Union Calendar No. 249

104TH CONGRESS

2D SESSION H. R. 3070

[Report No. 104–497, Part I]

A BILL

To improve portability and continuity of health insimplify the administration of health insurance. health insurance and health care delivery, and to markets, to combat waste, fraud, and abuse in surance coverage in the group and individual

MARCH 29, 1996

Committees on Ways and Means, the Judiciary, and EcoState of the Union and ordered to be printed mitted to the Committee of the Whole House on the nomic and Educational Opportunities discharged; com-
IB

Union Calendar No. 249

104TH CONGRESS

2D SESSION H. R. 3070

[Report No. 104–497, Part I]

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 in addition to

the 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

MARCH 25, 1996

Reported from the Committee on Commerce with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

MARCH 25, 1996

Referral to the Committees on Ways and Means, the Judiciary, and Economic

and Educational Opportunities extended for a period ending not later

than March 29, 1996

MARCH 29, 1996

Additional sponsors: Mr. HASTERT, Mr. GILLMOR, Mr. STEARNS, Mr. KLUG,

Mr. NORWOOD, and Mr. WELLER

MARCH 29, 1996

Committees on Ways and Means, the Judiciary, and Economic and Educational Opportunities discharged; committed to the Committee of the

Whole House on the State of the Union and ordered to be printed

[For text of introduced bill, see copy of bill as introduced on March 12, 1996]
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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,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

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

5 ‘‘Health Coverage Availability and Affordability Act of

6 1996’’.

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

8 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.
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PART 3—ENFORCEMENT

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

authority.

Subtitle C—Sense of Committee on Additional Requirements

Sec. 161. Sense of Committee on Commerce on additional requirements.

Subtitle D—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.

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.
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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

‘‘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 TO10 WARD PREEXISTING CONDITION RESTRICTIONS.—Subject

11 to the succeeding provisions of this section, a group health

12 plan, and an insurer or health maintenance organization
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1 offering health insurance coverage in connection with a

2 group health plan, shall provide that any preexisting condi3 tion limitation period (as defined in subsection (b)(2)) is

4 reduced by the length of the aggregate period of qualified

5 prior coverage (if any, as defined in subsection (b)(3)) ap6 plicable to the participant or beneficiary as of the date of

7 commencement of coverage under the plan.

8 (b) DEFINITIONS AND OTHER PROVISIONS RELATING

9 TO PREEXISTING CONDITIONS.—

10 (1) PREEXISTING CONDITION.—

11 (A) IN GENERAL.—For purposes of this sub12 title, subject to subparagraph (B), the term ‘‘pre13 existing condition’’ means a condition, regardless

14 of the cause of the condition, for which medical

15 advice, diagnosis, care, or treatment was rec16 ommended or received within the 6-month period

17 ending on the day before—

18 (i) the effective date of the coverage of

19 such participant or beneficiary, or

20 (ii) the earliest date upon which such

21 coverage could have been effective if there

22 were no waiting period applicable,

23 whichever is earlier.

24 (B) TREATMENT OF GENETIC INFORMA25 TION.—For purposes of this section, genetic in-
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1 formation shall not be considered to be a pre2 existing condition, so long as treatment of the

3 condition to which the information is applicable

4 has not been sought during the 6-month period

5 described in subparagraph (A).

6 (2) PREEXISTING CONDITION LIMITATION PE7 RIOD.—For purposes of this subtitle, the term ‘‘pre8 existing condition limitation period’’ means, with re9 spect to coverage of an individual under a group

10 health plan or under health insurance coverage, the

11 period during which benefits with respect to treat12 ment of a condition of such individual are not pro13 vided based on the fact that the condition is a pre14 existing condition.

15 (3) AGGREGATE PERIOD OF QUALIFIED PRIOR

16 COVERAGE.—

17 (A) IN GENERAL.—For purposes of this sec18 tion, the term ‘‘aggregate period of qualified

19 prior coverage’’ means, with respect to com20 mencement of coverage of an individual under a

21 group health plan or health insurance coverage

22 offered in connection with a group health plan,

23 the aggregate of the qualified coverage periods

24 (as defined in subparagraph (B)) of such indi25 vidual occurring before the date of such com-
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1 mencement. Such period shall be treated as zero

2 if there is more than a 60-day break in coverage

3 under a group health plan (or health insurance

4 coverage offered in connection with such a plan)

5 between the date the most recent qualified cov6 erage period ends and the date of such com7 mencement.

8 (B) QUALIFIED COVERAGE PERIOD.—

9 (i) IN GENERAL.—For purposes of this

10 paragraph, subject to subsection (c), the

11 term ‘‘qualified coverage period’’ means,

12 with respect to an individual, any period of

13 coverage of the individual under a group

14 health plan, health insurance coverage,

15 under title XVIII or XIX of the Social Secu16 rity Act, coverage under the TRICARE pro17 gram under chapter 55 of title 10, United

18 States Code, a program of the Indian

19 Health Service, and State health insurance

20 coverage or risk pool, and includes coverage

21 under a health plan offered under chapter

22 89 of title 5, United States Code.

23 (ii) DISREGARDING PERIODS BEFORE

24 BREAKS IN COVERAGE.—Such term does not

25 include any period occurring before any 60-
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1 day break in coverage described in subpara2 graph (A).

3 (C) WAITING PERIOD NOT TREATED AS A

4 BREAK IN COVERAGE.—For purposes of subpara5 graphs (A) and (B), any period that is in a

6 waiting period for any coverage under a group

7 health plan (or for health insurance coverage of8 fered in connection with a group health plan)

9 shall not be considered to be a break in coverage

10 described in subparagraph (B)(ii).

11 (D) ESTABLISHMENT OF PERIOD.—A quali12 fied coverage period with respect to an individ13 ual shall be established through presentation of

14 certifications described in subsection (c) or in

15 such other manner as may be specified in regula16 tions to carry out this section.

17 (c) CERTIFICATIONS OF COVERAGE; CONFORMING COV18 ERAGE.—

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

20 group health plan, or the insurer or HMO offering

21 health insurance coverage in connection with a group

22 health plan, shall, on request made on behalf of an in23 dividual covered (or previously covered within the

24 previous 18 months) under the plan or coverage, pro25 vide for a certification of the period of coverage of the
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1 individual under such plan or coverage and of the

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

3 individual for any coverage under the plan.

4 (2) STANDARD METHOD.—Subject to paragraph

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

6 health insurance coverage in connection with a group

7 health plan, shall determine qualified coverage periods

8 under subsection (b)(3)(B) by including all periods

9 described in such subsection, without regard to the

10 specific benefits offered during such a period.

11 (3) ALTERNATIVE METHOD.—Such a plan, in12 surer, or HMO may elect to make such determination

13 on a benefit-specific basis for all participants and

14 beneficiaries and not to include as a qualified cov15 erage period with respect to a specific benefit coverage

16 during a previous period unless such previous cov17 erage for that benefit was included at the end of the

18 most recent period of coverage. In the case of such an

19 election—

20 (A) the plan, insurer, or HMO shall promi21 nently state in any disclosure statements con22 cerning the plan or coverage and to each enrollee

23 at the time of enrollment under the plan (or at

24 the time the health insurance coverage is offered

25 for sale in the group health market) that the
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1 plan or coverage has made such election and

2 shall include a description of the effect of this

3 election; and

4 (B) upon the request of the plan, insurer, or

5 HMO, the entity providing a certification under

6 paragraph (1)—

7 (i) shall promptly disclose to the re8 questing plan, insurer, or HMO the plan

9 statement (insofar as it relates to health

10 benefits under the plan) or other detailed

11 benefit information on the benefits available

12 under the previous plan or coverage, and

13 (ii) may charge for the reasonable cost

14 of providing such information.

15 SEC. 102. LIMITATION ON PREEXISTING CONDITION EXCLU16 SIONS; NO APPLICATION TO CERTAIN

17 NEWBORNS, ADOPTED CHILDREN, AND PREG18 NANCY.

19 (a) LIMITATION OF PERIOD.—

20 (1) IN GENERAL.—Subject to the succeeding pro21 visions of this section, a group health plan, and an

22 insurer or HMO offering health insurance coverage in

23 connection with a group health plan, shall provide

24 that any preexisting condition limitation period (as
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1 defined in section 101(b)(2)) does not exceed 12

2 months, counting from the effective date of coverage.

3 (2) EXTENSION OF PERIOD IN THE CASE OF

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

5 beneficiary whose initial coverage commences after the

6 date the participant or beneficiary first becomes eligi7 ble for coverage under the group health plan, the ref8 erence in paragraph (1) to ‘‘12 months’’ is deemed a

9 reference to ‘‘18 months’’.

10 (b) EXCLUSION NOT APPLICABLE TO CERTAIN

11 NEWBORNS AND CERTAIN ADOPTIONS.—

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

13 group health plan, and an insurer or HMO offering

14 health insurance coverage in connection with a group

15 health plan, may not provide any limitation on bene16 fits based on the existence of a preexisting condition

17 in the case of—

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

19 period beginning with the date of birth, or

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

21 adoption beginning at the time of adoption or

22 placement if the individual, within the 30-day

23 period beginning on the date of adoption or

24 placement,
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1 becomes covered under a group health plan or other2 wise becomes covered under health insurance coverage

3 (or covered for medical assistance under title XIX of

4 the Social Security Act).

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

6 (1) shall no longer apply to an individual if the indi7 vidual does not have any coverage described in section

8 101(b)(3)(B)(i) for a continuous period of 60 days,

9 not counting in such period any days that are in a

10 waiting period for any coverage under a group health

11 plan.

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

13 subsection and section 103(d), the term ‘‘placement’’,

14 or being ‘‘placed’’, for adoption, in connection with

15 any placement for adoption of a child with any per16 son, means the assumption and retention by such per17 son of a legal obligation for total or partial support

18 of such child in anticipation of adoption of such

19 child. The child’s placement with such person termi20 nates upon the termination of such legal obligation.

21 (c) EXCLUSION NOT APPLICABLE TO PREGNANCY.—

22 For purposes of this section, pregnancy shall not be treated

23 as a preexisting condition.

24 (d) ELIGIBILITY PERIOD IMPOSED BY HEALTH MAIN25 TENANCE ORGANIZATIONS AS ALTERNATIVE TO PREEXIST-
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1 ING CONDITION LIMITATION.—A health maintenance orga2 nization which offers health insurance coverage in connec3 tion with a group health plan and which does not use the

4 preexisting condition limitations allowed under this section

5 and section 101 with respect to any particular coverage op6 tion may impose an eligibility period for such coverage op7 tion, but only if such period does not exceed—

8 (1) 60 days, in the case of a participant or bene9 ficiary whose initial coverage commences at the time

10 such participant or beneficiary first becomes eligible

11 for coverage under the plan, or

12 (2) 90 days, in the case of a participant or bene13 ficiary whose initial coverage commences after the

14 date on which such participant or beneficiary first be15 comes eligible for coverage.

16 Such an HMO may use alternative methods, from those de17 scribed in the previous sentence, to address adverse selection

18 as approved by the applicable State authority. For purposes

19 of this subsection, the term ‘‘eligibility period’’ means a pe20 riod which, under the terms of the health insurance coverage

21 offered by the health maintenance organization, must expire

22 before the health insurance coverage becomes effective. Any

23 such eligibility period shall be treated for purposes of this

24 subtitle as a waiting period under the plan and shall run
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1 concurrently with any other applicable waiting period

2 under the plan.

3 SEC. 103. PROHIBITING EXCLUSIONS BASED ON HEALTH

4 STATUS AND PROVIDING FOR ENROLLMENT

5 PERIODS.

6 (a) PROHIBITION OF EXCLUSION OF PARTICIPANTS OR

7 BENEFICIARIES BASED ON HEALTH STATUS.—

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

9 insurer or HMO offering health insurance coverage in

10 connection with a group health plan, may not exclude

11 an employee or his or her beneficiary from being (or

12 continuing to be) a participant or beneficiary under

13 the terms of such plan or coverage based on health

14 status (as defined in section 191(c)(6)).

15 (2) CONSTRUCTION.—Nothing in this subsection

16 shall be construed as preventing the establishment of

17 preexisting condition limitations and restrictions to

18 the extent consistent with the provisions of this sub19 title.

20 (b) ENROLLMENT OF ELIGIBLE INDIVIDUALS WHO

21 LOSE OTHER COVERAGE.—A group health plan shall per22 mit an uncovered employee who is otherwise eligible for cov23 erage under the terms of the plan (or an uncovered depend24 ent, as defined under the terms of the plan, of such an em25 ployee, if family coverage is available) to enroll for coverage
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1 under the plan under at least one benefit option if each

2 of the following conditions is met:

3 (1) The employee or dependent was covered

4 under a group health plan or had health insurance

5 coverage at the time coverage was previously offered

6 to the employee or individual.

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

8 that coverage under a group health plan or health in9 surance coverage was the reason for declining enroll10 ment.

11 (3) The employee or dependent lost coverage

12 under a group health plan or health insurance cov13 erage (as a result of loss of eligibility for the coverage,

14 termination of employment, or reduction in the num15 ber of hours of employment).

16 (4) The employee requests such enrollment within

17 30 days after the date of termination of such coverage.

18 (c) DEPENDENT BENEFICIARIES.—

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

20 family coverage available, the plan may not require,

21 as a condition of coverage of an individual as a de22 pendent (as defined under the terms of the plan) of

23 a participant in the plan, a waiting period applica24 ble to the coverage of a dependent who—

25 (A) is a newborn,
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1 (B) is an adopted child or child placed for

2 adoption (within the meaning of section

3 102(b)(3)), at the time of adoption or placement,

4 or

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

6 if the participant has met any waiting period appli7 cable to that participant.

8 (2) TIMELY ENROLLMENT.—

9 (A) IN GENERAL.—Enrollment of a partici10 pant’s beneficiary described in paragraph (1)

11 shall be considered to be timely if a request for

12 enrollment is made within 30 days of the date

13 family coverage is first made available or, in the

14 case described in—

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

16 of the date of the birth,

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

18 of the date of the adoption or placement for

19 adoption, or

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

21 of the date of the marriage with such a ben22 eficiary who is the spouse of the partici23 pant,

24 if family coverage is available as of such date.
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1 (B) COVERAGE.—If available coverage in2 cludes family coverage and enrollment is made

3 under such coverage on a timely basis under sub4 paragraph (A), the coverage shall become effec5 tive not later than the first day of the first

6 month beginning 15 days after the date the com7 pleted request for enrollment is received.

8 SEC. 104. ENFORCEMENT.

9 (a) ENFORCEMENT THROUGH COBRA PROVISIONS IN

10 INTERNAL REVENUE CODE.—

11 (1) APPLICATION OF COBRA SANCTIONS.—Sub12 section (a) of section 4980B of the Internal Revenue

13 Code of 1986 is amended by striking ‘‘the require14 ments of’’ and all that follows and inserting ‘‘the re15 quirements of—

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

17 beneficiary, or

18 ‘‘(2) subject to subsection (h)—

19 ‘‘(A) section 101 or 102 of the Health Cov20 erage Availability and Affordability Act of 1996

21 with respect to any individual covered under the

22 group health plan, or

23 ‘‘(B) section 103 of such Act with respect to

24 any individual.’’.
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1 (2) NOTICE REQUIREMENT.—Section

2 4980B(f)(6)(A) of such Code is amended by inserting

3 before the period the following: ‘‘and subtitle A of title

4 I of the Health Coverage Availability and Afford5 ability Act of 1996’’.

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

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

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

9 section in the case of requirements described in subsection

10 (a)(2) relating to section 101, section 102, or section 103

11 of the Health Coverage Availability and Affordability Act

12 of 1996—

13 ‘‘(1) DEFERRAL TO STATE REGULATION.—No tax

14 shall be imposed by this section on any failure to

15 meet the requirements of such section by any entity

16 which offers health insurance coverage and which is

17 an insurer or health maintenance organization (as

18 defined in section 191(c) of the Health Coverage

19 Availability and Affordability Act of 1996) regulated

20 by a State if the Secretary of Health and Human

21 Services has made the determination described in sec22 tion 104(c)(2) of such Act with respect to such State,

23 section, and entity.

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

25 case of a group health plan of a small employer (as
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1 defined in section 191 of the Health Coverage Avail2 ability and Affordability Act of 1996) that provides

3 health care benefits solely through a contract with an

4 insurer or health maintenance organization (as de5 fined in such section), no tax shall be imposed by this

6 section upon the employer on a failure to meet such

7 requirements if the failure is solely because of the

8 product offered by the insurer or organization under

9 such contract.

10 ‘‘(3) LIMITATION ON IMPOSITION OF TAX.—In no

11 case shall a tax be imposed by this section for a fail12 ure to meet such a requirement if a sanction has been

13 imposed—

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

15 5 of subtitle A of title I of the Employee Retire16 ment Income Security Act of 1974 with respect

17 to such failure, or

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

19 Human Services under section 109 of the Health

20 Coverage Availability and Affordability Act of

21 1996 with respect to such failure.’’.

22 (b) ENFORCEMENT THROUGH ERISA SANCTIONS FOR

23 CERTAIN GROUP HEALTH PLANS.—

24 (1) IN GENERAL.—Subject to the succeeding pro25 visions of this subsection, sections 101 through 103 of
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1 this subtitle shall be deemed to be provisions of title

2 I of the Employee Retirement Income Security Act of

3 1974 for purposes of applying such title.

4 (2) FEDERAL ENFORCEMENT ONLY IF NO EN5 FORCEMENT THROUGH STATE.—The Secretary of

6 Labor shall enforce each section referred to in para7 graph (1) with respect to any entity which is an in8 surer or health maintenance organization regulated

9 by a State only if the Secretary of Labor determines

10 that—

11 (A) such State has not provided for enforce12 ment of State laws which govern the same mat13 ters as are governed by such section and which

14 require compliance by such entity with at least

15 the same requirements as those provided under

16 such section, and

17 (B) such entity has failed to comply with

18 such requirements of such section as are applica19 ble to such entity.

20 (3) LIMITATIONS ON LIABILITY.—

21 (A) NO APPLICATION WHERE FAILURE NOT

22 DISCOVERED EXERCISING REASONABLE DILI23 GENCE.—No liability shall be imposed under this

24 subsection on the basis of any failure during any

25 period for which it is established to the satisfac-
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1 tion of the Secretary of Labor that none of the

2 persons against whom the liability would be im3 posed knew, or exercising reasonable diligence

4 would have known, that such failure existed.

5 (B) NO APPLICATION WHERE FAILURE COR6 RECTED WITHIN 30 DAYS.—No liability shall be

7 imposed under this subsection on the basis of

8 any failure if such failure was due to reasonable

9 cause and not to willful neglect, and such failure

10 is corrected during the 30-day period beginning

11 on the first day any of the persons against whom

12 the liability would be imposed knew, or exercis13 ing reasonable diligence would have known, that

14 such failure existed.

15 (4) AVOIDING DUPLICATION OF CERTAIN PEN16 ALTIES.—In no case shall a civil money penalty be

17 imposed under the authority provided under para18 graph (1) for a violation of this subtitle for which an

19 excise tax has been imposed under section 4980B of

20 the Internal Revenue Code of 1986 or a civil money

21 penalty imposed under subsection (c).

22 (c) ENFORCEMENT THROUGH CIVIL MONEY PEN23 ALTIES.—

24 (1) IMPOSITION.—
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1 (A) IN GENERAL.—Subject to the succeeding

2 provisions of this subsection, any group health

3 plan, insurer, or organization that fails to meet

4 a requirement of this subtitle is subject to a civil

5 money penalty under this section.

6 (B) LIABILITY FOR PENALTY.—Rules simi7 lar to the rules described in section 4980B(e) of

8 the Internal Revenue Code of 1986 for liability

9 for a tax imposed under section 4980B(a) of such

10 Code shall apply to liability for a penalty im11 posed under subparagraph (A).

12 (C) AMOUNT OF PENALTY.—

13 (i) IN GENERAL.—The maximum

14 amount of penalty imposed under this

15 paragraph is $100 for each day for each in16 dividual with respect to which such a fail17 ure occurs.

18 (ii) CONSIDERATIONS IN IMPOSI19 TION.—In determining the amount of any

20 penalty to be assessed under this paragraph,

21 the Secretary of Health and Human Serv22 ices shall take into account the previous

23 record of compliance of the person being as24 sessed with the applicable requirements of

25 this subtitle, the gravity of the violation,
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1 and the overall limitations for uninten2 tional failures provided under section

3 4980B(c)(4) of the Internal Revenue Code of

4 1986.

5 (iii) LIMITATIONS.—

6 (I) PENALTY NOT TO APPLY

7 WHERE FAILURE NOT DISCOVERED EX8 ERCISING REASONABLE DILIGENCE.—

9 No civil money penalty shall be im10 posed under this paragraph on any

11 failure during any period for which it

12 is established to the satisfaction of the

13 Secretary that none of the persons

14 against whom the penalty would be

15 imposed knew, or exercising reasonable

16 diligence would have known, that such

17 failure existed.

18 (II) PENALTY NOT TO APPLY TO

19 FAILURES CORRECTED WITHIN 30

20 DAYS.—No civil money penalty shall

21 be imposed under this paragraph on

22 any failure if such failure was due to

23 reasonable cause and not to willful ne24 glect, and such failure is corrected dur25 ing the 30-day period beginning on the
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1 first day any of the persons against

2 whom the penalty would be imposed

3 knew, or exercising reasonable diligence

4 would have known, that such failure

5 existed.

6 (D) ADMINISTRATIVE REVIEW.—

7 (i) OPPORTUNITY FOR HEARING.—The

8 person assessed shall be afforded an oppor9 tunity for hearing by the Secretary upon re10 quest made within 30 days after the date of

11 the issuance of a notice of assessment. In

12 such hearing the decision shall be made on

13 the record pursuant to section 554 of title 5,

14 United States Code. If no hearing is re15 quested, the assessment shall constitute a

16 final and unappealable order.

17 (ii) HEARING PROCEDURE.—If a hear18 ing is requested, the initial agency decision

19 shall be made by an administrative law

20 judge, and such decision shall become the

21 final order unless the Secretary modifies or

22 vacates the decision. Notice of intent to

23 modify or vacate the decision of the admin24 istrative law judge shall be issued to the

25 parties within 30 days after the date of the
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1 decision of the judge. A final order which

2 takes effect under this paragraph shall be

3 subject to review only as provided under

4 subparagraph (D).

5 (E) JUDICIAL REVIEW.—

6 (i) FILING OF ACTION FOR REVIEW.—

7 Any person against whom an order impos8 ing a civil money penalty has been entered

9 after an agency hearing under this para10 graph may obtain review by the United

11 States district court for any district in

12 which such person is located or the United

13 States District Court for the District of Co14 lumbia by filing a notice of appeal in such

15 court within 30 days from the date of such

16 order, and simultaneously sending a copy of

17 such notice be registered mail to the Sec18 retary.

19 (ii) CERTIFICATION OF ADMINISTRA20 TIVE RECORD.—The Secretary shall

21 promptly certify and file in such court the

22 record upon which the penalty was imposed.

23 (iii) STANDARD FOR REVIEW.—The

24 findings of the Secretary shall be set aside

25 only if found to be unsupported by substan-
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1 tial evidence as provided by section

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

3 (iv) APPEAL.—Any final decision,

4 order, or judgment of such district court

5 concerning such review shall be subject to

6 appeal as provided in chapter 83 of title 28

7 of such Code.

8 (F) FAILURE TO PAY ASSESSMENT; MAINTE9 NANCE OF ACTION.—

10 (i) FAILURE TO PAY ASSESSMENT.—If

11 any person fails to pay an assessment after

12 it has become a final and unappealable

13 order, or after the court has entered final

14 judgment in favor of the Secretary, the Sec15 retary shall refer the matter to the Attorney

16 General who shall recover the amount as17 sessed by action in the appropriate United

18 States district court.

19 (ii) NONREVIEWABILITY.—In such ac20 tion the validity and appropriateness of the

21 final order imposing the penalty shall not

22 be subject to review.

23 (G) PAYMENT OF PENALTIES.—Except as

24 otherwise provided, penalties collected under this

25 paragraph shall be paid to the Secretary (or
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1 other officer) imposing the penalty and shall be

2 available without appropriation and until ex3 pended for the purpose of enforcing the provi4 sions with respect to which the penalty was im5 posed.

6 (2) FEDERAL ENFORCEMENT ONLY IF NO EN7 FORCEMENT THROUGH STATE.—Paragraph (1) shall

8 apply to enforcement of the requirements of section

9 101, 102, or 103 with respect to any entity which of10 fers health insurance coverage and which is an in11 surer or HMO regulated by a State if the Secretary

12 of Health and Human Services has determined that

13 such State has not provided for enforcement of State

14 laws which govern the same matters as are governed

15 by such section and which require compliance by such

16 entity with at least the same requirements as those

17 provided under such section.

18 (3) NONDUPLICATION OF SANCTIONS.—In no case

19 shall a civil money penalty be imposed under this

20 subsection for a violation of this subtitle for which an

21 excise tax has been imposed under section 4980B of

22 the Internal Revenue Code of 1986 or for which a

23 civil money penalty has been imposed under the au24 thority 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 in

5 a manner that assures coordination and nonduplication in

6 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 sub16 sections of this section, each insurer or HMO that of17 fers health insurance coverage in the small group

18 market in a State—

19 (A) must accept every small employer in the

20 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 re8 spect to an insurer or HMO that offers health insur9 ance 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 that

22 offers health insurance coverage in the small group

23 market through a network plan and in the case of an

24 HMO that offers health insurance coverage in connec25 tion with such a plan, the insurer or HMO may—
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1 (A) limit the employers that may apply for

2 such coverage to those with eligible individuals

3 whose place of employment or residence is in the

4 service area for such plan or HMO;

5 (B) limit the individuals who may be en6 rolled under such coverage to those whose place

7 of residence or employment is within the service

8 area for such plan or HMO; and

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

10 HMO, deny such coverage to such employers if

11 the insurer or HMO demonstrates that—

12 (i) it will not have the capacity to de13 liver services adequately to enrollees of any

14 additional groups because of its obligations

15 to existing group contract holders and en16 rollees, and

17 (ii) it is applying this paragraph uni18 formly to all employers without regard to

19 the claims experience of those employers and

20 their employees (and their beneficiaries) or

21 the health status of such employees and

22 beneficiaries.

23 (2) 180-DAY SUSPENSION UPON DENIAL OF COV24 ERAGE.—An insurer or HMO, upon denying health

25 insurance coverage in any service area in accordance
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1 with paragraph (1)(C), may not offer coverage in the

2 small group market within such service area for a pe3 riod of 180 days after such coverage is denied.

4 (c) SPECIAL RULE FOR FINANCIAL CAPACITY LIM5 ITS.—

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

7 deny health insurance coverage in the small group

8 market if the insurer or HMO demonstrates to the ap9 plicable State authority that—

10 (A) it does not have the financial reserves

11 necessary to underwrite additional coverage, and

12 (B) it is applying this paragraph uni13 formly to all employers without regard to the

14 claims experience or duration of coverage of those

15 employers and their employees (and their bene16 ficiaries) or the health status of such employees

17 and beneficiaries.

18 (2) 180-DAY SUSPENSION UPON DENIAL OF COV19 ERAGE.—An insurer or HMO upon denying health

20 insurance coverage in connection with group health

21 plans in any service area in accordance with para22 graph (1) may not offer coverage in connection with

23 group health plans in the small group market within

24 such service area for a period of 180 days after such

25 coverage is denied.
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1 (d) EXCEPTION TO REQUIREMENT FOR ISSUANCE OF

2 COVERAGE BY REASON OF FAILURE BY PLAN TO MEET

3 CERTAIN MINIMUM PARTICIPATION OR CONTRIBUTION

4 RULES.—

5 (1) IN GENERAL.—Subsection (a) shall not apply

6 in the case of any group health plan with respect to

7 which—

8 (A) participation rules of an insurer or

9 HMO which are described in paragraph (2) are

10 not met, or

11 (B) contribution rules of an insurer or

12 HMO which are described in paragraph (3) are

13 not met.

14 (2) PARTICIPATION RULES.—For purposes of

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

16 insurer or HMO shall be treated as met with respect

17 to a group health plan only if such rules are uni18 formly applicable and in accordance with applicable

19 State law and the number or percentage of eligible in20 dividuals who, under the plan, are participants or

21 beneficiaries equals or exceeds a level which is deter22 mined in accordance with such rules.

23 (3) CONTRIBUTION RULES.—For purposes of

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

25 insurer or HMO shall be treated as met with respect
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1 to a group health plan only if such rules are in ac2 cordance with applicable State law.

3 SEC. 132. GUARANTEED RENEWABILITY OF GROUP COV4 ERAGE.

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

6 if an insurer or health maintenance organization offers

7 health insurance coverage in the small or large group mar8 ket, the insurer or organization must renew or continue in

9 force such coverage at the option of the employer.

10 (b) GENERAL EXCEPTIONS.—An insurer or organiza11 tion may nonrenew or discontinue health insurance cov12 erage offered an employer based only on one or more of the

13 following:

14 (1) NONPAYMENT OF PREMIUMS.—The employer

15 has failed to pay premiums or contributions in ac16 cordance with the terms of the health insurance cov17 erage or the insurer or organization has not received

18 timely premium payments.

19 (2) FRAUD.—The employer has performed an act

20 or practice that constitutes fraud or made an inten21 tional misrepresentation of material fact under the

22 terms of the coverage.

23 (3) VIOLATION WITH PARTICIPATION OR CON24 TRIBUTION RULES.—The employer has failed to com25 ply with a material plan provision relating to par-
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1 ticipation or contribution rules in accordance with

2 section 131(d).

3 (4) TERMINATION OF PLAN.—Subject to sub4 section (c), the insurer or organization is ceasing to

5 offer coverage in the small or large group market in

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

7 in a geographic area).

8 (5) MOVEMENT OUTSIDE SERVICE AREA.—The

9 employer has changed the place of employment in

10 such manner that employees and dependents reside

11 and are employed outside the service area of the in12 surer or organization or outside the area for which

13 the insurer or organization is authorized to do busi14 ness.

15 Paragraph (5) shall apply to an insurer or HMO only if

16 it is applied uniformly without regard to the claims experi17 ence of employers and their employees (and their bene18 ficiaries) or the health status of such employees and bene19 ficiaries.

20 (c) EXCEPTIONS FOR UNIFORM TERMINATION OF COV21 ERAGE.—

22 (1) PARTICULAR TYPE OF COVERAGE NOT OF23 FERED.—In any case in which a insurer or HMO de24 cides to discontinue offering a particular type of

25 health insurance coverage in the small or large group
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1 market, coverage of such type may be discontinued by

2 the insurer or organization only if—

3 (A) the insurer or organization provides no4 tice to each employer provided coverage of this

5 type in such market (and participants and bene6 ficiaries covered under such coverage) of such

7 discontinuation at least 90 days prior to the

8 date of the discontinuation of such coverage;

9 (B) the insurer or organization offers to

10 each employer in the small employer or large

11 employer market provided coverage of this type,

12 the option to purchase any other health insur13 ance coverage currently being offered by the in14 surer or organization for employers in such mar15 ket; and

16 (C) in exercising the option to discontinue

17 coverage of this type and in offering one or more

18 replacement coverage, the insurer or organization

19 acts uniformly without regard to the health sta20 tus or insurability of participants or bene21 ficiaries covered or new participants or bene22 ficiaries who may become eligible for such cov23 erage.

24 (2) DISCONTINUANCE OF ALL COVERAGE.—
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1 (A) IN GENERAL.—Subject to subparagraph

2 (C), in any case in which an insurer or HMO

3 elects to discontinue offering all health insurance

4 coverage in the small group market or the large

5 group market, or both markets, in a State, health

6 insurance coverage may be discontinued by the

7 insurer or organization only if—

8 (i) the insurer or organization provides

9 notice to the applicable State authority and

10 to each employer (and participants and

11 beneficiaries covered under such coverage) of

12 such discontinuation at least 180 days prior

13 to the date of the expiration of such cov14 erage, and

15 (ii) all health insurance issued or de16 livered for issuance in the State in such

17 market (or markets) are discontinued and

18 coverage under such health insurance cov19 erage in such market (or markets) is not re20 newed.

21 (B) PROHIBITION ON MARKET REENTRY.—

22 In the case of a discontinuation under subpara23 graph (A) in one or both markets, the insurer or

24 organization may not provide for the issuance of

25 any health insurance coverage in the market and
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1 State involved during the 5-year period begin2 ning on the date of the discontinuation of the

3 last health insurance coverage not so renewed.

4 (d) EXCEPTION FOR UNIFORM MODIFICATION OF COV5 ERAGE.—At the time of coverage renewal, an insurer or

6 HMO may modify the coverage offered to a group health

7 plan in the group health market so long as such modifica8 tion is effective on a uniform basis among group health

9 plans with that type of coverage.

10 PART 2—AVAILABILITY OF INDIVIDUAL HEALTH

11 INSURANCE COVERAGE

12 SEC. 141. GUARANTEED AVAILABILITY OF INDIVIDUAL

13 HEALTH INSURANCE COVERAGE TO CERTAIN

14 INDIVIDUALS WITH PRIOR GROUP COVERAGE.

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

16 (1) to guarantee that any qualifying individual

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

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

19 and

20 (2) to assure that qualifying individuals obtain21 ing such coverage receive credit for their prior cov22 erage toward the new coverage’s preexisting condition

23 exclusion period (if any) in a manner consistent with

24 subsection (b)(3).
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1 (b) QUALIFYING INDIVIDUAL AND HEALTH INSURANCE

2 COVERAGE DEFINED.—In this section—

3 (1) QUALIFYING INDIVIDUAL.—The term ‘‘quali4 fying individual’’ means an individual—

5 (A) who is in a qualified coverage period

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

7 (i) includes coverage under one or more

8 group health plans, and

9 (ii) commenced 18 or more months be10 fore the date on which the individual seeks

11 coverage under this section;

12 (B) is not eligible for coverage under (i) a

13 group health plan, (ii) part A or part B of title

14 XVIII of the Social Security Act, or (iii) a State

15 plan under title XIX of such Act (or any succes16 sor program);

17 (C) with respect to whom the most recent

18 coverage within the coverage period described in

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

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

21 section 132(b);

22 (D) if the individual had been offered the

23 option of continuation coverage under a COBRA

24 continuation provision or under a similar State

25 program, elected such coverage;
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1 (E) who, if the individual elected such con2 tinuation coverage, has exhausted such continu3 ation coverage;

4 (F) who does not have individual health in5 surance coverage; and

6 (G) whose most recent prior coverage either

7 (i) was under a group health plan, governmental

8 plan, or church plan (or health insurance cov9 erage offered in connection with any such plan),

10 or (ii) was not under such a plan (or such cov11 erage) but was terminated involuntarily because

12 of the withdrawal of the plan or coverage, move13 ment out of a service area, or similar involun14 tary reasons.

15 (2) QUALIFYING COVERAGE.—

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

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

18 HMO in relation to an qualifying individual,

19 individual health insurance coverage for which

20 the actuarial value of the benefits is not less

21 than—

22 (i) the weighted average actuarial

23 value of the benefits provided by all the in24 dividual health insurance coverage issued

25 by the insurer or HMO in the State during
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1 the previous year (not including coverage

2 issued under this section), or

3 (ii) the weighted average of the actuar4 ial value of the benefits provided by all the

5 individual health insurance coverage issued

6 by all insurers and HMOs in the State dur7 ing the previous year (not including cov8 erage issued under this section),

9 as elected by the plan or by the State under sub10 section (c)(1).

11 (B) ASSUMPTIONS.—For purposes of sub12 paragraph (A), the actuarial value of benefits

13 provided under individual health insurance cov14 erage shall be calculated based on a standardized

15 population and a set of standardized utilization

16 and cost factors.

17 (3) CREDITING FOR PREVIOUS COVERAGE.—

18 Crediting is consistent with this paragraph only if

19 any preexisting condition exclusion period is reduced

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

21 if the coverage under this section were under a group

22 health plan to which section 101(a) applies. In carry23 ing out this subsection, provisions similar to the pro24 visions of section 101(c) shall apply.
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1 (c) OPTIONAL STATE ESTABLISHMENT OF MECHA2 NISMS TO ACHIEVE GOALS OF GUARANTEEING AVAILABIL3 ITY OF COVERAGE.—

4 (1) IN GENERAL.—Any State may establish pub5 lic or private mechanisms reasonably designed to

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

7 implements such a mechanism by the deadline speci8 fied in paragraph (4), the State may elect to have

9 such mechanisms apply instead of having subsection

10 (d) apply in the State. An election under this para11 graph shall be by notice to the Secretary of Health

12 and Human Services on a timely basis consistent

13 with the deadlines specified in paragraph (4). In es14 tablishing what is qualifying coverage under such a

15 mechanism under this subsection, a State may exer16 cise the election described in subsection (b)(2)(A) with

17 respect to each insurer or HMO in the State (or on

18 a collective basis after exercising such election for each

19 such insurer or HMO).

20 (2) TYPES OF MECHANISMS.—State mechanisms

21 under this subsection may include one or more (or a

22 combination) of the following:

23 (A) Health insurance coverage pools or pro24 grams authorized or established by the State.

25 (B) Mandatory group conversion policies.
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1 (C) Guaranteed issue of one or more plans

2 of individual health insurance coverage to quali3 fying individuals.

4 (D) Open enrollment by one or more insur5 ers or HMOs.

6 The mechanisms described in the previous sentence

7 are not an exclusive list of the mechanisms (or com8 binations of mechanisms) that may be used under this

9 subsection.

10 (3) SAFE HARBOR FOR BENEFITS UNDER CUR11 RENT RISK POOLS.—In the case of a State that has

12 a health insurance coverage pool or risk pool in effect

13 on March 12, 1996, and that implements the mecha14 nism described in paragraph (2)(A), the benefits

15 under such mechanism (or benefits the actuarial value

16 of which is not less than the actuarial value of such

17 current benefits, using the assumptions described in

18 subsection (b)(2)(B)) are deemed, for purposes of this

19 section, to constitute qualified coverage.

20 (4) DEADLINE FOR STATE IMPLEMENTATION.—

21 (A) IN GENERAL.—Subject to subparagraph

22 (B), the deadline under this paragraph is July

23 1, 1997.

24 (B) EXTENSION TO PERMIT LEGISLATION.—

25 The deadline under this paragraph is July 1,
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1 1998, in the case of a State the legislature of

2 which does not have a regular legislative session

3 at any time between January 1, 1997, and June

4 30, 1997.

5 (C) CONSTRUCTION.—Nothing in this sec6 tion shall be construed as preventing a State

7 from—

8 (i) implementing guaranteed availabil9 ity mechanisms before the deadline,

10 (ii) continuing in effect mechanisms

11 that are in effect before the date of the en12 actment of this Act,

13 (iii) offering guaranteed availability of

14 coverage that is not qualifying coverage, or

15 (iv) offering guaranteed availability of

16 coverage to individuals who are not qualify17 ing individuals.

18 (d) FALLBACK PROVISIONS.—

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

20 provided notice to the Secretary of an election on a

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

22 notify the State that paragraph (3) will be applied in

23 the State.

24 (2) PRELIMINARY DETERMINATION AFTER STATE

25 ELECTION.—If—
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1 (A) a State has provided notice of an elec2 tion on a timely basis under subsection (c), and

3 (B) the Secretary finds, after consultation

4 with the chief executive officer of the State and

5 the insurance commissioner or chief insurance

6 regulatory official of the State, that such a mech7 anism (for which notice was provided) is not

8 reasonably designed to meet the goals specified in

9 subsection (a),

10 the Secretary shall notify the State of such prelimi11 nary determination, of the consequences under para12 graph (3) of a failure to implement such a mecha13 nism, and permit the State a reasonable opportunity

14 in which to modify the mechanism (or to adopt an15 other mechanism) that is reasonably designed to meet

16 the goals specified in subsection (a). If, after provid17 ing such notice and opportunity, the Secretary finds

18 that the State has not implemented such a mecha19 nism, the Secretary shall notify the State that para20 graph (3) will be applied in the State.

21 (3) DESCRIPTION OF FALLBACK MECHANISM.—

22 As provided under paragraphs (1) and (2) and sub23 ject to paragraph (5), each insurer or HMO in the

24 State involved that issues individual health insurance

25 coverage—
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1 (A) shall offer qualifying health insurance

2 coverage, in which qualifying individuals obtain3 ing such coverage receive credit for their prior

4 coverage toward the new coverage’s preexisting

5 condition exclusion period (if any) in a manner

6 consistent with subsection (b)(3), to each qualify7 ing individual in the State, and

8 (B) may not decline to issue such coverage

9 to such an individual based on health status (ex10 cept as permitted under paragraph (4)).

11 (4) APPLICATION OF NETWORK AND CAPACITY

12 LIMITS.—Under regulations, the provisions of sub13 sections (b) and (c) of section 131 shall apply to an

14 individual in the individual health insurance market

15 under this subsection in the same manner as they

16 apply under section 131 to an employer in the small

17 group market.

18 (5) TERMINATION OF FALLBACK MECHANISM.—

19 The provisions of this subsection shall cease to apply

20 to a State if the Secretary finds that a State has im21 plemented a mechanism that is reasonably designed to

22 meet the goals specified in subsection (a), and until

23 the Secretary finds that such mechanism is no longer

24 being implemented.

25 (e) CONSTRUCTION.—
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1 (1) PREMIUMS.—Nothing in this section shall be

2 construed to affect the determination of an insurer or

3 HMO as to the amount of the premium payable

4 under an individual health insurance coverage under

5 applicable state law.

6 (2) MARKET REQUIREMENTS.—

7 (A) IN GENERAL.—The provisions of sub8 section (a) shall not be construed to require that

9 an insurer or HMO offering health insurance

10 coverage only in connection with a group health

11 plan or an association offer individual health in12 surance coverage.

13 (B) CONVERSION POLICIES.—An insurer or

14 HMO offering health insurance coverage in con15 nection with a group health plan under subtitle

16 A shall not be deemed to be an insurer or HMO

17 offering an individual health insurance coverage

18 solely because such insurer or HMO offers a con19 version policy.

20 (3) DISREGARD OF ASSOCIATION COVERAGE.—

21 An insurer or HMO that offers health insurance cov22 erage only in connection with a group health plan or

23 in connection with individuals based on affiliation

24 with one or more associations is not considered, for
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1 purposes of this subtitle, to be offering individual

2 health insurance coverage.

3 (4) MARKETING OF PLANS.—Nothing in this sec4 tion shall be construed to prevent a State from requir5 ing insurer or HMOs offering individual health in6 surance coverage to actively market such coverage.

7 SEC. 142. GUARANTEED RENEWABILITY OF INDIVIDUAL

8 HEALTH INSURANCE COVERAGE.

9 (a) GUARANTEED RENEWABILITY.—Subject to the suc10 ceeding provisions of this section, an insurer or HMO that

11 provides individual health insurance coverage to an indi12 vidual shall renew or continue such coverage at the option

13 of the individual.

14 (b) NONRENEWAL PERMITTED IN CERTAIN CASES.—

15 An insurer or HMO may nonrenew or discontinue individ16 ual health insurance coverage of an individual only based

17 on one or more of the following:

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

19 payment of premiums or contributions in accordance

20 with the terms of the coverage or the insurer or orga21 nization has not failed to receive timely premium

22 payments.

23 (2) FRAUD.—The individual has performed an

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

2 terms of the coverage.

3 (3) TERMINATION OF COVERAGE.—Subject to

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

5 health insurance coverage in the individual market in

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

7 in a geographic area).

8 (4) MOVEMENT OUTSIDE SERVICE AREA.—The

9 individual has changed residence and resides outside

10 the service area of the insurer or organization or out11 side the area for which the insurer or organization is

12 authorized to do business.

13 Paragraph (4) shall apply to an insurer or HMO only if

14 it is applied uniformly without regard to the claims experi15 ence of employers and their employees (and their bene16 ficiaries) or the health status of such employees and bene17 ficiaries.

18 (c) TERMINATION OF INDIVIDUAL COVERAGE.—The

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

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

21 that any reference to an employer or market is deemed a

22 reference to the a covered individual or the individual mar23 ket, respectively.

24 (d) EXCEPTION FOR UNIFORM MODIFICATION OF COV25 ERAGE.—The provisions of section 132(d) shall apply to in-
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1 dividual health insurance coverage in the individual market

2 under this section in the same manner as it applies to

3 health insurance coverage offered in connection with a

4 group health plan in the group market under such section.

5 PART 3—ENFORCEMENT

6 SEC. 151. INCORPORATION OF PROVISIONS FOR STATE EN7 FORCEMENT WITH FEDERAL FALLBACK AU8 THORITY.

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

10 104(c) shall apply to enforcement of requirements in each

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

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

13 provisions apply to enforcement of requirements in section

14 101, 102, or 103 with respect to insurers and HMOs regu15 lated by a State.

16 Subtitle C—Sense of Committee on

17 Additional Requirements

18 SEC. 161. SENSE OF COMMITTEE ON COMMERCE ON ADDI19 TIONAL REQUIREMENTS.

20 (a) FINDINGS.—The Committee on Commerce of the

21 House of Representatives finds the following:

22 (1) The National Cancer Institute has stated

23 that sufficient data do not exist to support wide24 spread clinical applicability of autologous bone mar-
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1 row transplants and high dosage chemotherapy for

2 treatment of breast cancer.

3 (2) In relation to mandatory hospital stays for

4 child birth, several studies have shown little associa5 tion between initial hospital stays and subsequent

6 hospital stays. For example, a review of 20,000 inpa7 tient deliveries found no connection between the length

8 of stay and a newborn’s likelihood of developing

9 health problems. Another study that tracked readmis10 sion rates to 275,000 discharges showed no statis11 tically significant differences for those who had hos12 pital stays of 24 hours or less.

13 (b) SENSE OF COMMITTEE.—It is the sense of the Com14 mittee on Commerce of the House of Representatives that—

15 (1) the impact, on health care costs and the pro16 vision of necessary quality health services, of mandat17 ing the inclusion in health insurance coverage and

18 group health plans of bone marrow transplants for

19 treatment of breast cancer and of minimum periods

20 of inpatient care for child birth has not been evalu21 ated;

22 (2) there is no legislative precedent for Congress

23 requiring the coverage of specific benefits under pri24 vate and State health insurance plans; and
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1 (3) it is the intent of the Committee to conduct

2 one or more hearings to examine issues relating to re3 quiring the inclusion of benefits under group health

4 plans and health insurance coverage offered in the

5 group and individual markets.

6 Subtitle D—Definitions; General

7 Provisions

8 SEC. 191. DEFINITIONS; SCOPE OF COVERAGE.

9 (a) GROUP HEALTH PLAN.—

10 (1) DEFINITION.—Subject to the succeeding pro11 visions of this subsection and subsection (d)(1), the

12 term ‘‘group health plan’’ means an employee welfare

13 benefit plan to the extent that the plan provides medi14 cal care (as defined in subsection (c)(9)) to employees

15 or their dependents (as defined under the terms of the

16 plan) directly or through insurance, reimbursement,

17 or otherwise, and includes a group health plan (with18 in the meaning of section 5000(b)(1) of the Internal

19 Revenue Code of 1986).

20 (2) LIMITATION OF REQUIREMENTS TO PLANS

21 WITH 2 OR MORE EMPLOYEE PARTICIPANTS.—The re22 quirements of subtitle A and part 1 of subtitle B shall

23 apply in the case of a group health plan for any plan

24 year, or for health insurance coverage offered in con25 nection with a group health plan for a year, only if
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1 the group health plan has two or more participants

2 as current employees on the first day of the plan year.

3 (3) EXCLUSION OF PLANS WITH LIMITED COV4 ERAGE.—An employee welfare benefit plan shall be

5 treated as a group health plan under this title only

6 with respect to medical care which is provided under

7 the plan and which does not consist of coverage ex8 cluded from the definition of health insurance cov9 erage under subsection (c)(4)(B).

10 (4) TREATMENT OF CHURCH PLANS.—

11 (A) EXCLUSION.—The requirements of this

12 title insofar as they apply to group health plans

13 shall not apply to church plans.

14 (B) OPTIONAL DISREGARD IN DETERMINING

15 PERIOD OF COVERAGE.—For purposes of apply16 ing section 101(b)(3)(B)(i), a group health plan

17 may elect to disregard periods of coverage of an

18 individual under a church plan that, pursuant

19 to subparagraph (A), is not subject to the re20 quirements of this title.

21 (5) TREATMENT OF GOVERNMENTAL PLANS.—

22 (A) ELECTION TO BE EXCLUDED.—If the

23 plan sponsor of a governmental plan which is a

24 group health plan to which the provisions of this

25 subtitle otherwise apply makes an election under
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1 this paragraph for any specified period (in such

2 form and manner as the Secretary of Health and

3 Human Services may by regulations prescribe),

4 then the requirements of this title insofar as they

5 apply to group health plans shall not apply to

6 such governmental plans for such period.

7 (B) OPTIONAL DISREGARD IN DETERMINING

8 PERIOD OF COVERAGE IF ELECTION MADE.—For

9 purposes of applying section 101(b)(3)(B)(i), a

10 group health plan may elect to disregard periods

11 of coverage of an individual under a govern12 mental plan that, under an election under sub13 paragraph (A), is not subject to the requirements

14 of this title.

15 (6) TREATMENT OF MEDICAID PLAN AS GROUP

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

17 Social Security Act shall be treated as a group health

18 plan for purposes of applying section 101(c)(1), un19 less the State elects not to be so treated.

20 (7) TREATMENT OF MEDICARE AND INDIAN

21 HEALTH SERVICE PROGRAMS AS GROUP HEALTH

22 PLAN.—Title XVIII of the Social Security Act and a

23 program of the Indian Health Service shall be treated

24 as a group health plan for purposes of applying sec25 tion 101(c)(1).
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1 (b) INCORPORATION OF CERTAIN DEFINITIONS IN EM2 PLOYEE RETIREMENT INCOME SECURITY ACT OF 1974.—

3 Except as provided in this section, the terms ‘‘beneficiary’’,

4 ‘‘church plan’’, ‘‘employee’’, ‘‘employee welfare benefit

5 plan’’, ‘‘employer’’, ‘‘governmental plan’’, ‘‘multiemployer

6 plan’’, ‘‘multiple employer welfare arrangement’’, ‘‘partici7 pant’’, ‘‘plan sponsor’’, and ‘‘State’’ have the meanings

8 given such terms in section 3 of the Employee Retirement

9 Income Security Act of 1974.

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

11 (1) APPLICABLE STATE AUTHORITY.—The term

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

13 an insurer or health maintenance organization in a

14 State, the State insurance commissioner or official or

15 officials designated by the State to enforce the require16 ments of this title for the State involved with respect

17 to such insurer or organization.

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

19 fide association’’ means an association which—

20 (A) has been actively in existence for at

21 least 5 years,

22 (B) has been formed and maintained in

23 good faith for purposes other than obtaining in24 surance,
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1 (C) does not condition membership in the

2 association on health status,

3 (D) makes health insurance coverage offered

4 through the association available to all members

5 regardless of health status,

6 (E) does not make health insurance coverage

7 offered through the association available to any

8 individual who is not a member (or dependent

9 of a member) of the association at the time the

10 coverage is initially issued,

11 (F) does not impose preexisting condition

12 exclusions except in a manner consistent with

13 the requirements of sections 101 and 102 as they

14 relate to group health plans, and

15 (G) provides for renewal and continuation

16 of health insurance coverage in a manner con17 sistent with the requirements of section 132 as

18 they relate to the renewal and continuation in

19 force of coverage in a group market.

20 (3) COBRA CONTINUATION PROVISION.—The

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

22 the following:

23 (A) Section 4980B of the Internal Revenue

24 Code of 1986, other than subsection (f)(1) of such

25 section insofar as it relates to pediatric vaccines.
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1 (B) Part 6 of subtitle B of title I of the Em2 ployee Retirement Income Security Act of 1974

3 (29 U.S.C. 1161 et seq.), other than section 609.

4 (C) Title XXII of the Public Health Service

5 Act.

6 (4) HEALTH INSURANCE COVERAGE.—

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

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

9 coverage’’ means benefits consisting of medical

10 care (provided directly, through insurance or re11 imbursement, or otherwise) under any hospital

12 or medical service policy or certificate, hospital

13 or medical service plan contract, or health main14 tenance organization group contract offered by

15 an insurer or a health maintenance organiza16 tion.

17 (B) EXCEPTION.—Such term does not in18 clude coverage under any separate policy, certifi19 cate, or contract only for one or more of any of

20 the following:

21 (i) Coverage for accident, credit-only,

22 vision, disability income, long-term care,

23 nursing home care, community-based care

24 dental, on-site medical clinics, or employee
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1 assistance programs, or any combination

2 thereof.

3 (ii) Medicare supplemental health in4 surance (within the meaning of section

5 1882(g)(1) of the Social Security Act (42

6 U.S.C. 1395ss(g)(1))) and similar supple7 mental coverage provided under a group

8 health plan.

9 (iii) Coverage issued as a supplement

10 to liability insurance.

11 (iv) Liability insurance, including

12 general liability insurance and automobile

13 liability insurance.

14 (v) Workers’ compensation or similar

15 insurance.

16 (vi) Automobile medical-payment in17 surance.

18 (vii) Coverage consisting of benefit

19 payments made on a periodic basis for a

20 specified disease or illness or period of hos21 pitalization, without regard to the costs in22 curred or services rendered during the pe23 riod to which the payments relate.

24 (viii) Short-term limited duration in25 surance.
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1 (ix) Such other coverage, comparable to

2 that described in previous clauses, as may

3 be specified in regulations prescribed under

4 this title.

5 (5) HEALTH MAINTENANCE ORGANIZATION;

6 HMO.—The terms ‘‘health maintenance organization’’

7 and ‘‘HMO’’ mean—

8 (A) a Federally qualified health mainte9 nance organization (as defined in section

10 1301(a) of the Public Health Service Act (42

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

12 (B) an organization recognized under State

13 law as a health maintenance organization, or

14 (C) a similar organization regulated under

15 State law for solvency in the same manner and

16 to the same extent as such a health maintenance

17 organization,

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

19 is subject to State law which regulates insurance

20 (within the meaning of section 514(b)(2) of the Em21 ployee Retirement Income Security Act of 1974).

22 (6) HEALTH STATUS.—The term ‘‘health status’’

23 includes, with respect to an individual, medical con24 dition, claims experience, receipt of health care, medi25 cal history, genetic information, evidence of insurabil-
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1 ity (including conditions arising out of acts of domes2 tic violence), or disability.

3 (7) INDIVIDUAL HEALTH INSURANCE COV4 ERAGE.—The term ‘‘individual health insurance cov5 erage’’ means health insurance coverage offered to in6 dividuals if the coverage is not offered in connection

7 with a group health plan (other than such a plan that

8 has fewer than two participants as current employees

9 on the first day of the plan year).

10 (8) INSURER.—The term ‘‘insurer’’ means an in11 surance company, insurance service, or insurance or12 ganization which is licensed to engage in the business

13 of insurance in a State and (except for purposes of

14 part 2 of subtitle B) which is regulated by a State

15 (within the meaning of section 514(b)(2)(A) of the

16 Employee Retirement Income Security Act of 1974).

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

18 means—

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

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

21 treatment, or prevention of disease, or amounts

22 paid for, or items or services provided for, the

23 purpose of affecting any structure or function of

24 the body,
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1 (B) amounts paid for, or services in the

2 form of, transportation primarily for and essen3 tial to medical care referred to in subparagraph

4 (A), and

5 (C) amounts paid for insurance covering

6 medical care referred to in subparagraphs (A)

7 and (B).

8 (10) NETWORK PLAN.—The term ‘‘network plan’’

9 means, with respect to health insurance coverage, an

10 arrangement of an insurer or a health maintenance

11 organization under which the financing and delivery

12 of medical care are provided, in whole or in part,

13 through a defined set of providers under contract with

14 the insurer or health maintenance organization.

15 (11) WAITING PERIOD.—The term ‘‘waiting pe16 riod’’ means, with respect to a group health plan and

17 an individual who is a potential participant or bene18 ficiary in the plan, the minimum period that must

19 pass with respect to the individual before the individ20 ual is eligible to be covered for benefits under the

21 plan.

22 (d) TREATMENT OF PARTNERSHIPS.—

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

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

25 for this paragraph) an employee welfare benefit plan
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1 and which is established or maintained by a partner2 ship, to the extent that such plan, fund, or program

3 provides medical care to present or former partners

4 in the partnership or to their dependents (as defined

5 under the terms of the plan, fund, or program), di6 rectly or through insurance, reimbursement, or other7 wise, shall be treated (subject to paragraph (1)) as an

8 employee welfare benefit plan which is a group health

9 plan.

10 (2) TREATMENT OF PARTNERSHIP AND PART11 NERS AND EMPLOYER AND PARTICIPANTS.—In the

12 case of a group health plan—

13 (A) the term ‘‘employer’’ includes the part14 nership in relation to any partner; and

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

16 (i) in connection with a group health

17 plan maintained by a partnership, an indi18 vidual who is a partner in relation to the

19 partnership, or

20 (ii) in connection with a group health

21 plan maintained by a self-employed indi22 vidual (under which one or more employees

23 are participants), the self-employed individ24 ual,
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1 if such individual is or may become eligible to

2 receive a benefit under the plan or such individ3 ual’s beneficiaries may be eligible to receive any

4 such benefit.

5 (e) DEFINITIONS RELATING TO MARKETS AND SMALL

6 EMPLOYERS.—As used in this title:

7 (1) INDIVIDUAL MARKET.—The term ‘‘individual

8 market’’ means the market for health insurance cov9 erage offered to individuals and not to employers or

10 in connection with a group health plan and does not

11 include the market for such coverage issued only by

12 an insurer or HMO that makes such coverage avail13 able only on the basis of affiliation with a bona fide

14 association (as defined in subsection (c)(2)).

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

16 group market’’ means the market for health insurance

17 coverage offered to employers (other than small em18 ployers) on behalf of their employees (and their de19 pendents) and does not include health insurance cov20 erage available solely in connection with a bona fide

21 association (as defined in subsection (c)(2)).

22 (3) SMALL EMPLOYER.—The term ‘‘small em23 ployer’’ means, in connection with a group health

24 plan with respect to a calendar year, an employer

25 who employs at least 2 but fewer than 51 employees
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1 on a typical business day in the year. For purposes

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

3 whether or not incorporated, shall be deemed a single

4 employer if such trades or businesses are within the

5 same control group (within the meaning of section

6 3(40)(B)(ii)) of the Employee Retirement Income Se7 curity Act of 1974.

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

9 group market’’ means the health insurance market

10 under which individuals obtain health insurance cov11 erage (directly or through any arrangement) on behalf

12 of themselves (and their dependents) on the basis of

13 employment or other relationship with respect to a

14 small employer and does not include health insurance

15 coverage available solely in connection with a bona

16 fide association (as defined in subsection (c)(2)).

17 SEC. 192. STATE FLEXIBILITY TO PROVIDE GREATER PRO18 TECTION.

19 (a) STATE FLEXIBILITY TO PROVIDE GREATER PRO20 TECTION.—Subject to subsection (b), nothing in this title

21 shall be construed to preempt State laws that require insur22 ers or HMOs—

23 (1) to impose a limitation or exclusion of bene24 fits relating to the treatment of a preexisting condi-
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1 tion for a period that is shorter than the applicable

2 period provided for under this title;

3 (2) to allow individuals, participants, and bene4 ficiaries to be considered to be in a period of previous

5 qualifying coverage if such individual, participant, or

6 beneficiary experiences a lapse in coverage that is

7 greater than the 60-day periods provided for under

8 sections 101(b)(3)(A), 101(b)(3)(B)(ii), and 102(b)(2);

9 or

10 (3) in defining ‘‘pre-existing condition’’ to have

11 a look-back period that is shorter than the 6-month

12 period described in section 101(b)(1)(A).

13 (b) NO OVERRIDE OF ERISA PREEMPTION.—Nothing

14 in this Act shall be construed to affect or modify the provi15 sions of section 514 of the Employee Retirement Income Se16 curity 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 effective

9 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 may

13 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 amend8 ment to or repeal of a section or other provision, the ref9 erence shall be considered to be made to that section or other

10 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 local

2 law enforcement programs to control fraud and

3 abuse with respect to health plans,

4 ‘‘(B) to conduct investigations, audits, eval5 uations, and inspections relating to the delivery

6 of and payment for health care in the United

7 States,

8 ‘‘(C) to facilitate the enforcement of the pro9 visions of sections 1128, 1128A, and 1128B and

10 other statutes applicable to health care fraud and

11 abuse,

12 ‘‘(D) to provide for the modification and es13 tablishment of safe harbors and to issue advisory

14 opinions and special fraud alerts pursuant to

15 section 1128D, and

16 ‘‘(E) to provide for the reporting and disclo17 sure of certain final adverse actions against

18 health care providers, suppliers, or practitioners

19 pursuant to the data collection system established

20 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, pro12 viders, and others to enable the Secretary

13 and the Attorney General to carry out the

14 program (including coordination with

15 health plans under paragraph (2)).

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

18 such information is provided and utilized

19 in a manner that appropriately protects the

20 confidentiality of the information and the

21 privacy of individuals receiving health care

22 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 estab12 lished under this subsection.

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

14 Nothing in this Act shall be construed to diminish the

15 authority of any Inspector General, including such

16 authority as provided in the Inspector General Act of

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

18 ‘‘(b) ADDITIONAL USE OF FUNDS BY INSPECTOR GEN19 ERAL.—

20 ‘‘(1) REIMBURSEMENTS FOR INVESTIGATIONS.—

21 The Inspector General of the Department of Health

22 and Human Services is authorized to receive and re23 tain for current use reimbursement for the costs of

24 conducting investigations and audits and for mon25 itoring compliance plans when such costs are ordered
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1 by a court, voluntarily agreed to by the payor, or oth2 erwise.

3 ‘‘(2) CREDITING.—Funds received by the Inspec4 tor General under paragraph (1) as reimbursement

5 for costs of conducting investigations shall be depos6 ited to the credit of the appropriation from which ini7 tially paid, or to appropriations for similar purposes

8 currently available at the time of deposit, and shall

9 remain available for obligation for 1 year from the

10 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 organization;

17 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 INSUR23 ANCE TRUST FUND.—Section 1817 (42 U.S.C. 1395i) is

24 amended by adding at the end the following new subsection:
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1 ‘‘(k) HEALTH CARE FRAUD AND ABUSE CONTROL AC2 COUNT.—

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 Con6 trol Account’ (in this subsection referred to as the ‘Ac7 count’).

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 (C).

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

22 The Trust Fund is authorized to accept on behalf

23 of the United States money gifts and bequests

24 made unconditionally to the Trust Fund, for the
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1 benefit of the Account or any activity financed

2 through the Account.

3 ‘‘(C) TRANSFER OF AMOUNTS.—The Manag4 ing 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 amount

7 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 XIX, and chapter 38 of title 31,

16 United States Code (except as otherwise

17 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 re23 ceipts of the general fund of the Treasury

24 obtained under sections 3729 through 3733

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

2 claims related to the provision of health

3 care items and services (other than funds

4 awarded to a relator, for restitution or oth5 erwise authorized by law).

6 ‘‘(3) APPROPRIATED AMOUNTS TO ACCOUNT FOR

7 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 Trust

12 Fund such sums as the Secretary and the

13 Attorney General certify are necessary to

14 carry out the purposes described in sub15 paragraph (C), to be available without fur16 ther appropriation, in an amount not to ex17 ceed—

18 ‘‘(I) for fiscal year 1997,

19 $104,000,000,

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 ACTIVI5 TIES.—For each fiscal year, of the amount

6 appropriated in clause (i), the following

7 amounts shall be available only for the pur8 poses of the activities of the Office of the In9 spector General of the Department of Health

10 and Human Services with respect to the

11 medicare and medicaid programs—

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

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

14 $70,000,000;

15 ‘‘(II) for fiscal year 1998, not less

16 than $80,000,000 and not more than

17 $90,000,000;

18 ‘‘(III) for fiscal year 1999, not

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

20 than $100,000,000;

21 ‘‘(IV) for fiscal year 2000, not less

22 than $110,000,000 and not more than

23 $120,000,000;
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1 ‘‘(V) for fiscal year 2001, not less

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

3 $130,000,000;

4 ‘‘(VI) for fiscal year 2002, not less

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

6 $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 (C),

17 to be available without further appropriation—

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

19 ‘‘(ii) for fiscal year 1998, $56,000,000;

20 ‘‘(iii) for fiscal year 1999, $66,000,000;

21 ‘‘(iv) for fiscal year 2000, $76,000,000;

22 ‘‘(v) for fiscal year 2001, $88,000,000;

23 ‘‘(vi) for fiscal year 2002,

24 $101,000,000; and
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1 ‘‘(vii) for each fiscal year after fiscal

2 year 2002, $114,000,000.

3 ‘‘(C) USE OF FUNDS.—The purposes de4 scribed in this subparagraph are to cover the

5 costs (including equipment, salaries and benefits,

6 and travel and training) of the administration

7 and operation of the health care fraud and abuse

8 control program established under section

9 1128C(a), including the costs of—

10 ‘‘(i) prosecuting health care matters

11 (through criminal, civil, and administrative

12 proceedings);

13 ‘‘(ii) investigations;

14 ‘‘(iii) financial and performance au15 dits of health care programs and operations;

16 ‘‘(iv) inspections and other evalua17 tions; and

18 ‘‘(v) provider and consumer education

19 regarding compliance with the provisions of

20 title XI.

21 ‘‘(4) APPROPRIATED AMOUNTS TO ACCOUNT FOR

22 MEDICARE INTEGRITY PROGRAM.—

23 ‘‘(A) IN GENERAL.—There are hereby ap24 propriated to the Account from the Trust Fund

25 for each fiscal year such amounts as are nec-
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1 essary to carry out the Medicare Integrity Pro2 gram under section 1893, subject to subpara3 graph (B) and to be available without further

4 appropriation.

5 ‘‘(B) AMOUNTS SPECIFIED.—The amount

6 appropriated under subparagraph (A) for a fis7 cal year is as follows:

8 ‘‘(i) For fiscal year 1997, such amount

9 shall be not less than $430,000,000 and not

10 more than $440,000,000.

11 ‘‘(ii) For fiscal year 1998, such

12 amount shall be not less than $490,000,000

13 and not more than $500,000,000.

14 ‘‘(iii) For fiscal year 1999, such

15 amount shall be not less than $550,000,000

16 and not more than $560,000,000.

17 ‘‘(iv) For fiscal year 2000, such

18 amount shall be not less than $620,000,000

19 and not more than $630,000,000.

20 ‘‘(v) For fiscal year 2001, such amount

21 shall be not less than $670,000,000 and not

22 more than $680,000,000.

23 ‘‘(vi) For fiscal year 2002, such

24 amount shall be not less than $690,000,000

25 and not more than $700,000,000.
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1 ‘‘(vii) For each fiscal year after fiscal

2 year 2002, such amount shall be not less

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

4 $720,000,000.

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

6 Attorney General shall submit jointly an annual re7 port to Congress on the amount of revenue which is

8 generated and disbursed, and the justification for such

9 disbursements, by the Account in each fiscal year.’’.

10 SEC. 202. MEDICARE INTEGRITY PROGRAM.

11 (a) ESTABLISHMENT OF MEDICARE INTEGRITY PRO12 GRAM.—Title XVIII is amended by adding at the end the

13 following new section:

14 ‘‘MEDICARE INTEGRITY PROGRAM

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

16 There is hereby established the Medicare Integrity Program

17 (in this section referred to as the ‘Program’) under which

18 the Secretary shall promote the integrity of the medicare

19 program by entering into contracts in accordance with this

20 section with eligible private entities to carry out the activi21 ties described in subsection (b).

22 ‘‘(b) ACTIVITIES DESCRIBED.—The activities described

23 in this subsection are as follows:

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

25 or other individuals and entities furnishing items and

26 services for which payment may be made under this
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1 title (including skilled nursing facilities and home

2 health agencies), including medical and utilization

3 review and fraud review (employing similar stand4 ards, processes, and technologies used by private

5 health plans, including equipment and software tech6 nologies which surpass the capability of the equip7 ment and technologies used in the review of claims

8 under this title as of the date of the enactment of this

9 section).

10 ‘‘(2) Audit of cost reports.

11 ‘‘(3) Determinations as to whether payment

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

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

14 of payments that should not have been made.

15 ‘‘(4) Education of providers of services, bene16 ficiaries, and other persons with respect to payment

17 integrity and benefit quality assurance issues.

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

19 list of items of durable medical equipment in accord20 ance with section 1834(a)(15) which are subject to

21 prior authorization under such section.

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

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

24 any of the activities described in subsection (b) if—
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1 ‘‘(1) the entity has demonstrated capability to

2 carry out such activities;

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

4 agrees to cooperate with the Inspector General of the

5 Department of Health and Human Services, the At6 torney General of the United States, and other law

7 enforcement agencies, as appropriate, in the inves8 tigation and deterrence of fraud and abuse in relation

9 to this title and in other cases arising out of such ac10 tivities;

11 ‘‘(3) the entity demonstrates to the Secretary

12 that the entity’s financial holdings, interests, or rela13 tionships will not interfere with its ability to perform

14 the functions to be required by the contract in an ef15 fective and impartial manner; and

16 ‘‘(4) the entity meets such other requirements as

17 the Secretary may impose.

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

19 an entity shall be deemed to be eligible to enter into a con20 tract under the Program to carry out the activity if the

21 entity is a carrier with a contract in effect under section

22 1842.

23 ‘‘(d) PROCESS FOR ENTERING INTO CONTRACTS.—The

24 Secretary shall enter into contracts under the Program in

25 accordance with such procedures as the Secretary shall by
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1 regulation establish, except that such procedures shall in2 clude the following:

3 ‘‘(1) The Secretary shall determine the appro4 priate number of separate contracts which are nec5 essary to carry out the Program and the appropriate

6 times at which the Secretary shall enter into such

7 contracts.

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

9 (B), the provisions of section 1153(e)(1) shall apply

10 to contracts and contracting authority under this sec11 tion.

12 ‘‘(B) Competitive procedures must be used when

13 entering into new contracts under this section, or at

14 any other time considered appropriate by the Sec15 retary, except that the Secretary may contract with

16 entities that are carrying out the activities described

17 in this section pursuant to agreements under section

18 1816 or contracts under section 1842 in effect on the

19 date of the enactment of this section.

20 ‘‘(3) A contract under this section may be re21 newed without regard to any provision of law requir22 ing competition if the contractor has met or exceeded

23 the performance requirements established in the cur24 rent contract.
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1 ‘‘(e) LIMITATION ON CONTRACTOR LIABILITY.—The

2 Secretary shall by regulation provide for the limitation of

3 a contractor’s liability for actions taken to carry out a con4 tract under the Program, and such regulation shall, to the

5 extent the Secretary finds appropriate, employ the same or

6 comparable standards and other substantive and procedural

7 provisions as are contained in section 1157.’’.

8 (b) ELIMINATION OF FI AND CARRIER RESPONSIBIL9 ITY FOR CARRYING OUT ACTIVITIES SUBJECT TO PRO10 GRAM.—

11 (1) RESPONSIBILITIES OF FISCAL

12 INTERMEDIARIES UNDER PART A.—Section 1816 (42

13 U.S.C. 1395h) is amended by adding at the end the

14 following new subsection:

15 ‘‘(l) No agency or organization may carry out (or re16 ceive payment for carrying out) any activity pursuant to

17 an agreement under this section to the extent that the activ18 ity is carried out pursuant to a contract under the Medicare

19 Integrity Program under section 1893.’’.

20 (2) RESPONSIBILITIES OF CARRIERS UNDER

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

22 amended by adding at the end the following new

23 paragraph:

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

25 carrying out) any activity pursuant to a contract under
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1 this subsection to the extent that the activity is carried out

2 pursuant to a contract under the Medicare Integrity Pro3 gram under section 1893. The previous sentence shall not

4 apply with respect to the activity described in section

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

6 of durable medical equipment under section 1834(a)(15)).’’.

7 SEC. 203. BENEFICIARY INCENTIVE PROGRAMS.

8 (a) CLARIFICATION OF REQUIREMENT TO PROVIDE

9 EXPLANATION OF MEDICARE BENEFITS.—The Secretary of

10 Health and Human Services (in this section referred to as

11 the ‘‘Secretary’’) shall provide an explanation of benefits

12 under the medicare program under title XVIII of the Social

13 Security Act with respect to each item or service for which

14 payment may be made under the program which is fur15 nished to an individual, without regard to whether or not

16 a deductible or coinsurance may be imposed against the in17 dividual with respect to the item or service.

18 (b) PROGRAM TO COLLECT INFORMATION ON FRAUD

19 AND ABUSE.—

20 (1) ESTABLISHMENT OF PROGRAM.—Not later

21 than 3 months after the date of the enactment of this

22 Act, the Secretary shall establish a program under

23 which the Secretary shall encourage individuals to re24 port to the Secretary information on individuals and

25 entities who are engaging or who have engaged in
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1 acts or omissions which constitute grounds for the im2 position of a sanction under section 1128, section

3 1128A, or section 1128B of the Social Security Act,

4 or who have otherwise engaged in fraud and abuse

5 against the medicare program for which there is a

6 sanction provided under law. The program shall dis7 courage provision of, and not consider, information

8 which is frivolous or otherwise not relevant or mate9 rial to the imposition of such a sanction.

10 (2) PAYMENT OF PORTION OF AMOUNTS COL11 LECTED.—If an individual reports information to the

12 Secretary under the program established under para13 graph (1) which serves as the basis for the collection

14 by the Secretary or the Attorney General of any

15 amount of at least $100 (other than any amount paid

16 as a penalty under section 1128B of the Social Secu17 rity Act), the Secretary may pay a portion of the

18 amount collected to the individual (under procedures

19 similar to those applicable under section 7623 of the

20 Internal Revenue Code of 1986 to payments to indi21 viduals providing information on violations of such

22 Code).

23 (c) PROGRAM TO COLLECT INFORMATION ON PROGRAM

24 EFFICIENCY.—
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1 (1) ESTABLISHMENT OF PROGRAM.—Not later

2 than 3 months after the date of the enactment of this

3 Act, the Secretary shall establish a program under

4 which the Secretary shall encourage individuals to

5 submit to the Secretary suggestions on methods to im6 prove the efficiency of the medicare program.

7 (2) PAYMENT OF PORTION OF PROGRAM SAV8 INGS.—If an individual submits a suggestion to the

9 Secretary under the program established under para10 graph (1) which is adopted by the Secretary and

11 which results in savings to the program, the Secretary

12 may make a payment to the individual of such

13 amount as the Secretary considers appropriate.

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

15 AND ABUSE SANCTIONS TO FRAUD AND

16 ABUSE AGAINST FEDERAL HEALTH CARE

17 PROGRAMS.

18 (a) IN GENERAL.—Section 1128B (42 U.S.C. 1320a–

19 7b) is amended as follows:

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

21 STATE HEALTH CARE PROGRAMS’’ and inserting

22 ‘‘FEDERAL HEALTH CARE PROGRAMS’’.

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

24 under title XVIII or a State health care program (as
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1 defined in section 1128(h))’’ and inserting ‘‘a Federal

2 health care program’’.

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

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

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

6 (4) In the second sentence of subsection (a)—

7 (A) by striking ‘‘a State plan approved

8 under title XIX’’ and inserting ‘‘a Federal health

9 care program’’, and

10 (B) by striking ‘‘the State may at its option

11 (notwithstanding any other provision of that

12 title or of such plan)’’ and inserting ‘‘the admin13 istrator of such program may at its option (not14 withstanding any other provision of such pro15 gram)’’.

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

17 a State health care program’’ each place it appears

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

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

20 in section 1128(h))’’ after ‘‘a State health care pro21 gram’’.

22 (7) By adding at the end the following new sub23 section:

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

25 health care program’ means—
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1 ‘‘(1) any plan or program that provides health

2 benefits, whether directly, through insurance, or other3 wise, which is funded directly, in whole or in part,

4 by the United States Government (other than the

5 health insurance program under chapter 89 of title 5,

6 United States Code); or

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

8 in section 1128(h).’’.

9 (b) EFFECTIVE DATE.—The amendments made by this

10 section shall take effect on January 1, 1997.

11 SEC. 205. GUIDANCE REGARDING APPLICATION OF HEALTH

12 CARE FRAUD AND ABUSE SANCTIONS.

13 Title XI (42 U.S.C. 1301 et seq.), as amended by sec14 tion 201, is amended by inserting after section 1128C the

15 following new section:

16 ‘‘GUIDANCE REGARDING APPLICATION OF HEALTH CARE

17 FRAUD AND ABUSE SANCTIONS

18 ‘‘SEC. 1128D. (a) SOLICITATION AND PUBLICATION OF

19 MODIFICATIONS TO EXISTING SAFE HARBORS AND NEW

20 SAFE HARBORS.—

21 ‘‘(1) IN GENERAL.—

22 ‘‘(A) SOLICITATION OF PROPOSALS FOR

23 SAFE HARBORS.—Not later than January 1,

24 1997, and not less than annually thereafter, the

25 Secretary shall publish a notice in the Federal
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1 Register soliciting proposals, which will be ac2 cepted during a 60-day period, for—

3 ‘‘(i) modifications to existing safe har4 bors issued pursuant to section 14(a) of the

5 Medicare and Medicaid Patient and Pro6 gram Protection Act of 1987 (42 U.S.C.

7 1320a–7b note);

8 ‘‘(ii) additional safe harbors specifying

9 payment practices that shall not be treated

10 as a criminal offense under section

11 1128B(b) and shall not serve as the basis

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

13 ‘‘(iii) advisory opinions to be issued

14 pursuant to subsection (b); and

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

16 pursuant to subsection (c).

17 ‘‘(B) PUBLICATION OF PROPOSED MODIFICA18 TIONS AND PROPOSED ADDITIONAL SAFE HAR19 BORS.—After considering the proposals described

20 in clauses (i) and (ii) of subparagraph (A), the

21 Secretary, in consultation with the Attorney

22 General, shall publish in the Federal Register

23 proposed modifications to existing safe harbors

24 and proposed additional safe harbors, if appro25 priate, with a 60-day comment period. After
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1 considering any public comments received dur2 ing this period, the Secretary shall issue final

3 rules modifying the existing safe harbors and es4 tablishing new safe harbors, as appropriate.

5 ‘‘(C) REPORT.—The Inspector General of

6 the Department of Health and Human Services

7 (in this section referred to as the ‘Inspector Gen8 eral’) shall, in an annual report to Congress or

9 as part of the year-end semiannual report re10 quired by section 5 of the Inspector General Act

11 of 1978 (5 U.S.C. App.), describe the proposals

12 received under clauses (i) and (ii) of subpara13 graph (A) and explain which proposals were in14 cluded in the publication described in subpara15 graph (B), which proposals were not included in

16 that publication, and the reasons for the rejection

17 of the proposals that were not included.

18 ‘‘(2) CRITERIA FOR MODIFYING AND ESTABLISH19 ING SAFE HARBORS.—In modifying and establishing

20 safe harbors under paragraph (1)(B), the Secretary

21 may consider the extent to which providing a safe

22 harbor for the specified payment practice may result

23 in any of the following:

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

25 health care services.
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1 ‘‘(B) An increase or decrease in the quality

2 of health care services.

3 ‘‘(C) An increase or decrease in patient free4 dom of choice among health care providers.

5 ‘‘(D) An increase or decrease in competition

6 among health care providers.

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

8 of health care facilities to provide services in

9 medically underserved areas or to medically un10 derserved populations.

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

12 Federal health care programs (as defined in sec13 tion 1128B(f)).

14 ‘‘(G) An increase or decrease in the poten15 tial overutilization of health care services.

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

17 potential financial benefit to a health care pro18 fessional or provider which may vary based on

19 their decisions of—

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

21 item or service; or

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

23 of health care items or services to a particu24 lar practitioner or provider.
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1 ‘‘(I) Any other factors the Secretary deems

2 appropriate in the interest of preventing fraud

3 and abuse in Federal health care programs (as

4 so defined).

5 ‘‘(b) ADVISORY OPINIONS.—

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

7 Secretary shall issue written advisory opinions as

8 provided in this subsection.

9 ‘‘(2) MATTERS SUBJECT TO ADVISORY OPIN10 IONS.—The Secretary shall issue advisory opinions as

11 to the following matters:

12 ‘‘(A) What constitutes prohibited remunera13 tion within the meaning of section 1128B(b).

14 ‘‘(B) Whether an arrangement or proposed

15 arrangement satisfies the criteria set forth in sec16 tion 1128B(b)(3) for activities which do not re17 sult in prohibited remuneration.

18 ‘‘(C) Whether an arrangement or proposed

19 arrangement satisfies the criteria which the Sec20 retary has established, or shall establish by regu21 lation for activities which do not result in pro22 hibited remuneration.

23 ‘‘(D) What constitutes an inducement to re24 duce or limit services to individuals entitled to
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1 benefits under title XVIII or title XIX or title

2 XXI within the meaning of section 1128B(b).

3 ‘‘(E) Whether any activity or proposed ac4 tivity constitutes grounds for the imposition of a

5 sanction under section 1128, 1128A, or 1128B.

6 ‘‘(3) MATTERS NOT SUBJECT TO ADVISORY OPIN7 IONS.—Such advisory opinions shall not address the

8 following matters:

9 ‘‘(A) Whether the fair market value shall be,

10 or was paid or received for any goods, services

11 or property.

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

13 employee within the requirements of section

14 3121(d)(2) of the Internal Revenue Code of 1986.

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

16 ‘‘(A) BINDING AS TO SECRETARY AND PAR17 TIES INVOLVED.—Each advisory opinion issued

18 by the Secretary shall be binding as to the Sec19 retary and the party or parties requesting the

20 opinion.

21 ‘‘(B) FAILURE TO SEEK OPINION.—The fail22 ure of a party to seek an advisory opinion may

23 not be introduced into evidence to prove that the

24 party intended to violate the provisions of sec25 tions 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 for

11 an advisory opinion;

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

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

15 the party requesting an advisory opinion;

16 and

17 ‘‘(v) the manner in which advisory

18 opinions will be made available to the pub19 lic.

20 ‘‘(B) SPECIFIC CONTENTS.—Under the regu21 lations promulgated pursuant to subparagraph

22 (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 re6 sponding 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 time,

11 a request to the Inspector General for a notice

12 which informs the public of practices which the

13 Inspector General considers to be suspect or of

14 particular concern under the medicare program

15 or a State health care program, as defined in

16 section 1128(h) (in this subsection referred to as

17 a ‘special fraud alert’).

18 ‘‘(B) ISSUANCE AND PUBLICATION OF SPE19 CIAL FRAUD ALERTS.—Upon receipt of a request

20 described in subparagraph (A), the Inspector

21 General shall investigate the subject matter of the

22 request to determine whether a special fraud

23 alert should be issued. If appropriate, the Inspec24 tor General shall issue a special fraud alert in

25 response to the request. All special fraud alerts
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1 issued pursuant to this subparagraph shall be

2 published in the Federal Register.

3 ‘‘(2) CRITERIA FOR SPECIAL FRAUD ALERTS.—In

4 determining whether to issue a special fraud alert

5 upon a request described in paragraph (1), the In6 spector General may consider—

7 ‘‘(A) whether and to what extent the prac8 tices that would be identified in the special fraud

9 alert may result in any of the consequences de10 scribed in subsection (a)(2); and

11 ‘‘(B) the volume and frequency of the con12 duct that would be identified in the special fraud

13 alert.’’.

14 Subtitle B—Revisions to Current

15 Sanctions for Fraud and Abuse

16 SEC. 211. MANDATORY EXCLUSION FROM PARTICIPATION

17 IN MEDICARE AND STATE HEALTH CARE PRO18 GRAMS.

19 (a) INDIVIDUAL CONVICTED OF FELONY RELATING TO

20 HEALTH CARE FRAUD.—

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

22 1320a–7(a)) is amended by adding at the end the fol23 lowing new paragraph:

24 ‘‘(3) FELONY CONVICTION RELATING TO HEALTH

25 CARE FRAUD.—Any individual or entity that has
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1 been convicted after the date of the enactment of the

2 Health Coverage Availability and Affordability Act of

3 1996, under Federal or State law, in connection with

4 the delivery of a health care item or service or with

5 respect to any act or omission in a health care pro6 gram (other than those specifically described in para7 graph (1)) operated by or financed in whole or in

8 part by any Federal, State, or local government agen9 cy, of a criminal offense consisting of a felony relat10 ing to fraud, theft, embezzlement, breach of fiduciary

11 responsibility, or other financial misconduct.’’.

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

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

14 to read as follows:

15 ‘‘(1) CONVICTION RELATING TO FRAUD.—Any in16 dividual or entity that has been convicted after the

17 date of the enactment of the Health Coverage Avail18 ability and Affordability Act of 1996, under Federal

19 or State law—

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

21 misdemeanor relating to fraud, theft, embezzle22 ment, breach of fiduciary responsibility, or other

23 financial misconduct—

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

25 a health care item or service, or
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1 ‘‘(ii) with respect to any act or omis2 sion in a health care program (other than

3 those specifically described in subsection

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

5 in part by any Federal, State, or local gov6 ernment agency; or

7 ‘‘(B) of a criminal offense relating to fraud,

8 theft, embezzlement, breach of fiduciary respon9 sibility, or other financial misconduct with re10 spect to any act or omission in a program (other

11 than a health care program) operated by or fi12 nanced in whole or in part by any Federal,

13 State, or local government agency.’’.

14 (b) INDIVIDUAL CONVICTED OF FELONY RELATING TO

15 CONTROLLED SUBSTANCE.—

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

17 1320a–7(a)), as amended by subsection (a), is amend18 ed by adding at the end the following new paragraph:

19 ‘‘(4) FELONY CONVICTION RELATING TO CON20 TROLLED SUBSTANCE.—Any individual or entity that

21 has been convicted after the date of the enactment of

22 the Health Coverage Availability and Affordability

23 Act of 1996, under Federal or State law, of a crimi24 nal offense consisting of a felony relating to the un-
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1 lawful manufacture, distribution, prescription, or dis2 pensing of a controlled substance.’’.

3 (2) CONFORMING AMENDMENT.—Section

4 1128(b)(3) (42 U.S.C. 1320a–7(b)(3)) is amended—

5 (A) in the heading, by striking ‘‘CONVIC6 TION’’ and inserting ‘‘MISDEMEANOR CONVIC7 TION’’; and

8 (B) by striking ‘‘criminal offense’’ and in9 serting ‘‘criminal offense consisting of a mis10 demeanor’’.

11 SEC. 212. ESTABLISHMENT OF MINIMUM PERIOD OF EXCLU12 SION FOR CERTAIN INDIVIDUALS AND ENTI13 TIES SUBJECT TO PERMISSIVE EXCLUSION

14 FROM MEDICARE AND STATE HEALTH CARE

15 PROGRAMS.

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

17 amended by adding at the end the following new subpara18 graphs:

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

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

21 the period of the exclusion shall be 3 years, unless the Sec22 retary determines in accordance with published regulations

23 that a shorter period is appropriate because of mitigating

24 circumstances or that a longer period is appropriate be25 cause of aggravating circumstances.
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1 ‘‘(E) In the case of an exclusion of an individual or

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

3 exclusion shall not be less than the period during which the

4 individual’s or entity’s license to provide health care is re5 voked, suspended, or surrendered, or the individual or the

6 entity is excluded or suspended from a Federal or State

7 health care program.

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

9 entity under subsection (b)(6)(B), the period of the exclu10 sion shall be not less than 1 year.’’.

11 SEC. 213. PERMISSIVE EXCLUSION OF INDIVIDUALS WITH

12 OWNERSHIP OR CONTROL INTEREST IN

13 SANCTIONED ENTITIES.

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

15 adding at the end the following new paragraph:

16 ‘‘(15) INDIVIDUALS CONTROLLING A SANCTIONED

17 ENTITY.—(A) Any individual—

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

19 or control interest in a sanctioned entity and

20 who knows or should know (as defined in section

21 1128A(i)(6)) of the action constituting the basis

22 for the conviction or exclusion described in sub23 paragraph (B); or
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1 ‘‘(ii) who is an officer or managing em2 ployee (as defined in section 1126(b)) of such an

3 entity.

4 ‘‘(B) For purposes of subparagraph (A), the term

5 ‘sanctioned entity’ means an entity—

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

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

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

9 ‘‘(ii) that has been excluded from participa10 tion under a program under title XVIII or under

11 a State health care program.’’.

12 SEC. 214. SANCTIONS AGAINST PRACTITIONERS AND PER13 SONS FOR FAILURE TO COMPLY WITH STATU14 TORY OBLIGATIONS.

15 (a) MINIMUM PERIOD OF EXCLUSION FOR PRACTI16 TIONERS AND PERSONS FAILING TO MEET STATUTORY OB17 LIGATIONS.—

18 (1) IN GENERAL.—The second sentence of section

19 1156(b)(1) (42 U.S.C. 1320c–5(b)(1)) is amended by

20 striking ‘‘may prescribe)’’ and inserting ‘‘may pre21 scribe, except that such period may not be less than

22 1 year)’’.

23 (2) CONFORMING AMENDMENT.—Section

24 1156(b)(2) (42 U.S.C. 1320c–5(b)(2)) is amended by

25 striking ‘‘shall remain’’ and inserting ‘‘shall (subject
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1 to the minimum period specified in the second sen2 tence of paragraph (1)) remain’’.

3 (b) REPEAL OF ‘‘UNWILLING OR UNABLE’’ CONDITION

4 FOR IMPOSITION OF SANCTION.—Section 1156(b)(1) (42

5 U.S.C. 1320c–5(b)(1)) is amended—

6 (1) in the second sentence, by striking ‘‘and de7 termines’’ and all that follows through ‘‘such obliga8 tions,’’; and

9 (2) by striking the third sentence.

10 SEC. 215. INTERMEDIATE SANCTIONS FOR MEDICARE

11 HEALTH MAINTENANCE ORGANIZATIONS.

12 (a) APPLICATION OF INTERMEDIATE SANCTIONS FOR

13 ANY PROGRAM VIOLATIONS.—

14 (1) IN GENERAL.—Section 1876(i)(1) (42 U.S.C.

15 1395mm(i)(1)) is amended by striking ‘‘the Secretary

16 may terminate’’ and all that follows and inserting

17 ‘‘in accordance with procedures established under

18 paragraph (9), the Secretary may at any time termi19 nate any such contract or may impose the intermedi20 ate sanctions described in paragraph (6)(B) or (6)(C)

21 (whichever is applicable) on the eligible organization

22 if the Secretary determines that the organization—

23 ‘‘(A) has failed substantially to carry out the

24 contract;
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1 ‘‘(B) is carrying out the contract in a manner

2 substantially inconsistent with the efficient and effec3 tive administration of this section; or

4 ‘‘(C) no longer substantially meets the applicable

5 conditions of subsections (b), (c), (e), and (f).’’.

6 (2) OTHER INTERMEDIATE SANCTIONS FOR MIS7 CELLANEOUS PROGRAM VIOLATIONS.—Section

8 1876(i)(6) (42 U.S.C. 1395mm(i)(6)) is amended by

9 adding at the end the following new subparagraph:

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

11 the Secretary makes a determination under paragraph (1)

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

13 the Secretary may apply the following intermediate sanc14 tions:

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

16 $25,000 for each determination under paragraph (1)

17 if the deficiency that is the basis of the determination

18 has directly adversely affected (or has the substantial

19 likelihood of adversely affecting) an individual cov20 ered under the organization’s contract.

21 ‘‘(ii) Civil money penalties of not more than

22 $10,000 for each week beginning after the initiation

23 of procedures by the Secretary under paragraph (9)

24 during which the deficiency that is the basis of a de25 termination under paragraph (1) exists.
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1 ‘‘(iii) Suspension of enrollment of individuals

2 under this section after the date the Secretary notifies

3 the organization of a determination under paragraph

4 (1) and until the Secretary is satisfied that the defi5 ciency that is the basis for the determination has been

6 corrected and is not likely to recur.’’.

7 (3) PROCEDURES FOR IMPOSING SANCTIONS.—

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

9 by adding at the end the following new paragraph:

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

11 eligible organization under this section or may impose the

12 intermediate sanctions described in paragraph (6) on the

13 organization in accordance with formal investigation and

14 compliance procedures established by the Secretary under

15 which—

16 ‘‘(A) the Secretary first provides the organiza17 tion with the reasonable opportunity to develop and

18 implement a corrective action plan to correct the defi19 ciencies that were the basis of the Secretary’s deter20 mination under paragraph (1) and the organization

21 fails to develop or implement such a plan;

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

23 the Secretary considers aggravating factors such as

24 whether an organization has a history of deficiencies
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1 or has not taken action to correct deficiencies the Sec2 retary has brought to the organization’s attention;

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

4 delays between the finding of a deficiency and the im5 position of sanctions; and

6 ‘‘(D) the Secretary provides the organization

7 with reasonable notice and opportunity for hearing

8 (including the right to appeal an initial decision) be9 fore imposing any sanction or terminating the con10 tract.’’.

11 (4) CONFORMING AMENDMENTS.—Section

12 1876(i)(6)(B) (42 U.S.C. 1395mm(i)(6)(B)) is

13 amended by striking the second sentence.

14 (b) AGREEMENTS WITH PEER REVIEW ORGANIZA15 TIONS.—Section 1876(i)(7)(A) (42 U.S.C.

16 1395mm(i)(7)(A)) is amended by striking ‘‘an agreement’’

17 and inserting ‘‘a written agreement’’.

18 (c) EFFECTIVE DATE.—The amendments made by this

19 section shall apply with respect to contract years beginning

20 on or after January 1, 1996.

21 SEC. 216. ADDITIONAL EXCEPTION TO ANTI-KICKBACK PEN22 ALTIES FOR DISCOUNTING AND MANAGED

23 CARE ARRANGEMENTS.

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

25 1320a–7b(b)(3)) is amended—
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1 (1) by striking ‘‘and’’ at the end of subpara2 graph (D);

3 (2) by striking the period at the end of subpara4 graph (E) and inserting ‘‘; and’’; and

5 (3) by adding at the end the following new sub6 paragraph:

7 ‘‘(F) any remuneration between an organization

8 and an individual or entity providing items or serv9 ices, or a combination thereof, pursuant to a written

10 agreement between the organization and the individ11 ual or entity if the organization is an eligible organi12 zation under section 1876 or if the written agreement

13 places the individual or entity at substantial finan14 cial risk for the cost or utilization of the items or

15 services, or a combination thereof, which the individ16 ual or entity is obligated to provide, whether through

17 a withhold, capitation, incentive pool, per diem pay18 ment, or any other similar risk arrangement which

19 places the individual or entity at substantial finan20 cial risk.’’.

21 (b) EFFECTIVE DATE.—The amendments made by this

22 section shall apply to written agreements entered into on

23 or after January 1, 1997.
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1 SEC. 217. CRIMINAL PENALTY FOR FRAUDULENT DISPOSI2 TION OF ASSETS IN ORDER TO OBTAIN MED3 ICAID BENEFITS.

4 Section 1128B(a) (42 U.S.C. 1320a–7b(a)) is amend5 ed—

6 (1) by striking ‘‘or’’ at the end of paragraph (4);

7 (2) by adding ‘‘or’’ at the end of paragraph (5);

8 and

9 (3) by inserting after paragraph (5) the follow10 ing new paragraph:

11 ‘‘(6) knowingly and willfully disposes of assets

12 (including by any transfer in trust) in order for an

13 individual to become eligible for medical assistance

14 under a State plan under title XIX, if disposing of

15 the assets results in the imposition of a period of in16 eligibility for such assistance under section 1917(c),’’.

17 SEC. 218. EFFECTIVE DATE.

18 Except as otherwise provided, the amendments made

19 by this subtitle shall take effect January 1, 1997.

20 Subtitle C—Data Collection

21 SEC. 221. ESTABLISHMENT OF THE HEALTH CARE FRAUD

22 AND ABUSE DATA COLLECTION PROGRAM.

23 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.),

24 as amended by sections 201 and 205, is amended by insert25 ing after section 1128D the following new section:
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1 ‘‘HEALTH CARE FRAUD AND ABUSE DATA COLLECTION

2 PROGRAM

3 ‘‘SEC. 1128E. (a) GENERAL PURPOSE.—Not later than

4 January 1, 1997, the Secretary shall establish a national

5 health care fraud and abuse data collection program for the

6 reporting of final adverse actions (not including settlements

7 in which no findings of liability have been made) against

8 health care providers, suppliers, or practitioners as required

9 by subsection (b), with access as set forth in subsection (c).

10 ‘‘(b) REPORTING OF INFORMATION.—

11 ‘‘(1) IN GENERAL.—Each Government agency

12 and health plan shall report any final adverse action

13 (not including settlements in which no findings of li14 ability have been made) taken against a health care

15 provider, supplier, or practitioner.

16 ‘‘(2) INFORMATION TO BE REPORTED.—The in17 formation to be reported under paragraph (1) in18 cludes:

19 ‘‘(A) The name and TIN (as defined in sec20 tion 7701(a)(41) of the Internal Revenue Code of

21 1986) of any health care provider, supplier, or

22 practitioner who is the subject of a final adverse

23 action.

24 ‘‘(B) The name (if known) of any health

25 care entity with which a health care provider,
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1 supplier, or practitioner is affiliated or associ2 ated.

3 ‘‘(C) The nature of the final adverse action

4 and whether such action is on appeal.

5 ‘‘(D) A description of the acts or omissions

6 and injuries upon which the final adverse action

7 was based, and such other information as the

8 Secretary determines by regulation is required

9 for appropriate interpretation of information re10 ported under this section.

11 ‘‘(3) CONFIDENTIALITY.—In determining what

12 information is required, the Secretary shall include

13 procedures to assure that the privacy of individuals

14 receiving health care services is appropriately pro15 tected.

16 ‘‘(4) TIMING AND FORM OF REPORTING.—The in17 formation required to be reported under this sub18 section shall be reported regularly (but not less often

19 than monthly) and in such form and manner as the

20 Secretary prescribes. Such information shall first be

21 required to be reported on a date specified by the Sec22 retary.

23 ‘‘(5) TO WHOM REPORTED.—The information re24 quired to be reported under this subsection shall be re25 ported to the Secretary.
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1 ‘‘(c) DISCLOSURE AND CORRECTION OF INFORMA2 TION.—

3 ‘‘(1) DISCLOSURE.—With respect to the informa4 tion about final adverse actions (not including settle5 ments in which no findings of liability have been

6 made) reported to the Secretary under this section re7 specting a health care provider, supplier, or practi8 tioner, the Secretary shall, by regulation, provide

9 for—

10 ‘‘(A) disclosure of the information, upon re11 quest, to the health care provider, supplier, or li12 censed practitioner, and

13 ‘‘(B) procedures in the case of disputed ac14 curacy of the information.

15 ‘‘(2) CORRECTIONS.—Each Government agency

16 and health plan shall report corrections of informa17 tion already reported about any final adverse action

18 taken against a health care provider, supplier, or

19 practitioner, in such form and manner that the Sec20 retary prescribes by regulation.

21 ‘‘(d) ACCESS TO REPORTED INFORMATION.—

22 ‘‘(1) AVAILABILITY.—The information in this

23 database shall be available to Federal and State gov24 ernment agencies and health plans pursuant to proce25 dures that the Secretary shall provide by regulation.
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1 ‘‘(2) FEES FOR DISCLOSURE.—The Secretary

2 may establish or approve reasonable fees for the dis3 closure of information in this database (other than

4 with respect to requests by Federal agencies). The

5 amount of such a fee shall be sufficient to recover the

6 full costs of operating the database. Such fees shall be

7 available to the Secretary or, in the Secretary’s dis8 cretion to the agency designated under this section to

9 cover such costs.

10 ‘‘(e) PROTECTION FROM LIABILITY FOR REPORTING.—

11 No person or entity, including the agency designated by the

12 Secretary in subsection (b)(5) shall be held liable in any

13 civil action with respect to any report made as required

14 by this section, without knowledge of the falsity of the infor15 mation contained in the report.

16 ‘‘(f) DEFINITIONS AND SPECIAL RULES.—For pur17 poses of this section:

18 ‘‘(1) FINAL ADVERSE ACTION.—

19 ‘‘(A) IN GENERAL.—The term ‘final adverse

20 action’ includes:

21 ‘‘(i) Civil judgments against a health

22 care provider, supplier, or practitioner in

23 Federal or State court related to the deliv24 ery of a health care item or service.
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1 ‘‘(ii) Federal or State criminal convic2 tions related to the delivery of a health care

3 item or service.

4 ‘‘(iii) Actions by Federal or State

5 agencies responsible for the licensing and

6 certification of health care providers, sup7 pliers, and licensed health care practition8 ers, including—

9 ‘‘(I) formal or official actions,

10 such as revocation or suspension of a

11 license (and the length of any such sus12 pension), reprimand, censure or proba13 tion,

14 ‘‘(II) any other loss of license or

15 the right to apply for, or renew, a li16 cense of the provider, supplier, or prac17 titioner, whether by operation of law,

18 voluntary surrender, non-renewability,

19 or otherwise, or

20 ‘‘(III) any other negative action

21 or finding by such Federal or State

22 agency that is publicly available infor23 mation.

24 ‘‘(iv) Exclusion from participation in

25 Federal or State health care programs.
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1 ‘‘(v) Any other adjudicated actions or

2 decisions that the Secretary shall establish

3 by regulation.

4 ‘‘(B) EXCEPTION.—The term does not in5 clude any action with respect to a malpractice

6 claim.

7 ‘‘(2) PRACTITIONER.—The terms ‘licensed health

8 care practitioner’, ‘licensed practitioner’, and ‘practi9 tioner’ mean, with respect to a State, an individual

10 who is licensed or otherwise authorized by the State

11 to provide health care services (or any individual

12 who, without authority holds himself or herself out to

13 be so licensed or authorized).

14 ‘‘(3) GOVERNMENT AGENCY.—The term ‘Govern15 ment agency’ shall include:

16 ‘‘(A) The Department of Justice.

17 ‘‘(B) The Department of Health and

18 Human Services.

19 ‘‘(C) Any other Federal agency that either

20 administers or provides payment for the delivery

21 of health care services, including, but not limited

22 to the Department of Defense and the Veterans’

23 Administration.

24 ‘‘(D) State law enforcement agencies.

25 ‘‘(E) State medicaid fraud control units.
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1 ‘‘(F) Federal or State agencies responsible

2 for the licensing and certification of health care

3 providers and licensed health care practitioners.

4 ‘‘(4) HEALTH PLAN.—The term ‘health plan’ has

5 the meaning given such term by section 1128C(c).

6 ‘‘(5) DETERMINATION OF CONVICTION.—For pur7 poses of paragraph (1), the existence of a conviction

8 shall be determined under paragraph (4) of section

9 1128(i).’’.

10 (b) IMPROVED PREVENTION IN ISSUANCE OF MEDI11 CARE PROVIDER NUMBERS.—Section 1842(r) (42 U.S.C.

12 1395u(r)) is amended by adding at the end the following

13 new sentence: ‘‘Under such system, the Secretary may im14 pose appropriate fees on such physicians to cover the costs

15 of investigation and recertification activities with respect

16 to the issuance of the identifiers.’’.

17 Subtitle D—Civil Monetary

18 Penalties

19 SEC. 231. SOCIAL SECURITY ACT CIVIL MONETARY PEN20 ALTIES.

21 (a) GENERAL CIVIL MONETARY PENALTIES.—Section

22 1128A (42 U.S.C. 1320a–7a) is amended as follows:

23 (1) In the third sentence of subsection (a), by

24 striking ‘‘programs under title XVIII’’ and inserting
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1 ‘‘Federal health care programs (as defined in section

2 1128B(f)(1))’’.

3 (2) In subsection (f)—

4 (A) by redesignating paragraph (3) as

5 paragraph (4); and

6 (B) by inserting after paragraph (2) the fol7 lowing new paragraph:

8 ‘‘(3) With respect to amounts recovered arising

9 out of a claim under a Federal health care program

10 (as defined in section 1128B(f)), the portion of such

11 amounts as is determined to have been paid by the

12 program shall be repaid to the program, and the por13 tion of such amounts attributable to the amounts re14 covered under this section by reason of the amend15 ments made by the Health Coverage Availability and

16 Affordability Act of 1996 (as estimated by the Sec17 retary) shall be deposited into the Federal Hospital

18 Insurance Trust Fund pursuant to section

19 1817(k)(2)(C).’’.

20 (3) In subsection (i)—

21 (A) in paragraph (2), by striking ‘‘title V,

22 XVIII, XIX, or XX of this Act’’ and inserting ‘‘a

23 Federal health care program (as defined in sec24 tion 1128B(f))’’,
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1 (B) in paragraph (4), by striking ‘‘a health

2 insurance or medical services program under

3 title XVIII or XIX of this Act’’ and inserting ‘‘a

4 Federal health care program (as so defined)’’,

5 and

6 (C) in paragraph (5), by striking ‘‘title V,

7 XVIII, XIX, or XX’’ and inserting ‘‘a Federal

8 health care program (as so defined)’’.

9 (4) By adding at the end the following new sub10 section:

11 ‘‘(m)(1) For purposes of this section, with respect to

12 a Federal health care program not contained in this Act,

13 references to the Secretary in this section shall be deemed

14 to be references to the Secretary or Administrator of the de15 partment or agency with jurisdiction over such program

16 and references to the Inspector General of the Department

17 of Health and Human Services in this section shall be

18 deemed to be references to the Inspector General of the appli19 cable department or agency.

20 ‘‘(2)(A) The Secretary and Administrator of the de21 partments and agencies referred to in paragraph (1) may

22 include in any action pursuant to this section, claims with23 in the jurisdiction of other Federal departments or agencies

24 as long as the following conditions are satisfied:
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1 ‘‘(i) The case involves primarily claims submit2 ted to the Federal health care programs of the depart3 ment or agency initiating the action.

4 ‘‘(ii) The Secretary or Administrator of the de5 partment or agency initiating the action gives notice

6 and an opportunity to participate in the investiga7 tion to the Inspector General of the department or

8 agency with primary jurisdiction over the Federal

9 health care programs to which the claims were sub10 mitted.

11 ‘‘(B) If the conditions specified in subparagraph (A)

12 are fulfilled, the Inspector General of the department or

13 agency initiating the action is authorized to exercise all

14 powers granted under the Inspector General Act of 1978

15 with respect to the claims submitted to the other depart16 ments or agencies to the same manner and extent as pro17 vided in that Act with respect to claims submitted to such

18 departments or agencies.’’.

19 (b) EXCLUDED INDIVIDUAL RETAINING OWNERSHIP

20 OR CONTROL INTEREST IN PARTICIPATING ENTITY.—Sec21 tion 1128A(a) (42 U.S.C. 1320a–7a(a)) is amended—

22 (1) by striking ‘‘or’’ at the end of paragraph

23 (1)(D);

24 (2) by striking ‘‘, or’’ at the end of paragraph

25 (2) and inserting a semicolon;
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1 (3) by striking the semicolon at the end of para2 graph (3) and inserting ‘‘; or’’; and

3 (4) by inserting after paragraph (3) the follow4 ing new paragraph:

5 ‘‘(4) in the case of a person who is not an orga6 nization, agency, or other entity, is excluded from

7 participating in a program under title XVIII or a

8 State health care program in accordance with this

9 subsection or under section 1128 and who, at the time

10 of a violation of this subsection—

11 ‘‘(A) retains a direct or indirect ownership

12 or control interest in an entity that is partici13 pating in a program under title XVIII or a

14 State health care program, and who knows or

15 should know of the action constituting the basis

16 for the exclusion; or

17 ‘‘(B) is an officer or managing employee (as

18 defined in section 1126(b)) of such an entity;’’.

19 (c) MODIFICATIONS OF AMOUNTS OF PENALTIES AND

20 ASSESSMENTS.—Section 1128A(a) (42 U.S.C. 1320a–

21 7a(a)), as amended by subsection (b), is amended in the

22 matter following paragraph (4)—

23 (1) by striking ‘‘$2,000’’ and inserting

24 ‘‘$10,000’’;
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1 (2) by inserting ‘‘; in cases under paragraph (4),

2 $10,000 for each day the prohibited relationship oc3 curs’’ after ‘‘false or misleading information was

4 given’’; and

5 (3) by striking ‘‘twice the amount’’ and inserting

6 ‘‘3 times the amount’’.

7 (d) CLAIM FOR ITEM OR SERVICE BASED ON INCOR8 RECT CODING OR MEDICALLY UNNECESSARY SERVICES.—

9 Section 1128A(a)(1) (42 U.S.C. 1320a–7a(a)(1)) is amend10 ed—

11 (1) in subparagraph (A) by striking ‘‘claimed,’’

12 and inserting ‘‘claimed, including any person who

13 engages in a pattern or practice of presenting or

14 causing to be presented a claim for an item or service

15 that is based on a code that the person knows or

16 should know will result in a greater payment to the

17 person than the code the person knows or should know

18 is applicable to the item or service actually pro19 vided,’’;

20 (2) in subparagraph (C), by striking ‘‘or’’ at the

21 end; and

22 (3) by inserting after subparagraph (D) the fol23 lowing new subparagraph:
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1 ‘‘(E) is for a medical or other item or serv2 ice that a person knows or should know is not

3 medically necessary; or’’.

4 (e) SANCTIONS AGAINST PRACTITIONERS AND PER5 SONS FOR FAILURE TO COMPLY WITH STATUTORY OBLIGA6 TIONS.—Section 1156(b)(3) (42 U.S.C. 1320c–5(b)(3)) is

7 amended by striking ‘‘the actual or estimated cost’’ and in8 serting ‘‘up to $10,000 for each instance’’.

9 (f) PROCEDURAL PROVISIONS.—Section 1876(i)(6) (42

10 U.S.C. 1395mm(i)(6)), as amended by section 215(a)(2), is

11 amended by adding at the end the following new subpara12 graph:

13 ‘‘(D) The provisions of section 1128A (other than sub14 sections (a) and (b)) shall apply to a civil money penalty

15 under subparagraph (B)(i) or (C)(i) in the same manner

16 as such provisions apply to a civil money penalty or pro17 ceeding under section 1128A(a).’’.

18 (g) PROHIBITION AGAINST OFFERING INDUCEMENTS

19 TO INDIVIDUALS ENROLLED UNDER PROGRAMS OR

20 PLANS.—

21 (1) OFFER OF REMUNERATION.—Section

22 1128A(a) (42 U.S.C. 1320a–7a(a)), as amended, is

23 amended—

24 (A) by striking ‘‘or’’ at the end of para25 graph (3);
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1 (B) by striking the semicolon at the end of

2 paragraph (4) and inserting ‘‘; or’’; and

3 (D) by inserting after paragraph (4) the fol4 lowing new paragraph:

5 ‘‘(5) offers to or transfers remuneration to any

6 individual eligible for benefits under title XVIII of

7 this Act, or under a State health care program (as de8 fined in section 1128(h)) that such person knows or

9 should know is likely to influence such individual to

10 order or receive from a particular provider, practi11 tioner, or supplier any item or service for which pay12 ment may be made, in whole or in part, under title

13 XVIII, or a State health care program (as so de14 fined);’’.

15 (2) REMUNERATION DEFINED.—Section 1128A(i)

16 (42 U.S.C. 1320a–7a(i)) is amended by adding at the

17 end the following new paragraph:

18 ‘‘(6) The term ‘remuneration’ includes the waiv19 er of coinsurance and deductible amounts (or any

20 part thereof), and transfers of items or services for

21 free or for other than fair market value. The term ‘re22 muneration’ does not include—

23 ‘‘(A) the waiver of coinsurance and deduct24 ible amounts by a person, if—
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1 ‘‘(i) the waiver is not offered as part of

2 any advertisement or solicitation;

3 ‘‘(ii) the person does not routinely

4 waive coinsurance or deductible amounts;

5 and

6 ‘‘(iii) the person—

7 ‘‘(I) waives the coinsurance and

8 deductible amounts after determining

9 in good faith that the individual is in

10 financial need;

11 ‘‘(II) fails to collect coinsurance

12 or deductible amounts after making

13 reasonable collection efforts; or

14 ‘‘(III) provides for any permis15 sible waiver as specified in section

16 1128B(b)(3) or in regulations issued

17 by the Secretary;

18 ‘‘(B) differentials in coinsurance and de19 ductible amounts as part of a benefit plan design

20 as long as the differentials have been disclosed in

21 writing to all beneficiaries, third party payers,

22 and providers, to whom claims are presented and

23 as long as the differentials meet the standards as

24 defined in regulations promulgated by the Sec25 retary not later than 180 days after the date of
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1 the enactment of the Health Coverage Availabil2 ity and Affordability Act of 1996; or

3 ‘‘(C) incentives given to individuals to pro4 mote the delivery of preventive care as deter5 mined by the Secretary in regulations so pro6 mulgated.’’.

7 (h) EFFECTIVE DATE.—The amendments made by this

8 section shall take effect January 1, 1997.

9 SEC. 232. CLARIFICATION OF LEVEL OF INTENT REQUIRED

10 FOR IMPOSITION OF SANCTIONS.

11 (a) CLARIFICATION OF LEVEL OF KNOWLEDGE RE12 QUIRED FOR IMPOSITION OF CIVIL MONETARY PEN13 ALTIES.—

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

15 1320a–7a(a)) is amended—

16 (A) in paragraphs (1) and (2), by inserting

17 ‘‘knowingly’’ before ‘‘presents’’ each place it ap18 pears; and

19 (B) in paragraph (3), by striking ‘‘gives’’

20 and inserting ‘‘knowingly gives or causes to be

21 given’’.

22 (2) DEFINITION OF STANDARD.—Section

23 1128A(i) (42 U.S.C. 1320a–7a(i)), as amended by

24 section 231(g)(2), is amended by adding at the end

25 the following new paragraph:
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1 ‘‘(7) The term ‘should know’ means that a per2 son, with respect to information—

3 ‘‘(A) acts in deliberate ignorance of the

4 truth or falsity of the information; or

5 ‘‘(B) acts in reckless disregard of the truth

6 or falsity of the information,

7 and no proof of specific intent to defraud is re8 quired.’’.

9 (b) EFFECTIVE DATE.—The amendments made by this

10 section shall apply to acts or omissions occurring on or

11 after January 1, 1997.

12 SEC. 233. PENALTY FOR FALSE CERTIFICATION FOR HOME

13 HEALTH SERVICES.

14 (a) IN GENERAL.—Section 1128A(b) (42 U.S.C.

15 1320a–7a(b)) is amended by adding at the end the following

16 new paragraph:

17 ‘‘(3)(A) Any physician who executes a document de18 scribed in subparagraph (B) with respect to an individual

19 knowing that all of the requirements referred to in such sub20 paragraph are not met with respect to the individual shall

21 be subject to a civil monetary penalty of not more than the

22 greater of—

23 ‘‘(i) $5,000, or
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1 ‘‘(ii) three times the amount of the payments

2 under title XVIII for home health services which are

3 made pursuant to such certification.

4 ‘‘(B) A document described in this subparagraph is

5 any document that certifies, for purposes of title XVIII, that

6 an individual meets the requirements of section

7 1814(a)(2)(C) or 1835(a)(2)(A) in the case of home health

8 services furnished to the individual.’’.

9 (b) EFFECTIVE DATE.—The amendment made by sub10 section (a) shall apply to certifications made on or after

11 the date of the enactment of this Act.

12 Subtitle E—Revisions to Criminal

13 Law

14 SEC. 241. DEFINITION OF FEDERAL HEALTH CARE OF15 FENSE.

16 (a) IN GENERAL.—Chapter 1 of title 18, United States

17 Code, is amended by adding at the end the following:

18 ‘‘§ 24. Definition of Federal health care offense

19 ‘‘(a) As used in this title, the term ‘Federal health care

20 offense’ means a violation of, or a criminal conspiracy to

21 violate—

22 ‘‘(1) section 669, 1035, or 1347 of this title; or

23 ‘‘(2) section 287, 371, 664, 666, 1001, 1027,

24 1341, 1343, or 1954 of this title, if the violation or

25 conspiracy relates to a health care benefit program.
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1 ‘‘(b) As used in this title, the term ‘health care benefit

2 program’ has the meaning given such term in section

3 1347(b) of this title.’’.

4 (b) CLERICAL AMENDMENT.—The table of sections at

5 the beginning of chapter 2 of title 18, United States Code,

6 is amended by inserting after the item relating to section

7 23 the following new item:

‘‘24. Definition of Federal health care offense.’’.

8 SEC. 242. HEALTH CARE FRAUD.

9 (a) OFFENSE.—

10 (1) IN GENERAL.—Chapter 63 of title 18, United

11 States Code, is amended by adding at the end the fol12 lowing:

13 ‘‘§ 1347. Health care fraud

14 ‘‘(a) Whoever knowingly executes, or attempts to exe15 cute, a scheme or artifice—

16 ‘‘(1) to defraud any health care benefit program;

17 or

18 ‘‘(2) to obtain, by means of false or fraudulent

19 pretenses, representations, or promises, any of the

20 money or property owned by, or under the custody or

21 control of, any health care benefit program,

22 in connection with the delivery of or payment for health

23 care benefits, items, or services, shall be fined under this

24 title or imprisoned not more than 10 years, or both. If the

25 violation results in serious bodily injury (as defined in sec-
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1 tion 1365 of this title), such person shall be fined under

2 this title or imprisoned not more than 20 years, or both;

3 and if the violation results in death, such person shall be

4 fined under this title, or imprisoned for any term of years

5 or for life, or both.

6 ‘‘(b) As used in this section, the term ‘health care bene7 fit program’ means any public or private plan or contract,

8 affecting commerce, under which any medical benefit, item,

9 or service is provided to any individual, and includes any

10 individual or entity who is providing a medical benefit,

11 item, or service for which payment may be made under the

12 plan or contract.’’.

13 (2) CLERICAL AMENDMENT.—The table of sec14 tions at the beginning of chapter 63 of title 18, Unit15 ed States Code, is amended by adding at the end the

16 following:

‘‘1347. Health care fraud.’’.

17 (b) CRIMINAL FINES DEPOSITED IN FEDERAL HOS18 PITAL INSURANCE TRUST FUND.—The Secretary of the

19 Treasury shall deposit into the Federal Hospital Insurance

20 Trust Fund pursuant to section 1817(k)(2)(C) of the Social

21 Security Act (42 U.S.C. 1395i) an amount equal to the

22 criminal fines imposed under section 1347 of title 18, Unit23 ed States Code (relating to health care fraud).
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1 SEC. 243. THEFT OR EMBEZZLEMENT.

2 (a) IN GENERAL.—Chapter 31 of title 18, United

3 States Code, is amended by adding at the end the following:

4 ‘‘§ 669. Theft or embezzlement in connection with

5 health care

6 ‘‘(a) Whoever embezzles, steals, or otherwise without

7 authority willfully and unlawfully converts to the use of

8 any person other than the rightful owner, or intentionally

9 misapplies any of the moneys, funds, securities, premiums,

10 credits, property, or other assets of a health care benefit pro11 gram, shall be fined under this title or imprisoned not more

12 than 10 years, or both; but if the value of such property

13 does not exceed the sum of $100 the defendant shall be fined

14 under this title or imprisoned not more than one year, or

15 both.

16 ‘‘(b) As used in this section, the term ‘health care bene17 fit program’ has the meaning given such term in section

18 1347(b) of this title.’’.

19 (b) CLERICAL AMENDMENT.—The table of sections at

20 the beginning of chapter 31 of title 18, United States Code,

21 is amended by adding at the end the following:

‘‘669. Theft or embezzlement in connection with health care.’’.

22 SEC. 244. FALSE STATEMENTS.

23 (a) IN GENERAL.—Chapter 47 of title 18, United

24 States Code, is amended by adding at the end the following:
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1 ‘‘§ 1035. False statements relating to health care mat2 ters

3 ‘‘(a) Whoever, in any matter involving a health care

4 benefit program, knowingly—

5 ‘‘(1) falsifies, conceals, or covers up by any trick,

6 scheme, or device a material fact; or

7 ‘‘(2) makes any false, fictitious, or fraudulent

8 statements or representations, or makes or uses any

9 false writing or document knowing the same to con10 tain any false, fictitious, or fraudulent statement or

11 entry,

12 in connection with the delivery of or payment for health

13 care benefits, items, or services, shall be fined under this

14 title or imprisoned not more than 5 years, or both.

15 ‘‘(b) As used in this section, the term ‘health care bene16 fit program’ has the meaning given such term in section

17 1347(b) of this title.’’.

18 (b) CLERICAL AMENDMENT.—The table of sections at

19 the beginning of chapter 47 of title 18, United States Code,

20 is amended by adding at the end the following new item:

‘‘1035. False statements relating to health care matters.’’.

21 SEC. 245. OBSTRUCTION OF CRIMINAL INVESTIGATIONS OF

22 HEALTH CARE OFFENSES.

23 (a) IN GENERAL.—Chapter 73 of title 18, United

24 States Code, is amended by adding at the end the following:
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1 ‘‘§ 1518. Obstruction of criminal investigations of

2 health care offenses

3 ‘‘(a) Whoever willfully prevents, obstructs, misleads,

4 delays or attempts to prevent, obstruct, mislead, or delay

5 the communication of information or records relating to a

6 violation of a Federal health care offense to a criminal in7 vestigator shall be fined under this title or imprisoned not

8 more than 5 years, or both.

9 ‘‘(b) As used in this section the term ‘criminal inves10 tigator’ means any individual duly authorized by a depart11 ment, agency, or armed force of the United States to con12 duct or engage in investigations for prosecutions for viola13 tions of health care offenses.’’.

14 (b) CLERICAL AMENDMENT.—The table of sections at

15 the beginning of chapter 73 of title 18, United States Code,

16 is amended by adding at the end the following new item:

‘‘1518. Obstruction of criminal investigations of health care offenses.’’.

17 SEC. 246. LAUNDERING OF MONETARY INSTRUMENTS.

18 Section 1956(c)(7) of title 18, United States Code, is

19 amended by adding at the end the following:

20 ‘‘(F) Any act or activity constituting an of21 fense involving a Federal health care offense.’’.

22 SEC. 247. INJUNCTIVE RELIEF RELATING TO HEALTH CARE

23 OFFENSES.

24 (a) IN GENERAL.—Section 1345(a)(1) of title 18,

25 United States Code, is amended—
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1 (1) by striking ‘‘or’’ at the end of subparagraph

2 (A);

3 (2) by inserting ‘‘or’’ at the end of subparagraph

4 (B); and

5 (3) by adding at the end the following:

6 ‘‘(C) committing or about to commit a Federal

7 health care offense.’’.

8 (b) FREEZING OF ASSETS.—Section 1345(a)(2) of title

9 18, United States Code, is amended by inserting ‘‘or a Fed10 eral health care offense’’ after ‘‘title)’’.

11 SEC. 248. AUTHORIZED INVESTIGATIVE DEMAND PROCE12 DURES.

13 (a) IN GENERAL.—Chapter 223 of title 18, United

14 States Code, is amended by adding after section 3485 the

15 following:

16 ‘‘§ 3486. Authorized investigative demand procedures

17 ‘‘(a) AUTHORIZATION.—In any investigation relating

18 to any act or activity involving a Federal health care of19 fense, the Attorney General or the Attorney General’s des20 ignee may issue in writing and cause to be served a sub21 poena requiring the production of any records (including

22 any books, papers, documents, electronic media, or other ob23 jects or tangible things), which may be relevant to an au24 thorized law enforcement inquiry, that a person or legal en25 tity may possess or have care, custody, or control. A sub-
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1 poena shall describe the objects required to be produced and

2 prescribe a return date within a reasonable period of time

3 within which the objects can be assembled and made avail4 able.

5 ‘‘(b) SERVICE.—A subpoena issued under this section

6 may be served by any person designated in the subpoena

7 to serve it. Service upon a natural person may be made

8 by personal delivery of the subpoena to him. Service may

9 be made upon a domestic or foreign corporation or upon

10 a partnership or other unincorporated association which is

11 subject to suit under a common name, by delivering the sub12 poena to an officer, to a managing or general agent, or to

13 any other agent authorized by appointment or by law to

14 receive service of process. The affidavit of the person serving

15 the subpoena entered on a true copy thereof by the person

16 serving it shall be proof of service.

17 ‘‘(c) ENFORCEMENT.—In the case of contumacy by or

18 refusal to obey a subpoena issued to any person, the Attor19 ney General may invoke the aid of any court of the United

20 States within the jurisdiction of which the investigation is

21 carried on or of which the subpoenaed person is an inhab22 itant, or in which he carries on business or may be found,

23 to compel compliance with the subpoena. The court may

24 issue an order requiring the subpoenaed person to appear

25 before the Attorney General to produce records, if so ordered,
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1 or to give testimony touching the matter under investiga2 tion. Any failure to obey the order of the court may be pun3 ished by the court as a contempt thereof. All process in any

4 such case may be served in any judicial district in which

5 such person may be found.

6 ‘‘(d) IMMUNITY FROM CIVIL LIABILITY.—Notwith7 standing any Federal, State, or local law, any person, in8 cluding officers, agents, and employees, receiving a sum9 mons under this section, who complies in good faith with

10 the summons and thus produces the materials sought, shall

11 not be liable in any court of any State or the United States

12 to any customer or other person for such production or for

13 nondisclosure of that production to the customer.

14 ‘‘(e) LIMITATION ON USE.—(1) Health information

15 about an individual that is disclosed under this section may

16 not be used in, or disclosed to any person for use in, any

17 administrative, civil, or criminal action or investigation

18 directed against the individual who is the subject of the in19 formation unless the action or investigation arises out of

20 and is directly related to receipt of health care or payment

21 for health care or action involving a fraudulent claim relat22 ed to health; or if authorized by an appropriate order of

23 a court of competent jurisdiction, granted after application

24 showing good cause therefor.
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1 ‘‘(2) In assessing good cause, the court shall weigh the

2 public interest and the need for disclosure against the in3 jury to the patient, to the physician-patient relationship,

4 and to the treatment services.

5 ‘‘(3) Upon the granting of such order, the court, in

6 determining the extent to which any disclosure of all or any

7 part of any record is necessary, shall impose appropriate

8 safeguards against unauthorized disclosure.’’.

9 (b) CLERICAL AMENDMENT.—The table of sections at

10 the beginning of chapter 223 of title 18, United States Code,

11 is amended by inserting after the item relating to section

12 3485 the following new item:

‘‘3486. Authorized investigative demand procedures.’’.

13 (c) CONFORMING AMENDMENT.—Section

14 1510(b)(3)(B) of title 18, United States Code, is amended

15 by inserting ‘‘or a Department of Justice subpoena (issued

16 under section 3486 of title 18),’’ after ‘‘subpoena’’.

17 SEC. 249. FORFEITURES FOR FEDERAL HEALTH CARE OF18 FENSES.

19 (a) IN GENERAL.—Section 982(a) of title 18, United

20 States Code, is amended by adding after paragraph (5) the

21 following new paragraph:

22 ‘‘(6) The court, in imposing sentence on a person con23 victed of a Federal health care offense, shall order the person

24 to forfeit property, real or personal, that constitutes or is
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1 derived, directly or indirectly, from gross proceeds traceable

2 to the commission of the offense.’’.

3 (b) CONFORMING AMENDMENT.—Section 982(b)(1)(A)

4 of title 18, United States Code, is amended by inserting

5 ‘‘or (a)(6)’’ after ‘‘(a)(1)’’.

6 (c) PROPERTY FORFEITED DEPOSITED IN FEDERAL

7 HOSPITAL INSURANCE TRUST FUND.—

8 (1) IN GENERAL.—After the payment of the costs

9 of asset forfeiture has been made, and notwithstand10 ing any other provision of law, the Secretary of the

11 Treasury shall deposit into the Federal Hospital In12 surance Trust Fund pursuant to section

13 1817(k)(2)(C) of the Social Security Act, as added by

14 section 301(b), an amount equal to the net amount re15 alized from the forfeiture of property by reason of a

16 Federal health care offense pursuant to section

17 982(a)(6) of title 18, United States Code.

18 (2) COSTS OF ASSET FORFEITURE.—For pur19 poses of paragraph (1), the term ‘‘payment of the

20 costs of asset forfeiture’’ means—

21 (A) the payment, at the discretion of the At22 torney General, of any expenses necessary to

23 seize, detain, inventory, safeguard, maintain, ad24 vertise, sell, or dispose of property under seizure,

25 detention, or forfeited, or of any other necessary
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1 expenses incident to the seizure, detention, for2 feiture, or disposal of such property, including

3 payment for—

4 (i) contract services,

5 (ii) the employment of outside contrac6 tors to operate and manage properties or

7 provide other specialized services necessary

8 to dispose of such properties in an effort to

9 maximize the return from such properties;

10 and

11 (iii) reimbursement of any Federal,

12 State, or local agency for any expenditures

13 made to perform the functions described in

14 this subparagraph;

15 (B) at the discretion of the Attorney Gen16 eral, the payment of awards for information or

17 assistance leading to a civil or criminal forfeit18 ure involving any Federal agency participating

19 in the Health Care Fraud and Abuse Control Ac20 count;

21 (C) the compromise and payment of valid

22 liens and mortgages against property that has

23 been forfeited, subject to the discretion of the At24 torney General to determine the validity of any

25 such lien or mortgage and the amount of pay-
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1 ment to be made, and the employment of attor2 neys and other personnel skilled in State real es3 tate law as necessary;

4 (D) payment authorized in connection with

5 remission or mitigation procedures relating to

6 property forfeited; and

7 (E) the payment of State and local property

8 taxes on forfeited real property that accrued be9 tween the date of the violation giving rise to the

10 forfeiture and the date of the forfeiture order.

11 Subtitle F—Administrative

12 Simplification

13 SEC. 251. PURPOSE.

14 It is the purpose of this subtitle to improve the medi15 care program under title XVIII of the Social Security Act,

16 the medicaid program under title XIX of such Act, and the

17 efficiency and effectiveness of the health care system, by en18 couraging the development of a health information system

19 through the establishment of standards and requirements for

20 the electronic transmission of certain health information.

21 SEC. 252. ADMINISTRATIVE SIMPLIFICATION.

22 (a) IN GENERAL.—Title XI (42 U.S.C. 1301 et seq.)

23 is amended by adding at the end the following:
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1 ‘‘PART C—ADMINISTRATIVE SIMPLIFICATION

2 ‘‘SEC. 1171. DEFINITIONS.

3 ‘‘For purposes of this part:

4 ‘‘(1) CLEARINGHOUSE.—The term ‘clearinghouse’

5 means a public or private entity that—

6 ‘‘(A) processes or facilitates the processing

7 of nonstandard data elements of health informa8 tion into standard data elements; or

9 ‘‘(B) provides the means by which persons

10 may meet the requirements of this part.

11 ‘‘(2) CODE SET.—The term ‘code set’ means any

12 set of codes used for encoding data elements, such as

13 tables of terms, medical concepts, medical diagnostic

14 codes, or medical procedure codes.

15 ‘‘(3) HEALTH CARE PROVIDER.—The term

16 ‘health care provider’ includes a provider of services

17 (as defined in section 1861(u)), a provider of medical

18 or other health services (as defined in section

19 1861(s)), and any other person furnishing health care

20 services or supplies.

21 ‘‘(4) 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 ‘‘(5) 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 pro13 gram 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 li19 ability 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 not

4 provide sufficiently comprehensive coverage of a

5 benefit so that the policy should be treated as a

6 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 estab13 lished or maintained for the purpose of provid14 ing health benefits and has 50 or more partici15 pants (as defined in section 3(7) of such Act).

16 ‘‘(K) An employee welfare benefit plan or

17 any other arrangement which is established or

18 maintained for the purpose of offering or provid19 ing health benefits to the employees of 2 or more

20 employers.

21 ‘‘(L) The health care program for active

22 military personnel under title 10, United States

23 Code.

24 ‘‘(M) The veterans health care program

25 under chapter 17 of title 38, United States Code.
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1 ‘‘(N) The Civilian Health and Medical Pro2 gram of the Uniformed Services (CHAMPUS),

3 as defined in section 1073(4) of title 10, United

4 States Code.

5 ‘‘(O) The Indian health service program

6 under the Indian Health Care Improvement Act

7 (25 U.S.C. 1601 et seq.).

8 ‘‘(P) The Federal Employees Health Benefit

9 Plan under chapter 89 of title 5, United States

10 Code.

11 ‘‘(Q) Such other plan or arrangement as the

12 Secretary determines is a health plan.

13 ‘‘(6) INDIVIDUALLY IDENTIFIABLE HEALTH IN14 FORMATION.—The term ‘individually identifiable

15 health information’ means any information, includ16 ing demographic information collected from an indi17 vidual, that—

18 ‘‘(A) is created or received by a health care

19 provider, health plan, employer, or clearing20 house; and

21 ‘‘(B) relates to the past, present, or future

22 physical or mental health or condition of an in23 dividual, the provision of health care to an indi24 vidual, or the past, present, or future payment
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1 for the provision of health care to an individual,

2 and—

3 ‘‘(i) identifies the individual; or

4 ‘‘(ii) with respect to which there is a

5 reasonable basis to believe that the informa6 tion can be used to identify the individual.

7 ‘‘(7) STANDARD.—The term ‘standard’, when

8 used with reference to a data element of health infor9 mation or a transaction referred to in section

10 1173(a)(1), means any such data element or trans11 action that meets each of the standards and imple12 mentation specifications adopted or established by the

13 Secretary with respect to the data element or trans14 action under sections 1172 through 1174.

15 ‘‘(8) STANDARD SETTING ORGANIZATION.—The

16 term ‘standard setting organization’ means a stand17 ard setting organization accredited by the American

18 National Standards Institute, including the National

19 Council for Prescription Drug Programs, that devel20 ops standards for information transactions, data ele21 ments, or any other standard that is necessary to, or

22 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 adopted under

4 this part shall apply to the following persons:

5 ‘‘(1) A health plan.

6 ‘‘(2) A clearinghouse.

7 ‘‘(3) A health care provider who transmits any

8 health information in electronic form in connection

9 with a transaction referred to in section 1173(a)(1).

10 ‘‘(b) REDUCTION OF COSTS.—Any standard adopted

11 under this part shall be consistent with the objective of re12 ducing the administrative costs of providing and paying

13 for health care.

14 ‘‘(c) ROLE OF STANDARD SETTING ORGANIZATIONS.—

15 ‘‘(1) IN GENERAL.—Except as provided in para16 graph (2), any standard adopted under this part

17 shall be developed or modified by a standard setting

18 organization.

19 ‘‘(2) SPECIAL RULES.—

20 ‘‘(A) DIFFERENT STANDARDS.—The Sec21 retary may adopt a standard that is different

22 from any standard developed or modified by a

23 standard setting organization, if—

24 ‘‘(i) the different standard will sub25 stantially reduce administrative costs to
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1 health care providers and health plans com2 pared to the alternatives; and

3 ‘‘(ii) the standard is promulgated in

4 accordance with the rulemaking procedures

5 of subchapter III of chapter 5 of title 5,

6 United States Code.

7 ‘‘(B) NO STANDARD BY STANDARD SETTING

8 ORGANIZATION.—If no standard setting organi9 zation has adopted or modified any standard re10 lating to a standard that the Secretary is au11 thorized or required to adopt under this part—

12 ‘‘(i) paragraph (1) shall not apply;

13 and

14 ‘‘(ii) subsection (f) shall apply.

15 ‘‘(d) IMPLEMENTATION SPECIFICATIONS.—The Sec16 retary shall establish specifications for implementing each

17 of the standards adopted under this part.

18 ‘‘(e) PROTECTION OF TRADE SECRETS.—Except as

19 otherwise required by law, a standard adopted under this

20 part shall not require disclosure of trade secrets or confiden21 tial commercial information by a person required to comply

22 with this part.

23 ‘‘(f) ASSISTANCE TO THE SECRETARY.—In complying

24 with the requirements of this part, the Secretary shall rely

25 on the recommendations of the Health Information Advi-
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1 sory Committee established under section 1179 and shall

2 consult with appropriate Federal and State agencies and

3 private organizations. The Secretary shall publish in the

4 Federal Register the recommendations of the Health Infor5 mation Advisory Committee regarding the adoption of a

6 standard under this part.

7 ‘‘(g) APPLICATION TO MODIFICATIONS OF STAND8 ARDS.—This section shall apply to a modification to a

9 standard (including an addition to a standard) adopted

10 under section 1174(b) in the same manner as it applies to

11 an initial standard adopted under section 1174(a).

12 ‘‘SEC. 1173. STANDARDS FOR INFORMATION TRANSACTIONS

13 AND DATA ELEMENTS.

14 ‘‘(a) STANDARDS TO ENABLE ELECTRONIC EX15 CHANGE.—

16 ‘‘(1) IN GENERAL.—The Secretary shall adopt

17 standards for transactions, and data elements for

18 such transactions, to enable health information to be

19 exchanged electronically, that are—

20 ‘‘(A) appropriate for the financial and ad21 ministrative transactions described in paragraph

22 (2); and

23 ‘‘(B) related to other financial and admin24 istrative transactions determined appropriate by

25 the Secretary consistent with the goals of im-
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1 proving the operation of the health care system

2 and reducing administrative costs.

3 ‘‘(2) TRANSACTIONS.—The transactions referred

4 to in paragraph (1)(A) are the following:

5 ‘‘(A) Claims (including coordination of ben6 efits) or equivalent encounter information.

7 ‘‘(B) Claims attachments.

8 ‘‘(C) Enrollment and disenrollment.

9 ‘‘(D) Eligibility.

10 ‘‘(E) Health care payment and remittance

11 advice.

12 ‘‘(F) Premium payments.

13 ‘‘(G) First report of injury.

14 ‘‘(H) Claims status.

15 ‘‘(I) Referral certification and authoriza16 tion.

17 ‘‘(3) ACCOMMODATION OF SPECIFIC PROVID18 ERS.—The standards adopted by the Secretary under

19 paragraph (1) shall accommodate the needs of dif20 ferent types of health care providers.

21 ‘‘(b) UNIQUE HEALTH IDENTIFIERS.—

22 ‘‘(1) IN GENERAL.—The Secretary shall adopt

23 standards providing for a standard unique health

24 identifier for each individual, employer, health plan,

25 and health care provider for use in the health care
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1 system. In carrying out the preceding sentence for

2 each health plan and health care provider, the Sec3 retary shall take into account multiple uses for iden4 tifiers and multiple locations and specialty classifica5 tions for health care providers.

6 ‘‘(2) USE OF IDENTIFIERS.—The standards

7 adopted under paragraphs (1) shall specify the pur8 poses for which a unique health identifier may be

9 used.

10 ‘‘(c) CODE SETS.—

11 ‘‘(1) IN GENERAL.—The Secretary shall adopt

12 standards that—

13 ‘‘(A) select code sets for appropriate data

14 elements for the transactions referred to in sub15 section (a)(1) from among the code sets that have

16 been developed by private and public entities; or

17 ‘‘(B) establish code sets for such data ele18 ments if no code sets for the data elements have

19 been developed.

20 ‘‘(2) DISTRIBUTION.—The Secretary shall estab21 lish efficient and low-cost procedures for distribution

22 (including electronic distribution) of code sets and

23 modifications made to such code sets under section

24 1174(b).
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1 ‘‘(d) SECURITY STANDARDS FOR HEALTH INFORMA2 TION.—

3 ‘‘(1) SECURITY STANDARDS.—The Secretary

4 shall adopt security standards that—

5 ‘‘(A) take into account—

6 ‘‘(i) the technical capabilities of record

7 systems used to maintain health informa8 tion;

9 ‘‘(ii) the costs of security measures;

10 ‘‘(iii) the need for training persons

11 who have access to health information;

12 ‘‘(iv) the value of audit trails in com13 puterized record systems; and

14 ‘‘(v) the needs and capabilities of small

15 health care providers and rural health care

16 providers (as such providers are defined by

17 the Secretary); and

18 ‘‘(B) ensure that a clearinghouse, if it is

19 part of a larger organization, has policies and

20 security procedures which isolate the activities of

21 the clearinghouse with respect to processing in22 formation in a manner that prevents unauthor23 ized access to such information by such larger

24 organization.
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1 ‘‘(2) SAFEGUARDS.—Each person described in

2 section 1172(a) who maintains or transmits health

3 information shall maintain reasonable and appro4 priate administrative, technical, and physical safe5 guards—

6 ‘‘(A) to ensure the integrity and confiden7 tiality of the information;

8 ‘‘(B) to protect against any reasonably an9 ticipated—

10 ‘‘(i) threats or hazards to the security

11 or integrity of the information; and

12 ‘‘(ii) unauthorized uses or disclosures

13 of the information; and

14 ‘‘(C) otherwise to ensure compliance with

15 this part by the officers and employees of such

16 person.

17 ‘‘(e) PRIVACY STANDARDS FOR HEALTH INFORMA18 TION.—The Secretary shall adopt standards with respect to

19 the privacy of individually identifiable health information.

20 Such standards shall include standards concerning at least

21 the following:

22 ‘‘(1) The rights of an individual who is a subject

23 of such information.

24 ‘‘(2) The procedures to be established for the exer25 cise of such rights.
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1 ‘‘(3) The uses and disclosures of such informa2 tion that are authorized or required.

3 ‘‘(f) ELECTRONIC SIGNATURE.—

4 ‘‘(1) IN GENERAL.—The Secretary, in coordina5 tion with the Secretary of Commerce, shall adopt

6 standards specifying procedures for the electronic

7 transmission and authentication of signatures, com8 pliance with which shall be deemed to satisfy Federal

9 and State statutory requirements for written signa10 tures with respect to the transactions referred to in

11 subsection (a)(1).

12 ‘‘(2) PAYMENTS FOR SERVICES AND PRE13 MIUMS.—Nothing in this part shall be construed to

14 prohibit payment for health care services or health

15 plan premiums by debit, credit, payment card or

16 numbers, or other electronic means.

17 ‘‘(g) TRANSFER OF INFORMATION AMONG HEALTH

18 PLANS.—The Secretary shall adopt standards for transfer19 ring among health plans appropriate standard data ele20 ments needed for the coordination of benefits, the sequential

21 processing of claims, and other data elements for individ22 uals who have more than one health plan.

23 ‘‘SEC. 1174. TIMETABLES FOR ADOPTION OF STANDARDS.

24 ‘‘(a) INITIAL STANDARDS.—The Secretary shall carry

25 out section 1173 not later than 18 months after the date
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1 of the enactment of this part, except that standards relating

2 to claims attachments shall be adopted not later than 30

3 months after such date.

4 ‘‘(b) ADDITIONS AND MODIFICATIONS TO STAND5 ARDS.—

6 ‘‘(1) IN GENERAL.—Except as provided in para7 graph (2), the Secretary shall review the standards

8 adopted under section 1173, and shall adopt modi9 fications to the standards (including additions to the

10 standards), as determined appropriate, but not more

11 frequently than once every 6 months. Any addition or

12 modification to a standard shall be completed in a

13 manner which minimizes the disruption and cost of

14 compliance.

15 ‘‘(2) SPECIAL RULES.—

16 ‘‘(A) FIRST 12-MONTH PERIOD.—Except

17 with respect to additions and modifications to

18 code sets under subparagraph (B), the Secretary

19 may not adopt any modification to a standard

20 adopted under this part during the 12-month pe21 riod beginning on the date the standard is ini22 tially adopted, unless the Secretary determines

23 that the modification is necessary in order to

24 permit compliance with the standard.
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1 ‘‘(B) ADDITIONS AND MODIFICATIONS TO

2 CODE SETS.—

3 ‘‘(i) IN GENERAL.—The Secretary shall

4 ensure that procedures exist for the routine

5 maintenance, testing, enhancement, and ex6 pansion of code sets.

7 ‘‘(ii) ADDITIONAL RULES.—If a code

8 set is modified under this subsection, the

9 modified code set shall include instructions

10 on how data elements of health information

11 that were encoded prior to the modification

12 may be converted or translated so as to pre13 serve the informational value of the data

14 elements that existed before the modifica15 tion. Any modification to a code set under

16 this subsection shall be implemented in a

17 manner that minimizes the disruption and

18 cost of complying with such modification.

19 ‘‘SEC. 1175. REQUIREMENTS.

20 ‘‘(a) CONDUCT OF TRANSACTIONS BY PLANS.—

21 ‘‘(1) IN GENERAL.—If a person desires to con22 duct a transaction referred to in section 1173(a)(1)

23 with a health plan as a standard transaction—

24 ‘‘(A) the health plan may not refuse to con25 duct such transaction as a standard transaction;
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1 ‘‘(B) the health plan may not delay such

2 transaction, or otherwise adversely affect, or at3 tempt to adversely affect, the person or the trans4 action on the ground that the transaction is a

5 standard transaction; and

6 ‘‘(C) the information transmitted and re7 ceived in connection with the transaction shall be

8 in the form of standard data elements of health

9 information.

10 ‘‘(2) SATISFACTION OF REQUIREMENTS.—A

11 health plan may satisfy the requirements under para12 graph (1) by—

13 ‘‘(A) directly transmitting and receiving

14 standard data elements of health information; or

15 ‘‘(B) submitting nonstandard data elements

16 to a clearinghouse for processing into standard

17 data elements and transmission by the clearing18 house, and receiving standard data elements

19 through the clearinghouse.

20 ‘‘(3) TIMETABLE FOR COMPLIANCE.—Paragraph

21 (1) shall not be construed to require a health plan to

22 comply with any standard, implementation specifica23 tion, or modification to a standard or specification

24 adopted or established by the Secretary under sections

25 1172 through 1174 at any time prior to the date on
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1 which the plan is required to comply with the stand2 ard or specification under subsection (b).

3 ‘‘(b) COMPLIANCE WITH STANDARDS.—

4 ‘‘(1) INITIAL COMPLIANCE.—

5 ‘‘(A) IN GENERAL.—Not later than 24

6 months after the date on which an initial stand7 ard or implementation specification is adopted

8 or established under sections 1172 and 1173,

9 each person to whom the standard or implemen10 tation specification applies shall comply with the

11 standard or specification.

12 ‘‘(B) SPECIAL RULE FOR SMALL HEALTH

13 PLANS.—In the case of a small health plan,

14 paragraph (1) shall be applied by substituting

15 ‘36 months’ for ‘24 months’. For purposes of this

16 subsection, the Secretary shall determine the

17 plans that qualify as small health plans.

18 ‘‘(2) COMPLIANCE WITH MODIFIED STAND19 ARDS.—If the Secretary adopts a modification to a

20 standard or implementation specification under this

21 part, each person to whom the standard or implemen22 tation specification applies shall comply with the

23 modified standard or implementation specification at

24 such time as the Secretary determines appropriate,

25 taking into account the time needed to comply due to
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1 the nature and extent of the modification. The time

2 determined appropriate under the preceding sentence

3 may not be earlier than the last day of the 180-day

4 period beginning on the date such modification is

5 adopted. The Secretary may extend the time for com6 pliance for small health plans, if the Secretary deter7 mines that such extension is appropriate.

8 ‘‘SEC. 1176. GENERAL PENALTY FOR FAILURE TO COMPLY

9 WITH REQUIREMENTS AND STANDARDS.

10 ‘‘(a) GENERAL PENALTY.—

11 ‘‘(1) IN GENERAL.—Except as provided in sub12 section (b), the Secretary shall impose on any person

13 who violates a provision of this part a penalty of not

14 more than $100 for each such violation, except that

15 the total amount imposed on the person for all viola16 tions of an identical requirement or prohibition dur17 ing a calendar year may not exceed $25,000.

18 ‘‘(2) PROCEDURES.—The provisions of section

19 1128A (other than subsections (a) and (b) and the

20 second sentence of subsection (f)) shall apply to the

21 imposition of a civil money penalty under this sub22 section in the same manner as such provisions apply

23 to the imposition of a penalty under such section

24 1128A.

25 ‘‘(b) LIMITATIONS.—
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1 ‘‘(1) OFFENSES OTHERWISE PUNISHABLE.—A

2 penalty may not be imposed under subsection (a)

3 with respect to an act if the act constitutes an offense

4 punishable under section 1177.

5 ‘‘(2) NONCOMPLIANCE NOT DISCOVERED.—A pen6 alty may not be imposed under subsection (a) with

7 respect to a provision of this part if it is established

8 to the satisfaction of the Secretary that the person lia9 ble for the penalty did not know, and by exercising

10 reasonable diligence would not have known, that such

11 person violated the provision.

12 ‘‘(3) FAILURES DUE TO REASONABLE CAUSE.—

13 ‘‘(A) IN GENERAL.—Except as provided in

14 subparagraph (B), a penalty may not be im15 posed under subsection (a) if—

16 ‘‘(i) the failure to comply was due to

17 reasonable cause and not to willful neglect;

18 and

19 ‘‘(ii) the failure to comply is corrected

20 during the 30-day period beginning on the

21 first date the person liable for the penalty

22 knew, or by exercising reasonable diligence

23 would have known, that the failure to com24 ply occurred.

25 ‘‘(B) EXTENSION OF PERIOD.—
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1 ‘‘(i) NO PENALTY.—The period referred

2 to in subparagraph (A)(ii) may be extended

3 as determined appropriate by the Secretary

4 based on the nature and extent of the failure

5 to comply.

6 ‘‘(ii) ASSISTANCE.—If the Secretary

7 determines that a person failed to comply

8 because the person was unable to comply,

9 the Secretary may provide technical assist10 ance to the person during the period de11 scribed in subparagraph (A)(ii). Such as12 sistance shall be provided in any manner

13 determined appropriate by the Secretary.

14 ‘‘(4) REDUCTION.—In the case of a failure to

15 comply which is due to reasonable cause and not to

16 willful neglect, any penalty under subsection (a) that

17 is not entirely waived under paragraph (3) may be

18 waived to the extent that the payment of such penalty

19 would be excessive relative to the compliance failure

20 involved.

21 ‘‘SEC. 1177. WRONGFUL DISCLOSURE OF INDIVIDUALLY

22 IDENTIFIABLE HEALTH INFORMATION.

23 ‘‘(a) OFFENSE.—A person who knowingly and in vio24 lation of this part—
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1 ‘‘(1) uses or causes to be used a unique health

2 identifier;

3 ‘‘(2) obtains individually identifiable health in4 formation relating to an individual; or

5 ‘‘(3) discloses individually identifiable health in6 formation to another person,

7 shall be punished as provided in subsection (b).

8 ‘‘(b) PENALTIES.—A person described in subsection (a)

9 shall—

10 ‘‘(1) be fined not more than $50,000, imprisoned

11 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 gain,

18 or malicious harm, fined not more than $250,000,

19 imprisoned not more than 10 years, or both.

20 ‘‘SEC. 1178. EFFECT ON STATE LAW.

21 ‘‘(a) GENERAL EFFECT.—

22 ‘‘(1) GENERAL RULE.—Except as provided in

23 paragraph (2), a provision or requirement under this

24 part, or a standard or implementation specification

25 adopted or established under sections 1172 through
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1 1174, shall supersede any contrary provision of State

2 law, including a provision of State law that requires

3 medical or health plan records (including billing in4 formation) to be maintained or transmitted in writ5 ten rather than electronic form.

6 ‘‘(2) EXCEPTIONS.—A provision or requirement

7 under this part, or a standard or implementation

8 specification adopted or established under sections

9 1172 through 1174, shall not supersede a contrary

10 provision of State law, if the provision of State law—

11 ‘‘(A) imposes requirements, standards, or

12 implementation specifications that are more

13 stringent than the requirements, standards, or

14 implementation specifications under this part

15 with respect to the privacy of individually iden16 tifiable health information; or

17 ‘‘(B) is a provision the Secretary deter18 mines—

19 ‘‘(i) is necessary to prevent fraud and

20 abuse, or for other purposes; or

21 ‘‘(ii) addresses controlled substances.

22 ‘‘(b) PUBLIC HEALTH REPORTING.—Nothing in this

23 part shall be construed to invalidate or limit the authority,

24 power, or procedures established under any law providing

25 for the reporting of disease or injury, child abuse, birth,
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1 or death, public health surveillance, or public health inves2 tigation or intervention.

3 ‘‘SEC. 1179. HEALTH INFORMATION ADVISORY COMMITTEE.

4 ‘‘(a) ESTABLISHMENT.—There is established a com5 mittee to be known as the Health Information Advisory

6 Committee (in this section referred to as the ‘committee’).

7 ‘‘(b) DUTIES.—The committee shall—

8 ‘‘(1) provide assistance to the Secretary in com9 plying with the requirements imposed on the Sec10 retary under this part;

11 ‘‘(2) study the issues related to the adoption of

12 uniform data standards for patient medical record

13 information and the electronic exchange of such infor14 mation;

15 ‘‘(3) report to the Secretary not later than 4

16 years after the date of the enactment of this part rec17 ommendations and legislative proposals for such

18 standards and electronic exchange; and

19 ‘‘(4) generally be responsible for advising the

20 Secretary and the Congress on the status of the imple21 mentation of this part.

22 ‘‘(c) MEMBERSHIP.—

23 ‘‘(1) IN GENERAL.—The committee shall consist

24 of 15 members of whom—

25 ‘‘(A) 3 shall be appointed by the President;
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1 ‘‘(B) 6 shall be appointed by the Speaker of

2 the House of Representatives after consultation

3 with the minority leader of the House of Rep4 resentatives; and

5 ‘‘(C) 6 shall be appointed by the President

6 pro tempore of the Senate after consultation with

7 the minority leader of the Senate.

8 The appointments of the members shall be made not

9 later than 60 days after the date of the enactment of

10 this part. The President shall designate 1 member as

11 the Chair.

12 ‘‘(2) EXPERTISE.—The membership of the com13 mittee shall consist of individuals who are of recog14 nized standing and distinction in the areas of infor15 mation systems, information networking and integra16 tion, consumer health, health care financial manage17 ment, or privacy, and who possess the demonstrated

18 capacity to discharge the duties imposed on the com19 mittee.

20 ‘‘(3) TERMS.—Each member of the committee

21 shall be appointed for a term of 5 years, except that

22 the members first appointed shall serve staggered

23 terms such that the terms of not more than 3 members

24 expire at one time.
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1 ‘‘(4) INITIAL MEETING.—Not later than 30 days

2 after the date on which a majority of the members

3 have been appointed, the committee shall hold its first

4 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 com10 ply with this part are cooperating in implementing

11 the standards adopted under this part;

12 ‘‘(2) the extent to which such entities are meeting

13 the privacy and security standards adopted under

14 this part and the types of penalties assessed for non15 compliance with such standards;

16 ‘‘(3) whether the Federal and State Governments

17 are receiving information of sufficient quality to meet

18 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 PROVIDERS.—

2 Section 1866(a)(1) (42 U.S.C. 1395cc(a)(1)) is

3 amended—

4 (A) by striking ‘‘and’’ at the end of sub5 paragraph (P);

6 (B) by striking the period at the end of sub7 paragraph (Q) and inserting ‘‘; and’’; and

8 (C) by inserting immediately after subpara9 graph (Q) the following new subparagraph:

10 ‘‘(R) to contract only with a clearinghouse (as

11 defined in section 1171) that meets each standard and

12 implementation specification adopted or established

13 under part C of title XI on or after the date on which

14 the clearinghouse is required to comply with the

15 standard or specification.’’.

16 (2) TITLE HEADING.—Title XI (42 U.S.C. 1301

17 et seq.) is amended by striking the title heading and

18 inserting the following:

19 ‘‘TITLE XI—GENERAL PROVISIONS, PEER RE20 VIEW, AND ADMINISTRATIVE SIMPLIFICA21 TION’’.