I

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.

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

3 SECTION 1. SHORT TITLES; TABLE OF CONTENTS.

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

5 ‘‘Multiple Choice Health Care Act of 1994’’ or the

6 ‘‘Multicare Act of 1994’’.

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

8 this Act is as follows:
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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.
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‘‘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.
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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.
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Sec. 703. Reports.

Sec. 704. Definitions.

1 SEC. 2. GOALS AND STRATEGIES.

2 (a) GOALS.—The goals of this Act are—

3 (1) to restrain health care price inflation

4 through market incentives and competition,

5 (2) to ensure adequate medical care for all

6 Americans,

7 (3) to distribute Federal health subsidies more

8 fairly across the population,

9 (4) to allow meaningful consumer choice among

10 health care plans and providers,

11 (5) to allow States flexibility to tailor health

12 programs to local needs, and

13 (6) to accomplish these goals at no added cost

14 to taxpayers.

15 (b) STRATEGIES.—The strategies to be used in this

16 Act to achieve these goals are—

17 (1) to increase the role and flexibility of State

18 and local governments in providing health care infor19 mation to consumers, in ensuring health care for the

20 needy, and in promoting competition among health

21 plans,

22 (2) to replace the current tax exemption for em23 ployer-paid insurance with a payment towards health

24 care premiums for all Americans,
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1 (3) to increase public-private partnership by al2 lowing individuals in public programs to meet their

3 health care needs through the purchase of private

4 health insurance,

5 (4) to reduce the amount of direct regulation of

6 health care providers, and

7 (5) to allow individuals to participate in open

8 enrollment health plans.

9 SEC. 3. GENERAL DEFINITIONS.

10 In this Act:

11 (1) The term ‘‘acute care services’’ means such

12 services, identified by the Secretary, of the type cov13 ered under multicare plans.

14 (2) The term ‘‘eligible individual’’ means, with

15 respect to a State, an individual—

16 (A) who is a citizen or national of the

17 United States, an alien lawfully admitted for

18 permanent residence, or an alien otherwise law19 fully residing permanently in the United States

20 under color of law, and

21 (B) who is a resident of the State (as de22 fined by the Secretary).

23 (3) The term ‘‘exempt individual’’ means an in24 dividual who—
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1 (A) is entitled to benefits under part A or

2 part B of title XVIII of the Social Security

3 Act);

4 (B) is entitled to medicare and dental care

5 under section 1074(a) of title 10, United States

6 Code; or

7 (C) is a member on active duty (as defined

8 in section 101(22) of such title) of the armed

9 forces of the United States.

10 (4) The term ‘‘family income’’ means the total

11 value of income of the individual and the individual’s

12 family members (as defined by the Secretary), as de13 fined by the State in which the individual resides

14 and includes at least—

15 (A) cash income,

16 (B) aid under title IV of the Social Secu17 rity Act (relating to the aid to families with de18 pendent children program) and assistance re19 ceived under title XVI of such Act,

20 (C) the value of State or Federal housing

21 assistance (as determined by the State),

22 (D) the cash value of food stamps,

23 (E) general relief, and

24 (F) other State and local cash welfare pay25 ment.
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1 (5) The term ‘‘Federal official poverty level’’

2 means the income official poverty line defined by the

3 Office of Management and Budget and revised an4 nually in accordance with section 673(2) of the Om5 nibus Budget Reconciliation Act of 1981.

6 (6) The term ‘‘medicaid eligible individual’’

7 means an individual who is entitled to medical as8 sistance under a State medicaid plan, or would be so

9 eligible but for the election of a State under section

10 101(c)(1)(A).

11 (7) The terms ‘‘medicaid opt-out State’’ and

12 ‘‘medicaid opt-in State’’ mean a State that in its

13 multicare program has elected the option described

14 in section 101(c)(1)(A) or in section 101(c)(1)(B),

15 respectively.

16 (8) The term ‘‘multicare plan’’ means a health

17 benefits plan which is determined to meet the re18 quirements of title II, and includes a health benefit

19 plan in which an individual is enrolled under chapter

20 89 of title 5, United States Code, if the plan partici21 pates in a reinsurance system that meets the re22 quirements of section 108.

23 (9) The term ‘‘near poor individual’’ means an

24 individual whose family income is greater than 100

25 percent, but does not exceed 150 percent, of the
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1 Federal official poverty level applicable to a family

2 of the size involved.

3 (10) The term ‘‘open enrollment multicare

4 plan’’ means a multicare plan offered in an area of

5 a State that permits all eligible residents of the area

6 to enroll under the plan.

7 (11) The term ‘‘poor individual’’ means an indi8 vidual whose family income does not exceed the Fed9 eral official poverty level applicable to a family of

10 the size involved.

11 (12) The term ‘‘Secretary’’ means the Secretary

12 of Health and Human Services.

13 (13) The term ‘‘State’’ includes the District of

14 Columbia, Puerto Rico, the Virgin Islands, Guam,

15 American Samoa, and the Northern Mariana Is16 lands.

17 (14) The term ‘‘State medicaid plan’’ means

18 the plan of a State approved under title XIX of the

19 Social Security Act, and includes a statewide medi20 cal assistance plan operating under section 1115 of

21 such Act.

22 (15) The term ‘‘State multicare program’’

23 means such a program that the Secretary finds

24 meets the requirements of title I.
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1 TITLE I—ESTABLISHMENT OF

2 STATE MULTICARE PRO3 GRAMS; TAX CHANGES

4 Subtitle A—Establishment of State

5 Multicare Programs

6 SEC. 101. GRANTS TO STATES FOR STATE MULTICARE PRO7 GRAMS.

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

9 Human Services shall provide grants to each State to es10 tablish a State multicare program for the offering of com11 peting multicare plans in the State.

12 (b) GRANT APPLICATION.—No grant may be made

13 under this section to a State unless—

14 (1) the State has submitted an application in

15 such form and manner as the Secretary shall speci16 fy, and

17 (2) the Secretary determines that the applica18 tion provides for the operation of a State multicare

19 program that meets the requirements of the succeed20 ing sections of this title.

21 (c) AMOUNT OF GRANT.—

22 (1) BASE AMOUNT.—For any State, subject to

23 the succeeding provisions of this subsection, the

24 amount of a grant under this section, with respect

25 to each eligible individual (other than an exempt in-
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1 dividual) enrolled in a multicare plan, is equal to the

2 Federal contribution amount (determined under sec3 tion 121) for the class of enrollment involved.

4 (2) SUPPLEMENTAL PAYMENT TO STATES.—

5 The amount of such a grant shall be increased, with

6 respect to each eligible individual (other than an ex7 empt individual) who is not enrolled in a multicare

8 plan, by an amount equal to the amount that would

9 have been paid under paragraph (1) if the individual

10 were enrolled in a multicare plan.

11 (3) ADDITIONAL AMOUNTS.—The amount of

12 such a grant shall be further increased by the sum

13 of the following:

14 (A) MEDICAID SAVINGS.—

15 (i) IN GENERAL.—The amount de16 scribed in clause (ii) for the State, in17 creased (for each year after the last full

18 year referred to in clause (ii)(I), up to the

19 year involved) by the applicable inflator

20 (specified in section 107(b)(2)(D)) for the

21 year, and subject to any adjustment for

22 changes in population under section

23 107(b)(4).
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1 (ii) AMOUNT DESCRIBED.—The

2 amount described in this clause for a State

3 is—

4 (I) the total amount of Federal

5 payments made to the State under

6 section 1903(a) of the Social Security

7 Act for acute care services during the

8 last full year prior to the implementa9 tion of a State multicare program in

10 the State, reduced by

11 (II) the product of $400 and the

12 average number of individuals entitled

13 to assistance for such services under

14 the medicaid program in the State

15 during that year.

16 (B) CASH ASSISTANCE SAVINGS.—The

17 total amount of the reductions in Federal pay18 ments under title IV or XVI of the Social Secu19 rity Act, the Food Stamp Act, and other Fed20 eral welfare programs for residents of a State

21 resulting directly from the implementation of

22 the financial assistance provided under section

23 107 as a substitute for medical assistance for

24 acute care services under the State medicaid

25 plan.
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1 (d) USE OF FUNDS.—

2 (1) USE OF BASE AMOUNTS.—At least 97 per3 cent of the funds provided to a State under sub4 section (c)(1) with respect to enrollment of an eligi5 ble individual shall be used only, in accordance with

6 section 106, for payment of all or a portion of the

7 premium for enrollment of such an eligible individual

8 in a multicare plan under the multicare program.

9 (2) USE OF FEDERAL SUPPLEMENTAL

10 AMOUNTS.—At least 97 percent of the funds pro11 vided to the State under subsection (c)(2) shall be

12 used only towards—

13 (A) financing the State reinsurance mecha14 nism under section 108, or

15 (B) providing additional subsidies for poor

16 and near poor individuals under section 107.

17 (3) USE OF ADDITIONAL AMOUNTS FOR FINAN18 CIAL ASSISTANCE.—At least 97 percent of the funds

19 provided to the State under subsection (c)(3) shall

20 be used only for additional financial assistance for

21 poor and near poor individuals under section 107.

22 (4) APPLICATION TOWARD ADMINISTRATIVE

23 COSTS.—

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

25 the previous paragraphs, Federal grant funds
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1 may only be used to finance administrative

2 costs.

3 (B) ADMINISTRATIVE COSTS.—In this

4 paragraph, the term ‘‘administrative costs’’ in5 cludes costs associated with—

6 (i) soliciting bids and negotiating with

7 multicare plans and certifying compliance

8 of plans with the requirements of title II,

9 (ii) preparing and disseminating com10 parative value information on multicare

11 plans,

12 (iii) planning, developing, and imple13 menting the process for enrollment of eligi14 ble individuals in multicare plans, and

15 (iv) establishing and administering the

16 reinsurance mechanism under section 108

17 (not including reinsurance payments made

18 under such a mechanism).

19 (5) REQUIRED USE OF STATE SUPPLEMENTAL

20 FUNDS.—

21 (A) IN GENERAL.—Each State multicare

22 program shall assure that—

23 (i) at least 97 percent of the funds de24 scribed in subparagraph (C) are used to25 wards—
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1 (I) financing the State reinsur2 ance mechanism under section 108, or

3 (II) providing additional sub4 sidies for poor and near poor individ5 uals under section 107, and

6 (ii) at least 97 percent of the funds

7 described in section 107(b)(5) (relating to

8 State welfare savings) are used towards

9 providing additional subsidies for poor and

10 near poor individuals under section 107.

11 (B) STATE SUPPLEMENTAL FUNDS DE12 SCRIBED.—The funds described in this sub13 paragraph are the amount by which (i) the

14 State aggregate contribution amount (described

15 in section 106(b)(2)), exceeds (ii) the aggregate

16 amounts of the contributions paid by the State

17 under section 106(b)(1)(B) (determined as if

18 the reference to ‘‘97 percent’’ in such section

19 were a reference to ‘‘100 percent’’).

20 (e) SPECIAL RULES FOR TERRITORIES.—The Sec21 retary may establish such special rules as may be appro22 priate to adapt the provisions of this title (and titles II

23 and III) in the case of Puerto Rico, the Virgin Islands,

24 Guam, American Samoa, and the Northern Mariana Is25 lands.
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1 SEC. 102. REQUIREMENT FOR CERTIFICATION OF

2 MULTICARE PLANS.

3 (a) PROCESS.—

4 (1) IN GENERAL.—Each State multicare pro5 gram shall provide a mechanism for certifying at

6 least 2 competing open enrollment multicare plans in

7 all areas of the State.

8 (2) WAIVER AUTHORITY.—The Secretary may

9 waive the requirement of paragraph (1) that a State

10 multicare program offer more than 1 open enroll11 ment multicare plan in all areas of a State if the

12 Secretary finds that a single, coordinated open en13 rollment multicare plan would be more cost-effective.

14 (b) REQUIREMENTS FOR CERTIFICATION.—A pro15 gram shall not certify a multicare plan for purposes of

16 subsection (a) unless the program determines that the

17 plan—

18 (1) is in compliance with the requirements of

19 title II (including requirements relating to consumer

20 education and assistance and consumer rights) and

21 other Federal health care regulations, and

22 (2) meets such standards as the program or the

23 Secretary may establish relating to financial solvency

24 and quality of care.

25 (c) TREATMENT OF MULTI-STATE REGIONS.—The

26 State multicare programs of one or more adjacent States
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1 may establish agreements, consistent with the require2 ments of this Act, governing the certification and oper3 ation of multicare plans that enroll individuals residing in

4 an area that includes portions of such States.

5 (d) GENERAL AUTHORITY OF STATES.—Nothing in

6 this Act shall be construed as preventing a State—

7 (1) from sponsoring a multicare plan,

8 (2) from requiring individuals to select enroll9 ment under the plan,

10 (3) from providing additional subsidies for indi11 viduals selecting such a plan, or

12 (4) from requiring employers to provide for

13 payment of multicare premiums of employees

14 through automatic payroll deductions.

15 (e) TREATMENT OF FEHBP PLANS.—Nothing in

16 this title (other than section 108) shall be construed as

17 authorizing a State to regulate health plans offered under

18 the Federal Employees Health Benefits Program, under

19 chapter 89, of title 5, United States Code.

20 SEC. 103. REQUIREMENT FOR ENROLLMENT PROCESS.

21 (a) REQUIREMENT.—

22 (1) IN GENERAL.—Each State multicare pro23 gram—

24 (A) shall provide a mechanism for the en25 rollment, during open season periods, of eligible
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1 individuals (other than exempt individuals) who

2 are residents of the State in multicare plans,

3 and

4 (B) may require each eligible individual

5 (other than such an exempt individual or an in6 dividual described in paragraph (2)) residing in

7 the State to be enrolled in a multicare plan and

8 may require that such a plan be a multicare

9 plan operated directly by the program.

10 (2) EXCEPTION.—A State may, at its option,

11 except from the requirement described in paragraph

12 (1)(B) any of the following:

13 (A) An individual who is within a class of

14 individuals eligible for health care benefits from

15 the Department of Veterans Affairs.

16 (B) An individual who is incarcerated.

17 (C) An individual who is within any other

18 class of individuals with respect to whom the

19 State determines that members of the class are

20 likely to have health care coverage reasonably

21 comparable to the coverage available through

22 enrollment in a multicare plan.

23 (b) PERMITTING CLOSED ENROLLMENT PLANS.—

24 (1) IN GENERAL.—A State multicare program

25 may not deny approval of a plan (such as an em-
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1 ployer self-insured plan or a plan based on an asso2 ciation with or membership in a group) as a

3 multicare plan because the plan is not an open en4 rollment multicare plan and limits enrollment to in5 dividuals associated with an employer or association.

6 (2) CONSTRUCTION.—Nothing in this sub7 section shall be construed as waiving the require8 ment under section 204 that a multicare plan par9 ticipate in a reinsurance system (established under

10 the State multicare program under section 108 or by

11 the Secretary under section 301 or 331).

12 (c) DISTRIBUTION OF COMPARATIVE VALUE INFOR13 MATION.—

14 (1) IN GENERAL.—Each State multicare pro15 gram shall provide for the distribution to eligible in16 dividuals of comparative value information. Such

17 program may require that the information conform

18 to the national standards established under para19 graph (3).

20 (2) CONTENTS.—The comparative value infor21 mation shall include, with respect to each multicare

22 plan offered, information on—

23 (A) benefits, premiums costs, and patient

24 cost-sharing arrangements (including projected

25 annual costs for medium-risk individuals), and
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1 (B) indicators of the quality of health care

2 offered under the plan.

3 (3) STANDARDS.—The Secretary shall establish

4 national standards for the collection and distribution

5 of comparative value information.

6 (d) USE OF EMPLOYERS.—A State multicare pro7 gram may require employers to distribute the comparative

8 value information concerning multicare plans to employees

9 and to require automatic payroll deductions for payment

10 of premiums for such plans by such employees.

11 SEC. 104. SUGGESTIVE LIST OF MULTICARE SERVICES; LIM12 ITS ON COST-SHARING; TREATMENT PRAC13 TICE GUIDELINES.

14 (a) MULTICARE SERVICES.—

15 (1) NATIONAL SUGGESTED LIST.—The Sec16 retary shall develop a national list of services which

17 may be covered by a multicare plan. Such list shall

18 include those services identified as cost-effective by

19 the Secretary.

20 (2) STATE SUGGESTED LIST.—

21 (A) ESTABLISHMENT.—Each State

22 multicare program shall establish a State-spe23 cific list of covered health care services. Such

24 list may, but need not, include the services in-
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1 cluded in the national standard list developed

2 under paragraph (1).

3 (B) LIMITATIONS.—A State multicare pro4 gram may, with respect to a covered service,

5 limit the amount, duration, or scope of the serv6 ice to be included in the list of services.

7 (b) CATASTROPHIC PROTECTION.—A State multicare

8 program may decrease, under section 203(e)(2)(C) or oth9 erwise, the amount of the cost-sharing limit otherwise per10 mitted under multicare plans.

11 (c) SUGGESTED TREATMENT PRACTICE GUIDE12 LINES.—The Secretary shall publish and distribute treat13 ment practice guidelines for use by multicare plans under

14 State multicare programs.

15 SEC. 105. CONTINUITY OF COVERAGE.

16 (a) PROCESS.—Each State multicare program shall

17 establish procedures, including procedures for administer18 ing changes in enrollment in cases of changes in area of

19 residence, employment, and family status, to ensure for

20 eligible individuals residing in each State continuity of cov21 erage under a multicare plan.

22 (b) GUARANTEED ISSUANCE AND PROHIBITION OF

23 PREEXISTING CONDITION EXCLUSIONS.—In addition,

24 each State multicare program shall establish procedures

25 to ensure—
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1 (1) the multicare plans do not deny coverage to

2 any eligible individual, and

3 (2) multicare plans do not exclude coverage on

4 the basis of preexisting conditions.

5 SEC. 106. CONTRIBUTION TOWARD PREMIUM COSTS FOR

6 ELIGIBLE INDIVIDUALS.

7 (a) IN GENERAL.—Each State multicare program

8 shall provide, for each eligible individual (other than an

9 exempt individual) enrolled in a multicare plan under the

10 program for a contribution toward the premium cost of

11 such enrollment.

12 (b) AMOUNT OF CONTRIBUTION.—

13 (1) IN GENERAL.—The amount of the contribu14 tion under subsection (a) with respect to an eligible

15 individual is equal to the sum of—

16 (A) not less than 97 percent of the funds

17 provided to a State under section 101(d)(1)

18 with respect to enrollment of the eligible indi19 vidual, and

20 (B) not less than 97 percent of the amount

21 specified under paragraph (2) with respect to

22 the enrollment of the individual.

23 Except as the Secretary may otherwise permit, such

24 contribution shall be provided on a monthly basis.

25 (2) STATE CONTRIBUTION AMOUNT.—
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1 (A) INITIAL AMOUNT.—

2 (i) IN GENERAL.—Subject to subpara3 graph (C), the State aggregate contribu4 tion amount for a year is equal to—

5 (I) the total amount of available

6 funds (determined under clause (ii))

7 for the year, divided by

8 (II) the average number of indi9 viduals described in clause (iii) for the

10 year.

11 (ii) FUNDS AVAILABLE.—The total

12 amount of available funds for a year is

13 equal to the increase in all State revenues

14 (including employment-related excise taxes)

15 effected as a result of section 111 and the

16 amendment made by section 123.

17 (iii) INDIVIDUALS DESCRIBED.—The

18 number of individuals described in this

19 clause for a year is the estimated total av20 erage population of the State in the year,

21 less the sum of the average number of ex22 empt individuals (as defined in section

23 121(d)) in the State in the year.

24 (B) APPLICATION BY ENROLLMENT

25 CLASS.—The State shall adjust the State aggre-
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1 gate contribution amount determined under this

2 section among enrollment classes established

3 under section 121(c)(1) in the same manner as

4 the Secretary provides for adjustment of the

5 Federal contribution amount among such class6 es under section 121(c)(2).

7 SEC. 107. ADDITIONAL SUBSIDIES FOR POOR AND NEAR

8 POOR INDIVIDUALS.

9 (a) REQUIREMENT.—

10 (1) IN GENERAL.—Each State multicare pro11 gram shall include a mechanism for providing addi12 tional financial assistance, consistent with this sec13 tion, to poor individuals and near poor individuals

14 (as defined in section 3) to assist them in purchas15 ing coverage under multicare plans.

16 (2) INCOME DETERMINATIONS.—Each such

17 program is responsible for making income deter18 minations necessary to determine if individuals are

19 poor or near poor individuals.

20 (b) MAINTENANCE OF EFFORT REQUIRED.—

21 (1) IN GENERAL.—The financial assistance pro22 vided under this section shall not be less than the

23 maintenance-of-effort level described in paragraph

24 (2).
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1 (2) MAINTENANCE-OF-EFFORT LEVEL.—Sub2 ject to paragraphs (4) and (5), for a State for a

3 year, the ‘‘maintenance-of-effort level’’ described in

4 this subparagraph is equal to—

5 (A) the total amount of expenditures made

6 under the State medicaid plan (net of any Fed7 eral payments under section 1903(a) of the So8 cial Security Act) during the last full year prior

9 to the implementation of a State multicare pro10 gram in the State for acute care services, in11 creased

12 (B) for each subsequent year (up to the

13 year involved) by the applicable inflator (speci14 fied in paragraph (3)) for the year.

15 Expenditures under paragraph (A) shall include pay16 ments to disproportionate share hospitals under sec17 tion 1923 of the Social Security Act.

18 (3) APPLICABLE INFLATOR.—For purposes of

19 paragraph (1)(B), the applicable inflator for a year

20 is the lesser of—

21 (A) the rate of health care inflation for the

22 year, as determined by the Secretary, or

23 (B) the percentage increase in the

24 consumer price index for all urban consumers
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1 (all items; U.S. city average) for the year (as

2 specified by the Secretary), plus—

3 (i) for the first year in which the

4 State multicare program is implemented, 3

5 percentage points,

6 (ii) for the second such year, 2.5 per7 centage points,

8 (iii) for the third such year, 2.0 per9 centage points,

10 (iv) for the fourth such year, 1.5 per11 centage points,

12 (v) for the fifth such year, 1.0 per13 centage points,

14 (vi) for the sixth such year 0.5 per15 centage points, and

16 (vii) for any subsequent year, 0 per17 centage points.

18 (4) ADJUSTMENT TO REFLECT CHANGES IN

19 POPULATION.—The Secretary may adjust the main20 tenance-of-effort level of a State to reflect changes

21 in the population of poor and near poor individuals

22 in the State between the year described in paragraph

23 (2)(A) and the year involved.

24 (5) STATE SAVINGS FROM WELFARE PRO25 GRAMS.—The maintenance-of-effort level for a State
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1 shall be increased by the total amount of the reduc2 tions in State payments under title IV or XVI of the

3 Social Security Act, the Food Stamp Act, and other

4 Federal welfare programs (net of any Federal pay5 ments) for residents of a State resulting directly

6 from the implementation of the financial assistance

7 provided under this section as a substitute for medi8 cal assistance for acute care services under the State

9 medicaid plan.

10 (c) MEDICAID REVISIONS.—Notwithstanding any

11 other provision of law—

12 (1) a State may deny medical assistance for

13 acute care services under its State medicaid plan to

14 any poor or near poor individual who is eligible to

15 enroll under a multicare plan and for whom addi16 tional financial assistance is made available under

17 this section; and

18 (2) no Federal financial participation is allow19 able under section 1903(a) of the Social Security

20 Act for expenditures relating to acute care services

21 to any poor or near poor individual who is eligible

22 to enroll under a multicare plan and for whom addi23 tional financial assistance is made available under

24 this section.
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1 Expenditures under paragraph (2) shall include payments

2 to disproportionate share hospitals under section 1923 of

3 the Social Security Act.

4 (d) SPECIFIC LIMITATIONS ON COST-SHARING.—

5 (1) SLIDING SCALE.—The premiums and cost6 sharing imposed under the lowest cost multicare

7 plans for poor and near poor individuals shall be de8 termined on a sliding scale based on the family in9 come of an individual.

10 (2) MAXIMUM LEVEL.—Such premiums and

11 cost-sharing may not exceed—

12 (A) in the case of a poor individual, 5 per13 cent of the individual’s family income, and

14 (B) in the case of a near-poor individual,

15 5 percent of the Federal official poverty level

16 (applicable to a family of the size involved) plus

17 10 percent of the amount by which the individ18 ual’s family income exceeds such poverty level.

19 SEC. 108. ESTABLISHMENT OF REINSURANCE MECHANISM.

20 (a) ESTABLISHMENT.—

21 (1) IN GENERAL.—Each State multicare pro22 gram shall include a reinsurance mechanism for high

23 risk individuals enrolled (or enrolling) in multicare

24 plans offered in the State.
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1 (2) GOVERNANCE.—The mechanism shall be

2 governed by a commission appointed by the chief ex3 ecutive officer of the State. The membership of the

4 commission shall include such officer (or the officer’s

5 designee) and representatives of plan sponsors,

6 major providers, labor, consumers, State govern7 ments, and the business community.

8 (b) REQUIREMENTS.—The mechanism under this

9 section shall require all multicare plans—

10 (1) to pay into a common fund for each below11 average-risk individual an amount related to the de12 gree to which the individual’s risk is below the aver13 age risk, and

14 (2) to receive from the common fund for each

15 above-average-risk individual an amount related to

16 the degree to which the individual’s risk is above the

17 average risk.

18 The mechanism may not use the fact that a plan is a

19 below-average-cost plan as an indicator that the plan

20 serves below-average-risk individuals.

21 (c) OPTIONS.—

22 (1) STOP-LOSS.—The mechanism also may pro23 vide for additional payments from the common fund

24 to multicare plans for individuals whose costs exceed

25 a particular threshold, and may require all plans (in-
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1 cluding plans participating in the Federal Employees

2 Health Benefits program under chapter 89 of title

3 5, United States Code) to make contributions to the

4 fund to offset such additional payments.

5 (2) CONTINUOUS COVERAGE INCENTIVES.—The

6 mechanism may provide for appropriate incentives to

7 encourage continuous coverage of individuals and

8 groups.

9 (3) COST-SHARING LIMIT.—The mechanism

10 may provide for limits on the non-premium cost11 sharing of enrollees.

12 (4) MULTI-STATE OPTION.—State multicare

13 programs may cooperate and establish multistate re14 insurance mechanisms to carry out this section.

15 (d) TREATMENT OF SELF-INSURED PLANS.—

16 (1) IN GENERAL.—In the case of a multicare

17 plan that is a self-insured plan (as defined by the

18 Secretary), except as provided in paragraph (2), the

19 plan is subject to the requirements of this section,

20 notwithstanding any provision of the Employee Re21 tirement Income Security Act of 1974 to the con22 trary.

23 (2) EXCEPTION.—Paragraph (1) and the provi24 sions of subsections (a) through (c) shall not apply

25 to a self-insured plan that operates in at least 3
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1 States and that has elected, under section 331(c), to

2 participate in the national reinsurance mechanism

3 (under section 331) rather than in State reinsurance

4 mechanisms under this section.

5 SEC. 109. CONSUMER EDUCATION AND ASSISTANCE.

6 (a) IN GENERAL.—Each State multicare program

7 shall establish procedures—

8 (1) for collecting, publishing, and distributing

9 comparative value information (described in section

10 103(c)) on multicare plans to consumers, and

11 (2) for educating individuals eligible for State

12 health care subsidies regarding their health care op13 tions and the requirements under section 107 to

14 qualify for reduced cost-sharing.

15 (b) DISTRIBUTION OF PLAN INFORMATION

16 THROUGH EMPLOYERS.—A State multicare program may

17 require employers to supply basic information on

18 multicare plans in the State (whether prepared by the pro19 gram or the plans) to their employees.

20 SEC. 110. CONSUMER RIGHTS ENFORCEMENT.

21 Each State multicare program shall assure compli22 ance of multicare plans with the consumer rights under

23 section 203.
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1 SEC. 111. COMPLIANCE OF STATE INCOME TAX LAWS.

2 Each State multicare program shall provide for as3 surances that any income tax laws of the State, insofar

4 as they provide for the determination of tax based upon

5 income as determined under the Federal income tax laws,

6 treat employer payments for health care premiums and ex7 penses of employees or dependents as payment of wages

8 to such employees and dependents.

9 SEC. 112. DISTRIBUTION OF INFORMATION ON AVERAGE

10 PRICES OF COMMON HEALTH CARE SERV11 ICES.

12 Each State multicare program shall provide for the

13 distribution, on both a State and local level, of information

14 on the average prices of common health care services, in15 cluding such services as the Secretary may specify.

16 Subtitle B—Federal Contribution

17 Toward Multicare Plan Pre18 miums; Tax Law Changes

19 SEC. 121. COMPUTATION OF AMOUNT OF FEDERAL CON20 TRIBUTION.

21 (a) DETERMINATION OF AMOUNT.—The Secretary

22 shall determine for each year (beginning with 1996) an

23 annual Federal contribution amount in accordance with

24 this section.

25 (b) AMOUNT.—Subject to subsection (c):

26 (1) AMOUNT FOR YEARS BEFORE 2002.—
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1 (A) IN GENERAL.—The Federal contribu2 tion amount for a year before 2002 is equal

3 to—

4 (i) the total amount of available funds

5 (determined under subparagraph (B)) for

6 the year, divided by

7 (ii) the average number of individuals

8 described in subparagraph (C) for the

9 year.

10 (B) FUNDS AVAILABLE.—The total

11 amount of available funds for a year is equal to

12 the sum of the following:

13 (i) ADDITIONAL NET FEDERAL REVE14 NUES.—The amount described in this sub15 paragraph is the amount by which—

16 (I) the increase in all Federal

17 revenues (including employment-relat18 ed excise taxes) resulting from the

19 amendments made by sections 122

20 and 123, exceeds

21 (II) the increase in appropria22 tions resulting from the increase in

23 authorization of appropriations pro24 vided under section 441(a) (relating
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1 to facilitating development and use of

2 medical practice guidelines).

3 (ii) ADDITIONAL MEDICAID-RELATED

4 AMOUNT.—The product described in sec5 tion 101(c)(3)(A)(ii)(II) for the State, in6 creased (for each year after the last full

7 year referred to in section

8 101(c)(3)(A)(ii)(I), up to the year in9 volved) by the applicable inflator (specified

10 in section 107(b)(2)(D)) for the year, and

11 subject to any adjustment for changes in

12 population under section 107(b)(4).

13 (C) INDIVIDUALS DESCRIBED.—

14 (i) IN GENERAL.—The number of in15 dividuals described in this subparagraph

16 for a year is—

17 (I) the estimated total average

18 population of the United States in the

19 year, less

20 (II) the sum of the average num21 ber of exempt individuals in the year.

22 (2) YEARS BEGINNING WITH 2002.—The Fed23 eral contribution amount for a year after 2001 is

24 equal to the Federal contribution amount deter25 mined under this subsection for the previous year in-
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1 creased by the applicable inflator for the year in2 volved (as specified under section 107(b)(3)).

3 (c) APPLICATION BY ENROLLMENT CLASS.—

4 (1) ESTABLISHMENT OF ENROLLMENT CLASS5 ES.—

6 (A) IN GENERAL.—The Secretary shall es7 tablish one or more sets of enrollment classes

8 based on both—

9 (i) family composition, and

10 (ii) ages of family members.

11 (B) USE OF COMMON CLASSIFICATIONS

12 FOR FAMILY ENROLLMENT.—The family classi13 fications under subparagraph (A)(i) shall be

14 based on common family enrollment categories,

15 such as individual only, individual with children,

16 married couple without children, and a married

17 couple with children.

18 (2) ADJUSTMENT OF FEDERAL CONTRIBUTION

19 BASED ON ENROLLMENT CLASS.—The Secretary

20 shall adjust the Federal contribution amount deter21 mined under this section for each of the enrollment

22 classes so that, without changing the total amount

23 of the Federal contribution, the ratio of the Federal

24 contribution amount for enrollees in the different

25 classes is equal to the ratio of average costs under
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1 multicare plans for enrollees in the respective class2 es.

3 SEC. 122. TERMINATION OF EXCLUSION FOR EMPLOYER4 PROVIDED HEALTH CARE COVERAGE AND OF

5 DEDUCTION FOR HEALTH INSURANCE COSTS

6 OF SELF-EMPLOYED.

7 (a) TERMINATION OF EXCLUSION FOR EMPLOYER8 PROVIDED HEALTH CARE COVERAGE.—

9 (1) IN GENERAL.—The text of section 106 of

10 the Internal Revenue Code of 1986 is amended to

11 read as follows:

12 ‘‘(a) IN GENERAL.—Gross income of an employee

13 does not include employer-provided coverage under an ac14 cident or health plan.

15 ‘‘(b) TERMINATION.—

16 ‘‘(1) IN GENERAL.—This section shall not apply

17 to any taxable year beginning on or after the first

18 day of the second calendar year beginning after the

19 date of the enactment of this subsection.

20 ‘‘(2) EXCEPTION.—Paragraph (1) shall not

21 apply to a medical or dental care plan provided

22 under section 1074(a) of title 10, United States

23 Code.

24 ‘‘(c) SPECIAL RULES FOR DETERMINING AMOUNT OF

25 INCLUSION.—
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1 ‘‘(1) IN GENERAL.—For purposes of this sec2 tion, the value of any coverage shall be determined

3 on the basis of the average cost of providing such

4 coverage to the beneficiaries receiving such coverage.

5 ‘‘(2) SPECIAL RULE.—To the extent provided

6 by the Secretary, cost determinations under para7 graph (1) may be made on the basis of reasonable

8 estimates but shall not vary based on the age of em9 ployees or their dependents.’’

10 (2) REPORTING ON W-2 FORM.—Subsection (a)

11 of section 6051 of such Code (relating to receipts for

12 employees) is amended by striking ‘‘and’’ at the end

13 of paragraph (8), by striking the period at the end

14 of paragraph (9) and inserting ‘‘, and’’, and by in15 serting after paragraph (9) the following new para16 graph:

17 ‘‘(10) the value of the employer-provided cov18 erage under any accident or health plan (determined

19 in accordance with section 106(c)) which is not ex20 cludable from gross income under section 106 by

21 reason of section 106(b) and the number of months

22 during such calendar year that such coverage was

23 provided.’’

24 (b) TERMINATION OF DEDUCTION FOR HEALTH IN25 SURANCE COSTS OF SELF-EMPLOYED.—Subsection (l) of
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1 section 162 of such Code is amended by adding at the

2 end thereof the following new paragraph:

3 ‘‘(7) TERMINATION ON IMPLEMENTATION OF

4 MULTICARE.—In no event shall this subsection apply

5 to any taxable year beginning on or after the first

6 day of the second calendar year beginning after the

7 date of the enactment of this paragraph.’’

8 (c) APPLICATION OF FICA TAXES AND INCOME TAX

9 WITHHOLDING.—

10 (1) FICA TAXES.—Subsection (a) of section

11 3121 of such Code is amended by adding at the end

12 thereof the following new flush sentence:

13 ‘‘Paragraphs (2) and (4) shall not apply to any amount

14 paid for coverage of an employee or any of his dependents

15 under an accident or health plan.’’

16 (2) WAGE WITHHOLDING.—Subsection (a) of

17 section 3401 of such Code is amended by adding at

18 the end thereof the following new flush sentence:

19 ‘‘The term ‘wages’ shall include amounts paid for coverage

20 of an employee or any of his dependents under an accident

21 or health plan.’’

22 (3) EFFECTIVE DATE.—The amendments made

23 by this subsection shall apply to taxable years begin24 ning on or after the first day of the second calendar
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1 year beginning after the date of the enactment of

2 this Act.

3 SEC. 123. TERMINATION OF DEDUCTION FOR MEDICAL

4 CARE.

5 Section 213 of the Internal Revenue Code of 1986

6 is amended by adding at the end the following new sub7 section:

8 ‘‘(f) TERMINATION ON IMPLEMENTATION OF

9 MULTICARE.—In no event shall this section apply to any

10 taxable year beginning on or after the first day of the sec11 ond calendar year beginning after the date of the enact12 ment of this subsection.’’

13 TITLE II—REQUIREMENTS FOR

14 MULTICARE PLANS

15 Subtitle A—General Requirements

16 SEC. 201. ENROLLMENT AND CONTINUITY OF COVERAGE.

17 (a) IN GENERAL.—Each multicare plan shall—

18 (1) accept for enrollment (except to the extent

19 the Secretary may provide) all individuals eligible for

20 enrollment, except as provided in section 103(b); and

21 (2) not condition or limit the provision or pay22 ment for services based on any pre-existing condi23 tion.

24 (b) CERTIFICATION OF ENROLLMENT FOR PURPOSES

25 OF RECEIPT OF FEDERAL CONTRIBUTION.—Each
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1 multicare plan shall provide for notice to the Secretary

2 or the State multicare program of such information as the

3 Secretary may require in order to establish the entitlement

4 of the plan to payment from a State multicare program

5 under section 106.

6 SEC. 202. COVERED SERVICES.

7 A multicare plan must—

8 (1) clearly disclose to each enrollee (in a man9 ner specified by the State multicare program) the

10 differences between the services covered under the

11 plan and the list of services established under sec12 tion 104(a)(2)(A), and

13 (2) include, for purposes of applying the cata14 strophic protection under section 203(e), hospital,

15 professional, and other services specified by the Sec16 retary.

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

18 PROTECTION.

19 (a) IN GENERAL.—Except as a State multicare pro20 gram otherwise provides under title I and except as pro21 vided in this section, a multicare plan—

22 (1) may impose cost-sharing in the form of pre23 miums, deductibles, coinsurance, and copayments,

24 and
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1 (2) shall disclose the portion of such a premium

2 which is met through the contribution provided

3 under section 106.

4 (b) LIMITS ON PREMIUM VARIATIONS.—

5 (1) IN GENERAL.—Except as provided in para6 graph (2), the premiums with respect to multicare

7 plans offered in an area of a State shall be estab8 lished, and shall vary, based only on the enrollment

9 classes provided under section 121(c)(1). Each plan

10 shall fairly allocate the costs of such premiums

11 among such classes.

12 (2) USE OF BEHAVIORAL FACTORS.—Premiums

13 under a multicare plan may vary based on factors

14 (such as smoking, substance abuse, and excessive

15 weight) which are defined by the Secretary and for

16 which personal behavior is clearly related to receipt

17 of health care services.

18 (c) LIMITATION ON ADJUSTMENT OF COINSURANCE

19 AND COPAYMENTS.—A multicare plan—

20 (1) may adjust coinsurance or copayment rates

21 to encourage enrollees to use (A) preferred provid22 ers, (B) providers that charge lower amounts, or (C)

23 different procedures, but
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1 (2) may not adjust coinsurance based on indi2 vidual patient characteristics, including the age, sex,

3 wellness, or medical history of the individual.

4 (d) USE OF MEDICAL SAVINGS ACCOUNTS.—A

5 multicare plan may establish for its enrollees medical sav6 ings accounts—

7 (1) from which payments for services (below a

8 catastrophic limit) are made by the enrollees, and

9 (2) for which balances may be carried forward

10 from year to year and may be applied against future

11 expenses, be rebated to the enrollee, or used for re12 tirement purposes.

13 (e) CATASTROPHIC PROTECTION.—

14 (1) IN GENERAL.—A multicare plan shall in15 clude a maximum limit on the annual amount of pa16 tient cost-sharing for premiums and out-of-pocket

17 expenses for covered services.

18 (2) LIMIT.—

19 (A) IN GENERAL.—Subject to the succeed20 ing provisions of this paragraph, such annual

21 maximum limit shall not exceed—

22 (i) $5,000 for any individual, and

23 (ii) $10,000, in the aggregate, for all

24 members of a family.
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1 (B) INDEXING.—For any year, after the

2 year in which this Act is enacted, the dollar

3 amounts specified under subparagraph (A) shall

4 be the dollar amounts specified under this para5 graph for the previous year (taking into account

6 any previous application of this subparagraph)

7 increased by the applicable inflator for the year

8 (as specified under section 107(b)(3)).

9 (C) ADDITIONAL LIMITS.—A State

10 multicare program may—

11 (i) impose dollar limits that are less

12 than the limits otherwise specified under

13 this paragraph; and

14 (ii) provide for the application of lim15 its for expenses over a multi-year period.

16 (D) STATE AUTHORITY.—If a State

17 multicare program provides for a subsidy of

18 stop-loss limits for catastrophic coverage for

19 lower income residents (under its reinsurance

20 mechanism under section 108), the program

21 may establish regulations designed to prevent

22 manipulation of household size and membership

23 so as to qualify for catastrophic protection ben24 efits.
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1 (f) APPLICATION OF EXCESS CONTRIBUTION

2 AMOUNT TOWARDS COST SHARING.—If the amount of the

3 State contribution under section 106(b) toward the pre4 mium of an individual exceeds the individual’s premium

5 for a multicare plan, the excess amount shall be counted

6 by the plan towards the cost sharing for the individual

7 under the plan.

8 SEC. 204. PARTICIPATION IN REINSURANCE SYSTEM.

9 Each multicare plan shall participate in the applica10 ble reinsurance system (established by the State multicare

11 program under section 108 or by the Secretary pursuant

12 to section 301 or 331).

13 SEC. 205. DATA REQUIREMENT.

14 (a) IN GENERAL.—Each multicare plan (and health

15 care providers participating in the plan) shall collect and

16 provide to the State multicare program data on costs of

17 health care, prices for services, and patient outcomes, in

18 accordance with standards established by the Secretary by

19 regulation.

20 (b) PRICING INFORMATION.—A multicare plan shall

21 condition the payment under the plan for services of a pro22 vider upon the provider disclosing to the public, in a form,

23 manner, and at a time specified by the Secretary, such

24 information on the provider’s charges as the State
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1 multicare program specifies, in accordance with guidelines

2 of the Secretary.

3 SEC. 206. MEDICAL MALPRACTICE REFORM AND ADMINIS4 TRATIVE COST SAVINGS.

5 Each multicare plan (and health care providers par6 ticipating in the plan) shall comply with the applicable re7 quirements of—

8 (1) title IV (relating to medical malpractice li9 ability reform),

10 (2) subtitle A of title V (relating to standard11 ization of claims processing), and

12 (3) subtitle B of title V (relating to electronic

13 medical data standards).

14 SEC. 207. CONSUMER RIGHTS.

15 (a) NOTICE OF RIGHTS; ENFORCEMENT.—

16 (1) NOTICE.—Each multicare plan shall notify

17 enrollees of their consumer rights under this section

18 and of the procedures established by the plan to en19 sure these rights.

20 (2) DEVELOPMENT OF REGULATIONS.—The

21 Secretary shall develop regulation to implement the

22 consumer rights established under this section.

23 (3) STATE ENFORCEMENT.—States are respon24 sible, under their multicare programs, for assuring
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1 compliance of multicare plans with the requirements

2 of this section.

3 (b) PROVISION OF PATIENT COST-SHARING INFOR4 MATION.—

5 (1) IN GENERAL.—Each multicare plan which

6 provides for cost-sharing (other than premiums)

7 shall ensure that enrollees are provided, in advance

8 of the receipt of treatment (except as provided in

9 paragraph (3)), with information on the expected

10 total costs of treatment and their expected share of

11 the costs. Such information may be based on the es12 timates for the average cost for such treatment.

13 (2) TOTAL COST.—For purposes of paragraph

14 (1), the total cost of treatment—

15 (A) in the case of a patient’s initial visit,

16 shall consist of the initial visit only, and

17 (B) in the case of subsequent treatment,

18 shall include all expenses resulting from the

19 treatment procedure prescribed by the provider.

20 (3) EXCEPTION FOR EMERGENCIES.—In the

21 case of emergency treatment, the information under

22 this subsection shall be provided at the earliest rea23 sonable time after such treatment is initiated.

24 (c) PROVISION OF PRICE INFORMATION BY HEALTH

25 CARE PROVIDERS.—
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1 (1) IN GENERAL.—Each health care provider is

2 required to make available information on the pro3 vider’s prices for health care services. Such informa4 tion shall be made available to the public and to in5 dividuals and organizations upon request.

6 (2) STANDARDS.—Such information shall be

7 made available in accordance with standards and a

8 common format established by the Secretary.

9 (d) PATIENT ACCESS TO MEDICAL INFORMATION.—

10 Each individual has a right to obtain, through the

11 multicare plan in which the individual is enrolled, informa12 tion contained in the medical record of a provider that

13 has provided health care services for which payment may

14 be made under the plan.

15 Subtitle B—Multiple Employer

16 Health Benefits Protections

17 SEC. 211. LIMITED EXEMPTION UNDER PREEMPTION

18 RULES FOR MULTIPLE EMPLOYER PLANS

19 PROVIDING HEALTH BENEFITS SUBJECT TO

20 CERTAIN FEDERAL STANDARDS.

21 (a) IN GENERAL.—Subtitle B of title I of the Em22 ployee Retirement Income Security Act of 1974 is amend23 ed by adding at the end the following new part:
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1 ‘‘Part 7—Multiple Employer Health Plans

2 ‘‘SEC. 701. DEFINITIONS.

3 ‘‘For purposes of this part:

4 ‘‘(1) INSURER.—The term ‘insurer’ means an

5 insurance company, insurance service, or insurance

6 organization, licensed to engage in the business of

7 insurance by a State.

8 ‘‘(2) PARTICIPATING EMPLOYER.—The term

9 ‘participating employer’ means, in connection with a

10 multiple employer welfare arrangement, any em11 ployer if any of its employees, or any of the depend12 ents of its employees, are or were covered under

13 such arrangement during the employment of the

14 employees.

15 ‘‘(3) EXCESS/STOP LOSS COVERAGE.—The term

16 ‘excess/stop loss coverage’ means, in connection with

17 a multiple employer welfare arrangement, a contract

18 under which an insurer provides for payment with

19 respect to claims under the arrangement, relating to

20 participants or beneficiaries individually or other21 wise, in excess of an amount or amounts specified in

22 such contract.

23 ‘‘(4) QUALIFIED ACTUARY.—The term ‘quali24 fied actuary’ means an individual who is a member

25 of the American Academy of Actuaries or meets
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1 such reasonable standards and qualifications as the

2 Secretary may provide by regulation.

3 ‘‘(5) SPONSOR.—The term ‘sponsor’ means, in

4 connection with a multiple employer welfare arrange5 ment, the association or other entity which estab6 lishes or maintains the arrangement.

7 ‘‘(6) STATE LOCATION OF COVERED INDIVID8 UALS.—

9 ‘‘(A) IN GENERAL.—A multiple employer

10 welfare arrangement shall be treated as cover11 ing individuals located in a State only if the

12 minimum required number of individuals who

13 are covered under the arrangement are located

14 in such State, except that if the minimum re15 quired number of individuals are not located in

16 any State, such arrangement shall be treated as

17 covering individuals in any State in which any

18 covered individual is located.

19 ‘‘(B) MINIMUM REQUIRED NUMBER.—For

20 purposes of subparagraph (A), the minimum re21 quired number is the greater of—

22 ‘‘(i) 5 percent of the total number of

23 individuals described in subparagraph (A),

24 or

25 ‘‘(ii) 50.
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1 ‘‘(C) LOCATION OF INDIVIDUALS IN

2 STATE.—For purposes of subparagraph (A), an

3 individual shall be treated as located in a State

4 if such individual is employed in such State or

5 the address of such individual last known by

6 the arrangement is located in such State.

7 ‘‘(7) STATE INSURANCE COMMISSIONER.—The

8 term ‘State insurance commissioner’ means the in9 surance commissioner (or similar official) of a State.

10 ‘‘(8) DOMICILE STATE.—The term ‘domicile

11 State’ means, in connection with a multiple employer

12 welfare arrangement, the State in which, according

13 to the application for an exemption under this part,

14 most individuals to be covered under the arrange15 ment are located, except that, in any case in which

16 information contained in the latest annual report of

17 the arrangement filed under this part indicates that

18 most individuals covered under the arrangement are

19 located in a different State, such term means such

20 different State.

21 ‘‘(9) FULLY INSURED ARRANGEMENT.—A mul22 tiple employer welfare arrangement shall be treated

23 as fully insured only if one or more insurers, health

24 maintenance organizations, similar organizations

25 regulated under State law for solvency, or any com-
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1 bination thereof are liable under one or more insur2 ance policies or contracts for all benefits under the

3 arrangement (irrespective of any recourse they may

4 have against other parties).

5 ‘‘(10) MULTIPLE EMPLOYER HEALTH PLAN.—

6 The term ‘multiple employer health plan’ means a

7 multiple employer welfare arrangement treated as an

8 employee welfare benefit plan by reason of an

9 exemption under this part.

10 ‘‘SEC. 702. EXEMPTED MULTIPLE EMPLOYER PLANS PRO11 VIDING BENEFITS IN THE FORM OF MEDICAL

12 CARE RELIEVED OF CERTAIN RESTRICTIONS

13 ON PREEMPTION OF STATE LAW AND TREAT14 ED AS EMPLOYEE WELFARE BENEFIT PLANS.

15 ‘‘(a) IN GENERAL.—Subject to subsection (b), a mul16 tiple employer welfare arrangement which is not fully in17 sured and with respect to which there is in effect an ex18 emption granted by the Secretary under this part (or with

19 respect to which there is pending a complete application

20 for such an exemption and the Secretary determines that

21 provisional protection under this part is appropriate)—

22 ‘‘(1) shall be treated for purposes of subtitle A

23 and the preceding parts of this subtitle as an em24 ployee welfare benefit plan, irrespective of whether
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1 such arrangement is an employee welfare benefit

2 plan, and

3 ‘‘(2) shall be exempt from section

4 514(b)(6)(A)(ii).

5 ‘‘(b) BENEFITS MUST CONSIST OF MEDICAL

6 CARE.—Subsection (a) shall apply to a multiple employer

7 welfare arrangement only if the benefits provided there8 under consist solely of medical care described in section

9 607(1) (disregarding such incidental benefits as the

10 Secretary shall specify by regulation).

11 ‘‘(c) RESTRICTION ON COMMENCEMENT OF NEW AR12 RANGEMENTS.—A multiple employer welfare arrangement

13 providing benefits which consist of medical care described

14 in section 607(1) which has not commenced operations as

15 of January 1, 1994, may commence operations only if an

16 exemption granted to the arrangement under this part is

17 in effect (or there is pending with respect to the arrange18 ment a complete application for such an exemption and

19 the Secretary determines that provisional protection under

20 this part is appropriate).

21 ‘‘SEC. 703. EXEMPTION PROCEDURE.

22 ‘‘(a) IN GENERAL.—The Secretary shall grant an ex23 emption described in section 702(a) to a multiple employer

24 welfare arrangement if—
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1 ‘‘(1) an application for such exemption with re2 spect to such arrangement, identified individually or

3 by class, has been duly filed in complete form with

4 the Secretary in accordance with this part,

5 ‘‘(2) such application demonstrates compliance

6 with the requirements of section 704 with respect to

7 such arrangement, and

8 ‘‘(3) the Secretary finds that such exemption

9 is—

10 ‘‘(A) administratively feasible,

11 ‘‘(B) not adverse to the interests of the in12 dividuals covered under the arrangement, and

13 ‘‘(C) protective of the rights and benefits

14 of the individuals covered under the arrange15 ment.

16 ‘‘(b) NOTICE AND HEARING.—Before granting an ex17 emption under this section, the Secretary shall publish no18 tice in the Federal Register of the pendency of the exemp19 tion, shall require that adequate notice be given to inter20 ested persons, including the State insurance commissioner

21 of each State in which covered individuals under the ar22 rangement are, or are expected to be, located, and shall

23 afford interested persons opportunity to present views.

24 The Secretary may not grant an exemption under this sec25 tion unless the Secretary affords an opportunity for a
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1 hearing and makes a determination on the record with re2 spect to the findings required under subsection (a)(3). The

3 Secretary shall, to the maximum extent practicable, make

4 a final determination with respect to any application filed

5 under this section in the case of a newly established ar6 rangement within 90 days after the date which the Sec7 retary determines is the date on which such application

8 is filed in complete form.

9 ‘‘SEC. 704. ELIGIBILITY REQUIREMENTS.

10 ‘‘(a) APPLICATION FOR EXEMPTION.—

11 ‘‘(1) IN GENERAL.—An exemption may be

12 granted by the Secretary under this part only on the

13 basis of an application filed with the Secretary in

14 such form and manner as shall be prescribed in reg15 ulations of the Secretary. Any such application shall

16 be signed by the operating committee and the spon17 sor of the arrangement.

18 ‘‘(2) FILING FEE.—The arrangement shall pay

19 to the Secretary at the time of filing an application

20 under this section a filing fee in the amount of

21 $5,000, which shall be available, to the extent pro22 vided in appropriation Acts, to the Secretary for the

23 sole purpose of administering the exemption proce24 dures under this part.
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1 ‘‘(3) INFORMATION INCLUDED.—An application

2 filed under this section shall include, in a manner

3 and form prescribed in regulations of the Secretary,

4 at least the following information:

5 ‘‘(A) IDENTIFYING INFORMATION.—The

6 names and addresses of—

7 ‘‘(i) the sponsor, and

8 ‘‘(ii) the members of the operating

9 committee of the arrangement.

10 ‘‘(B) STATES IN WHICH ARRANGEMENT IN11 TENDS TO DO BUSINESS.—The States in which

12 individuals covered under the arrangement are

13 to be located and the number of such individ14 uals expected to be located in each such State.

15 ‘‘(C) BONDING REQUIREMENTS.—Evidence

16 provided by the operating committee that the

17 bonding requirements of section 412 will be met

18 as of the date of the application.

19 ‘‘(D) PLAN DOCUMENTS.—A copy of the

20 documents governing the arrangement (includ21 ing any bylaws and trust agreements), the sum22 mary plan description, and other material de23 scribing the benefits and coverage that will be

24 provided to individuals covered under the ar25 rangement.
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1 ‘‘(E) AGREEMENTS WITH SERVICE PROVID2 ERS.—A copy of any agreements between the

3 arrangement and contract administrators and

4 other service providers.

5 ‘‘(F) FUNDING REPORT.—A report setting

6 forth information determined as of a date with7 in the 120-day period ending with the date of

8 the application, including the following:

9 ‘‘(i) RESERVES.—A statement, cer10 tified by the operating committee of the ar11 rangement, and a statement of actuarial

12 opinion, signed by a qualified actuary, that

13 all applicable requirements of section 707

14 are or will be met in accordance with regu15 lations which the Secretary shall prescribe.

16 ‘‘(ii) ADEQUACY OF CONTRIBUTION

17 RATES.—A statement of actuarial opinion,

18 signed by a qualified actuary, which sets

19 forth a description of the extent to which

20 contribution rates are adequate to provide

21 for the payment of all obligations and the

22 maintenance of required reserves under the

23 arrangement for the 12-month period be24 ginning with such date within such 120-

25 day period, taking into account the ex-
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1 pected coverage and experience of the ar2 rangement. If the contribution rates are

3 not fully adequate, the statement of actu4 arial opinion shall indicate the extent to

5 which the rates are inadequate and the

6 changes needed to ensure adequacy.

7 ‘‘(iii) CURRENT AND PROJECTED

8 VALUE OF ASSETS AND LIABILITIES.—A

9 statement of actuarial opinion signed by a

10 qualified actuary, which sets forth the cur11 rent value of the assets and liabilities accu12 mulated under the arrangement and a pro13 jection of the assets, liabilities, income,

14 and expenses of the arrangement for the

15 12-month period referred to in clause (ii).

16 The income statement shall identify sepa17 rately the arrangement’s administrative ex18 penses and claims.

19 ‘‘(iv) COSTS OF COVERAGE TO BE

20 CHARGED AND OTHER EXPENSES.—A

21 statement of the costs of coverage to be

22 charged, including an itemization of

23 amounts for administration, reserves, and

24 other expenses associated with the oper25 ation of the arrangement.
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1 ‘‘(v) OTHER INFORMATION.—Any

2 other information which may be prescribed

3 in regulations of the Secretary as nec4 essary to carry out the purposes of this

5 part.

6 ‘‘(b) OTHER REQUIREMENTS.—A complete applica7 tion for an exemption under this part shall include infor8 mation which the Secretary determines to be complete and

9 accurate and sufficient to demonstrate that the following

10 requirements are met with respect to the arrangement:

11 ‘‘(1) SPONSOR.—The sponsor is, and has been

12 (together with its immediate predecessor, if any) for

13 a continuous period of not less than 3 years before

14 the date of the application, organized and main15 tained in good faith, with a constitution and bylaws

16 specifically stating its purpose, as a trade associa17 tion, an industry association, a professional associa18 tion, or a chamber of commerce or other business

19 group, for substantial purposes other than that of

20 obtaining or providing medical care described in sec21 tion 607(1), and the applicant demonstrates to the

22 satisfaction of the Secretary that the sponsor is es23 tablished as a permanent entity which receives the

24 active support of its members.
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1 ‘‘(2) OPERATING COMMITTEE.—The arrange2 ment is operated, pursuant to a trust agreement, by

3 an operating committee which has complete fiscal

4 control over the arrangement and which is respon5 sible for all operations of the arrangement, and the

6 operating committee has in effect rules of operation

7 and financial controls, based on a 3-year plan of op8 eration, adequate to carry out the terms of the ar9 rangement and to meet all requirements of this title

10 applicable to the arrangement. The members of the

11 committee are individuals selected from individuals

12 who are the owners, officers, directors, or employees

13 of the participating employers or who are partners

14 in the participating employers and actively partici15 pate in the business. No such member is an owner,

16 officer, director, or employee of, or partner in, a con17 tract administrator or other service provider to the

18 arrangement, except that officers or employees of a

19 sponsor which is a service provider (other than a

20 contract administrator) to the arrangement may be

21 members of the committee if they constitute not

22 more than 25 percent of the membership of the com23 mittee and they do not provide services to the ar24 rangement other than on behalf of the sponsor. The

25 committee has sole authority to approve applications
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1 for participation in the arrangement and to contract

2 with a service provider to administer the day-to-day

3 affairs of the arrangement.

4 ‘‘(3) CONTENTS OF GOVERNING INSTRU5 MENTS.—The instruments governing the arrange6 ment include a written instrument, meeting the re7 quirements of an instrument required under section

8 402(a)(1), which—

9 ‘‘(A) provides that the committee serves as

10 the named fiduciary required for plans under

11 section 402(a)(1) and serves in the capacity of

12 a plan administrator (referred to in section

13 3(16)(A)),

14 ‘‘(B) provides that the sponsor is to serve

15 as plan sponsor (referred to in section

16 3(16)(B)),

17 ‘‘(C) incorporates the requirements of sec18 tion 707, and

19 ‘‘(D) provides that, effective upon the

20 granting of an exemption under this part—

21 ‘‘(i) all participating employers must

22 be members or affiliated members of the

23 sponsor, except that, in the case of a spon24 sor which is a professional association or

25 other individual-based association, if at
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1 least one of the officers, directors, or em2 ployees of an employer, or at least one of

3 the individuals who are partners in an em4 ployer and who actively participates in the

5 business, is a member or affiliated member

6 of the sponsor, participating employers

7 may also include such employer, and

8 ‘‘(ii) all individuals thereafter com9 mencing coverage under the arrangement

10 must be—

11 ‘‘(I) active or retired owners, offi12 cers, directors, or employees of, or

13 partners in, participating employers,

14 or

15 ‘‘(II) the beneficiaries of individ16 uals described in subclause (I).

17 ‘‘(4) CONTRIBUTION RATES.—The contribution

18 rates referred to in subsection (a)(3)(F)(ii) are

19 adequate.

20 ‘‘(5) REGULATORY REQUIREMENTS.—Such

21 other requirements as the Secretary may prescribe

22 by regulation as necessary to carry out the purposes

23 of this part.

24 ‘‘(c) TREATMENT OF PARTY SEEKING EXEMPTION

25 WHERE PARTY IS SUBJECT TO DISQUALIFICATION.—
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1 ‘‘(1) IN GENERAL.—In the case of any applica2 tion for an exemption under this part with respect

3 to a multiple employer welfare arrangement, if the

4 Secretary determines that the sponsor of the ar5 rangement or any other person associated with the

6 arrangement is subject to disqualification under

7 paragraph (2), the Secretary may deny the exemp8 tion with respect to such arrangement.

9 ‘‘(2) DISQUALIFICATION.—A person is subject

10 to disqualification under this paragraph if such per11 son—

12 ‘‘(A) has intentionally made a material

13 misstatement in the application for exemption,

14 ‘‘(B) has obtained or attempted to obtain

15 an exemption under this part through misrepre16 sentation or fraud,

17 ‘‘(C) has misappropriated or converted to

18 such person’s own use, or improperly withheld,

19 money held under a plan or any multiple

20 employer welfare arrangement,

21 ‘‘(D) is prohibited (or would be prohibited

22 if the arrangement were a plan) from serving in

23 any capacity in connection with the arrange24 ment under section 411,
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1 ‘‘(E) has failed to appear without reason2 able cause or excuse in response to a subpoena,

3 examination, warrant, or any other order law4 fully issued by the Secretary compelling such

5 response,

6 ‘‘(F) has previously been subject to a de7 termination under this part resulting in the de8 nial, suspension, or revocation of an exemption

9 under this part on similar grounds, or

10 ‘‘(G) has otherwise violated any provision

11 of this title with respect to a matter which the

12 Secretary determines of sufficient consequence

13 to merit disqualification for purposes of this

14 part.

15 ‘‘(d) FRANCHISE NETWORKS.—In the case of a mul16 tiple employer welfare arrangement established and main17 tained by a franchisor for a franchise network consisting

18 of its franchisees, such franchisor shall be treated as the

19 sponsor referred to in the preceding provisions of this sec20 tion, such network shall be treated as an association re21 ferred to in such provisions, and each franchisee shall be

22 treated as a member (of the association and the sponsor)

23 referred to in such provisions, if all participating employ24 ers are such franchisees and the requirements of sub-
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1 section (b)(1) with respect to a sponsor are met with

2 respect to the network.

3 ‘‘(e) CERTAIN COLLECTIVELY BARGAINED ARRANGE4 MENTS.—In applying the preceding provisions of this sec5 tion in the case of a multiple employer welfare arrange6 ment which would be described in section 3(40)(A)(i) but

7 for the failure to meet any requirement of section

8 3(40)(C)—

9 ‘‘(1) paragraphs (1) and (2) of subsection (b)

10 and subparagraphs (A), (B), and (D) of paragraph

11 (3) of subsection (b) shall be disregarded, and

12 ‘‘(2) the joint board of trustees shall be consid13 ered the operating committee of the arrangement.

14 ‘‘(f) CERTAIN ARRANGEMENTS NOT MEETING SIN15 GLE EMPLOYER REQUIREMENT.—

16 ‘‘(1) IN GENERAL.—In any case in which the

17 majority of the employees covered under a multiple

18 employer welfare arrangement are employees of a

19 single employer (within the meaning of clauses (i)

20 and (ii) of section 3(40)(B)), if all other employees

21 covered under the arrangement are employed by em22 ployers who are related to such single employer, sub23 section (b)(3)(D) shall be disregarded.

24 ‘‘(2) RELATED EMPLOYERS.—For purposes of

25 paragraph (1), employers are ‘related’ if there is
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1 among all such employers a common ownership in2 terest or a substantial commonality of business oper3 ations based on common suppliers or customers.

4 ‘‘SEC. 705. ADDITIONAL REQUIREMENTS APPLICABLE TO

5 EXEMPTED ARRANGEMENTS.

6 ‘‘(a) NOTICE OF MATERIAL CHANGES.—In the case

7 of any multiple employer welfare arrangement with respect

8 to which there is in effect an exemption granted under

9 this part, descriptions of material changes in any informa10 tion which was required to be submitted with the applica11 tion for the exemption shall be filed in such form and man12 ner as shall be prescribed in regulations of the Secretary.

13 The Secretary may require by regulation prior notice of

14 material changes with respect to specified matters which

15 might serve as the basis for suspension or revocation of

16 the exemption.

17 ‘‘(b) REPORTING REQUIREMENTS.—Under regula18 tions of the Secretary, the requirements of sections 102,

19 103, and 104 shall apply with respect to any multiple em20 ployer welfare arrangement with respect to which there is

21 or has been in effect an exemption granted under this part

22 in the same manner and to the same extent as such re23 quirements apply to employee welfare benefit plans, irre24 spective of whether such exemption continues in effect.

25 The annual report required under section 103 for any plan
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1 year in the case of any such multiple employer welfare ar2 rangement shall also include information described in sec3 tion 704(a)(3)(F) with respect to the plan year and, not4 withstanding section 104(a)(1)(A), shall be filed not later

5 than 90 days after the close of the plan year.

6 ‘‘(c) ENGAGEMENT OF QUALIFIED ACTUARY.—The

7 operating committee of each multiple employer welfare ar8 rangement with respect to which there is or has been in

9 effect an exemption granted under this part shall engage,

10 on behalf of all covered individuals, a qualified actuary

11 who shall be responsible for the preparation of the mate12 rials comprising information necessary to be submitted by

13 a qualified actuary under this part. The qualified actuary

14 shall utilize such assumptions and techniques as are nec15 essary to enable such actuary to form an opinion as to

16 whether the contents of the matters reported under this

17 part—

18 ‘‘(1) are in the aggregate reasonably related to

19 the experience of the arrangement and to reasonable

20 expectations, and

21 ‘‘(2) represent such actuary’s best estimate of

22 anticipated experience under the arrangement.

23 The opinion by the qualified actuary shall be made with

24 respect to, and shall be made a part of, the annual report.
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1 ‘‘(d) FILING NOTICE OF EXEMPTION WITH

2 STATES.—An exemption granted to a multiple employer

3 welfare arrangement under this part shall not be effective

4 unless written notice of such exemption is filed with the

5 State insurance commissioner of each State in which at

6 least 5 percent of the individuals covered under the ar7 rangement are located. For purposes of this paragraph,

8 an individual shall be considered to be located in the State

9 in which a known address of such individual is located or

10 in which such individual is employed. The Secretary may

11 by regulation provide in specified cases for the application

12 of the preceding sentence with lesser percentages in lieu

13 of such 5 percent amount.

14 ‘‘SEC. 706. DISCLOSURE TO PARTICIPATING EMPLOYERS BY

15 ARRANGEMENTS PROVIDING MEDICAL CARE.

16 ‘‘(a) IN GENERAL.—A multiple employer welfare ar17 rangement providing benefits consisting of medical care

18 described in section 607(1) shall issue to each participat19 ing employer—

20 ‘‘(1) a document equivalent to the summary

21 plan description required of plans under part 1,

22 ‘‘(2) information describing the contribution

23 rates applicable to participating employers, and

24 ‘‘(3) a statement indicating—
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1 ‘‘(A) whether or not the arrangement is

2 fully insured,

3 ‘‘(B) whether or not there is in effect with

4 respect to the arrangement an exemption grant5 ed under this part and, if there is in effect such

6 an exemption, that the arrangement is (or is

7 treated as) an employee welfare benefit plan

8 under this title, and

9 ‘‘(C) that the arrangement is not a li10 censed insurer under the laws of any State.

11 ‘‘(b) TIME FOR DISCLOSURE.—Such information

12 shall be issued to employers within such reasonable period

13 of time before becoming participating employers as may

14 be prescribed in regulations of the Secretary.

15 ‘‘SEC. 707. MAINTENANCE OF RESERVES.

16 ‘‘(a) IN GENERAL.—Each multiple employer welfare

17 arrangement with respect to which there is or has been

18 in effect an exemption granted under this part and which

19 is not fully insured shall establish and maintain reserves,

20 consisting of—

21 ‘‘(1) a reserve for unearned contributions,

22 ‘‘(2) a reserve for payment of claims reported

23 and not yet paid and claims incurred but not yet re24 ported, and for expected administrative costs with

25 respect to such claims, and
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1 ‘‘(3) a reserve, in an amount recommended by

2 the qualified actuary, for any other obligations of

3 the arrangement.

4 ‘‘(b) MINIMUM AMOUNT FOR CERTAIN RESERVES.—

5 The total of the reserves described in subsection (a)(2)

6 shall not be less than an amount equal to 25 percent of

7 expected incurred claims and expenses for the plan year.

8 ‘‘(c) REQUIRED MARGIN.—In determining the

9 amounts of reserves required under this section in connec10 tion with any multiple employer welfare arrangement, the

11 qualified actuary shall include a margin for error and

12 other fluctuations taking into account the specific

13 circumstances of such arrangement.

14 ‘‘(d) ADDITIONAL REQUIREMENTS.—The Secretary

15 may provide such additional requirements relating to re16 serves and excess/stop loss coverage as the Secretary con17 siders appropriate. Such requirements may be provided,

18 by regulation or otherwise, with respect to any arrange19 ment or any class of arrangements.

20 ‘‘(e) ADJUSTMENTS FOR EXCESS/STOP LOSS COV21 ERAGE.—The Secretary may provide for adjustments to

22 the levels of reserves otherwise required under subsections

23 (a) and (b) with respect to any arrangement or class of

24 arrangements to take into account excess/stop loss cov-
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1 erage provided with respect to such arrangement or ar2 rangements.

3 ‘‘SEC. 708. CORRECTIVE ACTIONS.

4 ‘‘(a) ACTIONS TO AVOID DEPLETION OF RE5 SERVES.—A multiple employer welfare arrangement with

6 respect to which there is or has been in effect an exemp7 tion granted under this part shall continue to meet the

8 requirements of section 707, irrespective of whether such

9 exemption continues in effect. The operating committee of

10 such arrangement shall determine semiannually whether

11 the requirements of section 707 are met. In any case in

12 which the committee determines that there is reason to

13 believe that there is or will be a failure to meet such re14 quirements, or the Secretary makes such a determination

15 and so notifies the committee, the committee shall imme16 diately notify the qualified actuary engaged by the ar17 rangement, and such actuary shall, not later than the end

18 of the next following month, make such recommendations

19 to the committee for corrective action as the actuary deter20 mines necessary to ensure compliance with section 707.

21 Not later than 10 days after receiving from the actuary

22 recommendations for corrective actions, the committee

23 shall notify the Secretary (in such form and manner as

24 the Secretary may prescribe by regulation) of such rec25 ommendations of the actuary for corrective action, to-
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1 gether with a description of the actions (if any) that the

2 committee has taken or plans to take in response to such

3 recommendations. The committee shall thereafter report

4 to the Secretary, in such form and frequency as the Sec5 retary may specify to the committee, regarding corrective

6 action taken by the committee until the requirements of

7 section 707 are met.

8 ‘‘(b) TERMINATION.—

9 ‘‘(1) NOTICE OF TERMINATION.—In any case in

10 which the operating committee of a multiple em11 ployer welfare arrangement with respect to which

12 there is or has been in effect an exemption granted

13 under this part determines that there is reason to

14 believe that the arrangement will terminate, the

15 committee shall so inform the Secretary, shall de16 velop a plan for winding up the affairs of the ar17 rangement in connection with such termination in a

18 manner which will result in timely payment of all

19 benefits for which the arrangement is obligated, and

20 shall submit such plan in writing to the Secretary.

21 Actions required under this paragraph shall be taken

22 in such form and manner as may be prescribed in

23 regulations of the Secretary.

24 ‘‘(2) ACTIONS REQUIRED IN CONNECTION WITH

25 TERMINATION.—In any case in which—
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1 ‘‘(A) the Secretary has been notified under

2 subsection (a) of a failure of a multiple em3 ployer welfare arrangement with respect to

4 which there is or has been in effect an exemp5 tion granted under this part to meet the re6 quirements of section 707 and has not been no7 tified by the operating committee of the ar8 rangement that corrective action has restored

9 compliance with such requirements, and

10 ‘‘(B) the Secretary determines that the

11 continuing failure to meet the requirements of

12 section 707 can be reasonably expected to result

13 in a continuing failure to pay benefits for which

14 the arrangement is obligated,

15 the operating committee of the arrangement shall, at

16 the direction of the Secretary, terminate the ar17 rangement and, in the course of the termination,

18 take such actions as the Secretary may require as

19 necessary to ensure that the affairs of the arrange20 ment will be, to the maximum extent possible, wound

21 up in a manner which will result in timely payment

22 of all benefits for which the arrangement is

23 obligated.
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1 ‘‘SEC. 709. EXPIRATION, SUSPENSION, OR REVOCATION OF

2 EXEMPTION.

3 ‘‘(a) EXPIRATION AND RENEWAL OF EXEMPTION.—

4 An exemption granted to a multiple employer welfare ar5 rangement under this part shall expire 3 years after the

6 date on which the exemption is granted. An exemption

7 which has expired may be renewed by means of application

8 for an exemption in accordance with section 704.

9 ‘‘(b) SUSPENSION OR REVOCATION OF EXEMPTION

10 BY SECRETARY.—The Secretary may suspend or revoke

11 an exemption granted to a multiple employer welfare

12 arrangement under this part—

13 ‘‘(1) for any cause that may serve as the basis

14 for the denial of an initial application for such an

15 exemption under section 704, or

16 ‘‘(2) if the Secretary finds that—

17 ‘‘(A) the arrangement, or the sponsor

18 thereof, in the transaction of business while

19 under the exemption, has used fraudulent, coer20 cive, or dishonest practices, or has dem21 onstrated incompetence, untrustworthiness, or

22 financial irresponsibility,

23 ‘‘(B) the arrangement, or the sponsor

24 thereof, is using such methods or practices in

25 the conduct of its operations, so as to render its

26 further transaction of operations hazardous or
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1 injurious to participating employers, or covered

2 individuals,

3 ‘‘(C) the arrangement, or the sponsor

4 thereof, has refused to be examined in accord5 ance with this part or to produce its accounts,

6 records, and files for examination in accordance

7 with this part, or

8 ‘‘(D) any of the officers of the arrange9 ment, or the sponsor thereof, has refused to

10 give information with respect to the affairs of

11 the arrangement or the sponsor or to perform

12 any other legal obligation relating to such an

13 examination when required by the Secretary in

14 accordance with this part.

15 Any such suspension or revocation under this subsection

16 shall be effective only upon a final decision of the Sec17 retary made after notice and opportunity for a hearing

18 is provided in accordance with section 710.

19 ‘‘(c) SUSPENSION OR REVOCATION OF EXEMPTION

20 UNDER COURT PROCEEDINGS.—An exemption granted to

21 a multiple employer welfare arrangement under this part

22 may be suspended or revoked by a court of competent ju23 risdiction in an action by the Secretary brought under

24 paragraph (2), (5), or (6) of section 502(a), except that

25 the suspension or revocation under this subsection shall
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1 be effective only upon notification of the Secretary of such

2 suspension or revocation.

3 ‘‘(d) NOTIFICATION OF PARTICIPATING EMPLOY4 ERS.—All participating employers in a multiple employer

5 welfare arrangement shall be notified of the expiration,

6 suspension, or revocation of an exemption granted to such

7 arrangement under this part, by such persons and in such

8 form and manner as shall be prescribed in regulations of

9 the Secretary, not later than 20 days after such expiration

10 or after receipt of notice of a final decision requiring such

11 suspension or revocation.

12 ‘‘(e) PUBLICATION OF EXPIRATIONS, SUSPENSIONS,

13 AND REVOCATIONS.—The Secretary shall publish all expi14 rations of, and all final decisions to suspend or revoke,

15 exemptions granted under this part.

16 ‘‘SEC. 710. REVIEW OF ACTIONS OF THE SECRETARY.

17 ‘‘(a) IN GENERAL.—Any decision by the Secretary

18 which involves the denial of an application by a multiple

19 employer welfare arrangement for an exemption under this

20 part or the suspension or revocation of such an exemption

21 shall contain a statement of the specific reason or reasons

22 supporting the Secretary’s action, including reference to

23 the specific terms of the exemption and the statutory pro24 vision or provisions relevant to the determination.
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1 ‘‘(b) DENIALS OF APPLICATIONS.—In the case of the

2 denial of an application for an exemption under this part,

3 the Secretary shall send a copy of the decision to the appli4 cant by certified or registered mail at the address specified

5 in the records of the Secretary. Such decision shall con6 stitute the final decision of the Secretary unless the ar7 rangement, or any party that would be prejudiced by the

8 decision, files a written appeal of the denial within 30 days

9 after the mailing of such decision. The Secretary may af10 firm, modify, or reverse the initial decision. The decision

11 on appeal shall become final upon the mailing of a copy

12 by certified or registered mail to the arrangement or party

13 that filed the appeal.

14 ‘‘(c) SUSPENSIONS OR REVOCATIONS OF EXEMP15 TION.—In the case of the suspension or revocation of an

16 exemption granted under this part, the Secretary shall

17 send a copy of the decision to the arrangement by certified

18 or registered mail at its address, as specified in the

19 records of the Secretary. Upon the request of the arrange20 ment, or any party that would be prejudiced by the sus21 pension or revocation, filed within 15 days of the mailing

22 of the Secretary’s decision, the Secretary shall schedule

23 a hearing on such decision by written notice, sent by cer24 tified or registered mail to the arrangement or party

25 requesting such hearing. Such notice shall set forth—
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1 ‘‘(1) a specific date and time for the hearing,

2 which shall be within the 10-day period commencing

3 20 days after the date of the mailing of the notice,

4 and

5 ‘‘(2) a specific place for the hearing, which shall

6 be in the District of Columbia or in the State and

7 county thereof (or parish or other similar political

8 subdivision thereof) in which is located the arrange9 ment’s principal place of business.

10 The decision as affirmed or modified in such hearing shall

11 constitute the final decision of the Secretary, unless such

12 decision is reversed in such hearing.’’.

13 (b) CONFORMING AMENDMENT TO DEFINITION OF

14 PLAN SPONSOR.—Section 3(16)(B) of such Act (29

15 U.S.C. 1002(16)(B)) is amended by adding at the end the

16 following new sentence: ‘‘Such term also includes the spon17 sor (as defined in section 701(5)) of a multiple employer

18 welfare arrangement, or a multiple employer health plan

19 (as defined in section 701(10)), with respect to which

20 there is or has been in effect an exemption granted under

21 part 7.’’.

22 (c) ALTERNATIVE MEANS OF DISTRIBUTION OF

23 SUMMARY PLAN DESCRIPTIONS.—Section 110 of such

24 Act (29 U.S.C. 1030) is amended by adding at the end

25 the following new subsection:
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1 ‘‘(c) The Secretary shall prescribe, as an alternative

2 method for distributing summary plan descriptions in

3 order to meet the requirements of section 104(b)(1) in the

4 case of multiple employer welfare arrangements providing

5 benefits consisting of medical care described in section

6 607(1), a means of distribution of such descriptions by

7 participating employers.’’.

8 (d) CLERICAL AMENDMENT.—The table of contents

9 in section 1 of the Employee Retirement Income Security

10 Act of 1974 is amended by inserting after the item relat11 ing 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.’’.

12 SEC. 212. CLARIFICATION OF SCOPE OF PREEMPTION

13 RULES.

14 (a) IN GENERAL.—Section 514(b)(6)(A)(ii) of the

15 Employee Retirement Income Security Act of 1974 (29

16 U.S.C. 1144(b)(6)(A)(ii)) is amended by inserting ‘‘, but

17 only, in the case of an arrangement which provides medi18 cal care described in section 607(1) and with respect to
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1 which an exemption under part 7 is not in effect,’’ before

2 ‘‘to the extent not inconsistent with the preceding sections

3 of this title’’.

4 (b) CROSS-REFERENCE.—Section 514(b)(6) of such

5 Act (29 U.S.C. 1144(b)(6)) is amended by adding at the

6 end the following new subparagraph:

7 ‘‘(E) For additional rules relating to exemption from

8 subparagraph (A)(ii) of multiple employer welfare ar9 rangements providing medical care, see part 7.’’.

10 SEC. 213. CLARIFICATION OF TREATMENT OF SINGLE EM11 PLOYER ARRANGEMENTS.

12 Section 3(40)(B) of the Employee Retirement Income

13 Security Act of 1974 (29 U.S.C. 1002(40)(B)) is amend14 ed—

15 (1) in clause (i), by inserting ‘‘for any plan year

16 of any such plan, or any fiscal year of any such

17 other arrangement,’’ after ‘‘single employer’’, and by

18 inserting ‘‘during such year or at any time during

19 the preceding 1-year period’’ after ‘‘common con20 trol’’,

21 (2) in clause (iii), by striking ‘‘common control

22 shall not be based on an interest of less than 25 per23 cent’’ and inserting ‘‘an interest of greater than 25

24 percent may not be required as the minimum inter-
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1 est necessary for common control’’, and by striking

2 ‘‘and’’ at the end,

3 (3) by redesignating clause (iv) as clause (v),

4 and

5 (4) by inserting after clause (iii) the following

6 new clause:

7 ‘‘(iv) in determining, after the application of

8 clause (i), whether benefits are provided to employ9 ees of two or more employers, the arrangement shall

10 be treated as having only 1 participating employer

11 if, at the time the determination under clause (i) is

12 made, the number of individuals who are employees

13 and former employees of any one participating em14 ployer and who are covered under the arrangement

15 is greater than 95 percent of the aggregate number

16 of all individuals who are employees or former em17 ployees of participating employers and who are

18 covered under the arrangement.’’.

19 SEC. 214. CLARIFICATION OF TREATMENT OF CERTAIN

20 COLLECTIVELY BARGAINED ARRANGE21 MENTS.

22 (a) IN GENERAL.—Section 3(40)(A)(i) of the Em23 ployee Retirement Income Security Act of 1974 (29

24 U.S.C. 1002(40)(A)(i)) is amended to read as follows:
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1 ‘‘(i) under or pursuant to one or more collective

2 bargaining agreements,’’.

3 (b) LIMITATIONS.—Section 3(40) of such Act (29

4 U.S.C. 1002(40)) is amended by adding at the end the

5 following new subparagraphs:

6 ‘‘(C) Clause (i) of subparagraph (A) shall

7 apply only if—

8 ‘‘(i) the plan or other arrangement,

9 and the employee organization or any other

10 entity sponsoring the plan or other ar11 rangement, do not—

12 ‘‘(I) utilize the services of any li13 censed insurance agent or broker for

14 soliciting or enrolling employers or in15 dividuals as participating employers or

16 covered individuals under the plan or

17 other arrangement, or

18 ‘‘(II) pay a commission or any

19 other type of compensation to a per20 son that is related either to the vol21 ume or number of employers or indi22 viduals solicited or enrolled as partici23 pating employers or covered individ24 uals under the plan or other arrange25 ment, or to the dollar amount or size
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1 of the contributions made by partici2 pating employers or covered individ3 uals to the plan or other arrangement,

4 ‘‘(ii) not less than 85 percent of the

5 covered individuals under the plan or other

6 arrangement are individuals who—

7 ‘‘(I) are employed within a bar8 gaining unit covered by at least one of

9 the collective bargaining agreements

10 with a participating employer (or are

11 covered on the basis of an individual’s

12 employment in such a bargaining

13 unit), or

14 ‘‘(II) are present or former em15 ployees of the sponsoring employee or16 ganization, of an employer who is or

17 was a party to at least one of the col18 lective bargaining agreements, or of

19 the plan or other arrangement or a

20 related plan or arrangement (or are

21 covered on the basis of such present

22 or former employment),

23 ‘‘(iii) the plan or other arrangement

24 does not provide benefits to individuals

25 (other than individuals described in clause
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1 (ii)(II)) who work outside the standard

2 metropolitan statistical area in which the

3 sponsoring employee organization rep4 resents employees (or to individuals (other

5 than individuals described in clause

6 (ii)(II)) on the basis of such work by oth7 ers), except that in the case of a sponsor8 ing employee organization that represents

9 employees who work outside of any stand10 ard metropolitan statistical area, this

11 clause shall be applied by reference to the

12 State in which the sponsoring organization

13 represents employees, and

14 ‘‘(iv) the employee organization or

15 other entity sponsoring the plan or other

16 arrangement certifies to the Secretary each

17 year, in a form and manner which shall

18 be prescribed in regulations of the Sec19 retary—

20 ‘‘(I) that the plan or other ar21 rangement meets the requirements of

22 clauses (i), (ii), and (iii), and

23 ‘‘(II) if, for any year, 10 percent

24 or more of the covered individuals

25 under the plan are individuals not de-
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1 scribed in subclause (I) or (II) of

2 clause (ii), the total number of cov3 ered individuals and the total number

4 of covered individuals not so de5 scribed.

6 ‘‘(D)(i) Clause (i) of subparagraph (A)

7 shall not apply to a plan or other arrangement

8 that is established or maintained pursuant to

9 one or more collective bargaining agreements

10 which the National Labor Relations Boards de11 termines to have been negotiated or otherwise

12 agreed to in a manner or through conduct

13 which violates section 8(a)(2) of the National

14 Labor Relations Act (29 U.S.C. 158(a)(2)).

15 ‘‘(ii)(I) Whenever a State insurance com16 missioner has reason to believe that this sub17 paragraph is applicable to part or all of a plan

18 or other arrangement, the State insurance com19 missioner may file a petition with the National

20 Labor Relations Board for a determination

21 under clause (i), along with sworn written testi22 mony supporting the petition.

23 ‘‘(II) The Board shall give any such peti24 tion priority over all other petitions and cases,

25 other than other petitions under subclause (I)
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1 or cases given priority under section 10 of the

2 National Labor Relations Act (29 U.S.C. 160).

3 ‘‘(III) The Board shall determine, upon

4 the petition and any response, whether, on the

5 facts before it, the plan or other arrangement

6 was negotiated, created, or otherwise agreed to

7 in a manner or through conduct which violates

8 section 8(a)(2) of the National Labor Relations

9 Act (29 U.S.C. 158(a)(2)). Such determination

10 shall constitute a final determination for pur11 poses of this subparagraph and shall be binding

12 in all Federal or State actions with respect to

13 the status of the plan or other arrangement

14 under this subparagraph.

15 ‘‘(IV) A person aggrieved by the deter16 mination of the Board under subclause (III)

17 may obtain review of the determination in any

18 United States court of appeals in the circuit in

19 which the collective bargaining at issue oc20 curred. Commencement of proceedings under

21 this subclause shall not, unless specifically or22 dered by the court, operate as a stay of any

23 State administrative or judicial action or pro24 ceeding related to the status of the plan or

25 other arrangement, except that in no case may
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1 the court stay, before the completion of the re2 view, an order which prohibits the enrollment of

3 new individuals into coverage under a plan or

4 arrangement.’’.

5 SEC. 215. EMPLOYEE LEASING HEALTHCARE ARRANGE6 MENTS.

7 (a) EMPLOYEE LEASING HEALTHCARE ARRANGE8 MENT DEFINED.—Section 3 of the Employee Retirement

9 Income Security Act of 1974 (29 U.S.C. 1002) is amended

10 by adding at the end the following new paragraph:

11 ‘‘(43) EMPLOYEE LEASING HEALTHCARE ARRANGE12 MENT.—

13 ‘‘(A) IN GENERAL.—Subject to subparagraph

14 (B), the term ‘employee leasing healthcare arrange15 ment’ means any labor leasing arrangement, staff

16 leasing arrangement, extended employee staffing or

17 supply arrangement, or other arrangement under

18 which—

19 ‘‘(i) one business or other entity (herein20 after in this paragraph referred to as the ‘les21 see’), under a lease or other arrangement en22 tered into with any other business or other en23 tity (hereinafter in this paragraph referred to

24 as the ‘lessor’), receives from the lessor the
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1 services of individuals to be performed under

2 such lease or other arrangement, and

3 ‘‘(ii) benefits consisting of medical care de4 scribed in section 607(1) are provided to such

5 individuals or such individuals and their de6 pendents as participants and beneficiaries.

7 ‘‘(B) EXCEPTION.—Such term does not include

8 an arrangement described in subparagraph (A) if,

9 under such arrangement, the lessor retains, both le10 gally and in fact, a complete right of direction and

11 control within the scope of employment over the in12 dividuals whose services are supplied under such

13 lease or other arrangement, and such individuals

14 perform a specified function for the lessee which is

15 separate and divisible from the primary business or

16 operations of the lessee.’’.

17 (b) TREATMENT OF EMPLOYEE LEASING

18 HEALTHCARE ARRANGEMENTS AS MULTIPLE EMPLOYER

19 WELFARE ARRANGEMENTS.—Section 3(40) of such Act

20 (29 U.S.C. 1002(40)) (as amended by the preceding provi21 sions of this subtitle) is further amended by adding at the

22 end the following new subparagraph:

23 ‘‘(E) The term ‘multiple employer welfare arrange24 ment’ includes any employee leasing healthcare arrange25 ment, except that such term does not include any employee
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1 leasing healthcare arrangement which is a multiple em2 ployer health plan (as defined in section 701(10)).’’.

3 (c) SPECIAL RULES FOR EMPLOYEE LEASING

4 HEALTHCARE ARRANGEMENTS.—

5 (1) IN GENERAL.—Part 7 of subtitle B of title

6 I of such Act (as added by the preceding provisions

7 of this subtitle) is amended by adding at the end the

8 following new section:

9 ‘‘SEC. 711. SPECIAL RULES FOR EMPLOYEE LEASING

10 HEALTHCARE ARRANGEMENTS.

11 ‘‘(a) IN GENERAL.—The requirements of paragraphs

12 (1), (2), and (3) of section 704(b) shall be treated as satis13 fied in the case of a multiple employer welfare arrange14 ment that is an employee leasing healthcare arrangement

15 if the application for exemption includes information

16 which the Secretary determines to be complete and accu17 rate and sufficient to demonstrate that the following

18 requirements are met with respect to the arrangement:

19 ‘‘(1) 3-YEAR TENURE.—The lessor has been in

20 operation for not less than 3 years.

21 ‘‘(2) SOLICITATION RESTRICTIONS.—Employee

22 leasing services provided under the arrangement are

23 not solicited, advertised, or marketed through li24 censed insurance agents or brokers acting in such

25 capacity.
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1 ‘‘(3) CREATION OF EMPLOYMENT RELATION2 SHIP.—

3 ‘‘(A) DISCLOSURE STATEMENT.—Written

4 notice is provided to each applicant for employ5 ment subject to coverage under the arrange6 ment, at the time of application for employment

7 and before commencing coverage under the ar8 rangement, stating that the employer is the les9 sor under the arrangement.

10 ‘‘(B) INFORMED CONSENT.—Each such

11 applicant signs a written statement consenting

12 to the employment relationship with the lessor.

13 ‘‘(C) INFORMED RECRUITMENT OF LES14 SEE’S EMPLOYEES.—In any case in which the

15 lessor offers employment to an employee of a

16 lessee under the arrangement, the lessor in17 forms each employee in writing that his or her

18 acceptance of employment with the lessor is vol19 untary and that refusal of such offer will not be

20 deemed to be resignation from or abandonment

21 of current employment.

22 ‘‘(4) REQUISITE EMPLOYER-EMPLOYEE RELA23 TIONSHIP UNDER ARRANGEMENT.—Under the em24 ployer-employee relationship with the employees of

25 the lessor—
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1 ‘‘(A) the lessor retains the ultimate author2 ity to hire, terminate, and reassign such em3 ployees,

4 ‘‘(B) the lessor is responsible for the pay5 ment of wages, payroll-related taxes, and em6 ployee benefits, without regard to payment by

7 the lessee to the lessor for its services,

8 ‘‘(C) the lessor maintains the right of di9 rection and control over its employees, except to

10 the extent that the lessee is responsible for su11 pervision of the work performed consistent with

12 the lessee’s responsibility for its product or

13 service,

14 ‘‘(D) in accordance with section 301(a) of

15 the Labor Management Relations Act, 1947 (29

16 U.S.C. 185(a)), the lessor retains in the ab17 sence of an applicable collective bargaining

18 agreement, the right to enter into arbitration

19 and to decide employee grievances, and

20 ‘‘(E) no owner, officer, or director of, or

21 partner in, a lessee is an employee of the lessor,

22 and not more than 10 percent of the individuals

23 covered under the arrangement consist of own24 ers, officers, or directors of, or partners in,

25 such a lessee (or any combination thereof).
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1 ‘‘(b) DEFINITIONS.—For purposes of this section:

2 ‘‘(1) LESSOR.—The term ‘lessor’ means the

3 business or other entity from which services of indi4 viduals are obtained under an employee leasing

5 healthcare arrangement.

6 ‘‘(2) LESSEE.—The term ‘lessee’ means a busi7 ness or other entity which receives the services of in8 dividuals provided under an employee leasing

9 healthcare arrangement.’’.

10 (2) CLERICAL AMENDMENT.—The table of con11 tents in section 1 of such Act (as amended by the

12 preceding provisions of this subtitle) is further

13 amended by inserting after the item relating to sec14 tion 710 the following new item:

‘‘Sec. 711. Employee leasing healthcare arrangements.’’.

15 SEC. 216. ENFORCEMENT PROVISIONS RELATING TO MUL16 TIPLE EMPLOYER WELFARE ARRANGEMENTS

17 AND EMPLOYEE LEASING HEALTHCARE AR18 RANGEMENTS.

19 (a) ENFORCEMENT OF FILING REQUIREMENTS.—

20 Section 502 of the Employee Retirement Income Security

21 Act of 1974 (29 U.S.C. 1132) is amended—

22 (1) in subsection (a)(6), by striking ‘‘subsection

23 (c)(2) or (i) or (l)’’ and inserting ‘‘paragraph (2) or

24 (4) of subsection (c) or subsection (i) or (l)’’; and
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1 (2) by adding at the end of subsection (c) the

2 following new paragraph:

3 ‘‘(4) The Secretary may assess a civil penalty against

4 any person of up to $1,000 a day from the date of such

5 person’s failure or refusal to file the information required

6 to be filed with the Secretary under section 101(d).’’.

7 (b) ACTIONS BY STATES IN FEDERAL COURT.—Sec8 tion 502(a) of such Act (29 U.S.C. 1132(a)) is amended—

9 (1) in paragraph (5), by striking ‘‘or’’ at the

10 end;

11 (2) in paragraph (6), by striking the period and

12 inserting ‘‘, or’’; and

13 (3) by adding at the end the following:

14 ‘‘(7) by a State official having authority under

15 the law of such State to enforce the laws of such

16 State regulating insurance, to enjoin any act or

17 practice which violates any provision of part 7 which

18 such State has the power to enforce under part 7.’’.

19 (c) CRIMINAL PENALTIES FOR CERTAIN WILLFUL

20 MISREPRESENTATIONS.—Section 501 of such Act (29

21 U.S.C. 1131) is amended—

22 (1) by inserting ‘‘(a)’’ after ‘‘SEC. 501.’’; and

23 (2) by adding at the end the following new sub24 section:
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1 ‘‘(b) Any person who, either willfully or with willful

2 blindness, falsely represents, to any employee, any employ3 ee’s beneficiary, any employer, the Secretary, or any State,

4 an arrangement established or maintained for the purpose

5 of offering or providing any benefit described in section

6 3(1) to employees or their beneficiaries as being a multiple

7 employer welfare arrangement granted an exemption

8 under part 7, as being an employee leasing healthcare ar9 rangement under such an exemption, or as having been

10 established or maintained under or pursuant to a collective

11 bargaining agreement shall, upon conviction, be impris12 oned not more than five years, be fined under title 18,

13 United States Code, or both.’’.

14 (d) CEASE ACTIVITIES ORDERS.—Section 502 of

15 such Act (29 U.S.C. 1132) is amended by adding at the

16 end the following new subsection:

17 ‘‘(m)(1) Subject to paragraph (2), upon application

18 by the Secretary showing the operation, promotion, or

19 marketing of a multiple employer welfare arrangement

20 providing benefits consisting of medical care described in

21 section 607(1) that—

22 ‘‘(A) is not licensed, registered, or otherwise ap23 proved under the insurance laws of the States in

24 which the arrangement offers or provides benefits, or
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1 ‘‘(B) is not operating in accordance with the

2 terms of an exemption granted by the Secretary

3 under part 7,

4 a district court of the United States shall enter an order

5 requiring that the arrangement cease activities.

6 ‘‘(2) Paragraph (1) shall not apply in the case of a

7 multiple employer welfare arrangement if the arrangement

8 shows that it—

9 ‘‘(A) is fully insured, within the meaning of

10 section 701(9),

11 ‘‘(B) is licensed, registered, or otherwise ap12 proved in each State in which it offers or provides

13 benefits, except to the extent that such State does

14 not require licensing, registration, or approval of

15 fully insured multiple employer welfare arrange16 ments, and

17 ‘‘(C) with respect to each such State, is operat18 ing in accordance with applicable State insurance

19 laws that are not superseded under section 514.

20 ‘‘(3) The court may grant such additional equitable

21 or remedial relief, including any relief available under this

22 title, as it deems necessary to protect the interests of the

23 public and of persons having claims for benefits against

24 the arrangement.’’.
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1 (e) RESPONSIBILITY FOR CLAIMS PROCEDURE.—

2 Section 503 of such Act (29 U.S.C. 1133) is amended by

3 adding at the end (after and below paragraph (2)) the fol4 lowing new sentence: ‘‘The terms of each multiple em5 ployer welfare arrangement to which this section applies

6 and which provides benefits consisting of medical care de7 scribed in section 607(1) shall require the operating com8 mittee or the named fiduciary (as applicable) to ensure

9 that the requirements of this section are met in connection

10 with claims filed under the arrangement.’’.

11 SEC. 217. FILING REQUIREMENTS FOR HEALTH BENEFIT

12 MULTIPLE EMPLOYER WELFARE ARRANGE13 MENTS.

14 Section 101 of the Employee Retirement Income Se15 curity Act of 1974 (29 U.S.C. 1021) is amended—

16 (1) by redesignating subsection (e) as sub17 section (f); and

18 (2) by inserting after subsection (d) the follow19 ing new subsection:

20 ‘‘(e)(1) Each multiple employer welfare arrangement

21 shall file with the Secretary a registration statement de22 scribed in paragraph (2) within 60 days before commenc23 ing operations (in the case of an arrangement commencing

24 operations on or after January 1, 1994) and no later than

25 February 15 of each year (in the case of an arrangement
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1 in operation since the beginning of such year), unless, as

2 of the date by which such filing otherwise must be made,

3 such arrangement provides no benefits consisting of medi4 cal care described in section 607(1).

5 ‘‘(2) Each registration statement—

6 ‘‘(A) shall be filed in such form, and contain

7 such information concerning the multiple employer

8 welfare arrangement and any persons involved in its

9 operation (including whether the arrangement is

10 fully insured), as shall be provided in regulations

11 which shall be prescribed by the Secretary, and

12 ‘‘(B) if the arrangement is not fully insured,

13 shall contain a certification that copies of such reg14 istration statement have been transmitted by cer15 tified mail to—

16 ‘‘(i) in the case of an arrangement with re17 spect to which an exemption under part 7 is in

18 effect, the State insurance commissioner of the

19 domicile State of such arrangement, or

20 ‘‘(ii) in the case of an arrangement which

21 is not so exempt, the State insurance commis22 sioner of each State in which the arrangement

23 is located.

24 ‘‘(3) The person or persons responsible for filing the

25 annual registration statement are—
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1 ‘‘(A) the trustee or trustees so designated by

2 the terms of the instrument under which the mul3 tiple employer welfare arrangement is established or

4 maintained, or

5 ‘‘(B) in the case of a multiple employer welfare

6 arrangement for which the trustee or trustees can7 not be identified, or upon the failure of the trustee

8 or trustees of an arrangement to file, the person or

9 persons actually responsible for the acquisition, dis10 position, control, or management of the cash or

11 property of the arrangement, irrespective of whether

12 such acquisition, disposition, control, or management

13 is exercised directly by such person or persons or

14 through an agent designated by such person or

15 persons.

16 ‘‘(4) Any agreement entered into under section

17 506(c) with a State as the primary domicile State with

18 respect to any multiple employer welfare arrangement

19 shall provide for simultaneous filings of reports required

20 under this subsection with the Secretary and with the

21 State insurance commissioner of such State.’’.
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1 SEC. 218. COOPERATION BETWEEN FEDERAL AND STATE

2 AUTHORITIES.

3 Section 506 of the Employee Retirement Income Se4 curity Act of 1974 (29 U.S.C. 1136) is amended by adding

5 at the end the following new subsection:

6 ‘‘(c) RESPONSIBILITY WITH RESPECT TO MULTIPLE

7 EMPLOYER WELFARE ARRANGEMENTS.—

8 ‘‘(1) STATE ENFORCEMENT.—

9 ‘‘(A) AGREEMENTS WITH STATES.—A

10 State may enter into an agreement with the

11 Secretary for delegation to the State of some or

12 all of the Secretary’s authority under sections

13 502 and 504 to enforce the provisions of this

14 title applicable to multiple employer welfare ar15 rangements with respect to which an exemption

16 under part 7 is or has been in effect. The Sec17 retary shall enter into the agreement if the Sec18 retary determines that the delegation provided

19 for therein would not result in a lower level or

20 quality of enforcement of the provisions of this

21 title.

22 ‘‘(B) DELEGATIONS.—Any department,

23 agency, or instrumentality of a State to which

24 authority is delegated pursuant to an agree25 ment entered into under this paragraph may, if

26 authorized under State law and to the extent
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1 consistent with such agreement, exercise the

2 powers of the Secretary under this title which

3 relate to such authority.

4 ‘‘(C) CONCURRENT AUTHORITY OF THE

5 SECRETARY.—If the Secretary delegates author6 ity to a State in an agreement entered into

7 under subparagraph (A), the Secretary may

8 continue to exercise such authority concurrently

9 with the State.

10 ‘‘(D) RECOGNITION OF PRIMARY DOMICILE

11 STATE.—In entering into any agreement with a

12 State under subparagraph (A), the Secretary

13 shall ensure that, as a result of such agreement

14 and all other agreements entered into under

15 subparagraph (A), only one State will be recog16 nized, with respect to any particular multiple

17 employer welfare arrangement, as the primary

18 domicile State to which authority has been dele19 gated pursuant to such agreements.

20 ‘‘(2) ASSISTANCE TO STATES.—The Secretary

21 shall—

22 ‘‘(A) provide enforcement assistance to the

23 States with respect to multiple employer welfare

24 arrangements, including, but not limited to, co25 ordinating Federal and State efforts through
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1 the establishment of cooperative agreements

2 with appropriate State agencies under which

3 the Pension and Welfare Benefits Administra4 tion keeps the States informed of the status of

5 its cases and makes available to the States in6 formation obtained by it,

7 ‘‘(B) provide continuing technical assist8 ance to the States with respect to issues involv9 ing multiple employer welfare arrangements

10 and this Act,

11 ‘‘(C) assist the States in obtaining from

12 the Office of Regulations and Interpretations

13 timely and complete responses to requests for

14 advisory opinions on issues described in sub15 paragraph (B), and

16 ‘‘(D) distribute copies of all advisory opin17 ions described in subparagraph (C) to the State

18 insurance commissioner of each State.’’.

19 SEC. 219. EFFECTIVE DATE; TRANSITIONAL RULES.

20 (a) EFFECTIVE DATE.—The amendments made by

21 this subtitle shall take effect January 1, 1994, except that

22 the Secretary of Labor may issue regulations before such

23 date under such amendments. The Secretary shall issue

24 all regulations necessary to carry out the amendments

25 made by this subtitle before the effective date thereof.
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1 (b) TRANSITIONAL RULES.—If the sponsor of a mul2 tiple employer welfare arrangement which, as of January

3 1, 1994, provides benefits consisting of medical care de4 scribed in section 607(1) of the Employee Retirement In5 come Security Act of 1974 (29 U.S.C. 1167(1)) files with

6 the Secretary of Labor an application for an exemption

7 under part 7 of subtitle B of title I of such Act within

8 180 days after such date and the Secretary has not, as

9 of 90 days after receipt of such application, found such

10 application to be materially deficient, section 514(b)(6)(A)

11 of such Act (29 U.S.C. 1144(b)(6)(A)) shall not apply

12 with respect to such arrangement during the 18-month pe13 riod following such date. If the Secretary determines, at

14 any time after the date of enactment of this Act, that any

15 such exclusion from coverage under the provisions of such

16 section 514(b)(6)(A) of a multiple employer welfare ar17 rangement would be detrimental to the interests of individ18 uals covered under such arrangement, such exclusion shall

19 cease as of the date of the determination. Any determina20 tion made by the Secretary under this subsection shall be

21 in the Secretary’s sole discretion.
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1 Subtitle C—Repeal of COBRA

2 Continuation Requirements

3 SEC. 221. REPEAL OF REQUIREMENTS OF THE INTERNAL

4 REVENUE CODE OF 1954.

5 (a) IN GENERAL.—Section 4980B of the Internal

6 Revenue Code of 1986 is repealed.

7 (b) CONFORMING AMENDMENTS.—Section 414 of

8 such Code is amended—

9 (1) in subsection (n)(3)(C), by striking ‘‘505,

10 and 4980B’’ and inserting ‘‘and 505’’, and

11 (2) in subsection (t)(2), by striking ‘‘505, or

12 4980B’’ and inserting ‘‘or 505’’.

13 (c) EFFECTIVE DATE.—The repeal effected by sub14 section (a) shall apply to health plans offered in a State

15 by an employer as of the first date that a State multicare

16 program is in effect in the State.

17 SEC. 222. REPEAL OF REQUIREMENTS OF EMPLOYEE RE18 TIREMENT INCOME SECURITY ACT OF 1974.

19 (a) IN GENERAL.—Part 6 of subtitle B of title I of

20 the Employee Retirement Income Security Act of 1974 is

21 repealed.

22 (b) CONFORMING AMENDMENT.—Section 502(c)(1)

23 of such Act (29 U.S.C. 1132(c)(1)) is amended by striking

24 ‘‘paragraph (1) or (4) of section 606 or’’.
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1 (c) EFFECTIVE DATE.—The repeal effected by sub2 section (a) shall apply to health plans offered in a State

3 by an employer as of the first date that a State multicare

4 program is in effect in the State.

5 SEC. 223. REPEAL OF REQUIREMENTS OF PUBLIC HEALTH

6 SERVICE ACT.

7 (a) IN GENERAL.—Title XXII of the Public Health

8 Service Act is repealed.

9 (b) EFFECTIVE DATE.—The repeal effected by sub10 section (a) shall apply to health plans offered in a State

11 by an employer as of the first date that a State multicare

12 program is in effect in the State.

13 TITLE III—STATES WITHOUT

14 STATE MULTICARE PRO15 GRAMS; FEDERAL HEALTH

16 CARE PROGRAMS; NATIONAL

17 REINSURANCE POOL

18 Subtitle A—Multicare Plans in

19 States without State Multicare

20 Programs

21 SEC. 301. GENERAL PROVISIONS.

22 (a) IN GENERAL.—In the case of a State without a

23 State multicare program approved under title I, the Sec24 retary may provide for—
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1 (1) the operation (through the Department of

2 Health and Human Services) of such a program in

3 the State, and

4 (2) the approval and offering of multistate

5 plans in the State,

6 in the same manner as such a program and plans would

7 have been offered if a State multicare program were in

8 operation in the State.

9 (b) APPLICATION OF ALL REQUIREMENTS.—In the

10 case of multicare plans offered pursuant to subsection (a),

11 such plans shall meet all the same requirements of title

12 II (including requirements relating to consumer rights)

13 that would have applied if the plans were offered under

14 a State multicare program.

15 (c) CONSUMER EDUCATION AND ASSISTANCE.—In

16 the case of a State without a State multicare program ap17 proved under title I:

18 (1) DISTRIBUTION OF PLAN INFORMATION.—

19 The Secretary shall provide, through local Social Se20 curity Administration offices and State welfare of21 fices, for assistance to medicare, medicaid, and low22 income beneficiaries in the selection of multicare

23 plans pursuant to this section. Such offices shall

24 provide eligible individuals with the information nec-
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1 essary to qualify them for reduced cost-sharing and

2 to explain their available options.

3 (2) DISTRIBUTION OF PLAN INFORMATION.—

4 The Secretary shall provide for distribution of infor5 mation on approved multicare plans.

6 Subtitle B—Federal Health Care

7 Programs

8 SEC. 321. MEDICARE PROGRAM.

9 (a) NEGOTIATION AUTHORITY.—The Secretary of

10 Health and Human Services is authorized to negotiate an

11 agreement with a State multicare program to provide med12 icare-eligible individuals with access to multicare plans.

13 (b) TERMS OF AGREEMENTS.—

14 (1) IN GENERAL.—Under an agreement under

15 this section, medicare-eligible individuals—

16 (A) are permitted to choose to enroll in

17 multicare plans, and

18 (B) are provided payment of an amount to19 wards the cost of enrolling in the plan.

20 (2) OTHER TERMS.—An agreement under this

21 section—

22 (A) may not increase the total Federal cost

23 of care, and

24 (B) shall ensure that medicare-eligible in25 dividuals can easily compare the benefits of en-
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1 rollment under a multicare plan to the benefits

2 provided under the medicare program.

3 (c) SPECIAL RULES.—

4 (1) NO FEDERAL CONTRIBUTION.—No Federal

5 contribution is available to a State under section

6 101(c)(1) with respect to enrollment of an individual

7 with a multicare plan under an agreement under

8 this section.

9 (2) CONSTRUCTION.—Nothing in this section

10 shall be construed as—

11 (A) requiring a State multicare program to

12 enter into an agreement under this section as a

13 condition of approval of the program under this

14 Act or otherwise, or

15 (B) as authorizing the Secretary or a State

16 to require a medicare-eligible individual to en17 roll with a multicare plan under the agreement.

18 SEC. 322. FEDERAL EMPLOYEES HEALTH BENEFIT PRO19 GRAM.

20 (a) USE OF FEDERAL CONTRIBUTION TOWARD PUR21 CHASE OF MULTICARE PLAN.—In the case of an individ22 ual who is a Federal employee or annuitant eligible to en23 roll in a health benefit plan under chapter 89 of title 5,

24 United States Code and is residing in a State—
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1 (1) with a State multicare program, instead of

2 enrolling under such a plan the individual is entitled

3 to elect (in a form and manner specified by the Di4 rector of the Office of Personnel Management in

5 consultation with the Secretary) to have the amount

6 of the Federal Government contribution toward such

7 plan under such chapter applied toward enrollment

8 of the individual (and qualified family members)

9 under a multicare plan; and

10 (2) without a State multicare program, instead

11 of enrolling under such a plan the individual is enti12 tled to elect (in a form and manner specified by the

13 Director of the Office of Personnel Management in

14 consultation with the Secretary) to have the amount

15 of the Federal Government contribution toward such

16 plan under such chapter applied toward enrollment

17 of the individual (and qualified family members)

18 under a Federally approved multicare plan.

19 (b) APPROVAL OF FEHBP PLANS.—The Secretary

20 may approve a health benefit plan offered under chapter

21 89 of title 5, United States Code, as a multicare plan

22 under this Act if the plan—

23 (1) participates in a reinsurance mechanism

24 that meets the requirements of section 107, and
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1 (2) otherwise complies with the requirements

2 for a multicare plan under title II.

3 (c) TREATMENT OF FEHBP PLANS AS MULTICARE

4 PLANS FOR PURPOSES OF FEDERAL CONTRIBUTION.—

5 For purposes of section 121, a health benefit plan in which

6 an individual is enrolled under chapter 89 of title 5, Unit7 ed States Code is treated as a multicare plan in which

8 the individual is enrolled.

9 (d) CONSTRUCTION.—Nothing in this section shall be

10 construed as authorizing the Office of Personnel Manage11 ment to require any individual to enroll with a multicare

12 plan under this section.

13 SEC. 323. REPORT RECOMMENDING INTEGRATION OF

14 CHAMPUS, VETERANS HEALTH, AND INDIAN

15 HEALTH SERVICES.

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

17 Human Services, in coordination with the Secretary of

18 Veterans Affairs, the Secretary of Defense, and the Sec19 retary of the Interior, shall submit to Congress a report

20 that includes recommendations on how (and the extent to

21 which) the Civilian Health and Medical Program of the

22 Uniformed Services (CHAMPUS), the health care pro23 grams of the Department of Veterans Affairs, and the In24 dian Health Service may be integrated with the multicare

25 program established under this Act.
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1 (b) DEADLINE.—The report under subsection (a)

2 shall be submitted not later than 2 years after the date

3 of the enactment of this Act to the Committees on Armed

4 Services, Energy and Commerce, Interior, Veterans’ Af5 fairs, and Ways and Means of the House of Representa6 tives and to the Committees on Armed Services, Finance,

7 Labor and Human Resources, and Veterans’ Affairs of the

8 Senate.

9 SEC. 324. CONSUMER RIGHTS FOR INDIVIDUALS IN FED10 ERAL PROGRAMS.

11 (a) NOTICE OF RIGHTS; ENFORCEMENT.—

12 (1) NOTICE.—The Secretary shall notify indi13 viduals provided health care services under a Federal

14 health care program of their consumer rights under

15 this section and of the procedures established by the

16 Secretary to ensure these rights.

17 (2) DEVELOPMENT OF REGULATIONS.—The

18 Secretary shall develop regulation to implement the

19 consumer rights established under this section.

20 (3) STATE ENFORCEMENT.—The Secretary is

21 responsible, through modification of requirements of

22 Federal health care programs, for assuring compli23 ance of physicians with the requirements of this sec24 tion.
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1 (b) PROVISION OF PATIENT COST-SHARING INFOR2 MATION.—

3 (1) IN GENERAL.—Each physician who fur4 nishes professional services for which payment may

5 be made under a Federal health care program shall

6 provide, as a condition for the payment of funds for

7 such services under such program, that a patient is

8 provided, in advance of the receipt of the services

9 (except as provided by the Secretary in the case of

10 emergency services), with information on the ex11 pected total costs of the services and an estimate of

12 the patient’s share of the costs. Such information

13 may be based on the estimates for the average cost

14 for such services.

15 (2) TOTAL COST.—For purposes of paragraph

16 (1), the total cost of treatment—

17 (A) in the case of a patient’s initial visit,

18 shall consist of the initial visit only, and

19 (B) in the case of subsequent treatment,

20 shall include all expenses resulting from the

21 treatment procedure prescribed by the physi22 cian.

23 (3) EXCEPTION FOR EMERGENCIES.—In the

24 case of emergency services, the information under
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1 this subsection shall be provided at the earliest rea2 sonable time after such services are provided.

3 (c) PATIENT ACCESS TO MEDICAL INFORMATION.—

4 In the case of an individual who receives professional serv5 ices from a physician for which payment may be made

6 under a Federal health care program, the individual has

7 a right to obtain information contained in the individual’s

8 medical record maintained by the physician.

9 (d) FEDERAL HEALTH CARE PROGRAM.—In this sec10 tion, the term ‘‘Federal health care program’’ includes the

11 medicare program, the medicaid program, and the Federal

12 employees health benefits program.

13 Subtitle C—National Reinsurance

14 Mechanism

15 SEC. 331. NATIONAL REINSURANCE MECHANISM.

16 (a) ESTABLISHMENT.—

17 (1) IN GENERAL.—The Secretary shall establish

18 a national reinsurance mechanism for use by self-in19 sured closed multicare plans described in subsection

20 (b) which have not made an election described in

21 subsection (c). Such a mechanism shall be designed

22 to meet the requirements described in section

23 107(b).

24 (2) GOVERNANCE.—The mechanism shall be

25 governed by a commission appointed by the Sec-
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1 retary. The membership of the commission shall in2 clude the Secretary (or the Secretary’s designee) and

3 representatives of plan sponsors, major providers,

4 labor, State reinsurance mechanisms, consumers,

5 State governments, and the business community.

6 (b) PLANS COVERED.—The plans described in this

7 subsection are self-insured plans that operate in 3 or more

8 States.

9 (c) ELECTION.—A plan described in subsection (b)

10 shall be permitted to make a one-time election as to wheth11 er to participate in the national reinsurance mechanism

12 under this section or to participate in State reinsurance

13 mechanisms established under section 107 (or by the Sec14 retary under section 301).

15 TITLE IV—MEDICAL MAL16 PRACTICE LIABILITY RE17 FORM

18 Subtitle A—Medical Malpractice

19 Liability Reform

20 PART 1—GENERAL PROVISIONS

21 SEC. 401. FEDERAL REFORM OF MEDICAL MALPRACTICE

22 LIABILITY ACTIONS.

23 (a) CONGRESSIONAL FINDINGS.—

24 (1) EFFECT ON INTERSTATE COMMERCE.—

25 Congress finds that the health care and insurance
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1 industries are industries affecting interstate com2 merce and the medical malpractice litigation systems

3 existing throughout the United States affect inter4 state commerce by contributing to the high cost of

5 health care and premiums for malpractice insurance

6 purchased by health care providers.

7 (2) EFFECT ON FEDERAL SPENDING.—Con8 gress finds that the medical malpractice litigation

9 systems existing throughout the United States have

10 a significant effect on the amount, distribution, and

11 use of Federal funds because of—

12 (A) the large number of individuals who

13 receive health care benefits under programs op14 erated or financed by the Federal Government;

15 (B) the large number of individuals who

16 benefit because of the exclusion from Federal

17 taxes of the amounts spent by their employers

18 to provide them with health insurance benefits;

19 (C) the large number of health care provid20 ers and health care professionals who provide

21 items or services for which the Federal Govern22 ment makes payments; and

23 (D) the large number of such providers

24 and professionals who have received direct or

25 indirect financial assistance from the Federal
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1 Government because of their status as such

2 professionals or providers.

3 (b) APPLICABILITY.—This subtitle shall apply with

4 respect to any medical malpractice liability claim and to

5 any medical malpractice liability action brought in any

6 State or Federal court, except that this subtitle shall not

7 apply to—

8 (1) a claim or action for damages arising from

9 a vaccine-related injury or death to the extent that

10 title XXI of the Public Health Service Act applies to

11 the action; or

12 (2) a claim or action in which the plaintiff’s

13 sole allegation is an allegation of an injury arising

14 from the use of a medical product.

15 (c) PREEMPTION OF STATE LAW.—Subject to section

16 421, this subtitle supersedes State law only to the extent

17 that State law differs from any provision of law estab18 lished by or under this subtitle. Any issue that is not gov19 erned by any provision of law established by or under this

20 subtitle shall be governed by otherwise applicable State or

21 Federal law.

22 (d) FEDERAL COURT JURISDICTION NOT ESTAB23 LISHED ON FEDERAL QUESTION GROUNDS.—Nothing in

24 this subtitle shall be construed to establish any jurisdiction

25 in the district courts of the United States over medical
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1 malpractice liability actions on the basis of sections 1331

2 or 1337 of title 28, United States Code.

3 SEC. 402. DEFINITIONS.

4 As used in this subtitle:

5 (1) ALTERNATIVE DISPUTE RESOLUTION SYS6 TEM; ADR.—The term ‘‘alternative dispute resolu7 tion system’’ or ‘‘ADR’’ means a system established

8 by a State that provides for the resolution of medical

9 malpractice liability claims in a manner other than

10 through medical malpractice liability actions.

11 (2) CLAIMANT.—The term ‘‘claimant’’ means

12 any person who alleges a medical malpractice liabil13 ity claim, or, in the case of an individual who is de14 ceased, incompetent, or a minor, the person on

15 whose behalf such a claim is alleged.

16 (3) ECONOMIC DAMAGES.—The term ‘‘economic

17 damages’’ means damages paid to compensate an in18 dividual for losses for hospital and other medical ex19 penses, lost wages, lost employment, and other pecu20 niary losses.

21 (4) HEALTH CARE PROFESSIONAL.—The term

22 ‘‘health care professional’’ means any individual who

23 provides health care services in a State and who is

24 required by State law or regulation to be licensed or
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1 certified by the State to provide such services in the

2 State.

3 (5) HEALTH CARE PROVIDER.—The term

4 ‘‘health care provider’’ means any organization or

5 institution that is engaged in the delivery of health

6 care services in a State and that is required by State

7 law or regulation to be licensed or certified by the

8 State to engage in the delivery of such services in

9 the State.

10 (6) INJURY.—The term ‘‘injury’’ means any ill11 ness, disease, or other harm that is the subject of

12 a medical malpractice liability action or claim.

13 (7) MEDICAL MALPRACTICE LIABILITY AC14 TION.—The term ‘‘medical malpractice liability ac15 tion’’ means a civil action (other than an action in

16 which the plaintiff’s sole allegation is an allegation

17 of an intentional tort) brought in a State or Federal

18 court against a health care provider or health care

19 professional (regardless of the theory of liability on

20 which the action is based) in which the plaintiff al21 leges a medical malpractice liability claim.

22 (8) MEDICAL MALPRACTICE LIABILITY

23 CLAIM.—The term ‘‘medical malpractice liability

24 claim’’ means a claim in which the claimant alleges
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1 that injury was caused by the provision of (or the

2 failure to provide) health care services.

3 (9) MEDICAL PRODUCT.—The term ‘‘medical

4 product’’ means a device (as defined in section

5 201(h) of the Federal Food, Drug, and Cosmetic

6 Act) or a drug (as defined in section 201(g)(1) of

7 the Federal Food, Drug, and Cosmetic Act).

8 (10) NONECONOMIC DAMAGES.—The term

9 ‘‘noneconomic damages’’ means damages paid to

10 compensate an individual for losses for physical and

11 emotional pain, suffering, inconvenience, physical

12 impairment, mental anguish, disfigurement, loss of

13 enjoyment of life, loss of consortium, and other

14 nonpecuniary losses, but does not include punitive

15 damages.

16 (11) SECRETARY.—The term ‘‘Secretary’’

17 means the Secretary of Health and Human Services.

18 (12) STATE.—The term ‘‘State’’ means each of

19 the several States, the District of Columbia, the

20 Commonwealth of Puerto Rico, the Virgin Islands,

21 Guam, and American Samoa.

22 SEC. 403. EFFECTIVE DATE.

23 (a) IN GENERAL.—Except as provided in subsection

24 (b) and sections 419 and 442, this subtitle shall apply with

25 respect to claims accruing or actions brought on or after
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1 the expiration of the 3-year period that begins on the date

2 of the enactment of this Act.

3 (b) EXCEPTION FOR STATES REQUESTING EARLIER

4 IMPLEMENTATION OF REFORMS.—

5 (1) APPLICATION.—A State may submit an ap6 plication to the Secretary requesting the early imple7 mentation of this subtitle with respect to claims or

8 actions brought in the State.

9 (2) DECISION BY SECRETARY.—The Secretary

10 shall issue a response to a State’s application under

11 paragraph (1) not later than 90 days after receiving

12 the application. If the Secretary determines that the

13 State meets the requirements of this subtitle at the

14 time of submitting its application, the Secretary

15 shall approve the State’s application, and this sub16 title shall apply with respect to actions brought in

17 the State on or after the expiration of the 90-day

18 period that begins on the date the Secretary issues

19 the response. If the Secretary denies the State’s ap20 plication, the Secretary shall provide the State with

21 a written explanation of the grounds for the deci22 sion.
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1 PART 2—UNIFORM STANDARDS FOR MEDICAL

2 MALPRACTICE LIABILITY ACTIONS

3 SEC. 411. STATUTE OF LIMITATIONS.

4 (a) IN GENERAL.—No medical malpractice liability

5 claim may be brought after the expiration of the 2-year

6 period that begins on the date the alleged injury that is

7 the subject of the action should reasonably have been dis8 covered, but in no event after the expiration of the 4-year

9 period that begins on the date the alleged injury occurred.

10 (b) EXCEPTION FOR MINORS.—In the case of an al11 leged injury suffered by a minor who has not attained 6

12 years of age, no medical malpractice liability claim may

13 be brought after the expiration of the 2-year period that

14 begins on the date the alleged injury that is the subject

15 of the action should reasonably have been discovered, but

16 in no event after the date on which the minor attains 10

17 years of age.

18 SEC. 412. REQUIREMENT FOR INITIAL RESOLUTION OF AC19 TION THROUGH ALTERNATIVE DISPUTE RES20 OLUTION.

21 (a) IN GENERAL.—No medical malpractice liability

22 action may be brought in any State court unless the medi23 cal malpractice liability claim that is the subject of the

24 action has been initially resolved under an alternative dis-
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1 pute resolution system certified by the Secretary under

2 section 432(b).

3 (b) INITIAL RESOLUTION OF CLAIMS UNDER

4 ADR.—For purposes of subsection (a), an action is ‘‘ini5 tially resolved’’ under an alternative dispute resolution

6 system if—

7 (1) the ADR reaches a decision on whether the

8 defendant is liable to the plaintiff for damages; and

9 (2) if the ADR determines that the defendant

10 is liable, the ADR determines the amount of dam11 ages assessed against the defendant.

12 (c) PROCEDURES FOR FILING ACTIONS.—

13 (1) DEADLINE.—No medical malpractice liabil14 ity action may be brought unless the action is filed

15 in a court of competent jurisdiction not later than

16 90 days after an opinion resolving the medical mal17 practice liability claim that is the subject of the ac18 tion is issued under the applicable alternative dis19 pute resolution system.

20 (2) COURT OF COMPETENT JURISDICTION.—

21 For purposes of paragraph (1), the term ‘‘court of

22 competent jurisdiction’’ means—

23 (A) with respect to actions filed in a State

24 court, the appropriate State trial court; and
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1 (B) with respect to actions filed in a Fed2 eral court, the appropriate United States dis3 trict court.

4 (d) STATUS OF ADR DECISION.—The decision

5 reached under an alternative dispute resolution system

6 shall, for purposes of enforcement by a court of competent

7 jurisdiction, have the same status in the court as the ver8 dict of a medical malpractice liability action adjudicated

9 in a State or Federal trial court.

10 (e) TREATMENT OF ADR DECISION.—

11 (1) REQUIREMENTS FOR GOING FORWARD WITH

12 ACTION.—In order to bring a medical malpractice li13 ability action to contest the decision made under the

14 previous alternative dispute resolution system with

15 respect to a medical malpractice liability claim, the

16 party contesting the decision must—

17 (A) show that—

18 (i) the decision was procured by cor19 ruption, fraud, or undue means,

20 (ii) there was partiality or corruption

21 under the system,

22 (iii) there was other misconduct under

23 the system that materially prejudiced the

24 party’s rights, or
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1 (iv) the decision was based on an

2 error of law; or

3 (B) present new evidence before the trier

4 of fact that was not available for presentation

5 under the ADR system.

6 (2) BURDEN OF PROOF.—In any medical mal7 practice liability action, the trier of fact shall uphold

8 the decision made under the previous alternative dis9 pute resolution system with respect to the claim that

10 is the subject of the action unless the party contest11 ing the decision proves by a preponderance of the

12 evidence that the decision was incorrect.

13 SEC. 413. RELATION TO ALTERNATIVE DISPUTE RESOLU14 TION OF FEDERAL AGENCIES.

15 (a) MANDATORY APPLICATION OF FEDERAL ADR IN

16 MALPRACTICE CLAIMS AGAINST UNITED STATES.—Sec17 tion 2672 of title 28, United States Code, is amended by

18 striking the period at the end of the first paragraph and

19 inserting the following: ‘‘, except that each Federal agency

20 shall use arbitration or such alternative means of dispute

21 resolution to settle any tort claim against the United

22 States consisting of a medical malpractice liability claim

23 (as defined in section 402(8) of the Multicare Act of

24 1994).’’.
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1 (b) TRANSMITTAL OF INFORMATION OF MAL2 PRACTICE CLAIMS RESOLVED UNDER FEDERAL ADR.—

3 Section 584 of title 5, United States Code, as added by

4 section 4(b) of the Administrative Dispute Resolution Act

5 (Public Law 101-552), is amended by adding at the end

6 the following new subsection:

7 ‘‘(k) Each agency shall transmit on a regular basis

8 to the Administrator for Health Care Policy and Research

9 information on issues in controversy consisting of medical

10 malpractice liability claims (as defined in section 402(8)

11 of Multicare Act of 1994) that are resolved under the

12 agency’s dispute resolution proceeding under this sub13 chapter, in a manner that assures that the identity of the

14 parties to such proceedings shall not be revealed.’’.

15 SEC. 414. MANDATORY PRE-TRIAL SETTLEMENT CON16 FERENCE.

17 (a) IN GENERAL.—Before the beginning of the trial

18 phase of any medical malpractice liability action, the par19 ties shall attend a conference called by the court for pur20 poses of determining whether grounds exist upon which

21 the parties may negotiate a settlement for the action.

22 (b) REQUIRING PARTIES TO SUBMIT SETTLEMENT

23 OFFERS.—At the conference called pursuant to subsection

24 (a), each party to a medical malpractice liability action

25 shall present an offer of settlement for the action.
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1 SEC. 415. CALCULATION AND PAYMENT OF DAMAGES.

2 (a) LIMITATION ON NONECONOMIC DAMAGES.—The

3 total amount of noneconomic damages that may be award4 ed to a plaintiff and the members of the plaintiff’s family

5 for losses resulting from the injury which is the subject

6 of a medical malpractice liability action may not exceed

7 $250,000, regardless of the number of parties against

8 whom the action is brought or the number of actions

9 brought with respect to the injury.

10 (b) TREATMENT OF PUNITIVE DAMAGES.—

11 (1) LIMITATION ON AMOUNT.—The total

12 amount of punitive damages that may be imposed

13 under a medical malpractice liability action may not

14 exceed twice the total of the damages awarded to the

15 plaintiff and the members of the plaintiff’s family.

16 (2) PAYMENTS TO STATE FOR MEDICAL QUAL17 ITY ASSURANCE ACTIVITIES.—

18 (A) IN GENERAL.—Any punitive damages

19 imposed under a medical malpractice liability

20 action shall be paid to the State in which the

21 action is brought.

22 (B) ACTIVITIES DESCRIBED.—A State

23 shall use amount paid pursuant to subpara24 graph (A) to carry out activities to assure the

25 safety and quality of health care services pro-
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1 vided in the State, including (but not limited

2 to)—

3 (i) licensing or certifying health care

4 professionals and health care providers in

5 the State;

6 (ii) operating alternative dispute reso7 lution systems;

8 (iii) carrying out public education pro9 grams relating to medical malpractice and

10 the availability of alternative dispute reso11 lution systems in the State; and

12 (iv) carrying out programs to reduce

13 malpractice-related costs for retired provid14 ers or other providers volunteering to pro15 vide services in medically underserved

16 areas.

17 (C) MAINTENANCE OF EFFORT.—A State

18 shall use any amounts paid pursuant to sub19 paragraph (A) to supplement and not to replace

20 amounts spent by the State for the activities

21 described in subparagraph (B).

22 (c) PERIODIC PAYMENTS FOR FUTURE LOSSES.—If

23 more than $100,000 in damages for expenses to be in24 curred in the future is awarded to the plaintiff in a medi25 cal malpractice liability action, the defendant shall provide
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1 for payment for such damages on a periodic basis deter2 mined appropriate by the court (based upon projections

3 of when such expenses are likely to be incurred), unless

4 the court determines that it is not in the plaintiff’s best

5 interests to receive payments for such damages on such

6 a periodic basis.

7 (d) MANDATORY OFFSETS FOR DAMAGES PAID BY

8 A COLLATERAL SOURCE.—

9 (1) IN GENERAL.—The total amount of dam10 ages received by a plaintiff in a medical malpractice

11 liability action shall be reduced (in accordance with

12 paragraph (2)) by any other payment that has been

13 or will be made to the individual to compensate the

14 plaintiff for the injury that was the subject of the

15 action, including payment under—

16 (A) Federal or State disability or sickness

17 programs;

18 (B) Federal, State, or private health insur19 ance programs;

20 (C) private disability insurance programs;

21 (D) employer wage continuation programs;

22 and

23 (E) any other source of payment intended

24 to compensate the plaintiff for such injury.
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1 (2) AMOUNT OF REDUCTION.—The amount by

2 which an award of damages to a plaintiff shall be re3 duced under paragraph (1) shall be—

4 (A) the total amount of any payments

5 (other than such award) that have been made

6 or that will be made to the plaintiff to com7 pensate the plaintiff for the injury that was the

8 subject of the action; minus

9 (B) the amount paid by the plaintiff (or by

10 the spouse, parent, or legal guardian of the

11 plaintiff) to secure the payments described in

12 subparagraph (A).

13 SEC. 416. TREATMENT OF ATTORNEY’S FEES AND OTHER

14 COSTS.

15 (a) LIMITATION ON ATTORNEY’S FEES.—If the

16 plaintiff in a medical malpractice liability action has en17 tered into an agreement with the plaintiff’s attorney to

18 pay the attorney’s fees on a contingency basis, the attor19 ney’s fees for the action may not exceed—

20 (1) 25 percent of the first $150,000 of any

21 award or settlement paid to the plaintiff; or

22 (2) 15 percent of any additional amounts paid

23 to the plaintiff.

24 (b) AWARDING ATTORNEY’S FEES AND OTHER

25 COSTS TO WINNING PARTY.—
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1 (1) IN GENERAL.—If the court in a medical

2 malpractice liability action upholds a ruling of the

3 alternative dispute resolution system with respect to

4 whether or not a health care professional or health

5 care provider committed malpractice or with respect

6 to the amount of damages awarded, the court shall

7 require the party that contested the ruling to pay to

8 the opposing party the costs incurred by the oppos9 ing party under the action, including attorney’s fees,

10 fees paid to expert witnesses, and other litigation ex11 penses (but not including court costs, filing fees, or

12 other expenses paid directly by the party to the

13 court, or any fees or costs associated with the reso14 lution of the claim that is the subject of the action

15 under the alternative dispute resolution system).

16 (2) PERMITTING COURT TO WAIVE OR MODIFY

17 IMPOSITION OF COSTS.—A court may issue a written

18 order waiving or modifying the application of para19 graph (1) to a party if the court finds that the appli20 cation of such paragraph to the party would con21 stitute an undue hardship, or if the medical mal22 practice liability action raised a novel issue of law.

23 The order shall specify the grounds for the court’s

24 decision to waive or modify the application of such

25 paragraph.
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1 SEC. 417. JOINT AND SEVERAL LIABILITY.

2 The liability of each defendant in a medical mal3 practice liability action shall be several only and shall not

4 be joint, and each defendant shall be liable only for the

5 amount of damages allocated to the defendant in direct

6 proportion to the defendant’s percentage of responsibility

7 (as determined by the trier of fact).

8 SEC. 418. UNIFORM STANDARD FOR DETERMINING NEG9 LIGENCE.

10 Except as provided in subsection (b), a defendant in

11 a medical malpractice liability action may not be found

12 to have acted negligently unless the defendant’s conduct

13 at the time of providing the health care services that are

14 the subject of the action was not reasonable.

15 SEC. 419. APPLICATION OF MEDICAL PRACTICE GUIDE16 LINES IN MALPRACTICE LIABILITY ACTIONS.

17 (a) USE OF GUIDELINES AS AFFIRMATIVE DE18 FENSE.—In any medical malpractice liability action, it

19 shall be a complete defense to any allegation that the de20 fendant was negligent that, in the provision of (or the fail21 ure to provide) the services that are the subject of the

22 action, the defendant followed the appropriate practice

23 guideline.

24 (b) RESTRICTION ON GUIDELINES CONSIDERED AP25 PROPRIATE.—
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1 (1) GUIDELINES SANCTIONED BY SEC2 RETARY.—For purposes of subsection (a), a practice

3 guideline may not be considered appropriate with re4 spect to actions brought during a year unless the

5 Secretary has sanctioned the use of the guideline for

6 purposes of an affirmative defense to medical mal7 practice liability actions brought during the year in

8 accordance with paragraph (2) or (3).

9 (2) PROCESS FOR SANCTIONING GUIDELINES.—

10 Not less frequently than October 1 of each year (be11 ginning with 1995), the Secretary, shall review the

12 practice guidelines and standards developed by the

13 Administrator for Health Care Policy and Research

14 pursuant to section 1142 of the Social Security Act,

15 and shall sanction those guidelines which the Sec16 retary considers appropriate for purposes of an af17 firmative defense to medical malpractice liability ac18 tions brought during the next calendar year as ap19 propriate practice guidelines for purposes of sub20 section (a).

21 (3) USE OF STATE GUIDELINES.—Upon the ap22 plication of a State, the Secretary may sanction

23 practice guidelines selected by the State for purposes

24 of an affirmative defense to medical malpractice li25 ability actions brought in the State as appropriate
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1 practice guidelines for purposes of subsection (a) if

2 the guidelines meet such requirements as the Sec3 retary may impose.

4 (c) PROHIBITING APPLICATION OF FAILURE TO FOL5 LOW GUIDELINES AS PRIMA FACIE EVIDENCE OF NEG6 LIGENCE.—No plaintiff in a medical malpractice liability

7 action may be deemed to have presented prima facie evi8 dence that a defendant was negligent solely by showing

9 that the defendant failed to follow the appropriate practice

10 guideline.

11 SEC. 420. SPECIAL PROVISION FOR CERTAIN OBSTETRIC

12 SERVICES.

13 (a) IMPOSITION OF HIGHER STANDARD OF PROOF.—

14 (1) IN GENERAL.—In the case of a medical

15 malpractice liability action relating to services pro16 vided during labor or the delivery of a baby, if the

17 defendant health care professional did not previously

18 treat the plaintiff for the pregnancy, the trier of fact

19 may not find that the defendant committed mal20 practice and may not assess damages against the de21 fendant unless the malpractice is proven by clear

22 and convincing evidence.

23 (2) APPLICABILITY TO GROUP PRACTICES OR

24 AGREEMENTS AMONG PROVIDERS.—For purposes of

25 paragraph (1), a health care professional shall be
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1 considered to have previously treated an individual

2 for a pregnancy if the professional is a member of

3 a group practice whose members previously treated

4 the individual for the pregnancy or is providing serv5 ices to the individual during labor or the delivery of

6 a baby pursuant to an agreement with another pro7 fessional.

8 (b) CLEAR AND CONVINCING EVIDENCE DEFINED.—

9 In subsection (a), the term ‘‘clear and convincing evi10 dence’’ is that measure or degree of proof that will

11 produce in the mind of the trier of fact a firm belief or

12 conviction as to the truth of the allegations sought to be

13 established, except that such measure or degree of proof

14 is more than that required under preponderance of the evi15 dence, but less than that required for proof beyond a rea16 sonable doubt.

17 (c) EFFECTIVE DATE.—This section shall apply to

18 claims accruing or actions brought on or after the expira19 tion of the 2-year period that begins on the date of the

20 enactment of this Act.

21 SEC. 421. PREEMPTION.

22 (a) IN GENERAL.—This part supersedes any State

23 law only to the extent that State law—

24 (1) permits the recovery of a greater amount of

25 damages by a plaintiff;
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1 (2) permits the collection of a greater amount

2 of attorneys’ fees by a plaintiff’s attorney;

3 (3) establishes a longer period during which a

4 medical malpractice liability claim may be initiated;

5 or

6 (4) establishes a stricter standard for determin7 ing whether a defendant was negligent or for deter8 mining the liability of defendants described in sec9 tion 420(a) in actions described in such section.

10 (b) EFFECT ON SOVEREIGN IMMUNITY AND CHOICE

11 OF LAW OR VENUE.—Nothing in subsection (a) shall be

12 construed to—

13 (1) waive or affect any defense of sovereign im14 munity asserted by any State under any provision of

15 law;

16 (2) waive or affect any defense of sovereign im17 munity asserted by the United States;

18 (3) affect the applicability of any provision of

19 the Foreign Sovereign Immunities Act of 1976;

20 (4) preempt State choice-of-law rules with re21 spect to claims brought by a foreign nation or a citi22 zen of a foreign nation; or

23 (5) affect the right of any court to transfer

24 venue or to apply the law of a foreign nation or to

25 dismiss a claim of a foreign nation or of a citizen
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1 of a foreign nation on the ground of inconvenient

2 forum.

3 PART 3—REQUIREMENTS FOR STATE ALTERNATIVE

4 DISPUTE RESOLUTION SYSTEMS (ADR)

5 SEC. 431. BASIC REQUIREMENTS FOR ADR.

6 (a) IN GENERAL.—A State’s alternative dispute reso7 lution system meets the requirements of this section if the

8 system—

9 (1) applies to all medical malpractice liability

10 claims under the jurisdiction of the State courts;

11 (2) requires that a written opinion resolving the

12 dispute be issued that contains findings of fact relat13 ing to the dispute;

14 (3) requires individuals who hear and resolve

15 claims under the system to meet such qualifications

16 as the State may require (in accordance with regula17 tions of the Secretary);

18 (4) is approved by the State or by local govern19 ments in the State;

20 (5) with respect to a State system that consists

21 of multiple dispute resolution procedures—

22 (A) permits the parties to a dispute to se23 lect the procedure to be used for the resolution

24 of the dispute under the system, and
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1 (B) if the parties do not agree on the pro2 cedure to be used for the resolution of the dis3 pute, assigns a particular procedure to the par4 ties;

5 (6) provides for the transmittal to the State

6 agency responsible for monitoring or disciplining

7 health care professionals and health care providers

8 of any findings made under the system that such a

9 professional or provider committed malpractice, un10 less, during the 90-day period beginning on the date

11 the system resolves the claim against the profes12 sional or provider, the professional or provider

13 brings a medical malpractice liability action contest14 ing the decision made under the system; and

15 (7) provides for the regular transmittal to the

16 Administrator for Health Care Policy and Research

17 of information on disputes resolved under the sys18 tem, in a manner that assures that the identity of

19 the parties to a dispute shall not be revealed.

20 (b) APPLICATION OF MALPRACTICE LIABILITY

21 STANDARDS TO ALTERNATIVE DISPUTE RESOLUTION.—

22 The provisions of part 2 shall apply with respect to claims

23 brought under a State’s alternative dispute resolution sys24 tem in the same manner as such provisions apply with
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1 respect to medical malpractice liability actions brought in

2 the State.

3 SEC. 432. CERTIFICATION OF STATE SYSTEMS.

4 (a) IN GENERAL.—Not later than October 1 of each

5 year (beginning with 1995), the Secretary, in consultation

6 with the Attorney General, shall determine whether a

7 State’s alternative dispute resolution system meets the re8 quirements of this part for the following calendar year.

9 (b) BASIS FOR CERTIFICATION.—The Secretary shall

10 certify a State’s alternative dispute resolution system

11 under this subsection if the Secretary determines under

12 subsection (a) that the system meets the requirements of

13 section 431.

14 SEC. 433. REPORTS ON IMPLEMENTATION AND EFFECTIVE15 NESS OF ALTERNATIVE DISPUTE RESOLU16 TION SYSTEMS.

17 (a) IN GENERAL.—Not later than 5 years after the

18 date of the enactment of this Act, the Secretary shall pre19 pare and submit to Congress a report describing and eval20 uating State alternative dispute resolution systems oper21 ated pursuant to this part.

22 (b) CONTENTS OF REPORT.—The Secretary shall in23 clude in the report prepared and submitted under sub24 section (a)—

25 (1) information on—
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1 (A) the effect of such systems on the cost

2 of health care within the State,

3 (B) the impact of such systems on the ac4 cess of individuals to health care within the

5 State, and

6 (C) the effect of such systems on the qual7 ity of health care provided within such State;

8 and

9 (2) to the extent that such report does not pro10 vide information on no-fault systems operated by

11 States as alternative dispute resolution systems pur12 suant to this part, an analysis of the feasibility and

13 desirability of establishing a system under which

14 medical malpractice liability claims shall be resolved

15 on a no-fault basis.

16 Subtitle B—Other Requirements

17 and Programs

18 SEC. 441. FACILITATING DEVELOPMENT AND USE OF

19 MEDICAL PRACTICE GUIDELINES.

20 (a) INCREASE IN AUTHORIZATION OF APPROPRIA21 TIONS.—Section 1142(i)(1) of the Social Security Act (42

22 U.S.C. 1320b–12(i)(1)) is amended by striking subpara23 graphs (D) and (E) and inserting the following:

24 ‘‘(D) $158,000,000 for fiscal year 1995 (of

25 which $10,000,000 shall be used for sanction-
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1 ing practice guidelines for purposes of an af2 firmative defense in medical malpractice liabil3 ity actions);

4 ‘‘(E) $200,000,000 for fiscal year 1996 (of

5 which $20,000,000 shall be used for sanction6 ing practice guidelines for purposes of an af7 firmative defense in medical malpractice liabil8 ity actions); and

9 ‘‘(F) $20,000,000 for fiscal year 1997, to

10 be used for sanctioning practice guidelines for

11 purposes of an affirmative defense in medical

12 malpractice liability actions.’’.

13 (b) CONSIDERATION OF MALPRACTICE LIABILITY

14 DATA IN DEVELOPING AND UPDATING GUIDELINES.—

15 Section 1142(c)(5) of such Act (42 U.S.C. 1320b–

16 12(c)(5)) is amended by striking ‘‘claims data’’ and all

17 that follows through ‘‘patients’’ and inserting the follow18 ing: ‘‘claims data, data on clinical and functional status

19 of patients, and data on medical malpractice liability ac20 tions’’.

21 (c) DEVELOPMENT OF REPORTING FORMS FOR

22 STATE ADR SYSTEMS.—The Secretary, in consultation

23 with the Administrator for Health Care Policy and Re24 search, shall develop a standard reporting form to be used

25 by State alternative dispute resolution systems in trans-
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1 mitting information to the Administrator pursuant to sec2 tion 431(a)(6) on disputes resolved under such systems.

3 (d) STUDY OF EFFECT OF GUIDELINES ON MEDICAL

4 MALPRACTICE.—

5 (1) STUDY.—The Secretary shall conduct a

6 study of the effect of the use of the medical practice

7 guidelines developed by the Administrator for Health

8 Care Policy and Research on the incidence of and

9 the costs associated with medical malpractice.

10 (2) REPORTS.—(A) Not later than 1 year after

11 the date of the enactment of this Act, the Secretary

12 shall submit an interim report to Congress describ13 ing the availability and use of medical practice

14 guidelines and the aggregate costs associated with

15 medical malpractice.

16 (B) Not later than 5 years after the date of the

17 enactment of this Act, the Secretary shall submit a

18 report to Congress on the study conducted under

19 paragraph (1), together with recommendations re20 garding expanding the use of medical practice guide21 lines for determining the liability of health care pro22 fessionals and health care providers for medical mal23 practice.
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1 SEC. 442. PERMITTING STATE PROFESSIONAL SOCIETIES

2 TO PARTICIPATE IN DISCIPLINARY ACTIVI3 TIES.

4 (a) ROLE OF PROFESSIONAL SOCIETIES.—Notwith5 standing any other provision of State or Federal law, a

6 State agency responsible for the conduct of disciplinary

7 actions for a type of health care practitioner may enter

8 into agreements with State or county professional societies

9 of such type of health care practitioner to permit such so10 cieties to participate in the licensing of such health care

11 practitioner, and to review any health care malpractice ac12 tion, health care malpractice claim or allegation, or other

13 information concerning the practice patterns of any such

14 health care practitioner. Any such agreement shall comply

15 with subsection (b).

16 (b) REQUIREMENTS OF AGREEMENTS.—Any agree17 ment entered into under subsection (a) for licensing activi18 ties or the review of any health care malpractice action,

19 health care malpractice claim or allegation, or other infor20 mation concerning the practice patterns of a health care

21 practitioner shall provide that—

22 (1) the health care professional society conducts

23 such activities or review as expeditiously as possible;

24 (2) after the completion of such review, such so25 ciety shall report its findings to the State agency

26 with which it entered into such agreement;
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1 (3) the conduct of such activities or review and

2 the reporting of such findings be conducted in a

3 manner which assures the preservation of confiden4 tiality of health care information and of the review

5 process; and

6 (4) no individual affiliated with such society is

7 liable for any damages or injury directly caused by

8 the individual’s actions in conducting such activities

9 or review.

10 (c) AGREEMENTS NOT MANDATORY.—Nothing in

11 this section may be construed to require a State to enter

12 into agreements with societies described in subsection (a)

13 to conduct the activities described in such subsection.

14 (d) EFFECTIVE DATE.—This section shall take effect

15 2 years after the date of the enactment of this Act.

16 TITLE V—ADMINISTRATIVE

17 COST SAVINGS

18 Subtitle A—Standardization of

19 Claims Processing

20 SEC. 501. ADOPTION OF DATA ELEMENTS, UNIFORM

21 CLAIMS, AND UNIFORM ELECTRONIC TRANS22 MISSION STANDARDS.

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

24 Human Services (in this title referred to as the ‘‘Sec-
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1 retary’’) shall adopt standards relating to each of the fol2 lowing:

3 (1) Data elements for use in paper and elec4 tronic claims processing under health benefit plans,

5 as well as for use in utilization review and manage6 ment of care (including data fields, formats, and

7 medical nomenclature, and including plan benefit

8 and insurance information).

9 (2) Uniform claims forms (including uniform

10 procedure and billing codes for uses with such forms

11 and including information on other health benefit

12 plans that may be liable for benefits).

13 (3) Uniform electronic transmission of the data

14 elements (for purposes of billing and utilization re15 view).

16 Standards under paragraph (3) relating to electronic

17 transmission of data elements for claims for services shall

18 supersede (to the extent specified in such standards) the

19 standards adopted under paragraph (2) relating to the

20 submission of paper claims for such services.

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

22 under this section—

23 (1) the Secretary shall take into account the

24 recommendations of current taskforces, including at

25 least the Workgroup on Electronic Data Inter-
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1 change, National Uniform Billing Committee, the

2 Uniform Claim Task Force, and the Computer-based

3 Patient Record Institute;

4 (2) the Secretary shall consult with the Na5 tional Association of Insurance Commissioners (and,

6 with respect to standards under subsection (a)(3),

7 the American National Standards Institute); and

8 (3) the Secretary shall, to the maximum extent

9 practicable, seek to make the standards consistent

10 with any uniform clinical data sets which have been

11 adopted and are widely recognized.

12 (c) DEADLINES FOR PROMULGATION.—The Sec13 retary shall promulgate the standards under—

14 (1) subsection (a)(1) relating to claims process15 ing data, by not later than 12 months after the date

16 of the enactment of this Act;

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

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

19 date of the enactment of this Act; and

20 (3)(A) subsection (a)(3) relating to trans21 mission of information concerning hospital and phy22 sicians services, by not later than 24 months after

23 the date of the enactment of this Act, and
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1 (B) subsection (a)(3) relating to transmission

2 of information on other services, by such later date

3 as the Secretary may determine it to be feasible.

4 (d) REPORT TO CONGRESS.—Not later than 3 years

5 after the date of the enactment of this Act, the Secretary

6 shall report to Congress recommendations regarding re7 structuring the medicare peer review quality assurance

8 program given the availability of hospital data in elec9 tronic form.

10 SEC. 502. APPLICATION OF STANDARDS.

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

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

13 standards are adopted under section 501 with respect to

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

15 benefits for such services under health benefit plans are

16 not being submitted in accordance with such standards,

17 the Secretary may require, after notice in the Federal

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

19 such services must submit claims to health benefit plans

20 in accordance with such standards. The Secretary may

21 waive the application of such a requirement in such cases

22 as the Secretary finds that the imposition of the require23 ment would not be economically practicable.

24 (b) SIGNIFICANT NUMBER.—The Secretary shall

25 make an affirmative determination described in subsection
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1 (a) for a class of services only if the Secretary finds that

2 there would be a significant, measurable additional gain

3 in efficiencies in the health care system that would be ob4 tained by imposing the requirement described in such

5 paragraph with respect to such services.

6 (c) APPLICATION OF REQUIREMENT.—

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

8 requirement under subsection (a)—

9 (A) in the case of a requirement that imposes

10 the standards relating to electronic trans11 mission of claims for a class of services, each

12 health care provider that furnishes such services

13 for which benefits are payable under a health

14 benefit plan shall transmit electronically and di15 rectly to the plan on behalf of the beneficiary

16 involved a claim for such services in accordance

17 with such standards;

18 (B) any health benefit plan may reject any

19 claim subject to the standards adopted under

20 section 501 but which is not submitted in ac21 cordance with such standards;

22 (C) it is unlawful for a health benefit plan

23 (i) to reject any such claim on the basis of the

24 form in which it is submitted if it is submitted

25 in accordance with such standards or (ii) to re-
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1 quire, for the purpose of utilization review or as

2 a condition of providing benefits under the plan,

3 a provider to transmit medical data elements

4 that are inconsistent with the standards estab5 lished under section 501(a)(1); and

6 (D) the Secretary may impose a civil

7 money penalty on any provider that knowingly

8 and repeatedly submits claims in violation of

9 such standards or on any health benefit plan

10 (other than a health benefit plan described in

11 paragraph (2)) that knowingly and repeatedly

12 rejects claims in violation of subparagraph (B),

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

14 claim.

15 The provisions of section 1128A of the Social Secu16 rity Act (other than the first sentence of subsection

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

18 civil money penalty under subparagraph (D) in the

19 same manner as such provisions apply to a penalty

20 or proceeding under section 1128A(a) of such Act.

21 (2) PLANS SUBJECT TO EFFECTIVE STATE REG22 ULATION.—A plan described in this paragraph is a

23 health benefit plan—

24 (A) that is subject to regulation by a

25 State, and
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1 (B) with respect to which the Secretary

2 finds that—

3 (i) the State provides for application

4 of the standards established under section

5 501, and

6 (ii) the State regulatory program pro7 vides for the appropriate and effective en8 forcement of such standards.

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

10 a claim pursuant to subsection (c)(1), the plan shall per11 mit the person submitting the claim a reasonable oppor12 tunity to resubmit the claim on a form or in an electronic

13 manner that meets the requirements for acceptance of the

14 claim under such subsection.

15 SEC. 503. PERIODIC REVIEW AND REVISION OF

16 STANDARDS.

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

18 (1) provide for the ongoing receipt and review

19 of comments and suggestions for changes in the

20 standards adopted and promulgated under section

21 501;

22 (2) establish a schedule for the periodic review

23 of such standards; and
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1 (3) based upon such comments, suggestions,

2 and review, revise such standards and promulgate

3 such revisions.

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

5 Secretary under subsection (a) revises the standards de6 scribed in 501, then, in the case of any claim for benefits

7 submitted under a health benefit plan more than the mini8 mum period (of not less than 6 months specified by the

9 Secretary) after the date the revision is promulgated

10 under subsection (a)(3), such standards shall apply under

11 section 502 instead of the standards previously promul12 gated.

13 SEC. 504. HEALTH BENEFIT PLAN DEFINED.

14 In this title, the term ‘‘health benefit plan’’ has the

15 meaning given such term in section 111(6) and includes—

16 (1) the medicare program (under title XVIII of

17 the Social Security Act), and

18 (2) a State medicaid plan (approved under title

19 XIX of such Act).

20 Subtitle B—Electronic Medical

21 Data Standards

22 SEC. 511. MEDICAL DATA STANDARDS FOR HOSPITALS AND

23 OTHER PROVIDERS.

24 (a) PROMULGATION OF HOSPITAL DATA STAND25 ARDS.—
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1 (1) IN GENERAL.—Between July 1, 1996, and

2 January 1, 1997, the Secretary shall promulgate

3 standards described in subsection (b) for hospitals

4 concerning electronic medical data.

5 (2) REVISION.—The Secretary may from time

6 to time revise the standards promulgated under this

7 subsection.

8 (b) CONTENTS OF DATA STANDARDS.—The stand9 ards promulgated under subsection (a) shall include at

10 least the following:

11 (1) A definition of a standard set of data ele12 ments for use by utilization and quality control peer

13 review organizations.

14 (2) A definition of the set of comprehensive

15 data elements, which set shall include for hospitals

16 the standard set of data elements defined under

17 paragraph (1).

18 (3) Standards for an electronic patient care in19 formation system with data obtained at the point of

20 care, including standards to protect against the un21 authorized use and disclosure of information.

22 (4) A specification of, and manner of presen23 tation of, the individual data elements of the sets

24 and system under this subsection.
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1 (5) Standards concerning the transmission of

2 electronic medical data.

3 (6) Standards relating to confidentiality of pa4 tient-specific information.

5 The standards under this section shall be consistent with

6 standards for data elements established under section 501.

7 (c) OPTIONAL DATA STANDARDS FOR OTHER PRO8 VIDERS.—

9 (1) IN GENERAL.—The Secretary may promul10 gate standards described in paragraph (2) concern11 ing electronic medical data for providers that are not

12 hospitals. The Secretary may from time to time re13 vise the standards promulgated under this sub14 section.

15 (2) CONTENTS OF DATA STANDARDS.—The

16 standards promulgated under paragraph (1) for non17 hospital providers may include standards comparable

18 to the standards described in paragraphs (2), (4),

19 and (5) of subsection (b) for hospitals.

20 (d) CONSULTATION.—In promulgating and revising

21 standards under this section, the Secretary shall—

22 (1) consult with the American National Stand23 ards Institute, hospitals, with the advisory commis24 sion established under section 515, and with other
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1 affected providers, health benefit plans, and other

2 interested parties, and

3 (2) take into consideration, in developing stand4 ards under subsection (b)(1), the data set used by

5 the utilization and quality control peer review pro6 gram under part B of title XI of the Social Security

7 Act.

8 SEC. 512. APPLICATION OF ELECTRONIC DATA STANDARDS

9 TO CERTAIN HOSPITALS.

10 (a) MEDICARE REQUIREMENT FOR SHARING OF

11 HOSPITAL INFORMATION.—As of January 1, 1998, sub12 ject to paragraph (2), each hospital, as a requirement of

13 each participation agreement under section 1866 of the

14 Social Security Act, shall—

15 (1) maintain clinical data included in the set of

16 comprehensive data elements under section

17 511(b)(2) in electronic form on all inpatients,

18 (2) upon request of the Secretary or of a utili19 zation and quality control peer review organization

20 (with which the Secretary has entered into a con21 tract under part B of title XI of such Act), transmit

22 electronically the data set, and

23 (3) upon request of the Secretary, or of a fiscal

24 intermediary or carrier, transmit electronically any

25 data (with respect to a claim) from such data set,
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1 in accordance with the standards promulgated under sec2 tion 511(a).

3 (b) WAIVER AUTHORITY.—Until January 1, 2000:

4 (1) The Secretary may waive the application of

5 the requirements of subsection (a) for a hospital

6 that is a small rural hospital, for such period as the

7 hospital demonstrates compliance with such require8 ments would constitute an undue financial hardship.

9 (2) The Secretary may waive the application of

10 the requirements of subsection (a) for a hospital

11 that is in the process of developing a system to pro12 vide the required data set and executes agreements

13 with its fiscal intermediary and its utilization and

14 quality control peer review organization that the hos15 pital will meet the requirements of subsection (a) by

16 a specified date (not later than January 1, 2000).

17 (3) The Secretary may waive the application of

18 the requirement of subsection (a)(1) for a hospital

19 that agrees to obtain from its records the data ele20 ments that are needed to meet the requirements of

21 paragraphs (2) and (3) of subsection (a) and agrees

22 to subject its data transfer process to a quality as23 surance program specified by the Secretary.

24 (c) APPLICATION TO HOSPITALS OF THE DEPART25 MENT OF VETERANS AFFAIRS.—
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1 (1) IN GENERAL.—The Secretary of Veterans

2 Affairs shall provide that each hospital of the De3 partment of Veterans Affairs shall comply with the

4 requirements of subsection (a) in the same manner

5 as such requirements would apply to the hospital if

6 it were participating in the medicare program.

7 (2) WAIVER.—Such Secretary may waive the

8 application of such requirements to a hospital in the

9 same manner as the Secretary of Health and

10 Human Services may waive under subsection (b) the

11 application of the requirements of subsection (a).

12 SEC. 513. ELECTRONIC TRANSMISSION TO FEDERAL AGEN13 CIES.

14 (a) IN GENERAL.—Effective January 1, 2000, if a

15 provider is required under a Federal program to transmit

16 a data element that is subject to a presentation or trans17 mission standard (as defined in subsection (b)), the head

18 of the Federal agency responsible for such program (if not

19 otherwise authorized) is authorized to require the provider

20 to present and transmit the data element electronically in

21 accordance with such a standard.

22 (b) PRESENTATION OR TRANSMISSION STANDARD

23 DEFINED.—In subsection (a), the term ‘‘presentation or

24 transmission standard’’ means a standard, promulgated
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1 under subsection (b) or (c) of section 511, described in

2 paragraph (4) or (5) of section 511(b).

3 SEC. 514. LIMITATION ON DATA REQUIREMENTS WHERE

4 STANDARDS IN EFFECT.

5 (a) IN GENERAL.—If standards with respect to data

6 elements are promulgated under section 511 with respect

7 to a class of provider, a health benefit plan may not re8 quire, for the purpose of utilization review or as a condi9 tion of providing benefits under the plan, that a provider

10 in the class—

11 (1) provide any data element not in the set of

12 comprehensive data elements specified under such

13 standards, or

14 (2) transmit or present any such data element

15 in a manner inconsistent with the applicable stand16 ards for such transmission or presentation.

17 (b) COMPLIANCE.—

18 (1) IN GENERAL.—The Secretary may impose a

19 civil money penalty on any health benefit plan (other

20 than a health benefit plan described in paragraph

21 (2)) that fails to comply with subsection (a) in an

22 amount not to exceed $100 for each such failure.

23 The provisions of section 1128A of the Social Secu24 rity Act (other than the first sentence of subsection

25 (a) and other than subsection (b)) shall apply to a
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1 civil money penalty under this paragraph in the

2 same manner as such provisions apply to a penalty

3 or proceeding under section 1128A(a) of such Act.

4 (2) PLANS SUBJECT TO EFFECTIVE STATE REG5 ULATION.—A plan described in this paragraph is a

6 health benefit plan that is subject to regulation by

7 a State, if the Secretary finds that—

8 (A) the State provides for application of

9 the requirement of subsection (a), and

10 (B) the State regulatory program provides

11 for the appropriate and effective enforcement of

12 such requirement with respect to such plans.

13 SEC. 515. ADVISORY COMMISSION.

14 (a) IN GENERAL.—The Secretary shall establish an

15 advisory commission including hospital executives, hospital

16 data base managers, physicians, health services research17 ers, and technical experts in collection and use of data

18 and operation of data systems. Such commission shall in19 clude, as ex officio members, a representative of the Direc20 tor of the National Institutes of Health, the Administrator

21 for Health Care Policy and Research, the Secretary of

22 Veterans’ Affairs, and the Director of the Centers for Dis23 ease Control.

24 (b) FUNCTIONS.—The advisory commission shall

25 monitor and advise the Secretary concerning—
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1 (1) the standards established under this sub2 title, and

3 (2) operational concerns about the implementa4 tion of such standards under this subtitle.

5 (c) STAFF.—From the amounts appropriated under

6 subsection (d), the Secretary shall provide sufficient staff

7 to assist the advisory commission in its activities under

8 this section.

9 (d) AUTHORIZATION OF APPROPRIATIONS.—There

10 are authorized to be appropriated $2,000,000 for each of

11 fiscal years 1995 through 1999 to carry out this section.

12 TITLE VI—REMOVING RESTRIC13 TIONS ON MANAGED CARE

14 SEC. 601. REMOVING RESTRICTIONS ON MANAGED CARE.

15 (a) PREEMPTION OF STATE LAW PROVISIONS.—Sub16 ject to subsection (c), the following provisions of State law

17 are preempted and may not be enforced:

18 (1) RESTRICTIONS ON REIMBURSEMENT RATES

19 OR SELECTIVE CONTRACTING.—Any law that re20 stricts the ability of a carrier to negotiate reimburse21 ment rates with providers or to contract selectively

22 with one provider or a limited number of providers.

23 (2) RESTRICTIONS ON DIFFERENTIAL FINAN24 CIAL INCENTIVES.—Any law that limits the financial

25 incentives that a health benefit plan may require a
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1 beneficiary to pay when a non-plan provider is used

2 on a non-emergency basis.

3 (3) RESTRICTIONS ON UTILIZATION REVIEW

4 METHODS.—Any law that—

5 (A) prohibits utilization review of any or

6 all treatments and conditions,

7 (B) requires that such review be made (i)

8 by a resident of the State in which the treat9 ment is to be offered or by an individual li10 censed in such State, or (ii) by a physician in

11 any particular specialty or with any board cer12 tified specialty of the same medical specialty as

13 the provider whose services are being reviewed,

14 (C) requires the use of specified standards

15 of health care practice in such reviews or re16 quires the disclosure of the specific criteria used

17 in such reviews,

18 (D) requires payments to providers for the

19 expenses of responding to utilization review re20 quests, or

21 (E) imposes liability for delays in perform22 ing such review.

23 Nothing in subparagraph (B) shall be construed as

24 prohibiting a State from (i) requiring that utilization

25 review be conducted by a licensed health care profes-
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1 sional or (ii) requiring that any appeal from such a

2 review be made by a licensed physician or by a li3 censed physician in any particular specialty or with

4 any board certified specialty of the same medical

5 specialty as the provider whose services are being re6 viewed.

7 (b) GAO STUDY.—

8 (1) IN GENERAL.—The Comptroller General

9 shall conduct a study of the benefits and cost effec10 tiveness of the use of managed care in the delivery

11 of health services.

12 (2) REPORT.—By not later than 4 years after

13 the date of the enactment of this Act, the Comptrol14 ler General shall submit a report to Congress on the

15 study conducted under paragraph (1) and shall in16 clude in the report such recommendations (including

17 whether the provisions of subsection (a) should be

18 extended) as may be appropriate.

19 (c) SUNSET.—Unless otherwise provided, subsection

20 (a) shall not apply 5 years after the date of the enactment

21 of this Act.
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1 TITLE VII—MODIFICATION OF

2 THE OPERATION OF THE

3 ANTITRUST LAWS TO HOS4 PITALS

5 SEC. 701. PURPOSE.

6 The purpose of this title is to encourage cooperation

7 among hospitals in order to contain costs and achieve a

8 more efficient health care delivery system through the

9 elimination of unnecessary duplication and proliferation of

10 expensive medical services or expensive high technology

11 equipment.

12 SEC. 702. EXEMPTIONS FROM THE OPERATION OF THE

13 ANTITRUST LAWS.

14 (a) GENERAL EXEMPTION.—It shall not be unlawful

15 under the antitrust laws for 2 or more hospitals to engage

16 in conduct solely for the purpose of negotiating a proposed

17 agreement, to be submitted under subsection (b), to share

18 expensive medical services or expensive high technology

19 equipment.

20 (b) SPECIFIC EXEMPTIONS.—

21 (1) AUTHORITY TO GRANT WAIVER.—The Sec22 retary of Health and Human Services shall issue

23 waivers in accordance with paragraph (4) to exempt

24 from the operation of the antitrust laws conduct en-
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1 gaged in by hospitals to carry out agreements con2 tained in applications approved under paragraph (3).

3 (2) ELIGIBILITY.—To be eligible to receive a

4 waiver under paragraph (1), 2 or more hospitals

5 shall submit to the Secretary an application that

6 contains (in accordance with guidelines established

7 by the Secretary)—

8 (A) a proposed agreement that only—

9 (i) provides that such hospitals shall

10 share the expensive medical services or ex11 pensive high technology equipment identi12 fied in such agreement,

13 (ii) specifies the period of time during

14 which such agreement shall be in effect,

15 (iii) describes the particular medical

16 services or high technology equipment to

17 be shared under such agreement, and

18 (iv) contains such other terms and

19 conditions as the Secretary may reasonably

20 require, and

21 (B) such information and assurances as

22 the Secretary may reasonably require.

23 (3) APPROVAL.—For purposes of determining

24 whether to approve an application submitted under
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1 paragraph (2), the Secretary shall consider wheth2 er—

3 (A) the proposed agreement contained in

4 such application satisfies the guidelines issued

5 under paragraph (6), and

6 (B) implementation of such agreement will

7 result in—

8 (i) enhancement of the quality of hos9 pital care or hospital-related care,

10 (ii) the preservation of hospital serv11 ices in geographical proximity to the com12 munities traditionally served by the appli13 cants,

14 (iii) improvement in the cost-effective15 ness of high-technology services provided

16 by the applicants,

17 (iv) improvement in the efficient utili18 zation of hospital resources and capital

19 equipment,

20 (v) the provision of services that

21 would not otherwise be available, or

22 (vi) the avoidance of duplication of

23 hospital resources.

24 (4) ISSUANCE AND EFFECT OF WAIVER.—If—
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1 (A) the Secretary approves under para2 graph (3) an application submitted under para3 graph (2), and

4 (B) the applicants enter into the proposed

5 agreement contained in such application, modi6 fied as the Secretary may require as a condition

7 for approval,

8 then the Secretary shall issue a waiver with respect

9 to the agreement entered into. Except as provided in

10 paragraph (5), such waiver shall exempt the appli11 cants from the operation of the antitrust laws for

12 conduct the applicants engage in during the period

13 specified in such waiver and solely to carry out the

14 agreement with respect to which such waiver is is15 sued.

16 (5) REVOCATION OF WAIVER.—(A) If the Sec17 retary determines that a hospital with respect to

18 which a waiver is in effect under paragraph (4) is

19 not carrying out, or has not carried out, fully the

20 terms of the agreement with respect to which a

21 waiver is issued under paragraph (4), the Secretary

22 may revoke such waiver.

23 (B) If the Secretary revokes such waiver—
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1 (i) the Secretary shall specify the period

2 during which such hospital did not carry out

3 fully the terms of such agreement, and

4 (ii) such waiver shall have no legal effect

5 with respect to such period.

6 (6) ISSUANCE OF GUIDELINES.—Not later than

7 6 months after the date of the enactment of this

8 Act, the Secretary shall establish the guidelines for

9 applications under paragraph (2).

10 (c) DELEGATION OF AUTHORITY.—The Secretary is

11 authorized to delegate the authority under this section

12 with respect to a hospital in a State to the State multicare

13 program established under title I. To the extent the Sec14 retary delegates authority to a State under the previous

15 sentence with respect to hospitals in a State, any subse16 quent in this title to the ‘‘Secretary’’ is deemed a reference

17 to the State multicare program.

18 SEC. 703. REPORTS.

19 (a) REPORTS TO THE SECRETARY.—Each hospital

20 with respect to which a waiver is issued under section

21 702(b)(4) shall submit to the Secretary—

22 (1) during the period such waiver is in effect,

23 an annual report at such time, in such form, and

24 containing such information as the Secretary may

25 require, including a detailed description of the imple-
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1 mentation of the agreement to which such waiver

2 applies, and

3 (2) such other information as the Secretary

4 may require for purposes of determining compliance

5 with section 702.

6 (b) REPORT TO COMMITTEES OF THE CONGRESS.—

7 (1) CHAIRMEN OF COMMITTEES.—Not later

8 than 7 years after the date of the enactment of this

9 Act, the Secretary shall submit the report described

10 in paragraph (2) to—

11 (A) the chairman of the Committee on the

12 Judiciary of the House of Representatives,

13 (B) the chairman of the Committee on

14 Ways and Means of the House of Representa15 tives,

16 (C) the chairman of the Committee on En17 ergy and Commerce of the House of Represent18 atives,

19 (D) the chairman of the Committee on the

20 Judiciary of the Senate,

21 (E) the chairman of the Committee on Fi22 nance of the Senate, and

23 (F) the chairman of the Committee on

24 Labor and Human Resources of the Senate.
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1 (2) CONTENTS OF REPORT.—The report re2 quired by paragraph (1) shall contain a description

3 of the nature of the agreements with respect to

4 which the Secretary issued waivers under section

5 702(b)(4) and of the results of implementing such

6 agreements, including an assessment of whether

7 such agreements caused—

8 (A) a reduction in health care costs,

9 (B) an increase in access to medical serv10 ices, and

11 (C) improvement in the quality of health

12 care.

13 Such report shall also contain the recommendations

14 of the Secretary with respect to other arrangements

15 to facilitate cooperative activities to achieve the re16 sults specified in subparagraphs (A), (B), and (C).

17 SEC. 704. DEFINITIONS.

18 For purposes of this title:

19 (1) The term ‘‘antitrust laws’’ has the meaning

20 given it in subsection (a) of the first section of the

21 Clayton Act (15 U.S.C. 12(a)), except that such

22 term includes—

23 (A) section 5 of the Federal Trade Com24 mission Act (15 U.S.C. 45) to the extent such
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1 section applies to unfair methods of competi2 tion, and

3 (B) any State law similar to the antitrust

4 laws.

5 (2) The term ‘‘high technology equipment’’ in6 cludes drugs, devices, equipment, and medical and

7 surgical procedures utilized in medical care, and the

8 organizational and support systems within which

9 such care is provided, that—

10 (A) have high capital costs or extremely

11 high annual operating costs, and

12 (B) use technologies with respect to which

13 there is a reasonable expectation that shared

14 ownership will avoid a significant degree of the

15 potential excess capacity of service in the geo16 graphical area to be served.

17 (3) The term ‘‘medical services’’ includes serv18 ices that—

19 (A) either have high capital costs or ex20 tremely high annual operating costs, and

21 (B) with respect to which there is a rea22 sonable expectation that shared ownership will

23 avoid a significant degree of the potential ex24 cess capacity of such services in the geographi25 cal area to be served,
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1 and may include mobile services.

2 (4) The term ‘‘hospital’’ means a hospital

3 that—

4 (A) has entered into, and has in effect, a

5 participation agreement under section 1866(a)

6 of the Social Security Act, or

7 (B) which has in effect a participation

8 agreement under title XIX of such Act with the

9 State in which the hospital is located.

10 (5) The term ‘‘Secretary’’ means the Secretary

11 of Health and Human Services.

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