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[Congressional Bills 103th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4469 Introduced in House (IH)]

103d CONGRESS
  2d Session
                                H. R. 4469

To restrain health care costs and ensure adequate medical care for all 
 Americans by providing for a State and market-based system of choice 
         among qualified health plans, and for other purposes.

_______________________________________________________________________

                    IN THE HOUSE OF REPRESENTATIVES

                              May 20, 1994

Mr. Petri introduced the following bill; which was referred jointly to 
 the Committees on Energy and Commerce, Ways and Means, the Judiciary, 
                        and Education and Labor

_______________________________________________________________________

                                 A BILL

 
To restrain health care costs and ensure adequate medical care for all 
 Americans by providing for a State and market-based system of choice 
         among qualified health plans, and for other purposes.

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

SECTION 1. SHORT TITLES; TABLE OF CONTENTS.

    (a) Short Titles.--This Act may be cited as the ``Multiple Choice 
Health Care Act of 1994'' or the ``Multicare Act of 1994''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
Sec. 2. Goals and strategies.
Sec. 3. General definitions.
    TITLE I--ESTABLISHMENT OF STATE MULTICARE PROGRAMS; TAX CHANGES

         Subtitle A--Establishment of State Multicare Programs

Sec. 101. Grants to States for State multicare programs.
Sec. 102. Requirement for certification of multicare plans.
Sec. 103. Requirement for enrollment process.
Sec. 104. Suggestive list of multicare services; limits on cost-
                            sharing; treatment practice guidelines.
Sec. 105. Continuity of coverage.
Sec. 106. Contribution toward premium costs for eligible individuals.
Sec. 107. Additional subsidies for poor and near poor individuals.
Sec. 108. Establishment of reinsurance mechanism.
Sec. 109. Consumer education and assistance.
Sec. 110. Consumer rights enforcement.
Sec. 111. Compliance of State income tax laws.
Sec. 112. Distribution of information on average prices of common 
                            health care services.
 Subtitle B--Federal Contribution Toward Multicare Plan Premiums; Tax 
                              Law Changes

Sec. 121. Computation of amount of Federal contribution.
Sec. 122. Termination of exclusion for employer-provided health care 
                            coverage and of deduction for health 
                            insurance costs of self-employed.
Sec. 123. Termination of deduction for medical care.
               TITLE II--REQUIREMENTS FOR MULTICARE PLANS

                    Subtitle A--General Requirements

Sec. 201. Enrollment and continuity of coverage.
Sec. 202. Covered services.
Sec. 203. Premiums and cost-sharing; catastrophic protection.
Sec. 204. Participation in reinsurance system.
Sec. 205. Data requirement.
Sec. 206. Medical malpractice reform and administrative cost savings.
Sec. 207. Consumer rights.
       Subtitle B--Multiple Employer Health Benefits Protections

Sec. 211. Limited exemption under preemption rules for multiple 
                            employer plans providing health benefits 
                            subject to certain Federal standards.
                ``Part 7--Multiple Employer Health Plans

        ``Sec. 701. Definitions.
        ``Sec. 702. Exempted multiple employer plans providing benefits 
                            in the form of medical care relieved of 
                            certain restrictions on preemption of State 
                            law and treated as employee welfare benefit 
                            plans.
        ``Sec. 703. Exemption procedure.
        ``Sec. 704. Eligibility requirements.
        ``Sec. 705. Additional requirements applicable to exempted 
                            arrangements.
        ``Sec. 706. Disclosure to participating employers by 
                            arrangements providing medical care.
        ``Sec. 707. Maintenance of reserves.
        ``Sec. 708. Corrective actions.
        ``Sec. 709. Expiration, suspension, or revocation of exemption.
        ``Sec. 710. Review of actions of the Secretary.
Sec. 212. Clarification of scope of preemption rules.
Sec. 213. Clarification of treatment of single employer arrangements.
Sec. 214. Clarification of treatment of certain collectively bargained 
                            arrangements.
Sec. 215. Employee leasing healthcare arrangements.
Sec. 216. Enforcement provisions relating to multiple employer welfare 
                            arrangements and employee leasing 
                            healthcare arrangements.
Sec. 217. Filing requirements for health benefit multiple employer 
                            welfare arrangements.
Sec. 218. Cooperation between Federal and State authorities.
Sec. 219. Effective date; transitional rules.
         Subtitle C--Repeal of COBRA Continuation Requirements

Sec. 221. Repeal of requirements of the Internal Revenue Code of 1954.
Sec. 222. Repeal of requirements of Employee Retirement Income Security 
                            Act of 1974.
Sec. 223. Repeal of requirements of Public Health Service Act.
TITLE III--STATES WITHOUT STATE MULTICARE PROGRAMS; FEDERAL HEALTH CARE 
                  PROGRAMS; NATIONAL REINSURANCE POOL

 Subtitle A--Multicare Plans in States without State Multicare Programs

Sec. 301. General provisions.
                Subtitle B--Federal Health Care Programs

Sec. 321. Medicare program.
Sec. 322. Federal Employees Health Benefit Program.
Sec. 323. Report recommending integration of CHAMPUS, Veterans health, 
                            and Indian Health Services.
Sec. 324. Consumer rights for individuals in Federal programs.
               Subtitle C--National Reinsurance Mechanism

Sec. 331. National reinsurance mechanism.
             TITLE IV--MEDICAL MALPRACTICE LIABILITY REFORM

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

Sec. 401. Federal reform of medical malpractice liability actions.
Sec. 402. Definitions.
Sec. 403. Effective date.
  Part 2--Uniform Standards for Medical Malpractice Liability Actions

Sec. 411. Statute of limitations.
Sec. 412. Requirement for initial resolution of action through 
                            alternative dispute resolution.
Sec. 413. Relation to alternative dispute resolution of Federal 
                            agencies.
Sec. 414. Mandatory pre-trial settlement conference.
Sec. 415. Calculation and payment of damages.
Sec. 416. Treatment of attorney's fees and other costs.
Sec. 417. Joint and several liability.
Sec. 418. Uniform standard for determining negligence.
Sec. 419. Application of medical practice guidelines in malpractice 
                            liability actions.
Sec. 420. Special provision for certain obstetric services.
Sec. 421. Preemption.
 Part 3--Requirements for State Alternative Dispute Resolution Systems 
                                 (ADR)

Sec. 431. Basic requirements for ADR.
Sec. 432. Certification of State systems.
Sec. 433. Reports on implementation and effectiveness of alternative 
                            dispute resolution systems.
              Subtitle B--Other Requirements and Programs

Sec. 441. Facilitating development and use of medical practice 
                            guidelines.
Sec. 442. Permitting State professional societies to participate in 
                            disciplinary activities.
                  TITLE V--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

Sec. 501. Adoption of data elements, uniform claims, and uniform 
                            electronic transmission standards.
Sec. 502. Application of standards.
Sec. 503. Periodic review and revision of standards.
Sec. 504. Health benefit plan defined.
             Subtitle B--Electronic Medical Data Standards

Sec. 511. Medical data standards for hospitals and other providers.
Sec. 512. Application of electronic data standards to certain 
                            hospitals.
Sec. 513. Electronic transmission to Federal agencies.
Sec. 514. Limitation on data requirements where standards in effect.
Sec. 515. Advisory commission.
            TITLE VI--REMOVING RESTRICTIONS ON MANAGED CARE

Sec. 601. Removing restrictions on managed care.
   TITLE VII--MODIFICATION OF THE OPERATION OF THE ANTITRUST LAWS TO 
                               HOSPITALS

Sec. 701. Purpose.
Sec. 702. Exemptions from the operation of the antitrust laws.
Sec. 703. Reports.
Sec. 704. Definitions.

SEC. 2. GOALS AND STRATEGIES.

    (a) Goals.--The goals of this Act are--
            (1) to restrain health care price inflation through market 
        incentives and competition,
            (2) to ensure adequate medical care for all Americans,
            (3) to distribute Federal health subsidies more fairly 
        across the population,
            (4) to allow meaningful consumer choice among health care 
        plans and providers,
            (5) to allow States flexibility to tailor health programs 
        to local needs, and
            (6) to accomplish these goals at no added cost to 
        taxpayers.
    (b) Strategies.--The strategies to be used in this Act to achieve 
these goals are--
            (1) to increase the role and flexibility of State and local 
        governments in providing health care information to consumers, 
        in ensuring health care for the needy, and in promoting 
        competition among health plans,
            (2) to replace the current tax exemption for employer-paid 
        insurance with a payment towards health care premiums for all 
        Americans,
            (3) to increase public-private partnership by allowing 
        individuals in public programs to meet their health care needs 
        through the purchase of private health insurance,
            (4) to reduce the amount of direct regulation of health 
        care providers, and
            (5) to allow individuals to participate in open enrollment 
        health plans.

SEC. 3. GENERAL DEFINITIONS.

    In this Act:
            (1) The term ``acute care services'' means such services, 
        identified by the Secretary, of the type covered under 
        multicare plans.
            (2) The term ``eligible individual'' means, with respect to 
        a State, an individual--
                    (A) who is a citizen or national of the United 
                States, an alien lawfully admitted for permanent 
                residence, or an alien otherwise lawfully residing 
                permanently in the United States under color of law, 
                and
                    (B) who is a resident of the State (as defined by 
                the Secretary).
            (3) The term ``exempt individual'' means an individual 
        who--
                    (A) is entitled to benefits under part A or part B 
                of title XVIII of the Social Security Act);
                    (B) is entitled to medicare and dental care under 
                section 1074(a) of title 10, United States Code; or
                    (C) is a member on active duty (as defined in 
                section 101(22) of such title) of the armed forces of 
                the United States.
            (4) The term ``family income'' means the total value of 
        income of the individual and the individual's family members 
        (as defined by the Secretary), as defined by the State in which 
        the individual resides and includes at least--
                    (A) cash income,
                    (B) aid under title IV of the Social Security Act 
                (relating to the aid to families with dependent 
                children program) and assistance received under title 
                XVI of such Act,
                    (C) the value of State or Federal housing 
                assistance (as determined by the State),
                    (D) the cash value of food stamps,
                    (E) general relief, and
                    (F) other State and local cash welfare payment.
            (5) The term ``Federal official poverty level'' means the 
        income official poverty line defined by the Office of 
        Management and Budget and revised annually in accordance with 
        section 673(2) of the Omnibus Budget Reconciliation Act of 
        1981.
            (6) The term ``medicaid eligible individual'' means an 
        individual who is entitled to medical assistance under a State 
        medicaid plan, or would be so eligible but for the election of 
        a State under section 101(c)(1)(A).
            (7) The terms ``medicaid opt-out State'' and ``medicaid 
        opt-in State'' mean a State that in its multicare program has 
        elected the option described in section 101(c)(1)(A) or in 
        section 101(c)(1)(B), respectively.
            (8) The term ``multicare plan'' means a health benefits 
        plan which is determined to meet the requirements of title II, 
        and includes a health benefit plan in which an individual is 
        enrolled under chapter 89 of title 5, United States Code, if 
        the plan participates in a reinsurance system that meets the 
        requirements of section 108.
            (9) The term ``near poor individual'' means an individual 
        whose family income is greater than 100 percent, but does not 
        exceed 150 percent, of the Federal official poverty level 
        applicable to a family of the size involved.
            (10) The term ``open enrollment multicare plan'' means a 
        multicare plan offered in an area of a State that permits all 
        eligible residents of the area to enroll under the plan.
            (11) The term ``poor individual'' means an individual whose 
        family income does not exceed the Federal official poverty 
        level applicable to a family of the size involved.
            (12) The term ``Secretary'' means the Secretary of Health 
        and Human Services.
            (13) The term ``State'' includes the District of Columbia, 
        Puerto Rico, the Virgin Islands, Guam, American Samoa, and the 
        Northern Mariana Islands.
            (14) The term ``State medicaid plan'' means the plan of a 
        State approved under title XIX of the Social Security Act, and 
        includes a statewide medical assistance plan operating under 
        section 1115 of such Act.
            (15) The term ``State multicare program'' means such a 
        program that the Secretary finds meets the requirements of 
        title I.

    TITLE I--ESTABLISHMENT OF STATE MULTICARE PROGRAMS; TAX CHANGES

         Subtitle A--Establishment of State Multicare Programs

SEC. 101. GRANTS TO STATES FOR STATE MULTICARE PROGRAMS.

    (a) In General.--The Secretary of Health and Human Services shall 
provide grants to each State to establish a State multicare program for 
the offering of competing multicare plans in the State.
    (b) Grant Application.--No grant may be made under this section to 
a State unless--
            (1) the State has submitted an application in such form and 
        manner as the Secretary shall specify, and
            (2) the Secretary determines that the application provides 
        for the operation of a State multicare program that meets the 
        requirements of the succeeding sections of this title.
    (c) Amount of Grant.--
            (1) Base amount.--For any State, subject to the succeeding 
        provisions of this subsection, the amount of a grant under this 
        section, with respect to each eligible individual (other than 
        an exempt individual) enrolled in a multicare plan, is equal to 
        the Federal contribution amount (determined under section 121) 
        for the class of enrollment involved.
            (2) Supplemental payment to states.--The amount of such a 
        grant shall be increased, with respect to each eligible 
        individual (other than an exempt individual) who is not 
        enrolled in a multicare plan, by an amount equal to the amount 
        that would have been paid under paragraph (1) if the individual 
        were enrolled in a multicare plan.
            (3) Additional amounts.--The amount of such a grant shall 
        be further increased by the sum of the following:
                    (A) Medicaid savings.--
                            (i) In general.--The amount described in 
                        clause (ii) for the State, increased (for each 
                        year after the last full year referred to in 
                        clause (ii)(I), up to the year involved) by the 
                        applicable inflator (specified in section 
                        107(b)(2)(D)) for the year, and subject to any 
                        adjustment for changes in population under 
                        section 107(b)(4).
                            (ii) Amount described.--The amount 
                        described in this clause for a State is--
                                    (I) the total amount of Federal 
                                payments made to the State under 
                                section 1903(a) of the Social Security 
                                Act for acute care services during the 
                                last full year prior to the 
                                implementation of a State multicare 
                                program in the State, reduced by
                                    (II) the product of $400 and the 
                                average number of individuals entitled 
                                to assistance for such services under 
                                the medicaid program in the State 
                                during that year.
                    (B) Cash assistance savings.--The total amount of 
                the reductions in Federal payments under title IV or 
                XVI of the Social Security Act, the Food Stamp Act, and 
                other Federal welfare programs for residents of a State 
                resulting directly from the implementation of the 
                financial assistance provided under section 107 as a 
                substitute for medical assistance for acute care 
                services under the State medicaid plan.
    (d) Use of Funds.--
            (1) Use of base amounts.--At least 97 percent of the funds 
        provided to a State under subsection (c)(1) with respect to 
        enrollment of an eligible individual shall be used only, in 
        accordance with section 106, for payment of all or a portion of 
        the premium for enrollment of such an eligible individual in a 
        multicare plan under the multicare program.
            (2) Use of federal supplemental amounts.--At least 97 
        percent of the funds provided to the State under subsection 
        (c)(2) shall be used only towards--
                    (A) financing the State reinsurance mechanism under 
                section 108, or
                    (B) providing additional subsidies for poor and 
                near poor individuals under section 107.
            (3) Use of additional amounts for financial assistance.--At 
        least 97 percent of the funds provided to the State under 
        subsection (c)(3) shall be used only for additional financial 
        assistance for poor and near poor individuals under section 
        107.
            (4) Application toward administrative costs.--
                    (A) In general.--Except as provided in the previous 
                paragraphs, Federal grant funds may only be used to 
                finance administrative costs.
                    (B) Administrative costs.--In this paragraph, the 
                term ``administrative costs'' includes costs associated 
                with--
                            (i) soliciting bids and negotiating with 
                        multicare plans and certifying compliance of 
                        plans with the requirements of title II,
                            (ii) preparing and disseminating 
                        comparative value information on multicare 
                        plans,
                            (iii) planning, developing, and 
                        implementing the process for enrollment of 
                        eligible individuals in multicare plans, and
                            (iv) establishing and administering the 
                        reinsurance mechanism under section 108 (not 
                        including reinsurance payments made under such 
                        a mechanism).
            (5) Required use of state supplemental funds.--
                    (A) In general.--Each State multicare program shall 
                assure that--
                            (i) at least 97 percent of the funds 
                        described in subparagraph (C) are used 
                        towards--
                                    (I) financing the State reinsurance 
                                mechanism under section 108, or
                                    (II) providing additional subsidies 
                                for poor and near poor individuals 
                                under section 107, and
                            (ii) at least 97 percent of the funds 
                        described in section 107(b)(5) (relating to 
                        State welfare savings) are used towards 
                        providing additional subsidies for poor and 
                        near poor individuals under section 107.
                    (B) State supplemental funds described.--The funds 
                described in this subparagraph are the amount by which 
                (i) the State aggregate contribution amount (described 
                in section 106(b)(2)), exceeds (ii) the aggregate 
                amounts of the contributions paid by the State under 
                section 106(b)(1)(B) (determined as if the reference to 
                ``97 percent'' in such section were a reference to 
                ``100 percent'').
    (e) Special Rules for Territories.--The Secretary may establish 
such special rules as may be appropriate to adapt the provisions of 
this title (and titles II and III) in the case of Puerto Rico, the 
Virgin Islands, Guam, American Samoa, and the Northern Mariana Islands.

SEC. 102. REQUIREMENT FOR CERTIFICATION OF MULTICARE PLANS.

    (a) Process.--
            (1) In general.--Each State multicare program shall provide 
        a mechanism for certifying at least 2 competing open enrollment 
        multicare plans in all areas of the State.
            (2) Waiver authority.--The Secretary may waive the 
        requirement of paragraph (1) that a State multicare program 
        offer more than 1 open enrollment multicare plan in all areas 
        of a State if the Secretary finds that a single, coordinated 
        open enrollment multicare plan would be more cost-effective.
    (b) Requirements for Certification.--A program shall not certify a 
multicare plan for purposes of subsection (a) unless the program 
determines that the plan--
            (1) is in compliance with the requirements of title II 
        (including requirements relating to consumer education and 
        assistance and consumer rights) and other Federal health care 
        regulations, and
            (2) meets such standards as the program or the Secretary 
        may establish relating to financial solvency and quality of 
        care.
    (c) Treatment of Multi-State Regions.--The State multicare programs 
of one or more adjacent States may establish agreements, consistent 
with the requirements of this Act, governing the certification and 
operation of multicare plans that enroll individuals residing in an 
area that includes portions of such States.
    (d) General Authority of States.--Nothing in this Act shall be 
construed as preventing a State--
            (1) from sponsoring a multicare plan,
            (2) from requiring individuals to select enrollment under 
        the plan,
            (3) from providing additional subsidies for individuals 
        selecting such a plan, or
            (4) from requiring employers to provide for payment of 
        multicare premiums of employees through automatic payroll 
        deductions.
    (e) Treatment of FEHBP Plans.--Nothing in this title (other than 
section 108) shall be construed as authorizing a State to regulate 
health plans offered under the Federal Employees Health Benefits 
Program, under chapter 89, of title 5, United States Code.

SEC. 103. REQUIREMENT FOR ENROLLMENT PROCESS.

    (a) Requirement.--
            (1) In general.--Each State multicare program--
                    (A) shall provide a mechanism for the enrollment, 
                during open season periods, of eligible individuals 
                (other than exempt individuals) who are residents of 
                the State in multicare plans, and
                    (B) may require each eligible individual (other 
                than such an exempt individual or an individual 
                described in paragraph (2)) residing in the State to be 
                enrolled in a multicare plan and may require that such 
                a plan be a multicare plan operated directly by the 
                program.
            (2) Exception.--A State may, at its option, except from the 
        requirement described in paragraph (1)(B) any of the following:
                    (A) An individual who is within a class of 
                individuals eligible for health care benefits from the 
                Department of Veterans Affairs.
                    (B) An individual who is incarcerated.
                    (C) An individual who is within any other class of 
                individuals with respect to whom the State determines 
                that members of the class are likely to have health 
                care coverage reasonably comparable to the coverage 
                available through enrollment in a multicare plan.
    (b) Permitting Closed Enrollment Plans.--
            (1) In general.--A State multicare program may not deny 
        approval of a plan (such as an employer self-insured plan or a 
        plan based on an association with or membership in a group) as 
        a multicare plan because the plan is not an open enrollment 
        multicare plan and limits enrollment to individuals associated 
        with an employer or association.
            (2) Construction.--Nothing in this subsection shall be 
        construed as waiving the requirement under section 204 that a 
        multicare plan participate in a reinsurance system (established 
        under the State multicare program under section 108 or by the 
        Secretary under section 301 or 331).
    (c) Distribution of Comparative Value Information.--
            (1) In general.--Each State multicare program shall provide 
        for the distribution to eligible individuals of comparative 
        value information. Such program may require that the 
        information conform to the national standards established under 
        paragraph (3).
            (2) Contents.--The comparative value information shall 
        include, with respect to each multicare plan offered, 
        information on--
                    (A) benefits, premiums costs, and patient cost-
                sharing arrangements (including projected annual costs 
                for medium-risk individuals), and
                    (B) indicators of the quality of health care 
                offered under the plan.
            (3) Standards.--The Secretary shall establish national 
        standards for the collection and distribution of comparative 
        value information.
    (d) Use of Employers.--A State multicare program may require 
employers to distribute the comparative value information concerning 
multicare plans to employees and to require automatic payroll 
deductions for payment of premiums for such plans by such employees.

SEC. 104. SUGGESTIVE LIST OF MULTICARE SERVICES; LIMITS ON COST-
              SHARING; TREATMENT PRACTICE GUIDELINES.

    (a) Multicare Services.--
            (1) National suggested list.--The Secretary shall develop a 
        national list of services which may be covered by a multicare 
        plan. Such list shall include those services identified as 
        cost-effective by the Secretary.
            (2) State suggested list.--
                    (A) Establishment.--Each State multicare program 
                shall establish a State-specific list of covered health 
                care services. Such list may, but need not, include the 
                services included in the national standard list 
                developed under paragraph (1).
                    (B) Limitations.--A State multicare program may, 
                with respect to a covered service, limit the amount, 
                duration, or scope of the service to be included in the 
                list of services.
    (b) Catastrophic Protection.--A State multicare program may 
decrease, under section 203(e)(2)(C) or otherwise, the amount of the 
cost-sharing limit otherwise permitted under multicare plans.
    (c) Suggested Treatment Practice Guidelines.--The Secretary shall 
publish and distribute treatment practice guidelines for use by 
multicare plans under State multicare programs.

SEC. 105. CONTINUITY OF COVERAGE.

    (a) Process.--Each State multicare program shall establish 
procedures, including procedures for administering changes in 
enrollment in cases of changes in area of residence, employment, and 
family status, to ensure for eligible individuals residing in each 
State continuity of coverage under a multicare plan.
    (b) Guaranteed Issuance and Prohibition of Preexisting Condition 
Exclusions.--In addition, each State multicare program shall establish 
procedures to ensure--
            (1) the multicare plans do not deny coverage to any 
        eligible individual, and
            (2) multicare plans do not exclude coverage on the basis of 
        preexisting conditions.

SEC. 106. CONTRIBUTION TOWARD PREMIUM COSTS FOR ELIGIBLE INDIVIDUALS.

    (a) In General.--Each State multicare program shall provide, for 
each eligible individual (other than an exempt individual) enrolled in 
a multicare plan under the program for a contribution toward the 
premium cost of such enrollment.
    (b) Amount of Contribution.--
            (1) In general.--The amount of the contribution under 
        subsection (a) with respect to an eligible individual is equal 
        to the sum of--
                    (A) not less than 97 percent of the funds provided 
                to a State under section 101(d)(1) with respect to 
                enrollment of the eligible individual, and
                    (B) not less than 97 percent of the amount 
                specified under paragraph (2) with respect to the 
                enrollment of the individual.
        Except as the Secretary may otherwise permit, such contribution 
        shall be provided on a monthly basis.
            (2) State contribution amount.--
                    (A) Initial amount.--
                            (i) In general.--Subject to subparagraph 
                        (C), the State aggregate contribution amount 
                        for a year is equal to--
                                    (I) the total amount of available 
                                funds (determined under clause (ii)) 
                                for the year, divided by
                                    (II) the average number of 
                                individuals described in clause (iii) 
                                for the year.
                            (ii) Funds available.--The total amount of 
                        available funds for a year is equal to the 
                        increase in all State revenues (including 
                        employment-related excise taxes) effected as a 
                        result of section 111 and the amendment made by 
                        section 123.
                            (iii) Individuals described.--The number of 
                        individuals described in this clause for a year 
                        is the estimated total average population of 
                        the State in the year, less the sum of the 
                        average number of exempt individuals (as 
                        defined in section 121(d)) in the State in the 
                        year.
                    (B) Application by enrollment class.--The State 
                shall adjust the State aggregate contribution amount 
                determined under this section among enrollment classes 
                established under section 121(c)(1) in the same manner 
                as the Secretary provides for adjustment of the Federal 
                contribution amount among such classes under section 
                121(c)(2).

SEC. 107. ADDITIONAL SUBSIDIES FOR POOR AND NEAR POOR INDIVIDUALS.

    (a) Requirement.--
            (1) In general.--Each State multicare program shall include 
        a mechanism for providing additional financial assistance, 
        consistent with this section, to poor individuals and near poor 
        individuals (as defined in section 3) to assist them in 
        purchasing coverage under multicare plans.
            (2) Income determinations.--Each such program is 
        responsible for making income determinations necessary to 
        determine if individuals are poor or near poor individuals.
    (b) Maintenance of Effort Required.--
            (1) In general.--The financial assistance provided under 
        this section shall not be less than the maintenance-of-effort 
        level described in paragraph (2).
            (2) Maintenance-of-effort level.--Subject to paragraphs (4) 
        and (5), for a State for a year, the ``maintenance-of-effort 
        level'' described in this subparagraph is equal to--
                    (A) the total amount of expenditures made under the 
                State medicaid plan (net of any Federal payments under 
                section 1903(a) of the Social Security Act) during the 
                last full year prior to the implementation of a State 
                multicare program in the State for acute care services, 
                increased
                    (B) for each subsequent year (up to the year 
                involved) by the applicable inflator (specified in 
                paragraph (3)) for the year.
        Expenditures under paragraph (A) shall include payments to 
        disproportionate share hospitals under section 1923 of the 
        Social Security Act.
            (3) Applicable inflator.--For purposes of paragraph (1)(B), 
        the applicable inflator for a year is the lesser of--
                    (A) the rate of health care inflation for the year, 
                as determined by the Secretary, or
                    (B) the percentage increase in the consumer price 
                index for all urban consumers (all items; U.S. city 
                average) for the year (as specified by the Secretary), 
                plus--
                            (i) for the first year in which the State 
                        multicare program is implemented, 3 percentage 
                        points,
                            (ii) for the second such year, 2.5 
                        percentage points,
                            (iii) for the third such year, 2.0 
                        percentage points,
                            (iv) for the fourth such year, 1.5 
                        percentage points,
                            (v) for the fifth such year, 1.0 percentage 
                        points,
                            (vi) for the sixth such year 0.5 percentage 
                        points, and
                            (vii) for any subsequent year, 0 percentage 
                        points.
            (4) Adjustment to reflect changes in population.--The 
        Secretary may adjust the maintenance-of-effort level of a State 
        to reflect changes in the population of poor and near poor 
        individuals in the State between the year described in 
        paragraph (2)(A) and the year involved.
            (5) State savings from welfare programs.--The maintenance-
        of-effort level for a State shall be increased by the total 
        amount of the reductions in State payments under title IV or 
        XVI of the Social Security Act, the Food Stamp Act, and other 
        Federal welfare programs (net of any Federal payments) for 
        residents of a State resulting directly from the implementation 
        of the financial assistance provided under this section as a 
        substitute for medical assistance for acute care services under 
        the State medicaid plan.
    (c) Medicaid Revisions.--Notwithstanding any other provision of 
law--
            (1) a State may deny medical assistance for acute care 
        services under its State medicaid plan to any poor or near poor 
        individual who is eligible to enroll under a multicare plan and 
        for whom additional financial assistance is made available 
        under this section; and
            (2) no Federal financial participation is allowable under 
        section 1903(a) of the Social Security Act for expenditures 
        relating to acute care services to any poor or near poor 
        individual who is eligible to enroll under a multicare plan and 
        for whom additional financial assistance is made available 
        under this section.
Expenditures under paragraph (2) shall include payments to 
disproportionate share hospitals under section 1923 of the Social 
Security Act.
    (d) Specific Limitations on Cost-Sharing.--
            (1) Sliding scale.--The premiums and cost-sharing imposed 
        under the lowest cost multicare plans for poor and near poor 
        individuals shall be determined on a sliding scale based on the 
        family income of an individual.
            (2) Maximum level.--Such premiums and cost-sharing may not 
        exceed--
                    (A) in the case of a poor individual, 5 percent of 
                the individual's family income, and
                    (B) in the case of a near-poor individual, 5 
                percent of the Federal official poverty level 
                (applicable to a family of the size involved) plus 10 
                percent of the amount by which the individual's family 
                income exceeds such poverty level.

SEC. 108. ESTABLISHMENT OF REINSURANCE MECHANISM.

    (a) Establishment.--
            (1) In general.--Each State multicare program shall include 
        a reinsurance mechanism for high risk individuals enrolled (or 
        enrolling) in multicare plans offered in the State.
            (2) Governance.--The mechanism shall be governed by a 
        commission appointed by the chief executive officer of the 
        State. The membership of the commission shall include such 
        officer (or the officer's designee) and representatives of plan 
        sponsors, major providers, labor, consumers, State governments, 
        and the business community.
    (b) Requirements.--The mechanism under this section shall require 
all multicare plans--
            (1) to pay into a common fund for each below-average-risk 
        individual an amount related to the degree to which the 
        individual's risk is below the average risk, and
            (2) to receive from the common fund for each above-average-
        risk individual an amount related to the degree to which the 
        individual's risk is above the average risk.
The mechanism may not use the fact that a plan is a below-average-cost 
plan as an indicator that the plan serves below-average-risk 
individuals.
    (c) Options.--
            (1) Stop-loss.--The mechanism also may provide for 
        additional payments from the common fund to multicare plans for 
        individuals whose costs exceed a particular threshold, and may 
        require all plans (including plans participating in the Federal 
        Employees Health Benefits program under chapter 89 of title 5, 
        United States Code) to make contributions to the fund to offset 
        such additional payments.
            (2) Continuous coverage incentives.--The mechanism may 
        provide for appropriate incentives to encourage continuous 
        coverage of individuals and groups.
            (3) Cost-sharing limit.--The mechanism may provide for 
        limits on the non-premium cost-sharing of enrollees.
            (4) Multi-state option.--State multicare programs may 
        cooperate and establish multistate reinsurance mechanisms to 
        carry out this section.
    (d) Treatment of Self-Insured Plans.--
            (1) In general.--In the case of a multicare plan that is a 
        self-insured plan (as defined by the Secretary), except as 
        provided in paragraph (2), the plan is subject to the 
        requirements of this section, notwithstanding any provision of 
        the Employee Retirement Income Security Act of 1974 to the 
        contrary.
            (2) Exception.--Paragraph (1) and the provisions of 
        subsections (a) through (c) shall not apply to a self-insured 
        plan that operates in at least 3 States and that has elected, 
        under section 331(c), to participate in the national 
        reinsurance mechanism (under section 331) rather than in State 
        reinsurance mechanisms under this section.

SEC. 109. CONSUMER EDUCATION AND ASSISTANCE.

    (a) In General.--Each State multicare program shall establish 
procedures--
            (1) for collecting, publishing, and distributing 
        comparative value information (described in section 103(c)) on 
        multicare plans to consumers, and
            (2) for educating individuals eligible for State health 
        care subsidies regarding their health care options and the 
        requirements under section 107 to qualify for reduced cost-
        sharing.
    (b) Distribution of Plan Information Through Employers.--A State 
multicare program may require employers to supply basic information on 
multicare plans in the State (whether prepared by the program or the 
plans) to their employees.

SEC. 110. CONSUMER RIGHTS ENFORCEMENT.

    Each State multicare program shall assure compliance of multicare 
plans with the consumer rights under section 203.

SEC. 111. COMPLIANCE OF STATE INCOME TAX LAWS.

    Each State multicare program shall provide for assurances that any 
income tax laws of the State, insofar as they provide for the 
determination of tax based upon income as determined under the Federal 
income tax laws, treat employer payments for health care premiums and 
expenses of employees or dependents as payment of wages to such 
employees and dependents.

SEC. 112. DISTRIBUTION OF INFORMATION ON AVERAGE PRICES OF COMMON 
              HEALTH CARE SERVICES.

    Each State multicare program shall provide for the distribution, on 
both a State and local level, of information on the average prices of 
common health care services, including such services as the Secretary 
may specify.

 Subtitle B--Federal Contribution Toward Multicare Plan Premiums; Tax 
                              Law Changes

SEC. 121. COMPUTATION OF AMOUNT OF FEDERAL CONTRIBUTION.

    (a) Determination of Amount.--The Secretary shall determine for 
each year (beginning with 1996) an annual Federal contribution amount 
in accordance with this section.
    (b) Amount.--Subject to subsection (c):
            (1) Amount for years before 2002.--
                    (A) In general.--The Federal contribution amount 
                for a year before 2002 is equal to--
                            (i) the total amount of available funds 
                        (determined under subparagraph (B)) for the 
                        year, divided by
                            (ii) the average number of individuals 
                        described in subparagraph (C) for the year.
                    (B) Funds available.--The total amount of available 
                funds for a year is equal to the sum of the following:
                            (i) Additional net federal revenues.--The 
                        amount described in this subparagraph is the 
                        amount by which--
                                    (I) the increase in all Federal 
                                revenues (including employment-related 
                                excise taxes) resulting from the 
                                amendments made by sections 122 and 
                                123, exceeds
                                    (II) the increase in appropriations 
                                resulting from the increase in 
                                authorization of appropriations 
                                provided under section 441(a) (relating 
                                to facilitating development and use of 
                                medical practice guidelines).
                            (ii) Additional medicaid-related amount.--
                        The product described in section 
                        101(c)(3)(A)(ii)(II) for the State, increased 
                        (for each year after the last full year 
                        referred to in section 101(c)(3)(A)(ii)(I), up 
                        to the year involved) by the applicable 
                        inflator (specified in section 107(b)(2)(D)) 
                        for the year, and subject to any adjustment for 
                        changes in population under section 107(b)(4).
                    (C) Individuals described.--
                            (i) In general.--The number of individuals 
                        described in this subparagraph for a year is--
                                    (I) the estimated total average 
                                population of the United States in the 
                                year, less
                                    (II) the sum of the average number 
                                of exempt individuals in the year.
            (2) Years beginning with 2002.--The Federal contribution 
        amount for a year after 2001 is equal to the Federal 
        contribution amount determined under this subsection for the 
        previous year increased by the applicable inflator for the year 
        involved (as specified under section 107(b)(3)).
    (c) Application by Enrollment Class.--
            (1) Establishment of enrollment classes.--
                    (A) In general.--The Secretary shall establish one 
                or more sets of enrollment classes based on both--
                            (i) family composition, and
                            (ii) ages of family members.
                    (B) Use of common classifications for family 
                enrollment.--The family classifications under 
                subparagraph (A)(i) shall be based on common family 
                enrollment categories, such as individual only, 
                individual with children, married couple without 
                children, and a married couple with children.
            (2) Adjustment of federal contribution based on enrollment 
        class.--The Secretary shall adjust the Federal contribution 
        amount determined under this section for each of the enrollment 
        classes so that, without changing the total amount of the 
        Federal contribution, the ratio of the Federal contribution 
        amount for enrollees in the different classes is equal to the 
        ratio of average costs under multicare plans for enrollees in 
        the respective classes.

SEC. 122. TERMINATION OF EXCLUSION FOR EMPLOYER-PROVIDED HEALTH CARE 
              COVERAGE AND OF DEDUCTION FOR HEALTH INSURANCE COSTS OF 
              SELF-EMPLOYED.

    (a) Termination of Exclusion for Employer-Provided Health Care 
Coverage.--
            (1) In general.--The text of section 106 of the Internal 
        Revenue Code of 1986 is amended to read as follows:
    ``(a) In General.--Gross income of an employee does not include 
employer-provided coverage under an accident or health plan.
    ``(b) Termination.--
            ``(1) In general.--This section shall not apply to any 
        taxable year beginning on or after the first day of the second 
        calendar year beginning after the date of the enactment of this 
        subsection.
            ``(2) Exception.--Paragraph (1) shall not apply to a 
        medical or dental care plan provided under section 1074(a) of 
        title 10, United States Code.
    ``(c) Special Rules for Determining Amount of Inclusion.--
            ``(1) In general.--For purposes of this section, the value 
        of any coverage shall be determined on the basis of the average 
        cost of providing such coverage to the beneficiaries receiving 
        such coverage.
            ``(2) Special rule.--To the extent provided by the 
        Secretary, cost determinations under paragraph (1) may be made 
        on the basis of reasonable estimates but shall not vary based 
        on the age of employees or their dependents.''
            (2) Reporting on w-2 form.--Subsection (a) of section 6051 
        of such Code (relating to receipts for employees) is amended by 
        striking ``and'' at the end of paragraph (8), by striking the 
        period at the end of paragraph (9) and inserting ``, and'', and 
        by inserting after paragraph (9) the following new paragraph:
            ``(10) the value of the employer-provided coverage under 
        any accident or health plan (determined in accordance with 
        section 106(c)) which is not excludable from gross income under 
        section 106 by reason of section 106(b) and the number of 
        months during such calendar year that such coverage was 
        provided.''
    (b) Termination of Deduction for Health Insurance Costs of Self-
Employed.--Subsection (l) of section 162 of such Code is amended by 
adding at the end thereof the following new paragraph:
            ``(7) Termination on implementation of multicare.--In no 
        event shall this subsection apply to any taxable year beginning 
        on or after the first day of the second calendar year beginning 
        after the date of the enactment of this paragraph.''
    (c) Application of FICA Taxes and Income Tax Withholding.--
            (1) FICA taxes.--Subsection (a) of section 3121 of such 
        Code is amended by adding at the end thereof the following new 
        flush sentence:
``Paragraphs (2) and (4) shall not apply to any amount paid for 
coverage of an employee or any of his dependents under an accident or 
health plan.''
            (2) Wage withholding.--Subsection (a) of section 3401 of 
        such Code is amended by adding at the end thereof the following 
        new flush sentence:
``The term `wages' shall include amounts paid for coverage of an 
employee or any of his dependents under an accident or health plan.''
            (3) Effective date.--The amendments made by this subsection 
        shall apply to taxable years beginning on or after the first 
        day of the second calendar year beginning after the date of the 
        enactment of this Act.

SEC. 123. TERMINATION OF DEDUCTION FOR MEDICAL CARE.

    Section 213 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new subsection:
    ``(f) Termination on Implementation of Multicare.--In no event 
shall this section apply to any taxable year beginning on or after the 
first day of the second calendar year beginning after the date of the 
enactment of this subsection.''

               TITLE II--REQUIREMENTS FOR MULTICARE PLANS

                    Subtitle A--General Requirements

SEC. 201. ENROLLMENT AND CONTINUITY OF COVERAGE.

    (a) In General.--Each multicare plan shall--
            (1) accept for enrollment (except to the extent the 
        Secretary may provide) all individuals eligible for enrollment, 
        except as provided in section 103(b); and
            (2) not condition or limit the provision or payment for 
        services based on any pre-existing condition.
    (b) Certification of Enrollment for Purposes of Receipt of Federal 
Contribution.--Each multicare plan shall provide for notice to the 
Secretary or the State multicare program of such information as the 
Secretary may require in order to establish the entitlement of the plan 
to payment from a State multicare program under section 106.

SEC. 202. COVERED SERVICES.

    A multicare plan must--
            (1) clearly disclose to each enrollee (in a manner 
        specified by the State multicare program) the differences 
        between the services covered under the plan and the list of 
        services established under section 104(a)(2)(A), and
            (2) include, for purposes of applying the catastrophic 
        protection under section 203(e), hospital, professional, and 
        other services specified by the Secretary.

SEC. 203. PREMIUMS AND COST-SHARING; CATASTROPHIC PROTECTION.

    (a) In General.--Except as a State multicare program otherwise 
provides under title I and except as provided in this section, a 
multicare plan--
            (1) may impose cost-sharing in the form of premiums, 
        deductibles, coinsurance, and copayments, and
            (2) shall disclose the portion of such a premium which is 
        met through the contribution provided under section 106.
    (b) Limits on Premium Variations.--
            (1) In general.--Except as provided in paragraph (2), the 
        premiums with respect to multicare plans offered in an area of 
        a State shall be established, and shall vary, based only on the 
        enrollment classes provided under section 121(c)(1). Each plan 
        shall fairly allocate the costs of such premiums among such 
        classes.
            (2) Use of behavioral factors.--Premiums under a multicare 
        plan may vary based on factors (such as smoking, substance 
        abuse, and excessive weight) which are defined by the Secretary 
        and for which personal behavior is clearly related to receipt 
        of health care services.
    (c) Limitation on Adjustment of Coinsurance and Copayments.--A 
multicare plan--
            (1) may adjust coinsurance or copayment rates to encourage 
        enrollees to use (A) preferred providers, (B) providers that 
        charge lower amounts, or (C) different procedures, but
            (2) may not adjust coinsurance based on individual patient 
        characteristics, including the age, sex, wellness, or medical 
        history of the individual.
    (d) Use of Medical Savings Accounts.--A multicare plan may 
establish for its enrollees medical savings accounts--
            (1) from which payments for services (below a catastrophic 
        limit) are made by the enrollees, and
            (2) for which balances may be carried forward from year to 
        year and may be applied against future expenses, be rebated to 
        the enrollee, or used for retirement purposes.
    (e) Catastrophic Protection.--
            (1) In general.--A multicare plan shall include a maximum 
        limit on the annual amount of patient cost-sharing for premiums 
        and out-of-pocket expenses for covered services.
            (2) Limit.--
                    (A) In general.--Subject to the succeeding 
                provisions of this paragraph, such annual maximum limit 
                shall not exceed--
                            (i) $5,000 for any individual, and
                            (ii) $10,000, in the aggregate, for all 
                        members of a family.
                    (B) Indexing.--For any year, after the year in 
                which this Act is enacted, the dollar amounts specified 
                under subparagraph (A) shall be the dollar amounts 
                specified under this paragraph for the previous year 
                (taking into account any previous application of this 
                subparagraph) increased by the applicable inflator for 
                the year (as specified under section 107(b)(3)).
                    (C) Additional limits.--A State multicare program 
                may--
                            (i) impose dollar limits that are less than 
                        the limits otherwise specified under this 
                        paragraph; and
                            (ii) provide for the application of limits 
                        for expenses over a multi-year period.
                    (D) State authority.--If a State multicare program 
                provides for a subsidy of stop-loss limits for 
                catastrophic coverage for lower income residents (under 
                its reinsurance mechanism under section 108), the 
                program may establish regulations designed to prevent 
                manipulation of household size and membership so as to 
                qualify for catastrophic protection benefits.
    (f) Application of Excess Contribution Amount Towards Cost 
Sharing.--If the amount of the State contribution under section 106(b) 
toward the premium of an individual exceeds the individual's premium 
for a multicare plan, the excess amount shall be counted by the plan 
towards the cost sharing for the individual under the plan.

SEC. 204. PARTICIPATION IN REINSURANCE SYSTEM.

    Each multicare plan shall participate in the applicable reinsurance 
system (established by the State multicare program under section 108 or 
by the Secretary pursuant to section 301 or 331).

SEC. 205. DATA REQUIREMENT.

    (a) In General.--Each multicare plan (and health care providers 
participating in the plan) shall collect and provide to the State 
multicare program data on costs of health care, prices for services, 
and patient outcomes, in accordance with standards established by the 
Secretary by regulation.
    (b) Pricing Information.--A multicare plan shall condition the 
payment under the plan for services of a provider upon the provider 
disclosing to the public, in a form, manner, and at a time specified by 
the Secretary, such information on the provider's charges as the State 
multicare program specifies, in accordance with guidelines of the 
Secretary.

SEC. 206. MEDICAL MALPRACTICE REFORM AND ADMINISTRATIVE COST SAVINGS.

    Each multicare plan (and health care providers participating in the 
plan) shall comply with the applicable requirements of--
            (1) title IV (relating to medical malpractice liability 
        reform),
            (2) subtitle A of title V (relating to standardization of 
        claims processing), and
            (3) subtitle B of title V (relating to electronic medical 
        data standards).

SEC. 207. CONSUMER RIGHTS.

    (a) Notice of Rights; Enforcement.--
            (1) Notice.--Each multicare plan shall notify enrollees of 
        their consumer rights under this section and of the procedures 
        established by the plan to ensure these rights.
            (2) Development of regulations.--The Secretary shall 
        develop regulation to implement the consumer rights established 
        under this section.
            (3) State enforcement.--States are responsible, under their 
        multicare programs, for assuring compliance of multicare plans 
        with the requirements of this section.
    (b) Provision of Patient Cost-Sharing Information.--
            (1) In general.--Each multicare plan which provides for 
        cost-sharing (other than premiums) shall ensure that enrollees 
        are provided, in advance of the receipt of treatment (except as 
        provided in paragraph (3)), with information on the expected 
        total costs of treatment and their expected share of the costs. 
        Such information may be based on the estimates for the average 
        cost for such treatment.
            (2) Total cost.--For purposes of paragraph (1), the total 
        cost of treatment--
                    (A) in the case of a patient's initial visit, shall 
                consist of the initial visit only, and
                    (B) in the case of subsequent treatment, shall 
                include all expenses resulting from the treatment 
                procedure prescribed by the provider.
            (3) Exception for emergencies.--In the case of emergency 
        treatment, the information under this subsection shall be 
        provided at the earliest reasonable time after such treatment 
        is initiated.
    (c) Provision of Price Information by Health Care Providers.--
            (1) In general.--Each health care provider is required to 
        make available information on the provider's prices for health 
        care services. Such information shall be made available to the 
        public and to individuals and organizations upon request.
            (2) Standards.--Such information shall be made available in 
        accordance with standards and a common format established by 
        the Secretary.
    (d) Patient Access to Medical Information.--Each individual has a 
right to obtain, through the multicare plan in which the individual is 
enrolled, information contained in the medical record of a provider 
that has provided health care services for which payment may be made 
under the plan.

       Subtitle B--Multiple Employer Health Benefits Protections

SEC. 211. LIMITED EXEMPTION UNDER PREEMPTION RULES FOR MULTIPLE 
              EMPLOYER PLANS PROVIDING HEALTH BENEFITS SUBJECT TO 
              CERTAIN FEDERAL STANDARDS.

    (a) In General.--Subtitle B of title I of the Employee Retirement 
Income Security Act of 1974 is amended by adding at the end the 
following new part:

                ``Part 7--Multiple Employer Health Plans

``SEC. 701. DEFINITIONS.

    ``For purposes of this part:
            ``(1) Insurer.--The term `insurer' means an insurance 
        company, insurance service, or insurance organization, licensed 
        to engage in the business of insurance by a State.
            ``(2) Participating employer.--The term `participating 
        employer' means, in connection with a multiple employer welfare 
        arrangement, any employer if any of its employees, or any of 
        the dependents of its employees, are or were covered under such 
        arrangement during the employment of the employees.
            ``(3) Excess/stop loss coverage.--The term `excess/stop 
        loss coverage' means, in connection with a multiple employer 
        welfare arrangement, a contract under which an insurer provides 
        for payment with respect to claims under the arrangement, 
        relating to participants or beneficiaries individually or 
        otherwise, in excess of an amount or amounts specified in such 
        contract.
            ``(4) Qualified actuary.--The term `qualified actuary' 
        means an individual who is a member of the American Academy of 
        Actuaries or meets such reasonable standards and qualifications 
        as the Secretary may provide by regulation.
            ``(5) Sponsor.--The term `sponsor' means, in connection 
        with a multiple employer welfare arrangement, the association 
        or other entity which establishes or maintains the arrangement.
            ``(6) State location of covered individuals.--
                    ``(A) In general.--A multiple employer welfare 
                arrangement shall be treated as covering individuals 
                located in a State only if the minimum required number 
                of individuals who are covered under the arrangement 
                are located in such State, except that if the minimum 
                required number of individuals are not located in any 
                State, such arrangement shall be treated as covering 
                individuals in any State in which any covered 
                individual is located.
                    ``(B) Minimum required number.--For purposes of 
                subparagraph (A), the minimum required number is the 
                greater of--
                            ``(i) 5 percent of the total number of 
                        individuals described in subparagraph (A), or
                            ``(ii) 50.
                    ``(C) Location of individuals in state.--For 
                purposes of subparagraph (A), an individual shall be 
                treated as located in a State if such individual is 
                employed in such State or the address of such 
                individual last known by the arrangement is located in 
                such State.
            ``(7) State insurance commissioner.--The term `State 
        insurance commissioner' means the insurance commissioner (or 
        similar official) of a State.
            ``(8) Domicile state.--The term `domicile State' means, in 
        connection with a multiple employer welfare arrangement, the 
        State in which, according to the application for an exemption 
        under this part, most individuals to be covered under the 
        arrangement are located, except that, in any case in which 
        information contained in the latest annual report of the 
        arrangement filed under this part indicates that most 
        individuals covered under the arrangement are located in a 
        different State, such term means such different State.
            ``(9) Fully insured arrangement.--A multiple employer 
        welfare arrangement shall be treated as fully insured only if 
        one or more insurers, health maintenance organizations, similar 
        organizations regulated under State law for solvency, or any 
        combination thereof are liable under one or more insurance 
        policies or contracts for all benefits under the arrangement 
        (irrespective of any recourse they may have against other 
        parties).
            ``(10) Multiple employer health plan.--The term `multiple 
        employer health plan' means a multiple employer welfare 
        arrangement treated as an employee welfare benefit plan by 
        reason of an exemption under this part.

``SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PROVIDING BENEFITS IN THE 
              FORM OF MEDICAL CARE RELIEVED OF CERTAIN RESTRICTIONS ON 
              PREEMPTION OF STATE LAW AND TREATED AS EMPLOYEE WELFARE 
              BENEFIT PLANS.

    ``(a) In General.--Subject to subsection (b), a multiple employer 
welfare arrangement which is not fully insured and with respect to 
which there is in effect an exemption granted by the Secretary under 
this part (or with respect to which there is pending a complete 
application for such an exemption and the Secretary determines that 
provisional protection under this part is appropriate)--
            ``(1) shall be treated for purposes of subtitle A and the 
        preceding parts of this subtitle as an employee welfare benefit 
        plan, irrespective of whether such arrangement is an employee 
        welfare benefit plan, and
            ``(2) shall be exempt from section 514(b)(6)(A)(ii).
    ``(b) Benefits Must Consist of Medical Care.--Subsection (a) shall 
apply to a multiple employer welfare arrangement only if the benefits 
provided thereunder consist solely of medical care described in section 
607(1) (disregarding such incidental benefits as the Secretary shall 
specify by regulation).
    ``(c) Restriction on Commencement of New Arrangements.--A multiple 
employer welfare arrangement providing benefits which consist of 
medical care described in section 607(1) which has not commenced 
operations as of January 1, 1994, may commence operations only if an 
exemption granted to the arrangement under this part is in effect (or 
there is pending with respect to the arrangement a complete application 
for such an exemption and the Secretary determines that provisional 
protection under this part is appropriate).

``SEC. 703. EXEMPTION PROCEDURE.

    ``(a) In General.--The Secretary shall grant an exemption described 
in section 702(a) to a multiple employer welfare arrangement if--
            ``(1) an application for such exemption with respect to 
        such arrangement, identified individually or by class, has been 
        duly filed in complete form with the Secretary in accordance 
        with this part,
            ``(2) such application demonstrates compliance with the 
        requirements of section 704 with respect to such arrangement, 
        and
            ``(3) the Secretary finds that such exemption is--
                    ``(A) administratively feasible,
                    ``(B) not adverse to the interests of the 
                individuals covered under the arrangement, and
                    ``(C) protective of the rights and benefits of the 
                individuals covered under the arrangement.
    ``(b) Notice and Hearing.--Before granting an exemption under this 
section, the Secretary shall publish notice in the Federal Register of 
the pendency of the exemption, shall require that adequate notice be 
given to interested persons, including the State insurance commissioner 
of each State in which covered individuals under the arrangement are, 
or are expected to be, located, and shall afford interested persons 
opportunity to present views. The Secretary may not grant an exemption 
under this section unless the Secretary affords an opportunity for a 
hearing and makes a determination on the record with respect to the 
findings required under subsection (a)(3). The Secretary shall, to the 
maximum extent practicable, make a final determination with respect to 
any application filed under this section in the case of a newly 
established arrangement within 90 days after the date which the 
Secretary determines is the date on which such application is filed in 
complete form.

``SEC. 704. ELIGIBILITY REQUIREMENTS.

    ``(a) Application for Exemption.--
            ``(1) In general.--An exemption may be granted by the 
        Secretary under this part only on the basis of an application 
        filed with the Secretary in such form and manner as shall be 
        prescribed in regulations of the Secretary. Any such 
        application shall be signed by the operating committee and the 
        sponsor of the arrangement.
            ``(2) Filing fee.--The arrangement shall pay to the 
        Secretary at the time of filing an application under this 
        section a filing fee in the amount of $5,000, which shall be 
        available, to the extent provided in appropriation Acts, to the 
        Secretary for the sole purpose of administering the exemption 
        procedures under this part.
            ``(3) Information included.--An application filed under 
        this section shall include, in a manner and form prescribed in 
        regulations of the Secretary, at least the following 
        information:
                    ``(A) Identifying information.--The names and 
                addresses of--
                            ``(i) the sponsor, and
                            ``(ii) the members of the operating 
                        committee of the arrangement.
                    ``(B) States in which arrangement intends to do 
                business.--The States in which individuals covered 
                under the arrangement are to be located and the number 
                of such individuals expected to be located in each such 
                State.
                    ``(C) Bonding requirements.--Evidence provided by 
                the operating committee that the bonding requirements 
                of section 412 will be met as of the date of the 
                application.
                    ``(D) Plan documents.--A copy of the documents 
                governing the arrangement (including any bylaws and 
                trust agreements), the summary plan description, and 
                other material describing the benefits and coverage 
                that will be provided to individuals covered under the 
                arrangement.
                    ``(E) Agreements with service providers.--A copy of 
                any agreements between the arrangement and contract 
                administrators and other service providers.
                    ``(F) Funding report.--A report setting forth 
                information determined as of a date within the 120-day 
                period ending with the date of the application, 
                including the following:
                            ``(i) Reserves.--A statement, certified by 
                        the operating committee of the arrangement, and 
                        a statement of actuarial opinion, signed by a 
                        qualified actuary, that all applicable 
                        requirements of section 707 are or will be met 
                        in accordance with regulations which the 
                        Secretary shall prescribe.
                            ``(ii) Adequacy of contribution rates.--A 
                        statement of actuarial opinion, signed by a 
                        qualified actuary, which sets forth a 
                        description of the extent to which contribution 
                        rates are adequate to provide for the payment 
                        of all obligations and the maintenance of 
                        required reserves under the arrangement for the 
                        12-month period beginning with such date within 
                        such 120-day period, taking into account the 
                        expected coverage and experience of the 
                        arrangement. If the contribution rates are not 
                        fully adequate, the statement of actuarial 
                        opinion shall indicate the extent to which the 
                        rates are inadequate and the changes needed to 
                        ensure adequacy.
                            ``(iii) Current and projected value of 
                        assets and liabilities.--A statement of 
                        actuarial opinion signed by a qualified 
                        actuary, which sets forth the current value of 
                        the assets and liabilities accumulated under 
                        the arrangement and a projection of the assets, 
                        liabilities, income, and expenses of the 
                        arrangement for the 12-month period referred to 
                        in clause (ii). The income statement shall 
                        identify separately the arrangement's 
                        administrative expenses and claims.
                            ``(iv) Costs of coverage to be charged and 
                        other expenses.--A statement of the costs of 
                        coverage to be charged, including an 
                        itemization of amounts for administration, 
                        reserves, and other expenses associated with 
                        the operation of the arrangement.
                            ``(v) Other information.--Any other 
                        information which may be prescribed in 
                        regulations of the Secretary as necessary to 
                        carry out the purposes of this part.
    ``(b) Other Requirements.--A complete application for an exemption 
under this part shall include information which the Secretary 
determines to be complete and accurate and sufficient to demonstrate 
that the following requirements are met with respect to the 
arrangement:
            ``(1) Sponsor.--The sponsor is, and has been (together with 
        its immediate predecessor, if any) for a continuous period of 
        not less than 3 years before the date of the application, 
        organized and maintained in good faith, with a constitution and 
        bylaws specifically stating its purpose, as a trade 
        association, an industry association, a professional 
        association, or a chamber of commerce or other business group, 
        for substantial purposes other than that of obtaining or 
        providing medical care described in section 607(1), and the 
        applicant demonstrates to the satisfaction of the Secretary 
        that the sponsor is established as a permanent entity which 
        receives the active support of its members.
            ``(2) Operating committee.--The arrangement is operated, 
        pursuant to a trust agreement, by an operating committee which 
        has complete fiscal control over the arrangement and which is 
        responsible for all operations of the arrangement, and the 
        operating committee has in effect rules of operation and 
        financial controls, based on a 3-year plan of operation, 
        adequate to carry out the terms of the arrangement and to meet 
        all requirements of this title applicable to the arrangement. 
        The members of the committee are individuals selected from 
        individuals who are the owners, officers, directors, or 
        employees of the participating employers or who are partners in 
        the participating employers and actively participate in the 
        business. No such member is an owner, officer, director, or 
        employee of, or partner in, a contract administrator or other 
        service provider to the arrangement, except that officers or 
        employees of a sponsor which is a service provider (other than 
        a contract administrator) to the arrangement may be members of 
        the committee if they constitute not more than 25 percent of 
        the membership of the committee and they do not provide 
        services to the arrangement other than on behalf of the 
        sponsor. The committee has sole authority to approve 
        applications for participation in the arrangement and to 
        contract with a service provider to administer the day-to-day 
        affairs of the arrangement.
            ``(3) Contents of governing instruments.--The instruments 
        governing the arrangement include a written instrument, meeting 
        the requirements of an instrument required under section 
        402(a)(1), which--
                    ``(A) provides that the committee serves as the 
                named fiduciary required for plans under section 
                402(a)(1) and serves in the capacity of a plan 
                administrator (referred to in section 3(16)(A)),
                    ``(B) provides that the sponsor is to serve as plan 
                sponsor (referred to in section 3(16)(B)),
                    ``(C) incorporates the requirements of section 707, 
                and
                    ``(D) provides that, effective upon the granting of 
                an exemption under this part--
                            ``(i) all participating employers must be 
                        members or affiliated members of the sponsor, 
                        except that, in the case of a sponsor which is 
                        a professional association or other individual-
                        based association, if at least one of the 
                        officers, directors, or employees of an 
                        employer, or at least one of the individuals 
                        who are partners in an employer and who 
                        actively participates in the business, is a 
                        member or affiliated member of the sponsor, 
                        participating employers may also include such 
                        employer, and
                            ``(ii) all individuals thereafter 
                        commencing coverage under the arrangement must 
                        be--
                                    ``(I) active or retired owners, 
                                officers, directors, or employees of, 
                                or partners in, participating 
                                employers, or
                                    ``(II) the beneficiaries of 
                                individuals described in subclause (I).
            ``(4) Contribution rates.--The contribution rates referred 
        to in subsection (a)(3)(F)(ii) are adequate.
            ``(5) Regulatory requirements.--Such other requirements as 
        the Secretary may prescribe by regulation as necessary to carry 
        out the purposes of this part.
    ``(c) Treatment of Party Seeking Exemption Where Party is Subject 
to Disqualification.--
            ``(1) In general.--In the case of any application for an 
        exemption under this part with respect to a multiple employer 
        welfare arrangement, if the Secretary determines that the 
        sponsor of the arrangement or any other person associated with 
        the arrangement is subject to disqualification under paragraph 
        (2), the Secretary may deny the exemption with respect to such 
        arrangement.
            ``(2) Disqualification.--A person is subject to 
        disqualification under this paragraph if such person--
                    ``(A) has intentionally made a material 
                misstatement in the application for exemption,
                    ``(B) has obtained or attempted to obtain an 
                exemption under this part through misrepresentation or 
                fraud,
                    ``(C) has misappropriated or converted to such 
                person's own use, or improperly withheld, money held 
                under a plan or any multiple employer welfare 
                arrangement,
                    ``(D) is prohibited (or would be prohibited if the 
                arrangement were a plan) from serving in any capacity 
                in connection with the arrangement under section 411,
                    ``(E) has failed to appear without reasonable cause 
                or excuse in response to a subpoena, examination, 
                warrant, or any other order lawfully issued by the 
                Secretary compelling such response,
                    ``(F) has previously been subject to a 
                determination under this part resulting in the denial, 
                suspension, or revocation of an exemption under this 
                part on similar grounds, or
                    ``(G) has otherwise violated any provision of this 
                title with respect to a matter which the Secretary 
                determines of sufficient consequence to merit 
                disqualification for purposes of this part.
    ``(d) Franchise Networks.--In the case of a multiple employer 
welfare arrangement established and maintained by a franchisor for a 
franchise network consisting of its franchisees, such franchisor shall 
be treated as the sponsor referred to in the preceding provisions of 
this section, such network shall be treated as an association referred 
to in such provisions, and each franchisee shall be treated as a member 
(of the association and the sponsor) referred to in such provisions, if 
all participating employers are such franchisees and the requirements 
of subsection (b)(1) with respect to a sponsor are met with respect to 
the network.
    ``(e) Certain Collectively Bargained Arrangements.--In applying the 
preceding provisions of this section in the case of a multiple employer 
welfare arrangement which would be described in section 3(40)(A)(i) but 
for the failure to meet any requirement of section 3(40)(C)--
            ``(1) paragraphs (1) and (2) of subsection (b) and 
        subparagraphs (A), (B), and (D) of paragraph (3) of subsection 
        (b) shall be disregarded, and
            ``(2) the joint board of trustees shall be considered the 
        operating committee of the arrangement.
    ``(f) Certain Arrangements Not Meeting Single Employer 
Requirement.--
            ``(1) In general.--In any case in which the majority of the 
        employees covered under a multiple employer welfare arrangement 
        are employees of a single employer (within the meaning of 
        clauses (i) and (ii) of section 3(40)(B)), if all other 
        employees covered under the arrangement are employed by 
        employers who are related to such single employer, subsection 
        (b)(3)(D) shall be disregarded.
            ``(2) Related employers.--For purposes of paragraph (1), 
        employers are `related' if there is among all such employers a 
        common ownership interest or a substantial commonality of 
        business operations based on common suppliers or customers.

``SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO EXEMPTED 
              ARRANGEMENTS.

    ``(a) Notice of Material Changes.--In the case of any multiple 
employer welfare arrangement with respect to which there is in effect 
an exemption granted under this part, descriptions of material changes 
in any information which was required to be submitted with the 
application for the exemption shall be filed in such form and manner as 
shall be prescribed in regulations of the Secretary. The Secretary may 
require by regulation prior notice of material changes with respect to 
specified matters which might serve as the basis for suspension or 
revocation of the exemption.
    ``(b) Reporting Requirements.--Under regulations of the Secretary, 
the requirements of sections 102, 103, and 104 shall apply with respect 
to any multiple employer welfare arrangement with respect to which 
there is or has been in effect an exemption granted under this part in 
the same manner and to the same extent as such requirements apply to 
employee welfare benefit plans, irrespective of whether such exemption 
continues in effect. The annual report required under section 103 for 
any plan year in the case of any such multiple employer welfare 
arrangement shall also include information described in section 
704(a)(3)(F) with respect to the plan year and, notwithstanding section 
104(a)(1)(A), shall be filed not later than 90 days after the close of 
the plan year.
    ``(c) Engagement of Qualified Actuary.--The operating committee of 
each multiple employer welfare arrangement with respect to which there 
is or has been in effect an exemption granted under this part shall 
engage, on behalf of all covered individuals, a qualified actuary who 
shall be responsible for the preparation of the materials comprising 
information necessary to be submitted by a qualified actuary under this 
part. The qualified actuary shall utilize such assumptions and 
techniques as are necessary to enable such actuary to form an opinion 
as to whether the contents of the matters reported under this part--
            ``(1) are in the aggregate reasonably related to the 
        experience of the arrangement and to reasonable expectations, 
        and
            ``(2) represent such actuary's best estimate of anticipated 
        experience under the arrangement.
The opinion by the qualified actuary shall be made with respect to, and 
shall be made a part of, the annual report.
    ``(d) Filing Notice of Exemption With States.--An exemption granted 
to a multiple employer welfare arrangement under this part shall not be 
effective unless written notice of such exemption is filed with the 
State insurance commissioner of each State in which at least 5 percent 
of the individuals covered under the arrangement are located. For 
purposes of this paragraph, an individual shall be considered to be 
located in the State in which a known address of such individual is 
located or in which such individual is employed. The Secretary may by 
regulation provide in specified cases for the application of the 
preceding sentence with lesser percentages in lieu of such 5 percent 
amount.

``SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY ARRANGEMENTS 
              PROVIDING MEDICAL CARE.

    ``(a) In General.--A multiple employer welfare arrangement 
providing benefits consisting of medical care described in section 
607(1) shall issue to each participating employer--
            ``(1) a document equivalent to the summary plan description 
        required of plans under part 1,
            ``(2) information describing the contribution rates 
        applicable to participating employers, and
            ``(3) a statement indicating--
                    ``(A) whether or not the arrangement is fully 
                insured,
                    ``(B) whether or not there is in effect with 
                respect to the arrangement an exemption granted under 
                this part and, if there is in effect such an exemption, 
                that the arrangement is (or is treated as) an employee 
                welfare benefit plan under this title, and
                    ``(C) that the arrangement is not a licensed 
                insurer under the laws of any State.
    ``(b) Time for Disclosure.--Such information shall be issued to 
employers within such reasonable period of time before becoming 
participating employers as may be prescribed in regulations of the 
Secretary.

``SEC. 707. MAINTENANCE OF RESERVES.

    ``(a) In General.--Each multiple employer welfare arrangement with 
respect to which there is or has been in effect an exemption granted 
under this part and which is not fully insured shall establish and 
maintain reserves, consisting of--
            ``(1) a reserve for unearned contributions,
            ``(2) a reserve for payment of claims reported and not yet 
        paid and claims incurred but not yet reported, and for expected 
        administrative costs with respect to such claims, and
            ``(3) a reserve, in an amount recommended by the qualified 
        actuary, for any other obligations of the arrangement.
    ``(b) Minimum Amount for Certain Reserves.--The total of the 
reserves described in subsection (a)(2) shall not be less than an 
amount equal to 25 percent of expected incurred claims and expenses for 
the plan year.
    ``(c) Required Margin.--In determining the amounts of reserves 
required under this section in connection with any multiple employer 
welfare arrangement, the qualified actuary shall include a margin for 
error and other fluctuations taking into account the specific 
circumstances of such arrangement.
    ``(d) Additional Requirements.--The Secretary may provide such 
additional requirements relating to reserves and excess/stop loss 
coverage as the Secretary considers appropriate. Such requirements may 
be provided, by regulation or otherwise, with respect to any 
arrangement or any class of arrangements.
    ``(e) Adjustments for Excess/Stop Loss Coverage.--The Secretary may 
provide for adjustments to the levels of reserves otherwise required 
under subsections (a) and (b) with respect to any arrangement or class 
of arrangements to take into account excess/stop loss coverage provided 
with respect to such arrangement or arrangements.

``SEC. 708. CORRECTIVE ACTIONS.

    ``(a) Actions To Avoid Depletion of Reserves.--A multiple employer 
welfare arrangement with respect to which there is or has been in 
effect an exemption granted under this part shall continue to meet the 
requirements of section 707, irrespective of whether such exemption 
continues in effect. The operating committee of such arrangement shall 
determine semiannually whether the requirements of section 707 are met. 
In any case in which the committee determines that there is reason to 
believe that there is or will be a failure to meet such requirements, 
or the Secretary makes such a determination and so notifies the 
committee, the committee shall immediately notify the qualified actuary 
engaged by the arrangement, and such actuary shall, not later than the 
end of the next following month, make such recommendations to the 
committee for corrective action as the actuary determines necessary to 
ensure compliance with section 707. Not later than 10 days after 
receiving from the actuary recommendations for corrective actions, the 
committee shall notify the Secretary (in such form and manner as the 
Secretary may prescribe by regulation) of such recommendations of the 
actuary for corrective action, together with a description of the 
actions (if any) that the committee has taken or plans to take in 
response to such recommendations. The committee shall thereafter report 
to the Secretary, in such form and frequency as the Secretary may 
specify to the committee, regarding corrective action taken by the 
committee until the requirements of section 707 are met.
    ``(b) Termination.--
            ``(1) Notice of termination.--In any case in which the 
        operating committee of a multiple employer welfare arrangement 
        with respect to which there is or has been in effect an 
        exemption granted under this part determines that there is 
        reason to believe that the arrangement will terminate, the 
        committee shall so inform the Secretary, shall develop a plan 
        for winding up the affairs of the arrangement in connection 
        with such termination in a manner which will result in timely 
        payment of all benefits for which the arrangement is obligated, 
        and shall submit such plan in writing to the Secretary. Actions 
        required under this paragraph shall be taken in such form and 
        manner as may be prescribed in regulations of the Secretary.
            ``(2) Actions required in connection with termination.--In 
        any case in which--
                    ``(A) the Secretary has been notified under 
                subsection (a) of a failure of a multiple employer 
                welfare arrangement with respect to which there is or 
                has been in effect an exemption granted under this part 
                to meet the requirements of section 707 and has not 
                been notified by the operating committee of the 
                arrangement that corrective action has restored 
                compliance with such requirements, and
                    ``(B) the Secretary determines that the continuing 
                failure to meet the requirements of section 707 can be 
                reasonably expected to result in a continuing failure 
                to pay benefits for which the arrangement is obligated,
        the operating committee of the arrangement shall, at the 
        direction of the Secretary, terminate the arrangement and, in 
        the course of the termination, take such actions as the 
        Secretary may require as necessary to ensure that the affairs 
        of the arrangement will be, to the maximum extent possible, 
        wound up in a manner which will result in timely payment of all 
        benefits for which the arrangement is obligated.

``SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF EXEMPTION.

    ``(a) Expiration and Renewal of Exemption.--An exemption granted to 
a multiple employer welfare arrangement under this part shall expire 3 
years after the date on which the exemption is granted. An exemption 
which has expired may be renewed by means of application for an 
exemption in accordance with section 704.
    ``(b) Suspension or Revocation of Exemption by Secretary.--The 
Secretary may suspend or revoke an exemption granted to a multiple 
employer welfare arrangement under this part--
            ``(1) for any cause that may serve as the basis for the 
        denial of an initial application for such an exemption under 
        section 704, or
            ``(2) if the Secretary finds that--
                    ``(A) the arrangement, or the sponsor thereof, in 
                the transaction of business while under the exemption, 
                has used fraudulent, coercive, or dishonest practices, 
                or has demonstrated incompetence, untrustworthiness, or 
                financial irresponsibility,
                    ``(B) the arrangement, or the sponsor thereof, is 
                using such methods or practices in the conduct of its 
                operations, so as to render its further transaction of 
                operations hazardous or injurious to participating 
                employers, or covered individuals,
                    ``(C) the arrangement, or the sponsor thereof, has 
                refused to be examined in accordance with this part or 
                to produce its accounts, records, and files for 
                examination in accordance with this part, or
                    ``(D) any of the officers of the arrangement, or 
                the sponsor thereof, has refused to give information 
                with respect to the affairs of the arrangement or the 
                sponsor or to perform any other legal obligation 
                relating to such an examination when required by the 
                Secretary in accordance with this part.
Any such suspension or revocation under this subsection shall be 
effective only upon a final decision of the Secretary made after notice 
and opportunity for a hearing is provided in accordance with section 
710.
    ``(c) Suspension or Revocation of Exemption Under Court 
Proceedings.--An exemption granted to a multiple employer welfare 
arrangement under this part may be suspended or revoked by a court of 
competent jurisdiction in an action by the Secretary brought under 
paragraph (2), (5), or (6) of section 502(a), except that the 
suspension or revocation under this subsection shall be effective only 
upon notification of the Secretary of such suspension or revocation.
    ``(d) Notification of Participating Employers.--All participating 
employers in a multiple employer welfare arrangement shall be notified 
of the expiration, suspension, or revocation of an exemption granted to 
such arrangement under this part, by such persons and in such form and 
manner as shall be prescribed in regulations of the Secretary, not 
later than 20 days after such expiration or after receipt of notice of 
a final decision requiring such suspension or revocation.
    ``(e) Publication of Expirations, Suspensions, and Revocations.--
The Secretary shall publish all expirations of, and all final decisions 
to suspend or revoke, exemptions granted under this part.

``SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

    ``(a) In General.--Any decision by the Secretary which involves the 
denial of an application by a multiple employer welfare arrangement for 
an exemption under this part or the suspension or revocation of such an 
exemption shall contain a statement of the specific reason or reasons 
supporting the Secretary's action, including reference to the specific 
terms of the exemption and the statutory provision or provisions 
relevant to the determination.
    ``(b) Denials of Applications.--In the case of the denial of an 
application for an exemption under this part, the Secretary shall send 
a copy of the decision to the applicant by certified or registered mail 
at the address specified in the records of the Secretary. Such decision 
shall constitute the final decision of the Secretary unless the 
arrangement, or any party that would be prejudiced by the decision, 
files a written appeal of the denial within 30 days after the mailing 
of such decision. The Secretary may affirm, modify, or reverse the 
initial decision. The decision on appeal shall become final upon the 
mailing of a copy by certified or registered mail to the arrangement or 
party that filed the appeal.
    ``(c) Suspensions or Revocations of Exemption.--In the case of the 
suspension or revocation of an exemption granted under this part, the 
Secretary shall send a copy of the decision to the arrangement by 
certified or registered mail at its address, as specified in the 
records of the Secretary. Upon the request of the arrangement, or any 
party that would be prejudiced by the suspension or revocation, filed 
within 15 days of the mailing of the Secretary's decision, the 
Secretary shall schedule a hearing on such decision by written notice, 
sent by certified or registered mail to the arrangement or party 
requesting such hearing. Such notice shall set forth--
            ``(1) a specific date and time for the hearing, which shall 
        be within the 10-day period commencing 20 days after the date 
        of the mailing of the notice, and
            ``(2) a specific place for the hearing, which shall be in 
        the District of Columbia or in the State and county thereof (or 
        parish or other similar political subdivision thereof) in which 
        is located the arrangement's principal place of business.
The decision as affirmed or modified in such hearing shall constitute 
the final decision of the Secretary, unless such decision is reversed 
in such hearing.''.
    (b) Conforming Amendment to Definition of Plan Sponsor.--Section 
3(16)(B) of such Act (29 U.S.C. 1002(16)(B)) is amended by adding at 
the end the following new sentence: ``Such term also includes the 
sponsor (as defined in section 701(5)) of a multiple employer welfare 
arrangement, or a multiple employer health plan (as defined in section 
701(10)), with respect to which there is or has been in effect an 
exemption granted under part 7.''.
    (c) Alternative Means of Distribution of Summary Plan 
Descriptions.--Section 110 of such Act (29 U.S.C. 1030) is amended by 
adding at the end the following new subsection:
    ``(c) The Secretary shall prescribe, as an alternative method for 
distributing summary plan descriptions in order to meet the 
requirements of section 104(b)(1) in the case of multiple employer 
welfare arrangements providing benefits consisting of medical care 
described in section 607(1), a means of distribution of such 
descriptions by participating employers.''.
    (d) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 is amended by inserting 
after the item relating to section 608 the following new items:

                ``Part 7--Multiple Employer Health Plans

``Sec. 701. Definitions.
``Sec. 702. Exempted multiple employer welfare arrangements treated as 
                            employee welfare benefit plans and exempt 
                            from certain restrictions on preemption.
``Sec. 703. Exemption procedure.
``Sec. 704. Eligibility requirements.
``Sec. 705. Additional requirements applicable to exempted 
                            arrangements.
``Sec. 706. Disclosure to participating employers by arrangements 
                            providing medical care.
``Sec. 707. Maintenance of reserves.
``Sec. 708. Corrective actions.
``Sec. 709. Expiration, suspension, or revocation of exemption.
``Sec. 710. Review of actions of the Secretary.''.

SEC. 212. CLARIFICATION OF SCOPE OF PREEMPTION RULES.

    (a) In General.--Section 514(b)(6)(A)(ii) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1144(b)(6)(A)(ii)) is 
amended by inserting ``, but only, in the case of an arrangement which 
provides medical care described in section 607(1) and with respect to 
which an exemption under part 7 is not in effect,'' before ``to the 
extent not inconsistent with the preceding sections of this title''.
    (b) Cross-Reference.--Section 514(b)(6) of such Act (29 U.S.C. 
1144(b)(6)) is amended by adding at the end the following new 
subparagraph:
    ``(E) For additional rules relating to exemption from subparagraph 
(A)(ii) of multiple employer welfare arrangements providing medical 
care, see part 7.''.

SEC. 213. CLARIFICATION OF TREATMENT OF SINGLE EMPLOYER ARRANGEMENTS.

    Section 3(40)(B) of the Employee Retirement Income Security Act of 
1974 (29 U.S.C. 1002(40)(B)) is amended--
            (1) in clause (i), by inserting ``for any plan year of any 
        such plan, or any fiscal year of any such other arrangement,'' 
        after ``single employer'', and by inserting ``during such year 
        or at any time during the preceding 1-year period'' after 
        ``common control'',
            (2) in clause (iii), by striking ``common control shall not 
        be based on an interest of less than 25 percent'' and inserting 
        ``an interest of greater than 25 percent may not be required as 
        the minimum interest necessary for common control'', and by 
        striking ``and'' at the end,
            (3) by redesignating clause (iv) as clause (v), and
            (4) by inserting after clause (iii) the following new 
        clause:
            ``(iv) in determining, after the application of clause (i), 
        whether benefits are provided to employees of two or more 
        employers, the arrangement shall be treated as having only 1 
        participating employer if, at the time the determination under 
        clause (i) is made, the number of individuals who are employees 
        and former employees of any one participating employer and who 
        are covered under the arrangement is greater than 95 percent of 
        the aggregate number of all individuals who are employees or 
        former employees of participating employers and who are covered 
        under the arrangement.''.

SEC. 214. CLARIFICATION OF TREATMENT OF CERTAIN COLLECTIVELY BARGAINED 
              ARRANGEMENTS.

    (a) In General.--Section 3(40)(A)(i) of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1002(40)(A)(i)) is amended to 
read as follows:
            ``(i) under or pursuant to one or more collective 
        bargaining agreements,''.
    (b) Limitations.--Section 3(40) of such Act (29 U.S.C. 1002(40)) is 
amended by adding at the end the following new subparagraphs:
                    ``(C) Clause (i) of subparagraph (A) shall apply 
                only if--
                            ``(i) the plan or other arrangement, and 
                        the employee organization or any other entity 
                        sponsoring the plan or other arrangement, do 
                        not--
                                    ``(I) utilize the services of any 
                                licensed insurance agent or broker for 
                                soliciting or enrolling employers or 
                                individuals as participating employers 
                                or covered individuals under the plan 
                                or other arrangement, or
                                    ``(II) pay a commission or any 
                                other type of compensation to a person 
                                that is related either to the volume or 
                                number of employers or individuals 
                                solicited or enrolled as participating 
                                employers or covered individuals under 
                                the plan or other arrangement, or to 
                                the dollar amount or size of the 
                                contributions made by participating 
                                employers or covered individuals to the 
                                plan or other arrangement,
                            ``(ii) not less than 85 percent of the 
                        covered individuals under the plan or other 
                        arrangement are individuals who--
                                    ``(I) are employed within a 
                                bargaining unit covered by at least one 
                                of the collective bargaining agreements 
                                with a participating employer (or are 
                                covered on the basis of an individual's 
                                employment in such a bargaining unit), 
                                or
                                    ``(II) are present or former 
                                employees of the sponsoring employee 
                                organization, of an employer who is or 
                                was a party to at least one of the 
                                collective bargaining agreements, or of 
                                the plan or other arrangement or a 
                                related plan or arrangement (or are 
                                covered on the basis of such present or 
                                former employment),
                            ``(iii) the plan or other arrangement does 
                        not provide benefits to individuals (other than 
                        individuals described in clause (ii)(II)) who 
                        work outside the standard metropolitan 
                        statistical area in which the sponsoring 
                        employee organization represents employees (or 
                        to individuals (other than individuals 
                        described in clause (ii)(II)) on the basis of 
                        such work by others), except that in the case 
                        of a sponsoring employee organization that 
                        represents employees who work outside of any 
                        standard metropolitan statistical area, this 
                        clause shall be applied by reference to the 
                        State in which the sponsoring organization 
                        represents employees, and
                            ``(iv) the employee organization or other 
                        entity sponsoring the plan or other arrangement 
                        certifies to the Secretary each year, in a form 
                        and manner which shall 
                        be prescribed in regulations of the Secretary--
                                    ``(I) that the plan or other 
                                arrangement meets the requirements of 
                                clauses (i), (ii), and (iii), and
                                    ``(II) if, for any year, 10 percent 
                                or more of the covered individuals 
                                under the plan are individuals not 
                                described in subclause (I) or (II) of 
                                clause (ii), the total number of 
                                covered individuals and the total 
                                number of covered individuals not so 
                                described.
                    ``(D)(i) Clause (i) of subparagraph (A) shall not 
                apply to a plan or other arrangement that is 
                established or maintained pursuant to one or more 
                collective bargaining agreements which the National 
                Labor Relations Boards determines to have been 
                negotiated or otherwise agreed to in a manner or 
                through conduct which violates section 8(a)(2) of the 
                National Labor Relations Act (29 U.S.C. 158(a)(2)).
                    ``(ii)(I) Whenever a State insurance commissioner 
                has reason to believe that this subparagraph is 
                applicable to part or all of a plan or other 
                arrangement, the State insurance commissioner may file 
                a petition with the National Labor Relations Board for 
                a determination under clause (i), along with sworn 
                written testimony supporting the petition.
                    ``(II) The Board shall give any such petition 
                priority over all other petitions and cases, other than 
                other petitions under subclause (I) or cases given 
                priority under section 10 of the National Labor 
                Relations Act (29 U.S.C. 160).
                    ``(III) The Board shall determine, upon the 
                petition and any response, whether, on the facts before 
                it, the plan or other arrangement was negotiated, 
                created, or otherwise agreed to in a manner or through 
                conduct which violates section 8(a)(2) of the National 
                Labor Relations Act (29 U.S.C. 158(a)(2)). Such 
                determination shall constitute a final determination 
                for purposes of this subparagraph and shall be binding 
                in all Federal or State actions with respect to the 
                status of the plan or other arrangement under this 
                subparagraph.
                    ``(IV) A person aggrieved by the determination of 
                the Board under subclause (III) may obtain review of 
                the determination in any United States court of appeals 
                in the circuit in which the collective bargaining at 
                issue occurred. Commencement of proceedings under this 
                subclause shall not, unless specifically ordered by the 
                court, operate as a stay of any State administrative or 
                judicial action or proceeding related to the status of 
                the plan or other arrangement, except that in no case 
                may the court stay, before the completion of the 
                review, an order which prohibits the enrollment of new 
                individuals into coverage under a plan or 
                arrangement.''.

SEC. 215. EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    (a) Employee Leasing Healthcare Arrangement Defined.--Section 3 of 
the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002) is 
amended by adding at the end the following new paragraph:
    ``(43) Employee Leasing Healthcare Arrangement.--
            ``(A) In general.--Subject to subparagraph (B), the term 
        `employee leasing healthcare arrangement' means any labor 
        leasing arrangement, staff leasing arrangement, extended 
        employee staffing or supply arrangement, or other arrangement 
        under which--
                    ``(i) one business or other entity (hereinafter in 
                this paragraph referred to as the `lessee'), under a 
                lease or other arrangement entered into with any other 
                business or other entity (hereinafter in this paragraph 
                referred to as the `lessor'), receives from the lessor 
                the services of individuals to be performed under such 
                lease or other arrangement, and
                    ``(ii) benefits consisting of medical care 
                described in section 607(1) are provided to such 
                individuals or such individuals and their dependents as 
                participants and beneficiaries.
            ``(B) Exception.--Such term does not include an arrangement 
        described in subparagraph (A) if, under such arrangement, the 
        lessor retains, both legally and in fact, a complete right of 
        direction and control within the scope of employment over the 
        individuals whose services are supplied under such lease or 
        other arrangement, and such individuals perform a specified 
        function for the lessee which is separate and divisible from 
        the primary business or operations of the lessee.''.
    (b) Treatment of Employee Leasing Healthcare Arrangements as 
Multiple Employer Welfare Arrangements.--Section 3(40) of such Act (29 
U.S.C. 1002(40)) (as amended by the preceding provisions of this 
subtitle) is further amended by adding at the end the following new 
subparagraph:
    ``(E) The term `multiple employer welfare arrangement' includes any 
employee leasing healthcare arrangement, except that such term does not 
include any employee leasing healthcare arrangement which is a multiple 
employer health plan (as defined in section 701(10)).''.
    (c) Special Rules for Employee Leasing Healthcare Arrangements.--
            (1) In general.--Part 7 of subtitle B of title I of such 
        Act (as added by the preceding provisions of this subtitle) is 
        amended by adding at the end the following new section:

``SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING HEALTHCARE ARRANGEMENTS.

    ``(a) In General.--The requirements of paragraphs (1), (2), and (3) 
of section 704(b) shall be treated as satisfied in the case of a 
multiple employer welfare arrangement that is an employee leasing 
healthcare arrangement if the application for exemption includes 
information which the Secretary determines to be complete and accurate 
and sufficient to demonstrate that the following requirements are met 
with respect to the arrangement:
            ``(1) 3-year tenure.--The lessor has been in operation for 
        not less than 3 years.
            ``(2) Solicitation restrictions.--Employee leasing services 
        provided under the arrangement are not solicited, advertised, 
        or marketed through licensed insurance agents or brokers acting 
        in such capacity.
            ``(3) Creation of employment relationship.--
                    ``(A) Disclosure statement.--Written notice is 
                provided to each applicant for employment subject to 
                coverage under the arrangement, at the time of 
                application for employment and before commencing 
                coverage under the arrangement, stating that the 
                employer is the lessor under the arrangement.
                    ``(B) Informed consent.--Each such applicant signs 
                a written statement consenting to the employment 
                relationship with the lessor.
                    ``(C) Informed recruitment of lessee's employees.--
                In any case in which the lessor offers employment to an 
                employee of a lessee under the arrangement, the lessor 
                informs each employee in writing that his or her 
                acceptance of employment with the lessor is voluntary 
                and that refusal of such offer will not be deemed to be 
                resignation from or abandonment of current employment.
            ``(4) Requisite employer-employee relationship under 
        arrangement.--Under the employer-employee relationship with the 
        employees of the lessor--
                    ``(A) the lessor retains the ultimate authority to 
                hire, terminate, and reassign such employees,
                    ``(B) the lessor is responsible for the payment of 
                wages, payroll-related taxes, and employee benefits, 
                without regard to payment by the lessee to the lessor 
                for its services,
                    ``(C) the lessor maintains the right of direction 
                and control over its employees, except to the extent 
                that the lessee is responsible for supervision of the 
                work performed consistent with the lessee's 
                responsibility for its product or service,
                    ``(D) in accordance with section 301(a) of the 
                Labor Management Relations Act, 1947 (29 U.S.C. 
                185(a)), the lessor retains in the absence of an 
                applicable collective bargaining agreement, the right 
                to enter into arbitration and to decide employee 
                grievances, and
                    ``(E) no owner, officer, or director of, or partner 
                in, a lessee is an employee of the lessor, and not more 
                than 10 percent of the individuals covered under the 
                arrangement consist of owners, officers, or directors 
                of, or partners in, such a lessee (or any combination 
                thereof).
    ``(b) Definitions.--For purposes of this section:
            ``(1) Lessor.--The term `lessor' means the business or 
        other entity from which services of individuals are obtained 
        under an employee leasing healthcare arrangement.
            ``(2) Lessee.--The term `lessee' means a business or other 
        entity which receives the services of individuals provided 
        under an employee leasing healthcare arrangement.''.
            (2) Clerical amendment.--The table of contents in section 1 
        of such Act (as amended by the preceding provisions of this 
        subtitle) is further amended by inserting after the item 
        relating to section 710 the following new item:

``Sec. 711. Employee leasing healthcare arrangements.''.

SEC. 216. ENFORCEMENT PROVISIONS RELATING TO MULTIPLE EMPLOYER WELFARE 
              ARRANGEMENTS AND EMPLOYEE LEASING HEALTHCARE 
              ARRANGEMENTS.

    (a) Enforcement of Filing Requirements.--Section 502 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1132) is 
amended--
            (1) in subsection (a)(6), by striking ``subsection (c)(2) 
        or (i) or (l)'' and inserting ``paragraph (2) or (4) of 
        subsection (c) or subsection (i) or (l)''; and
            (2) by adding at the end of subsection (c) the following 
        new paragraph:
    ``(4) The Secretary may assess a civil penalty against any person 
of up to $1,000 a day from the date of such person's failure or refusal 
to file the information required to be filed with the Secretary under 
section 101(d).''.
    (b) Actions by States in Federal Court.--Section 502(a) of such Act 
(29 U.S.C. 1132(a)) is amended--
            (1) in paragraph (5), by striking ``or'' at the end;
            (2) in paragraph (6), by striking the period and inserting 
        ``, or''; and
            (3) by adding at the end the following:
            ``(7) by a State official having authority under the law of 
        such State to enforce the laws of such State regulating 
        insurance, to enjoin any act or practice which violates any 
        provision of part 7 which such State has the power to enforce 
        under part 7.''.
    (c) Criminal Penalties for Certain Willful Misrepresentations.--
Section 501 of such Act (29 U.S.C. 1131) is amended--
            (1) by inserting ``(a)'' after ``Sec. 501.''; and
            (2) by adding at the end the following new subsection:
    ``(b) Any person who, either willfully or with willful blindness, 
falsely represents, to any employee, any employee's beneficiary, any 
employer, the Secretary, or any State, an arrangement established or 
maintained for the purpose of offering or providing any benefit 
described in section 3(1) to employees or their beneficiaries as being 
a multiple employer welfare arrangement granted an exemption under part 
7, as being an employee leasing healthcare arrangement under such an 
exemption, or as having been established or maintained under or 
pursuant to a collective bargaining agreement shall, upon conviction, 
be imprisoned not more than five years, be fined under title 18, United 
States Code, or both.''.
    (d) Cease Activities Orders.--Section 502 of such Act (29 U.S.C. 
1132) is amended by adding at the end the following new subsection:
    ``(m)(1) Subject to paragraph (2), upon application by the 
Secretary showing the operation, promotion, or marketing of a multiple 
employer welfare arrangement providing benefits consisting of medical 
care described in section 607(1) that--
            ``(A) is not licensed, registered, or otherwise approved 
        under the insurance laws of the States in which the arrangement 
        offers or provides benefits, or
            ``(B) is not operating in accordance with the terms of an 
        exemption granted by the Secretary under part 7,
a district court of the United States shall enter an order requiring 
that the arrangement cease activities.
    ``(2) Paragraph (1) shall not apply in the case of a multiple 
employer welfare arrangement if the arrangement shows that it--
            ``(A) is fully insured, within the meaning of section 
        701(9),
            ``(B) is licensed, registered, or otherwise approved in 
        each State in which it offers or provides benefits, except to 
        the extent that such State does not require licensing, 
        registration, or approval of fully insured multiple employer 
        welfare arrangements, and
            ``(C) with respect to each such State, is operating in 
        accordance with applicable State insurance laws that are not 
        superseded under section 514.
    ``(3) The court may grant such additional equitable or remedial 
relief, including any relief available under this title, as it deems 
necessary to protect the interests of the public and of persons having 
claims for benefits against the arrangement.''.
    (e) Responsibility for Claims Procedure.--Section 503 of such Act 
(29 U.S.C. 1133) is amended by adding at the end (after and below 
paragraph (2)) the following new sentence: ``The terms of each multiple 
employer welfare arrangement to which this section applies and which 
provides benefits consisting of medical care described in section 
607(1) shall require the operating committee or the named fiduciary (as 
applicable) to ensure that the requirements of this section are met in 
connection with claims filed under the arrangement.''.

SEC. 217. FILING REQUIREMENTS FOR HEALTH BENEFIT MULTIPLE EMPLOYER 
              WELFARE ARRANGEMENTS.

    Section 101 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1021) is amended--
            (1) by redesignating subsection (e) as subsection (f); and
            (2) by inserting after subsection (d) the following new 
        subsection:
    ``(e)(1) Each multiple employer welfare arrangement shall file with 
the Secretary a registration statement described in paragraph (2) 
within 60 days before commencing operations (in the case of an 
arrangement commencing operations on or after January 1, 1994) and no 
later than February 15 of each year (in the case of an arrangement in 
operation since the beginning of such year), unless, as of the date by 
which such filing otherwise must be made, such arrangement provides no 
benefits consisting of medical care described in section 607(1).
    ``(2) Each registration statement--
            ``(A) shall be filed in such form, and contain such 
        information concerning the multiple employer welfare 
        arrangement and any persons involved in its operation 
        (including whether the arrangement is fully insured), as shall 
        be provided in regulations which shall be prescribed by the 
        Secretary, and
            ``(B) if the arrangement is not fully insured, shall 
        contain a certification that copies of such registration 
        statement have been transmitted by certified mail to--
                    ``(i) in the case of an arrangement with respect to 
                which an exemption under part 7 is in effect, the State 
                insurance commissioner of the domicile State of such 
                arrangement, or
                    ``(ii) in the case of an arrangement which is not 
                so exempt, the State insurance commissioner of each 
                State in which the arrangement is located.
    ``(3) The person or persons responsible for filing the annual 
registration statement are--
            ``(A) the trustee or trustees so designated by the terms of 
        the instrument under which the multiple employer welfare 
        arrangement is established or maintained, or
            ``(B) in the case of a multiple employer welfare 
        arrangement for which the trustee or trustees cannot be 
        identified, or upon the failure of the trustee or trustees of 
        an arrangement to file, the person or persons actually 
        responsible for the acquisition, disposition, control, or 
        management of the cash or property of the arrangement, 
        irrespective of whether such acquisition, disposition, control, 
        or management is exercised directly by such person or persons 
        or through an agent designated by such person or persons.
    ``(4) Any agreement entered into under section 506(c) with a State 
as the primary domicile State with respect to any multiple employer 
welfare arrangement shall provide for simultaneous filings of reports 
required under this subsection with the Secretary and with the State 
insurance commissioner of such State.''.

SEC. 218. COOPERATION BETWEEN FEDERAL AND STATE AUTHORITIES.

    Section 506 of the Employee Retirement Income Security Act of 1974 
(29 U.S.C. 1136) is amended by adding at the end the following new 
subsection:
    ``(c) Responsibility With Respect to Multiple Employer Welfare 
Arrangements.--
            ``(1) State enforcement.--
                    ``(A) Agreements with states.--A State may enter 
                into an agreement with the Secretary for delegation to 
                the State of some or all of the Secretary's authority 
                under sections 502 and 504 to enforce the provisions of 
                this title applicable to multiple employer welfare 
                arrangements with respect to which an exemption under 
                part 7 is or has been in effect. The Secretary shall 
                enter into the agreement if the Secretary determines 
                that the delegation provided for therein would not 
                result in a lower level or quality of enforcement of 
                the provisions of this title.
                    ``(B) Delegations.--Any department, agency, or 
                instrumentality of a State to which authority is 
                delegated pursuant to an agreement entered into under 
                this paragraph may, if authorized under State law and 
                to the extent consistent with such agreement, exercise 
                the powers of the Secretary under this title which 
                relate to such authority.
                    ``(C) Concurrent authority of the secretary.--If 
                the Secretary delegates authority to a State in an 
                agreement entered into under subparagraph (A), the 
                Secretary may continue to exercise such authority 
                concurrently with the State.
                    ``(D) Recognition of primary domicile state.--In 
                entering into any agreement with a State under 
                subparagraph (A), the Secretary shall ensure that, as a 
                result of such agreement and all other agreements 
                entered into under subparagraph (A), only one State 
                will be recognized, with respect to any particular 
                multiple employer welfare arrangement, as the primary 
                domicile State to which authority has been delegated 
                pursuant to such agreements.
            ``(2) Assistance to states.--The Secretary shall--
                    ``(A) provide enforcement assistance to the States 
                with respect to multiple employer welfare arrangements, 
                including, but not limited to, coordinating Federal and 
                State efforts through the establishment of cooperative 
                agreements with appropriate State agencies under which 
                the Pension and Welfare Benefits Administration keeps 
                the States informed of the status of its cases and 
                makes available to the States information obtained by 
                it,
                    ``(B) provide continuing technical assistance to 
                the States with respect to issues involving multiple 
                employer welfare arrangements and this Act,
                    ``(C) assist the States in obtaining from the 
                Office of Regulations and Interpretations timely and 
                complete responses to requests for advisory opinions on 
                issues described in subparagraph (B), and
                    ``(D) distribute copies of all advisory opinions 
                described in subparagraph (C) to the State insurance 
                commissioner of each State.''.

SEC. 219. EFFECTIVE DATE; TRANSITIONAL RULES.

    (a) Effective Date.--The amendments made by this subtitle shall 
take effect January 1, 1994, except that the Secretary of Labor may 
issue regulations before such date under such amendments. The Secretary 
shall issue all regulations necessary to carry out the amendments made 
by this subtitle before the effective date thereof.
    (b) Transitional Rules.--If the sponsor of a multiple employer 
welfare arrangement which, as of January 1, 1994, provides benefits 
consisting of medical care described in section 607(1) of the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1167(1)) files with 
the Secretary of Labor an application for an exemption under part 7 of 
subtitle B of title I of such Act within 180 days after such date and 
the Secretary has not, as of 90 days after receipt of such application, 
found such application to be materially deficient, section 514(b)(6)(A) 
of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply with respect to 
such arrangement during the 18-month period following such date. If the 
Secretary determines, at any time after the date of enactment of this 
Act, that any such exclusion from coverage under the provisions of such 
section 514(b)(6)(A) of a multiple employer welfare arrangement would 
be detrimental to the interests of individuals covered under such 
arrangement, such exclusion shall cease as of the date of the 
determination. Any determination made by the Secretary under this 
subsection shall be in the Secretary's sole discretion.

         Subtitle C--Repeal of COBRA Continuation Requirements

SEC. 221. REPEAL OF REQUIREMENTS OF THE INTERNAL REVENUE CODE OF 1954.

    (a) In General.--Section 4980B of the Internal Revenue Code of 1986 
is repealed.
    (b) Conforming Amendments.--Section 414 of such Code is amended--
            (1) in subsection (n)(3)(C), by striking ``505, and 4980B'' 
        and inserting ``and 505'', and
            (2) in subsection (t)(2), by striking ``505, or 4980B'' and 
        inserting ``or 505''.
    (c) Effective Date.--The repeal effected by subsection (a) shall 
apply to health plans offered in a State by an employer as of the first 
date that a State multicare program is in effect in the State.

SEC. 222. REPEAL OF REQUIREMENTS OF EMPLOYEE RETIREMENT INCOME SECURITY 
              ACT OF 1974.

    (a) In General.--Part 6 of subtitle B of title I of the Employee 
Retirement Income Security Act of 1974 is repealed.
    (b) Conforming Amendment.--Section 502(c)(1) of such Act (29 U.S.C. 
1132(c)(1)) is amended by striking ``paragraph (1) or (4) of section 
606 or''.
    (c) Effective Date.--The repeal effected by subsection (a) shall 
apply to health plans offered in a State by an employer as of the first 
date that a State multicare program is in effect in the State.

SEC. 223. REPEAL OF REQUIREMENTS OF PUBLIC HEALTH SERVICE ACT.

    (a) In General.--Title XXII of the Public Health Service Act is 
repealed.
    (b) Effective Date.--The repeal effected by subsection (a) shall 
apply to health plans offered in a State by an employer as of the first 
date that a State multicare program is in effect in the State.

TITLE III--STATES WITHOUT STATE MULTICARE PROGRAMS; FEDERAL HEALTH CARE 
                  PROGRAMS; NATIONAL REINSURANCE POOL

 Subtitle A--Multicare Plans in States without State Multicare Programs

SEC. 301. GENERAL PROVISIONS.

    (a) In General.--In the case of a State without a State multicare 
program approved under title I, the Secretary may provide for--
            (1) the operation (through the Department of Health and 
        Human Services) of such a program in the State, and
            (2) the approval and offering of multistate plans in the 
        State,
in the same manner as such a program and plans would have been offered 
if a State multicare program were in operation in the State.
    (b) Application of All Requirements.--In the case of multicare 
plans offered pursuant to subsection (a), such plans shall meet all the 
same requirements of title II (including requirements relating to 
consumer rights) that would have applied if the plans were offered 
under a State multicare program.
    (c) Consumer Education and Assistance.--In the case of a State 
without a State multicare program approved under title I:
            (1) Distribution of plan information.--The Secretary shall 
        provide, through local Social Security Administration offices 
        and State welfare offices, for assistance to medicare, 
        medicaid, and low-income beneficiaries in the selection of 
        multicare plans pursuant to this section. Such offices shall 
        provide eligible individuals with the information necessary to 
        qualify them for reduced cost-sharing and to explain their 
        available options.
            (2) Distribution of plan information.--The Secretary shall 
        provide for distribution of information on approved multicare 
        plans.

                Subtitle B--Federal Health Care Programs

SEC. 321. MEDICARE PROGRAM.

    (a) Negotiation Authority.--The Secretary of Health and Human 
Services is authorized to negotiate an agreement with a State multicare 
program to provide medicare-eligible individuals with access to 
multicare plans.
    (b) Terms of Agreements.--
            (1) In general.--Under an agreement under this section, 
        medicare-eligible individuals--
                    (A) are permitted to choose to enroll in multicare 
                plans, and
                    (B) are provided payment of an amount towards the 
                cost of enrolling in the plan.
            (2) Other terms.--An agreement under this section--
                    (A) may not increase the total Federal cost of 
                care, and
                    (B) shall ensure that medicare-eligible individuals 
                can easily compare the benefits of enrollment under a 
                multicare plan to the benefits provided under the 
                medicare program.
    (c) Special Rules.--
            (1) No federal contribution.--No Federal contribution is 
        available to a State under section 101(c)(1) with respect to 
        enrollment of an individual with a multicare plan under an 
        agreement under this section.
            (2) Construction.--Nothing in this section shall be 
        construed as--
                    (A) requiring a State multicare program to enter 
                into an agreement under this section as a condition of 
                approval of the program under this Act or otherwise, or
                    (B) as authorizing the Secretary or a State to 
                require a medicare-eligible individual to enroll with a 
                multicare plan under the agreement.

SEC. 322. FEDERAL EMPLOYEES HEALTH BENEFIT PROGRAM.

    (a) Use of Federal Contribution Toward Purchase of Multicare 
Plan.--In the case of an individual who is a Federal employee or 
annuitant eligible to enroll in a health benefit plan under chapter 89 
of title 5, United States Code and is residing in a State--
            (1) with a State multicare program, instead of enrolling 
        under such a plan the individual is entitled to elect (in a 
        form and manner specified by the Director of the Office of 
        Personnel Management in consultation with the Secretary) to 
        have the amount of the Federal Government contribution toward 
        such plan under such chapter applied toward enrollment of the 
        individual (and qualified family members) under a multicare 
        plan; and
            (2) without a State multicare program, instead of enrolling 
        under such a plan the individual is entitled to elect (in a 
        form and manner specified by the Director of the Office of 
        Personnel Management in consultation with the Secretary) to 
        have the amount of the Federal Government contribution toward 
        such plan under such chapter applied toward enrollment of the 
        individual (and qualified family members) under a Federally 
        approved multicare plan.
    (b) Approval of FEHBP Plans.--The Secretary may approve a health 
benefit plan offered under chapter 89 of title 5, United States Code, 
as a multicare plan under this Act if the plan--
            (1) participates in a reinsurance mechanism that meets the 
        requirements of section 107, and
            (2) otherwise complies with the requirements for a 
        multicare plan under title II.
    (c) Treatment of FEHBP Plans as Multicare Plans for Purposes of 
Federal Contribution.--For purposes of section 121, a health benefit 
plan in which an individual is enrolled under chapter 89 of title 5, 
United States Code is treated as a multicare plan in which the 
individual is enrolled.
    (d) Construction.--Nothing in this section shall be construed as 
authorizing the Office of Personnel Management to require any 
individual to enroll with a multicare plan under this section.

SEC. 323. REPORT RECOMMENDING INTEGRATION OF CHAMPUS, VETERANS HEALTH, 
              AND INDIAN HEALTH SERVICES.

    (a) In General.--The Secretary of Health and Human Services, in 
coordination with the Secretary of Veterans Affairs, the Secretary of 
Defense, and the Secretary of the Interior, shall submit to Congress a 
report that includes recommendations on how (and the extent to which) 
the Civilian Health and Medical Program of the Uniformed Services 
(CHAMPUS), the health care programs of the Department of Veterans 
Affairs, and the Indian Health Service may be integrated with the 
multicare program established under this Act.
    (b) Deadline.--The report under subsection (a) shall be submitted 
not later than 2 years after the date of the enactment of this Act to 
the Committees on Armed Services, Energy and Commerce, Interior, 
Veterans' Affairs, and Ways and Means of the House of Representatives 
and to the Committees on Armed Services, Finance, Labor and Human 
Resources, and Veterans' Affairs of the Senate.

SEC. 324. CONSUMER RIGHTS FOR INDIVIDUALS IN FEDERAL PROGRAMS.

    (a) Notice of Rights; Enforcement.--
            (1) Notice.--The Secretary shall notify individuals 
        provided health care services under a Federal health care 
        program of their consumer rights under this section and of the 
        procedures established by the Secretary to ensure these rights.
            (2) Development of regulations.--The Secretary shall 
        develop regulation to implement the consumer rights established 
        under this section.
            (3) State enforcement.--The Secretary is responsible, 
        through modification of requirements of Federal health care 
        programs, for assuring compliance of physicians with the 
        requirements of this section.
    (b) Provision of Patient Cost-Sharing Information.--
            (1) In general.--Each physician who furnishes professional 
        services for which payment may be made under a Federal health 
        care program shall provide, as a condition for the payment of 
        funds for such services under such program, that a patient is 
        provided, in advance of the receipt of the services (except as 
        provided by the Secretary in the case of emergency services), 
        with information on the expected total costs of the services 
        and an estimate of the patient's share of the costs. Such 
        information may be based on the estimates for the average cost 
        for such services.
            (2) Total cost.--For purposes of paragraph (1), the total 
        cost of treatment--
                    (A) in the case of a patient's initial visit, shall 
                consist of the initial visit only, and
                    (B) in the case of subsequent treatment, shall 
                include all expenses resulting from the treatment 
                procedure prescribed by the physician.
            (3) Exception for emergencies.--In the case of emergency 
        services, the information under this subsection shall be 
        provided at the earliest reasonable time after such services 
        are provided.
    (c) Patient Access to Medical Information.--In the case of an 
individual who receives professional services from a physician for 
which payment may be made under a Federal health care program, the 
individual has a right to obtain information contained in the 
individual's medical record maintained by the physician.
    (d) Federal Health Care Program.--In this section, the term 
``Federal health care program'' includes the medicare program, the 
medicaid program, and the Federal employees health benefits program.

               Subtitle C--National Reinsurance Mechanism

SEC. 331. NATIONAL REINSURANCE MECHANISM.

    (a) Establishment.--
            (1) In general.--The Secretary shall establish a national 
        reinsurance mechanism for use by self-insured closed multicare 
        plans described in subsection (b) which have not made an 
        election described in subsection (c). Such a mechanism shall be 
        designed to meet the requirements described in section 107(b).
            (2) Governance.--The mechanism shall be governed by a 
        commission appointed by the Secretary. The membership of the 
        commission shall include the Secretary (or the Secretary's 
        designee) and representatives of plan sponsors, major 
        providers, labor, State reinsurance mechanisms, consumers, 
        State governments, and the business community.
    (b) Plans Covered.--The plans described in this subsection are 
self-insured plans that operate in 3 or more States.
    (c) Election.--A plan described in subsection (b) shall be 
permitted to make a one-time election as to whether to participate in 
the national reinsurance mechanism under this section or to participate 
in State reinsurance mechanisms established under section 107 (or by 
the Secretary under section 301).

             TITLE IV--MEDICAL MALPRACTICE LIABILITY REFORM

            Subtitle A--Medical Malpractice Liability Reform

                       Part 1--General Provisions

SEC. 401. FEDERAL REFORM OF MEDICAL MALPRACTICE LIABILITY ACTIONS.

    (a) Congressional Findings.--
            (1) Effect on interstate commerce.--Congress finds that the 
        health care and insurance industries are industries affecting 
        interstate commerce and the medical malpractice litigation 
        systems existing throughout the United States affect interstate 
        commerce by contributing to the high cost of health care and 
        premiums for malpractice insurance purchased by health care 
        providers.
            (2) Effect on federal spending.--Congress finds that the 
        medical malpractice litigation systems existing throughout the 
        United States have a significant effect on the amount, 
        distribution, and use of Federal funds because of--
                    (A) the large number of individuals who receive 
                health care benefits under programs operated or 
                financed by the Federal Government;
                    (B) the large number of individuals who benefit 
                because of the exclusion from Federal taxes of the 
                amounts spent by their employers to provide them with 
                health insurance benefits;
                    (C) the large number of health care providers and 
                health care professionals who provide items or services 
                for which the Federal Government makes payments; and
                    (D) the large number of such providers and 
                professionals who have received direct or indirect 
                financial assistance from the Federal Government 
                because of their status as such professionals or 
                providers.
    (b) Applicability.--This subtitle shall apply with respect to any 
medical malpractice liability claim and to any medical malpractice 
liability action brought in any State or Federal court, except that 
this subtitle shall not apply to--
            (1) a claim or action for damages arising from a vaccine-
        related injury or death to the extent that title XXI of the 
        Public Health Service Act applies to the action; or
            (2) a claim or action in which the plaintiff's sole 
        allegation is an allegation of an injury arising from the use 
        of a medical product.
    (c) Preemption of State Law.--Subject to section 421, this subtitle 
supersedes State law only to the extent that State law differs from any 
provision of law established by or under this subtitle. Any issue that 
is not governed by any provision of law established by or under this 
subtitle shall be governed by otherwise applicable State or Federal 
law.
    (d) Federal Court Jurisdiction Not Established on Federal Question 
Grounds.--Nothing in this subtitle shall be construed to establish any 
jurisdiction in the district courts of the United States over medical 
malpractice liability actions on the basis of sections 1331 or 1337 of 
title 28, United States Code.

SEC. 402. DEFINITIONS.

    As used in this subtitle:
            (1) Alternative dispute resolution system; ADR.--The term 
        ``alternative dispute resolution system'' or ``ADR'' means a 
        system established by a State that provides for the resolution 
        of medical malpractice liability claims in a manner other than 
        through medical malpractice liability actions.
            (2) Claimant.--The term ``claimant'' means any person who 
        alleges a medical malpractice liability claim, or, in the case 
        of an individual who is deceased, incompetent, or a minor, the 
        person on whose behalf such a claim is alleged.
            (3) Economic damages.--The term ``economic damages'' means 
        damages paid to compensate an individual for losses for 
        hospital and other medical expenses, lost wages, lost 
        employment, and other pecuniary losses.
            (4) Health care professional.--The term ``health care 
        professional'' means any individual who provides health care 
        services in a State and who is required by State law or 
        regulation to be licensed or certified by the State to provide 
        such services in the State.
            (5) Health care provider.--The term ``health care 
        provider'' means any organization or institution that is 
        engaged in the delivery of health care services in a State and 
        that is required by State law or regulation to be licensed or 
        certified by the State to engage in the delivery of such 
        services in the State.
            (6) Injury.--The term ``injury'' means any illness, 
        disease, or other harm that is the subject of a medical 
        malpractice liability action or claim.
            (7) Medical malpractice liability action.--The term 
        ``medical malpractice liability action'' means a civil action 
        (other than an action in which the plaintiff's sole allegation 
        is an allegation of an intentional tort) brought in a State or 
        Federal court against a health care provider or health care 
        professional (regardless of the theory of liability on which 
        the action is based) in which the plaintiff alleges a medical 
        malpractice liability claim.
            (8) Medical malpractice liability claim.--The term 
        ``medical malpractice liability claim'' means a claim in which 
        the claimant alleges that injury was caused by the provision of 
        (or the failure to provide) health care services.
            (9) Medical product.--The term ``medical product'' means a 
        device (as defined in section 201(h) of the Federal Food, Drug, 
        and Cosmetic Act) or a drug (as defined in section 201(g)(1) of 
        the Federal Food, Drug, and Cosmetic Act).
            (10) Noneconomic damages.--The term ``noneconomic damages'' 
        means damages paid to compensate an individual for losses for 
        physical and emotional pain, suffering, inconvenience, physical 
        impairment, mental anguish, disfigurement, loss of enjoyment of 
        life, loss of consortium, and other nonpecuniary losses, but 
        does not include punitive damages.
            (11) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (12) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Virgin Islands, Guam, and American Samoa.

SEC. 403. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b) and sections 
419 and 442, this subtitle shall apply with respect to claims accruing 
or actions brought on or after the expiration of the 3-year period that 
begins on the date of the enactment of this Act.
    (b) Exception for States Requesting Earlier Implementation of 
Reforms.--
            (1) Application.--A State may submit an application to the 
        Secretary requesting the early implementation of this subtitle 
        with respect to claims or actions brought in the State.
            (2) Decision by secretary.--The Secretary shall issue a 
        response to a State's application under paragraph (1) not later 
        than 90 days after receiving the application. If the Secretary 
        determines that the State meets the requirements of this 
        subtitle at the time of submitting its application, the 
        Secretary shall approve the State's application, and this 
        subtitle shall apply with respect to actions brought in the 
        State on or after the expiration of the 90-day period that 
        begins on the date the Secretary issues the response. If the 
        Secretary denies the State's application, the Secretary shall 
        provide the State with a written explanation of the grounds for 
        the decision.

  Part 2--Uniform Standards For Medical Malpractice Liability Actions

SEC. 411. STATUTE OF LIMITATIONS.

    (a) In General.--No medical malpractice liability claim may be 
brought after the expiration of the 2-year period that begins on the 
date the alleged injury that is the subject of the action should 
reasonably have been discovered, but in no event after the expiration 
of the 4-year period that begins on the date the alleged injury 
occurred.
    (b) Exception for Minors.--In the case of an alleged injury 
suffered by a minor who has not attained 6 years of age, no medical 
malpractice liability claim may be brought after the expiration of the 
2-year period that begins on the date the alleged injury that is the 
subject of the action should reasonably have been discovered, but in no 
event after the date on which the minor attains 10 years of age.

SEC. 412. REQUIREMENT FOR INITIAL RESOLUTION OF ACTION THROUGH 
              ALTERNATIVE DISPUTE RESOLUTION.

    (a) In General.--No medical malpractice liability action may be 
brought in any State court unless the medical malpractice liability 
claim that is the subject of the action has been initially resolved 
under an alternative dispute resolution system certified by the 
Secretary under section 432(b).
    (b) Initial Resolution of Claims Under ADR.--For purposes of 
subsection (a), an action is ``initially resolved'' under an 
alternative dispute resolution system if--
            (1) the ADR reaches a decision on whether the defendant is 
        liable to the plaintiff for damages; and
            (2) if the ADR determines that the defendant is liable, the 
        ADR determines the amount of damages assessed against the 
        defendant.
    (c) Procedures for Filing Actions.--
            (1) Deadline.--No medical malpractice liability action may 
        be brought unless the action is filed in a court of competent 
        jurisdiction not later than 90 days after an opinion resolving 
        the medical malpractice liability claim that is the subject of 
        the action is issued under the applicable alternative dispute 
        resolution system.
            (2) Court of competent jurisdiction.--For purposes of 
        paragraph (1), the term ``court of competent jurisdiction'' 
        means--
                    (A) with respect to actions filed in a State court, 
                the appropriate State trial court; and
                    (B) with respect to actions filed in a Federal 
                court, the appropriate United States district court.
    (d) Status of ADR Decision.--The decision reached under an 
alternative dispute resolution system shall, for purposes of 
enforcement by a court of competent jurisdiction, have the same status 
in the court as the verdict of a medical malpractice liability action 
adjudicated in a State or Federal trial court.
    (e) Treatment of ADR Decision.--
            (1) Requirements for going forward with action.--In order 
        to bring a medical malpractice liability action to contest the 
        decision made under the previous alternative dispute resolution 
        system with respect to a medical malpractice liability claim, 
        the party contesting the decision must--
                    (A) show that--
                            (i) the decision was procured by 
                        corruption, fraud, or undue means,
                            (ii) there was partiality or corruption 
                        under the system,
                            (iii) there was other misconduct under the 
                        system that materially prejudiced the party's 
                        rights, or
                            (iv) the decision was based on an error of 
                        law; or
                    (B) present new evidence before the trier of fact 
                that was not available for presentation under the ADR 
                system.
            (2) Burden of proof.--In any medical malpractice liability 
        action, the trier of fact shall uphold the decision made under 
        the previous alternative dispute resolution system with respect 
        to the claim that is the subject of the action unless the party 
        contesting the decision proves by a preponderance of the 
        evidence that the decision was incorrect.

SEC. 413. RELATION TO ALTERNATIVE DISPUTE RESOLUTION OF FEDERAL 
              AGENCIES.

    (a) Mandatory Application of Federal ADR in Malpractice Claims 
Against United States.--Section 2672 of title 28, United States Code, 
is amended by striking the period at the end of the first paragraph and 
inserting the following: ``, except that each Federal agency shall use 
arbitration or such alternative means of dispute resolution to settle 
any tort claim against the United States consisting of a medical 
malpractice liability claim (as defined in section 402(8) of the 
Multicare Act of 1994).''.
    (b) Transmittal of Information of Malpractice Claims Resolved Under 
Federal ADR.--Section 584 of title 5, United States Code, as added by 
section 4(b) of the Administrative Dispute Resolution Act (Public Law 
101-552), is amended by adding at the end the following new subsection:
    ``(k) Each agency shall transmit on a regular basis to the 
Administrator for Health Care Policy and Research information on issues 
in controversy consisting of medical malpractice liability claims (as 
defined in section 402(8) of Multicare Act of 1994) that are resolved 
under the agency's dispute resolution proceeding under this subchapter, 
in a manner that assures that the identity of the parties to such 
proceedings shall not be revealed.''.

SEC. 414. MANDATORY PRE-TRIAL SETTLEMENT CONFERENCE.

    (a) In General.--Before the beginning of the trial phase of any 
medical malpractice liability action, the parties shall attend a 
conference called by the court for purposes of determining whether 
grounds exist upon which the parties may negotiate a settlement for the 
action.
    (b) Requiring Parties to Submit Settlement Offers.--At the 
conference called pursuant to subsection (a), each party to a medical 
malpractice liability action shall present an offer of settlement for 
the action.

SEC. 415. CALCULATION AND PAYMENT OF DAMAGES.

    (a) Limitation on Noneconomic Damages.--The total amount of 
noneconomic damages that may be awarded to a plaintiff and the members 
of the plaintiff's family for losses resulting from the injury which is 
the subject of a medical malpractice liability action may not exceed 
$250,000, regardless of the number of parties against whom the action 
is brought or the number of actions brought with respect to the injury.
    (b) Treatment of Punitive Damages.--
            (1) Limitation on amount.--The total amount of punitive 
        damages that may be imposed under a medical malpractice 
        liability action may not exceed twice the total of the damages 
        awarded to the plaintiff and the members of the plaintiff's 
        family.
            (2) Payments to state for medical quality assurance 
        activities.--
                    (A) In general.--Any punitive damages imposed under 
                a medical malpractice liability action shall be paid to 
                the State in which the action is brought.
                    (B) Activities described.--A State shall use amount 
                paid pursuant to subparagraph (A) to carry out 
                activities to assure the safety and quality of health 
                care services provided in the State, including (but not 
                limited to)--
                            (i) licensing or certifying health care 
                        professionals and health care providers in the 
                        State;
                            (ii) operating alternative dispute 
                        resolution systems;
                            (iii) carrying out public education 
                        programs relating to medical malpractice and 
                        the availability of alternative dispute 
                        resolution systems in the State; and
                            (iv) carrying out programs to reduce 
                        malpractice-related costs for retired providers 
                        or other providers volunteering to provide 
                        services in medically underserved areas.
                    (C) Maintenance of effort.--A State shall use any 
                amounts paid pursuant to subparagraph (A) to supplement 
                and not to replace amounts spent by the State for the 
                activities described in subparagraph (B).
    (c) Periodic Payments for Future Losses.--If more than $100,000 in 
damages for expenses to be incurred in the future is awarded to the 
plaintiff in a medical malpractice liability action, the defendant 
shall provide for payment for such damages on a periodic basis 
determined appropriate by the court (based upon projections of when 
such expenses are likely to be incurred), unless the court determines 
that it is not in the plaintiff's best interests to receive payments 
for such damages on such a periodic basis.
    (d) Mandatory Offsets for Damages Paid by a Collateral Source.--
            (1) In general.--The total amount of damages received by a 
        plaintiff in a medical malpractice liability action shall be 
        reduced (in accordance with paragraph (2)) by any other payment 
        that has been or will be made to the individual to compensate 
        the plaintiff for the injury that was the subject of the 
        action, including payment under--
                    (A) Federal or State disability or sickness 
                programs;
                    (B) Federal, State, or private health insurance 
                programs;
                    (C) private disability insurance programs;
                    (D) employer wage continuation programs; and
                    (E) any other source of payment intended to 
                compensate the plaintiff for such injury.
            (2) Amount of reduction.--The amount by which an award of 
        damages to a plaintiff shall be reduced under paragraph (1) 
        shall be--
                    (A) the total amount of any payments (other than 
                such award) that have been made or that will be made to 
                the plaintiff to compensate the plaintiff for the 
                injury that was the subject of the action; minus
                    (B) the amount paid by the plaintiff (or by the 
                spouse, parent, or legal guardian of the plaintiff) to 
                secure the payments described in subparagraph (A).

SEC. 416. TREATMENT OF ATTORNEY'S FEES AND OTHER COSTS.

    (a) Limitation on Attorney's Fees.--If the plaintiff in a medical 
malpractice liability action has entered into an agreement with the 
plaintiff's attorney to pay the attorney's fees on a contingency basis, 
the attorney's fees for the action may not exceed--
            (1) 25 percent of the first $150,000 of any award or 
        settlement paid to the plaintiff; or
            (2) 15 percent of any additional amounts paid to the 
        plaintiff.
    (b) Awarding Attorney's Fees and Other Costs to Winning Party.--
            (1) In general.--If the court in a medical malpractice 
        liability action upholds a ruling of the alternative dispute 
        resolution system with respect to whether or not a health care 
        professional or health care provider committed malpractice or 
        with respect to the amount of damages awarded, the court shall 
        require the party that contested the ruling to pay to the 
        opposing party the costs incurred by the opposing party under 
        the action, including attorney's fees, fees paid to expert 
        witnesses, and other litigation expenses (but not including 
        court costs, filing fees, or other expenses paid directly by 
        the party to the court, or any fees or costs associated with 
        the resolution of the claim that is the subject of the action 
        under the alternative dispute resolution system).
            (2) Permitting court to waive or modify imposition of 
        costs.--A court may issue a written order waiving or modifying 
        the application of paragraph (1) to a party if the court finds 
        that the application of such paragraph to the party would 
        constitute an undue hardship, or if the medical malpractice 
        liability action raised a novel issue of law. The order shall 
        specify the grounds for the court's decision to waive or modify 
        the application of such paragraph.

SEC. 417. JOINT AND SEVERAL LIABILITY.

    The liability of each defendant in a medical malpractice liability 
action shall be several only and shall not be joint, and each defendant 
shall be liable only for the amount of damages allocated to the 
defendant in direct proportion to the defendant's percentage of 
responsibility (as determined by the trier of fact).

SEC. 418. UNIFORM STANDARD FOR DETERMINING NEGLIGENCE.

    Except as provided in subsection (b), a defendant in a medical 
malpractice liability action may not be found to have acted negligently 
unless the defendant's conduct at the time of providing the health care 
services that are the subject of the action was not reasonable.

SEC. 419. APPLICATION OF MEDICAL PRACTICE GUIDELINES IN MALPRACTICE 
              LIABILITY ACTIONS.

    (a) Use of Guidelines as Affirmative Defense.--In any medical 
malpractice liability action, it shall be a complete defense to any 
allegation that the defendant was negligent that, in the provision of 
(or the failure to provide) the services that are the subject of the 
action, the defendant followed the appropriate practice guideline.
    (b) Restriction on Guidelines Considered Appropriate.--
            (1) Guidelines sanctioned by secretary.--For purposes of 
        subsection (a), a practice guideline may not be considered 
        appropriate with respect to actions brought during a year 
        unless the Secretary has sanctioned the use of the guideline 
        for purposes of an affirmative defense to medical malpractice 
        liability actions brought during the year in accordance with 
        paragraph (2) or (3).
            (2) Process for sanctioning guidelines.--Not less 
        frequently than October 1 of each year (beginning with 1995), 
        the Secretary, shall review the practice guidelines and 
        standards developed by the Administrator for Health Care Policy 
        and Research pursuant to section 1142 of the Social Security 
        Act, and shall sanction those guidelines which the Secretary 
        considers appropriate for purposes of an affirmative defense to 
        medical malpractice liability actions brought during the next 
        calendar year as appropriate practice guidelines for purposes 
        of subsection (a).
            (3) Use of state guidelines.--Upon the application of a 
        State, the Secretary may sanction practice guidelines selected 
        by the State for purposes of an affirmative defense to medical 
        malpractice liability actions brought in the State as 
        appropriate practice guidelines for purposes of subsection (a) 
        if the guidelines meet such requirements as the Secretary may 
        impose.
    (c) Prohibiting Application of Failure to Follow Guidelines as 
Prima Facie Evidence of Negligence.--No plaintiff in a medical 
malpractice liability action may be deemed to have presented prima 
facie evidence that a defendant was negligent solely by showing that 
the defendant failed to follow the appropriate practice guideline.

SEC. 420. SPECIAL PROVISION FOR CERTAIN OBSTETRIC SERVICES.

    (a) Imposition of Higher Standard of Proof.--
            (1) In general.--In the case of a medical malpractice 
        liability action relating to services provided during labor or 
        the delivery of a baby, if the defendant health care 
        professional did not previously treat the plaintiff for the 
        pregnancy, the trier of fact may not find that the defendant 
        committed malpractice and may not assess damages against the 
        defendant unless the malpractice is proven by clear and 
        convincing evidence.
            (2) Applicability to group practices or agreements among 
        providers.--For purposes of paragraph (1), a health care 
        professional shall be considered to have previously treated an 
        individual for a pregnancy if the professional is a member of a 
        group practice whose members previously treated the individual 
        for the pregnancy or is providing services to the individual 
        during labor or the delivery of a baby pursuant to an agreement 
        with another professional.
    (b) Clear and Convincing Evidence Defined.--In subsection (a), the 
term ``clear and convincing evidence'' is that measure or degree of 
proof that will produce in the mind of the trier of fact a firm belief 
or conviction as to the truth of the allegations sought to be 
established, except that such measure or degree of proof is more than 
that required under preponderance of the evidence, but less than that 
required for proof beyond a reasonable doubt.
    (c) Effective Date.--This section shall apply to claims accruing or 
actions brought on or after the expiration of the 2-year period that 
begins on the date of the enactment of this Act.

SEC. 421. PREEMPTION.

    (a) In General.--This part supersedes any State law only to the 
extent that State law--
            (1) permits the recovery of a greater amount of damages by 
        a plaintiff;
            (2) permits the collection of a greater amount of 
        attorneys' fees by a plaintiff's attorney;
            (3) establishes a longer period during which a medical 
        malpractice liability claim may be initiated; or
            (4) establishes a stricter standard for determining whether 
        a defendant was negligent or for determining the liability of 
        defendants described in section 420(a) in actions described in 
        such section.
    (b) Effect on Sovereign Immunity and Choice of Law or Venue.--
Nothing in subsection (a) shall be construed to--
            (1) waive or affect any defense of sovereign immunity 
        asserted by any State under any provision of law;
            (2) waive or affect any defense of sovereign immunity 
        asserted by the United States;
            (3) affect the applicability of any provision of the 
        Foreign Sovereign Immunities Act of 1976;
            (4) preempt State choice-of-law rules with respect to 
        claims brought by a foreign nation or a citizen of a foreign 
        nation; or
            (5) affect the right of any court to transfer venue or to 
        apply the law of a foreign nation or to dismiss a claim of a 
        foreign nation or of a citizen of a foreign nation on the 
        ground of inconvenient forum.

 Part 3--Requirements For State Alternative Dispute Resolution Systems 
                                 (ADR)

SEC. 431. BASIC REQUIREMENTS FOR ADR.

    (a) In General.--A State's alternative dispute resolution system 
meets the requirements of this section if the system--
            (1) applies to all medical malpractice liability claims 
        under the jurisdiction of the State courts;
            (2) requires that a written opinion resolving the dispute 
        be issued that contains findings of fact relating to the 
        dispute;
            (3) requires individuals who hear and resolve claims under 
        the system to meet such qualifications as the State may require 
        (in accordance with regulations of the Secretary);
            (4) is approved by the State or by local governments in the 
        State;
            (5) with respect to a State system that consists of 
        multiple dispute resolution procedures--
                    (A) permits the parties to a dispute to select the 
                procedure to be used for the resolution of the dispute 
                under the system, and
                    (B) if the parties do not agree on the procedure to 
                be used for the resolution of the dispute, assigns a 
                particular procedure to the parties;
            (6) provides for the transmittal to the State agency 
        responsible for monitoring or disciplining health care 
        professionals and health care providers of any findings made 
        under the system that such a professional or provider committed 
        malpractice, unless, during the 90-day period beginning on the 
        date the system resolves the claim against the professional or 
        provider, the professional or provider brings a medical 
        malpractice liability action contesting the decision made under 
        the system; and
            (7) provides for the regular transmittal to the 
        Administrator for Health Care Policy and Research of 
        information on disputes resolved under the system, in a manner 
        that assures that the identity of the parties to a dispute 
        shall not be revealed.
    (b) Application of Malpractice Liability Standards to Alternative 
Dispute Resolution.--The provisions of part 2 shall apply with respect 
to claims brought under a State's alternative dispute resolution system 
in the same manner as such provisions apply with respect to medical 
malpractice liability actions brought in the State.

SEC. 432. CERTIFICATION OF STATE SYSTEMS.

    (a) In General.--Not later than October 1 of each year (beginning 
with 1995), the Secretary, in consultation with the Attorney General, 
shall determine whether a State's alternative dispute resolution system 
meets the requirements of this part for the following calendar year.
    (b) Basis for Certification.--The Secretary shall certify a State's 
alternative dispute resolution system under this subsection if the 
Secretary determines under subsection (a) that the system meets the 
requirements of section 431.

SEC. 433. REPORTS ON IMPLEMENTATION AND EFFECTIVENESS OF ALTERNATIVE 
              DISPUTE RESOLUTION SYSTEMS.

    (a) In General.--Not later than 5 years after the date of the 
enactment of this Act, the Secretary shall prepare and submit to 
Congress a report describing and evaluating State alternative dispute 
resolution systems operated pursuant to this part.
    (b) Contents of Report.--The Secretary shall include in the report 
prepared and submitted under subsection (a)--
            (1) information on--
                    (A) the effect of such systems on the cost of 
                health care within the State,
                    (B) the impact of such systems on the access of 
                individuals to health care within the State, and
                    (C) the effect of such systems on the quality of 
                health care provided within such State; and
            (2) to the extent that such report does not provide 
        information on no-fault systems operated by States as 
        alternative dispute resolution systems pursuant to this part, 
        an analysis of the feasibility and desirability of establishing 
        a system under which medical malpractice liability claims shall 
        be resolved on a no-fault basis.

              Subtitle B--Other Requirements and Programs

SEC. 441. FACILITATING DEVELOPMENT AND USE OF MEDICAL PRACTICE 
              GUIDELINES.

    (a) Increase in Authorization of Appropriations.--Section 
1142(i)(1) of the Social Security Act (42 U.S.C. 1320b-12(i)(1)) is 
amended by striking subparagraphs (D) and (E) and inserting the 
following:
                    ``(D) $158,000,000 for fiscal year 1995 (of which 
                $10,000,000 shall be used for sanctioning practice 
                guidelines for purposes of an affirmative defense in 
                medical malpractice liability actions);
                    ``(E) $200,000,000 for fiscal year 1996 (of which 
                $20,000,000 shall be used for sanctioning practice 
                guidelines for purposes of an affirmative defense in 
                medical malpractice liability actions); and
                    ``(F) $20,000,000 for fiscal year 1997, to be used 
                for sanctioning practice guidelines for purposes of an 
                affirmative defense in medical malpractice liability 
                actions.''.
    (b) Consideration of Malpractice Liability Data in Developing and 
Updating Guidelines.--Section 1142(c)(5) of such Act (42 U.S.C. 1320b-
12(c)(5)) is amended by striking ``claims data'' and all that follows 
through ``patients'' and inserting the following: ``claims data, data 
on clinical and functional status of patients, and data on medical 
malpractice liability actions''.
    (c) Development of Reporting Forms for State ADR Systems.--The 
Secretary, in consultation with the Administrator for Health Care 
Policy and Research, shall develop a standard reporting form to be used 
by State alternative dispute resolution systems in transmitting 
information to the Administrator pursuant to section 431(a)(6) on 
disputes resolved under such systems.
    (d) Study of Effect of Guidelines on Medical Malpractice.--
            (1) Study.--The Secretary shall conduct a study of the 
        effect of the use of the medical practice guidelines developed 
        by the Administrator for Health Care Policy and Research on the 
        incidence of and the costs associated with medical malpractice.
            (2) Reports.--(A) Not later than 1 year after the date of 
        the enactment of this Act, the Secretary shall submit an 
        interim report to Congress describing the availability and use 
        of medical practice guidelines and the aggregate costs 
        associated with medical malpractice.
            (B) Not later than 5 years after the date of the enactment 
        of this Act, the Secretary shall submit a report to Congress on 
        the study conducted under paragraph (1), together with 
        recommendations regarding expanding the use of medical practice 
        guidelines for determining the liability of health care 
        professionals and health care providers for medical 
        malpractice.

SEC. 442. PERMITTING STATE PROFESSIONAL SOCIETIES TO PARTICIPATE IN 
              DISCIPLINARY ACTIVITIES.

    (a) Role of Professional Societies.--Notwithstanding any other 
provision of State or Federal law, a State agency responsible for the 
conduct of disciplinary actions for a type of health care practitioner 
may enter into agreements with State or county professional societies 
of such type of health care practitioner to permit such societies to 
participate in the licensing of such health care practitioner, and to 
review any health care malpractice action, health care malpractice 
claim or allegation, or other information concerning the practice 
patterns of any such health care practitioner. Any such agreement shall 
comply with subsection (b).
    (b) Requirements of Agreements.--Any agreement entered into under 
subsection (a) for licensing activities or the review of any health 
care malpractice action, health care malpractice claim or allegation, 
or other information concerning the practice patterns of a health care 
practitioner shall provide that--
            (1) the health care professional society conducts such 
        activities or review as expeditiously as possible;
            (2) after the completion of such review, such society shall 
        report its findings to the State agency with which it entered 
        into such agreement;
            (3) the conduct of such activities or review and the 
        reporting of such findings be conducted in a manner which 
        assures the preservation of confidentiality of health care 
        information and of the review process; and
            (4) no individual affiliated with such society is liable 
        for any damages or injury directly caused by the individual's 
        actions in conducting such activities or review.
    (c) Agreements Not Mandatory.--Nothing in this section may be 
construed to require a State to enter into agreements with societies 
described in subsection (a) to conduct the activities described in such 
subsection.
    (d) Effective Date.--This section shall take effect 2 years after 
the date of the enactment of this Act.

                  TITLE V--ADMINISTRATIVE COST SAVINGS

            Subtitle A--Standardization of Claims Processing

SEC. 501. ADOPTION OF DATA ELEMENTS, UNIFORM CLAIMS, AND UNIFORM 
              ELECTRONIC TRANSMISSION STANDARDS.

    (a) In General.--The Secretary of Health and Human Services (in 
this title referred to as the ``Secretary'') shall adopt standards 
relating to each of the following:
            (1) Data elements for use in paper and electronic claims 
        processing under health benefit plans, as well as for use in 
        utilization review and management of care (including data 
        fields, formats, and medical nomenclature, and including plan 
        benefit and insurance information).
            (2) Uniform claims forms (including uniform procedure and 
        billing codes for uses with such forms and including 
        information on other health benefit plans that may be liable 
        for benefits).
            (3) Uniform electronic transmission of the data elements 
        (for purposes of billing and utilization review).
Standards under paragraph (3) relating to electronic transmission of 
data elements for claims for services shall supersede (to the extent 
specified in such standards) the standards adopted under paragraph (2) 
relating to the submission of paper claims for such services.
    (b) Use of Task Forces.--In adopting standards under this section--
            (1) the Secretary shall take into account the 
        recommendations of current taskforces, including at least the 
        Workgroup on Electronic Data Interchange, National Uniform 
        Billing Committee, the Uniform Claim Task Force, and the 
        Computer-based Patient Record Institute;
            (2) the Secretary shall consult with the National 
        Association of Insurance Commissioners (and, with respect to 
        standards under subsection (a)(3), the American National 
        Standards Institute); and
            (3) the Secretary shall, to the maximum extent practicable, 
        seek to make the standards consistent with any uniform clinical 
        data sets which have been adopted and are widely recognized.
    (c) Deadlines for Promulgation.--The Secretary shall promulgate the 
standards under--
            (1) subsection (a)(1) relating to claims processing data, 
        by not later than 12 months after the date of the enactment of 
        this Act;
            (2) subsection (a)(2) (relating to uniform claims forms) by 
        not later than 12 months after the date of the enactment of 
        this Act; and
            (3)(A) subsection (a)(3) relating to transmission of 
        information concerning hospital and physicians services, by not 
        later than 24 months after the date of the enactment of this 
        Act, and
            (B) subsection (a)(3) relating to transmission of 
        information on other services, by such later date as the 
        Secretary may determine it to be feasible.
    (d) Report to Congress.--Not later than 3 years after the date of 
the enactment of this Act, the Secretary shall report to Congress 
recommendations regarding restructuring the medicare peer review 
quality assurance program given the availability of hospital data in 
electronic form.

SEC. 502. APPLICATION OF STANDARDS.

    (a) In General.--If the Secretary determines, at the end of the 2-
year period beginning on the date that standards are adopted under 
section 501 with respect to classes of services, that a significant 
number of claims for benefits for such services under health benefit 
plans are not being submitted in accordance with such standards, the 
Secretary may require, after notice in the Federal Register of not less 
than 6 months, that all providers of such services must submit claims 
to health benefit plans in accordance with such standards. The 
Secretary may waive the application of such a requirement in such cases 
as the Secretary finds that the imposition of the requirement would not 
be economically practicable.
    (b) Significant Number.--The Secretary shall make an affirmative 
determination described in subsection (a) for a class of services only 
if the Secretary finds that there would be a significant, measurable 
additional gain in efficiencies in the health care system that would be 
obtained by imposing the requirement described in such paragraph with 
respect to such services.
    (c) Application of Requirement.--
            (1) In general.--If the Secretary imposes the requirement 
        under subsection (a)--
                  (A) in the case of a requirement that imposes the 
                standards relating to electronic transmission of claims 
                for a class of services, each health care provider that 
                furnishes such services for which benefits are payable 
                under a health benefit plan shall transmit 
                electronically and directly to the plan on behalf of 
                the beneficiary involved a claim for such services in 
                accordance with such standards;
                    (B) any health benefit plan may reject any claim 
                subject to the standards adopted under section 501 but 
                which is not submitted in accordance with such 
                standards;
                    (C) it is unlawful for a health benefit plan (i) to 
                reject any such claim on the basis of the form in which 
                it is submitted if it is submitted in accordance with 
                such standards or (ii) to require, for the purpose of 
                utilization review or as a condition of providing 
                benefits under the plan, a provider to transmit medical 
                data elements that are inconsistent with the standards 
                established under section 501(a)(1); and
                    (D) the Secretary may impose a civil money penalty 
                on any provider that knowingly and repeatedly submits 
                claims in violation of such standards or on any health 
                benefit plan (other than a health benefit plan 
                described in paragraph (2)) that knowingly and 
                repeatedly rejects claims in violation of subparagraph 
                (B), in an amount not to exceed $100 for each such 
                claim.
        The provisions of section 1128A of the Social Security Act 
        (other than the first sentence of subsection (a) and other than 
        subsection (b)) shall apply to a civil money penalty under 
        subparagraph (D) in the same manner as such provisions apply to 
        a penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan--
                    (A) that is subject to regulation by a State, and
                    (B) with respect to which the Secretary finds 
                that--
                            (i) the State provides for application of 
                        the standards established under section 501, 
                        and
                            (ii) the State regulatory program provides 
                        for the appropriate and effective enforcement 
                        of such standards.
    (d) Treatment of Rejections.--If a plan rejects a claim pursuant to 
subsection (c)(1), the plan shall permit the person submitting the 
claim a reasonable opportunity to resubmit the claim on a form or in an 
electronic manner that meets the requirements for acceptance of the 
claim under such subsection.

SEC. 503. PERIODIC REVIEW AND REVISION OF STANDARDS.

    (a) In General.--The Secretary shall--
            (1) provide for the ongoing receipt and review of comments 
        and suggestions for changes in the standards adopted and 
        promulgated under section 501;
            (2) establish a schedule for the periodic review of such 
        standards; and
            (3) based upon such comments, suggestions, and review, 
        revise such standards and promulgate such revisions.
    (b) Application of Revised Standards.--If the Secretary under 
subsection (a) revises the standards described in 501, then, in the 
case of any claim for benefits submitted under a health benefit plan 
more than the minimum period (of not less than 6 months specified by 
the Secretary) after the date the revision is promulgated under 
subsection (a)(3), such standards shall apply under section 502 instead 
of the standards previously promulgated.

SEC. 504. HEALTH BENEFIT PLAN DEFINED.

    In this title, the term ``health benefit plan'' has the meaning 
given such term in section 111(6) and includes--
            (1) the medicare program (under title XVIII of the Social 
        Security Act), and
            (2) a State medicaid plan (approved under title XIX of such 
        Act).

             Subtitle B--Electronic Medical Data Standards

SEC. 511. MEDICAL DATA STANDARDS FOR HOSPITALS AND OTHER PROVIDERS.

    (a) Promulgation of Hospital Data Standards.--
            (1) In general.--Between July 1, 1996, and January 1, 1997, 
        the Secretary shall promulgate standards described in 
        subsection (b) for hospitals concerning electronic medical 
        data.
            (2) Revision.--The Secretary may from time to time revise 
        the standards promulgated under this subsection.
    (b) Contents of Data Standards.--The standards promulgated under 
subsection (a) shall include at least the following:
            (1) A definition of a standard set of data elements for use 
        by utilization and quality control peer review organizations.
            (2) A definition of the set of comprehensive data elements, 
        which set shall include for hospitals the standard set of data 
        elements defined under paragraph (1).
            (3) Standards for an electronic patient care information 
        system with data obtained at the point of care, including 
        standards to protect against the unauthorized use and 
        disclosure of information.
            (4) A specification of, and manner of presentation of, the 
        individual data elements of the sets and system under this 
        subsection.
            (5) Standards concerning the transmission of electronic 
        medical data.
            (6) Standards relating to confidentiality of patient-
        specific information.
The standards under this section shall be consistent with standards for 
data elements established under section 501.
    (c) Optional Data Standards for Other Providers.--
            (1) In general.--The Secretary may promulgate standards 
        described in paragraph (2) concerning electronic medical data 
        for providers that are not hospitals. The Secretary may from 
        time to time revise the standards promulgated under this 
        subsection.
            (2) Contents of data standards.--The standards promulgated 
        under paragraph (1) for non-hospital providers may include 
        standards comparable to the standards described in paragraphs 
        (2), (4), and (5) of subsection (b) for hospitals.
    (d) Consultation.--In promulgating and revising standards under 
this section, the Secretary shall--
            (1) consult with the American National Standards Institute, 
        hospitals, with the advisory commission established under 
        section 515, and with other affected providers, health benefit 
        plans, and other interested parties, and
            (2) take into consideration, in developing standards under 
        subsection (b)(1), the data set used by the utilization and 
        quality control peer review program under part B of title XI of 
        the Social Security Act.

SEC. 512. APPLICATION OF ELECTRONIC DATA STANDARDS TO CERTAIN 
              HOSPITALS.

    (a) Medicare Requirement for Sharing of Hospital Information.--As 
of January 1, 1998, subject to paragraph (2), each hospital, as a 
requirement of each participation agreement under section 1866 of the 
Social Security Act, shall--
            (1) maintain clinical data included in the set of 
        comprehensive data elements under section 511(b)(2) in 
        electronic form on all inpatients,
            (2) upon request of the Secretary or of a utilization and 
        quality control peer review organization (with which the 
        Secretary has entered into a contract under part B of title XI 
        of such Act), transmit electronically the data set, and
            (3) upon request of the Secretary, or of a fiscal 
        intermediary or carrier, transmit electronically any data (with 
        respect to a claim) from such data set,
in accordance with the standards promulgated under section 511(a).
    (b) Waiver Authority.--Until January 1, 2000:
            (1) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is a small 
        rural hospital, for such period as the hospital demonstrates 
        compliance with such requirements would constitute an undue 
        financial hardship.
            (2) The Secretary may waive the application of the 
        requirements of subsection (a) for a hospital that is in the 
        process of developing a system to provide the required data set 
        and executes agreements with its fiscal intermediary and its 
        utilization and quality control peer review organization that 
        the hospital will meet the requirements of subsection (a) by a 
        specified date (not later than January 1, 2000).
            (3) The Secretary may waive the application of the 
        requirement of subsection (a)(1) for a hospital that agrees to 
        obtain from its records the data elements that are needed to 
        meet the requirements of paragraphs (2) and (3) of subsection 
        (a) and agrees to subject its data transfer process to a 
        quality assurance program specified by the Secretary.
    (c) Application to Hospitals of the Department of Veterans 
Affairs.--
            (1) In general.--The Secretary of Veterans Affairs shall 
        provide that each hospital of the Department of Veterans 
        Affairs shall comply with the requirements of subsection (a) in 
        the same manner as such requirements would apply to the 
        hospital if it were participating in the medicare program.
            (2) Waiver.--Such Secretary may waive the application of 
        such requirements to a hospital in the same manner as the 
        Secretary of Health and Human Services may waive under 
        subsection (b) the application of the requirements of 
        subsection (a).

SEC. 513. ELECTRONIC TRANSMISSION TO FEDERAL AGENCIES.

    (a) In General.--Effective January 1, 2000, if a provider is 
required under a Federal program to transmit a data element that is 
subject to a presentation or transmission standard (as defined in 
subsection (b)), the head of the Federal agency responsible for such 
program (if not otherwise authorized) is authorized to require the 
provider to present and transmit the data element electronically in 
accordance with such a standard.
    (b) Presentation or Transmission Standard Defined.--In subsection 
(a), the term ``presentation or transmission standard'' means a 
standard, promulgated under subsection (b) or (c) of section 511, 
described in paragraph (4) or (5) of section 511(b).

SEC. 514. LIMITATION ON DATA REQUIREMENTS WHERE STANDARDS IN EFFECT.

    (a) In General.--If standards with respect to data elements are 
promulgated under section 511 with respect to a class of provider, a 
health benefit plan may not require, for the purpose of utilization 
review or as a condition of providing benefits under the plan, that a 
provider in the class--
            (1) provide any data element not in the set of 
        comprehensive data elements specified under such standards, or
            (2) transmit or present any such data element in a manner 
        inconsistent with the applicable standards for such 
        transmission or presentation.
    (b) Compliance.--
            (1) In general.--The Secretary may impose a civil money 
        penalty on any health benefit plan (other than a health benefit 
        plan described in paragraph (2)) that fails to comply with 
        subsection (a) in an amount not to exceed $100 for each such 
        failure. The provisions of section 1128A of the Social Security 
        Act (other than the first sentence of subsection (a) and other 
        than subsection (b)) shall apply to a civil money penalty under 
        this paragraph in the same manner as such provisions apply to a 
        penalty or proceeding under section 1128A(a) of such Act.
            (2) Plans subject to effective state regulation.--A plan 
        described in this paragraph is a health benefit plan that is 
        subject to regulation by a State, if the Secretary finds that--
                    (A) the State provides for application of the 
                requirement of subsection (a), and
                    (B) the State regulatory program provides for the 
                appropriate and effective enforcement of such 
                requirement with respect to such plans.

SEC. 515. ADVISORY COMMISSION.

    (a) In General.--The Secretary shall establish an advisory 
commission including hospital executives, hospital data base managers, 
physicians, health services researchers, and technical experts in 
collection and use of data and operation of data systems. Such 
commission shall include, as ex officio members, a representative of 
the Director of the National Institutes of Health, the Administrator 
for Health Care Policy and Research, the Secretary of Veterans' 
Affairs, and the Director of the Centers for Disease Control.
    (b) Functions.--The advisory commission shall monitor and advise 
the Secretary concerning--
            (1) the standards established under this subtitle, and
            (2) operational concerns about the implementation of such 
        standards under this subtitle.
    (c) Staff.--From the amounts appropriated under subsection (d), the 
Secretary shall provide sufficient staff to assist the advisory 
commission in its activities under this section.
    (d) Authorization of Appropriations.--There are authorized to be 
appropriated $2,000,000 for each of fiscal years 1995 through 1999 to 
carry out this section.

            TITLE VI--REMOVING RESTRICTIONS ON MANAGED CARE

SEC. 601. REMOVING RESTRICTIONS ON MANAGED CARE.

    (a) Preemption of State Law Provisions.--Subject to subsection (c), 
the following provisions of State law are preempted and may not be 
enforced:
            (1) Restrictions on reimbursement rates or selective 
        contracting.--Any law that restricts the ability of a carrier 
        to negotiate reimbursement rates with providers or to contract 
        selectively with one provider or a limited number of providers.
            (2) Restrictions on differential financial incentives.--Any 
        law that limits the financial incentives that a health benefit 
        plan may require a beneficiary to pay when a non-plan provider 
        is used on a non-emergency basis.
            (3) Restrictions on utilization review methods.--Any law 
        that--
                    (A) prohibits utilization review of any or all 
                treatments and conditions,
                    (B) requires that such review be made (i) by a 
                resident of the State in which the treatment is to be 
                offered or by an individual licensed in such State, or 
                (ii) by a physician in any particular specialty or with 
                any board certified specialty of the same medical 
                specialty as the provider whose services are being 
                reviewed,
                    (C) requires the use of specified standards of 
                health care practice in such reviews or requires the 
                disclosure of the specific criteria used in such 
                reviews,
                    (D) requires payments to providers for the expenses 
                of responding to utilization review requests, or
                    (E) imposes liability for delays in performing such 
                review.
        Nothing in subparagraph (B) shall be construed as prohibiting a 
        State from (i) requiring that utilization review be conducted 
        by a licensed health care professional or (ii) requiring that 
        any appeal from such a review be made by a licensed physician 
        or by a licensed physician in any particular specialty or with 
        any board certified specialty of the same medical specialty as 
        the provider whose services are being reviewed.
    (b) GAO Study.--
            (1) In general.--The Comptroller General shall conduct a 
        study of the benefits and cost effectiveness of the use of 
        managed care in the delivery of health services.
            (2) Report.--By not later than 4 years after the date of 
        the enactment of this Act, the Comptroller General shall submit 
        a report to Congress on the study conducted under paragraph (1) 
        and shall include in the report such recommendations (including 
        whether the provisions of subsection (a) should be extended) as 
        may be appropriate.
    (c) Sunset.--Unless otherwise provided, subsection (a) shall not 
apply 5 years after the date of the enactment of this Act.

   TITLE VII--MODIFICATION OF THE OPERATION OF THE ANTITRUST LAWS TO 
                               HOSPITALS

SEC. 701. PURPOSE.

    The purpose of this title is to encourage cooperation among 
hospitals in order to contain costs and achieve a more efficient health 
care delivery system through the elimination of unnecessary duplication 
and proliferation of expensive medical services or expensive high 
technology equipment.

SEC. 702. EXEMPTIONS FROM THE OPERATION OF THE ANTITRUST LAWS.

    (a) General Exemption.--It shall not be unlawful under the 
antitrust laws for 2 or more hospitals to engage in conduct solely for 
the purpose of negotiating a proposed agreement, to be submitted under 
subsection (b), to share expensive medical services or expensive high 
technology equipment.
    (b) Specific Exemptions.--
            (1) Authority to grant waiver.--The Secretary of Health and 
        Human Services shall issue waivers in accordance with paragraph 
        (4) to exempt from the operation of the antitrust laws conduct 
        engaged in by hospitals to carry out agreements contained in 
        applications approved under paragraph (3).
            (2) Eligibility.--To be eligible to receive a waiver under 
        paragraph (1), 2 or more hospitals shall submit to the 
        Secretary an application that contains (in accordance with 
        guidelines established by the Secretary)--
                    (A) a proposed agreement that only--
                            (i) provides that such hospitals shall 
                        share the expensive medical services or 
                        expensive high technology equipment identified 
                        in such agreement,
                            (ii) specifies the period of time during 
                        which such agreement shall be in effect,
                            (iii) describes the particular medical 
                        services or high technology equipment to be 
                        shared under such agreement, and
                            (iv) contains such other terms and 
                        conditions as the Secretary may reasonably 
                        require, and
                    (B) such information and assurances as the 
                Secretary may reasonably require.
            (3) Approval.--For purposes of determining whether to 
        approve an application submitted under paragraph (2), the 
        Secretary shall consider whether--
                    (A) the proposed agreement contained in such 
                application satisfies the guidelines issued under 
                paragraph (6), and
                    (B) implementation of such agreement will result 
                in--
                            (i) enhancement of the quality of hospital 
                        care or hospital-related care,
                            (ii) the preservation of hospital services 
                        in geographical proximity to the communities 
                        traditionally served by the applicants,
                            (iii) improvement in the cost-effectiveness 
                        of high-technology services provided by the 
                        applicants,
                            (iv) improvement in the efficient 
                        utilization of hospital resources and capital 
                        equipment,
                            (v) the provision of services that would 
                        not otherwise be available, or
                            (vi) the avoidance of duplication of 
                        hospital resources.
            (4) Issuance and effect of waiver.--If--
                    (A) the Secretary approves under paragraph (3) an 
                application submitted under paragraph (2), and
                    (B) the applicants enter into the proposed 
                agreement contained in such application, modified as 
                the Secretary may require as a condition for approval,
        then the Secretary shall issue a waiver with respect to the 
        agreement entered into. Except as provided in paragraph (5), 
        such waiver shall exempt the applicants from the operation of 
        the antitrust laws for conduct the applicants engage in during 
        the period specified in such waiver and solely to carry out the 
        agreement with respect to which such waiver is issued.
            (5) Revocation of waiver.--(A) If the Secretary determines 
        that a hospital with respect to which a waiver is in effect 
        under paragraph (4) is not carrying out, or has not carried 
        out, fully the terms of the agreement with respect to which a 
        waiver is issued under paragraph (4), the Secretary may revoke 
        such waiver.
            (B) If the Secretary revokes such waiver--
                    (i) the Secretary shall specify the period during 
                which such hospital did not carry out fully the terms 
                of such agreement, and
                    (ii) such waiver shall have no legal effect with 
                respect to such period.
            (6) Issuance of guidelines.--Not later than 6 months after 
        the date of the enactment of this Act, the Secretary shall 
        establish the guidelines for applications under paragraph (2).
    (c) Delegation of Authority.--The Secretary is authorized to 
delegate the authority under this section with respect to a hospital in 
a State to the State multicare program established under title I. To 
the extent the Secretary delegates authority to a State under the 
previous sentence with respect to hospitals in a State, any subsequent 
in this title to the ``Secretary'' is deemed a reference to the State 
multicare program.

SEC. 703. REPORTS.

    (a) Reports to the Secretary.--Each hospital with respect to which 
a waiver is issued under section 702(b)(4) shall submit to the 
Secretary--
            (1) during the period such waiver is in effect, an annual 
        report at such time, in such form, and containing such 
        information as the Secretary may require, including a detailed 
        description of the implementation of the agreement to which 
        such waiver applies, and
            (2) such other information as the Secretary may require for 
        purposes of determining compliance with section 702.
    (b) Report to Committees of the Congress.--
            (1) Chairmen of committees.--Not later than 7 years after 
        the date of the enactment of this Act, the Secretary shall 
        submit the report described in paragraph (2) to--
                    (A) the chairman of the Committee on the Judiciary 
                of the House of Representatives,
                    (B) the chairman of the Committee on Ways and Means 
                of the House of Representatives,
                    (C) the chairman of the Committee on Energy and 
                Commerce of the House of Representatives,
                    (D) the chairman of the Committee on the Judiciary 
                of the Senate,
                    (E) the chairman of the Committee on Finance of the 
                Senate, and
                    (F) the chairman of the Committee on Labor and 
                Human Resources of the Senate.
            (2) Contents of report.--The report required by paragraph 
        (1) shall contain a description of the nature of the agreements 
        with respect to which the Secretary issued waivers under 
        section 702(b)(4) and of the results of implementing such 
        agreements, including an assessment of whether such agreements 
        caused--
                    (A) a reduction in health care costs,
                    (B) an increase in access to medical services, and
                    (C) improvement in the quality of health care.
        Such report shall also contain the recommendations of the 
        Secretary with respect to other arrangements to facilitate 
        cooperative activities to achieve the results specified in 
        subparagraphs (A), (B), and (C).

SEC. 704. DEFINITIONS.

    For purposes of this title:
            (1) The term ``antitrust laws'' has the meaning given it in 
        subsection (a) of the first section of the Clayton Act (15 
        U.S.C. 12(a)), except that such term includes--
                    (A) section 5 of the Federal Trade Commission Act 
                (15 U.S.C. 45) to the extent such section applies to 
                unfair methods of competition, and
                    (B) any State law similar to the antitrust laws.
            (2) The term ``high technology equipment'' includes drugs, 
        devices, equipment, and medical and surgical procedures 
        utilized in medical care, and the organizational and support 
        systems within which such care is provided, that--
                    (A) have high capital costs or extremely high 
                annual operating costs, and
                    (B) use technologies with respect to which there is 
                a reasonable expectation that shared ownership will 
                avoid a significant degree of the potential excess 
                capacity of service in the geographical area to be 
                served.
            (3) The term ``medical services'' includes services that--
                    (A) either have high capital costs or extremely 
                high annual operating costs, and
                    (B) with respect to which there is a reasonable 
                expectation that shared ownership will avoid a 
                significant degree of the potential excess capacity of 
                such services in the geographical area to be served,
        and may include mobile services.
            (4) The term ``hospital'' means a hospital that--
                    (A) has entered into, and has in effect, a 
                participation agreement under section 1866(a) of the 
                Social Security Act, or
                    (B) which has in effect a participation agreement 
                under title XIX of such Act with the State in which the 
                hospital is located.
            (5) The term ``Secretary'' means the Secretary of Health 
        and Human Services.

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