasonable or unnecessary

10 delays between the finding of a deficiency and the

11 imposition of sanctions; and

12 ‘‘(D) the Secretary provides the organization

13 with reasonable notice and opportunity for hearing

14 (including the right to appeal an initial decision) be15 fore imposing any sanction or terminating the con16 tract.’’.

17 (4) CONFORMING AMENDMENTS.—Section

18 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

19 amended by striking the second sentence.

20 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA21 TIONS.—Section 1876(i)(7)(A) (42 U.S.C.

22 1395mm(i)(7)(A)) is amended by striking ‘‘an agreement’’

23 and inserting ‘‘a written agreement’’.
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply with respect to contract years be3 ginning on or after January 1, 1996.

4 SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PEN5 ALTIES FOR DISCOUNTING AND MANAGED

6 CARE ARRANGEMENTS.

7 (a) IN GENERAL.—Section 1128B(b)(3) (42 U.S.C.

8 1320a–7b(b)(3)) is amended—

9 (1) by striking ‘‘and’’ at the end of subpara10 graph (D);

11 (2) by striking the period at the end of sub12 paragraph (E) and inserting ‘‘; and’’; and

13 (3) by adding at the end the following new sub14 paragraph:

15 ‘‘(F) any remuneration between an organization

16 and an individual or entity providing items or serv17 ices, or a combination thereof, pursuant to a written

18 agreement between the organization and the individ19 ual or entity if the organization is an eligible organi20 zation under section 1876 or if the written agree21 ment places the individual or entity at substantial fi22 nancial risk for the cost or utilization of the items

23 or services, or a combination thereof, which the indi24 vidual or entity is obligated to provide, whether

25 through a withhold, capitation, incentive pool, per
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1 diem payment, or any other similar risk arrange2 ment which places the individual or entity at sub3 stantial financial risk.’’.

4 (b) EFFECTIVE DATE.—The amendments made by

5 this section shall apply to written agreements entered into

6 on or after January 1, 1997.

7 SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSI8 TION OF ASSETS IN ORDER TO OBTAIN MED9 ICAID BENEFITS.

10 Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is

11 amended—

12 (1) by striking ‘‘or’’ at the end of paragraph

13 (4);

14 (2) by adding ‘‘or’’ at the end of paragraph (5);

15 and

16 (3) by inserting after paragraph (5) the follow17 ing new paragraph:

18 ‘‘(6) knowingly and willfully disposes of assets

19 (including by any transfer in trust) in order for an

20 individual to become eligible for medical assistance

21 under a State plan under title XIX, if disposing of

22 the assets results in the imposition of a period of in23 eligibility for such assistance under section

24 1917(c),’’.
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1 SEC. 218. EFFECTIVE DATE.

2 Except as otherwise provided, the amendments made

3 by this subtitle shall take effect January 1, 1997.

4 Subtitle C—Data Collection

5 SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD

6 AND ABUSE DATA COLLECTION PROGRAM.

7 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),

8 as amended by sections 211 and 215, is amended by in9 serting after section 1128D the following new section:

10 ‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION

11 PROGRAM

12 ‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later

13 than January 1, 1997, the Secretary shall establish a na14 tional health care fraud and abuse data collection program

15 for the reporting of final adverse actions (not including

16 settlements in which no findings of liability have been

17 made) against health care providers, suppliers, or practi18 tioners as required by subsection (b), with access as set

19 forth in subsection (c).

20 ‘‘(b) REPORTING OF INFORMATION.—

21 ‘‘(1) IN GENERAL.—Each Government agency

22 and health plan shall report any final adverse action

23 (not including settlements in which no findings of li24 ability have been made) taken against a health care

25 provider, supplier, or practitioner.
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1 ‘‘(2) INFORMATION TO BE REPORTED.—The in2 formation to be reported under paragraph (1) in3 cludes:

4 ‘‘(A) The name and TIN (as defined in

5 section 7701(a)(41) of the Internal Revenue

6 Code of 1986) of any health care provider, sup7 plier, or practitioner who is the subject of a

8 final adverse action.

9 ‘‘(B) The name (if known) of any health

10 care entity with which a health care provider,

11 supplier, or practitioner is affiliated or associ12 ated.

13 ‘‘(C) The nature of the final adverse action

14 and whether such action is on appeal.

15 ‘‘(D) A description of the acts or omissions

16 and injuries upon which the final adverse action

17 was based, and such other information as the

18 Secretary determines by regulation is required

19 for appropriate interpretation of information re20 ported under this section.

21 ‘‘(3) CONFIDENTIALITY.—In determining what

22 information is required, the Secretary shall include

23 procedures to assure that the privacy of individuals

24 receiving health care services is appropriately pro25 tected.
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1 ‘‘(4) TIMING AND FORM OF REPORTING.—The

2 information required to be reported under this sub3 section shall be reported regularly (but not less often

4 than monthly) and in such form and manner as the

5 Secretary prescribes. Such information shall first be

6 required to be reported on a date specified by the

7 Secretary.

8 ‘‘(5) TO WHOM REPORTED.—The information

9 required to be reported under this subsection shall

10 be reported to the Secretary.

11 ‘‘(c) DISCLOSURE AND CORRECTION OF INFORMA12 TION.—

13 ‘‘(1) DISCLOSURE.—With respect to the infor14 mation about final adverse actions (not including

15 settlements in which no findings of liability have

16 been made) reported to the Secretary under this sec17 tion respecting a health care provider, supplier, or

18 practitioner, the Secretary shall, by regulation, pro19 vide for—

20 ‘‘(A) disclosure of the information, upon

21 request, to the health care provider, supplier, or

22 licensed practitioner, and

23 ‘‘(B) procedures in the case of disputed ac24 curacy of the information.
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1 ‘‘(2) CORRECTIONS.—Each Government agency

2 and health plan shall report corrections of informa3 tion already reported about any final adverse action

4 taken against a health care provider, supplier, or

5 practitioner, in such form and manner that the Sec6 retary prescribes by regulation.

7 ‘‘(d) ACCESS TO REPORTED INFORMATION.—

8 ‘‘(1) AVAILABILITY.—The information in this

9 database shall be available to Federal and State gov10 ernment agencies and health plans pursuant to pro11 cedures that the Secretary shall provide by regula12 tion.

13 ‘‘(2) FEES FOR DISCLOSURE.—The Secretary

14 may establish or approve reasonable fees for the dis15 closure of information in this database (other than

16 with respect to requests by Federal agencies). The

17 amount of such a fee shall be sufficient to recover

18 the full costs of operating the database. Such fees

19 shall be available to the Secretary or, in the Sec20 retary’s discretion to the agency designated under

21 this section to cover such costs.

22 ‘‘(e) PROTECTION FROM LIABILITY FOR REPORT23 ING.—No person or entity, including the agency des24 ignated by the Secretary in subsection (b)(5) shall be held

25 liable in any civil action with respect to any report made
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1 as required by this section, without knowledge of the fal2 sity of the information contained in the report.

3 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur4 poses of this section:

5 ‘‘(1) FINAL ADVERSE ACTION.—

6 ‘‘(A) IN GENERAL.—The term ‘final ad7 verse action’ includes:

8 ‘‘(i) Civil judgments against a health

9 care provider, supplier, or practitioner in

10 Federal or State court related to the deliv11 ery of a health care item or service.

12 ‘‘(ii) Federal or State criminal convic13 tions related to the delivery of a health

14 care item or service.

15 ‘‘(iii) Actions by Federal or State

16 agencies responsible for the licensing and

17 certification of health care providers, sup18 pliers, and licensed health care practition19 ers, including—

20 ‘‘(I) formal or official actions,

21 such as revocation or suspension of a

22 license (and the length of any such

23 suspension), reprimand, censure or

24 probation,
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1 ‘‘(II) any other loss of license or

2 the right to apply for, or renew, a li3 cense of the provider, supplier, or

4 practitioner, whether by operation of

5 law, voluntary surrender, non-renew6 ability, or otherwise, or

7 ‘‘(III) any other negative action

8 or finding by such Federal or State

9 agency that is publicly available infor10 mation.

11 ‘‘(iv) Exclusion from participation in

12 Federal or State health care programs.

13 ‘‘(v) Any other adjudicated actions or

14 decisions that the Secretary shall establish

15 by regulation.

16 ‘‘(B) EXCEPTION.—The term does not in17 clude any action with respect to a malpractice

18 claim.

19 ‘‘(2) PRACTITIONER.—The terms ‘licensed

20 health care practitioner’, ‘licensed practitioner’, and

21 ‘practitioner’ mean, with respect to a State, an indi22 vidual who is licensed or otherwise authorized by the

23 State to provide health care services (or any individ24 ual who, without authority holds himself or herself

25 out to be so licensed or authorized).
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1 ‘‘(3) GOVERNMENT AGENCY.—The term ‘Gov2 ernment agency’ shall include:

3 ‘‘(A) The Department of Justice.

4 ‘‘(B) The Department of Health and

5 Human Services.

6 ‘‘(C) Any other Federal agency that either

7 administers or provides payment for the deliv8 ery of health care services, including, but not

9 limited to the Department of Defense and the

10 Veterans’ Administration.

11 ‘‘(D) State law enforcement agencies.

12 ‘‘(E) State medicaid fraud control units.

13 ‘‘(F) Federal or State agencies responsible

14 for the licensing and certification of health care

15 providers and licensed health care practitioners.

16 ‘‘(4) HEALTH PLAN.—The term ‘health plan’

17 has the meaning given such term by section

18 1128C(c).

19 ‘‘(5) DETERMINATION OF CONVICTION.—For

20 purposes of paragraph (1), the existence of a convic21 tion shall be determined under paragraph (4) of sec22 tion 1128(i).’’.

23 (b) IMPROVED PREVENTION IN ISSUANCE OF MEDI24 CARE PROVIDER NUMBERS.—Section 1842(r) (42 U.S.C.

25 1395u(r)) is amended by adding at the end the following
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1 new sentence: ‘‘Under such system, the Secretary may im2 pose appropriate fees on such physicians to cover the costs

3 of investigation and recertification activities with respect

4 to the issuance of the identifiers.’’.

5 Subtitle D—Civil Monetary

6 Penalties

7 SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PEN8 ALTIES.

9 (a) GENERAL CIVIL MONETARY PENALTIES.—Sec10 tion 1128A (42 U.S.C. 1320a–7a) is amended as follows:

11 (1) In the third sentence of subsection (a), by

12 striking ‘‘programs under title XVIII’’ and inserting

13 ‘‘Federal health care programs (as defined in section

14 1128B(f)(1))’’.

15 (2) In subsection (f)—

16 (A) by redesignating paragraph (3) as

17 paragraph (4); and

18 (B) by inserting after paragraph (2) the

19 following new paragraph:

20 ‘‘(3) With respect to amounts recovered arising

21 out of a claim under a Federal health care program

22 (as defined in section 1128B(f)), the portion of such

23 amounts as is determined to have been paid by the

24 program shall be repaid to the program, and the

25 portion of such amounts attributable to the amounts
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1 recovered under this section by reason of the amend2 ments made by the Health Coverage Availability and

3 Affordability Act of 1996 (as estimated by the Sec4 retary) shall be deposited into the Federal Hospital

5 Insurance Trust Fund pursuant to section

6 1817(k)(2)(C).’’.

7 (3) In subsection (i)—

8 (A) in paragraph (2), by striking ‘‘title V,

9 XVIII, XIX, or XX of this Act’’ and inserting

10 ‘‘a Federal health care program (as defined in

11 section 1128B(f))’’,

12 (B) in paragraph (4), by striking ‘‘a health

13 insurance or medical services program under

14 title XVIII or XIX of this Act’’ and inserting

15 ‘‘a Federal health care program (as so de16 fined)’’, and

17 (C) in paragraph (5), by striking ‘‘title V,

18 XVIII, XIX, or XX’’ and inserting ‘‘a Federal

19 health care program (as so defined)’’.

20 (4) By adding at the end the following new sub21 section:

22 ‘‘(m)(1) For purposes of this section, with respect to

23 a Federal health care program not contained in this Act,

24 references to the Secretary in this section shall be deemed

25 to be references to the Secretary or Administrator of the
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1 department or agency with jurisdiction over such program

2 and references to the Inspector General of the Department

3 of Health and Human Services in this section shall be

4 deemed to be references to the Inspector General of the

5 applicable department or agency.

6 ‘‘(2)(A) The Secretary and Administrator of the de7 partments and agencies referred to in paragraph (1) may

8 include in any action pursuant to this section, claims with9 in the jurisdiction of other Federal departments or agen10 cies as long as the following conditions are satisfied:

11 ‘‘(i) The case involves primarily claims submit12 ted to the Federal health care programs of the de13 partment or agency initiating the action.

14 ‘‘(ii) The Secretary or Administrator of the de15 partment or agency initiating the action gives notice

16 and an opportunity to participate in the investiga17 tion to the Inspector General of the department or

18 agency with primary jurisdiction over the Federal

19 health care programs to which the claims were sub20 mitted.

21 ‘‘(B) If the conditions specified in subparagraph (A)

22 are fulfilled, the Inspector General of the department or

23 agency initiating the action is authorized to exercise all

24 powers granted under the Inspector General Act of 1978

25 with respect to the claims submitted to the other depart-
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1 ments or agencies to the same manner and extent as pro2 vided in that Act with respect to claims submitted to such

3 departments or agencies.’’.

4 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

5 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—

6 Section 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

7 (1) by striking ‘‘or’’ at the end of paragraph

8 (1)(D);

9 (2) by striking ‘‘, or’’ at the end of paragraph

10 (2) and inserting a semicolon;

11 (3) by striking the semicolon at the end of

12 paragraph (3) and inserting ‘‘; or’’; and

13 (4) by inserting after paragraph (3) the follow14 ing new paragraph:

15 ‘‘(4) in the case of a person who is not an orga16 nization, agency, or other entity, is excluded from

17 participating in a program under title XVIII or a

18 State health care program in accordance with this

19 subsection or under section 1128 and who, at the

20 time of a violation of this subsection—

21 ‘‘(i) retains a direct or indirect ownership

22 or control interest in an entity that is partici23 pating in a program under title XVIII or a

24 State health care program, and who knows or
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1 should know of the action constituting the basis

2 for the exclusion; or

3 ‘‘(ii) is an officer or managing employee

4 (as defined in section 1126(b)) of such an en5 tity;’’.

6 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES

7 AND ASSESSMENTS.—Section 1128A(a) (42 U.S.C.

8 1320a–7a(a)), as amended by subsection (b), is amended

9 in the matter following paragraph (4)—

10 (1) by striking ‘‘$2,000’’ and inserting

11 ‘‘$10,000’’;

12 (2) by inserting ‘‘; in cases under paragraph

13 (4), $10,000 for each day the prohibited relationship

14 occurs’’ after ‘‘false or misleading information was

15 given’’; and

16 (3) by striking ‘‘twice the amount’’ and insert17 ing ‘‘3 times the amount’’.

18 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR19 RECT CODING OR MEDICALLY UNNECESSARY SERV20 ICES.—Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1))

21 is amended—

22 (1) in subparagraph (A) by striking ‘‘claimed,’’

23 and inserting ‘‘claimed, including any person who

24 engages in a pattern or practice of presenting or

25 causing to be presented a claim for an item or serv-
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1 ice that is based on a code that the person knows

2 or should know will result in a greater payment to

3 the person than the code the person knows or should

4 know is applicable to the item or service actually

5 provided,’’;

6 (2) in subparagraph (C), by striking ‘‘or’’ at

7 the end;

8 (3) in subparagraph (D), by striking ‘‘; or’’ and

9 inserting ‘‘, or’’; and

10 (4) by inserting after subparagraph (D) the fol11 lowing new subparagraph:

12 ‘‘(E) is for a medical or other item or serv13 ice that a person knows or should know is not

14 medically necessary; or’’.

15 (e) SANCTIONS AGAINST PRACTITIONERS AND PER16 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLI17 GATIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3))

18 is amended by striking ‘‘the actual or estimated cost’’ and

19 inserting ‘‘up to $10,000 for each instance’’.

20 (f) PROCEDURAL PROVISIONS.—Section 1876(i)(6)

21 (42 U.S.C. 1395mm(i)(6)), as amended by section

22 215(a)(2), is amended by adding at the end the following

23 new subparagraph:

24 ‘‘(D) The provisions of section 1128A (other than

25 subsections (a) and (b)) shall apply to a civil money pen-
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1 alty under subparagraph (B)(i) or (C)(i) in the same man2 ner as such provisions apply to a civil money penalty or

3 proceeding under section 1128A(a).’’.

4 (g) PROHIBITION AGAINST OFFERING INDUCEMENTS

5 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

6 PLANS.—

7 (1) OFFER OF REMUNERATION.—Section

8 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

9 (A) by striking ‘‘or’’ at the end of para10 graph (1)(D);

11 (B) by striking ‘‘, or’’ at the end of para12 graph (2) and inserting a semicolon;

13 (C) by striking the semicolon at the end of

14 paragraph (3) and inserting ‘‘; or’’; and

15 (D) by inserting after paragraph (3) the

16 following new paragraph:

17 ‘‘(4) offers to or transfers remuneration to any

18 individual eligible for benefits under title XVIII of

19 this Act, or under a State health care program (as

20 defined in section 1128(h)) that such person knows

21 or should know is likely to influence such individual

22 to order or receive from a particular provider, practi23 tioner, or supplier any item or service for which pay24 ment may be made, in whole or in part, under title
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1 XVIII, or a State health care program (as so de2 fined);’’.

3 (2) REMUNERATION DEFINED.—Section

4 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

5 adding the following new paragraph:

6 ‘‘(6) The term ‘remuneration’ includes the waiv7 er of coinsurance and deductible amounts (or any

8 part thereof), and transfers of items or services for

9 free or for other than fair market value. The term

10 ‘remuneration’ does not include—

11 ‘‘(A) the waiver of coinsurance and deduct12 ible amounts by a person, if—

13 ‘‘(i) the waiver is not offered as part

14 of any advertisement or solicitation;

15 ‘‘(ii) the person does not routinely

16 waive coinsurance or deductible amounts;

17 and

18 ‘‘(iii) the person—

19 ‘‘(I) waives the coinsurance and

20 deductible amounts after determining

21 in good faith that the individual is in

22 financial need;

23 ‘‘(II) fails to collect coinsurance

24 or deductible amounts after making

25 reasonable collection efforts; or
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1 ‘‘(III) provides for any permis2 sible waiver as specified in section

3 1128B(b)(3) or in regulations issued

4 by the Secretary;

5 ‘‘(B) differentials in coinsurance and de6 ductible amounts as part of a benefit plan de7 sign as long as the differentials have been dis8 closed in writing to all beneficiaries, third party

9 payers, and providers, to whom claims are pre10 sented and as long as the differentials meet the

11 standards as defined in regulations promulgated

12 by the Secretary not later than 180 days after

13 the date of the enactment of the Health Cov14 erage Availability and Affordability Act of

15 1996; or

16 ‘‘(C) incentives given to individuals to pro17 mote the delivery of preventive care as deter18 mined by the Secretary in regulations so pro19 mulgated.’’.

20 (h) EFFECTIVE DATE.—The amendments made by

21 this section shall take effect January 1, 1997.
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1 SEC. 232. CLARIFICATION OF LEVEL OF INTENT REQUIRED

2 FOR IMPOSITION OF SANCTIONS.

3 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE4 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN5 ALTIES.—

6 (1) IN GENERAL.—Section 1128A(a) (42

7 U.S.C. 1320a–7a(a)) is amended—

8 (A) in paragraphs (1) and (2), by inserting

9 ‘‘knowingly’’ before ‘‘presents’’ each place it ap10 pears; and

11 (B) in paragraph (3), by striking ‘‘gives’’

12 and inserting ‘‘knowingly gives or causes to be

13 given’’.

14 (2) DEFINITION OF STANDARD.—Section

15 1128A(i) (42 U.S.C. 1320a–7a(i)) is amended by

16 adding at the end the following new paragraph:

17 ‘‘(6) The term ‘should know’ means that a per18 son, with respect to information—

19 ‘‘(A) acts in deliberate ignorance of the

20 truth or falsity of the information; or

21 ‘‘(B) acts in reckless disregard of the truth

22 or falsity of the information,

23 and no proof of specific intent to defraud is re24 quired.’’.
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1 (b) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to acts or omissions occurring on

3 or after January 1, 1997.

4 SEC. 233. PENALTY FOR FALSE CERTIFICATION FOR HOME

5 HEALTH SERVICES.

6 (a) IN GENERAL.—Section 1128A(b) (42 U.S.C.

7 1320a–7a(b)) is amended by adding at the end the follow8 ing new paragraph:

9 ‘‘(3)(A) Any physician who executes a document de10 scribed in subparagraph (B) with respect to an individual

11 knowing that all of the requirements referred to in such

12 subparagraph are not met with respect to the individual

13 shall be subject to a civil monetary penalty of not more

14 than the greater of—

15 ‘‘(i) $5,000, or

16 ‘‘(ii) three times the amount of the payments

17 under title XVIII for home health services which are

18 made pursuant to such certification.

19 ‘‘(B) A document described in this subparagraph is

20 any document that certifies, for purposes of title XVIII,

21 that an individual meets the requirements of section

22 1814(a)(2)(C) or 1835(a)(2)(A) in the case of home

23 health services furnished to the individual.’’.
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1 (b) EFFECTIVE DATE.—The amendment made by

2 subsection (a) shall apply to certifications made on or

3 after the date of the enactment of this Act.

4 Subtitle E—Revisions to Criminal

5 Law

6 SEC. 241. DEFINITION OF FEDERAL HEALTH CARE OF7 FENSE.

8 (a) IN GENERAL.—Chapter 1 of title 18, United

9 States Code, is amended by adding at the end the follow10 ing:

11 ‘‘§ 24. Definition of Federal health care offense

12 ‘‘(a) As used in this title, the term ‘Federal health

13 care offense’ means a violation of, or a criminal conspiracy

14 to violate—

15 ‘‘(1) section 669, 1035, or 1347 of this title; or

16 ‘‘(2) section 287, 371, 664, 666, 1001, 1027,

17 1341, 1343, or 1954 of this title, if the violation or

18 conspiracy relates to a health care benefit program.

19 ‘‘(b) As used in this title, the term ‘health care bene20 fit program’ has the meaning given such term in section

21 1347(b) of this title.’’.

22 (b) CLERICAL AMENDMENT.—The table of sections

23 at the beginning of chapter 2 of title 18, United States

24 Code, is amended by inserting after the item relating to

25 section 23 the following new item:

‘‘24. Definition relating to Federal health care offense defined.’’.
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1 SEC. 242. HEALTH CARE FRAUD.

2 (a) OFFENSE.—

3 (1) IN GENERAL.—Chapter 63 of title 18, Unit4 ed States Code, is amended by adding at the end the

5 following:

6 ‘‘§ 1347. Health care fraud

7 ‘‘(a) Whoever knowingly executes, or attempts to exe8 cute, a scheme or artifice—

9 ‘‘(1) to defraud any health care benefit pro10 gram; or

11 ‘‘(2) to obtain, by means of false or fraudulent

12 pretenses, representations, or promises, any of the

13 money or property owned by, or under the custody

14 or control of, any health care benefit program,

15 in connection with the delivery of or payment for health

16 care benefits, items, or services, shall be fined under this

17 title or imprisoned not more than 10 years, or both. If

18 the violation results in serious bodily injury (as defined

19 in section 1365 of this title), such person shall be fined

20 under this title or imprisoned not more than 20 years, or

21 both; and if the violation results in death, such person

22 shall be fined under this title, or imprisoned for any term

23 of years or for life, or both.

24 ‘‘(b) As used in this section, the term ‘health care

25 benefit program’ means any public or private plan or con26 tract, affecting commerce, under which any medical bene-
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1 fit, item, or service is provided to any individual, and in2 cludes any individual or entity who is providing a medical

3 benefit, item, or service for which payment may be made

4 under the plan or contract.’’.

5 (2) CLERICAL AMENDMENT.—The table of sec6 tions at the beginning of chapter 63 of title 18,

7 United States Code, is amended by adding at the

8 end the following:

‘‘1347. Health care fraud.’’.

9 (b) CRIMINAL FINES DEPOSITED IN FEDERAL HOS10 PITAL INSURANCE TRUST FUND.—The Secretary of the

11 Treasury shall deposit into the Federal Hospital Insurance

12 Trust Fund pursuant to section 1817(k)(2)(C) of the So13 cial Security Act (42 U.S.C. 1395i) an amount equal to

14 the criminal fines imposed under section 1347 of title 18,

15 United States Code (relating to health care fraud).

16 SEC. 243. THEFT OR EMBEZZLEMENT.

17 (a) IN GENERAL.—Chapter 31 of title 18, United

18 States Code, is amended by adding at the end the follow19 ing:

20 ‘‘§ 669. Theft or embezzlement in connection with

21 health care

22 ‘‘(a) Whoever embezzles, steals, or otherwise without

23 authority willfully and unlawfully converts to the use of

24 any person other than the rightful owner, or intentionally

25 misapplies any of the moneys, funds, securities, premiums,
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1 credits, property, or other assets of a health care benefit

2 program, shall be fined under this title or imprisoned not

3 more than 10 years, or both; but if the value of such prop4 erty does not exceed the sum of $100 the defendant shall

5 be fined under this title or imprisoned not more than one

6 year, or both.

7 ‘‘(b) As used in this section, the term ‘health care

8 benefit program’ has the meaning given such term in sec9 tion 1347(b) of this title.’’.

10 (b) CLERICAL AMENDMENT.—The table of sections

11 at the beginning of chapter 31 of title 18, United States

12 Code, is amended by adding at the end the following:

‘‘669. Theft or embezzlement in connection with health care.’’.

13 SEC. 244. FALSE STATEMENTS.

14 (a) IN GENERAL.—Chapter 47 of title 18, United

15 States Code, is amended by adding at the end the follow16 ing:

17 ‘‘§ 1035. False statements relating to health care mat18 ters

19 ‘‘(a) Whoever, in any matter involving a health care

20 benefit program, knowingly—

21 ‘‘(1) falsifies, conceals, or covers up by any

22 trick, scheme, or device a material fact; or

23 ‘‘(2) makes any false, fictitious, or fraudulent

24 statements or representations, or makes or uses any

25 false writing or document knowing the same to con-
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1 tain any false, fictitious, or fraudulent statement or

2 entry,

3 in connection with the delivery of or payment for health

4 care benefits, items, or services, shall be fined under this

5 title or imprisoned not more than 5 years, or both.

6 ‘‘(b) As used in this section, the term ‘health care

7 benefit program’ has the meaning given such term in sec8 tion 1347(b) of this title.’’.

9 (b) CLERICAL AMENDMENT.—The table of sections

10 at the beginning of chapter 47 of title 18, United States

11 Code, is amended by adding at the end the following new

12 item:

‘‘1035. False statements relating to health care matters.’’.

13 SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF

14 HEALTH CARE OFFENSES.

15 (a) IN GENERAL.—Chapter 73 of title 18, United

16 States Code, is amended by adding at the end the follow17 ing:

18 ‘‘§ 1518. Obstruction of criminal investigations of

19 health care offenses

20 ‘‘(a) Whoever willfully prevents, obstructs, misleads,

21 delays or attempts to prevent, obstruct, mislead, or delay

22 the communication of information or records relating to

23 a violation of a Federal health care offense to a criminal

24 investigator shall be fined under this title or imprisoned

25 not more than 5 years, or both.
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1 ‘‘(b) As used in this section the term ‘criminal inves2 tigator’ means any individual duly authorized by a depart3 ment, agency, or armed force of the United States to con4 duct or engage in investigations for prosecutions for viola5 tions of health care offenses.’’.

6 (b) CLERICAL AMENDMENT.—The table of sections

7 at the beginning of chapter 73 of title 18, United States

8 Code, is amended by adding at the end the following new

9 item:

‘‘1518. Obstruction of criminal investigations of health care offenses.’’.

10 SEC. 246. LAUNDERING OF MONETARY INSTRUMENTS.

11 Section 1956(c)(7) of title 18, United States Code,

12 is amended by adding at the end the following:

13 ‘‘(F) Any act or activity constituting an of14 fense involving a Federal health care offense.’’.

15 SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE

16 OFFENSES.

17 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

18 United States Code, is amended—

19 (1) by striking ‘‘or’’ at the end of subparagraph

20 (A);

21 (2) by inserting ‘‘or’’ at the end of subpara22 graph (B); and

23 (3) by adding at the end the following:

24 ‘‘(C) committing or about to commit a

25 Federal health care offense.’’.
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1 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of

2 title 18, United States Code, is amended by inserting ‘‘or

3 a Federal health care offense’’.

4 SEC. 248. AUTHORIZED INVESTIGATIVE DEMAND PROCE5 DURES.

6 (a) IN GENERAL.—Chapter 233 of title 18, United

7 States Code, is amended by adding after section 3485 the

8 following:

9 ‘‘§ 3486. Authorized investigative demand procedures

10 ‘‘(a) AUTHORIZATION.—In any investigation relating

11 to any act or activity involving a Federal health care of12 fense, the Attorney General or the Attorney General’s des13 ignee may issue in writing and cause to be served a sub14 poena requiring the production of any records (including

15 any books, papers, documents, electronic media, or other

16 objects or tangible things), which may be relevant to an

17 authorized law enforcement inquiry, that a person or legal

18 entity may possess or have care, custody, or control. A

19 subpoena shall describe the objects required to be pro20 duced and prescribe a return date within a reasonable pe21 riod of time within which the objects can be assembled

22 and made available.

23 ‘‘(b) SERVICE.—A subpoena issued under this section

24 may be served by any person designated in the subpoena

25 to serve it. Service upon a natural person may be made
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1 by personal delivery of the subpoena to him. Service may

2 be made upon a domestic or foreign corporation or upon

3 a partnership or other unincorporated association which

4 is subject to suit under a common name, by delivering the

5 subpoena to an officer, to a managing or general agent,

6 or to any other agent authorized by appointment or by

7 law to receive service of process. The affidavit of the per8 son serving the subpoena entered on a true copy thereof

9 by the person serving it shall be proof of service.

10 ‘‘(c) ENFORCEMENT.—In the case of contumacy by

11 or refusal to obey a subpoena issued to any person, the

12 Attorney General may invoke the aid of any court of the

13 United States within the jurisdiction of which the inves14 tigation is carried on or of which the subpoenaed person

15 is an inhabitant, or in which he carries on business or may

16 be found, to compel compliance with the subpoena. The

17 court may issue an order requiring the subpoenaed person

18 to appear before the Attorney General to produce records,

19 if so ordered, or to give testimony touching the matter

20 under investigation. Any failure to obey the order of the

21 court may be punished by the court as a contempt thereof.

22 All process in any such case may be served in any judicial

23 district in which such person may be found.

24 ‘‘(d) IMMUNITY FROM CIVIL LIABILITY.—Notwith25 standing any Federal, State, or local law, any person, in-
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1 cluding officers, agents, and employees, receiving a sum2 mons under this section, who complies in good faith with

3 the summons and thus produces the materials sought,

4 shall not be liable in any court of any State or the United

5 States to any customer or other person for such produc6 tion or for nondisclosure of that production to the cus7 tomer.

8 ‘‘(e) LIMITATION ON USE.—(1) Health information

9 about an individual that is disclosed under this section

10 may not be used in, or disclosed to any person for use

11 in, any administrative, civil, or criminal action or inves12 tigation directed against the individual who is the subject

13 of the information unless the action or investigation arises

14 out of and is directly related to receipt of health care or

15 payment for health care or action involving a fraudulent

16 claim related to health; or if authorized by an appropriate

17 order of a court of competent jurisdiction, granted after

18 application showing good cause therefor.

19 ‘‘(2) In assessing good cause, the court shall weigh

20 the public interest and the need for disclosure against the

21 injury to the patient, to the physician-patient relationship,

22 and to the treatment services.

23 ‘‘(3) Upon the granting of such order, the court, in

24 determining the extent to which any disclosure of all or
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1 any part of any record is necessary, shall impose appro2 priate safeguards against unauthorized disclosure.’’.

3 (b) CLERICAL AMENDMENT.—The table of sections

4 at the beginning of chapter 223 of title 18, United States

5 Code, is amended by inserting after the item relating to

6 section 3485 the following new item:

‘‘3486. Authorized investigative demand procedures.’’.

7 (c) CONFORMING AMENDMENT.—Section

8 1510(b)(3)(B) of title 18, United States Code, is amended

9 by inserting ‘‘or a Department of Justice subpoena (issued

10 under section 3486 of title 18),’’ after ‘‘subpoena’’.

11 SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OF12 FENSES.

13 (a) IN GENERAL.—Section 982(a) of title 18, United

14 States Code, is amended by adding after paragraph (5)

15 the following new paragraph:

16 ‘‘(6) The court, in imposing sentence on a person con17 victed of a Federal health care offense, shall order the per18 son to forfeit property, real or personal, that constitutes

19 or is derived, directly or indirectly, from gross proceeds

20 traceable to the commission of the offense.’’.

21 (b) CONFORMING AMENDMENT.—Section

22 982(b)(1)(A) of title 18, United States Code, is amended

23 by inserting ‘‘or (a)(6)’’ after ‘‘(a)(1)’’.

24 (c) PROPERTY FORFEITED DEPOSITED IN FEDERAL

25 HOSPITAL INSURANCE TRUST FUND.—
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1 (1) IN GENERAL.—After the payment of the

2 costs of asset forfeiture has been made, and notwith3 standing any other provision of law, the Secretary of

4 the Treasury shall deposit into the Federal Hospital

5 Insurance Trust Fund pursuant to section

6 1817(k)(2)(C) of the Social Security Act, as added

7 by section 301(b), an amount equal to the net

8 amount realized from the forfeiture of property by

9 reason of a Federal health care offense pursuant to

10 section 982(a)(6) of title 18, United States Code.

11 (2) COSTS OF ASSET FORFEITURE.—For pur12 poses of paragraph (1), the term ‘‘payment of the

13 costs of asset forfeiture’’ means—

14 (A) the payment, at the discretion of the

15 Attorney General, of any expenses necessary to

16 seize, detain, inventory, safeguard, maintain,

17 advertise, sell, or dispose of property under sei18 zure, detention, or forfeited, or of any other

19 necessary expenses incident to the seizure, de20 tention, forfeiture, or disposal of such property,

21 including payment for—

22 (i) contract services,

23 (ii) the employment of outside con24 tractors to operate and manage properties

25 or provide other specialized services nec-
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1 essary to dispose of such properties in an

2 effort to maximize the return from such

3 properties; and

4 (iii) reimbursement of any Federal,

5 State, or local agency for any expenditures

6 made to perform the functions described in

7 this subparagraph;

8 (B) at the discretion of the Attorney Gen9 eral, the payment of awards for information or

10 assistance leading to a civil or criminal forfeit11 ure involving any Federal agency participating

12 in the Health Care Fraud and Abuse Control

13 Account;

14 (C) the compromise and payment of valid

15 liens and mortgages against property that has

16 been forfeited, subject to the discretion of the

17 Attorney General to determine the validity of

18 any such lien or mortgage and the amount of

19 payment to be made, and the employment of at20 torneys and other personnel skilled in State real

21 estate law as necessary;

22 (D) payment authorized in connection with

23 remission or mitigation procedures relating to

24 property forfeited; and
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1 (E) the payment of State and local prop2 erty taxes on forfeited real property that ac3 crued between the date of the violation giving

4 rise to the forfeiture and the date of the forfeit5 ure order.

6 Subtitle F—Administrative

7 Simplification

8 SEC. 251. PURPOSE.

9 It is the purpose of this subtitle to improve the medi10 care program under title XVIII of the Social Security Act,

11 the medicaid program under title XIX of such Act, and

12 the efficiency and effectiveness of the health care system,

13 by encouraging the development of a health information

14 system through the establishment of standards and re15 quirements for the electronic transmission of certain

16 health information.

17 SEC. 252. ADMINISTRATIVE SIMPLIFICATION.

18 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.)

19 is amended by adding at the end the following:

20 ‘‘PART C—ADMINISTRATIVE SIMPLIFICATION

21 ‘‘SEC. 1171. DEFINITIONS.

22 ‘‘For purposes of this part:

23 ‘‘(1) CLEARINGHOUSE.—The term ‘clearing24 house’ means a public or private entity that—
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1 ‘‘(A) processes or facilitates the processing

2 of nonstandard data elements of health infor3 mation into standard data elements; or

4 ‘‘(B) provides the means by which persons

5 may meet the requirements of this part.

6 ‘‘(2) CODE SET.—The term ‘code set’ means

7 any set of codes used for encoding data elements,

8 such as tables of terms, medical concepts, medical

9 diagnostic codes, or medical procedure codes.

10 ‘‘(3) COORDINATION OF BENEFITS.—The term

11 ‘coordination of benefits’ means determining and co12 ordinating the financial obligations of health plans

13 when health care benefits are payable under 2 or

14 more health plans.

15 ‘‘(4) HEALTH CARE PROVIDER.—The term

16 ‘health care provider’ includes a provider of services

17 (as defined in section 1861(u)), a provider of medi18 cal or other health services (as defined in section

19 1861(s)), and any other person furnishing health

20 care services or supplies.

21 ‘‘(5) HEALTH INFORMATION.—The term ‘health

22 information’ means any information, whether oral or

23 recorded in any form or medium that—

24 ‘‘(A) is created or received by a health care

25 provider, health plan, public health authority,
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1 employer, life insurer, school or university, or

2 clearinghouse; and

3 ‘‘(B) relates to the past, present, or future

4 physical or mental health or condition of an in5 dividual, the provision of health care to an indi6 vidual, or the past, present, or future payment

7 for the provision of health care to an individual.

8 ‘‘(6) HEALTH PLAN.—The term ‘health plan’

9 means a plan which provides, or pays the cost of,

10 health benefits. Such term includes the following, or

11 any combination thereof:

12 ‘‘(A) Part A or part B of the medicare

13 program under title XVIII.

14 ‘‘(B) The medicaid program under title

15 XIX.

16 ‘‘(C) A medicare supplemental policy (as

17 defined in section 1882(g)(1)).

18 ‘‘(D) Coverage issued as a supplement to

19 liability insurance.

20 ‘‘(E) General liability insurance.

21 ‘‘(F) Worker’s compensation or similar in22 surance.

23 ‘‘(G) Automobile or automobile medical24 payment insurance.
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1 ‘‘(H) A long-term care policy, including a

2 nursing home fixed indemnity policy (unless the

3 Secretary determines that such a policy does

4 not provide sufficiently comprehensive coverage

5 of a benefit so that the policy should be treated

6 as a health plan).

7 ‘‘(I) A hospital or fixed indemnity income8 protection policy.

9 ‘‘(J) An employee welfare benefit plan, as

10 defined in section 3(1) of the Employee Retire11 ment Income Security Act of 1974 (29 U.S.C.

12 1002(1)), but only to the extent the plan is es13 tablished or maintained for the purpose of pro14 viding health benefits and has 50 or more par15 ticipants (as defined in section 3(7) of such

16 Act).

17 ‘‘(K) An employee welfare benefit plan or

18 any other arrangement which is established or

19 maintained for the purpose of offering or pro20 viding health benefits to the employees of 2 or

21 more employers.

22 ‘‘(L) The health care program for active

23 military personnel under title 10, United States

24 Code.
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1 ‘‘(M) The veterans health care program

2 under chapter 17 of title 38, United States

3 Code.

4 ‘‘(N) The Civilian Health and Medical Pro5 gram of the Uniformed Services (CHAMPUS),

6 as defined in section 1073(4) of title 10, United

7 States Code.

8 ‘‘(O) The Indian health service program

9 under the Indian Health Care Improvement Act

10 (25 U.S.C. 1601 et seq.).

11 ‘‘(P) The Federal Employees Health Bene12 fit Plan under chapter 89 of title 5, United

13 States Code.

14 ‘‘(Q) Such other plan or arrangement as

15 the Secretary determines is a health plan.

16 ‘‘(7) INDIVIDUALLY IDENTIFIABLE HEALTH IN17 FORMATION.—The term ‘individually identifiable

18 health information’ means any information, includ19 ing demographic information collected from an indi20 vidual, that—

21 ‘‘(A) is created or received by a health care

22 provider, health plan, employer, or clearing23 house; and

24 ‘‘(B) relates to the past, present, or future

25 physical or mental health or condition of an in-
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1 dividual, the provision of health care to an indi2 vidual, or the past, present, or future payment

3 for the provision of health care to an individual,

4 and—

5 ‘‘(i) identifies an individual; or

6 ‘‘(ii) with respect to which there is a

7 reasonable basis to believe that the infor8 mation can be used to identify an individ9 ual.

10 ‘‘(8) STANDARD.—The term ‘standard’, when

11 used with reference to a data element of health in12 formation or a transaction referred to in section

13 1173(a)(1), means any such data element or trans14 action that meets each of the standards and imple15 mentation specifications adopted or established by

16 the Secretary with respect to the data element or

17 transaction under sections 1172 and 1173.

18 ‘‘(9) STANDARD SETTING ORGANIZATION.—The

19 term ‘standard setting organization’ means a stand20 ard setting organization accredited by the American

21 National Standards Institute, including the National

22 Council for Prescription Drug Programs, that devel23 ops standards for information transactions, data ele24 ments, or any other standard that is necessary to,

25 or will facilitate, the implementation of this part.
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1 ‘‘SEC. 1172. GENERAL REQUIREMENTS FOR ADOPTION OF

2 STANDARDS.

3 ‘‘(a) APPLICABILITY.—Any standard or modification

4 of a standard adopted under this part shall apply to the

5 following persons:

6 ‘‘(1) A health plan.

7 ‘‘(2) A clearinghouse.

8 ‘‘(3) A health care provider who transmits any

9 health information in electronic form in connection

10 with a transaction referred to in section 1173(a)(1).

11 ‘‘(b) REDUCTION OF COSTS.—Any standard or modi12 fication of a standard adopted under this part shall be

13 consistent with the objective of reducing the administra14 tive costs of providing and paying for health care.

15 ‘‘(c) ROLE OF STANDARD SETTING ORGANIZA16 TIONS.—

17 ‘‘(1) IN GENERAL.—Except as provided in para18 graph (2), any standard or modification of a stand19 ard adopted under this part shall be developed or

20 modified by a standard setting organization.

21 ‘‘(2) SPECIAL RULE.—The Secretary may adopt

22 a standard or modification of a standard that is dif23 ferent from any standard developed or modified by

24 a standard setting organization, if—

25 ‘‘(A) the different standard or modification

26 will substantially reduce administrative costs to
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1 health care providers and health plans com2 pared to the alternatives; and

3 ‘‘(B) the standard or modification is pro4 mulgated in accordance with the rulemaking

5 procedures of subchapter III of chapter 5 of

6 title 5, United States Code.

7 ‘‘(d) IMPLEMENTATION SPECIFICATIONS.—The Sec8 retary shall establish specifications for implementing each

9 of the standards and modifications adopted under this

10 part.

11 ‘‘(e) PROTECTION OF TRADE SECRETS.—Except as

12 otherwise required by law, a standard or modification of

13 a standard adopted under this part shall not require dis14 closure of trade secrets or confidential commercial infor15 mation by a person required to comply with this part.

16 ‘‘(f) ASSISTANCE TO THE SECRETARY.—In complying

17 with the requirements of this part, the Secretary shall rely

18 on the recommendations of the Health Information Advi19 sory Committee established under section 1179 and shall

20 consult with appropriate Federal and State agencies and

21 private organizations. The Secretary shall publish in the

22 Federal Register the recommendations of the Health In23 formation Advisory Committee regarding the adoption of

24 a standard or modification of a standard under this part.
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1 ‘‘SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS

2 AND DATA ELEMENTS.

3 ‘‘(a) STANDARDS TO ENABLE ELECTRONIC EX4 CHANGE.—

5 ‘‘(1) IN GENERAL.—The Secretary shall adopt

6 standards for transactions, and data elements for

7 such transactions, to enable health information to be

8 exchanged electronically, that are—

9 ‘‘(A) appropriate for the financial and ad10 ministrative transactions described in para11 graph (2); and

12 ‘‘(B) related to other financial and admin13 istrative transactions determined appropriate by

14 the Secretary consistent with the goals of im15 proving the operation of the health care system

16 and reducing administrative costs.

17 ‘‘(2) TRANSACTIONS.—The transactions re18 ferred to in paragraph (1)(A) are the following:

19 ‘‘(A) Claims (including coordination of

20 benefits) or equivalent encounter information.

21 ‘‘(B) Claims attachments.

22 ‘‘(C) Enrollment and disenrollment.

23 ‘‘(D) Eligibility.

24 ‘‘(E) Health care payment and remittance

25 advice.

26 ‘‘(F) Premium payments.
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1 ‘‘(G) First report of injury.

2 ‘‘(H) Claims status.

3 ‘‘(I) Referral certification and authoriza4 tion.

5 ‘‘(3) ACCOMMODATION OF SPECIFIC PROVID6 ERS.—The standards adopted by the Secretary

7 under paragraph (1) shall accommodate the needs of

8 different types of health care providers.

9 ‘‘(b) UNIQUE HEALTH IDENTIFIERS.—

10 ‘‘(1) IN GENERAL.—The Secretary shall adopt

11 standards providing for a standard unique health

12 identifier for each individual, employer, health plan,

13 and health care provider for use in the health care

14 system. In carrying out the preceding sentence for

15 each health plan and health care provider, the Sec16 retary shall take into account multiple uses for iden17 tifiers and multiple locations and specialty classifica18 tions for health care providers.

19 ‘‘(2) USE OF IDENTIFIERS.—The standards

20 adopted under paragraphs (1) shall specify the pur21 poses for which a unique health identifier may be

22 used.

23 ‘‘(c) CODE SETS.—

24 ‘‘(1) IN GENERAL.—The Secretary shall adopt

25 standards that—
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1 ‘‘(A) select code sets for appropriate data

2 elements for the transactions referred to in sub3 section (a)(1) from among the code sets that

4 have been developed by private and public enti5 ties; or

6 ‘‘(B) establish code sets for such data ele7 ments if no code sets for the data elements

8 have been developed.

9 ‘‘(2) DISTRIBUTION.—The Secretary shall es10 tablish efficient and low-cost procedures for distribu11 tion (including electronic distribution) of code sets

12 and modifications made to such code sets under sec13 tion 1174(b).

14 ‘‘(d) SECURITY STANDARDS FOR HEALTH INFORMA15 TION.—

16 ‘‘(1) SECURITY STANDARDS.—The Secretary

17 shall adopt security standards that—

18 ‘‘(A) take into account—

19 ‘‘(i) the technical capabilities of record

20 systems used to maintain health informa21 tion;

22 ‘‘(ii) the costs of security measures;

23 ‘‘(iii) the need for training persons

24 who have access to health information;
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1 ‘‘(iv) the value of audit trails in com2 puterized record systems; and

3 ‘‘(v) the needs and capabilities of

4 small health care providers and rural

5 health care providers (as such providers

6 are defined by the Secretary); and

7 ‘‘(B) ensure that a clearinghouse, if it is

8 part of a larger organization, has policies and

9 security procedures which isolate the activities

10 of the clearinghouse with respect to processing

11 information in a manner that prevents unau12 thorized access to such information by such

13 larger organization.

14 ‘‘(2) SAFEGUARDS.—Each person described in

15 section 1172(a) who maintains or transmits health

16 information shall maintain reasonable and appro17 priate administrative, technical, and physical safe18 guards—

19 ‘‘(A) to ensure the integrity and confiden20 tiality of the information;

21 ‘‘(B) to protect against any reasonably an22 ticipated—

23 ‘‘(i) threats or hazards to the security

24 or integrity of the information; and
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1 ‘‘(ii) unauthorized uses or disclosures

2 of the information; and

3 ‘‘(C) otherwise to ensure compliance with

4 this part by the officers and employees of such

5 person.

6 ‘‘(e) PRIVACY STANDARDS FOR HEALTH INFORMA7 TION.—The Secretary shall adopt standards with respect

8 to the privacy of individually identifiable health informa9 tion. Such standards shall include standards concerning

10 at least the following:

11 ‘‘(1) The rights of an individual who is a sub12 ject of such information.

13 ‘‘(2) The procedures to be established for the

14 exercise of such rights.

15 ‘‘(3) The uses and disclosures of such informa16 tion that are authorized or required.

17 ‘‘(f) ELECTRONIC SIGNATURE.—

18 ‘‘(1) IN GENERAL.—The Secretary, in coordina19 tion with the Secretary of Commerce, shall adopt

20 standards specifying procedures for the electronic

21 transmission and authentication of signatures, com22 pliance with which shall be deemed to satisfy Fed23 eral and State statutory requirements for written

24 signatures with respect to the transactions referred

25 to in subsection (a)(1).
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1 ‘‘(2) PAYMENTS FOR SERVICES AND PRE2 MIUMS.—Nothing in this part shall be construed to

3 prohibit payment for health care services or health

4 plan premiums by debit, credit, payment card or

5 numbers, or other electronic means.

6 ‘‘(g) COORDINATION OF BENEFITS.—The Secretary

7 shall adopt standards—

8 ‘‘(1) for determining the financial liability of

9 health plans when health care benefits are payable

10 under two or more health plans; and

11 ‘‘(2) for transferring among health plans appro12 priate standard data elements needed for the coordi13 nation of benefits, the sequential processing of

14 claims, and other data elements for individuals who

15 have more than one health plan.

16 ‘‘SEC. 1174. TIMETABLES FOR ADOPTION OF STANDARDS.

17 ‘‘(a) INITIAL STANDARDS.—The Secretary shall

18 carry out section 1173 not later than 18 months after the

19 date of the enactment of this part, except that standards

20 relating to claims attachments shall be adopted not later

21 than 30 months after such date.

22 ‘‘(b) ADDITIONS AND MODIFICATIONS TO STAND23 ARDS.—

24 ‘‘(1) IN GENERAL.—Except as provided in para25 graph (2), the Secretary shall review the standards
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1 adopted under section 1173, and shall adopt addi2 tional or modified standards, as determined appro3 priate, but not more frequently than once every 6

4 months. Any addition or modification to a standard

5 shall be completed in a manner which minimizes the

6 disruption and cost of compliance.

7 ‘‘(2) SPECIAL RULES.—

8 ‘‘(A) FIRST 12-MONTH PERIOD.—Except

9 with respect to additions and modifications to

10 code sets under subparagraph (B), the Sec11 retary may not adopt any modification to a

12 standard adopted under this part during the

13 12-month period beginning on the date the

14 standard is initially adopted, unless the Sec15 retary determines that the modification is nec16 essary in order to permit compliance with the

17 standard.

18 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

19 CODE SETS.—

20 ‘‘(i) IN GENERAL.—The Secretary

21 shall ensure that procedures exist for the

22 routine maintenance, testing, enhancement,

23 and expansion of code sets.

24 ‘‘(ii) ADDITIONAL RULES.—If a code

25 set is modified under this subsection, the
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1 modified code set shall include instructions

2 on how data elements of health informa3 tion that were encoded prior to the modi4 fication may be converted or translated so

5 as to preserve the informational value of

6 the data elements that existed before the

7 modification. Any modification to a code

8 set under this subsection shall be imple9 mented in a manner that minimizes the

10 disruption and cost of complying with such

11 modification.

12 ‘‘SEC. 1175. REQUIREMENTS.

13 ‘‘(a) CONDUCT OF TRANSACTIONS BY PLANS.—

14 ‘‘(1) IN GENERAL.—If a person desires to con15 duct a transaction referred to in section 1173(a)(1)

16 with a health plan as a standard transaction—

17 ‘‘(A) the health plan may not refuse to

18 conduct such transaction as a standard trans19 action;

20 ‘‘(B) the health plan may not delay such

21 transaction, or otherwise adversely affect, or at22 tempt to adversely affect, the person or the

23 transaction on the ground that the transaction

24 is a standard transaction; and
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1 ‘‘(C) the information transmitted and re2 ceived in connection with the transaction shall

3 be in the form of standard data elements of

4 health information.

5 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

6 health plan may satisfy the requirements under

7 paragraph (1) by—

8 ‘‘(A) directly transmitting and receiving

9 standard data elements of health information;

10 or

11 ‘‘(B) submitting nonstandard data ele12 ments to a clearinghouse for processing into

13 standard data elements and transmission by the

14 clearinghouse, and receiving standard data ele15 ments through the clearinghouse.

16 ‘‘(3) TIMETABLE FOR COMPLIANCE.—Para17 graph (1) shall not be construed to require a health

18 plan to comply with any standard, implementation

19 specification, or modification to a standard or speci20 fication adopted or established by the Secretary

21 under sections 1172 and 1173 at any time prior to

22 the date on which the plan is required to comply

23 with the standard or specification under subsection

24 (b).

25 ‘‘(b) COMPLIANCE WITH STANDARDS.—
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1 ‘‘(1) INITIAL COMPLIANCE.—

2 ‘‘(A) IN GENERAL.—Not later than 24

3 months after the date on which an initial stand4 ard or implementation specification is adopted

5 or established under sections 1172 and 1173,

6 each person to whom the standard or imple7 mentation specification applies shall comply

8 with the standard or specification.

9 ‘‘(B) SPECIAL RULE FOR SMALL HEALTH

10 PLANS.—In the case of a small health plan,

11 paragraph (1) shall be applied by substituting

12 ‘‘36 months’’ for ‘‘24 months’’. For purposes of

13 this subsection, the Secretary shall determine

14 the plans that qualify as small health plans.

15 ‘‘(2) COMPLIANCE WITH MODIFIED STAND16 ARDS.—If the Secretary adopts a modification to a

17 standard or implementation specification under this

18 part, each person to whom the standard or imple19 mentation specification applies shall comply with the

20 modified standard or implementation specification at

21 such time as the Secretary determines appropriate,

22 taking into account the time needed to comply due

23 to the nature and extent of the modification. The

24 time determined appropriate under the preceding

25 sentence may not be earlier than the last day of the
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1 180-day period beginning on the date such modifica2 tion is adopted. The Secretary may extend the time

3 for compliance for small health plans, if the Sec4 retary determines that such extension is appropriate.

5 ‘‘SEC. 1176. GENERAL PENALTY FOR FAILURE TO COMPLY

6 WITH REQUIREMENTS AND STANDARDS.

7 ‘‘(a) GENERAL PENALTY.—

8 ‘‘(1) IN GENERAL.—Except as provided in sub9 section (b), the Secretary shall impose on any person

10 who violates a provision of this part a penalty of

11 not more than $100 for each such violation, except

12 that the total amount imposed on the person for all

13 violations of an identical requirement or prohibition

14 during a calendar year may not exceed $25,000.

15 ‘‘(2) PROCEDURES.—The provisions of section

16 1128A (other than subsections (a) and (b) and the

17 second sentence of subsection (f)) shall apply to the

18 imposition of a civil money penalty under this sub19 section in the same manner as such provisions apply

20 to the imposition of a penalty under such section

21 1128A.

22 ‘‘(b) LIMITATIONS.—

23 ‘‘(1) OFFENSES OTHERWISE PUNISHABLE.—A

24 penalty may not be imposed under subsection (a)
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1 with respect to an act if the act constitutes an of2 fense punishable under section 1177.

3 ‘‘(2) NONCOMPLIANCE NOT DISCOVERED.—A

4 penalty may not be imposed under subsection (a)

5 with respect to a provision of this part if it is estab6 lished to the satisfaction of the Secretary that the

7 person liable for the penalty did not know, and by

8 exercising reasonable diligence would not have

9 known, that such person violated the provision.

10 ‘‘(3) FAILURES DUE TO REASONABLE CAUSE.—

11 ‘‘(A) IN GENERAL.—Except as provided in

12 subparagraph (B), a penalty may not be im13 posed under subsection (a) if—

14 ‘‘(i) the failure to comply was due to

15 reasonable cause and not to willful neglect;

16 and

17 ‘‘(ii) the failure to comply is corrected

18 during the 30-day period beginning on the

19 1st date the person liable for the penalty

20 knew, or by exercising reasonable diligence

21 would have known, that the failure to com22 ply occurred.

23 ‘‘(B) EXTENSION OF PERIOD.—

24 ‘‘(i) NO PENALTY.—The period re25 ferred to in subparagraph (A)(ii) may be
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1 extended as determined appropriate by the

2 Secretary based on the nature and extent

3 of the failure to comply.

4 ‘‘(ii) ASSISTANCE.—If the Secretary

5 determines that a person failed to comply

6 because the person was unable to comply,

7 the Secretary may provide technical assist8 ance to the person during the period de9 scribed in subparagraph (A)(ii). Such as10 sistance shall be provided in any manner

11 determined appropriate by the Secretary.

12 ‘‘(4) REDUCTION.—In the case of a failure to

13 comply which is due to reasonable cause and not to

14 willful neglect, any penalty under subsection (a) that

15 is not entirely waived under paragraph (3) may be

16 waived to the extent that the payment of such pen17 alty would be excessive relative to the compliance

18 failure involved.

19 ‘‘SEC. 1177. WRONGFUL DISCLOSURE OF INDIVIDUALLY

20 IDENTIFIABLE HEALTH INFORMATION.

21 ‘‘(a) OFFENSE.—A person who knowingly—

22 ‘‘(1) uses or causes to be used a unique health

23 identifier in violation of a provision of this part;
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1 ‘‘(2) obtains individually identifiable health in2 formation relating to an individual in violation of a

3 provision of this part; or

4 ‘‘(3) discloses individually identifiable health in5 formation to another person in violation of a provi6 sion of this part,

7 shall be punished as provided in subsection (b).

8 ‘‘(b) PENALTIES.—A person described in subsection

9 (a) shall—

10 ‘‘(1) be fined not more than $50,000, impris11 oned not more than 1 year, or both;

12 ‘‘(2) if the offense is committed under false pre13 tenses, be fined not more than $100,000, imprisoned

14 not more than 5 years, or both; and

15 ‘‘(3) if the offense is committed with intent to

16 sell, transfer, or use individually identifiable health

17 information for commercial advantage, personal

18 gain, or malicious harm, fined not more than

19 $250,000, imprisoned not more than 10 years, or

20 both.

21 ‘‘SEC. 1178. EFFECT ON STATE LAW.

22 ‘‘(a) GENERAL EFFECT.—

23 ‘‘(1) GENERAL RULE.—Except as provided in

24 paragraph (2), a provision or requirement under this

25 part, or a standard or implementation specification
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1 adopted or established under sections 1172 and

2 1173, shall supersede any contrary provision of

3 State law, including a provision of State law that re4 quires medical or health plan records (including bill5 ing information) to be maintained or transmitted in

6 written rather than electronic form.

7 ‘‘(2) EXCEPTIONS.—A provision or requirement

8 under this part, or a standard or implementation

9 specification adopted or established under sections

10 1172 and 1173, shall not supersede a contrary pro11 vision of State law, if the provision of State law—

12 ‘‘(A) imposes requirements, standards, or

13 implementation specifications that are more

14 stringent than the requirements, standards, or

15 implementation specifications under this part

16 with respect to the privacy of individually iden17 tifiable health information; or

18 ‘‘(B) is a provision the Secretary deter19 mines—

20 ‘‘(i) is necessary to prevent fraud and

21 abuse, or for other purposes; or

22 ‘‘(ii) addresses controlled substances.

23 ‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this

24 part shall be construed to invalidate or limit the authority,

25 power, or procedures established under any law providing
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1 for the reporting of disease or injury, child abuse, birth,

2 or death, public health surveillance, or public health inves3 tigation or intervention.

4 ‘‘SEC. 1179. HEALTH INFORMATION ADVISORY COMMITTEE.

5 ‘‘(a) ESTABLISHMENT.—There is established a com6 mittee to be known as the Health Information Advisory

7 Committee (in this section referred to as the ‘committee’).

8 ‘‘(b) DUTIES.—The committee shall—

9 ‘‘(1) provide assistance to the Secretary in com10 plying with the requirements imposed on the Sec11 retary under this part;

12 ‘‘(2) study the issues related to the adoption of

13 uniform data standards for patient medical record

14 information and the electronic exchange of such in15 formation;

16 ‘‘(3) report to the Secretary not later than 4

17 years after the date of the enactment of this part

18 recommendations and legislative proposals for such

19 standards and electronic exchange; and

20 ‘‘(4) generally be responsible for advising the

21 Secretary and the Congress on the status of the im22 plementation of this part.

23 ‘‘(c) MEMBERSHIP.—

24 ‘‘(1) IN GENERAL.—The committee shall con25 sist of 15 members of whom—
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1 ‘‘(A) 3 shall be appointed by the President;

2 ‘‘(B) 6 shall be appointed by the Speaker

3 of the House of Representatives after consulta4 tion with the minority leader of the House of

5 Representatives; and

6 ‘‘(C) 6 shall be appointed by the President

7 pro tempore of the Senate after consultation

8 with the minority leader of the Senate.

9 The appointments of the members shall be made not

10 later than 60 days after the date of the enactment

11 of this part. The President shall designate 1 member

12 as the Chair.

13 ‘‘(2) EXPERTISE.—The membership of the com14 mittee shall consist of individuals who are of recog15 nized standing and distinction in the areas of infor16 mation systems, information networking and inte17 gration, consumer health, health care financial man18 agement, or privacy, and who possess the dem19 onstrated capacity to discharge the duties imposed

20 on the committee.

21 ‘‘(3) TERMS.—Each member of the committee

22 shall be appointed for a term of 5 years, except that

23 the members first appointed shall serve staggered

24 terms such that the terms of not more than 3 mem25 bers expire at one time.
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1 ‘‘(4) INITIAL MEETING.—Not later than 30

2 days after the date on which a majority of the mem3 bers have been appointed, the committee shall hold

4 its first meeting.

5 ‘‘(d) REPORTS.—Not later than 1 year after the date

6 of the enactment of this part, and annually thereafter, the

7 committee shall submit to the Congress, and make public,

8 a report regarding—

9 ‘‘(1) the extent to which persons required to

10 comply with this part are cooperating in implement11 ing the standards adopted under this part;

12 ‘‘(2) the extent to which such entities are meet13 ing the privacy and security standards adopted

14 under this part and the types of penalties assessed

15 for noncompliance with such standards;

16 ‘‘(3) whether the Federal and State Govern17 ments are receiving information of sufficient quality

18 to meet their responsibilities under this part;

19 ‘‘(4) any problems that exist with respect to im20 plementation of this part; and

21 ‘‘(5) the extent to which timetables under this

22 part are being met.’’.

23 (b) CONFORMING AMENDMENTS.—
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1 (1) REQUIREMENT FOR MEDICARE PROVID2 ERS.—Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1))

3 is amended—

4 (A) by striking ‘‘and’’ at the end of sub5 paragraph (P);

6 (B) by striking the period at the end of

7 subparagraph (Q) and inserting ‘‘; and’’; and

8 (C) by inserting immediately after sub9 paragraph (Q) the following new subparagraph:

10 ‘‘(R) to contract only with a clearinghouse

11 (as defined in section 1171) that meets each

12 standard and implementation specification

13 adopted or established under sections 1172 and

14 1173 on or after the date on which the clear15 inghouse is required to comply with the stand16 ard or specification.’’.

17 (2) CLERICAL AMENDMENTS.—

18 (A) Title XI (42 U.S.C. 1301 et seq.) is

19 amended by striking the title heading and in20 serting the following:

21 ‘‘TITLE XI—GENERAL PROVISIONS, PEER RE22 VIEW, AND ADMINISTRATIVE SIMPLIFICA23 TION’’.

24 (B) Parts A and B of title XI (42 U.S.C.

25 1301 et seq.) are amended by striking ‘‘this
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1 title’’ each place such term appears and insert2 ing ‘‘parts A and B of this title’’.

Æ