I

104TH CONGRESS

2D SESSION H. R. 3013

To increase the availability and continuity of health coverage for individuals,

small employers, and other groups, to reduce paperwork and simplify

administration of health care claims, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 5, 1996

Mr. NEY introduced the following bill; which was referred to the Committee

on Commerce, and in addition to the Committees on Economic and Educational Opportunities and Ways and Means, 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 increase the availability and continuity of health coverage

for individuals, small employers, and other groups, to

reduce paperwork and simplify administration of health

care claims, and for other purposes.

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

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Insurance and Health Care Reform Act of 1995’’.

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

7 this Act is as follows:
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Sec. 1. Short title; table of contents.

TITLE I—HEALTH INSURANCE REFORMS

Subtitle A—Improving Access to and Continuity of Coverage

Sec. 101. Limitation on pre-existing conditions provisions in the small employer

market.

Sec. 102. Assurance of continuity of coverage through previous satisfaction of

pre-existing condition requirement.

Sec. 103. Requirements relating to renewability generally.

Sec. 104. Limits on premiums and other rating practices in the small employer

market.

Sec. 105. Small employer purchasing groups.

Subtitle B—Open Enrollment and Related Practices

Sec. 111. Enrollment guidelines.

Subtitle C—Preemption of State Mandated Benefits, Anti-managed Care

Laws, and State Insurance Standards

Sec. 121. Preemption from State mandated benefits.

Sec. 122. Preemption of State law restrictions on managed care arrangements.

Sec. 123. Preemption of State insurance standards.

Subtitle D—Administrative Simplification

Sec. 131. Adoption of data elements, uniform claims, and uniform electronic

transmission standards.

Sec. 132. Application of standards.

Sec. 133. Periodic review and revision of standards.

Subtitle E—Restriction on Genetic Screening and Testing

Sec. 141. Genetic screening and testing restrictions in health insurance.

Subtitle F—Administrative Expenses

Sec. 151. Limitation on administrative expenses.

Subtitle G—Limitations on Balance Billing

Sec. 161. Medicare program.

Sec. 162. Other programs.

Subtitle H—Enforcement; General Definitions

Sec. 171. General enforcement.

Sec. 172. General definitions.

TITLE II—EXTENSION OF PREVENTIVE PUBLIC HEALTH

Sec. 201. Immunizations against vaccine-preventable diseases.

Sec. 202. Prevention, control, and elimination of tuberculosis.

Sec. 203. Lead poisoning prevention.

TITLE III—TAX PROVISIONS
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Sec. 301. Increased deduction for health insurance costs of self-employed individuals.

Sec. 302. Safe harbor for health care providers otherwise exempt under

501(c)(3) or (4) which affiliate with certain health entities.

1 TITLE I—HEALTH INSURANCE

2 REFORMS

3 Subtitle A—Improving Access to

4 and Continuity of Coverage

5 SEC. 101. LIMITATION ON PRE-EXISTING CONDITIONS PRO6 VISIONS IN THE SMALL EMPLOYER MARKET.

7 (a) IN GENERAL.—An insurer may impose a pre-ex8 isting conditions provision (as defined in subsection (b))

9 with respect to an individual under a health benefit plan

10 covering small employers only if—

11 (1) the limitation or exclusion does not extend

12 for a period beyond 12 months following the individ13 ual’s effective date of coverage under the plan and

14 only relates to conditions during the six months im15 mediately preceding the effective date of coverage;

16 and

17 (2) the limitation or exclusion does not apply to

18 an individual who, as of the date of birth, was cov19 ered under the plan.

20 (b) PRE-EXISTING CONDITIONS PROVISION DE21 FINED.—In this title, the term ‘‘pre-existing conditions

22 provision’’ means a policy provision that excludes or limits

23 coverage for charges or expenses incurred during a speci-
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1 fied period following the insured’s effective date of cov2 erage as to a condition which, during a specified period

3 immediately preceding the effective date of coverage, had

4 manifested itself in such a manner as would cause an ordi5 narily prudent person to seek medical advice, diagnosis,

6 care, or treatment or for which medical advice, diagnosis,

7 care or treatment was recommended or received, or a preg8 nancy existing on the effective date of coverage.

9 SEC. 102. ASSURANCE OF CONTINUITY OF COVERAGE

10 THROUGH PREVIOUS SATISFACTION OF PRE11 EXISTING CONDITION REQUIREMENT.

12 (a) IN GENERAL.—In determining whether a pre-ex13 isting conditions provision applies to an eligible employee

14 or dependent covered under any health benefit plan, the

15 plan shall credit the time the person was covered under

16 a previous health benefit plan if the previous coverage was

17 continuous to a date not more than 30 days prior to the

18 effective date of the new coverage, exclusive of any appli19 cable service waiting period under the plan.

20 (b) TREATMENT OF WAITING PERIODS.—In applying

21 subsection (a), any waiting period, which may not exceed

22 90 days, imposed by an employer before an employee is

23 eligible to be covered under a plan shall be treated as a

24 period in which the employee was covered under a health

25 benefit plan.
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1 SEC. 103. REQUIREMENTS RELATING TO RENEWABILITY

2 GENERALLY.

3 (a) MULTIPLE EMPLOYER WELFARE ARRANGE4 MENTS.—A multiple employer welfare arrangement may

5 not cancel coverage or deny renewal of coverage under

6 such a plan with respect to an employer other than—

7 (1) for nonpayment of contributions;

8 (2) for fraud or other misrepresentation by the

9 employer;

10 (3) for noncompliance with plan provisions; and

11 (4) because the plan is ceasing to provide any

12 coverage in a geographic area.

13 (b) INSURERS.—An insurer may not cancel a health

14 benefit plan or deny renewal of coverage under such a plan

15 other than—

16 (1) for nonpayment of premiums;

17 (2) for fraud or other misrepresentation by the

18 insured;

19 (3) for noncompliance with plan provisions;

20 (4) in the case of a plan issued to a small em21 ployer, for failure to maintain minimum participa22 tion rates (consistent with subsection (d)); or

23 (5) because the insurer is ceasing to provide

24 any health benefit plan in a State, or, in the case

25 of an HMO, in a geographic area.
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1 (c) LIMITATION ON MARKET RE-ENTRY.—If an in2 surer ceases to offer health benefit plans to employers in

3 a geographic area, the insurer may not offer such a health

4 benefit plan to any employer in the geographic area until

5 5 years after the date of the termination.

6 (d) MINIMUM PARTICIPATION RATES.—An insurer

7 may require, with respect to a health benefit plan issued

8 to a small employer, that a minimum percentage of eligible

9 employees who do not otherwise have health insurance are

10 enrolled in such plan if such percentage is applied uni11 formly to all plans offered to employers of comparable size.

12 (e) UNDERWRITING AND SELECTIVE EXCLUSION.—

13 (1) IN GENERAL.—Except as provided in this

14 subsection, an insurer may underwrite and rate

15 small employer groups using accepted underwriting

16 and actuarial practices.

17 (2) PROHIBITION OF HEALTH STATUS UNDER18 WRITING.—Subject to paragraph (3), an insurer

19 shall not exclude any eligible employee or dependent,

20 who would otherwise be covered under a health bene21 fit plan offered by the insurer, on the basis of any

22 actual or expected health condition of the employee

23 or dependent.
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1 (3) EXCLUSION OF LATE ENROLLEES.—With

2 respect to an individual who is a late enrollee (as de3 fined in paragraph (4)), an insurer—

4 (A) may exclude the individual for a period

5 of up to 24 months or may, in the discretion of

6 the insurer, extend coverage to the individual at

7 any time during that period, and

8 (B) may medically underwrite the individ9 ual.

10 (4) LATE ENROLLEE.—In this title, the term

11 ‘‘late enrollee’’ means an eligible employee or de12 pendent who requests enrollment in a small employ13 er’s health benefit plan following the initial enroll14 ment period provided under the terms of the first

15 plan for which the employee or dependent was eligi16 ble through the small employer, unless any of the

17 following apply:

18 (A) The individual—

19 (i) was covered under another em20 ployer-provided health benefit plan at the

21 time the individual was eligible to enroll;

22 (ii) states, at the time of the initial

23 eligibility, that coverage under another em24 ployer health benefit plan was the reason

25 for declining enrollment;
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1 (iii) has lost coverage under another

2 employer health benefit plan as a result of

3 the termination of employment, the termi4 nation of the other plan’s coverage, death

5 of a spouse, or divorce; and

6 (iv) requests enrollment within 30

7 days after the termination of coverage

8 under another employer health benefit

9 plan.

10 (B) The individual is employed by an em11 ployer who offers multiple health benefit plans

12 and the individual elects a different health ben13 efit plan during an open enrollment period.

14 (C) A court has ordered coverage to be

15 provided for a spouse or minor child under a

16 covered employee’s plan and a request for en17 rollment is made within 30 days after issuance

18 of the court order.

19 SEC. 104. LIMITS ON PREMIUMS AND OTHER RATING PRAC20 TICES IN THE SMALL EMPLOYER MARKET.

21 (a) LIMITS ON PREMIUMS.—

22 (1) LIMIT ON VARIATION OF RATES.—

23 (A) NEW ISSUANCE.—With respect to a

24 health benefit plan offered to small employers

25 by an insurer and issued on or after the date
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1 of the enactment of this Act, the premium rates

2 charged or offered for a rating period for the

3 same or similar coverage under the plan cover4 ing any small employer with similar case char5 acteristics may not vary from the applicable

6 midpoint rate by more than 35 percent of the

7 midpoint rate.

8 (B) CURRENT ISSUANCE.—

9 (i) IN GENERAL.—If the premium

10 rate charged or offered for the same or

11 similar coverage under the plan covering

12 any small employer with similar case char13 acteristics exceeds the applicable midpoint

14 rate by more than 35 percent, any increase

15 in premium for a new rating period shall

16 not exceed the sum of the following:

17 (I) BASE PREMIUM INCREASE.—

18 Subject to clause (ii), any percentage

19 change in the base premium rate

20 measured from the first day of the

21 prior rating period to the first day of

22 the new rating period.

23 (II) ADJUSTMENT FOR CASE

24 CHARACTERISTICS.—Any adjustment

25 due to change in case characteristics
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1 or plan design of the small employer,

2 as determined by the insurer.

3 (ii) LIMITATION.—Any increase in

4 premium rates for a new rating period

5 shall not exceed any percentage change in

6 the base premium rate measured from the

7 first day of the prior rating period to the

8 first day of the new rating period plus 15

9 percent, adjusted on a pro rata basis for

10 rating periods greater or less than one

11 year and adjustments due to a change in

12 case characteristics or plan design of the

13 small employer.

14 (iii) RATING PERIOD.—For purposes

15 of this subsection, an insurer shall treat all

16 health benefit plans covering small employ17 ers issued or renewed in the same calendar

18 month as having the same rating period.

19 (C) LIMITATION ON VARIATION DUE TO

20 USE OF INDUSTRY AS CASE CHARACTERISTIC.—

21 If an insurer uses industry as a case char22 acteristic in establishing premium rates, the

23 rate factor associated with any industry classi24 fication may not vary by more than 15 percent
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1 from the arithmetic average of the rate factors

2 associated with all industry classifications.

3 (2) LIMIT ON VARIATION OF PREMIUM RATES

4 WITHIN A CLASS A BUSINESS.—For a class of busi5 ness (as defined in subsection (e)(3)) of an insurer,

6 the highest premium rates charged during a rating

7 period to small employers with similar case charac8 teristics for the same or similar coverage, or the

9 highest rates which could be charged to such em10 ployers under the rating system for that class of

11 business, shall not exceed an amount that is 1.5

12 times the base premium rate for the class of busi13 ness for a rating period (or portion thereof) that oc14 curs in the first 3 years in which this section is in

15 effect, and 1.35 times the base premium rate there16 after.

17 (3) LIMIT ON TRANSFER OF EMPLOYERS

18 AMONG CLASSES OF BUSINESS.—An insurer may not

19 involuntarily transfer a small employer into or out of

20 a class of business. An insurer may not offer to

21 transfer a small employer into or out of a class of

22 business unless such offer is made to transfer all

23 small employers in the class of business without re24 gard to claim experience, health status, or duration

25 of coverage since issue.
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1 (b) FULL DISCLOSURE OF RATING PRACTICES.—At

2 the time an insurer offers a health benefit plan to a small

3 employer, the insurer shall fully disclose to the employer

4 rating practices applicable to such plan.

5 (c) ACTUARIAL CERTIFICATION.—Each insurer that

6 offers a health benefit plan to a small employer in a State

7 shall file annually with the State commissioner of insur8 ance a written statement by a member of the American

9 Academy of Actuaries (or other individual acceptable to

10 the commissioner) that, based upon an examination by the

11 individual which includes a review of the appropriate

12 records and the actuarial assumptions of the insurer and

13 methods used by the insurer in establishing premium rates

14 for applicable health benefit plans—

15 (1) the insurer is in compliance with the appli16 cable provisions of this section; and

17 (2) the rating methods are actuarially sound.

18 Each such insurer shall retain a copy of such statement

19 for examination at its principal place of business.

20 (d) REGISTRATION AND REPORTING.—Each insurer

21 that issues any health benefit plan to a small employer

22 in a State shall be registered or licensed with the State

23 commissioner of insurance and shall comply with any re24 porting requirements of the commissioner relating to such

25 a plan.
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1 (e) DEFINITIONS.—In this section:

2 (1) BASE PREMIUM RATE.—The term ‘‘base

3 premium rate’’ means, as to any health benefit plan

4 that is issued by an insurer and that covers more

5 than 1 but less than 51 employees of a small em6 ployer, the lowest premium rate for a new or exist7 ing business for same or similar coverage covering

8 any small employer with small case characteristics.

9 (2) CASE CHARACTERISTICS.—The term ‘‘case

10 characteristics’’ means, with respect to a small em11 ployer, any of the following:

12 (A) The geographic area in which the em13 ployees reside.

14 (B) The age and sex of the individual em15 ployees and their dependents.

16 (C) The appropriate industry classification

17 as determined by the insurer.

18 (D) The number of employees and depend19 ents.

20 (E) Such other objective criteria as may be

21 established by the insurer, but not including

22 claims experience, health status, or duration of

23 coverage from the date of issue.

24 (3) CLASS OF BUSINESS.—The term ‘‘class of

25 business’’ means, with respect to an insurer, all (or
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1 a distinct group of) small employers as shown on the

2 records of the insurer.

3 (4) MIDPOINT RATE ‘‘midpoint rate’’ means, for

4 small employers with similar case characteristics and

5 plan designs and as determined by the applicable in6 surer for a rating period, the arithmetic average of

7 the applicable base premium rate and the cor8 responding highest premium rate.

9 SEC. 105. SMALL EMPLOYER PURCHASING GROUPS.

10 (a) SMALL EMPLOYER PURCHASING GROUPS DE11 SCRIBED.—

12 (1) IN GENERAL.—As used in this section, the

13 term ‘‘small employer purchasing group’’ means an

14 organization that—

15 (A) has a membership consisting solely of

16 small employers;

17 (B) is administered solely under the au18 thority and control of its member employers;

19 (C) with respect to each State in which its

20 members are located, consists of not fewer than

21 the number of small employers established by

22 the State as appropriate for such a group;

23 (D) offers a program to assist such small

24 employer members to obtain coverage for their
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1 employees under one or more health benefit

2 plans; and

3 (E) is not directly or indirectly controlled,

4 through voting membership, representation on

5 its governing board or otherwise, by an insurer,

6 agent, broker, or any other individual or entity

7 engaged in the sale of insurance, provider, or by

8 persons who are officers, trustees, or directors

9 of such enterprises.

10 (2) SPECIAL RULE.—An employer member of a

11 small employer purchasing group that meets the re12 quirements of paragraph (1) may retain its member13 ship in the group if the number of employees of the

14 employer increases such that the employer is no

15 longer a small employer.

16 (b) AUTHORITY.—A small employer purchasing

17 group established under this section may do any of the

18 following:

19 (1) OFFERING HEALTH BENEFIT PLANS.—Ne20 gotiate and enter into agreements with one or more

21 insurers for the insurers to offer and provide one or

22 more health benefit plans to small employers for

23 their employees and retirees, and the dependents

24 and members of the families of such employees and

25 retirees, which coverage may be made available to
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1 enrolled small employers without regard to indus2 trial, rating, or other classifications, and for the pur3 chasing group to perform, or contract with others

4 for the performance of, functions for or with respect

5 to such purchasing group.

6 (2) CONTRACTS WITH OTHER GROUPS.—Con7 tract with another small employer purchasing group

8 for the inclusion of the small employer members of

9 one in the program of the other.

10 (3) INFORMATION DISSEMINATION.—Provide or

11 cause to be provided to small employers information

12 concerning the availability coverage, benefits, pre13 miums, and other information regarding purchasing

14 groups.

15 (4) ADMINISTRATION.—Provide, or contract

16 with others to provide, enrollment, recordkeeping, in17 formation, premium billing, collection and transmit18 tal, and other services for a purchasing group.

19 (5) AUDITS.—Receive reports and information

20 from the insurer and negotiate and enter into agree21 ments with respect to inspection and audit of the

22 books and records of the insurer.

23 (c) LIMITATION ON ACTIVITIES.—A small employer

24 purchasing group may not—
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1 (1) perform any activity involving approval or

2 enforcement of payment rates for providers;

3 (2) assume financial risk in relation to any

4 health benefit plan; or

5 (3) perform other activities identified by the

6 State as being inconsistent with the performance of

7 its duties under this section.

8 (d) RULES OF CONSTRUCTION.—

9 (1) ESTABLISHMENT NOT REQUIRED.—Nothing

10 in this section shall be construed as requiring—

11 (A) that a State organize, operate, or oth12 erwise establish a small employer purchasing

13 group, or otherwise require the establishment of

14 purchasing groups; and

15 (B) that there be only one small employer

16 purchasing group established with respect to a

17 community rating area.

18 (2) ELIGIBILITY REQUIREMENTS.—Nothing in

19 this section shall be construed as inhibiting or pre20 venting a small employer purchasing group from

21 adopting, imposing, and enforcing rules, conditions,

22 limitations, or restrictions that are based on factors

23 other than the health status of employees or their

24 dependents for the purpose of determining whether
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1 a small employer is eligible to become a member of

2 a purchasing group.

3 (e) RECEIPT OF PREMIUMS.—

4 (1) ENROLLMENT CHARGE.—The amount

5 charged by a small employer purchasing group for

6 coverage under a health benefit plan shall be equal

7 to the sum of—

8 (A) the premium rate offered by such

9 health plan;

10 (B) the administrative charge for such

11 health plan; and

12 (C) the purchasing group administrative

13 charge for enrollment of eligible employees, eli14 gible individuals and certain uninsured individ15 uals through the group.

16 (2) DISCLOSURE OF PREMIUM RATES AND AD17 MINISTRATIVE CHARGES.—Each small employer pur18 chasing group shall, prior to the time of enrollment,

19 disclose to enrollees and other interested parties the

20 premium rate for a health benefit plan, administra21 tive charge for such plan, and administrative charge

22 of the group, separately.

23 (f) SPECIAL RULES.—No health benefit plan offered

24 or provided by an insurer to a small employer in a small
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1 employer purchasing group is subject to any law that does

2 any of the following:

3 (1) SELECTIVE CONTRACTING.—Inhibits the in4 surer from selectively contracting with providers or

5 groups of providers with respect to health care serv6 ice or benefits.

7 (2) PAYMENT NEGOTIATION.—Imposes any re8 strictions on the ability of the insurer to negotiate

9 with providers regarding the level or method of reim10 bursing for care or services.

11 (3) BENEFIT OR PROVIDER MANDATES.—Re12 quires the reimbursement, utilization, or consider13 ation of a specific category of health care services or

14 benefits.

15 (4) BENEFICIARY INCENTIVES.—Limits the fi16 nancial incentives that a health benefit plan may re17 quire a beneficiary to pay when a nonplan provider

18 is used on a nonemergency basis.

19 (5) UTILIZATION REVIEW.—(A) Prohibits utili20 zation review of any or all treatments and condi21 tions, (B) requires the use of specified standards of

22 health care practice in such reviews or requires the

23 disclosure of the specific criteria used in such re24 views, (C) requires payments to providers for the ex25 penses of responding to utilization review requests,
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1 or (D) imposes liability for delays in performing

2 such review.

3 Subtitle B—Open Enrollment and

4 Related Practices

5 SEC. 111. ENROLLMENT GUIDELINES.

6 (a) REQUIREMENT OF OPEN ENROLLMENT.—

7 (1) IN GENERAL.—Beginning in January of

8 each year, each insurer shall accept applicants for

9 open enrollment coverage described in paragraph (2)

10 or (3) in the order in which they apply for coverage,

11 subject to subsection (f).

12 (2) SMALL EMPLOYERS.—In the case of an ap13 plicant that is a small employer, the applicant must

14 accept the employer if coverage is not otherwise

15 available and if coverage had not been terminated by

16 the employer (or by an insurer with respect to the

17 employer) during the preceding 12-month period.

18 (3) INDIVIDUALS.—In the case of an applicant

19 that is an individual, the applicant—

20 (A) is not applying for coverage as an em21 ployee of an employer, as a member of an asso22 ciation, or as a member of any other group; and

23 (B) is not covered, and is not eligible for

24 coverage, under any other private or public

25 health benefits arrangement, including the Med-
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1 icare program under title XVIII of the Social

2 Security Act or any other Act of Congress or

3 law of any State that provides benefits com4 parable to the benefits provided under this sec5 tion or any conversion or continuation of cov6 erage policy under State or Federal law.

7 (b) MINIMUM COVERAGE.—An insurer shall provide

8 to any individual or small employer group accepted under

9 this section a health benefit plan that provides, at a mini10 mum, coverage of the following health care services, when

11 such services are provided within the scope of authorized

12 practice by the applicable licensed providers:

13 (1) Major medical.

14 (2) Hospital services.

15 (3) Basic medical-surgical services, both inpa16 tient and outpatient medical and surgical services,

17 diagnostic services, anesthesia services, and con18 sultation services.

19 (4) Prescription drugs, insulin, syringes, diag20 nostic x-rays and laboratory tests.

21 (5) Screening by low-dose mammography for

22 the presence of breast cancer and cytologic screening

23 for the presence of cervical cancer in accordance

24 with standards of the National Cancer Institute.

25 (6) Maternity services.
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1 (c) PREEXISTING CONDITIONS PROVISIONS.—Health

2 benefit plans issued under this section may establish pre3 existing conditions provisions (as defined in section

4 101(b)) that exclude or limit coverage for a period of up

5 to 12 months (or 24 months in the case of a late enrollee,

6 as defined in section 101(e)(4) and at the option of the

7 insurer) following the individual’s effective date of cov8 erage and that may relate only to conditions during the

9 6 months immediately preceding the effective date of cov10 erage.

11 (d) PREMIUMS.—

12 (1) SMALL EMPLOYERS.—Premiums charged to

13 small employers under this section may not exceed

an amount that is 11 14 ⁄2 times the highest rate

15 charged any other small employer with similar case

16 characteristics for same or similar coverage.

17 (2) INDIVIDUALS.—Premiums charged to indi18 viduals under this section may not exceed an amount

that is 11 19 ⁄2 times the highest rate charged to any

20 other individual of the same age and gender for

21 same or similar coverage. If the insurer does not

22 have established individual rates in a State, the pre23 mium charged to individuals may not exceed an

amount that is 11 24 ⁄2 times the rate charged a small

25 employer with case characteristics similar to the in-
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1 dividual seeking coverage for same or similar cov2 erage.

3 (e) USE OF NETWORKS.—In offering health benefit

4 plans under this section, an insurer may require the pur5 chase of health benefit plans that condition the reimburse6 ment of health services upon the use of a specific network

7 of providers.

8 (f) LIMITATION ON NUMBER OF NEW INSUREDS RE9 QUIRED TO ACCEPT.—

10 (1) IN GENERAL.—An insurer is not required to

11 accept annually under this section either individuals

12 or small employers that, in the aggregate, would

13 cause the insurer to have a total number of new

insureds under this section that is more than 1 14 ⁄2 per15 cent per year of its total number of insured individ16 uals or small group certificate holders, calculated as

17 of the immediately preceding 31st day of December

18 and excluding Medicare supplemental policies and

19 conversion or continuation of coverage policies under

20 State or Federal law.

21 (2) CERTIFICATION.—An officer of the insurer

22 shall certify to the State commissioner of insurance

23 of its domiciliary State when it has met the enroll24 ment limit under paragraph (1). Upon providing

25 such certification, the insurer shall be relieved of its
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1 open enrollment requirement under this section for

2 the remainder of the calendar year.

3 (g) LIMITATION ON ACCEPTANCE OF CERTAIN CON4 FINED INDIVIDUALS.—An insurer shall not be required to

5 accept under this section applicants who, at the time of

6 enrollment, are confined to a health care facility because

7 of chronic illness, permanent injury, or other infirmity

8 that would cause economic impairment to the insurer if

9 the applicants were accepted, or to make the effective date

10 of benefits for individuals or groups accepted under this

11 section earlier than 90 days after the date of acceptance.

12 (h) NO APPLICATION TO INSOLVENT INSURERS.—

13 The requirements of this section do not apply to any in14 surer that is in a state of supervision, insolvency, or liq15 uidation. If the insurer demonstrates to the satisfaction

16 of the State commissioner of insurance of the insurer’s

17 domiciliary State that the application of the requirements

18 of this section would place the insurer in a State of super19 vision, insolvency, or liquidation, the commissioner may

20 waive or modify the requirements of subsection (a) and

21 (f). The actions of the commissioner under this subsection

22 shall be effective for a period of not more than 1 year.

23 At the expiration of such time, a new showing of need

24 for a waiver or modification by the insurer shall be made

25 before a new waiver or modification is issued or imposed.
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1 (i) LIMITATION ON AGENT COMPENSATION.—No in2 surer shall pay or allow, or cause to be paid or allowed,

3 and no agent shall accept, or agree to receive or accept,

4 any commission, consideration, money, or other thing of

5 value in excess of 5 percent of the premium charged for

6 initial placement or for otherwise securing the issuance of,

7 or in excess of 4 percent of the premium charged for the

8 renewal of, a policy or contract issued to an individual or

9 small employer group under this section. The Secretary

10 may adopt such rules as are necessary to enforce this sub11 section.

12 (j) EXCLUSION OF CERTAIN POLICIES.—This section

13 does not apply to any policy that provides coverage for

14 specified diseases or accidents only or to any hospital in15 demnity, Medicare supplement, long-term care, disability

16 income, one-time-limited-duration policy of no longer than

17 6 months, or other policy that offers only supplemental

18 benefits.

19 Subtitle C—Preemption of State

20 Mandated Benefits, Anti-man21 aged Care Laws, and State In22 surance Standards

23 SEC. 121. PREEMPTION FROM STATE MANDATED BENEFITS.

24 Effective as of January 1, 1996, no State shall estab25 lish or enforce any law or regulation that—
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1 (1) requires the offering, as part of health in2 surance coverage, of any services, category of care,

3 or services of any class or type of provider; or

4 (2) specifies the individuals to be provided

5 health insurance coverage or the duration of such

6 coverage.

7 SEC. 122. PREEMPTION OF STATE LAW RESTRICTIONS ON

8 MANAGED CARE ARRANGEMENTS.

9 Effective as of January 1, 1996—

10 (1) a State may not prohibit or limit an insurer

11 or health benefit plan providing health coverage

12 from including incentives for enrollees to use the

13 services of participating providers;

14 (2) a State may not prohibit or limit such in15 surer or plan from limiting coverage of services to

16 those provided by a participating provider;

17 (3) a State may not prohibit or limit the nego18 tiation of rates and forms of payments for providers

19 by such insurer or plan with respect to health cov20 erage;

21 (4) a State may not prohibit or limit such in22 surer or plan from limiting the number of participat23 ing providers; and

24 (5) a State may not prohibit or limit such in25 surer or plan from requiring that services be pro-
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1 vided (or authorized) by a practitioner selected by

2 the enrollee from a list of available participating pro3 viders or from requiring enrollees to obtain referral

4 in order to have coverage for treatment by a special5 ist or health institution.

6 SEC. 123. PREEMPTION OF STATE INSURANCE STANDARDS.

7 A State may not establish or enforce standards for

8 health insurance coverage made available in the individual

9 and small group markets that are different from the

10 standards established under this title, unless the State has

11 already established or has been enforcing such standards

12 for health insurance coverage prior to the effective date

13 of this title.

14 Subtitle D—Administrative

15 Simplification

16 SEC. 131. ADOPTION OF DATA ELEMENTS, UNIFORM

17 CLAIMS, AND UNIFORM ELECTRONIC TRANS18 MISSION STANDARDS.

19 (a) IN GENERAL.—The Secretary of Health and

20 Human Services (in this subtitle referred to as the ‘‘Sec21 retary’’) shall adopt standards relating to each of the fol22 lowing:

23 (1) DATA ELEMENTS.—Data elements for use

24 in paper and electronic claims processing under

25 health benefit plans, as well as for use in utilization
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1 review and management of care (including data

2 fields, formats, and medical nomenclature, and in3 cluding plan benefit and insurance information).

4 (2) UNIFORM CLAIMS FORMS.—Uniform claims

5 forms (including uniform procedure and billing codes

6 for use with such forms and including information

7 or other health benefit plans that may be liable for

8 benefits).

9 (3) UNIFORM ELECTRONIC TRANSMISSION.—

10 Uniform electronic transmission of the date elements

11 (for purposes of billing and utilization review).

12 The standards under paragraph (3) (relating to electronic

13 transmission of data elements) for claims for services)

14 shall supersede (to the extent specified in such standards)

15 the standards adopted under paragraph (2) (relating to

16 the submission of paper claims) for such services. The

17 standards under paragraph (3) shall include protections

18 to assure the confidentiality of patient-specific information

19 and to protect against the unauthorized use and disclosure

20 of information.

21 (b) USE OF TASK FORCES.—In adopting standards

22 under this section, the Secretary shall—

23 (1) take into account the recommendations of

24 current task forces;
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1 (2) consult with the National Association of In2 surance Commissioners (and, with respect to stand3 ards under subsection (a)(3), the American National

4 Standards Institute); and

5 (3) to the maximum extent practicable, seek to

6 make the standards consistent with any uniform

7 clinical data sets which have been adopted and are

8 widely recognized.

9 (c) DEADLINES FOR PROMULGATION.—The Sec10 retary shall promulgate the standards under—

11 (1) subsection (a)(1) relating to claims process12 ing data, by not later than 12 months after the date

13 of the enactment of this Act;

14 (2) subsection (a)(2) (relating to uniform

15 claims forms) by not later than 12 months after the

16 date of the enactment of this Act; and

17 (3)(A) subsection (a)(3) relating to trans18 mission of information concerning hospital and phy19 sicians services, by not later than 24 months after

20 the date of the enactment of this Act; and

21 (B) subsection (a)(3) relating to transmission

22 of information on other services by such later date

23 as the Secretary may determine it to be feasible.
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1 SEC. 132. APPLICATION OF STANDARDS.

2 (a) IN GENERAL.—If the Secretary determines, at

3 the end of the 2-year period beginning on the date that

4 standards are adopted under section 131 with respect to

5 classes of services, that a significant number of claims for

6 benefits for such services under health benefit plans are

7 not being submitted in accordance with such standards,

8 the Secretary may require, after notice in the Federal

9 Register of not less than 6 months, that all providers of

10 such services must submit claims to health benefit plans

11 in accordance with such standards. The Secretary may

12 waive the application of such a requirement in such cases

13 as the Secretary finds that the imposition of the require14 ment would not be economically practicable.

15 (b) SIGNIFICANT NUMBER.—The Secretary shall

16 make an affirmative determination described in subsection

17 (a) for a class of services only if the Secretary finds that

18 there would be a significant, measurable, additional gain

19 in efficiencies in the health care system that would be ob20 tained by imposing the requirement described in such

21 paragraph with respect to such services.

22 (c) APPLICATION OF REQUIREMENT.—

23 (1) IN GENERAL.—If the Secretary imposes the

24 requirement under subsection (a)—

25 (A) in the case of a requirement that im26 poses the standards relating to electronic trans-
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1 mission of claims for a class of services, each

2 health care provider that furnishes such services

3 for which benefits are payable under a health

4 benefit plan shall transmit electronically and di5 rectly to the plan on behalf of the beneficiary

6 involved a claim for such services in accordance

7 with such standards;

8 (B) any health benefit plan may reject any

9 claim subject to the standards adopted under

10 section 131 but which is not submitted in ac11 cordance with such standards;

12 (C) it is unlawful for a health benefit

13 plan—

14 (i) to reject any such claim on the

15 basis of the form in which it is submitted

16 if it is submitted in accordance with such

17 standards; or

18 (ii) to require, for the purpose of utili19 zation review or as a condition of providing

20 benefits under the plan, a provider to

21 transmit medical data elements that are

22 inconsistent with the standards established

23 under section 131; and

24 (D) the Secretary may impose a civil

25 money penalty on any provider that knowingly
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1 and repeatedly submits claims in violation of

2 such standards or on any health benefit plan

3 (other than a health benefit plan described in

4 paragraph (2)) that knowingly, and repeatedly

5 rejects claims in violation of subparagraph (B),

6 in an amount not to exceed $100 for each such

7 claim.

8 The provisions of section 1128A of the Social Secu9 rity Act (other than the first sentence of subsection

10 (a) and other than subsection (b)) shall apply to a

11 civil money penalty under subparagraph (D) in the

12 same manner as such provisions apply to penalty or

13 proceeding under section 1128 of such Act.

14 (2) PLANS SUBJECT TO EFFECTIVE STATE REG15 ULATION.—A plan described in this paragraph is a

16 health benefit plan—

17 (A) that is subject to regulation by a

18 State; and

19 (B) with respect to which the Secretary

20 finds that—

21 (i) the State provides for application

22 of the standards established under section

23 131; and
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1 (ii) the State regulatory program pro2 vides for the appropriate and effective en3 forcement of such standards.

4 (d) TREATMENT OF REJECTIONS.—If a plan rejects

5 a claim pursuant to subsection (c), the plan shall permit

6 the person submitting the claim a reasonable opportunity

7 to resubmit the claim on a form or in an electronic manner

8 that meets the requirements for acceptance of the claim

9 under such subsection.

10 SEC. 133. PERIODIC REVIEW AND REVISION OF STAND11 ARDS.

12 (a) IN GENERAL.—The Secretary shall—

13 (1) provide for the ongoing receipt and review

14 of comments and suggestions for changes in the

15 standards adopted and promulgated under section

16 131;

17 (2) establish a schedule for the periodic review

18 of such standards; and

19 (3) based upon such comments, suggestions,

20 and review, revise such standards and promulgate

21 such revisions.

22 (b) APPLICATION OF REVISED STANDARDS.—If the

23 Secretary under subsection (a) revises the standards de24 scribed in section 131, then, in the case of any claim for

25 benefits submitted under a health benefit plan more than
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1 the minimum period (of not less than 6 months specified

2 by the Secretary) after the date the revision is promul3 gated under subsection (a), such standards shall apply

4 under section 132 instead of the standards previously pro5 mulgated.

6 Subtitle E—Restriction on Genetic

7 Screening and Testing

8 SEC. 141. GENETIC SCREENING AND TESTING RESTRIC9 TIONS IN HEALTH INSURANCE.

10 (a) IN GENERAL.—No insurer, in processing an ap11 plication for coverage under a health benefit plan or in

12 determining insurability under such plan, shall do any of

13 the following:

14 (1) Require an individual seeking coverage to

15 submit to genetic screening or testing (as defined in

16 subsection (g)).

17 (2) Take into consideration, other than in ac18 cordance with subsection (f), the results of genetic

19 screening or testing.

20 (3) Make any inquiry to determine the results

21 of genetic screening or testing.

22 (4) Make a decision adverse to the applicant

23 based on entries in medical records or other reports

24 of genetic screening or testing.
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1 (b) NO QUESTIONS.—In developing and asking ques2 tions regarding medical histories of applicants for an indi3 vidual or group health benefit plan, no insurer shall ask

4 for the results of genetic screening or testing or ask ques5 tions designed to ascertain the results of genetic screening

6 or testing.

7 (c) NO CANCELLATION.—No insurer shall cancel or

8 refuse to issue or renew coverage under a health benefit

9 plan based on the results of genetic screening or testing.

10 (d) NO BENEFIT LIMITATION.—No insurer shall de11 liver, issue for delivery, or renew an individual or group

12 health benefit plan that limits benefits based on the results

13 of genetic screening or testing.

14 (e) USE OF VOLUNTARY TESTING.—Notwithstanding

15 the previous provisions of this section, an insurer may con16 sider the results of genetic screening or testing if the re17 sults are voluntarily submitted by an applicant for cov18 erage or renewal of coverage and the results are favorable

19 to the applicant.

20 (f) GENETIC SCREENING OR TESTING DEFINED.—

21 As used in this section, the term ‘‘genetic screening or

22 testing’’ means a laboratory test of a person’s genes or

23 chromosomes for abnormalities, defects, or deficiencies, in24 cluding carrier status, that are linked to physical or men25 tal disorders or impairments, or that indicate a suscepti-
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1 bility to illness, disease, or other disorders, whether phys2 ical or mental, which test is a direct test for abnormalities,

3 defects, or deficiencies, and not an indirect manifestation

4 of genetic disorders.

5 Subtitle F—Administrative

6 Expenses

7 SEC. 151. LIMITATION ON ADMINISTRATIVE EXPENSES.

8 (a) IN GENERAL.—The following apply to every in9 surer with respect to administrative expenses for sickness

10 and accident insurance business of the insurer offered in

11 each State:

12 (1) For calendar year 1996, each insurer shall

13 have aggregate administrative expenses for such

14 business of no more than 40 percent of the premium

15 income of the insurer for such business, based on

16 the premiums received in that year on the sickness

17 and accident insurance business of the insurer.

18 (2) For calendar year 1997, each insurer shall

19 have aggregate administrative expenses of no more

20 than 30 percent of the premium income of the in21 surer, based on the premiums received in that year

22 on the sickness and accident insurance business of

23 the insurer.

24 (3) For calendar year 1998, each insurer shall

25 have aggregate administrative expenses of no more
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1 than 25 percent of the premium income of the in2 surer, based on the premiums received in that year

3 on the sickness and accident insurance business of

4 the insurer.

5 (4) For calendar year 1999 and each calendar

6 year thereafter, each insurer shall have aggregate

7 administrative expenses of no more than 20 percent

8 of the premium income of the insurer, based on the

9 premiums received in that year on the sickness and

10 accident insurance business of the insurer.

11 (b) ANNUAL STATEMENT.—Each insurer, during the

12 first 2 months of each year (beginning with 1997), shall

13 annually prepare, under oath, and deposit in the office of

14 the commissioner of insurance of the insurer’s State of

15 domicile, a statement of the aggregate administrative ex16 penses of the insurer, based on the premiums received in

17 the immediately preceding calendar year on the sickness

18 and accident insurance business of the insurer.

19 (c) DEFINITIONS.—As used in this section:

20 (1) ADMINISTRATIVE EXPENSE.—

21 (A) IN GENERAL.—The term ‘‘Administra22 tive expense’’ means the amount of premiums

23 received by the insurer for sickness and acci24 dent insurance business, minus the sum of the

25 following:
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1 (i) The amount of claims for losses

2 paid.

3 (ii) The amount of losses incurred but

4 not reported.

5 (iii) The amount paid for State fees,

6 Federal and State taxes, and reinsurance.

7 (iv) The amount paid for commis8 sions.

9 (B) EXCLUSION OF ERISA ITEMS.—Such

10 term does not include any amounts collected, or

11 administrative expenses incurred, by an insurer

12 for the administration of an employee health

13 benefit plan subject to regulation by the Em14 ployee Retirement Income Security Act of 1974.

15 In the previous sentence, the term ‘‘amount col16 lected or administrative expenses incurred’’

17 means the total amount paid to an adminis18 trator for the administration and payment of

19 claims minus the sum of the amount of claims

20 for losses paid and the amount of losses in21 curred but not reported.

22 (2) SICKNESS AND ACCIDENT INSURANCE BUSI23 NESS.—The term ‘‘sickness and accident insurance

24 business’’ does not include—
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1 (A) coverage provided by an insurer for

2 specific diseases or accidents only;

3 (B) any hospital indemnity, Medicare sup4 plement, long-term care, disability income, one5 time-limited-duration policy of no longer than 6

6 months, or other policy that offers only supple7 mental benefits; or

8 (C) coverage provided to individuals who

9 are not residents of the State involved.

10 Subtitle G—Limitations on Balance

11 Billing

12 SEC. 161. MEDICARE PROGRAM.

13 (a) IN GENERAL.—Section 1848(g)(2)(B) of the So14 cial Security Act (42 U.S.C. 1395w–4(g)(2)(B)) is amend15 ed by striking ‘‘115 percent’’ and inserting ‘‘105 percent’’.

16 (b) EFFECTIVE DATE.—The amendment made by

17 subsection (a) shall apply to charges for items and services

18 furnished on or after the first January 1 that occurs after

19 the date of the enactment of this Act.

20 SEC. 162. OTHER PROGRAMS.

21 (a) IN GENERAL.—No provider shall balance bill any

22 individual or dependent of an individual or any eligible em23 ployee or dependent of an employee for any health care

24 supplies or services provided to the individual or depend25 ent or the eligible employee or dependent, who is insured
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1 under a health benefit plan. The provider shall accept pay2 ments made to it by the insurer under the terms of the

3 plan insuring or covering such individual as payment in

4 full for such health care supplies or services.

5 (b) BALANCED BILL DEFINED.—As used in this sec6 tion, the term ‘‘balance bill’’ means charging or collecting

7 an amount in excess of the amount reimbursable or pay8 able under a health benefit plan for such health care sup9 ply or service. Such term does not include charging for

10 or collecting copayments or deductibles required by the

11 plan.

12 Subtitle H—Enforcement; General

13 Definitions

14 SEC. 171. GENERAL ENFORCEMENT.

15 (a) INSURERS.—If a commissioner of insurance for

16 an insurer’s State of domicile determines that an insurer

17 has failed to comply with a requirement of subtitle A, B,

18 E, or F of this title applicable to the insurer, the commis19 sioner is responsible for suspending the insurer’s license

20 to do the business of sickness and accident insurance in

21 the State until the commissioner is satisfied that the in22 surer is in compliance with such requirements. If the in23 surer continues to do the business of sickness and accident

24 insurance in the State while under the suspension order,

25 the commissioner may impose a civil money penalty (speci-
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1 fied by the commissioner) for each day of the violation.

2 Any funds collected by the commissioner under the pre3 vious sentence shall be deposited into the State treasury

4 to the credit of the operating fund for the commissioner.

5 (b) OTHER HEALTH BENEFIT PLANS.—Insofar as a

6 requirement under subtitle A, B, or F of this title applies

7 to a health benefit plan that is not offered by an insurer,

8 the Secretary of Health and Human Services, in consulta9 tion with the Secretary of Labor, shall take such actions

10 as may be appropriate to ensure enforcement with such

11 requirement. Such actions may include—

12 (1) an action in an appropriate court to enjoin

13 violations of such requirements, and

14 (2) a civil money penalty (of not to exceed

15 $50,000) for each violation of such a requirement.

16 SEC. 172. GENERAL DEFINITIONS.

17 As used in this title:

18 (1) COMMISSIONER OF INSURANCE.—The term

19 ‘‘commissioner of insurance’’ includes a superintend20 ent of insurance.

21 (2) ELIGIBLE EMPLOYEE.—The term ‘‘eligible

22 employee’’ means an employee who works a normal

23 work week of 25 or more hours. Such term does not

24 include a temporary or substitute or seasonal em25 ployee who works only part of the calendar year.
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1 (3) HEALTH BENEFIT PLAN.—The term

2 ‘‘health benefit plan’’ means any contract or ar3 rangement under which an entity bears all or part

4 of the cost of providing health care items and serv5 ices. Such term includes a hospital or medical serv6 ice policy or certificate, hospital or medical service

7 plan contract, or health maintenance organization

8 group contract offered by an insurer, but does not

9 include any of the following:

10 (A) Coverage only for accident, dental, vi11 sion, disability, or long term care, Medicare

12 supplemental health insurance, or any combina13 tion thereof.

14 (B) Coverage issued as supplemental to li15 ability insurance.

16 (C) Workers’ compensation or similar in17 surance.

18 (D) Automobile medical-payment insur19 ance.

20 (E) Liability insurance, including general

21 liability insurance and automobile insurance.

22 (F) Coverage for a specified disease or ill23 ness.

24 (4) HMO.—The term ‘‘HMO’’ means an orga25 nization that is recognized under State law as an
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1 HMO or managed care organization or a similar or2 ganization regulated under State law for solvency

3 and that offers health care services on a prepaid, at4 risk basis primarily through a defined set of provid5 ers.

6 (5) INSURER.—The term ‘‘Insurer’’ means—

7 (A) a licensed insurance company;

8 (B) an entity offering prepaid hospital or

9 medical services;

10 (C) an HMO; or

11 (D) a multiple small employer welfare ar12 rangement or other combination of small em13 ployers associated for the purpose of providing

14 health insurance plan coverage for their employ15 ers.

16 (6) PROVIDER.—The term ‘‘provider’’ means a

17 physician, hospital, pharmacy, laboratory, or other

18 person licensed or otherwise authorized under appli19 cable State laws to furnish health care items or serv20 ices.

21 (7) SMALL EMPLOYER.—The term ‘‘small em22 ployer’’ means, with respect to a calendar year, an

23 employer whose total employed work force consisted

24 of, on at least 50 percent of its working days during

25 the preceding year, more than 1 but less than 51 eli-
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1 gible employees. For purposes of determining if an

2 employer is a small employer, rules similar to the

3 rules of subsections (B) of (C) of Section 414 of the

4 Internal Revenue Code of 1986 shall apply.

5 (8) STATE.—The term ‘‘State’’ means the 50

6 States, the District of Columbia, Puerto Rico, the

7 Virgin Islands, Guam, American Samoa, and the

8 Northern Mariana Islands.

9 TITLE II—EXTENSION OF

10 PREVENTIVE PUBLIC HEALTH

11 SEC. 201. IMMUNIZATIONS AGAINST VACCINE-PREVENT12 ABLE DISEASES.

13 Section 317(j)(1) of the Public Health Service Act

14 (42 U.S.C. 247b(j)(1)) is amended by striking ‘‘through

15 1995’’ and inserting ‘‘through 1999’’.

16 SEC. 202. PREVENTION, CONTROL, AND ELIMINATION OF

17 TUBERCULOSIS.

18 Section 317E(g)(1)(A) of the Public Health Service

19 Act (42 U.S.C. 247b–6(g)(1)(A)) is amended by striking

20 ‘‘through 1998’’ and inserting ‘‘through 1999’’.

21 SEC. 203. LEAD POISONING PREVENTION.

22 Section 317A(l)(1) of the Public Health Service Act

23 (42 U.S.C. 247b–1(l)(1)) is amended by striking ‘‘through

24 1998’’ and inserting ‘‘through 1999’’.
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1 TITLE III—TAX PROVISIONS

2 SEC. 301. INCREASED DEDUCTION FOR HEALTH INSUR3 ANCE COSTS OF SELF-EMPLOYED INDIVID4 UALS.

5 (a) PHASE-IN OF INCREASED DEDUCTION.—Para6 graph (1) of section 162(l) of the Internal Revenue Code

7 of 1986 (relating to special rules for health insurance costs

8 of self-employed individuals) is amended to read as fol9 lows:

10 ‘‘(1) IN GENERAL.—

11 ‘‘(A) DEDUCTION.—In the case of an indi12 vidual who is an employee within the meaning

13 of section 401(c)(1), there shall be allowed as

14 a deduction under this section an amount equal

15 to the applicable percentage of the amount paid

16 during the taxable year for insurance which

17 constitutes medical care for the taxpayer, his

18 spouse, and dependents.

19 ‘‘(B) APPLICABLE PERCENTAGE.—For

20 purposes of subparagraph (A), the applicable

21 percentage for any taxable year beginning in a

22 calendar year is the percentage determined in

23 accordance with the following table:

Calendar year: Applicable percentage:

1996 .......................................................................... 30 percent

1997 .......................................................................... 55 percent
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1998 .......................................................................... 75 percent

1999 or any subsequent year .................................... 100 percent.’’

1 (b) EFFECTIVE DATE.—The amendment made by

2 this section shall apply to taxable years beginning after

3 December 31, 1995.

4 SEC. 302. SAFE HARBOR FOR HEALTH CARE PROVIDERS

5 OTHERWISE EXEMPT UNDER 501(c) (3) OR (4)

6 WHICH AFFILIATE WITH CERTAIN HEALTH

7 ENTITIES.

8 (a) IN GENERAL.—Section 501 of the Internal Reve9 nue Code of 1986 (relating to exemption from tax on cor10 porations, certain trusts, etc.) is amended by redesignat11 ing subsection (n) as subsection (o) and inserting after

12 subsection (m) the following new subsection:

13 ‘‘(n) SAFE HARBOR FOR HEALTH CARE PROVIDERS

14 OTHERWISE EXEMPT UNDER SUBSECTION (c) (3) OR (4)

15 WHICH AFFILIATE WITH CERTAIN HEALTH ENTITIES.—

16 ‘‘(1) IN GENERAL.—For purposes of this title,

17 a health care provider shall not be treated as failing

18 to be described in paragraph (3) or (4) of subsection

19 (c) for any taxable year solely for the reason that

20 such health care provider is affiliated with or con21 trolled by a qualified health entity (through a man22 agement services agreement, joint venture, member23 ship, or other arrangement) if such health care pro-
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1 vider meets the requirements of paragraph (3) for

2 such year.

3 ‘‘(2) BONDS ISSUED BY HEALTH CARE PRO4 VIDERS OTHERWISE EXEMPT UNDER SUBSECTION

5 (c)(3) WHICH AFFILIATE WITH CERTAIN HEALTH

6 ENTITIES.—

7 ‘‘(A) IN GENERAL.—For purposes of this

8 title, obligations issued by a health care pro9 vider shall not be treated as failing to be de10 scribed in section 145(a) for any taxable year

11 solely for the reason that such health care pro12 vider is affiliated with or controlled by a quali13 fied health entity (through a management serv14 ices agreement, joint venture, membership, or

15 other arrangement) if such health care provider

16 meets the requirements of paragraph (3) for

17 such year.

18 ‘‘(B) SPECIAL RULES FOR MERGERS, CON19 SOLIDATIONS, AND PARTNERSHIPS.—For pur20 poses of applying section 150 to an obligation

21 described in subparagraph (A), if the affiliation

22 or control referred to in subparagraph (A) is a

23 merger or consolidation, or the creation of a

24 partnership—
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1 ‘‘(i) property owned by the entity re2 sulting from such merger or consolidation

3 (or by such partnership) shall be treated as

4 owned by a 501(c)(3) organization to the

5 extent that such property was owned, on

6 the day preceding the affiliation date, by

7 the 501(c)(3) organization issuing such ob8 ligation, and

9 ‘‘(ii) each trade or business of such

10 resulting entity (or such partnership) shall

11 be treated as a trade or business of a

12 501(c)(3) organization to the extent that

13 such trade or business was conducted, on

14 the day preceding the affiliation date, by

15 the 501(c)(3) organization issuing such ob16 ligation.

17 ‘‘(C) AFFILIATION DATE.—For purposes of

18 subparagraph (B), the term ‘affiliation date’

19 means—

20 ‘‘(i) with respect to a merger or con21 solidation, the date of such merger or con22 solidation, and

23 ‘‘(ii) with respect to a partnership, the

24 date on which the property referred to in
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1 section 150(b) is contributed to such part2 nership.

3 ‘‘(D) OBLIGATIONS ISSUED TO REFUND.—

4 An obligation issued to refund an obligation de5 scribed in subparagraph (A) shall be treated as

6 described in subparagraph (A) if such refunding

7 obligation meets the requirements of subclauses

8 (I), (II), and (III) of section 144(a)(12)(A)(ii).

9 ‘‘(3) REQUIREMENTS.—A health care provider

10 meets the requirements of this paragraph if, for the

11 taxable year, such health care provider—

12 ‘‘(A)(i) assesses the health care needs of

13 the community in which the health care pro14 vider is located,

15 ‘‘(ii) develops a written plan which states

16 the manner in which the health care provider

17 plans to meet such needs, consistent with the

18 purpose of the health care provider, and

19 ‘‘(iii) makes the plan available in the same

20 manner as a return filed under section 6033 is

21 required to be made available under section

22 6104(e)(1),

23 ‘‘(B) maintains a board of directors or

24 trustees, at least 50 percent of whom are rep25 resentatives of the community in which the
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1 health care provider is located, and at least 80

2 percent of whom receive no compensation (di3 rectly or indirectly) from the health care pro4 vider for the taxable year for medical services

5 performed in connection with the health care

6 provider or as an officer of the health care pro7 vider,

8 ‘‘(C) does not discriminate in the provision

9 of health care services on the basis of whether

10 an individual is insured by Medicare, Medicaid,

11 or a health care provider who contracts with a

12 State to provide health care services under a

13 government-sponsored health plan, and

14 ‘‘(D) does not discriminate in the provision

15 of emergency health care services on the basis

16 of the patient’s ability to pay.

17 ‘‘(4) DEFINITIONS.—For purposes of this sub18 section:

19 ‘‘(A) HEALTH CARE PROVIDER.—The term

20 ‘health care provider’ means any person whose

21 predominant activity is the provision of health

22 care services.

23 ‘‘(B) HEALTH CARE SERVICES.—The term

24 ‘health care services’ means any activity de25 scribed in section 213(d)(1)(A).
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1 ‘‘(C) QUALIFIED HEALTH ENTITY.—The

2 term ‘qualified health entity’ means any organi3 zation—

4 ‘‘(i) the predominant activity of which

5 is the provision of health care services, or

6 ‘‘(ii) a primary activity of which is the

7 provision of insurance relating to such

8 services,

9 either directly or through arrangements with

10 health care providers, to individuals enrolled

11 with the organization.’’

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

13 this section shall apply to taxable years beginning after

14 December 31, 1995, except that the requirements of sec15 tion 501(n)(3)(B) of such Code (as added by this Act)

16 shall apply to taxable years beginning after December 31,

17 1996.

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